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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A
(Amendment No. 1)

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 1, 2024

 

VIVAKOR, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   001-41286   26-2178141

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

5220 Spring Valley Road, Suite 500

Dallas, TX 75254

(Address of principal executive offices)

 

(949) 281-2606

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   VIVK   The Nasdaq Stock Market LLC (Nasdaq Capital Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

 

 

Explanatory Note

 

On October 7, 2024, Vivakor, Inc. (the “Company”), a Nevada corporation, filed a Current Report on Form 8-K (the “Initial Report”) to report that on October 1, 2024, the Company, 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 Endeavor Crude, LLC, a Texas limited liability company, Equipment Transport, LLC, a Pennsylvania limited liability company, Meridian Equipment Leasing, LLC, a Texas limited liability company, and Silver Fuels Processing, LLC, a Texas limited liability company (collectively, the “Endeavor Entities”) closed the transactions that were the subject of the previously-disclosed Membership Interest Purchase Agreement among them dated March 21, 2024, as amended (the “MIPA”).

 

This Current Report on Form 8-K/A (this “Amendment”) amends and supplements the Initial Report to provide financial statements of the Endeavor Entities, and the pro forma financial statements of the Company required by Item 9.01 of Form 8-K. No other modifications to the Initial Report are being made by this Amendment. This Amendment should be read in connection with the Initial Report, which provides a more complete description of the MIPA and transactions contemplated thereby. The financial statements of the Endeavor Entities are presented in two sets of financial statements for each period reported, with one set of financial statements being the combined financial statements of Endeavor Crude, LLC, which includes the combined financial results of Endeavor Crude, LLC, Equipment Transport, LLC and Meridian Equipment Leasing, LLC, and the second set of financial statements being the financial statements of Silver Fuels Processing, LLC.

 

1

 

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of the Endeavor Entities

 

The audited combined financial statements of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC, and the audited financial statements of Silver Fuels Processing, LLC as of and for the years ended December 31, 2023 and 2022, together with the related notes to the financial statements, are included as Exhibits 99.1 and 99.2 to this Current Report.

 

The unaudited combined financial statements of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC and the unaudited financial statements of Silver Fuels Processing, LLC, for the six months ended June 30, 2024 and 2023, together with the related unaudited notes to the financial statements, are included as Exhibits 99.3 and 99.4 to this Current Report and are incorporated herein by reference.

 

The unaudited combined financial statements of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC, and the unaudited financial statements of Silver Fuels Processing, LLC, for the nine months ended September 30, 2024 and 2023, together with the related unaudited notes to the financial statements, are included as Exhibits 99.5 and 99.6 to this Current Report and are incorporated herein by reference.

 

(b) Pro Forma Financial Information.

 

The unaudited pro forma consolidated financial statements of the Company for the six months ended June 30, 2024, the nine months ended September 30, 2024 and for the year ended December 31, 2023, are included as Exhibit 99.7 to this Current Report and are incorporated herein by reference.

 

The pro forma financial information included in this Amendment No.1 has been presented for informational purposes only and is not necessarily indicative of the consolidated financial position or results of operations that would have been realized had the acquisition occurred as of the dates indicated, nor is it meant to be indicative of any anticipated consolidated financial position or future results of operations that the Company will experience after the acquisition. The pro forma financial information is subject to a full valuation report to be completed by the Company by September 30, 2025according to ASC 805.

 

(d) Exhibits

 

99.1   Audited Annual Combined Financial Statements of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC for the Years Ended December 31, 2023 and 2022
99.2   Audited Annual Financial Statements of Silver Fuels Processing LLC, for the Years Ended December 31, 2023 and 2022
99.3   Unaudited Combined Financial Statements of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC for the Six Months Ended June 30, 2024 and 2023
99.4   Unaudited Financial Statements of Silver Fuels Processing, LLC, for the Six Months Ended June 30, 2024 and 2023
99.5   Unaudited Combined Financial Statements of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC for the Nine Months Ended September 30, 2024 and 2023
99.6   Unaudited Financial Statements of Silver Fuels Processing, LLC, for the Nine Months Ended September 30, 2024 and 2023
99.7   Unaudited Pro Forma Consolidated Financial Information
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

2

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  VIVAKOR, INC.
     
Dated: December 13, 2024 By: /s/ Tyler Nelson
    Name: Tyler Nelson
    Title: Chief Financial Officer

 

3

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

Endeavor Crude, LLC and Meridian

 

Equipment Leasing, LLC

 

Audited Combined Financial Statements

 

as of and for the year ended

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Table of Contents

 

 

 

Independent Auditors’ Report   1-2
     
Combined Balance Sheet as of December 31, 2023   3
     
Combined Statement of Income for the year ended December 31, 2023   4
     
Combined Statement of Members’ Equity for the year ended December 31, 2023   5
     
Combined Statement of Cash Flows for the year ended December 31, 2023   6
     
Notes to the Combined Financial Statements   7-22

 

i

 

 

 

INDEPENDENT AUDITORS’ REPORT

 

Management

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Dallas, Texas

 

 

Opinion

 

We have audited the accompanying combined financial statements of Endeavor Crude, LLC and Meridian Equipment Leasing, LLC, which comprise the balance sheet as of December 31, 2023 and the related combined statements of income, members’ equity, and statement of cash flows for the year then ended, and the related notes to the combined financial statements.

 

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Endeavor Crude, LLC and Meridian Equipment Leasing, LLC, as of December 31, 2023 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Combined Financial Statements section of our report. We are required to be independent of Endeavor Crude, LLC and Meridian Equipment Leasing, LLC and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Responsibilities of Management for the Combined Financial Statements

 

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Endeavor Crude, LLC and Meridian Equipment Leasing, LLC’s ability to continue as a going concern within one year after the date that the combined financial statements are available to be issued.

 

 

 

1

 

 

Auditors’ Responsibilities for the Audit of the Combined Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.

 

In performing an audit in accordance with generally accepted auditing standards, we:

 

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Endeavor Crude, LLC and Meridian Equipment Leasing, LLC’s internal control. Accordingly, no such opinion is expressed.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined financial statements.

 

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Endeavor Crude, LLC and Meridian Equipment Leasing, LLC’s ability to continue as a going concern for a reasonable period of time

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

 

Shreveport, Louisiana

June 6, 2024

 

 

 

 

2

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Combined Balance Sheet
as of December 31, 2023

 

 

 

Assets        
Current assets        
Cash     1,164,555  
Restricted cash, Note 11     1,262,525  
Trade accounts receivable, net of allowance for credit losses of $24,531 as of December 31, 2023, Note 2     11,925,230  
Prepaid expenses     546,655  
Inventory     46,784  
Other current assets     2,953,305  
Total current assets     17,899,054  
         
Property and equipment, net, Note 4     65,895,192  
         
Other assets        
Right-of-use asset - operating, Note 9     5,657,160  
Other assets     871,655  
Total other assets, net     6,528,815  
         
Total assets     90,323,061  
         
Liabilities and members’ equity        
Current liabilities        
Trade payables     1,623,303  
Accrued liabilities     5,510,927  
Due to related-parties, Note 5     1,182,193  
Line of credit, Note 11     5,575,005  
Short-term notes payable, Note 13     2,397,623  
Current portion of finance lease obligations, Note 8     6,200,710  
Current portion of operating lease obligations, Note 9     2,486,740  
Current portion of long-term debt, Note 7     14,843,727  
Total current liabilities     39,820,228  
         
Long-term liabilities        
Finance lease obligations - less current portion, Note 8     8,773,041  
Operating lease obligations - less current portion, Note 9     3,164,086  
Long-term debt - less current portion, Note 7     13,104,926  
Total long-term liabilities     25,042,053  
         
Members’ equity     25,460,780  
         
Total liabilities and members’ equity     90,323,061  

 

See independent auditors’ report and accompanying notes to the combined financial statements.

 

3

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Combined Statement of Income

for the year ended December 31, 2023

 

 

 

Sales     52,509,189  
         
Operating expenses        
Operating     7,500  
Auto     2,825,237  
Credit losses     39,197  
Bank charges     567  
Business licenses     884  
Business taxes     220,033  
Computer     384,305  
Contract labor     89,941  
Depreciation     6,989,967  
Employee benefits     207,471  
Insurance     229,714  
Inspections     7,005  
Licenses and permits     209,913  
Meals     866  
Miscellaneous     809,731  
Office     7,353  
Payroll taxes     256,653  
Professional fess     383,987  
Rent     354,237  
Repairs and maintenance     1,274,726  
Regulatory     29,511  
Training     6,552  
Travel     236,922  
Utilities     291,769  
Tools     1,432  
Supplies     107,389  
Employee     90,668  
Lease     169,574  
Amortization     830,850  
Salaries and wages     31,595,576  
Total operating expenses     47,659,530  
         
Income from operations     4,849,659  
         
Other income (expense)        
Other income     1,103,016  
Interest income     70,696  
Gain on sale of assets     (48,630 )
Interest expense     (2,338,911 )
Legal settlement     (64,155 )
Total other expense     (1,277,984 )
         
Net income     3,571,675  

 

See independent auditors’ report and accompanying notes to the combined financial statements.

 

4

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Combined Statement of Members’ Equity

for the year ended December 31, 2023

 

 

 

   

Accumulated

Other

Comprehensive

Income

   

Members’

Equity

    Total  
Balance, December 31, 2022     28,884       30,990,723       31,019,607  
                         
Amounts reclassified from accumulated other comprehensive income     (28,884 )     28,884       0  
                         
Net income     0       3,571,675       3,571,675  
Members’ contributions     0       4,901,138       4,901,138  
Members’ distributions     0       (14,031,640 )     (14,031,640 )
                         
Balance, December 31, 2023     0       25,460,780       25,460,780  

 

See independent auditors’ report and accompanying notes to the combined financial statements.

 

5

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Combined Statement of Cash Flows

for the year ended December 31, 2023

 

 

 

Cash flows from operating activities        
Net income     3,571,675  
Adjustments to reconcile net income to net cash used in operating activities:        
Credit losses     39,197  
Depreciation     6,989,967  
Amortization of trucking contracts     830,850  
Loss on disposal of assets     48,630  
Amortization of debt issuance costs     77,346  
(Increase) decrease in:        
Trade accounts receivable     (11,715,257 )
Inventory     446,352  
Prepaid expenses     (295,779 )
Other assets     (401,118 )
Increase (decrease) in:        
Trade payables     (3,782,530 )
Accrued liabilities     3,913,346  
Other liabilities     (137,500 )
Net cash used in operating activities     (414,821 )
         
Cash flows from investing activities        
Purchases of property and equipment     (13,612,927 )
Proceeds from sale of assets     150,937  
Net cash used in investing activities     (13,461,990 )
         
Cash flows from financing activities        
Net borrowings on line of credit     3,579,946  
Repayments of finance lease obligations     (2,959,635 )
Repayments on long-term debt     (2,406,890 )
Proceeds from issuance of long-term debt     14,478,240  
Debt issuance costs incurred     (302,750 )
Members’ contributions     2,579,500  
Members’ distributions     (1,980,414 )
Net cash provided by investing activities     12,987,997  
         
Net change in cash and cash equivalents     (888,814 )
         
Beginning cash and cash equivalents     2,053,369  
         
Ending cash and cash equivalents     1,164,555  
         
Supplemental disclosure of cash flow information        
Cash paid for interest     2,261,565  
         
Supplementary non-cash investing and financing activities        
Assignment of related-party receivables to parent through distributions     12,051,226  
Assumption of related-party payables by parent through contributions     2,321,638  
Obtaining right-of-use assets in exchange for finance lease obligations     10,160,304  

 

See independent auditors’ report and accompanying notes to the combined financial statements.

 

6

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(1) Nature of Business

Endeavor Crude, LLC (“Endeavor”) and Meridian Equipment Leasing, LLC (“Meridian”) (collectively, the “Company” or “Companies”) are privately held Texas limited liability companies. CPE Gathering Midcon, LLC (“CP”), a wholly-owned subsidiary of Meridian, is a privately held Delaware limited liability company and Equipment Transport, LLC (“ET”), a wholly-owned subsidiary of Meridian, is a privately held Pennsylvania limited liability company. The Company is primarily engaged in the business of crude oil transportation.

 

Endeavor was formed in February 2019 and began operations in April 2019. Meridian was formed in April 2019 and began operations in May 2019 through the acquisition of real estate and trucking assets. Endeavor’s primary activity of generating revenue is the transportation of crude oil through its operation of a fleet of trucks and tank trailers primarily servicing Texas and New Mexico. Meridian is the owner of this fleet of trucks and tank trailers. Meridian’s primary activity of generating revenue is the leasing of these trucks and tank trailers to Endeavor.

 

In December 2022, Meridian acquired 100% of the membership interests in CP through a business acquisition. CP owns and operates several transfer stations and pipelines used in the processing and transportation of crude oil and gas.

 

In December 2023, Meridian acquired 100% of the membership interests in ET through a business acquisition. ET owns and operates a fleet of trucks and tank trailers used in the transportation of crude oil and gas. See Note 10.

 

(2) Summary of Significant Accounting Policies

Basis of accounting – The combined financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Principles of consolidation/combination – These financial statements have been combined as the Companies are under common ownership and management. Meridian’s wholly owned subsidiaries have been consolidated into Meridian’s financial statements before combination. All intercompany transactions and balances have been eliminated during consolidation and combination.

 

Basis of presentation and use of estimates – The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

See independent auditors’ report.

 

7

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Cash and cash equivalents – Cash and cash equivalents include all cash on hand and cash on deposit with maturities of less than three months.

 

Trade accounts receivable and allowance for credit losses – The Company’s trade accounts receivable are primarily derived from trucking transportation customers. At each balance sheet date, the Company recognizes an expected allowance for credit losses. In addition, also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist.

 

The allowance estimate is derived from a review of the Company’s historical losses based on the aging of receivables. This estimate is adjusted for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segment, trucking transportation customers, has remained constant since the Company’s inception. The allowance for credit losses for trade accounts receivable was $24,531 as of December 31, 2023.

 

Property and equipment – Property and equipment are carried at cost, less accumulated depreciation. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of property and equipment are 3-7 years.

 

Routine maintenance and repairs are charged to operating expense, while costs of improvements and replacements are capitalized. When an asset is retired or sold, its cost and related accumulated depreciation are removed from the accounts, and the difference between the net book value of the asset and proceeds from disposition is recognized as a gain or loss in the combined statement of operations.

 

Other intangible assets – Other intangible assets consist of an acquired trucking contract that has been assigned a useful life of 5 years and is being amortized on a straight-line basis.

 

Total amortization expense relating to the trucking contract was $830,850 for the year ended December 31, 2023.

 

See independent auditors’ report.

 

8

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Fair Value Measurements – 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 framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under ASC 820 are described as follows:

 

Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Impairment of long-lived assets – The Company regularly assesses all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews all material assets annually for possible impairment. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. No impairment was considered necessary during the year ended December 31, 2023.

 

Interest rate used for operating leases – Under the provisions of FASB ASC 842-10-65-1, the Company has elected to use the risk-free discount rate of a U.S. government bond with a period comparable with that of the lease term for all operating leases placed on the combined balance sheet.

 

See independent auditors’ report.

 

9

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Revenue recognition – Substantially all revenue the Company earns is related to trucking fees charged to customers for gathering and transporting crude oil and gas products.

 

Management has identified that a legally enforceable contract with its customers is executed by both parties at the point of pickup at the customer’s location. Although the Company may have master agreements with its customers, these master agreements only establish general terms and there is no financial obligation to the customer until the load is accepted and the Company takes possession of the load.

 

The Company’s only performance obligation is transportation services, which is completed at the point in time in which the Company delivers the load to the customer’s designated delivery point, effectively transferring control of the load to the customer. At such time, the Company recognizes the related transportation revenue. There is no significant financing component in transaction price, as the Company’s customers generally pay within the contractual payment terms of 30 to 60 days.

 

Debt issuance costs – Debt issuance costs represent costs incurred in relation to the Main Street Loan Credit Facility (see Note 7). Such costs have been deferred and are being amortized on a straight-line basis over the five-year term of the related loan. Long-term debt, net of current portion is recorded on the accompanying combined balance sheet net of unamortized debt issuance costs. A total of $52,415 has been amortized to interest expense during the year ended December 31, 2023.

 

Income taxes – The Companies are limited liability companies that are taxed as partnerships for federal and state income tax purposes. As such, the Companies do not pay income taxes, as any income or loss and credits are included in the tax returns of the individual member. Accordingly, no provision has been made for income taxes in the combined financial statements.

 

Under the provisions of FASB ASC 740-10, the Company records a liability for uncertain tax positions when probable that a loss has been incurred and the amount can be reasonably estimated. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

 

Subsequent events – Management has evaluated subsequent events through June 6, 2024 the date these financial statements were available to be issued. There were no material subsequent events that required recognition or disclosure in these financial statements. See note 15.

 

See independent auditors’ report.

 

10

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(3) Major Customers and Concentration of Credit Risk

Endeavor had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

 

The Company had one (1) major customer that accounted for approximately 30% of revenue for the year ended December 31, 2023 and 34% of the balance of accounts receivable as of December 31, 2023.

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company has not experienced any losses in such accounts.

 

(4) Property and Equipment

The Company’s balance of property and equipment at year end is comprised of the following:

 

  Land     2,848,857  
  Buildings and Improvements     1,700,201  
  Trucks and trailers     30,603,602  
  Right-of-use asset - finance leases     14,718,960  
  Pipeline and tanks     41,107,022  
  Sub-total     90,978,642  
  Less: accumulated depreciation     (25,083,450 )
  Property and equipment, net     65,895,192  

 

Depreciation expense related to property and equipment was $6,989,967 for the year ended December 31, 2023

 

(5) Related-Party Transactions

During the year ended December 31, 2023, the Company received an operating loan from Waskom Enterprises, LLC, a related party controlled by James H. Ballengee (“Ballengee”), the manager of Jorgan Development, LLC, the majority owner of the Company. The loan is short term in nature with no stated repayment terms. As of December 31, 2023, the Company owed a total of $1,182,193 to Waskom Enterprises, LLC.

 

See independent auditors’ report.

 

11

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(5) Related-Party Transactions (continued)

On January 1, 2023, Endeavor entered into a take or pay agreement with White Claw Crude, LLC (“WCC”), a related party controlled by Ballengee, in which the Company is to provide hauling services to WCC for their crude oil and gas products. The agreement states that if WCC does not haul 100,000 barrels per day during the period January 1, 2023 through December 31, 2033, the minimum volume commitment (“MVC”), then WCC must pay the Company a deficiency fee equal to the shortage amount, in barrels, multiplied by 25% of the average rate of all hauls for the related calendar year. During the year ended December 31, 2023, the Company earned $8,997,073 in deficiency fees, which are included in sales in the accompanying combined statement of income.

 

On January 1, 2023, CP entered into a take or pay agreement with WCC in which WCC is to process and transfer 200,000 barrels per month, the MVC, of its crude oil and gas products through the Company’s processing and transfer terminals. The agreement states WCC must pay the Company an amount equal to the greater of the actual volume of product transferred multiplied by the applicable rate, or, the MVC multiplied by the applicable rate. The applicable rates are $1.00 per barrel up to the MVC and $.50 for each barrel in excess of the MVC. During the year ended December 31, 2023, the Company earned $2,401,422 from the agreement, which are included in sales in the accompanying combined statement of income.

 

(6) Note Payable – PPP Loan

On March 11, 2020, the World Health Organization pronounced the coronavirus (COVID-19) outbreak a pandemic. Citizens and the economies of the United States and other countries have been significantly impacted by the pandemic. In response to the COVID-19 outbreak in 2020, the U.S. Federal Government enacted the Coronavirus Aid, Relief, and Economic Security Act that, among other economic stimulus measures, established the Paycheck Protection Program (PPP) to provide small business loans. In April 2020, the Company obtained its first PPP loan in the amount of $2,145,300. The note matures in April 2025 and bears interest at a fixed annual rate of 1% with the first six months of interest deferred. During the period ending December 31, 2021, the Company received a second PPP loan in the amount of $2,000,000 and received forgiveness of $1,000,735 for the first loan. The second note matures in February of 2026 and bears interest at a fixed annual rate of 1%. The Company believes that all PPP proceeds have been used on qualifying expenses and expects to be forgiven for the remaining portion of the first loan, as well as the full amount of the second loan.

