NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Basis of Presentation
On February 14, 2022, we effected a 1-for-30 reverse
split of our outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with
the Nevada Secretary of State which was effective at the commencement of trading of our Common Stock. No fractional shares of the Company’s
common stock will be issued as a result of the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split will
be rounded up to the nearest whole share. All issued and outstanding common stock, preferred stock, and per share amounts in the consolidated
financial statements and footnotes included herein have been retroactively adjusted to reflect this reverse stock split for all periods
presented.
COVID-19
On March 11, 2020, the World Health Organization
(“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the
pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets.
Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease.
COVID-19 and the U.S. response to the pandemic
are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may
have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent
of the effects on the economy, the markets we serve, our business, or our operations. In March 2020 we temporarily suspended operations
in Kuwait and Utah due to COVID-19 government restrictions, Utah has resumed operations in full. Kuwait has allowed for the Company to
obtain site personnel visas to recommence operations. These suspensions have had a negative impact on our business and there can be no
guaranty that we will not need to suspend operations again in the future as a result of the pandemic.
Interim Financial Information
The accompanying unaudited condensed consolidated
financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have
been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and the related notes for the year ended December 31, 2021. The unaudited condensed consolidated financial
statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and
include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation
of the condensed consolidated financial statements. The operating results for the three and six months ended June 30, 2022 are not necessarily
indicative of the results expected for the full year ending December 31, 2022.
Principles of Consolidation
The Company follows ASC 810-10-15 guidance with
respect to accounting for Variable Interest Entities (“VIE”). A VIE is an entity that does not have sufficient equity at risk
to finance its activities without additional subordinated financial support from other parties, or whose equity investors lack any of
the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions
of a VIE’s expected losses or receive portions of the entity’s expected residual returns. For the six months ended June 30,
2022 and year ended December 31, 2021 the following entities are considered to be a VIE and are consolidated in our consolidated financial
statements: Viva Wealth Fund I, LLC and RPC Design and Manufacturing, LLC. For the six months ended June 30, 2022 and year ended December
31, 2021 the following entities were considered to be a VIE, but were not consolidated in our consolidated financial statements due to
a lack of the power criterion or the losses/benefits criterion: Vivaventures UTS I, LLC, Vivaventures Royalty II, LLC, Vivaopportunity
Fund, LLC, and International Metals Exchange, LLC. For the six months ended June 30, 2022 and year ended December 31, 2021 the unaudited
financial information for the unconsolidated VIEs is as follows: Vivaventures UTSI, LLC held assets of $3,383,610 and $3,753,296 (where
the primary asset represents a receivable from the Company), and liabilities of $47,049 and $12,608. Vivaventures Royalty II, LLC held
assets of $2,939,498 and $2,648,810 (where the primary asset represents a receivable from the Company), and liabilities of $1,720 and
$300. Vivaopportunity Fund LLC held assets of $2,119,856 and $2,119,961 (where the primary asset represents a noncontrolling interest
in units of a consolidated entity of the Company) and no liabilities. International Metals Exchange, LLC held assets of $29,938 and $30,461
and liabilities of $1,900.
RPC Design and Manufacturing, LLC: As of
June 30, 2022 and year ended December 31, 2021, investors in RDM have a noncontrolling interest of $387,049 and $629,694, respectively.
As of June 30, 2022 and December 31, 2021, the cash and cash equivalents of this VIE are not restricted and can be used to settle the
obligations of the reporting entity. As of June 30, 2022 and December 31, 2021 this VIE has an outstanding note payable to the reporting
entity in the amount of $628,828 and $354,566, which is eliminated upon consolidation. We have the primary risk (expense) exposure in
financing and operating the assets and are responsible for 100% of the operation, maintenance and any unfunded capital expenditures, which
ultimately could be 100% of a custom machine, and the decisions related to those expenditures including budgeting, financing and dispatch
of power. Based on all these facts, it was determined that we are the primary beneficiary of RDM. Therefore, RDM has been consolidated
by the Company. Any intercompany revenue and expense associated with RDM and its license agreement with the Company has been eliminated
in consolidation.
Viva Wealth Fund I, LLC: As of June
30, 2022 and December 31, 2021, the cash and cash equivalents of this VIE are restricted solely for the use of proceeds of the VWFI
offering (to manufacture RPCs) and cannot be used to settle the obligations of the reporting entity. As of June 30, 2022 and
December 31, 2021, the Company has cash attributed to variable interest entities of $296,257
and $199,952.
As of June 30, 2022, VWFI has reached $6,250,000 in funding and has released the funding for construction of RPC Series A. VWFI has
commenced fundraising for RPC Series B. In the event that VWFI does not raise at least $6,250,000 for these RPC Series by the
offering termination date (which date has been extended until November 13, 2022), then the convertible notes and/or units would
convert into Vivakor common stock where the minimum conversion price will be the greater of $13.50 or a 10% discount to market per
share or in the event of a public offering, 200% of the per share price of the Company common stock sold in the underwritten
offering, which was closed on February 14, 2022 at $5.00 per share. As of August 8, 2022, VWFI has raised approximately $4,690,000
for RPC Series B. VWFI unit holders may also sell their units to the Company for their principal investment amount on the
3rd, 4th, and 5th anniversary of the offering termination date, which if this option were
exercised, the Company may elect to pay the amount in either cash or common stock. The Company also has the option to purchase any
LLC units where the members did not exercise their conversion option under the same terms and pricing for cash or common stock. VWFI
has entered into a license agreement with the Company indicating that VWFI will pay the Company a license fee of $1,000,000 per
series of equipment manufactured with the Company’s proprietary technology, however these transactions are eliminated upon consolidation. All of the operations of VWFI relate to private
placement offering to fund and manufacture proprietary equipment for the Company, as intended in VWFI’s design and
organization by the Company, so that the Company controls VWFI in its business purpose, use of proceeds, and selling and leasing of
its equipment solely to the Company. Creditors of VWFI have no recourse to the general credit of the Company. We have the primary
risk (expense) exposure in financing and operating the assets and are responsible for 100% of the operation, and any unfunded
capital expenditures, and the expense to the unit holders in conversion to common stock if series of equipment cannot be fully
funded, which ultimately could be 100% of any custom machine. By request of the fund manager, we are responsible for the decisions
related to the expenditures of VWFI proceeds including budgeting, financing and dispatch of power surrounding the series of
equipment. Based on all these facts, it was determined that we are the primary beneficiary of VWFI. Therefore, VWFI has been
consolidated by the Company.