 

See independent auditors’ report.

 

12

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(7) Long-term Debt
  Long-term debt as of December 31, 2023 consisted of the following:        
  Note payable to Ford Credit dated November 1, 2019, payable in 54 monthly installments of $860 at 8.6% interest. Note is collateralized by a 2019 Ford Explorer.     3,008  
  Note payable to B1Bank dated February 12, 2020, payable in 48 monthly installments of $7,278 at 5.5% interest. Note is collateralized by 6 Dragon tractor trailers.     13,985  
  Main Street Lending Priority Loan Agreement with Business First Bank dated November 12, 2020. Interest accrues at the LIBOR rate plus 3% per annum; maturing on November 12, 2025; secured by substantially all assets of the Company.     10,760,805  
  Note payable to the U.S. Small Business Administration dated June 16, 2020, payable in 348 monthly installments of $731 beginning June 16, 2021 at 3.75% interest. Note is collateralized by substantially all assets of the Company.     160,000  
  Note payable to Ally Financial dated July 30, 2021, payable in 60 monthly installments of $1,645 at 6.24% interest. Note is collateralized by a 2020 Dodge Challenger.     50,393  
  Note payable to TD Ameritrade dated January 4, 2021, payable in 72 monthly installments of $991.21 at 6.89% interest. Note is collateralized by a 2019 Ford Expedition.     32,838  
  Note payable to TD Ameritrade dated December 9, 2021, payable in 72 monthly installments of $1,434 at 4.94% interest. Note is collateralized by a 2018 Jeep Grand Cherokee.     62,378  
  Note payable to Ally Financial dated December 24, 2021, payable in 60 monthly installments of $1,532 at 9.79% interest. Note is collateralized by a 2018 Ford Expedition.     46,684  
  Note payable to Ford Credit dated March 31, 2023, payable in 60 monthly installments of $1,046 at 0.90% interest. Note is collateralized by a 2018 Ford F-150.     57,272  
  Note payable to Ford Credit dated March 31, 2023, payable in 60 monthly installments of $1,093 at .9% interest. Note is collateralized by a 2022 Ford F-150.     60,249  
  Notes payable to Small Business Administration dated April 10, 2020 and February 4, 2021, payable in 60 monthly installments of $30,374 and $35,024, respectively, at 1.00% interest. Notes are collateralized by the Company’s real and personal property.     2,482,360  

 

See independent auditors’ report.

 

13

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(7) Long-term Debt (continued)
  Note payable to Ford Credit dated July 17, 2023, payable in 48 monthly installments of $1,622 at 9.99% interest. Note is collateralized by a 2021 Chevrolet Tahoe.     58,787  
  Note payable to TD Ameritrade dated January 6, 2023, payable in 72 monthly installments of $1,194 at 8.99% interest. Note is collateralized by a 2021 Ford F-250.     58,351  
  Note payable to Ally Financial dated February 27, 2023, payable in 72 monthly installments of $1,163 at 10.89% interest. Note is collateralized by a 2022 Ford F-150.     55,849  
  Note payable to Ford Credit dated July 7, 2023, payable in 48 monthly installments of $1,195 at 2.9% interest. Note is collateralized by a 2023 Ford F-150.     54,935  
  Note payable to Ford Credit dated September 8, 2023, payable in 48 monthly installments of $2,370 at 10.79% interest. Note is collateralized by a 2022 Dodge Charger.     86,854  
  Note payable to Pilot OFS Holdings, LLC dated December 31, 2023, payable in one lump sum payment of $12,500,000 plus all interest accrued at a rate of 10.5% on June 30, 2024. Note is collateralized by 405 various tractors, trucks, and trailers along with all related tools and supplies.     12,500,000  
  Note payable to Pilot OFS Holdings, LLC dated December 1, 2023, payable in 18 monthly installments of $90,431 at 10.5% interest. Note is collaterlized by 28 various tanker trailers.     1,500,000  
  Less: unamortized debt issuance costs     (96,095 )
  Long-term debt, less unamortized debt issuance costs     27,948,653  
  Less: current portion     (14,843,727 )
  Total long-term debt, less current portion     13,104,926  

 

Following are maturities of long-term debt for each of the next five years:

 

  2024   14,843,727 
  2025   10,727,026 
  2026   2,162,737 
  2027   115,025 
  2028 & thereafter   100,138 
  Totals   27,948,653 

 

See independent auditors’ report.

 

14

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(8) Finance Lease Obligations

On December 28, 2021, the Company entered into six finance leases with Maxus Capital Group, LLC (Maxus) for 57 trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $10,986 to $14,483 and the option to purchase the leased equipment at the end of the lease term ranging from $37,927 to $50,000. The Company is required to make a one-time security deposit payment for each lease ranging from $10,986 to $14,483 to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreement, including the Company’s option to purchase the leased assets from Maxus at the end of the lease term, classify the lease as a finance lease in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation equal to the present value of the future cash payments using the interest rate provided by Maxus Capital Group of 8.61%, as well as a lease asset equal to the present value of the future cash payments using an interest rate of 8.61% plus lease costs of $94,905 and prepaid lease payments of $111,555.

 

On April 21, 2022, the Company entered into two additional finance leases with Maxus, the first being for thirty (30) trucks and tanker trailers and the second being for two (2) tanker trailers.

 

Both leases have a term of thirty-six (36) months with monthly installments of $24,767 and $4,473 for the first and second lease, respectively. Both leases include an option to purchase the leased equipment at the end of the lease term for $83,400 and $15,000 for the first and second lease, respectively. The Company is required to make a one-time security deposit payment of $24,767 and $4,473 for the first and second lease, respectively, to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposits.

 

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the interest rate provided by Maxus Capital Group of 10.44% and 10.19% for the first and second lease, respectively, as well as lease assets equal to the present value of the future cash payments using an interest rate of 10.44% and 10.19%, respectively, plus lease costs of $25,030 and $5,150 for the first and second lease, respectively.

 

See independent auditors’ report.

 

15

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(8) Finance Lease Obligations (continued)

On December 22, 2022, the Company entered into two sale and leaseback transactions with Maxus. The Company assigned all of the assets comprising the pipeline system that was acquired from the acquisition of CPE Gathering Midcon, LLC to Maxus for consideration of $3,250,000 and $1,198,931 for the first and second sale, respectively. and entered into two lease agreements to lease the pipeline assets back from Maxus for 60 monthly payments of $56,803 and $20,955 for the first and second lease, respectively. At the end of the lease term, the Company has an option to purchase the pipeline assets back from Maxus for $1,218,762 and $449,604 for the first and second lease, respectively.

 

The Company has pledged 100% of its interests in the related pipeline assets as collateral for the lease obligations.

 

The Company is required to make one-time security deposit payments of $56,803 and $20,955 for the first and second lease, respectively, to be used in the event of a default by the Company. In addition, the Company is required to make minimum cash reserve payments of at least $18,934 and $6,985 for the first and second lease, respectively, each month in addition to the base lease payments until Maxus has received $681,640 and $251,458 for the first and second lease, respectively. The cash reserve payments are to be used in the event of default by the Company. All security deposit amounts as well as cash reserve amounts will be fully refunded to the Company at the end of the lease term. As of December 31, 2023, the balance of cash reserve payments made under these lease obligations was $311,033.

 

The terms of the lease agreement, including the Company’s option to purchase the pipeline assets from Maxus at the end of the lease term, preclude the Company from using sale and leaseback accounting treatment in accordance with FASB ASC-842-40. As such, the transaction is being accounted for as a financing arrangement, whereby the Company does not record a sale or derecognize the pipeline assets. The Company continues to record depreciation expense on the pipeline assets and has recorded a financial liability due to Maxus (included in Finance lease obligations in the accompanying balance sheet).

 

The Company is using imputed interest rates of 16.85% and 17.39% for the first and second lease, respectively, which results in the carrying value of the financial liability equating the estimated book value of the pipeline assets at the end of the lease terms and the date at which the Company may exercise its buy-back option.

 

See independent auditors’ report.

 

16

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(8) Finance Lease Obligations (continued)

On March 22, 2023, the Company entered into three (3) additional finance leases with Maxus for 90 trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $14,443 to $37,865 and the option to purchase the leased equipment at the end of the lease term ranging from $47,586 to $124,758. The Company is required to make a one-time security deposit payment for each lease ranging from $14,443 to $37,865 to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the interest rate implicit in the leases of 11.56% as well as lease assets equal to the present value of the future cash payments using an interest rate of 11.56%.

 

On November 20, 2023, the Company entered into five (5) additional finance leases with Maxus for one hundred and five (105) trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $23,192 to $75,217 and the option to purchase the leased equipment at the end of the lease term ranging from $74,000 to $240,000. The Company is required to make a one-time security deposit payment for each lease ranging from $23,192 to $75,217 to be used in the event of a default by the Company. At the end of the terms Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the implicit borrowing rate of similar leases with Maxus for similar assets and terms of 11.56% as well as lease assets equal to the present value of the future cash payments using an interest rate of 11.56% plus lease costs of $302,750 and prepaid lease payments of $235,054.

 

See independent auditors’ report.

 

17

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(8) Finance Lease Obligations (continued)

Future minimum lease payments for each of the next five years under the Maxus lease obligation and a reconciliation of undiscounted cash flows to the balance of the lease obligation as of December 31, 2023 on the accompanying combined balance sheet are as follows:

 

  2024     6,200,710  
  2025     4,911,823  
  2026     4,462,499  
  2027     855,340  
  Total minimum lease payments     16,430,372  
  Less: amount representing interest     (4,189,714 )
  Present value of net minimum payments     12,240,658  
  Add: carrying value of lease obligation at end of lease term     2,832,813  
  Total lease obligation     15,073,471  
  Less: unamortized financing fees     (99,720 )
  Total lease obligation, less unamortized financing fees     14,973,751  
  Less: current portion     (6,200,710 )
  Total lease obligation, less current portion     8,773,041  

 

(9) Operating Lease Liabilities

On May 1, 2021, and December 16, 2021, the Company entered into operating leases with Monahans Commercial Properties, LLC (Monahans) and Glacier Oilfield Services, Inc. (Glacier) for the use of corporate office space with terms of 60 months and 36 months with monthly installments of $10,000 and $4,000, respectively.

 

The terms of the lease agreement classify the lease as an operating lease in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate for the calculation of future cash payments, the Company used the risk-free discount rate of .857% for Monahans and .948% for Glacier, which are the rates of a U.S. government bond as of the commencement dates of the leases and for a term comparable to the respective lease terms.

 

As part of the business acquisition of ET, dated December 22, 2023, Meridian assumed three (3) leases with Pilot Water Solutions SWD, LLC for the use of trucking yards, shops, and a housing development to be used in trucking operations. The terms of the leases range from twenty-four (24) to thirty-six (36) with monthly installments ranging from $5,750 to $138,395.

 

See independent auditors’ report.

 

18

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(9) Operating Lease Liabilities (continued)

The terms of the lease agreements classify the leases as operating leases in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate for the calculation of future cash payments, the Company used the risk-free discount rate of 4.336% and 4.042%, which are the rates of a U.S. government bonds as of the commencement dates of the leases and for a term comparable to the respective lease terms.

 

Under the provisions of ASC 842, the Company has elected the practical expedient to not separate nonlease components from lease components and instead will account for each separate lease component and the related nonlease components as a single lease component. The Company has made this election for all operating leases.

 

Under the provisions of ASC 842, the Company has elected the short-term lease expedient. A short-term lease is a lease that, as of the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For such leases, the Company will not apply the recognition requirements of Topic 842 and instead will recognize the lease payments as lease cost on a straight-line basis over the lease term. Lease costs related to short-term leases as of December 31, 2023 were $218,237.

 

Future minimum lease payments for each of the next three years under the operating lease obligations and a reconciliation of the undiscounted cash flows to the balance of the operating lease obligation as of December 31, 2023 on the accompanying combined balance sheet are as follows:

 

  2024     2,486,740  
  2025     2,431,740  
  2026     978,975  
  Total minimum lease payments     5,897,455  
  Less: amount representing interest     (246,629 )
  Total lease obligation     5,650,826  
  Less: current portion     (2,486,740 )
  Total lease obligation, less current portion     3,164,086  

 

See independent auditors’ report.

 

19

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(10) Business Combination

On December 22, 2023, Meridian acquired 100% of the security interest in ET, a limited liability company in the business of crude oil transportation through the use of trucking equipment, for cash consideration of $12,500,000, making ET a wholly owned subsidiary of Meridian. Meridian did not assume any liabilities of ET as a result of the purchase. Included in the assets acquired by the Company were trade accounts receivable that have a fair market value of $1,500,000 and are believed to be 100% collectible. The fair value of net assets acquired was estimated to equal the amount of consideration paid by Meridian.

 

The following is a list of net identifiable assets at estimated fair value assumed as of the date of the acquisition:

 

  Total cash consideration     12,500,000  
  Purchase price allocation:        
  Accounts receivable     1,500,000  
  Inventory     46,784  
  Property and equipment, net     10,953,216  
  Net assets acquired     12,500,000  

 

(11) Line of Credit

On January 6, 2023, the Company entered into an accounts receivable factoring agreement with a financial institution that allows the Company to sell their currently outstanding accounts receivable for cash up to a maximum principal balance of $7,500,000 (hereinafter referred to as line of credit). The Company is charged a service charge by the institution in the amount of 1% of all receivables purchased. The agreement states that if a receivable becomes 120 days or more outstanding, then the institution may require the Company to repurchase the account at face value. To facilitate the potential buyback, the agreement states that the Company must keep a reserve account with the institution in an amount equal to 10% of all purchased accounts. The outstanding principal balance of the line of credit was $5,575,005 as of December 31, 2023. The amount of the reserve account was $1,262,525 as of December 31, 2023 and is included in restricted cash in the accompanying combined balance sheet.

 

See independent auditors’ report.

 

20

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(12) Interest Rate Swap

During February 2022 the Company entered into an interest rate swap contract associated with its Main Street Lending Priority Loan (See Note 7). The Company used the interest rate swap to manage risks related to interest rate movements and effectively converted this variable rate debt into a fixed-rate borrowing at 3.92% on a notional amount of $10,000,000. The swap contract settled monthly. On May 11, 2023, the Company terminated its swap agreement with Citibank N.A. The Company recorded a net gain of $686,096 included in other income in the accompanying combined statement of income.

 

(13) Short-Term Borrowings

On November 20, 2023, the Company entered into a short-term financing agreement with Maxus for a principal amount of $1,500,000. The Company will make interest only payments monthly until the maturity of the note, upon which all outstanding principal and accrued interest is due. The note was originally scheduled to mature six months from the date of borrowing and was subsequently extended an additional six months to a maturity date of November 20, 2024. The note is collateralized by twenty-eight (28) trucks and tanker trailers.

 

On November 30, 2023, the Company entered into a cash advance agreement with Curve Capital, LLC (“Curve”) in which the Company pledged future receipts of its accounts receivable in exchange for $1,000,000 in cash. The Company is required to pay Curve a total of $1,390,000 in weekly installments of $38,612 at 7% interest.

 

(14) Adoption of New Accounting Standard

In June 2016, the FASB issued guidance (FASB ASC 326) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, the disclosures are required to provide users of the financial statements with useful information in analyzing an entity’s exposure to credit risk and the measurement of credit losses. Financial assets held by the company that are subject to the guidance in FASB ASC 326 were trade accounts receivable.

 

The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the combined financial statements.

 

(15) Subsequent Events

On March 21, 2024, the members of the Company entered into a Membership Interest Purchase Agreement with Vivakor, Inc. (“Vivakor”), whereby, at closing, Vivakor will acquire 100% of the membership interests of the Company.

 

See independent auditors’ report.

 

21

 

 

Endeavor Crude, LLC and Meridian Equipment Leasing, LLC

Notes to the Combined Financial Statements

 

 

 

(15) Subsequent Events (continued)

Vivakor’s acquisition of 100% of the membership interests of the Company is subject to various closing conditions. As of the date the financial statements were available to be issued, the acquisition has not yet officially occurred.

 

See independent auditors’ report.

 

22

 

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

Silver Fuels Processing, LLC

 

Audited Financial Statements

 

as of and for the years ended

 

December 31, 2023 and 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

Independent Auditors’ Report   1-2
     
Balance Sheets as of December 31, 2023 and 2022   3
     
Statements of Operations for the years ended December 31, 2023 and 2022   4
     
Statements of Members’ Equity for the years ended December 31, 2023 and 2022   5
     
Statements of Cash Flows for the years ended December 31, 2023 and 2022   6
     
Notes to the Financial Statements   7-10

 

i

 

 

 

INDEPENDENT AUDITORS’ REPORT

 

Management

Silver Fuels Processing, LLC

Dallas, Texas

 

 

Opinion

 

We have audited the accompanying financial statements of Silver Fuels Processing, LLC, which comprise the balance sheets as of December 31, 2023 and 2022 and the related statements of operations, members’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Silver Fuels Processing, LLC, as of December 31, 2023 and 2022 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Silver Fuels Processing, LLC and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Related-Party Transactions

 

As discussed in Notes 4 and 5 to the accompanying financial statements, all revenues are derived from an entity in which the Company’s manager also controls. Our opinion is not modified with respect to that matter.

 

Responsibilities of Management for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Silver Fuels Processing, LLC’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

 

 

 

1

 

 

Auditors’ Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

 

In performing an audit in accordance with generally accepted auditing standards, we:

 

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Silver Fuels Processing, LLC’s internal control. Accordingly, no such opinion is expressed.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Silver Fuels Processing, LLC’s ability to continue as a going concern for a reasonable period of time

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

 

Shreveport, Louisiana

June 6, 2024

 

 

 

 

2

 

 

Silver Fuels Processing, LLC

Balance Sheets

as of December 31, 2023 and 2022

 

 

 

   2023   2022 
Assets          
Current assets          
Cash and cash equivalents   5,990    47,015 
Accounts receivable, Note 2   64,037    20,383 
Prepaid expense   63,309    45,659 
Total current assets   133,336    113,057 
           
Property and equipment, net, Notes 2 and 3   1,157,113    724,244 
           
Other Assets          
Utility deposits   2,992    2,992 
Total other assets   2,992    2,992 
           
Total assets   1,293,441    840,293 
           
Liabilities and members’ equity          
Current liabilities          
Accounts payable   325,807    47,674 
Total current liabilities   325,807    47,674 
           
Members’ equity   967,634    792,619 
           
Total liabilities and members’ equity   1,293,441    840,293 

 

See independent auditors’ report and accompanying notes to the financial statements.

 

3

 

 

Silver Fuels Processing, LLC

Statements of Operations

for the years ended December 31, 2023 and 2022

 

 

 

   2023   2022 
Sales income   630,000    600,000 
           
Operating expenses          
Equipment   16,982    0 
License and permits   50    0 
Bank charges   160    40 
Depreciation   252,147    235,661 
Insurance   88,249    16,095 
Miscellaneous   9,732    24,231 
Office supplies   545    252 
Payroll   74,925    89,538 
Professional fees   36,023    21,723 
Repairs and maintenance   53,841    32,531 
Travel   23,723    13,656 
Utilities   28,581    13,606 
Rent   59,000    82,000 
Contract labor   0    10,243 
Billable   0    15,241 
Bad debt   0    6,451 
Station   2,219    147,882 
Total operating expenses   646,177    709,150 
           
Loss from operations   (16,177)   (109,150)
           
Other income (expenses)          
Miscellaneous income   126,682    290,856 
Other income   33,750    0 
Total other income   160,432    290,856 
           
Net income   144,255    181,706 

 

See independent auditors’ report and accompanying notes to the financial statements.

 

4

 

 

Silver Fuels Processing, LLC

Statements of Members’ Equity

for the years ended December 31, 2023 and 2022

 

 

 

Balance, December 31, 2021   997,757 
      
Net income   181,706 
Members’ contributions   546,603 
Members’ distributions   (933,447)
      
Balance, December 31, 2022   792,619 
      
Net income   144,255 
Members’ contributions   695,201 
Members’ distributions   (664,441)
      
Balance, December 31, 2023   967,634 

 

See independent auditors’ report and accompanying notes to the financial statements.

 

5

 

 

Silver Fuels Processing, LLC

Statements of Cash Flows

for the years ended December 31, 2023 and 2022

 

 

 

   2023   2022 
Cash flows from operating activities          
Net income   144,255    181,706 
Adjustments to reconcile net income to net cash provided by operating activities:          
Bad debt   0    6,451 
Depreciation   252,147    235,661 
(Increase) decrease in:          
Accounts receivables   (678,096)   (266,535)
Prepaid expenses   (17,650)   (45,659)
Increase (decrease) in:          
Accounts payable   520,835    (67,986)
Due to affiliates   245,000    0 
Net cash provided by operating activities   466,491    43,638 
           
Cash flows from investing activities          
Purchases of property and equipment   (685,016)   (138,538)
Net cash used in investing activities   (685,016)   (138,538)
           
Cash flows from financing activities          

Contributions from members

   207,499    459,600 
Distributions to members   (29,999)   (320,223)
Net cash provided by financing activities   177,500    139,377 
           
Net change in cash and cash equivalents   (41,025)   44,477 
           
Beginning cash and cash equivalents   47,015    2,538 
           
Ending cash and cash equivalents   5,990    47,015 
           
Supplementary non-cash investing and financing activities:          

Assignment of related-party receivables to parent through distributions

   634,442    613,224 
Assumption of related-party payables by parent through contributions   487,701    87,003 

 

See independent auditors’ report and accompanying notes to the financial statements.

 

6

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(1) Nature of Business

Silver Fuels Processing, LLC, (the “Company”), organized in January 2018, owns, and operates crude oil transfer stations in Texas, New Mexico, and North Dakota. The Company has operated the stations since June of 2018. The Company is a Texas limited liability company in which Jorgan Development (“Jorgan”) (a Louisiana limited liability company) owns 99% of the equity interest and JBAH Holdings, LLC (“JBAH”) (a Texas limited liability company) owns the remaining 1% of equity interest.

 

(2) Summary of Significant Accounting Policies

Basis of accounting – The financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Basis of presentation and 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 and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and cash equivalents – For the purpose of reporting cash flows, cash and cash equivalents include all cash on hand and cash on deposit with maturities of less than three months.

 

Accounts receivable – Accounts receivable primarily relate to advances of operating expenses for related parties and fees charged to customers (all related parties) for the right to use the Company’s crude oil transfer stations to transport their crude oil along various oil pipelines. Differences in the amounts due from customers and the amounts management expects to collect are reported in the results of operations of the year in which those differences are determined. Once management has used reasonable collection efforts, any balance determined to be uncollectible is written off directly through a charge to bad debt expense or distributions with a credit entry to an accounts receivable. Bad debt expense for the years ended December 31, 2023 and 2022 was $0 and $6,451, respectively. Accounts receivable are zero-interest bearing.

 

Property and equipment – Property and equipment is stated at cost. Depreciation is computed by the straight-line method over the assets’ estimated useful lives ranging from 5 to 7 years.

 

Impairment of long-lived assets – The Company regularly assesses all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews all material assets annually for possible impairment. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. No impairment was considered necessary during the years ended December 31, 2023 and 2022.

 

See independent auditors’ report.

 

7

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Revenue recognition – The Company derives its revenues from fees charged to its customer for the use of their crude oil transfer stations to transport oil along various pipelines. The Company has one performance obligation in the form of allowing customers to utilize their transfer stations. The Company has determined that the customer has obtained the promised service when the customer successfully utilizes the Company’s transfer station to transport oil, as such, the Company recognizes revenue at the point in time that the transfer stations are utilized by the customer.

 

Income taxes – The Company is a limited liability company that is taxed as a partnership for federal and state income tax purposes. As such, the Company does not pay income taxes, as any income or loss and credits are included in the tax returns of the individual partners. Accordingly, no provision has been made for income taxes in the financial statements.

 

Under the provisions of FASB ASC 740-10, the Company records a liability for uncertain tax positions when probable that a loss has been incurred and the amount can be reasonably estimated. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

 

Advertising – The Company’s policy is to expense advertising costs as they are incurred. Advertising costs for the years ended December 31, 2023 and 2022 were $0 and $0, respectively.

 

Subsequent events – Management of the Company has evaluated subsequent events, for recognition and disclosure, through June 6, 2024, the date the financial statements were available to be issued. See note 7.

 

(3) Property and Equipment

The following is a summary of property and equipment as of December 31, 2023 and 2022:

 

     2023   2022 
  Basa station   1,137,216    486,781 
  Midland station   87,581    53,000 
  Posse Monroe station   689,557    689,557 
  Wasson station   376,711    376,711 
  Steel Tanks   64,175    64,175 
  Sub-total  $2,355,240   $1,670,224 
  Less: accumulated depreciation   1,198,127    945,980 
  Totals  $1,157,113   $724,244 

 

Depreciation expense related to property and equipment for the years ended December 31, 2023 and 2022 was $252,147 and $235,661, respectively.

 

See independent auditors’ report.

 

8

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(4) Related-Party Transactions

During the years ended December 31, 2023 and 2022, the Company made substantially all of its sales to White Claw Crude, LLC (“WCC”), a related-party owned and managed by Jorgan Development (“Jorgan”), a Louisiana limited liability company, the majority owner of the Company. The total sales made by the Company to WCC during the years ended December 31, 2023 and 2022 was $630,000 and $600,000, respectively.

 

During the year ended December 31, 2021 (the “Effective Date”), the Company entered into a 10- year take or pay agreement (the “Agreement”) with WCC. The Agreement requires that WCC transports greater than or equal to 200,000 barrels per month, the minimum volume commitment (“MVC”), through the Company’s crude transfer stations at a rate of $0.25 per barrel, for the period beginning on the Effective Date and ending June 30, 2023, and $0.275 per barrel, for the period beginning on July 1, 2023 and ending upon the expiration of the Agreement, for quantities up to the MVC and $0.125 for amounts that exceed the MVC. Under the terms of the Agreement, each month WCC does not meet the MVC, it is responsible for paying the Company the amount equal to the MVC times the applicable rate.

 

The Company rents crude oil stations on a month-to-month basis from Endeavor Crude, LLC, a related party owned and managed by Jorgan. Total rent expense related to this lease was $59,000 and $67,500 for the years ended December 31, 2023 and 2022, respectively, and is included in rent expense on the accompanying statements of operations.

 

During the years ended December 31, 2023 and 2022, the Company paid for operating expenses on behalf of various related parties under common management. As of December 31, 2023 and 2022, the Company was owed $64,037 and $20,383, respectively, from its various related parties.

 

As described in Note 2, substantially all of the Company’s accounts receivable are due from related parties. Such amounts due as of December 31, 2023 and 2022 were $64,037 and $20,383, respectively.

 

(5) Major Customers and Concentration of Credit Risk

The Company’s only customer is WCC. WCC accounts for 100% of the Company’s revenue as of December 31, 2023 and 2022.

 

Additionally, the Company and WCC operate in the crude oil industry. The industry concentration has the potential to impact the Company’s overall exposure to credit risk in that WCC may be similarly affected by changes in economic, industry, or other conditions. There is a risk that the Company would not be able to identify and access replacement markets at comparable margins.

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company has not experienced any losses in such accounts.

 

See independent auditors’ report.

 

9

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(6) Adoption of New Accounting Standards

In February 2016, the FASB issued ASU No. 2016-02 (“ASC 842”), Leases, to require lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of income will remain similar to current lease accounting. ASC 842 eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. This standard is effective for annual periods beginning after December 15, 2021, with early adoption permitted.

 

The Company adopted ASC 842 as of January 1, 2021. Adoption of this standard did not have a material impact on the Company’s financial statements as the party is not a party to any long-term leasing arrangements.

 

The Company has elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options that are reasonably certain to be exercised.

 

In June 2016, the FASB issued guidance (“ASC 326”) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity’s exposure to credit risk and the measurement of credit losses. The Company did not have significant financial assets that are subject to the guidance in ASC 326. Specifically, the Company’s accounts receivable are substantially all related-party receivables from companies under common ownership. FASB ASC 326 excludes such receivables from the expected loss model.

 

The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements.

 

(7) Subsequent Events

On March 21, 2024, the members of the Company entered into a Membership Interest Purchase Agreement with Vivakor, Inc. (“Vivakor”), whereby, at closing, Vivakor will acquire 100% of the membership interests of the Company.

 

Vivakor’s acquisition of 100% of the membership interests of the Company is subject to various closing conditions. As of the date the financial statements were available to be issued, the acquisition has not yet officially occurred.

 

See independent auditors’ report.

 

10

 

Exhibit 99.3

 

 

 

 

 

 

 

 

 

 

Endeavor Crude, LLC, Meridian Equipment

 

Leasing, LLC, and Equipment Transport, LLC

 

Combined Financial Statements

 

as of June 30, 2024 and December 31, 2023 and

 

for the three-month and six-month periods

 

ended June 30, 2024 and 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Table of Contents

 

 

 

Independent Auditors’ Review Report   1-2
     
Combined Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023   3
     
Combined Statements of Operations for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited)   4
     
Combined Statements of Members’ Equity for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited)   5
     
Combined Statements of Cash Flows for the six-month periods ended June 30, 2024 and 2023 (Unaudited)   6
     
Notes to the Combined Financial Statements (Unaudited)   7-27

 

i

 

 

 

INDEPENDENT AUDITORS’ REVIEW REPORT

 

Management

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Dallas, Texas

 

 

Results of Review of Interim Financial Information

 

We have reviewed the accompanying combined financial statements of Endeavor Crude, LLC, Meridian Equipment, LLC, and Equipment Transport, LLC, which comprise the combined balance sheet as of June 30, 2024 and the related combined statements of operations and members’ equity for the three-month and six-month periods ended June 30, 2024 and 2023, and statements of cash flows for the six-month periods ended June 30, 2024 and 2023, and the related notes to the combined financial statements (collectively referred to as the “interim financial information”).

 

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Review Results

 

We conducted our reviews in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit in accordance with GAAS, the objective of which is the expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our reviews. We believe that the results of the review procedures provide a reasonable basis for our conclusion.

 

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

 

The accompanying financial information has been prepared assuming that the Company will continue as a going concern. As discussed in Note 17 to the interim financial information, the Company was in default under certain promissory notes. The Company has been unable to obtain an extension to pay under its obligations, has been unable to obtain alternative financing, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the conditions and events and management’s plans regarding those matters are also described in Note 17. The accompanying interim financial information does not include any adjustments that might result from the outcome of that uncertainty.

 

 

 

1

 

 

Responsibilities of Management for the Interim Financial Information

 

Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.

 

Report on Balance Sheet as of December 31, 2023

 

We have previously audited, in accordance with GAAS, the balance sheet as of December 31, 2023, and the related statement of income, members’ equity, and cash flows for the year then ended (not presented herein); and we expressed an unmodified opinion on those audited financial statements in our report dated June 6, 2024. In our opinion, the accompanying balance sheet of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC as of December 31, 2023, is consistent, in all material respects, with the audited financial statements from which it has been derived.

 

Shreveport, Louisiana

September 11, 2024, except for Note 3, as to which the date is December 6, 2024

 

 

 

 

2

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Balance Sheets

as of June 30, 2024 (Unaudited) and December 31, 2023

 

 

 

    June 30,
2024
(Unaudited)
    December 31,
2023
 
Assets                
Current assets                
Cash     1,122,432       1,164,555  
Restricted cash, Note 12     2,630,164       1,262,525  
Trade accounts receivable, net of allowance for credit losses of $63,064 and $24,531 as of June 30, 2024 and December 31, 2023, respectively, Note 2     23,712,411       11,679,862  
Prepaid expenses     3,193,156       546,655  
Due from related party, Note 6     1,684,310       245,368  
Inventory, Note 2     134,810       46,784  
Total current assets     32,477,283       14,945,749  
                 
Property and equipment, net, Notes 2 and 5     61,738,454       65,895,192  
                 
Other assets                
Right-of-use asset - operating, Note 10     4,424,081       5,657,160  
Intangible assets, net, Note 2     1,476,652       2,953,305  
Other assets     1,194,614       871,655  
Total other assets, net     7,095,347       9,482,120  
                 
Total assets     101,311,084       90,323,061  
                 
Liabilities and members’ equity                
Current liabilities                
Trade payables     7,990,960       1,151,741  
Accrued liabilities     8,943,207       5,562,998  
Due to related party, Note 6     1,784,994       1,653,755  
Line of credit, Note 12     13,409,798       5,575,005  
Short-term notes payable, Note 14     6,818,560       2,345,552  
Current portion of finance lease obligations, Note 9     3,195,725       6,200,710  
Current portion of operating lease obligations, Note 10     1,240,870       2,486,740  
Current portion of long-term debt, Note 8     14,779,232       14,843,727  
Total current liabilities     58,163,346       39,820,228  
                 
Long-term liabilities                
Finance lease obligations - less current portion, Note 9     9,705,171       8,773,041  
Operating lease obligations - less current portion, Note 10     3,241,445       3,164,086  
Long-term debt - less current portion, Note 8     12,978,246       13,104,926  
Total long-term liabilities     25,924,862       25,042,053  
                 
Members’ equity     17,222,876       25,460,780  
                 
Total liabilities and members’ equity     101,311,084       90,323,061  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

3

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Statements of Operations

for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited)

 

 

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2024     2023     2024     2023  
Revenues                                
Sales     22,123,019       12,592,022       44,631,086       25,738,605  
Reimbursed expenses - related party     1,158,277       0       2,207,336       0  
Total revenues     23,281,296       12,592,022       46,838,422       25,738,605  
                                 
Operating expenses                                
Operating     41,281       0       85,497       0  
Auto     1,095,020       186,291       2,422,773       472,474  
Credit losses     120,092       0       120,092       0  
Bank charges     6,490       155       31,208       267  
Business taxes     15,539       43,898       29,061       110,271  
Computer     264,703       97,065       580,583       205,803  
Consulting     14,517       0       28,678       0  
Contract labor     8,597,382       6,512,830       17,159,999       14,125,873  
Depreciation     2,950,658       1,740,483       5,833,126       3,259,235  
Employee benefits     144,903       59,533       234,646       97,223  
Insurance     767,735       18,739       1,370,550       24,985  
Inspections     3,027       669       38,391       2,346  
Licenses and permits     32,108       42,185       82,475       105,195  
Meals     646       263       914       367  
Miscellaneous     51,217       501       75,211       3,583  
Office     94,252       3,202       279,162       3,862  
Payroll taxes     88,397       43,204       178,453       105,082  
Postage     972       0       4,682       0  
Professional fess     120,163       70       179,740       34,709  
Repairs and maintenance     611,536       328,949       851,692       723,195  
Regulatory     65,712       750       120,205       750  
Training     0       911       0       1,086  
Travel     48,709       57,622       92,327       118,583  
Utilities     89,649       72,643       156,600       148,597  
Tools     0       338       700       338  
Supplies     58,532       23,368       85,888       45,300  
Employee costs     15,102       30,779       20,877       60,156  
Lease     977,365       120,377       1,981,739       237,685  
Amortization     800,982       309,600       2,057,863       619,200  
Salaries and wages     5,301,294       861,393       11,600,491       1,705,358  
Total operating expenses     22,377,983       10,555,818       45,703,623       22,211,523  
                                 
Income from operations     903,313       2,036,204       1,134,799       3,527,082  
                                 
Other income (expense)                                
Other income     18,184       643,216       83,500       698,580  
Other expense     0       (64,155 )     0       (64,155 )
Interest income     19,708       49,247       35,500       51,892  
Gain (loss) on sale of assets     (18,630 )     0       (18,630 )     (26,031 )
Interest expense     (1,952,622 )     (817,667 )     (3,825,511 )     (1,533,237 )
Total other income (expense)     (1,933,360 )     (189,359 )     (3,725,141 )     (872,951 )
                                 
Net income (loss)     (1,030,047 )     1,846,845       (2,590,342 )     2,654,131  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

4

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Statements of Members’ Equity

for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited)

 

 

 

   

Accumulated
Other
Comprehensive
Income

    Members’
Equity
    Total  
Balance, March 31, 2024 (Unaudited)     0       19,819,940       19,819,940  
                         
Net loss     0       (1,030,047 )     (1,030,047 )
Members’ contributions     0       5,172,610       5,172,610  
Members’ distributions     0       (6,739,627 )     (6,739,627 )
                         
Balance, June 30, 2024 (Unaudited)     0       17,222,876       17,222,876  
                         
Balance, December 31, 2023     0       25,460,780       25,460,780  
                         
Net loss     0       (2,590,342 )     (2,590,342 )
Members’ contributions     0       7,450,179       7,450,179  
Members’ distributions     0       (13,097,741 )     (13,097,741 )
                         
Balance, June 30, 2024 (Unaudited)     0       17,222,876       17,222,876  
                         
Balance, March 31, 2023 (Unaudited)     0       29,196,981       29,196,981  
                         
Net income     0       1,846,845       1,846,845  
Members’ contributions     0       1,196,999       1,196,999  
Members’ distributions     0       (916,000 )     (916,000 )
                         
Balance, June 30, 2023 (Unaudited)     0       31,324,825       31,324,825  
                         
Balance, December 31, 2022     28,884       30,990,723       31,019,607  
                         
Amounts reclassified from accumulated other comprehensive income     (28,884 )     28,884       0  
                         
Net income     0       2,654,131       2,654,131  
Members’ contributions     0       1,992,499       1,992,499  
Members’ distributions     0       (4,341,412 )     (4,341,412 )
                         
Balance, June 30, 2023 (Unaudited)     0       31,324,825       31,324,825  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

5

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Statements of Cash Flows

for the six-month periods ended June 30, 2024 and 2023 (Unaudited)

 

 

 

    Six Months Ended
June 30,
 
    2024     2023  
Cash flows from operating activities                
Net income (loss)     (2,590,342 )     2,654,131  
Adjustments to reconcile net income (loss) to net cash used in operating activities:                
Credit losses     120,092       0  
Depreciation     5,833,126       3,259,235  
Amortization     1,476,653       619,200  
Loss on disposal of assets     18,630       26,031  
Gain on sale of interest rate swap agreement     0       (594,000 )
Capitalization of interest expense     670,774       0  
Amortization of debt issuance costs     89,888       38,673  
(Increase) decrease in:                
Trade accounts receivable     (16,811,000 )     (5,545,930 )
Inventory     (88,026 )     493,136  
Prepaid expenses     (5,225,936 )     (2,443,997 )
Due from related party     (1,438,942 )     0  
Other current assets     0       34,671  
Other assets     (322,959 )     (177,819 )
Note receivable     0       12,125  
Increase (decrease) in:                
Trade payables     4,404,152       (3,053,325 )
Accrued liabilities     6,599,644       1,984,115  
Due to related party     131,239       0  
Other liabilities     0       (75,000 )
Net cash used in operating activities     (7,133,007 )     (2,768,754 )
                 
Cash flows from investing activities                
Purchases of property and equipment     (642,854 )     (112,475 )
Proceeds from sale of assets     68,700       135,144  
Net cash provided by (used in) investing activities     (574,154 )     22,669  
                 
Cash flows from financing activities                
Net borrowings on line of credit     7,866,164       4,403,274  
Net borrowings on short-term debt     4,540,418       0  
Repayments of finance lease obligations     (2,085,321 )     (931,303 )
Repayments on long-term debt     (888,157 )     (405,903 )
Debt issuance costs incurred     (149,995 )     0  
Members’ contributions     3,282,568       1,970,499  
Members’ distributions     (3,533,000 )     (480,412 )
Net cash provided by financing activities     9,032,677       4,556,155  
                 
Net change in cash and cash equivalents     1,325,516       1,810,070  
                 
Beginning cash and cash equivalents     2,427,080       2,085,508  
                 
Ending cash and cash equivalents     3,752,596       3,895,578  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest     3,064,849       1,496,587  
                 
Supplementary non-cash investing and financing activities                
Assignment of related-party receivables to parent through distributions     8,664,741       594,000  
Assumption of related-party payables through distributions     900,000       3,267,000  
Assumption of related-party receivables through contributions     0       22,000  
Assumption of related-party payables by parent through contributions     4,167,611       0  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

6

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(1) Nature of Business

Endeavor Crude, LLC (“Endeavor”), Meridian Equipment Leasing, LLC (“Meridian”), and Equipment Transport, LLC (“ET”) (collectively, the “Company” or “Companies”) is primarily engaged in the business of crude oil transportation. Endeavor and Meridian are privately held Texas limited liability companies. ET is a privately held Pennsylvania limited liability company and CPE Gathering Midcon, LLC (“CP”), a wholly-owned subsidiary of Meridian, is a privately held Delaware limited liability company.