Long Lived Assets
The Company reviews the carrying values of
its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying
amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges
were incurred during the six months ended June 30, 2022 or for the year ended December 31, 2021, as the Company was still in the
early phases of our business plan and operating losses were expected in our early phases. On March 11, 2020, the World Health
Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on
human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the
global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of
the disease. We have observed supply chain disruptions from the COVID-19 pandemic that has contributed to delays in the completion
of the manufacturing of our RPCs, although we do not believe that these delays have constituted a triggering event for impairment of
our assets. Our Kuwait operations were suspended to comply with the social distancing measures implemented in Kuwait, but in 2022
has allowed for the Company to obtain site personnel visas to recommence operations. Our Utah operations were temporarily
suspended from March through May 2020, but have since resumed in full in its manufacturing of its RPCs, and construction and implementation of site and infrastructure preparations
in anticipation of commencing operations in 2022. There can be no assurance, however, that market conditions
will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in
the future.
Intangible Assets:
We account for intangible assets in accordance
with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). Intangible asset amounts represent the acquisition
date fair values of identifiable intangible assets acquired. The fair values of the intangible assets were determined by using the income
approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment.
The rates used to discount projected future cash flows reflected a weighted average cost of capital based on our industry, capital structure
and risk premiums including those reflected in the current market capitalization. Definite-lived intangible assets are amortized over
their useful lives, which have historically ranged from 10 to 20 years. The carrying amounts of our definite-lived intangible assets are
evaluated for recoverability whenever events or changes in circumstances indicate that the entity may be unable to recover the asset’s
carrying amount.
We assess our intangible assets in accordance
with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur
that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following
are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant
decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived
asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate
that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation
of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group)
(e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast
that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely
than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated
useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We have evaluated our intangible
assets and found that certain losses and a delay in our business plan may have constituted a triggering event for our intangible assets.
We performed an analysis and assessed that there was no impairment for the six months ended June 30, 2022 or for the year ended December
31, 2021.
Advertising Expense
Advertising costs are expensed as incurred. The
Company did not incur advertising expense for the six months ended June 30, 2022 and 2021.
Net Income/Loss Per Share
Basic net income (loss) per share is
calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of
common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common
share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the
period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of June 30, 2022
and 2021 include the following: convertible notes payable convertible into approximately 14,560
and 227,150
shares of common stock, convertible Series A preferred stock convertible into none
and 666,667
shares of common stock (due to the event of a public offering of the Company’s common stock in February 2022 this will convert
to 833,333 shares), stock options granted to employees of 2,039,585
and 183,333
shares of common stock. Stock options granted to Board members or consultants of 466,667
shares of common stock were granted as of June 30, 2022 and 2021. There were also warrants issued and outstanding to EF Hutton of 80,000
shares of common stock as of June 30, 2022. These warrants were related to and granted during the close of the
underwritten public offering in February 2022
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions
that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our critical accounting estimates
relate to the following: Recoverability of current and noncurrent assets, revenue recognition, stock-based compensation, income taxes,
effective interest rates related to long-term debt, marketable securities, cost basis and equity method investments, lease assets and
liabilities, equity method investments, valuation of stock used to acquire assets, and derivatives.
While our estimates and assumptions are based
on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates
and assumptions.
Fair Value of Financial Instruments
The Company follows Accounting Standards Codification
(“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured
at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted
accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value, and expands
disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position
or operating results but did expand certain disclosures.
ASC 820 defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized below:
Level 1: Applies to assets or liabilities for
which there are quoted prices in active markets for identical assets or liabilities.
Level 2: Applies to assets or liabilities for
which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets
or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally
from, or corroborated by, observable market data.
Level 3: Applies to assets or liabilities for
which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets
or liabilities.
The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard
for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement. The carrying amounts reported in the consolidated balance sheets for marketable
securities are classified as Level 1 assets due to observable quoted prices for identical assets in active markets. The carrying amounts
reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses
approximate their estimated fair market values based on the short-term maturity of these instruments. The
recorded values of notes payable approximate their current fair values because of their nature, rates, and respective maturity dates or
durations.
Note 2. Liquidity
We have historically suffered net losses and
cumulative negative cash flows from operations, and as of June 30, 2022, we had an accumulated deficit of approximately $41.3
million. As of June 30, 2022 we had cash of $5,204,591. The
Company closed an underwritten public offering of 1,600,000
shares of common stock, at a public offering price of $5.00 per share, for aggregate gross proceeds of $8
million, prior to deducting underwriting discounts, commissions, and other offering expenses. Prior to the offering, we financed our
operations primarily through debt financing, private equity offerings our working interest agreements. We believe we have other
liquid assets that may be used to assist in financing the operations of the Company if needed, including marketable securities in
Scepter, which hold a fair value $1,818,029
as of June 30, 2022 and have been deposited for trading. We believe the liquid assets from the Company’s available for sale
investments and funding provided from subsequent fundraising activities (see Note 15) of the Company give it adequate working
capital to finance our day-to-day operations for at least twelve months through August 2023.