 

Endeavor was formed in February 2019 and began operations in April 2019. Meridian was formed in April 2019 and began operations in May 2019 through the acquisition of real estate and trucking assets. Endeavor’s primary activity of generating revenue is the transportation of crude oil through its operation of a fleet of trucks and trailers primarily servicing Texas and New Mexico. Meridian is the owner of this fleet of trucks and trailers. Meridian’s primary activity of generating revenue is the leasing of these trucks and trailers to Endeavor.

 

In December 2022, Meridian acquired 100% of the membership interests in CP through a business acquisition. CP owns and operates several transfer stations and pipelines used in the processing and transportation of crude oil and gas.

 

In December 2023, Meridian acquired 100% of the membership interests in ET through a business combination, see Note 11. In January 2024, Meridian transferred 100% of its membership interests in ET to its parent, Jorgan Development, LLC. ET owns and operates a fleet of trucks and trailers used in the transportation of crude oil and gas.

 

(2) Summary of Significant Accounting Policies

Basis of accounting – The combined financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Principles of consolidation/combination – These financial statements have been combined as the Companies are under common ownership and management. Meridian’s wholly owned subsidiaries have been consolidated into Meridian’s financial statements before combination. All intercompany transactions and balances have been eliminated during consolidation and combination.

 

See independent auditors’ review report

 

7

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Basis of presentation and use of estimates – The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and cash equivalents – Cash and cash equivalents include all cash on hand and cash on deposit with maturities of less than three months.

 

Trade accounts receivable and allowance for credit losses – The Company’s trade accounts receivable are primarily derived from trucking transportation customers. At each balance sheet date, the Company recognizes an expected allowance for credit losses. Also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist.

 

The allowance estimate is derived from a review of the Company’s historical losses based on the aging of receivables. This estimate is adjusted for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segment, trucking transportation customers, has remained constant since the Company’s inception. The allowance for credit losses for trade accounts receivable was $63,064 and $24,531 as of June 30, 2024 and December 31, 2023, respectively.

 

Property and equipment – Property and equipment are carried at cost, less accumulated depreciation. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the assets as follows:

 

  Communications equipment  3 years 
  Autos, trucks and trailers  5-7 years 
  Buildings and improvements  15 years 
  Pipeline and tanks  20 years 

 

Routine maintenance and repairs are charged to operating expense, while costs of improvements and replacements are capitalized. When an asset is retired or sold, its cost and related accumulated depreciation are removed from the accounts, and the difference between the net book value of the asset and proceeds from disposition is recognized as a gain or loss in the combined statement of operations.

 

See independent auditors’ review report

 

8

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Intangible assets – Intangible assets consist of an acquired trucking contract that has been assigned a useful life of 5 years and transaction costs related to the purchase of ET that have been assigned a useful life of 1 year. The assets are being amortized on a straight-line basis.

 

Total amortization expense relating to the trucking contract was $0 and $309,600 for the three- month period ended June 30, 2024 and 2023, respectively, and $0 and $619,200 for the six-month period ended June 30, 2024 and 2023, respectively.

 

Total amortization expense relating to the transaction costs was $800,982 and $0 for the three- month period ended June 30, 2024 and 2023, respectively, and $2,057,863 and $0 for the six- month period ended June 30, 2024 and 2023, respectively.

 

Fair Value Measurements – 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 framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under ASC 820 are described as follows:

 

Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

See independent auditors’ review report

 

9

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Impairment of long-lived assets – The Company regularly assesses all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews all material assets annually for possible impairment. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. No impairment was considered necessary during the three and six-month period ended June 30, 2024 and 2023.

 

Interest rate used for operating leases – Under the provisions of FASB ASC 842-10-65-1, the Company has elected to use the risk-free discount rate of a U.S. government bond with a period comparable with that of the lease term for all operating leases placed on the combined balance sheet.

 

Inventory – Inventory is stated at the lower of cost or net realizable value, with cost being determined under the first-in, first-out method.

 

Revenue recognition – Substantially all revenue the Company earns is related to trucking fees charged to customers for gathering and transporting crude oil and gas products.

 

Management has identified that a legally enforceable contract with its customers is executed by both parties at the point of pickup at the customer’s location. Although the Company may have master agreements with its customers, these master agreements only establish general terms and there is no financial obligation to the customer until the load is accepted and the Company takes possession of the load.

 

The Company’s only performance obligation is transportation services, which is completed at the point in time in which the Company delivers the load to the customer’s designated delivery point, effectively transferring control of the load to the customer. At such time, the Company recognizes the related transportation revenue. There is no significant financing component in transaction price, as the Company’s customers generally pay within the contractual payment terms of 30 to 60 days.

 

See independent auditors’ review report

 

10

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Debt issuance costs – Debt issuance costs represent costs incurred in relation to the Main Street Loan Credit Facility (see Note 8), Maxus lease obligations (see Note 9 and 14), and the Business First Bank line of credit (see Note 12). Such costs have been deferred and are being amortized on a straight-line basis over the term of the related loan and lease agreements. Long-term debt and finance lease obligations, net of current portion, short-term debt, and line of credit are recorded on the accompanying combined balance sheet net of unamortized debt issuance costs. The total of these costs amortized to interest expense was $64,275 and $19,336 for the three-month period ended June 30, 2024 and 2023, respectively, and $89,888 and $38,673 for the six-month period ended June 30, 2024 and 2023, respectively.

 

Income taxes – The Companies are limited liability companies that are taxed as partnerships for federal and state income tax purposes. As such, the Companies do not pay income taxes, as any income or loss and credits are included in the tax returns of the individual member. Accordingly, no provision has been made for income taxes in the combined financial statements.

 

Under the provisions of FASB ASC 740-10, the Company records a liability for uncertain tax positions when probable that a loss has been incurred and the amount can be reasonably estimated. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

 

Compensated absences – Employees of the Company are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. The Company does not accumulate vacation or sick time, the estimate for the amount of compensation for future absences was immaterial and, accordingly, no liability has been recorded in the accompanying combined financial statements. The Company’s policy is to recognize the costs of compensated absences when paid to the individual employees.

 

Subsequent events – Management has evaluated subsequent events through September 11, 2024, the date these combined financial statements were available to be issued. See Note 17.

 

Reclassifications – Certain reclassifications have been made to the December 31, 2023 balance sheet in order for it to be in conformity with the current year presentation.

 

See independent auditors’ review report

 

11

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(3) Restatement of Previously Issued Interim Financial Information

Subsequent to the issuance of the interim financial information as of June 30, 2024 and for the three-month and six-month periods ended June 30, 2024 and 2023, management identified errors in the calculation of interest expense. These errors were due to (1) failing to accrue interest on long-term debt in accordance with its terms, and (2) incorrectly recording payments on short-term notes payable by understating the interest portion of those payments.

 

As a result of these errors, interest expense was understated by $769,424 for the three-month period ended June 30, 2024, and by $1,578,500 for the six-month period ended June 30, 2024. The effects of correcting these errors on the interim financial information are summarized below.

 

Effect on balance sheet as of June 30, 2024:

 

      As
Previously
Reported
    Adjustment     As
Restated
 
  Short-term notes payable     5,910,834       907,726       6,818,560  
  Current portion of long-term debt     14,108,458       670,774       14,779,232  
  Members’ equity     18,801,376       (1,578,500 )     17,222,876  

 

Effect on statement of operations for the three-month period ended June 30, 2024:

 

      As
Previously
Reported
    Adjustment     As
Restated
 
  Interest expense     (1,183,198 )     (769,424 )     (1,952,622 )
  Net loss     (260,623 )     (769,424 )     (1,030,047 )

 

Effect on statement of operations for the six-month period ended June 30, 2024:

 

      As
Previously
Reported
    Adjustment     As
Restated
 
  Interest expense     (2,247,011 )     (1,578,500 )     (3,825,511 )
  Net loss     (1,011,842 )     (1,578,500 )     (2,590,342 )

 

See independent auditors’ review report

 

12

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(4) Major Customers and Concentration of Credit Risk

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue and whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

 

The Company had two (2) major customers that accounted for approximately 42% and 30% of revenue for the three-month period ended June 30, 2024 and 2023, respectively, and 36% and 31% of revenue for the six-month period ended June 30, 2024 and 2023, respectively. These customers accounted for approximately 42% and 24% of the balance of accounts receivable as of June 30, 2024 and December 31, 2023, respectively.

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company has not experienced any losses in such accounts.

 

(5) Property and Equipment

The Company’s balance of property and equipment as of June 30, 2024 and December 31, 2023 is comprised of the following:

 

      June 30,
2024
    December 31,
2023
 
  Land     2,848,857       2,848,857  
  Communications equipment     267,290       0  
  Buildings and improvements     1,700,201       1,700,201  
  Trucks and trailers     32,000,898       30,603,602  
  Right-of-use asset - finance leases     14,718,960       14,718,960  
  Pipeline and tanks     41,107,022       41,107,022  
  Sub-total     92,643,228       90,978,642  
  Less: accumulated depreciation     (30,904,774 )     (25,083,450 )
  Property and equipment, net     61,738,454       65,895,192  

 

Depreciation expense related to property and equipment was $2,950,658 and $1,740,483 for the three-month period ended June 30, 2024 and 2023, respectively, and $5,833,126 and $3,259,235 for the six-month period ended June 30, 2024 and 2023, respectively.

 

See independent auditors’ review report

 

13

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(6) Related-Party Transactions

On January 1, 2023, Endeavor entered into a take or pay agreement with White Claw Crude, LLC (“WCC”), a related party controlled by James Ballengee, manager of the Company, in which the Company is to provide hauling services to WCC for their crude oil and gas products. The agreement states that if WCC does not cause 100,000 barrels per day to be hauled (subsequently amended to 75,000 barrels effective January 1, 2024) during the period January 1, 2023 through December 31, 2033 (subsequently amended to December 31, 2034), the minimum volume commitment (“MVC”), then WCC must pay the Company a deficiency fee equal to the shortage amount, in barrels, multiplied by 25% of the average rate of all hauls for the related calendar year. The Company earned $422,546 and $2,701,148 in deficiency fees during the three-month period ended June 30, 2024 and 2023, respectively, and $640,927 and $4,964,474 during the six-month period ended June 30, 2024 and 2023, respectively, which are included in sales in the accompanying combined statements of operations.

 

On January 1, 2023, CP entered into a take or pay agreement with WCC in which WCC is to process and transfer 200,000 barrels per month, the MVC, of its crude oil and gas products through the Company’s processing and transfer terminals. The agreement states WCC must pay the Company an amount equal to the greater of the actual volume of product transferred multiplied by the applicable rate, or, the MVC multiplied by the applicable rate. The applicable rates are $1.00 per barrel up to the MVC and $.50 for each barrel in excess of the MVC. The Company earned $600,000 and $600,000 from the agreement during the three-month period ended June 30, 2024 and 2023, respectively, of which $169,066 and $204,216 was derived from volume of product transferred, respectively. The Company earned $1,200,000 and $1,200,000 during the six-month period ended June 30, 2024 and 2023, respectively, of which $322,042 and $401,512 was derived from volume of product transferred, respectively. The above amounts are included in sales in the accompanying combined statements of operations. Of these fees, $447,024 and $1,642,458 were included in trade accounts receivable on the accompanying combined balance sheets as of June 30, 2024 and December 31, 2023, respectively.

 

On January 1, 2024, Meridian and ET allowed Horizon Truck and Trailer, LLC (“HTT”), a related party with common management, to occupy five (5) of the Company’s locations under operating leases on a month-to-month basis and reimburse the Company for the related monthly lease payments. The monthly payments on the leases range from $5,750 to $138,395 and have terms ranging from 24 to 36 months. The Company recorded lease payments due from HTT in the amount of $577,800 and $978,550 for the three and six-month periods ended June 30, 2024, respectively, which are included in reimbursed expenses on the accompanying combined statement of operations and trade accounts receivable on the accompanying combined balance sheet.

 

See independent auditors’ review report

 

14

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(6) Related-Party Transactions (continued)

In addition, the Company agreed to pay for various expenses on behalf of HTT which totaled $580,477 and $1,228,786 for the three and six-month periods ended June 30, 2024, respectively, and are included in reimbursed expenses on the accompanying combined statement of operations and trade accounts receivable on the accompanying combined balance sheet.

 

The Company used HTT’s services during the three and six-month periods ended June 30, 2024 to perform capital repairs, upgrades, and maintenance to prepare and maintain their fleet of trucks and trailers for operations. The costs totaled $1,698,037 for the six-month period ended June 30, 2024 and are included in accounts payable on the accompanying combined balance sheet, of which $1,677,811 were recognized as capital improvements on the Company’s trucks and trailers.

 

During the year ended December 31, 2023, the Company received and provided operating loans from and to various related parties. The loans are short term in nature with no stated repayment terms. As of June 30, 2024 and December 31, 2023, the Company was owed a total of $1,684,310 and $245,368 from its related parties, respectively, and owed a total of $1,784,994 and $1,653,755, respectively, to its related parties.

 

(7) Note Payable – PPP Loan

On March 11, 2020, the World Health Organization pronounced the coronavirus (COVID-19) outbreak a pandemic. Citizens and the economies of the United States and other countries have been significantly impacted by the pandemic. In response to the COVID-19 outbreak in 2020, the U.S. Federal Government enacted the Coronavirus Aid, Relief, and Economic Security Act that, among other economic stimulus measures, established the Paycheck Protection Program (PPP) to provide small business loans. In April 2020, the Company obtained its first PPP loan in the amount of $2,145,300. The note matures in April 2025 and bears interest at a fixed annual rate of 1% with the first six months of interest deferred. During the period ending December 31, 2021, the Company received a second PPP loan in the amount of $2,000,000 and received forgiveness of $1,000,735 for the first loan. The second note matures in February of 2026 and bears interest at a fixed annual rate of 1%. The Company believes that all PPP proceeds have been used on qualifying expenses and expects to be forgiven for the full amount of the second loan.

 

See independent auditors’ review report

 

15

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(8) Long-Term Debt

Long-Term debt as of June 30, 2024 and December 31, 2023 consisted of the following:

 

     

June 30,

2024

   

December 31,

2023

 
  Note payable to Ford Credit dated November 1, 2019, payable in 54 monthly installments of $860 at 8.6% interest. Note is collateralized by a 2019 Ford Explorer.     0       3,008  
  Note payable to B1Bank dated February 12, 2020, payable in 48 monthly installments of $7,278 at 5.5% interest. Note is collateralized by 6 Dragon tractor trailers.     0       13,985  
  Main Street Lending Priority Loan Agreement with Business First Bank dated November 12, 2020. Interest accrues at the LIBOR rate plus 3% per annum; maturing on November 12, 2025; secured by substantially all assets of the Company.     10,760,805       10,760,805  
  Note payable to the U.S. Small Business Administration dated June 16, 2020, payable in 348 monthly installments of $731 beginning June 16, 2021 at 3.75% interest. Note is collateralized by substantially all assets of the Company.     10,000       160,000  
  Note payable to Ally Financial dated July 30, 2021, payable in 60 monthly installments of $1,645 at 6.24% interest. Note is collateralized by a 2020 Dodge Challenger.     41,929       50,393  
  Note payable to TD Ameritrade dated January 4, 2021, payable in 72 monthly installments of $991 at 6.89% interest. Note is collateralized by a 2019 Ford Expedition.     27,956       32,838  
  Note payable to TD Ameritrade dated December 9, 2021, payable in 72 monthly installments of $1,434 at 4.94% interest. Note is collateralized by a 2018 Jeep Grand Cherokee.     54,056       62,378  
  Note payable to Ally Financial dated December 24, 2021, payable in 60 monthly installments of $1,532 at 9.79% interest. Note is collateralized by a 2018 Ford Expedition.     39,692       46,684  
  Note payable to Ford Credit dated March 31, 2023, payable in 60 monthly installments of $1,046 at 0.90% interest. Note is collateralized by a 2018 Ford F-150.     53,240       57,272  
  Note payable to Ford Credit dated March 31, 2023, payable in 60 monthly installments of $1,093 at 0.90% interest. Note is collateralized by a 2022 Ford F-150.     56,392       60,249  

 

See independent auditors’ review report

 

16

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(8) Long-Term Debt (continued)
      June 30,
2024
    December, 31
2023
 
  Notes payable to Small Business Administration dated April 10, 2020 and February 4, 2021, payable in 60 monthly installments of $30,374 and $35,024, respectively, at 1.00% interest. Notes are collateralized by the Company’s real and personal property.     2,302,305       2,482,360  
  Note payable to Ford Credit dated July 17, 2023, payable in 48 monthly installments of $1,622 at 9.99% interest. Note is collateralized by a 2021 Chevrolet Tahoe.     51,829       58,787  
  Note payable to TD Ameritrade dated January 6, 2023, payable in 72 monthly installments of $1,194 at 8.99% interest. Note is collateralized by a 2021 Ford F-250.     52,995       58,351  
  Note payable to Ally Financial dated February 27, 2023, payable in 72 monthly installments of $1,163 at 10.89% interest. Note is collateralized by a 2022 Ford F-150.     51,847       55,849  
  Note payable to Ford Credit dated July 7, 2023, payable in 48 monthly installments of $1,195 at 2.9% interest. Note is collateralized by a 2023 Ford F-150.     49,824       54,935  
  Note payable to Ford Credit dated September 8, 2023, payable in 48 monthly installments of $2,370 at 10.79% interest. Note is collateralized by a 2022 Dodge Charger.     77,130       86,854  
  Note payable to Pilot OFS Holdings, LLC dated December 31, 2023, payable in one lump sum payment of $12,500,000 plus all interest accrued at a rate of 10.5% on June 30, 2024. Note is collateralized by 405 various tractors, trucks, and trailers along with all related tools and supplies.     13,170,774       12,500,000  
  Note payable to Pilot OFS Holdings, LLC dated December 1, 2023, payable in 18 monthly installments of $90,431 at 10.5% interest. Note is collateralized by 28 various tanker trailers.     1,026,591       1,500,000  
  Total long-term debt     27,827,365       28,044,748  
  Less: unamortized debt issuance costs     (69,887 )     (96,095 )
  Long-term debt, less unamortized debt issuance costs     27,757,478       27,948,653  
  Less: current portion     (14,779,232 )     (14,843,727 )
  Total long-term debt, less current portion     12,978,246       13,104,926  

 

See independent auditors’ review report

 

17

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(8) Long-Term Debt (continued)

Following are the maturities of long-term debt:

 

  2024     14,779,232  
  2025     10,727,026  
  2026     2,162,737  
  2027     115,025  
  2028     38,420  
  2029 & thereafter     4,925  
  Totals     27,827,365  

 

(9) Finance Lease Obligations

On December 28, 2021, the Company entered into six finance leases with Maxus Capital Group, LLC (Maxus) for 57 trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $10,986 to $14,483 and the option to purchase the leased equipment at the end of the lease term ranging from $37,927 to $50,000. The Company is required to make a one-time security deposit payment for each lease ranging from $10,986 to $14,483 to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreement, including the Company’s option to purchase the leased assets from Maxus at the end of the lease term, classify the lease as a finance lease in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation equal to the present value of the future cash payments using the interest rate provided by Maxus Capital Group of 8.61%, as well as a lease asset equal to the present value of the future cash payments using an interest rate of 8.61% plus lease costs of $94,905 and prepaid lease payments of $111,555.

 

On April 21, 2022, the Company entered into two additional finance leases with Maxus, the first being for thirty (30) trucks and tanker trailers and the second being for two (2) tanker trailers.

 

Both leases have a term of thirty-six (36) months with monthly installments of $24,767 and $4,473 for the first and second lease, respectively. Both leases include an option to purchase the leased equipment at the end of the lease term for $83,400 and $15,000 for the first and second lease, respectively. The Company is required to make a one-time security deposit payment of $24,767 and $4,473 for the first and second lease, respectively, to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposits.

 

See independent auditors’ review report

 

18

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(9) Finance Lease Obligations (continued)

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the interest rate provided by Maxus Capital Group of 10.44% and 10.19% for the first and second lease, respectively, as well as lease assets equal to the present value of the future cash payments using an interest rate of 10.44% and 10.19%, respectively, plus lease costs of $25,030 and $5,150 for the first and second lease, respectively.

 

On December 22, 2022, the Company entered into two sale and leaseback transactions with Maxus. The Company assigned all of the assets comprising the pipeline system that was acquired from the acquisition of CPE Gathering Midcon, LLC to Maxus for consideration of $3,250,000 and $1,198,931 for the first and second sale, respectively. and entered into two lease agreements to lease the pipeline assets back from Maxus for 60 monthly payments of $56,803 and $20,955 for the first and second lease, respectively. At the end of the lease term, the Company has an option to purchase the pipeline assets back from Maxus for $1,218,762 and $449,604 for the first and second lease, respectively.

 

The Company has pledged 100% of its interests in the related pipeline assets as collateral for the lease obligations.

 

The Company is required to make one-time security deposit payments of $56,803 and $20,955 for the first and second lease, respectively, to be used in the event of a default by the Company. In addition, the Company is required to make minimum cash reserve payments of at least $18,934 and $6,985 for the first and second lease, respectively, each month in addition to the base lease payments until Maxus has received $681,640 and $251,458 for the first and second lease, respectively. The cash reserve payments are to be used in the event of default by the Company. All security deposit amounts as well as cash reserve amounts will be fully refunded to the Company at the end of the lease term. As of June 30, 2024 and December 31, 2023, the balance of cash reserve payments made under these lease obligations was $466,549 and $311,033, respectively. The Company incurred $124,650 of lease costs from the preceding transaction that are being amortized over the 5-year term of the leases.

 

The terms of the lease agreement, including the Company’s option to purchase the pipeline assets from Maxus at the end of the lease term, preclude the Company from using sale and leaseback accounting treatment in accordance with FASB ASC-842-40. As such, the transaction is being accounted for as a financing arrangement, whereby the Company does not record a sale or derecognize the pipeline assets. The Company continues to record depreciation expense on the pipeline assets and has recorded a financial liability due to Maxus (included in finance lease obligations in the accompanying combined balance sheet).

 

See independent auditors’ review report

 

19

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(9) Finance Lease Obligations (continued)

The Company is using imputed interest rates of 16.85% and 17.39% for the first and second lease, respectively, which results in the carrying value of the financial liability equating the estimated book value of the pipeline assets at the end of the lease terms and the date at which the Company may exercise its buy-back option.

 

On March 22, 2023, the Company entered into three (3) additional finance leases with Maxus for 90 trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $14,443 to $37,865 and the option to purchase the leased equipment at the end of the lease term ranging from $47,586 to $124,758. The Company is required to make a one-time security deposit payment for each lease ranging from $14,443 to $37,865 to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the interest rate implicit in the leases of 11.56% as well as lease assets equal to the present value of the future cash payments using an interest rate of 11.56%.

 

On November 20, 2023, the Company entered into five (5) additional finance leases with Maxus for one hundred and five (105) trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $23,192 to $75,217 and the option to purchase the leased equipment at the end of the lease term ranging from $74,000 to $240,000. The Company is required to make a one-time security deposit payment for each lease ranging from $23,192 to $75,217 to be used in the event of a default by the Company. At the end of the terms Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the implicit borrowing rate of similar leases with Maxus for similar assets and terms of 11.56% as well as lease assets equal to the present value of the future cash payments using an interest rate of 11.56% plus lease costs of $302,750 and prepaid lease payments of $235,054.

 

See independent auditors’ review report

 

20

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(9) Finance Lease Obligations (continued)

Future minimum lease payments for each of the next four years under the Maxus lease obligation and a reconciliation of undiscounted cash flows to the balance of the lease obligation as of June 30, 2024 on the accompanying combined balance sheet are as follows:

 

  2024     3,195,725  
  2025     4,911,822  
  2026     4,462,499  
  2027     858,530  
  Total minimum lease payments     13,428,576  
  Less: amount representing interest     (3,273,238 )
  Present value of net minimum payments     10,155,338  
  Add: carrying value of lease obligation at end of lease term     2,832,813  
  Total lease obligation     12,988,151  
  Less: unamortized financing fees     (87,255 )
  Total lease obligation, less unamortized financing fees     12,900,896  
  Less: current portion     (3,195,725 )
  Total lease obligation, less current portion     9,705,171  

 

(10) Operating Lease Liabilities

On May 1, 2021, and December 16, 2021, the Company entered into operating leases with Monahans Commercial Properties, LLC (Monahans) and Glacier Oilfield Services, Inc. (Glacier) for the use of corporate office space with terms of 60 months and 36 months with monthly installments of $10,000 and $4,000, respectively.

 

The terms of the lease agreement classify the lease as an operating lease in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate for the calculation of future cash payments, the Company used the risk-free discount rate of .857% for Monahans and .948% for Glacier, which are the rates of a U.S. government bond as of the commencement dates of the leases and for a term comparable to the respective lease terms.

 

As part of the business acquisition of ET, dated December 22, 2023, Meridian assumed three (3) leases with Pilot Water Solutions SWD, LLC for the use of trucking yards, shops, and a housing development to be used in trucking operations. The terms of the leases range from twenty-four (24) to thirty-six (36) months with monthly installments ranging from $5,750 to $138,395.

 

See independent auditors’ review report

 

21

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(10) Operating Lease Liabilities (continued)

The terms of the lease agreements classify the leases as operating leases in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate for the calculation of future cash payments, the Company used the risk-free discount rate of 4.336% and 4.042%, which are the rates of a U.S. government bond as of the commencement dates of the leases and for a term comparable to the respective lease terms.

 

Under the provisions of ASC 842, the Company has elected the practical expedient to not separate nonlease components from lease components and instead will account for each separate lease component and the related nonlease components as a single lease component. The Company has made this election for all operating leases.

 

Under the provisions of ASC 842, the Company has elected the short-term lease expedient. A short-term lease is a lease that, as of the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For such leases, the Company will not apply the recognition requirements of Topic 842 and instead will recognize the lease payments as lease cost on a straight-line basis over the lease term. Lease costs related to short-term leases were $671,236 and $54,407 for the three- month period ended June 30, 2024 and 2023, respectively, and $1,503,118 and $101,847 for the six-month period ended June 30, 2024 and 2023, respectively, and are included in lease expense on the accompanying combined statements of operations.

 

Future minimum lease payments for each of the next three years under the operating lease obligations and a reconciliation of the undiscounted cash flows to the balance of the operating lease obligation as of June 30, 2024 on the accompanying combined balance sheet are as follows:

 

  2024     1,240,870  
  2025     2,431,740  
  2026     978,975  
  Total minimum lease payments     4,651,585  
  Less: amount representing interest     (169,270 )
  Total lease obligation     4,482,315  
  Less: current portion     (1,240,870 )
  Total lease obligation, less current portion     3,241,445  

 

See independent auditors’ review report

 

22

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(11) Business Combination

On December 22, 2023, Meridian acquired 100% of the security interest in ET, a limited liability company in the business of crude oil transportation through the use of trucking equipment, for cash consideration of $12,500,000, making ET a wholly owned subsidiary of Meridian. Meridian did not assume any liabilities of ET as a result of the purchase. Included in the assets acquired by the Company were trade accounts receivable that have a fair market value of $1,500,000 and are believed to be 100% collectible. The fair value of net assets acquired was estimated to equal the amount of consideration paid by Meridian.

 

On January 1, 2024, upon inspection of the equipment shops that the Company assumed the operating leases for during the acquisition, management discovered parts inventory housed in the shops with a value of $556,947 that was not included in the original list of net identifiable assets during the sale and was not taken into consideration during the purchase price allocation. After discovery, management adjusted beginning inventory to reflect the additional inventory and offset the addition by reducing the amount of the purchase price allocated to property and equipment.

 

The following is a recalculated list of net identifiable assets at estimated fair value assumed as of the date of the acquisition:

 

  Total cash consideration     12,500,000  
  Purchase price allocation:        
  Accounts receivable     1,500,000  
  Inventory     603,731  
  Property and equipment, net     10,396,269  
  Net assets acquired     12,500,000  

 

As disclosed in Note 1, effective January 1, 2024, the Company transferred 100% of its membership interests in ET to its parent company, Jorgan.

 

See independent auditors’ review report

 

23

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(12) Line of Credit

On January 6, 2023, the Company entered into an accounts receivable factoring agreement with a financial institution that allows the Company to sell their currently outstanding accounts receivable for cash up to a maximum principal balance of $7,500,000 (hereinafter referred to as line of credit). The Company is charged a fixed service charge by the institution in the amount of 1% of all receivables purchased in addition to a variable service charge of 1.75% of the outstanding amount of a purchased receivable per day up to 120 days or until the face amount of the purchased receivable is collected by the financial institution. The agreement states that if a receivable becomes 120 days or more outstanding, then the institution may require the Company to repurchase the account at face value. To facilitate the potential buyback, the agreement states that the Company must keep a reserve account with the institution in an amount equal to 10% of all purchased accounts. The outstanding principal balance of the line of credit was $7,330,705 and $5,575,005 as of June 30, 2024 and December 31, 2023, respectively. The amount of the reserve account was $1,923,434 and $1,262,525 as of June 30, 2024 and December 31, 2023, respectively, and is included in restricted cash in the accompanying combined balance sheets.

 

On May 9, 2024, the Company entered into an accounts receivable factoring agreement with a financial institution that allows the Company to sell their currently outstanding accounts receivable for cash up to a maximum principal balance of $7,000,000 (hereinafter referred to as line of credit). The Company is charged a fixed service charge by the institution in the amount of 1% of all receivables purchased in addition to a variable service charge of 2.5% of the face amount of a purchased receivable per day up to 120 days or until the face amount of the purchased receivable is collected by the financial institution. The agreement states that if a receivable becomes 120 days or more outstanding, then the institution may require the Company to repurchase the account at face value. To facilitate the potential buyback, the agreement states that the Company must keep a reserve account with the institution in an amount equal to 10% of all purchased accounts. The outstanding principal balance of the line of credit, net of unamortized issuance costs, was $6,079,093 and $0 as of June 30, 2024 and December 31, 2023, respectively. The amount of the reserve account was $706,730 and $0 as of June 30, 2024 and December 31, 2023, respectively, and is included in restricted cash in the accompanying combined balance sheets.

 

(13) Interest Rate Swap

During February 2022 the Company entered into an interest rate swap contract associated with its Main Street Lending Priority Loan (See Note 8). The Company used the interest rate swap to manage risks related to interest rate movements and effectively converted this variable rate debt into a fixed-rate borrowing at 3.92% on a notional amount of $10,000,000. The swap contract settled monthly. On May 11, 2023, the Company terminated its swap agreement with Citibank N.A. The Company recorded a net gain of $686,096 included in other income in the accompanying combined statements of income.

 

See independent auditors’ review report

 

24

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(14) Short-Term Notes Payable

On November 20, 2023, the Company entered into a short-term financing agreement with Maxus for a principal amount of $1,500,000. The Company will make interest only payments monthly until the maturity of the note, upon which all outstanding principal and accrued interest is due. The note was originally scheduled to mature six months from the date of borrowing and was subsequently extended an additional six months to a maturity date of November 20, 2024. The outstanding principal balance was $1,432,049 and $1,500,000 as of June 30, 2024 and December 31, 2023, respectively. The note is collateralized by twenty-eight (28) trucks and tanker trailers.

 

On November 30, 2023, the Company entered into a cash advance agreement with Curve Capital, LLC (“Curve”) in which the Company pledged future receipts of its accounts receivable in exchange for $1,000,000 in cash. The Company is required to pay Curve a total of $1,390,000 in weekly installments of $38,612 at 98.85% interest. The outstanding principal was $845,552 as of December 31, 2023. On March 14, 2024, the Company refinanced its original agreement with Curve for $2,000,000, of which $810,820 was used to pay off the remaining principal balance of the original agreement. The Company is required to pay Curve a total of $2,780,000 in weekly installments of $76,000 at 99.82% interest and the principal balance as of June 30, 2024 was $1,317,726.

 

On February 13, 2024, the Company entered into a short-term financing agreement with Maxus for a principal amount of $3,000,000. The Company will make interest only payments monthly until the maturity of the note, September 1, 2024, upon which all outstanding principal and accrued interest is due. The note is collateralized by a fleet of trucks and trailers. The outstanding principal balance, net of unamortized debt issuance costs, was $2,818,785 and $0 as of June 30, 2024 and December 31, 2023, respectively. On August 15, 2024, the Company received a three-month extension until November 30, 2024.

 

On June 20, 2024, the Company entered into a short-term financing agreement with Agile Lending, LLC for a principal amount of $1,312,500. The Company is required to make weekly installments of $67,500 at 145.93% interest until maturity on January 3, 2025. The outstanding principal balance was $1,250,000 and $0 as of June 30, 2024 and December 31, 2023, respectively.

 

See independent auditors’ review report

 

25

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(15) Adoption of New Accounting Standard

In June 2016, the FASB issued guidance (FASB ASC 326) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, the disclosures are required to provide users of the financial statements with useful information in analyzing an entity’s exposure to credit risk and the measurement of credit losses. Financial assets held by the company that are subject to the guidance in FASB ASC 326 were trade accounts receivable.

 

The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the combined financial statements.

 

(16) Intent to Sell Membership Interests

On March 21, 2024, the members of the Company entered into a Membership Interest Purchase Agreement with Vivakor, Inc. (“Vivakor”), whereby, at closing, Vivakor will acquire 100% of the membership interests of the Company.

 

Vivakor’s acquisition of 100% of the membership interests of the Company is subject to various closing conditions. As of the date the financial statements were available to be issued, the acquisition has not yet officially occurred.

 

(17) Default on Promissory Notes

On August 23, 2024, the Company received two (2) amended demand letters from the counsel for Pilot Travel Centers, LLC and Pilot OFS Holdings, LLC (collectively referred to as “Pilot”) demanding that Meridian pay all outstanding principal and accrued interest on certain promissory notes, assigned accounts receivable, and rental payments.

 

The first amended demand letter refers to Meridian’s default under its $1,500,000 note payable, dated December 1, 2023. Eighteen (18) monthly installments in the amount of $90,431 were being made under this note. Meridian made these monthly payments through June 2024 and failed to make payments for July and August 2024, triggering a default and immediate payment of the outstanding principal and accrued interest under this note in the amount of $1,034,873.

 

The second amended demand letter refers to Meridian’s default under its $12,500,000 note payable, dated December 31, 2023. The principal amount of this note plus accrued interest was due in full on June 30, 2024. Meridian failed to make payment. In addition, the demand letter states that Meridian failed to make a payment of $3,410,574 related to assigned accounts receivable as well as $19,250 in rental payments due as a result of the purchase of ET.

 

See independent auditors’ review report

 

26

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(17) Default on Promissory Notes (continued)

Both letters demand that full payment be made by Meridian on the defaulted obligations no later than August 30, 2024. As of September 11, 2024, the date the combined financial statements were available to be issued, Meridian has made payments of $500,000 towards these obligations.

 

Additionally, as shown in the accompanying financial statements, the Company’s current liabilities exceed its current assets by $25,688,063 as of June 30, 2024. These factors, along with the uncertain conditions Meridian faces regarding its notes payable with Pilot, create substantial doubt about the Company’s ability to continue as a going concern. Management of the Company has evaluated these conditions and is currently working with outside creditors to obtain additional financing to repay its obligations to Pilot. While the Company works to obtain additional financing, they have also requested extensions on the payment of all outstanding obligations in default through December 31, 2024. The ability of the Company to continue as a going concern and meet its obligations as they become due is dependent on the acceptance of the extension by Pilot and the Company’s ability to obtain additional financing. The combined financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

See independent auditors’ review report

 

27

 

Exhibit 99.4

 

 

 

 

 

 

 

 

 

 

Silver Fuels Processing, LLC

 

Financial Statements

 

as of June 30, 2024 and December 31, 2023

 

and for the three-month and six-month periods

 

ended June 30, 2024 and 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

Independent Auditors’ Review Report   1-2
     
Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023   3
     
Statements of Income for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited)   4
     
Statements of Members’ Equity for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited)   5
     
Statements of Cash Flows for the six-month periods ended June 30, 2024 and 2023 (Unaudited)   6
     
Notes to the Financial Statements (Unaudited)   7-11

 

i

 

 

 

INDEPENDENT AUDITORS’ REVIEW REPORT

 

Management

Silver Fuels Processing, LLC

Dallas, Texas

 

 

Results of Review of Interim Financial Information

 

We have reviewed the accompanying financial statements of Silver Fuels Processing, LLC, which comprise the balance sheet as of June 30, 2024 and the related statements of income and members’ equity for the three-month and six-month periods ended June 30, 2024 and 2023, and statements of cash flows for the six-month periods ended June 30, 2024 and 2023, and the related notes to the financial statements (collectively referred to as the “interim financial information”).

 

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Review Results

 

We conducted our reviews in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit in accordance with GAAS, the objective of which is the expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of Silver Fuels Processing, LLC and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our reviews. We believe that the results of the review procedures provide a reasonable basis for our conclusion.

 

Related-Party Transactions

 

As discussed in Notes 4 and 5 to the accompanying financial statements, all revenues are derived from an entity in which the Company’s manager also controls. Our conclusion is not modified with respect to that matter.

 

Responsibilities of Management for the Interim Financial Information

 

Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.

 

 

 

1

 

 

Report on Balance Sheet as of December 31, 2023

 

We have previously audited, in accordance with GAAS, the balance sheet as of December 31, 2023, and the related statements of income, members’ equity, and cash flows for the year then ended (not presented herein); and we expressed an unmodified opinion on those audited financial statements in our report dated June 6, 2024. Our audit report included an emphasis-of-matter section that indicated all revenues were derived from an entity in which the Company’s manager also controls. In our opinion, the accompanying balance sheet of Silver Fuels Processing, LLC as of December 31, 2023, is consistent, in all material respects, with the audited financial statements from which it has been derived.