Note 3. Prepaid Expenses and Other Assets
As of June 30, 2022 and December 31, 2021, our
other assets mainly consist of various deposits with vendors, professional service agents, or security deposits on office and warehouse
leases. As of June 30, 2022 and December 31, 2021 we had office and warehouse lease deposits in the amount of $61,676 and $73,245. As
of June 30, 2022 we had deposits in the amounts of $161,458 with vendors, professional service agencies, and a reclamation bond with the
Utah Division of Oil, Gas and Mining in the amount of $14,288.
Note 4. Marketable Securities
As of December 31, 2020, the Company owned 3,309,758
shares of common stock in Odyssey Group International, Inc. (“Odyssey”) ticker: ODYY, OTC Markets. In December 2021 we
sold such shares of Odyssey in a private transaction for a purchase price of $860,491,
with $10,000 cash delivered at signing and a note issued in favor of Vivakor in the amount of $850,491, reflecting the market price
at that time. The Company accounted for such securities based on the quoted price from the OTC Markets where the stock is traded,
which resulted in the Company recording an unrealized loss of $595,392
on these marketable securities for the three months ended June 30, 2021 compared to an unrealized gain of $1,494,275
for the six months ended June 30, 2021.
In 2019 the Company had an investment of $800,000
or 800,000,000 shares of common stock, or a diluted 23% equity holding in Scepter Holdings, Inc. (“Scepter”), ticker: BRZL,
OTC Markets. In the fourth quarter of 2020, the Company was diluted to a 19% equity holding in Scepter, and was no longer deemed to have
significant influence and ceased to be an equity investment, and as the stock is traded on an active market, the Company has classified
the investment as marketable securities with the change in unrealized gains and losses on the investment included in the statement of
operations for the three months ended June 30, 2022 and 2021. In August 2021 we converted $81,768 of our note receivable with Scepter
into 26,376,882 shares of Scepter common stock pursuant to the terms of the note at $0.0031 per share. On the date of the conversion,
the Scepter price per share on OTC Markets was $0.0062 per share, which resulted in a $87,044 gain on the disposition of the note receivable.
The Company has accounted for such securities based on the quoted price from the OTC Markets where the stock is traded, which resulted
in the Company recording an unrealized loss on marketable securities of $1,652,755 and $8,353,777 for the three months ended June 30,
2022 and 2021 compared to an unrealized gain (loss) of $(413,189) and 2,240,000 for the six months ended June 30, 2022 and 2021. As of
June 30, 2022 and December 31, 2021, the Company’s Chief Executive Officer has an immediate family member who sits on the board
of directors of Scepter Holdings, Inc. As of June 30, 2022 and December 31, 2021 our Scepter marketable securities were valued at $1,818,029
and $2,231,218.
As of June 30, 2022 and December 31, 2021, marketable
securities were $1,818,029 and $2,231,218. For the three months ended June 30, 2022 and 2021, the Company recorded a total unrealized
loss of $1,652,755 and $8,949,169 compared to an unrealized gain (loss) of $(413,189) and $3,734,275 for the six months ended June 30,
2022 and 2021 on marketable securities in the statement of operations.
Note 5. Inventories
As of June 30, 2022, inventories consist primarily
of raw materials (including tar-sand stockpiles) and finished goods (which includes Fenix iron). The tar-sand stockpiles consist of 10,000
tons of tar sand stockpile and are anticipated to be used for our extraction remediation units. The stockpiles were acquired when the
Company entered into a land lease agreement for located in Vernal, Utah. Under the terms of the lease agreement, we are required to pay
$3 per ton of oil sands processed. As a condition of the lease, we were required to provide $30,000 toward initial tonnage of oil sands
to be processed at a cost of approximately $3.00 per ton. The nano Fenix Iron are finished goods that have a 20-year shelf life and were
acquired at cost for $192,000. As of December 31, 2021, inventories consist primarily of the Fenix Iron. Inventories are valued at the
lower of cost or market (net realizable value).