 

Shreveport, Louisiana

September 6, 2024

 

 

 

 

2

 

 

Silver Fuels Processing, LLC

Balance Sheets

as of June 30, 2024 (Unaudited) and December 31, 2023

 

 

 

    June 30,
2024
    December 31,
2023
 
    (Unaudited)        
Assets              
Current assets                
Cash and cash equivalents     4,673       5,990  
Accounts receivable, Notes 2 and 4     138,859       0  
Prepaid expense     169,627       63,309  
Due from related parties, Note 4     68,196       64,037  
Other current assets     8,312       0  
Total current assets     389,667       133,336  
                 
Property and equipment, net, Notes 2 and 3     986,566       1,157,113  
                 
Other Assets                
Security deposits     12,992       2,992  
Total other assets     12,992       2,992  
                 
Total assets     1,389,225       1,293,441  
                 
Liabilities and members’ equity                
Current liabilities                
Accounts payable     1,093       325,807  
Due to related parties, Note 4     318,468       0  
Total current liabilities     319,561       325,807  
                 
Members’ equity     1,069,664       967,634  
                 
Total liabilities and members’ equity     1,389,225       1,293,441  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

3

 

 

Silver Fuels Processing, LLC

Statements of Income

for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited) 

 

 

 

    Three Months Ended
June 30,
   

Six Months Ended
June 30,

 
   

2024

    2023     2024     2023  
Revenues                                
Sales     189,750       150,000       379,500       300,000  
Reimbursed expenses - related party     11,478       16,269       58,360       89,561  
Total income     201,228       166,269       437,860       389,561  
                                 
Operating expenses                                
Bank charges     190       0       340       0  
Depreciation     83,886       60,157       164,118       119,808  
Insurance     47,238       26,475       80,634       35,300  
Miscellaneous     556       833       4,882       7,787  
Office supplies     0       157       83       196  
Payroll     18,559       18,638       37,413       37,684  
Professional fees     9,950       8,773       26,667       24,273  
Repairs and maintenance     518       3,636       24,089       46,085  
Travel     1,747       3,681       6,094       6,812  
Utilities     6,023       8,312       15,965       15,520  
Rent     16,000       16,000       32,025       29,500  
Contract labor     0       0       5,885       0  
Station     4,853       0       9,635       2,219  
Total operating expenses     189,520       146,662       407,830       325,184  
                                 
Income from operations     11,708       19,607       30,030       64,377  
                                 
Other income                                
Other income     0       0       0       33,750  
Total other income     0       0       0       33,750  
                                 
Net income     11,708       19,607       30,030       98,127  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

4

 

 

Silver Fuels Processing, LLC

Statements of Members’ Equity

for the three-month and six-month periods ended June 30, 2024 and 2023 (Unaudited)

 

 

 

Balance, March 31, 2024 (Unaudited)     997,956  
         
Net income     11,708  
Members’ contributions     60,000  
Members’ distributions     0  
         
Balance, June 30, 2024 (Unaudited)     1,069,664  
         
Balance, December 31, 2023     967,634  
         
Net income     30,030  
Members’ contributions     72,000  
Members’ distributions     0  
         
Balance, June 30, 2024 (Unaudited)     1,069,664  
         
Balance, March 31, 2023 (Unaudited)     884,639  
         
Net income     19,607  
Members’ contributions     77,500  
Members’ distributions     (374,320 )
         
Balance, June 30, 2023 (Unaudited)     607,426  
         
Balance, December 31, 2022     792,619  
         
Net income     98,127  
Members’ contributions     121,000  
Members’ distributions     (404,320 )
         
Balance, June 30, 2023 (Unaudited)     607,426  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

5

 

 

Silver Fuels Processing, LLC

Statements of Cash Flows

for the six-month periods ended June 30, 2024 and 2023 (Unaudited)

 

 

 

    Six Months Ended
June 30,
 
    2024     2023  
Cash flows from operating activities                
Net income     30,030       98,127  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
Depreciation     164,118       119,808  
(Increase) decrease in:                
Accounts receivables     (138,859 )     (400,249 )
Due from related parties     (4,159 )     0  
Prepaid expenses     (106,318 )     836  
Security deposit     (10,000 )     0  
Other current assets     (8,312 )     0  
Increase (decrease) in:                
Accounts payable     (211,833 )     67,243  
Due to related party     318,468       0  
Net cash provided by (used in) operating activities     33,135       (114,235 )
                 
Cash flows from investing activities                
Purchases of property and equipment     (106,452 )     (21,250 )
Net cash used in investing activities     (106,452 )     (21,250 )
                 
Cash flows from financing activities                

Contributions from members

    72,000       121,000  
Distributions to members     0       (30,000 )
Net cash provided by financing activities     72,000       91,000  
                 
Net change in cash and cash equivalents     (1,317 )     (44,485 )
                 
Beginning cash and cash equivalents     5,990       47,015  
                 
Ending cash and cash equivalents     4,673       2,530  
                 
Supplementary non-cash investing and financing activities:                
Assignment of related-party receivable to parent through distributions     0       374,320  
Transfer of property improvements to related party     112,880       0  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

6

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(1) Nature of Business

Silver Fuels Processing, LLC, (the “Company”), organized in January 2018, owns, and operates crude oil transfer stations in Texas, New Mexico, and North Dakota. The Company has operated the stations since June of 2018. The Company is a Texas limited liability company in which Jorgan Development (“Jorgan”) (a Louisiana limited liability company) owns 99% of the equity interest and JBAH Holdings, LLC (“JBAH”) (a Texas limited liability company) owns the remaining 1% of equity interest.

 

(2) Summary of Significant Accounting Policies

Basis of accounting - The financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Basis of presentation and 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 and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and cash equivalents - For the purpose of reporting cash flows, cash and cash equivalents include all cash on hand and cash on deposit with maturities of less than three months.

 

Accounts receivable and allowance for credit losses – All of the Company’s accounts receivable are from one customer, White Claw Crude, LLC (“WCC”), a related party (Note 4). Accounts receivable are generated from fees charged to WCC for the right to use the Company’s crude oil transfer stations to transport their crude oil along various oil pipelines and monthly reimbursable operating expenses. At each balance sheet date, the Company evaluates the need for an allowance for credit loss account and, if deemed necessary, recognizes an expected allowance for credit losses. In addition, also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist.

 

Due to all accounts receivable being due from a related party, and considered 100% collectible, management has not calculated an allowance for credit losses as of June 30, 2024 and December 31, 2023.

 

Property and equipment – Property and equipment is stated at cost. Depreciation is computed by the straight-line method over the assets’ estimated useful lives of 7 years.

 

See independent auditors’ review report.

 

7

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Impairment of long-lived assets – The Company regularly assesses all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews all material assets annually for possible impairment. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. No impairment was considered necessary during the periods ended June 30, 2024 and December 31, 2023.

 

Revenue recognition – All of the Company’s revenues are derived from fees charged for the use of their crude oil transfer stations to transport oil along various pipelines and from reimbursement of certain operating expenses related to the facilitation of this process. The Company has one performance obligation in the form of allowing its customer to utilize their transfer stations. The Company has determined that the customer has obtained the promised service when the customer successfully utilizes the Company’s transfer station to transport oil, as such, the Company recognizes revenue at the point in time that the transfer stations are utilized by the customer. Reimbursed expense income is recognized as the related expenses are incurred. There is no significant financing component in transaction price, as the Company’s customer generally pays within the contractual payment terms of 30 to 60 days.

 

Income taxes - The Company is a limited liability company that is taxed as a partnership for federal and state income tax purposes. As such, the Company does not pay income taxes, as any income or loss and credits are included in the tax returns of the individual partners. Accordingly, no provision has been made for income taxes in the financial statements.

 

Under the provisions of FASB ASC 740-10, the Company records a liability for uncertain tax positions when probable that a loss has been incurred and the amount can be reasonably estimated. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

 

Compensated absences – Employees of the Company are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. The Company does not accumulate vacation or sick time, the estimate for the amount of compensation for future absences was immaterial and, accordingly, no liability has been recorded in the accompanying financial statements. The Company’s policy is to recognize the costs of compensated absences when paid to the individual employees.

 

Subsequent events – Management of the Company has evaluated subsequent events, for recognition and disclosure, through September 6, 2024, the date the financial statements were available to be issued.

 

See independent auditors’ review report.

 

8

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(3) Property and Equipment

The following is a summary of property and equipment as of June 30, 2024 and December 31, 2023:

 

      June 30,
2024
    December 31,
2023
 
  Basa station     1,130,787       1,137,216  
  Midland station     87,581       87,581  
  Posse Monroe station     689,557       689,557  
  Wasson station     376,711       376,711  
  Steel Tanks     64,175       64,175  
  Sub-total   $ 2,348,811     $ 2,355,240  
  Less: accumulated depreciation     1,362,245       1,198,127  
  Totals   $ 986,566     $ 1,157,113  

 

Depreciation expense related to property and equipment was $83,886 and $60,157 for the three- month periods ended June 30, 2024 and 2023, respectively, and was $164,118 and $119,808 for the six-month periods ended June 30, 2024 and 2023, respectively.

 

(4) Related-Party Transactions

As disclosed in Notes 2 and 5, the Company’s only Customer is WCC, a related party owned and managed by Jorgan Development, a Louisiana limited liability company, the majority owner of the Company.

 

During the year ended December 31, 2021 (the “Effective Date”), the Company entered into a 10- year take or pay agreement (the “Agreement”) with WCC. The Agreement requires that WCC transports greater than or equal to 200,000 barrels per month, the minimum volume commitment (“MVC”), through the Company’s crude transfer stations at a rate of $0.25 per barrel, for the period beginning on the Effective Date and ending June 30, 2023, and $0.275 per barrel, for the period beginning on July 1, 2023 and ending upon the expiration of the Agreement, for quantities up to the MVC and $0.125 for amounts that exceed the MVC. Under the terms of the Agreement, each month WCC does not meet the MVC, it is responsible for paying the Company the amount equal to the MVC times the applicable rate. In addition, the Agreement requires that WCC reimburse the Company for certain operating expenses.

 

Effective January 1, 2024, the Company and WCC amended the above Agreement to change the MVC to 230,000 barrels per month, the rate per barrel above and beyond the MVC to $0.15, and to extend the maturity date of the Agreement to December 31, 2034.

 

See independent auditors’ review report.

 

9

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(4) Related-Party Transactions (continued)

Revenues from WCC during the three-month periods ended June 30, 2024 and 2023 totaled $201,228 and $166,269, respectively, which includes $189,750 and $150,000, respectively, of fee income, and $11,478 and $16,269, respectively, of reimbursed expenses. Revenues from WCC during the six-month periods ended June 30, 2024 and 2023 totaled $437,860 and $389,561, respectively, which includes $379,500 and $300,000, respectively, of fee income and $58,360 and $89,561, respectively, of reimbursed expenses.

 

During the periods ended June 30, 2024 and December 31, 2023, the Company provided and received operating loans to and from various related parties. The operating loans have no stated repayments terms. As of June 30, 2024 and December 31, 2023, the Company was due $68,196 and $64,037, respectively, from its related parties and owed $318,468 and $0, respectively, to its related parties.

 

The Company rents crude oil stations on a month-to-month basis from Endeavor Crude, LLC, a related party owned and managed by Jorgan. Total rent expense related to this lease was $16,000 and $16,000 for the three-month periods ended June 30, 2024 and 2023, respectively, and was $32,025 and $29,500 for the six-month periods ended June 30, 2024 and 2023, respectively, and is included in rent expense on the accompanying statements of income.

 

(5) Major Customers and Concentration of Credit Risk

The Company’s only customer is WCC. WCC accounts for 100% of the Company’s revenue for the three and six-month periods ended June 30, 2024 and 2023.

 

Additionally, the Company and WCC operate in the crude oil industry. The industry concentration has the potential to impact the Company’s overall exposure to credit risk in that WCC may be similarly affected by changes in economic, industry, or other conditions. There is a risk that the Company would not be able to identify and access replacement markets at comparable margins.

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company has not experienced any losses in such accounts.

 

See independent auditors’ review report.

 

10

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(6) Adoption of New Accounting Standards

In June 2016, the FASB issued guidance (“ASC 326”) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity’s exposure to credit risk and the measurement of credit losses. The Company did not have significant financial assets that are subject to the guidance in ASC 326. Specifically, the Company’s accounts receivable are substantially all related-party receivables from companies under common ownership. FASB ASC 326 excludes such receivables from the expected loss model.

 

The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements.

 

(7) Intent to Sell Membership Interests

On March 21, 2024, the members of the Company entered into a Membership Interest Purchase Agreement with Vivakor, Inc. (“Vivakor”), whereby, at closing, Vivakor will acquire 100% of the membership interests of the Company.

 

Vivakor’s acquisition of 100% of the membership interests of the Company is subject to various closing conditions. As of the date the financial statements were available to be issued, the acquisition has not yet officially occurred.

 

See independent auditors’ review report.

 

11

 

Exhibit 99.5

 

 

 

 

 

 

 

 

 

 

Endeavor Crude, LLC, Meridian Equipment

 

Leasing, LLC, and Equipment Transport, LLC

 

Combined Financial Statements

 

as of September 30, 2024 and December 31, 2023

 

and for the three-month and nine-month

 

periods ended September 30, 2024 and 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Table of Contents

 

 

 

Independent Auditors’ Review Report   1-2
     
Combined Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023   3
     
Combined Statements of Operations for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)   4
     
Combined Statements of Members’ Equity for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)   5
     
Combined Statements of Cash Flows for the nine-month periods ended September 30, 2024 and 2023 (Unaudited)   6
     
Notes to the Combined Financial Statements (Unaudited)   7-26

 

i

 

 

 

INDEPENDENT AUDITORS’ REVIEW REPORT

 

Management

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Dallas, Texas

 

 

Results of Review of Interim Financial Information

 

We have reviewed the accompanying combined financial statements of Endeavor Crude, LLC, Meridian Equipment, LLC, and Equipment Transport, LLC, which comprise the combined balance sheet as of September 30, 2024 and the related combined statements of operations and members’ equity for the three-month and nine-month periods ended September 30, 2024 and 2023, and statements of cash flows for the nine-month periods ended September 30, 2024 and 2023, and the related notes to the combined financial statements (collectively referred to as the “interim financial information”).

 

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Review Results

 

We conducted our reviews in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquires of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit in accordance with GAAS, the objective of which is the expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our reviews. We believe that the results of the review procedures provide a reasonable basis for our conclusion.

 

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

 

The accompanying financial information has been prepared assuming that the Company will continue as a going concern. As discussed in Note 16 to the interim financial information, the Company was in default under certain promissory notes. The Company has been able to obtain a short-term extension to pay under its obligations, however has been unable to obtain alternative financing, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the conditions and events and management’s plans regarding those matters are also described in Note 16. The accompanying interim financial information does not include any adjustments that might result from the outcome of that uncertainty.

 

 

 

1

 

 

Responsibilities of Management for the Interim Financial Information

 

Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.

 

Report on Balance Sheet as of December 31, 2023

 

We have previously audited, in accordance with GAAS, the balance sheet as of December 31, 2023, and the related statement of income, members’ equity, and cash flows for the year then ended (not presented herein); and we expressed an unmodified opinion on those audited financial statements in our report dated June 6, 2024. In our opinion, the accompanying balance sheet of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and Equipment Transport, LLC as of December 31, 2023, is consistent, in all material respects, with the audited financial statements from which it has been derived.

 

Shreveport, Louisiana

December 10, 2024

 

 

 

 

2

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Balance Sheets

as of September 30, 2024 (Unaudited) and December 31, 2023

 

 

 

    September 30,
2024
    December 31,  
    (Unaudited)     2023  
Assets                
Current assets                
Cash     710,366       1,164,555  
Restricted cash, Note 11     3,258,649       1,262,525  
Trade accounts receivable, net of allowance for credit losses of $21,361 and $24,531 as of September 30, 2024 and December 31, 2023, respectively, Note 2     11,190,475       11,679,862  
Prepaid expenses     3,232,191       546,655  
Due from related party, Note 5     0       245,368  
Inventory, Note 2     126,298       46,784  
Total current assets     18,517,979       14,945,749  
                 
Property and equipment, net, Notes 2 and 4     58,813,934       65,895,192  
                 
Other assets                
Right-of-use asset - operating, Note 9     3,899,499       5,657,160  
Intangible assets, net, Note 2     738,326       2,953,305  
Other assets     1,149,824       871,655  
Total other assets, net     5,787,649       9,482,120  
                 
Total assets     83,119,562       90,323,061  
                 
Liabilities and members’ equity                
Current liabilities                
Trade payables     4,629,414       1,151,741  
Accrued liabilities     6,982,795       5,562,998  
Due to related party, Note 5     1,345,104       1,653,755  
Line of credit, Note 11     10,835,696       5,575,005  
Short-term notes payable, Note 13     7,188,638       2,345,552  
Current portion of finance lease obligations, Note 8     1,693,233       6,200,710  
Current portion of operating lease obligations, Note 9     617,935       2,486,740  
Current portion of long-term debt, Note 7     16,288,433       14,843,727  
Total current liabilities     49,581,248       39,820,228  
                 
Long-term liabilities                

Finance lease obligations - less current portion, Note 8

    10,121,022       8,773,041  
Operating lease obligations - less current portion, Note 9     3,281,564       3,164,086  
Long-term debt - less current portion, Note 7     11,743,663       13,104,926  
Total long-term liabilities     25,146,249       25,042,053  
                 
Members’ equity     8,392,065       25,460,780  
                 
Total liabilities and members’ equity     83,119,562       90,323,061  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

3

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Statements of Operations

for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)

 

 

 

    Three Months
Ended September 30,
    Nine Months
Ended September 30,
 
    2024     2023     2024     2023  
Revenues                                
Sales     22,680,412       13,029,539       68,568,366       39,939,971  
Reimbursed expenses - related party     190,250       0       2,107,086       0  
Total revenues     22,870,662       13,029,539       70,675,452       39,939,971  
                                 
Operating expenses                                
Operating     35,626       7,500       121,123       7,500  
Auto     940,703       70,971       3,363,476       543,445  
Bank charges     7,091       150       450       417  
Business taxes     50,838       18,230       74,718       128,501  
Computer     206,443       92,658       787,026       298,461  
Consulting     12,660       0       41,338       0  
Contract labor     10,213,578       7,468,898       28,630,445       22,766,598  
Depreciation     2,923,020       1,745,446       8,756,146       5,004,681  
Employee benefits     79,845       67,274       314,491       164,497  
Insurance     979,864       56,132       2,350,414       73,715  
Inspections     1,217       3,443       39,608       5,789  
Licenses and permits     93,980       34,904       176,455       140,099  
Meals     384       143       1,298       510  
Miscellaneous     82,980       18       158,191       3,601  
Office     106,769       3,101       385,931       6,963  
Payroll taxes     75,295       74,130       253,748       179,212  
Postage     179       0       4,861       0  
Professional fess     81,586       25,311       261,326       60,020  
Repairs and maintenance     380,918       313,424       1,232,610       1,036,619  
Regulatory     52,735       8,018       172,940       8,768  
Training     0       0       0       1,086  
Travel     54,114       52,584       146,441       171,167  
Utilities     81,199       72,997       237,799       221,594  
Tools     0       1,094       700       1,432  
Supplies     50,406       28,781       136,294       74,081  
Employee costs     0       18,714       19,882       78,870  
Lease     393,645       112,765       2,084,884       350,450  
Equipment rental     468       0       468       0  
Fees     66,999       0       66,999       0  
Amortization     738,326       211,650       2,796,189       830,850  
Salaries and wages     4,276,817       941,389       15,877,308       2,646,747  
Total operating expenses     21,987,685       11,429,725       68,493,559       34,805,673  
                                 
Income from operations     882,977       1,599,814       2,181,893       5,134,298  
                                 
Other income (expense)                                
Other income     19,876       10,866       59,351       0  
Other expense     0       0       0       (48,207 )
Interest income     30,095       5,435       65,595       57,327  
Credit losses     13,367       0       (106,725 )     0  
Gain on hedging transactions     0       0       0       686,096  
Gain (loss) on sale of assets     0       34,598       (18,630 )     8,567  
Interest expense     (2,901,543 )     (775,278 )     (6,727,054 )     (2,308,515 )
Total other expense     (2,838,205 )     (724,379 )     (6,727,463 )     (1,604,732 )
                                 
Net income (loss)     (1,955,228 )     875,435       (4,545,570 )     3,529,566  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

4

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Statements of Members’ Equity

for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)

 

 

 

    Accumulated
Other
Comprehensive
Income
    Members’
Equity
    Total  
Balance, June 30, 2024 (Unaudited)     0       17,222,876       17,222,876  
                         
Net loss     0       (1,955,228 )     (1,955,228 )
Members’ contributions     0       6,620,772       6,620,772  
Members’ distributions     0       (13,496,355 )     (13,496,355 )
                         
Balance, September 30, 2024 (Unaudited)     0       8,392,065       8,392,065  
                         
Balance, December 31, 2023     0       25,460,780       25,460,780  
                         
Net loss     0       (4,545,570 )     (4,545,570 )
Members’ contributions     0       14,070,951       14,070,951  
Members’ distributions     0       (26,594,096 )     (26,594,096 )
                         
Balance, September 30, 2024 (Unaudited)     0       8,392,065       8,392,065  
                         
Balance, June 30, 2023 (Unaudited)     0       31,324,825       31,324,825  
                         
Net income     0       875,435       875,435  
Members’ contributions     0       502,307       502,307  
Members’ distributions     0       (4,803,224 )     (4,803,224 )
                         
Balance, September 30, 2023 (Unaudited)     0       27,899,343       27,899,343  
                         
Balance, December 31, 2022     28,884       30,990,723       31,019,607  
                         
Amounts reclassified from accumulated other comprehensive income     (28,884 )     28,884       0  
                         
Net income     0       3,529,566       3,529,566  
Members’ contributions     0       2,494,806       2,494,806  
Members’ distributions     0       (9,144,636 )     (9,144,636 )
                         
Balance, September 30, 2023 (Unaudited)     0       27,899,343       27,899,343  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

5

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC,

and Equipment Transport, LLC

Combined Statements of Cash Flows

for the nine-month periods ended September 30, 2024 and 2023 (Unaudited)

 

 

 

    Nine Months Ended
September 30,
 
    2024     2023  

Cash flows from operating activities

               
Net income (loss)     (4,545,570 )     3,529,566  
Adjustments to reconcile net income (loss) to net cash used in operating activities:                
Credit losses     (106,725 )     0  
Depreciation     8,756,146       5,004,681  
Amortization     2,796,189       830,850  
(Gain) loss on disposal of assets     18,630       (8,567 )
Gain on sale of interest rate swap agreement     0       (594,000 )
Amortization of debt issuance costs     263,090       58,010  
Capitalization of interest expense     1,026,591       0  
(Increase) decrease in:                
Trade accounts receivable     (9,032,197 )     (7,350,240 )
Inventory     (79,514 )     493,136  
Prepaid expenses     (5,982,360 )     (2,772,146 )
Due from related party     245,368       (1,497,440 )
Other current assets     0       23,982  
Other assets     (278,169 )     (166,442 )
Note receivable     0       12,125  
Increase (decrease) in:                
Trade payables     1,101,560       (3,066,250 )
Accrued liabilities     4,775,411       2,427,146  
Due to related party     (308,651 )     1,182,193  
Other liabilities     0       (112,500 )
Net cash used in operating activities     (1,350,201 )     (2,005,896 )
                 
Cash flows from investing activities                
Purchases of property and equipment     (641,354 )     (112,475 )
Proceeds from sale of assets     68,700       135,144  
Net cash provided by (used in) investing activities     (572,654 )     22,669  
                 
Cash flows from financing activities                
Net borrowings on line of credit     5,282,650       3,778,758  
Net borrowings on short-term debt     4,938,541       0  
Repayments of finance lease obligations     (3,178,193 )     (1,433,609 )
Repayments on long-term debt     (982,460 )     (1,700,058 )
Debt issuance costs incurred     (322,495 )     0  
Members’ contributions     3,537,568       2,432,499  
Members’ distributions     (5,810,821 )     (480,412 )
Net cash provided by financing activities     3,464,790       2,597,178  
                 
Net change in cash and cash equivalents     1,541,935       613,951  
                 
Beginning cash and cash equivalents     2,427,080       2,085,508  
                 
Ending cash and cash equivalents     3,969,015       2,699,459  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest     6,785,971       1,581,754  
                 
Supplementary non-cash investing and financing activities                
Assignment of related-party receivables to parent through distributions     14,521,164       5,332,224  
Assumption of related-party payables through distributions to parent     6,262,111       3,332,000  
Assumption of related-party receivables through contributions from parent     1,032,750       0  
Assumption of related-party payables by parent through contributions     9,500,633       62,307  

 

See independent auditors’ review report and accompanying notes to the combined financial statements.