Note 6. Property and Equipment
The following table sets forth the components
of the Company’s property and equipment at June 30, 2022 and December 31, 2021:
| Schedule of property and equipment, net | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
June 30, 2022 | | |
December 31, 2021 | |
| | |
Gross Carrying Amount | | |
Accumulated Depreciation | | |
Net Book Value | | |
Gross Carrying Amount | | |
Accumulated Depreciation | | |
Net Book Value | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Office furniture and equipment | |
$ | 14,998 | | |
$ | 4,956 | | |
$ | 10,042 | | |
$ | 14,998 | | |
$ | 4,000 | | |
$ | 10,998 | |
| Vehicles | |
| 36,432 | | |
| 22,466 | | |
| 13,966 | | |
| 48,248 | | |
| 26,306 | | |
| 21,942 | |
| Precious metal extraction machine- 1 ton | |
| 2,280,000 | | |
| 285,000 | | |
| 1,995,000 | | |
| 2,280,000 | | |
| 228,000 | | |
| 2,052,000 | |
| Precious metal extraction machine- 10 ton | |
| 5,320,000 | | |
| 665,000 | | |
| 4,655,000 | | |
| 5,320,000 | | |
| 532,000 | | |
| 4,788,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Construction in process: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Bioreactors | |
| 1,440,000 | | |
| – | | |
| 1,440,000 | | |
| 1,440,000 | | |
| – | | |
| 1,440,000 | |
| Nanosponge/Cavitation device | |
| 22,103 | | |
| – | | |
| 22,103 | | |
| 22,103 | | |
| – | | |
| 22,103 | |
| Remediation Processing Unit 1 | |
| 6,150,506 | | |
| – | | |
| 6,150,506 | | |
| 6,249,082 | | |
| – | | |
| 6,249,082 | |
| Remediation Processing Unit 2 | |
| 5,489,760 | | |
| – | | |
| 5,489,760 | | |
| 5,201,098 | | |
| – | | |
| 5,201,098 | |
| Remediation Processing Unit System A | |
| 3,127,669 | | |
| – | | |
| 3,127,669 | | |
| 2,561,467 | | |
| – | | |
| 2,561,467 | |
| Remediation Processing Unit System B | |
| 2,974,884 | | |
| – | | |
| 2,974,884 | | |
| 2,345,421 | | |
| – | | |
| 2,345,421 | |
| Total fixed assets | |
$ | 26,856,352 | | |
$ | 977,422 | | |
$ | 25,878,930 | | |
$ | 25,482,417 | | |
$ | 790,306 | | |
$ | 24,692,111 | |
For the year ended December 31, 2021 the
Company issued 5,413 shares
of Series C-1 Preferred Stock value at $64,950
for equipment, which has been valued based on similar cash purchases of the Series C-1 Preferred Stock at approximately $12.00 per
share. For the six months ended June 30, 2022 and 2021 depreciation expense was $195,387 and
$5,781. For the six months ended June 30, 2022 and 2021
capitalized interest to equipment from debt financing was $256,235 and
$822,700. Equipment that is
currently being manufactured is considered construction in process and is not depreciated until the equipment is placed into
service.
Note 7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist
of the following:
| Schedule of accounts payable and accrued expenses | |
| | |
| |
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Accounts payable | |
$ | 851,495 | | |
$ | 1,450,531 | |
| Office access deposits | |
| 340 | | |
| 340 | |
| Accrued compensation | |
| 400,798 | | |
| 175,000 | |
| Unearned revenue | |
| 69,784 | | |
| – | |
| Accrued interest (working interest royalty programs) | |
| 1,341,079 | | |
| – | |
| Accrued tax penalties and interest | |
| 398,114 | | |
| 398,114 | |
| Accounts payable and accrued expenses | |
$ | 3,061,610 | | |
$ | 2,023,985 | |
As of December
31, 2021 the Company accrued $225,000 for a milestone payment to be paid to TBT Group, Inc. (of which an independent Vivakor Board
member is a 7% shareholder) related to our worldwide, exclusive license agreement for the license of piezo electric and energy harvesting
technologies for creating self-powered sensors for making smart roadways. This milestone payment was paid in March 2022.
Note 8. Loans and Notes Payable
Loans and Notes payable (including accrued interest)
consist of the following:
| Schedule of loans and notes payable | |
| | |
| |
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Various promissory notes and convertible notes | |
$ | 50,960 | | |
$ | 50,960 | |
| Novus Capital Group LLC Note (a) | |
| 283,612 | | |
| 378,854 | |
| Triple T Notes | |
| 329,613 | | |
| 353,330 | |
| National Buick GMC | |
| 16,977 | | |
| 19,440 | |
| Various Convertible Bridge Notes (b) | |
| – | | |
| 1,075,813 | |
| Blue Ridge Bank | |
| 410,200 | | |
| 410,200 | |
| Small Business Administration | |
| 324,267 | | |
| 318,175 | |
| JP Morgan Chase Bank | |
| 90,645 | | |
| 90,645 | |
| Various Promissory Notes (c) | |
| 2,308,232 | | |
| 3,416,379 | |
| Total Notes Payable | |
$ | 3,814,506 | | |
$ | 6,113,796 | |
| | |
| | | |
| | |
| Loans and notes payable, current | |
$ | 962,405 | | |
$ | 1,511,447 | |
| Loans and notes payable, current attributed to variable interest entity | |
| 2,308,232 | | |
| 3,416,379 | |
| Loans and notes payable, long term | |
$ | 543,869 | | |
$ | 1,185,970 | |
| Schedule of maturities of loans and notes payable | |
| | |
| 2022 | |
$ | 2,787,944 | |
| 2023 | |
| 518,114 | |
| 2024 | |
| 72,278 | |
| 2025 | |
| 68,878 | |
| 2026 | |
| 111,979 | |
| Thereafter | |
| 255,313 | |
| Total | |
$ | 3,814,506 | |
__________________
| (a) |
On September 5, 2017, the Company acquired patents in the amount of $4,931,380 in which the Company also agreed to assume the encumbering debt on asset in the amount of $334,775 due in December 2019 with no interest accruing until 2020 and a deferred tax liability of $1,043,398. As of April 1 2022, the lender agreed to extend the maturity of the note to April 1, 2023 with an initial payment of $52,448 and approximate monthly payment of $29,432 thereafter until the note is fully paid. |
| (b) |
In 2021 and 2020 the Company entered into various convertible promissory notes as follows: |
| |
Throughout 2021 and 2020 the Company
entered into convertible promissory notes with an aggregate principal of $415,000. The notes accrue interest at 10% per annum and have
a maturity of the earlier of 12 months or the consummation of the Company listing its Common Stock on a senior stock exchange. The notes
are convertible at the Company’s option into shares of the Company’s common stock at a price equal to 80% of the opening price
of the Company’s common stock on the national exchange or the offering price paid by the investors in the financing in connection
with the uplist, whichever is lower, or (ii) repaid in cash in an amount equal to the indebtedness being repaid plus a premium payment
equal to 15% of the amount being repaid. If an event of default has occurred and the Company does not convert the amounts due under the
Note into the Company’s common stock, then the Company will have the option to convert the outstanding indebtedness into shares
of the Company’s common stock at a price equal to 80% of the weighted average trading price of the Company’s common stock
on the OTC Markets, or be repaid in cash in an amount equal to all principal and interest due under the Note. All of these notes were
converted to common stock as of June 30, 2022. |
| |
|
| |
On
October 13, 2020, the Company entered into a convertible promissory note in an amount of $280,500 having an interest rate of 12% per annum.
The note bears a 10% Original Issue Discount. The loan shall mature in 1 year and may be convertible at the lower of $12.00 or 80% of
the lowest median daily traded price over ten trading days prior to conversion, but in the event of a Qualified Uplist the note may be
converted at a 30% discount to market. The Company also issued 3,333 restricted shares with no registration rights in conjunction with
this note, which was recorded as a debt discount in the amount of $44,000, which is amortized to interest expense over the term
of the agreements using the effective interest method. On March 28, 2021 the parties amended this agreement to state that in no event
shall the conversion price be lower than $3.00 per share. In October 2021 the parties agreed to extend the maturity of this loan to April
13, 2022 in exchange for an increase in principal owed of $30,000. This note has been converted to common stock as of June 30, 2022. |
| |
|
| |
On
February 4, 2021, the Company entered into a convertible promissory note in an amount of $277,778 having an interest rate of 12% per annum.
The note bears a 10% Original Issue Discount. The loan shall mature in 1 year and may be convertible at the lower of $12.00 or 80% of
the lowest median daily traded price over ten trading days prior to conversion, but in the event of a Qualified Uplist the note may be
converted at a 30% discount to market. The Company also issued 3,333 restricted shares with no registration rights in conjunction with
this note, which was recorded as a debt discount in the amount of $36,000, which is amortized to interest expense over the term
of the agreements using the effective interest method. On March 28, 2021 the parties amended this agreement to state that in no event
shall the conversion price be lower than $3.00 per share. In February 2022 the parties agreed to extend the maturity of this loan to August
8, 2022 in exchange for an increase in principal owed of $25,000. This note has been converted to common stock as of June 30, 2022. |
| |
|
| (c) |
Viva
Wealth Fund I, LLC is offering up to $25,000,000 in
convertible notes in a private offering. As of June 30, 2022, VWFI has raised $10,510,000
and converted $8,575,000 of this debt to VWFI LLC units. A convertible note will automatically convert
into the LLC units at the earlier of (i) the date that the Equipment is placed into quality control and testing or (ii) six months
from the date of investment. The convertible notes will accrue interest at 12% per annum and are paid quarterly. At the
maturity date, remaining interest will be paid, at which time no further interest payments will accrue. Upon the offering
termination date, all units accepted for any series of equipment will automatically convert to Vivakor common stock if the Company
has not accepted subscriptions for at least $6,250,000 for a series of equipment. The conversion price of the automatic stock
conversion will be the the greater of $13.50 or a 10% discount to market per share or in the event of a public offering, 200% of the
per share price of the Company common stock sold in an underwritten offering, which was closed on February 14, 2022 at $5.00 per
share. The termination date of the offering has been extended until November 13, 2022
in the sole discretion of the Company. As of April 28, 2021 VWFI has reached $6,250,000 in funding and has released the funding for
construction of RPC Series A. VWFI has commenced fundraising for RPC Series B and has raised approximately $4,690,000 to manufacture
RPC Series B. Subsequent to June 30, 2022 an additional $30,000 of this debt has been converted into units of the LLC. |
Note
9. Commitments and Contingencies
Leases
Commencing on September 15, 2019, the Company
entered into a five-year lease with Jamboree Center 1 & 2 LLC covering approximately 6,961 square feet of office space in Irvine,
CA. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $21,927, Year 2 $22,832,
Year 3 $23,737, Year 4 $24,712, Year 5 $25,686. As a condition of the lease, we were required to provide a $51,992 security deposit.
On February 1, 2022, the Company entered into
a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March
1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are
required to make the following monthly lease payments: Year 1 $1,950, Year 2 $2,028, Year 3 $2,110. As a condition of the lease, we were
required to provide a $2,418 security deposit.
On March 28, 2022, the Company entered into a
lease agreement for approximately 1,469 square feet of office space located in Lehi, Utah. Commencing on April 1, 2022, the Company entered
into a three-year lease with Victory Holdings, LLC. Under the terms of the lease agreement, we are required to make the following monthly
lease payments: Year 1 is comprised of April to May 2022 $867, June 2022 to March 2023 $3,550, Year 2 $3,657, Year 3 $3,766. As a condition
of the lease, we were required to provide a $3,766 security deposit.
On April 1, 2022, the Company entered into a lease
agreement for approximately 2,000 square feet of office and warehouse space located in Houston, Texas. Commencing on April 1, 2022, the
Company entered into a month-to-month lease with JVS Holdings, Inc. The lease may be terminated at any time or for any reason with a 30-day
written notice to terminate. The lease requires a monthly lease payment of $2,000 as long as the Company remains in the space.
The right-of-use asset for operating leases as
of June 30, 2022 and December 31, 2021 was $721,550 and $663,291. Rent expense for the six months ended June 30, 2022 and 2021 was $199,170
and $186,086.