 

6

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(1) Nature of Business

Endeavor Crude, LLC (“Endeavor”), Meridian Equipment Leasing, LLC (“Meridian”), and Equipment Transport, LLC (“ET”) (collectively, the “Company” or “Companies”) is primarily engaged in the business of crude oil transportation. Endeavor and Meridian are privately held Texas limited liability companies. ET is a privately held Pennsylvania limited liability company and CPE Gathering Midcon, LLC (“CP”), a wholly-owned subsidiary of Meridian, is a privately held Delaware limited liability company.

 

Endeavor was formed in February 2019 and began operations in April 2019. Meridian was formed in April 2019 and began operations in May 2019 through the acquisition of real estate and trucking assets. Endeavor’s primary activity of generating revenue is the transportation of crude oil through its operation of a fleet of trucks and trailers primarily servicing Texas and New Mexico. Meridian is the owner of this fleet of trucks and trailers. Meridian’s primary activity of generating revenue is the leasing of these trucks and trailers to Endeavor.

 

In December 2022, Meridian acquired 100% of the membership interests in CP through a business acquisition. CP owns and operates several transfer stations and pipelines used in the processing and transportation of crude oil and gas.

 

In December 2023, Meridian acquired 100% of the membership interests in ET through a business combination, see Note 10. In January 2024, Meridian transferred 100% of its membership interests in ET to its parent, Jorgan Development, LLC. ET owns and operates a fleet of trucks and trailers used in the transportation of crude oil and gas.

 

(2) Summary of Significant Accounting Policies

Basis of accounting – The combined financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Principles of consolidation/combination – These financial statements have been combined as the Companies are under common ownership and management. Meridian’s wholly owned subsidiaries have been consolidated into Meridian’s financial statements before combination. All intercompany transactions and balances have been eliminated during consolidation and combination.

 

See independent auditors’ review report

 

7

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Basis of presentation and use of estimates – The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and cash equivalents – Cash and cash equivalents include all cash on hand and cash on deposit with maturities of less than three months.

 

Trade accounts receivable and allowance for credit losses – The Company’s trade accounts receivable are primarily derived from trucking transportation customers. At each balance sheet date, the Company recognizes an expected allowance for credit losses. Also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist.

 

The allowance estimate is derived from a review of the Company’s historical losses based on the aging of receivables. This estimate is adjusted for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segment, trucking transportation customers, has remained constant since the Company’s inception. The allowance for credit losses for trade accounts receivable was $21,361 and $24,531 as of September 30, 2024 and December 31, 2023, respectively.

 

Property and equipment – Property and equipment are carried at cost, less accumulated depreciation. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the assets as follows:

 

  Communications equipment     3 years  
  Autos, trucks and trailers     5-7 years  
  Buildings and improvements     15 years  
  Pipeline and tanks     20 years  

 

Routine maintenance and repairs are charged to operating expense, while costs of improvements and replacements are capitalized. When an asset is retired or sold, its cost and related accumulated depreciation are removed from the accounts, and the difference between the net book value of the asset and proceeds from disposition is recognized as a gain or loss in the combined statement of operations.

 

See independent auditors’ review report

 

8

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Intangible assets – Intangible assets consist of an acquired trucking contract that has been assigned a useful life of 5 years and transaction costs related to the purchase of ET that have been assigned a useful life of 1 year. The assets are being amortized on a straight-line basis.

 

Total amortization expense relating to the trucking contract was $0 and $211,650 for the three- month period ended September 30, 2024 and 2023, respectively, and $0 and $830,850 for the nine-month period ended September 30, 2024 and 2023, respectively.

 

Total amortization expense relating to the transaction costs was $738,326 and $0 for the three- month period ended September 30, 2024 and 2023, respectively, and $2,796,189 and $0 for the nine-month period ended September 30, 2024 and 2023, respectively.

 

Fair Value Measurements – 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 framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under ASC 820 are described as follows:

 

Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

See independent auditors’ review report

 

9

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Impairment of long-lived assets – The Company regularly assesses all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews all material assets annually for possible impairment. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. No impairment was considered necessary during the three and nine-month period ended September 30, 2024 and 2023.

 

Interest rate used for operating leases – Under the provisions of FASB ASC 842-10-65-1, the Company has elected to use the risk-free discount rate of a U.S. government bond with a period comparable with that of the lease term for all operating leases placed on the combined balance sheet.

 

Inventory – Inventory is stated at the lower of cost or net realizable value, with cost being determined under the first-in, first-out method.

 

Revenue recognition – Substantially all revenue the Company earns is related to trucking fees charged to customers for gathering and transporting crude oil and gas products.

 

Management has identified that a legally enforceable contract with its customers is executed by both parties at the point of pickup at the customer’s location. Although the Company may have master agreements with its customers, these master agreements only establish general terms and there is no financial obligation to the customer until the load is accepted and the Company takes possession of the load.

 

The Company’s only performance obligation is transportation services, which is completed at the point in time in which the Company delivers the load to the customer’s designated delivery point, effectively transferring control of the load to the customer. At such time, the Company recognizes the related transportation revenue. There is no significant financing component in transaction price, as the Company’s customers generally pay within the contractual payment terms of 30 to 60 days.

 

See independent auditors’ review report

 

10

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Debt issuance costs – Debt issuance costs represent costs incurred in relation to the Main Street Loan Credit Facility (see Note 7), Maxus lease obligations (see Note 8 and 13), and the Business First Bank line of credit (see Note 11). Such costs have been deferred and are being amortized on a straight-line basis over the term of the related loan and lease agreements. Long-term debt and finance lease obligations, net of current portion, short-term debt, and line of credit are recorded on the accompanying combined balance sheet net of unamortized debt issuance costs. The total of these costs amortized to interest expense was $148,879 and $19,337 for the three-month period ended September 30, 2024 and 2023, respectively, and $263,090 and $58,010 for the nine-month period ended September 30, 2024 and 2023, respectively.

 

Income taxes – The Companies are limited liability companies that are taxed as partnerships for federal and state income tax purposes. As such, the Companies do not pay income taxes, as any income or loss and credits are included in the tax returns of the individual member. Accordingly, no provision has been made for income taxes in the combined financial statements.

 

Under the provisions of FASB ASC 740-10, the Company records a liability for uncertain tax positions when probable that a loss has been incurred and the amount can be reasonably estimated. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

 

Compensated absences – Employees of the Company are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. The Company does not accumulate vacation or sick time, the estimate for the amount of compensation for future absences was immaterial and, accordingly, no liability has been recorded in the accompanying combined financial statements. The Company’s policy is to recognize the costs of compensated absences when paid to the individual employees.

 

Subsequent events – Management has evaluated subsequent events through December 10, 2024, the date these combined financial statements were available to be issued. See Note 16.

 

Reclassifications – Certain reclassifications have been made to the December 31, 2023 balance sheet in order for it to be in conformity with the current year presentation.

 

See independent auditors’ review report

 

11

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(3) Major Customers and Concentration of Credit Risk

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue and whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

 

The Company had two (2) major customers that accounted for approximately 42% and 44% of revenue for the three-month period ended September 30, 2024 and 2023, respectively, and 38% and 35% of revenue for the nine-month period ended September 30, 2024 and 2023, respectively. These customers accounted for approximately 36% and 24% of the balance of accounts receivable as of September 30, 2024 and December 31, 2023, respectively.

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company has not experienced any losses in such accounts.

 

(4) Property and Equipment

The Company’s balance of property and equipment as of September 30, 2024 and December 31, 2023 is comprised of the following:

 

      September 30,
2024
    December 31,
2023
 
  Land     2,848,857       2,848,857  
  Communications equipment     265,790       0  
  Buildings and improvements     1,700,201       1,700,201  
  Trucks and trailers     32,000,899       30,603,602  
  Right-of-use asset - finance leases     14,718,960       14,718,960  
  Pipeline and tanks     41,107,022       41,107,022  
  Sub-total     92,641,729       90,978,642  
  Less: accumulated depreciation     (33,827,795 )     (25,083,450 )
  Property and equipment, net     58,813,934       65,895,192  

 

Depreciation expense related to property and equipment was $2,923,020 and $1,745,446 for the three-month period ended September 30, 2024 and 2023, respectively, and $8,756,146 and $5,004,681 for the nine-month period ended September 30, 2024 and 2023, respectively.

 

See independent auditors’ review report

 

12

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(5) Related-Party Transactions

On January 1, 2023, Endeavor entered into a take or pay agreement with White Claw Crude, LLC (“WCC”), a related party controlled by James Ballengee, manager of the Company, in which the Company is to provide hauling services to WCC for their crude oil and gas products. The agreement states that if WCC does not cause 100,000 barrels per day to be hauled (subsequently amended to 75,000 barrels effective January 1, 2024) during the period January 1, 2023 through December 31, 2033 (subsequently amended to December 31, 2034), the minimum volume commitment (“MVC”), then WCC must pay the Company a deficiency fee equal to the shortage amount, in barrels, multiplied by 25% of the average rate of all hauls for the related calendar year. The Company earned $843,107 and $2,230,446 in deficiency fees during the three-month period ended September 30, 2024 and 2023, respectively, and $1,484,034 and $7,194,920 during the nine-month period ended September 30, 2024 and 2023, respectively, which are included in sales in the accompanying combined statements of operations.

 

On January 1, 2023, CP entered into a take or pay agreement with WCC in which WCC is to process and transfer 200,000 barrels per month, the MVC, of its crude oil and gas products through the Company’s processing and transfer terminals. The agreement states WCC must pay the Company an amount equal to the greater of the actual volume of product transferred multiplied by the applicable rate, or, the MVC multiplied by the applicable rate. The applicable rates are $1.00 per barrel up to the MVC and $.50 for each barrel in excess of the MVC. The Company earned $600,000 and $600,000 from the agreement during the three-month period ended September 30, 2024 and 2023, respectively, of which $149,310 and $187,209 was derived from volume of product transferred, respectively. The Company earned $1,800,000 and $1,800,000 during the nine-month period ended September 30, 2024 and 2023, respectively, of which $471,352 and $588,721 was derived from volume of product transferred, respectively. The above amounts are included in sales in the accompanying combined statements of operations. Of these fees, $0 and $1,642,458 were included in trade accounts receivable on the accompanying combined balance sheets as of September 30, 2024 and December 31, 2023, respectively.

 

On January 1, 2024, Meridian and ET allowed Horizon Truck and Trailer, LLC (“HTT”), a related party with common management, to occupy five (5) of the Company’s locations under operating leases on a month-to-month basis and reimburse the Company for the related monthly lease payments. The monthly payments on the leases range from $5,750 to $138,395 and have terms ranging from 24 to 36 months. The Company recorded lease payments due from HTT in the amount of $190,250 and $878,300 for the three and nine-month periods ended September 30, 2024, respectively, which are included in reimbursed expenses on the accompanying combined statement of operations and trade accounts receivable on the accompanying combined balance sheet.

 

See independent auditors’ review report

 

13

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(5) Related-Party Transactions (continued)

In addition, the Company agreed to pay for various expenses on behalf of HTT which totaled $0 and $1,228,786 for the three and nine-month periods ended September 30, 2024, respectively, and are included in reimbursed expenses on the accompanying combined statement of operations and of which $93,511 are included in trade accounts receivable on the accompanying combined balance sheet.

 

The Company used HTT’s services during the three and nine-month periods ended September 30, 2024 to perform capital repairs, upgrades, and maintenance to prepare and maintain their fleet of trucks and trailers for operations. The costs totaled $1,698,037 for the nine-month period ended September 30, 2024, of which $1,677,811 were recognized as capital improvements on the Company’s trucks and trailers.

 

During the year ended December 31, 2023, the Company received and provided operating loans from and to various related parties. The loans are short term in nature with no stated repayment terms. As of September 30, 2024 and December 31, 2023, the Company was owed a total of $0 and $245,368 from its related parties, respectively, and owed a total of $1,345,104 and $1,653,755, respectively, to its related parties.

 

(6) Note Payable – PPP Loan

On March 11, 2020, the World Health Organization pronounced the coronavirus (COVID-19) outbreak a pandemic. Citizens and the economies of the United States and other countries have been significantly impacted by the pandemic. In response to the COVID-19 outbreak in 2020, the U.S. Federal Government enacted the Coronavirus Aid, Relief, and Economic Security Act that, among other economic stimulus measures, established the Paycheck Protection Program (PPP) to provide small business loans. In April 2020, the Company obtained its first PPP loan in the amount of $2,145,300. The note matures in April 2025 and bears interest at a fixed annual rate of 1% with the first six months of interest deferred. During the period ending December 31, 2021, the Company received a second PPP loan in the amount of $2,000,000 and received forgiveness of $1,000,735 for the first loan. The second note matures in February of 2026 and bears interest at a fixed annual rate of 1%. The Company believes that all PPP proceeds have been used on qualifying expenses and expects to be forgiven for the full amount of the second loan.

 

See independent auditors’ review report

 

14

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(7) Long-Term Debt

Long-term debt as of September 30, 2024 and December 31, 2023 consisted of the following:

 

      September 30,
2024
    December 31,
2023
 
  Note payable to Ford Credit dated November 1, 2019, payable in 54 monthly installments of $860 at 8.6% interest. Note is collateralized by a 2019 Ford Explorer.     0       3,008  
  Note payable to B1Bank dated February 12, 2020, payable in 48 monthly installments of $7,278 at 5.5% interest. Note is collateralized by 6 Dragon tractor trailers.     0       13,985  
  Main Street Lending Priority Loan Agreement with Business First Bank dated November 12, 2020. Interest accrues at the LIBOR rate plus 3% per annum; maturing on November 12, 2025; secured by substantially all assets of the Company.     10,760,805       10,760,805  
  Note payable to the U.S. Small Business Administration dated June 16, 2020, payable in 348 monthly installments of $731 beginning June 16, 2021 at 3.75% interest. Note is collateralized by substantially all assets of the Company.     10,000       160,000  
  Note payable to Ally Financial dated July 30, 2021, payable in 60 monthly installments of $1,645 at 6.24% interest. Note is collateralized by a 2020 Dodge Challenger.     35,582       50,393  
  Note payable to TD Ameritrade dated January 4, 2021, payable in 72 monthly installments of $991 at 6.89% interest. Note is collateralized by a 2019 Ford Expedition.     25,246       32,838  
  Note payable to TD Ameritrade dated December 9, 2021, payable in 72 monthly installments of $1,434 at 4.94% interest. Note is collateralized by a 2018 Jeep Grand Cherokee.     51,568       62,378  
  Note payable to Ally Financial dated December 24, 2021, payable in 60 monthly installments of $1,532 at 9.79% interest. Note is collateralized by a 2018 Ford Expedition.     51,272       46,684  
  Note payable to Ford Credit dated March 31, 2023, payable in 60 monthly installments of $1,046 at 0.90% interest. Note is collateralized by a 2018 Ford F-150.     54,275       57,272  
  Note payable to Ford Credit dated March 31, 2023, payable in 60 monthly installments of $1,093 at 0.90% interest. Note is collateralized by a 2022 Ford F-150.     51,959       60,249  

 

See independent auditors’ review report

 

15

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(7) Long-Term Debt (continued)
      September 30,
2024
    December 31,
2023
 
  Notes payable to Small Business Administration dated April 10, 2020 and February 4, 2021, payable in 60 monthly installments of $30,374 and $35,024, respectively, at 1.00% interest. Notes are collateralized by the Company’s real and personal property.     2,241,898       2,482,360  
  Note payable to Ford Credit dated July 17, 2023, payable in 48 monthly installments of $1,622 at 9.99% interest. Note is collateralized by a 2021 Chevrolet Tahoe.     47,869       58,787  
  Note payable to TD Ameritrade dated January 6, 2023, payable in 72 monthly installments of $1,194 at 8.99% interest. Note is collateralized by a 2021 Ford F-250.     51,382       58,351  
  Note payable to Ally Financial dated February 27, 2023, payable in 72 monthly installments of $1,163 at 10.89% interest. Note is collateralized by a 2022 Ford F-150.     49,536       55,849  
  Note payable to Ford Credit dated July 7, 2023, payable in 48 monthly installments of $1,195 at 2.9% interest. Note is collateralized by a 2023 Ford F-150.     38,730       54,935  
  Note payable to Ford Credit dated September 8, 2023, payable in 48 monthly installments of $2,370 at 10.79% interest. Note is collateralized by a 2022 Dodge Charger.     72,625       86,854  
  Note payable to Pilot OFS Holdings, LLC dated December 31, 2023, payable in one lump sum payment of $12,500,000 plus all interest accrued at a rate of 10.5% on June 30, 2024. Note is collateralized by 405 various tractors, trucks, and trailers along with all related tools and supplies.     13,519,541       12,500,000  
  Note payable to Pilot OFS Holdings, LLC dated December 1, 2023, payable in 18 monthly installments of $90,431 at 10.5% interest. Note is collateralized by 28 various tanker trailers.     1,026,591       1,500,000  
  Total long-term debt     28,088,879       28,044,748  
  Less: unamortized debt issuance costs     (56,783 )     (96,095 )
  Long-term debt, less unamortized debt issuance costs     28,032,096       27,948,653  
  Less: current portion     (16,288,433 )     (14,843,727 )
  Total long-term debt, less current portion     11,743,663       13,104,926  

 

See independent auditors’ review report

 

16

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(7) Long-Term Debt (continued)

Following are the maturities of long-term debt:

 

  2024     16,288,433  
  2025     9,430,110  
  2026     2,162,737  
  2027     115,025  
  2028     87,647  
  2029 & thereafter     4,925  
  Totals     28,088,877  

 

(8) Finance Lease Obligations

On December 28, 2021, the Company entered into six finance leases with Maxus Capital Group, LLC (Maxus) for 57 trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $10,986 to $14,483 and the option to purchase the leased equipment at the end of the lease term ranging from $37,927 to $50,000. The Company is required to make a one-time security deposit payment for each lease ranging from $10,986 to $14,483 to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreement, including the Company’s option to purchase the leased assets from Maxus at the end of the lease term, classify the lease as a finance lease in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation equal to the present value of the future cash payments using the interest rate provided by Maxus Capital Group of 8.61%, as well as a lease asset equal to the present value of the future cash payments using an interest rate of 8.61% plus lease costs of $94,905 and prepaid lease payments of $111,555.

 

On April 21, 2022, the Company entered into two additional finance leases with Maxus, the first being for thirty (30) trucks and tanker trailers and the second being for two (2) tanker trailers.