The following table reconciles the undiscounted
cash flows for the leases as of June 30, 2022 to the operating lease liability recorded on the balance sheet:
| Schedule of lessee operating lease liability | |
| | |
| 2022 | |
$ | 180,195 | |
| 2023 | |
| 370,902 | |
| 2024 | |
| 304,892 | |
| 2025 | |
| 16,135 | |
| Total undiscounted lease payments | |
| 872,124 | |
| Less: Imputed interest | |
| 93,074 | |
| Present value of lease payments | |
$ | 779,050 | |
| | |
| | |
| Operating lease liabilities, current | |
$ | 364,103 | |
| Operating lease liabilities, long-term | |
$ | 414,946 | |
| | |
| | |
| Weighted-average remaining lease term | |
| 2.36 | |
| Weighted-average discount rate | |
| 7.0% | |
The discount rate is the Company’s incremental
borrowing rate, or the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an
amount equal to the lease payments in a similar economic environment. Based on an assessment of the Company’s borrowings the incremental
borrowing rate was determined to be 7%.
Employment Agreements
In June 2022, the Company entered into employment
agreements with its Chief Executive Officer and Chief Financial Officer, which provide for annual base salaries of $375,000 and $350,000,
respectively, and provide for incremental increases in their salaries upon the Company’s achievement of specific performance metrics.
The Company is currently accruing substantial portions of both executive’s base salaries (see Note 7). The employment agreements
provide for the grant of stock options to the Chief Executive Officer and Chief Financial Officer to purchase up to 955,093 and 917,825
shares of the Company’s common stock, respectively, at an exercise price equal to 110% and 100% of the fair market value of the
Company’s common stock on the date of grant. The stock option will vest after two years of continuous employment, subject to acceleration
if terminated without cause or resignations for good reason. The agreement also provides that it is anticipated that the executives will
receive bonuses for 2022 which will be determined by the Company’s Compensation Committee and Board of Directors after taking into
account the general business performance of the Company, including any completed financings and or acquisitions.
Note 10. Long-term Debt
To assist in funding the manufacture of the Company’s
Remediation Processing Centers, between 2015 and 2017, the Company entered into two agreements which include terms for the purchase of
participation rights for the sale of future revenue of the funded RPCs. The RPCs are estimated to enter scaled up operations in 2022 and
make estimated payments. The Company estimates future payments based on revenue projections for the RPCs. Due to delays in scaled up operations
(see Note 1 Long Lived Assets) the effective interest rate of these agreements increased from approximately 33% to 36%.
Long-term debt consists of the following:
| Schedule Of Long-Term Debt | |
| | | |
| | |
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Principal | |
$ | 2,196,233 | | |
$ | 2,196,233 | |
| Accrued interest | |
| 3,049,304 | | |
| 4,205,144 | |
| Debt discount | |
| (219,380 | ) | |
| (226,823 | ) |
| Total long term debt | |
$ | 5,026,157 | | |
$ | 6,174,554 | |
| | |
| | | |
| | |
| Long term debt, current | |
$ | 8,565 | | |
$ | 3,256 | |
| Long term debt | |
$ | 5,017,592 | | |
$ | 6,171,298 | |
The following table sets forth the estimated
payment schedule of long-term debt as of June 30, 2022:
| Schedule of long-term debt maturities | |
| | |
| 2022 | |
$ | 3,525 | |
| 2023 | |
| 10,795 | |
| 2024 | |
| 14,078 | |
| 2025 | |
| 18,359 | |
| 2026 | |
| 23,943 | |
| Thereafter | |
| 2,125,533 | |
| Total | |
$ | 2,196,233 | |
Note 11. Temporary Equity
The following table shows all changes to temporary equity during for
the six months ended June 30, 2021.
| Schedule of temporary equity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
Convertible Preferred Stock | |
| | |
Series B | | |
Series B-1 | | |
Series C-1 | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | |
| March 31, 2021 | |
| 213,583 | | |
$ | 1,281,500 | | |
| 459,426 | | |
$ | 3,445,716 | | |
| 260,702 | | |
$ | 4,615,927 | |
| Dividend paid in Series B-1 Preferred Stock | |
| – | | |
| – | | |
| – | | |
| – | | |
| 5,626 | | |
| 42,196 | |
| Conversion of Series B and B-1 Preferred Stock to Common Stock | |
| (213,583 | ) | |
| (1,281,500 | ) | |
| (459,426 | ) | |
| (3,445,716 | ) | |
| (266,328 | ) | |
| (4,658,123 | ) |
| June 30, 2021 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
| | |
Convertible Preferred Stock | |
| | |
Series B | | |
Series B-1 | | |
Series C-1 | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | |
| December 31, 2020 | |
| 216,916 | | |
$ | 1,301,500 | | |
| 467,728 | | |
$ | 3,507,981 | | |
| 255,289 | | |
$ | 4,550,977 | |
| Series C-1 Issue for a reduction in stock payables | |
| – | | |
| – | | |
| – | | |
| – | | |
| 5,413 | | |
| 64,950 | |
| Dividend paid in Series B-1 Preferred Stock | |
| – | | |
| – | | |
| – | | |
| – | | |
| 5,626 | | |
| 42,196 | |
| Conversion of Series B and B-1 Preferred Stock to Common Stock | |
| (216,916 | ) | |
| (1,301,500 | ) | |
| (467,728 | ) | |
| (3,507,981 | ) | |
| (266,328 | ) | |
| (4,658,123 | ) |
| June 30, 2021 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
During the year ended December 31, 2021, all shares of Series B, B-1,
and C-1 Preferred Stock were converted to common stock.
Note 12. Noncontrolling Interest
For the six months ended June 30, 2022 and 2021, the Company converted
$3,025,000 and $735,000 in Viva Wealth Fund I, LLC convertible promissory notes into 605 and 147 units of noncontrolling interest in Viva
Wealth Fund I, LLC.
For the six months ended June 30, 2021 and 2020,
the Company paid distributions to Viva Wealth Fund I, LLC unit holders of $343,889 and none.
Note 13. Share-Based Compensation & Warrants
Options
Generally accepted accounting principles require
share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income
statement based on their fair values at the date of grant, net of estimated forfeitures.
As of June 30, 2022 and December 31, 2021,
the Company has granted stock-based compensation to employees, including a 16,667
share stock award, which was issued in 2018 and vested in May 2022, 166,667
in employee stock options that were issued in 2020 and cliff vest at the end of five years, and 1,872,918
employee stock options granted in June 2022 and vest over a period of two years. For the six months ended June 30, 2022 and 2021,
stock-based compensation was $1,340,703
and $223,056.
In 2020, the Company also granted non-statutory stock options, including 133,333
stock options to the Board of Directors, which vests over 1 year, and a 333,334
stock option to a consultant, which vests over 4 years. Non-statutory stock-based compensation was $855,000
and $730,000
for the six months ended June 30, 2022 and 2021. In 2022, the Company closed on its underwritten public offering in which the
Company granted the underwriter, EF Hutton, division of Benchmark Investments, LLC ("EF Hutton"), a 45-day option to
purchase up to an additional 240,000
shares of Common Stock at the public offering price per share, less the underwriting discounts and commissions, to cover
over-allotments, if any. These options were not exercised and expired.
There were no other options granted during the
six months ended June 30, 2022 and 2021, respectively.
The assumptions used in the Black-Scholes option
pricing model to determine the fair value of the options on the date of issuance are as follows:
| Schedule of warrant assumptions |
|
|
| |
|
|
| |
|
December 31, 2020 through June 30, 2022 |
| Risk-free interest rate |
|
0.24 – 3.04% |
| Expected dividend yield |
|
None |
| Expected life of warrants |
|
3.33-10 years |
| Expected volatility rate |
|
169 - 273% |
The following table summarizes all stock option
activity of the Company for the six months ended June 30, 2022 and 2021:
| Schedule of option activity | |
| | |
| | |
| |
| | |
| | |
| | |
Weighted | |
| | |
| | |
Weighted | | |
Average | |
| | |
| | |
Average | | |
Remaining | |
| | |
Number | | |
Exercise | | |
Contractual | |
| | |
of Shares | | |
Price | | |
Life (Years) | |
| | |
| | |
| | |
| |
| Outstanding, December 31, 2021 | |
| 650,000 | | |
$ | 12.00 | | |
| 7.53 | |
| Granted | |
| 2,112,919 | | |
| 2.24 | | |
| 6.60 | |
| Exercised | |
| (16,667 | ) | |
| 11.1 | | |
| – | |
| Forfeited | |
| (240,000 | ) | |
| 5.00 | | |
| – | |
| Outstanding, June 30, 2022 | |
| 2,506,252 | | |
$ | 4.53 | | |
| 7.39 | |
| | |
| | | |
| | | |
| | |
| Exercisable, December 31, 2021 | |
| 180,000 | | |
$ | 12.00 | | |
| 7.01 | |
| Exercisable, June 30, 2022 | |
| 890,168 | | |
$ | 4.74 | | |
| 7.48 | |
| | |
| | | |
| | | |
| | |
| Outstanding, December 31, 2020 | |
| 650,000 | | |
$ | 12.00 | | |
| 6.41 | |
| Outstanding, June 30, 2021 | |
| 650,000 | | |
$ | 12.00 | | |
| 5.91 | |
| | |
| | | |
| | | |
| | |
| Exercisable, December 31, 2020 | |
| 47,083 | | |
$ | 12.00 | | |
| 3.38 | |
| Exercisable, June 30, 2021 | |
| 108,333 | | |
$ | 12.00 | | |
| 5.10 | |
As of June 30, 2022 and December 31, 2021, the
aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change
based on the fair market value of the Company’s common stock.
Warrants
As of June 30, 2022 and December 31, 2021,
the Company had 80,000
and no
warrants outstanding. On February 14, 2022, the Company closed on its underwritten public offering of 1,600,000
shares of common stock, at a public offering price of $5.00 per share. In addition, the Company has issued the underwriter, EF
Hutton, 5-year warrants to purchase 80,000
shares of common stock at an exercise price equal $5.75.
and were valued with a fair market value of $374,000. We used the Black-Scholes option pricing model to determine the fair value of
the warrants, with assumptions of a risk free rate of 1.92%, an expected life of 5 years, and volatility of 167%. The impact of
these warrants has no effect on stockholder’s equity, as they are considered equity-like instruments, and are considered a
direct expense of the offering.
Note 14. Income Tax
The Company calculates its quarterly tax provision
pursuant to the guidelines in ASC 740 Income Taxes. ASC 740 requires companies to estimate the annual effective tax rate for current year
ordinary income. In calculating the effective tax rate, permanent differences between financial reporting and taxable income are factored
into the calculation, and temporary differences are not. The estimated annual effective tax rate represents the Company’s estimate
of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then
applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision.
The
Company recorded a provision for income taxes of $800 and $723,911 for the six months ended June 30, 2022 and 2021, respectively. The
Company is projecting a (0.04)% effective tax rate for the year
ending December 31, 2022, which is primarily the result of projected provision from book loss incurred for the year offset by additional
valuation allowance on the net operating losses. The Company’s effective tax rate for 2021 was 9.18% which was the result of the
benefit of book income for the year.
As of December 31, 2021, the Company had estimated
federal and state net operating loss (NOL) carryforwards of approximately $14.3 million. Federal NOL carryforwards begin to expire in
2028.
Note 15. Subsequent Events
The Company has evaluated
subsequent events through the date the financial statements were available to issue.
On August 1, 2022, we
closed a Membership Interest Purchase Agreement, (the “MIPA”), with Jorgan Development, LLC, a Louisiana limited liability
company ("Jorgan") and JBAH Holdings, LLC, a Texas limited liability company ("JBAH" and, together with Jorgan, the
"Sellers"), as the equity holders of Silver Fuels Delhi, LLC, a Louisiana limited liability company ("SFD") and White
Claw Colorado City, LLC, a Texas limited liability company ("WCCC" ) whereby, the Company acquired all of the issued and outstanding
membership interests in each of SFD and WCCC (the “Membership Interests”), making SFD and WCCC wholly owned subsidiaries of
the Company. The purchase price for the Membership Interests is approximately $37.4 million, subject to post-closing adjustments, payable
by the Company in a combination of 3,009,552 shares of the Company’s common stock, amount equal to 19.99% of the number of issued
and outstanding shares of the Company’s common stock immediately prior to issuance, a secured three-year promissory notes made by
the Company in favor of the Sellers, and the assumption of certain liabilities of SFD and WCCC. The shares of the Company’s common
stock and the Notes will have an aggregate value of approximately $32,942,939.
Sellers have entered
into 18-month lock-up agreements at closing with regard to the 3,009,552 common shares issued for consideration for the Membership Interests.
Under the MIPA, the
Company has committed to make a payment to the Sellers on or before the 18-month anniversary of the closing date in the amount of
$16,471,469 whether in cash or unrestricted common stock.
In the event of a breach
of the terms of the MIPA, the Notes, or the Pledge Agreement, the sole and exclusive remedy of the parties will be to unwind the MIPA
transaction.
The principal amount
of the Notes, together with any and all accrued and unpaid interest thereon, will be paid to the Sellers on a monthly basis in an amount
equal to the Monthly Free Cash Flow continuing thereafter on the twentieth (20th) calendar day of each calendar month thereafter.
Monthly Free Cash Flow means cash proceeds received by SFD and WCCC from its operations minus any capital expenditures (including, but
not limited to, maintenance capital expenditures and expenditures for personal protective equipment, additions to the land/current facilities
and pipeline connections) and any payments on capital lease obligations of SFD and WCCC.
In conjunction with the
closing under the MIPA, SFD, WCCC and the Company will enter into a Shared Services Agreement with Endeavor Crude, LLC, a Texas limited
liability company affiliated with the Sellers (“Endeavor”), under which Endeavor will provide certain operating and administrative
services to SFD and WCCC.
In conjunction with the
closing we entered into a Master Netting Agreement, hereto (the “Netting Agreement”), with Jorgan, JBAH, Endeavor and White
Claw Crude, LLC under which all amounts as a result of all Contracts during a given calendar month shall be netted against all amounts
owed as a result of all contracts and the resulting net amount shall be payable. The Netting Agreement includes contracts such as the
MIPA, the Notes, any pledge agreements, the Shared Services Agreement, the Crude Petroleum Supply Agreement dated January 1, 2021, by
and between WC Crude and SFD, as amended, and the Oil Storage Agreement dated January 1, 2021, by and between WC Crude, as Shipper, and
WCCC, as Operator, as amended.
In the acquisition
of WCCC we also acquired WCC’s Oil Storage Agreement with WC Crude, under which WC Crude has the right, subject to the payment of
service and maintenance fees, to store volumes of crude oil and other liquid hydrcarbons at a certain crude oil and liquid hydrocarbon
receipt, storage, blending, throughput and delivery terminal operated by WCCC, which expires on December 31, 2031.
In the acquisition of
SFD, we acquired a Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”), under which WC Crude supplies
volumes of Crude Petroleum to SFD. WC Crude and SFD will be entered into an amendment to the Supply Agreement, in conjunction with the
closing under the MIPA, which provides for the delivery to SFD a minimum of 1,000 sourced barrels per day, and includes a guarantee that
when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin that WC Crude will pay to SFD the difference between
the sales price and $5.00 per barrel In the event that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit sharing payment
in the amount equal to 10% of the excess price over $5.00 per barrel, which amount will be multiplied by the number of barrels associated
with the sale. The Supply Agreement, as amended, will remain in effect through and including December 31,2031.
In the acquisition of
SFD, we acquired a crude oil gathering, storage, and transportation facility located on approximately 9.3 acres near Delhi, Louisiana,
along with its existing sales agreements, where a subsidiary of a large NYSE traded energy company is obligated to purchase blended crude
oil from SFD in amounts up to 60,000 barrels per month. With prior approval, SFD is eligible to sell to the Purchaser amounts greater
than 60,000 barrels of crude oil per month. In the acquisition of WCCC, we acquired a 120,000 barrel crude oil storage tank, in the heart
of the Permian Basin, located near Colorado City, Texas. The storage tank is presently connected to the Lotus pipeline system
Subsequent to June 30, 2022, VWFI has raised $430,000
in conjunction with the $25,000,000 private placement offering to sell convertible promissory notes, which convert to VWFI LLC units,
to accredited investors to raise funds to manufacture equipment that manufacture RPC Series B. Subsequent to June 30, 2022, VWFI has also
converted $30,000 of convertible debt into VWFI LLC units.