 

Both leases have a term of thirty-six (36) months with monthly installments of $24,767 and $4,473 for the first and second lease, respectively. Both leases include an option to purchase the leased equipment at the end of the lease term for $83,400 and $15,000 for the first and second lease, respectively. The Company is required to make a one-time security deposit payment of $24,767 and $4,473 for the first and second lease, respectively, to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposits.

 

See independent auditors’ review report

 

17

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(8) Finance Lease Obligations (continued)

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the interest rate provided by Maxus Capital Group of 10.44% and 10.19% for the first and second lease, respectively, as well as lease assets equal to the present value of the future cash payments using an interest rate of 10.44% and 10.19%, respectively, plus lease costs of $25,030 and $5,150 for the first and second lease, respectively.

 

On December 22, 2022, the Company entered into two sale and leaseback transactions with Maxus. The Company assigned all of the assets comprising the pipeline system that was acquired from the acquisition of CPE Gathering Midcon, LLC to Maxus for consideration of $3,250,000 and $1,198,931 for the first and second sale, respectively. and entered into two lease agreements to lease the pipeline assets back from Maxus for 60 monthly payments of $56,803 and $20,955 for the first and second lease, respectively. At the end of the lease term, the Company has an option to purchase the pipeline assets back from Maxus for $1,218,762 and $449,604 for the first and second lease, respectively.

 

The Company has pledged 100% of its interests in the related pipeline assets as collateral for the lease obligations.

 

The Company is required to make one-time security deposit payments of $56,803 and $20,955 for the first and second lease, respectively, to be used in the event of a default by the Company. In addition, the Company is required to make minimum cash reserve payments of at least $18,934 and $6,985 for the first and second lease, respectively, each month in addition to the base lease payments until Maxus has received $681,640 and $251,458 for the first and second lease, respectively. The cash reserve payments are to be used in the event of default by the Company. All security deposit amounts as well as cash reserve amounts will be fully refunded to the Company at the end of the lease term. As of September 30, 2024 and December 31, 2023, the balance of cash reserve payments made under these lease obligations was $523,352 and $331,988, respectively. The Company incurred $124,650 of lease costs from the preceding transaction that are being amortized over the 5-year term of the leases.

 

The terms of the lease agreement, including the Company’s option to purchase the pipeline assets from Maxus at the end of the lease term, preclude the Company from using sale and leaseback accounting treatment in accordance with FASB ASC-842-40. As such, the transaction is being accounted for as a financing arrangement, whereby the Company does not record a sale or derecognize the pipeline assets. The Company continues to record depreciation expense on the pipeline assets and has recorded a financial liability due to Maxus (included in finance lease obligations in the accompanying combined balance sheet).

 

See independent auditors’ review report

 

18

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(8) Finance Lease Obligations (continued)

The Company is using imputed interest rates of 16.85% and 17.39% for the first and second lease, respectively, which results in the carrying value of the financial liability equating the estimated book value of the pipeline assets at the end of the lease terms and the date at which the Company may exercise its buy-back option.

 

On March 22, 2023, the Company entered into three (3) additional finance leases with Maxus for 90 trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $14,443 to $37,865 and the option to purchase the leased equipment at the end of the lease term ranging from $47,586 to $124,758. The Company is required to make a one-time security deposit payment for each lease ranging from $14,443 to $37,865 to be used in the event of a default by the Company. At the end of the terms, Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the interest rate implicit in the leases of 11.56% as well as lease assets equal to the present value of the future cash payments using an interest rate of 11.56%.

 

On November 20, 2023, the Company entered into five (5) additional finance leases with Maxus for one hundred and five (105) trucks and tanker trailers.

 

The leases have terms of thirty-six (36) months with monthly installments ranging from $23,192 to $75,217 and the option to purchase the leased equipment at the end of the lease term ranging from $74,000 to $240,000. The Company is required to make a one-time security deposit payment for each lease ranging from $23,192 to $75,217 to be used in the event of a default by the Company. At the end of the terms Maxus will return the balance of any security deposit payments.

 

The terms of the lease agreements, including the Company’s option to purchase the leased assets from Maxus at the end of the lease terms, classify the leases as finance leases in accordance with FASB ASC 842. As such, the Company has recorded lease obligations equal to the present value of the future cash payments using the implicit borrowing rate of similar leases with Maxus for similar assets and terms of 11.56% as well as lease assets equal to the present value of the future cash payments using an interest rate of 11.56% plus lease costs of $302,750 and prepaid lease payments of $235,054.

 

See independent auditors’ review report

 

19

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(8) Finance Lease Obligations (continued)

Future minimum lease payments for each of the next four years under the Maxus lease obligation and a reconciliation of undiscounted cash flows to the balance of the lease obligation as of September 30, 2024 on the accompanying combined balance sheet are as follows:

 

  2024     1,693,233  
  2025     4,911,823  
  2026     4,462,499  
  2027     854,344  
  Total minimum lease payments     11,921,899  
  Less: amount representing interest     (2,859,434 )
  Present value of net minimum payments     9,062,465  
  Add: carrying value of lease obligation at end of lease term     2,832,813  
  Total lease obligation     11,895,278  
  Less: unamortized financing fees     (81,023 )
  Total lease obligation, less unamortized financing fees     11,814,255  
  Less: current portion     (1,693,233 )
  Total lease obligation, less current portion     10,121,022  

 

(9) Operating Lease Liabilities

On May 1, 2021, and December 16, 2021, the Company entered into operating leases with Monahans Commercial Properties, LLC (Monahans) and Glacier Oilfield Services, Inc. (Glacier) for the use of corporate office space with terms of 60 months and 36 months with monthly installments of $10,000 and $4,000, respectively.

 

The terms of the lease agreement classify the lease as an operating lease in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate for the calculation of future cash payments, the Company used the risk-free discount rate of .857% for Monahans and .948% for Glacier, which are the rates of a U.S. government bond as of the commencement dates of the leases and for a term comparable to the respective lease terms.

 

As part of the business acquisition of ET, dated December 22, 2023, Meridian assumed three (3) leases with Pilot Water Solutions SWD, LLC for the use of trucking yards, shops, and a housing development to be used in trucking operations. The terms of the leases range from twenty-four (24) to thirty-six (36) months with monthly installments ranging from $5,750 to $138,395.

 

See independent auditors’ review report

 

20

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(9) Operating Lease Liabilities (continued)

The terms of the lease agreements classify the leases as operating leases in accordance with FASB ASC 842. As such, the Company has recorded a lease obligation as well as a lease asset equal to the present value of the future cash payments. In determining the discount rate for the calculation of future cash payments, the Company used the risk-free discount rate of 4.336% and 4.042%, which are the rates of a U.S. government bond as of the commencement dates of the leases and for a term comparable to the respective lease terms.

 

Under the provisions of ASC 842, the Company has elected the practical expedient to not separate nonlease components from lease components and instead will account for each separate lease component and the related nonlease components as a single lease component. The Company has made this election for all operating leases.

 

Under the provisions of ASC 842, the Company has elected the short-term lease expedient. A short-term lease is a lease that, as of the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For such leases, the Company will not apply the recognition requirements of Topic 842 and instead will recognize the lease payments as lease cost on a straight-line basis over the lease term. Lease costs related to short-term leases were $319,899 and $78,145 for the three- month period ended September 30, 2024 and 2023, respectively, and $1,823,017 and $179,992 for the nine-month period ended September 30, 2024 and 2023, respectively, and are included in lease expense on the accompanying combined statements of operations.

 

Future minimum lease payments for each of the next three years under the operating lease obligations and a reconciliation of the undiscounted cash flows to the balance of the operating lease obligation as of September 30, 2024 on the accompanying combined balance sheet are as follows:

 

  2024     617,935  
  2025     2,431,740  
  2026     978,975  
  Total minimum lease payments     4,028,650  
  Less: amount representing interest     (129,151 )
  Total lease obligation     3,899,499  
  Less: current portion     (617,935 )
  Total lease obligation, less current portion     3,281,564  

 

See independent auditors’ review report

 

21

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(10) Business Combination

On December 22, 2023, Meridian acquired 100% of the security interest in ET, a limited liability company in the business of crude oil transportation through the use of trucking equipment, for cash consideration of $12,500,000, making ET a wholly owned subsidiary of Meridian. Meridian did not assume any liabilities of ET as a result of the purchase. Included in the assets acquired by the Company were trade accounts receivable that have a fair market value of $1,500,000 and are believed to be 100% collectible. The fair value of net assets acquired was estimated to equal the amount of consideration paid by Meridian.

 

On January 1, 2024, upon inspection of the equipment shops that the Company assumed the operating leases for during the acquisition, management discovered parts inventory housed in the shops with a value of $556,947 that was not included in the original list of net identifiable assets during the sale and was not taken into consideration during the purchase price allocation. After discovery, management adjusted beginning inventory to reflect the additional inventory and offset the addition by reducing the amount of the purchase price allocated to property and equipment.

 

The following is a recalculated list of net identifiable assets at estimated fair value assumed as of the date of the acquisition:

 

  Total cash consideration     12,500,000  
  Purchase price allocation:        
  Accounts receivable     1,500,000  
  Inventory     603,731  
  Property and equipment, net     10,396,269  
  Net assets acquired     12,500,000  

 

As disclosed in Note 1, effective January 1, 2024, the Company transferred 100% of its membership interests in ET to its parent company, Jorgan.

 

See independent auditors’ review report

 

22

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(11) Line of Credit

On January 6, 2023, the Company entered into an accounts receivable factoring agreement with a financial institution that allows the Company to sell their currently outstanding accounts receivable for cash up to a maximum principal balance of $7,500,000 (hereinafter “line of credit”). The Company is charged a fixed service charge by the institution in the amount of 1% of all receivables purchased in addition to a variable service charge of 1.75% of the outstanding amount of a purchased receivable per day up to 120 days or until the face amount of the purchased receivable is collected by the financial institution. The agreement states that if a receivable becomes 120 days or more outstanding, then the institution may require the Company to repurchase the account at face value. To facilitate the potential buyback, the agreement states that the Company must keep a reserve account with the institution in an amount equal to 10% of all purchased accounts. The outstanding principal balance of the line of credit, net unamortized debt issuance costs, was $5,601,030 and $5,575,005 as of September 30, 2024 and December 31, 2023, respectively. The amount of the reserve account was $1,902,799 and $1,262,525 as of September 30, 2024 and December 31, 2023, respectively, and is included in restricted cash in the accompanying combined balance sheets.

 

On May 9, 2024, the Company entered into an accounts receivable factoring agreement with a financial institution that allows the Company to sell their currently outstanding accounts receivable for cash up to a maximum principal balance of $7,000,000 (hereinafter “line of credit”). The Company is charged a fixed service charge by the institution in the amount of 1% of all receivables purchased in addition to a variable service charge of 2.5% of the face amount of a purchased receivable per day up to 120 days or until the face amount of the purchased receivable is collected by the financial institution. The agreement states that if a receivable becomes 120 days or more outstanding, then the institution may require the Company to repurchase the account at face value. To facilitate the potential buyback, the agreement states that the Company must keep a reserve account with the institution in an amount equal to 10% of all purchased accounts. The outstanding principal balance of the line of credit, net of unamortized issuance costs, was $5,234,666 and $0 as of September 30, 2024 and December 31, 2023, respectively. The amount of the reserve account was $1,355,850 and $0 as of September 30, 2024 and December 31, 2023, respectively, and is included in restricted cash in the accompanying combined balance sheets.

 

(12) Interest Rate Swap

During February 2022 the Company entered into an interest rate swap contract associated with its Main Street Lending Priority Loan (See Note 7). The Company used the interest rate swap to manage risks related to interest rate movements and effectively converted this variable rate debt into a fixed-rate borrowing at 3.92% on a notional amount of $10,000,000. The swap contract settled monthly. On May 11, 2023, the Company terminated its swap agreement with Citibank N.A. The Company recorded a net gain of $686,096 included in other income in the accompanying combined statements of income.

 

See independent auditors’ review report

 

23

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(13) Short-Term Notes Payable

On November 20, 2023, the Company entered into a short-term financing agreement with Maxus for a principal amount of $1,500,000. The Company will make interest only payments monthly until the maturity of the note, upon which all outstanding principal and accrued interest is due. The note was originally scheduled to mature six months from the date of borrowing, was subsequently extended an additional six months, and then subsequently extended again for an additional six months to a maturity date of May 31, 2025. The outstanding principal balance was $1,500,000 and $1,466,952 as of September 30, 2024 and December 31, 2023, respectively. The note is collateralized by twenty-eight (28) trucks and tanker trailers.

 

On November 30, 2023, the Company entered into a cash advance agreement with Curve Capital, LLC (“Curve”) in which the Company pledged future receipts of its accounts receivable in exchange for $1,000,000 in cash. The Company is required to pay Curve a total of $1,390,000 in weekly installments of $38,612 at 98.85% interest. The outstanding principal was $845,552 as of December 31, 2023. On March 14, 2024, the Company refinanced its original agreement with Curve for $2,000,000, of which $810,820 was used to pay off the remaining principal and interest balances of the original agreement. The Company is required to pay Curve a total of $2,780,000 in weekly installments of $76,000 at 99.82%. On August 20, 2024, the Company refinanced its second agreement with Curve for $2,250,000, of which $1,108,000 was used to pay off the remaining principal and interest balances of the second agreement. The Company is required to pay Curve a total of $3,206,250 in weekly installments of $99,500 at 124.86% interest and the principal balance as of September 30, 2024 was $1,915,992.

 

On February 13, 2024, the Company entered into a short-term financing agreement with Maxus for a principal amount of $3,000,000. The Company will make interest only payments monthly until the maturity of the note, September 1, 2024, upon which all outstanding principal and accrued interest is due. The note is collateralized by a fleet of trucks and trailers. The outstanding principal balance, net of unamortized debt issuance costs, was $3,000,000 and $0 as of September 30, 2024 and December 31, 2023, respectively. On August 15, 2024, the Company received a three-month extension until November 30, 2024 and subsequently received a six month extension until May 31, 2025.

 

On June 20, 2024, the Company entered into a short-term financing agreement with Agile Lending, LLC for a principal amount of $1,312,500. The Company is required to make weekly installments of $67,500 at 145.93% interest until maturity on January 3, 2025. The outstanding principal balance was $772,646 and $0 as of September 30, 2024 and December 31, 2023, respectively.

 

See independent auditors’ review report

 

24

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(14) Adoption of New Accounting Standard

In June 2016, the FASB issued guidance (FASB ASC 326) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, the disclosures are required to provide users of the financial statements with useful information in analyzing an entity’s exposure to credit risk and the measurement of credit losses. Financial assets held by the company that are subject to the guidance in FASB ASC 326 were trade accounts receivable.

 

The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the combined financial statements.

 

(15) Sale of Membership Interests

On March 21, 2024, the members of the Company entered into a Membership Interest Purchase Agreement with Vivakor, Inc. (“Vivakor”), whereby, at closing, Vivakor will acquire 100% of the membership interests of the Company.

 

Subsequent to September 30, 2024, all closing processes were completed and Vivakor completed its acquisition of 100% of the membership interests of the Company effective October 1, 2024.

 

(16) Default on Promissory Notes

On August 23, 2024, the Company received two (2) amended demand letters from the counsel for Pilot Travel Centers, LLC and Pilot OFS Holdings, LLC (collectively referred to as “Pilot”) demanding that Meridian pay all outstanding principal and accrued interest on certain promissory notes, assigned accounts receivable, and rental payments.

 

The first amended demand letter refers to Meridian’s default under its $1,500,000 note payable, dated December 1, 2023. Eighteen (18) monthly installments in the amount of $90,431 were being made under this note. Meridian made these monthly payments through June 2024 and failed to make payments for July and August 2024, triggering a default and immediate payment of the outstanding principal and accrued interest under this note in the amount of $1,034,873.

 

The second amended demand letter refers to Meridian’s default under its $12,500,000 note payable, dated December 31, 2023. The principal amount of this note plus accrued interest was due in full on June 30, 2024. Meridian failed to make payment. In addition, the demand letter states that Meridian failed to make a payment of $3,410,574 related to assigned accounts receivable as well as $19,250 in rental payments due as a result of the purchase of ET.

 

See independent auditors’ review report

 

25

 

 

Endeavor Crude, LLC, Meridian Equipment Leasing, LLC

and Equipment Transport, LLC

Notes to the Combined Financial Statements (Unaudited)

 

 

 

(16) Default on Promissory Notes (continued)

Both letters demand that full payment be made by Meridian on the defaulted obligations no later than August 30, 2024. As of December 10, 2024, the date the combined financial statements were available to be issued, Meridian has made payments of $500,000 towards these obligations.

 

Subsequent to September 30, 2024, Meridian entered into a Letter Agreement regarding the secured promissory note and related loan documents with Pilot (“Extension Agreement”). Effective October 1, 2024, Pilot agreed to rescind demands for payments for outstanding amounts under the notes payable, and extend the due dates until December 31, 2024, subject to full payment of the outstanding assigned accounts receivable amount, which is subject to Meridian obtaining a full and final closing of a revolving line of credit to satisfy these obligations.

 

The Extension Agreement will terminate if the assigned accounts receivable payments are not made by the Company prior to December 31, 2024. As of December 10, 2024, the date the combined financial statements were available to be issued, Meridian has yet to make the payments on the assigned accounts receivable obligation.

 

Additionally, as shown in the accompanying financial statements, the Company’s current liabilities exceed its current assets by $31,063,269 as of September 30, 2024. These factors, along with the uncertain conditions Meridian faces regarding its notes payable with Pilot, create substantial doubt about the Company’s ability to continue as a going concern. Management of the Company has evaluated these conditions and is currently working with outside creditors to obtain additional financing to repay its obligations to Pilot. While the Company works to obtain additional financing, they have also received extensions on the payment of outstanding obligations in default through December 31, 2024, subject to certain conditions described above. The ability of the Company to continue as a going concern and meet its obligations as they become due is dependent on the Company’s ability to maintain the extension stipulations required by Pilot and the Company’s ability to obtain additional financing. The combined financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

See independent auditors’ review report

 

26

 

Exhibit 99.6

 

 

 

 

 

 

 

 

 

 

Silver Fuels Processing, LLC

 

Financial Statements

 

as of September 30, 2024 and December 31, 2023

 

and for the three-month and nine-month

 

periods ended September 30, 2024 and 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

Independent Auditors’ Review Report   1-2
     
Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023   3
     
Statements of Operations for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)   4
     
Statements of Members’ Equity for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)   5
     
Statements of Cash Flows for the nine-month periods ended September 30, 2024 and 2023 (Unaudited)   6
     
Notes to the Financial Statements (Unaudited)   7-11

 

i

 

 

 

INDEPENDENT AUDITORS’ REVIEW REPORT

 

Management

Silver Fuels Processing, LLC

Dallas, Texas

 

 

Results of Review of Interim Financial Information

 

We have reviewed the accompanying financial statements of Silver Fuels Processing, LLC, which comprise the balance sheet as of September 30, 2024 and the related statements of operations and members’ equity for the three-month and nine-month periods ended September 30, 2024 and 2023, and statements of cash flows for the nine-month periods ended September 30, 2024 and 2023, and the related notes to the financial statements (collectively referred to as the “interim financial information”).

 

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Review Results

 

We conducted our reviews in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit in accordance with GAAS, the objective of which is the expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of Silver Fuels Processing, LLC and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our reviews. We believe that the results of the review procedures provide a reasonable basis for our conclusion.

 

Related-Party Transactions

 

As discussed in Notes 4 and 5 to the accompanying financial statements, all revenues are derived from an entity in which the Company’s manager also controls. Our conclusion is not modified with respect to that matter.

 

Responsibilities of Management for the Interim Financial Information

 

Management is responsible for the preparation and fair presentation of the interim financial information in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.

 

 

 

1

 

 

Report on Balance Sheet as of December 31, 2023

 

We have previously audited, in accordance with GAAS, the balance sheet as of December 31, 2023, and the related statements of income, members’ equity, and cash flows for the year then ended (not presented herein); and we expressed an unmodified opinion on those audited financial statements in our report dated June 6, 2024. Our audit report included an emphasis-of-matter section that indicated all revenues were derived from an entity in which the Company’s manager also controls. In our opinion, the accompanying balance sheet of Silver Fuels Processing, LLC as of December 31, 2023, is consistent, in all material respects, with the audited financial statements from which it has been derived.

 

Shreveport, Louisiana

December 6, 2024

 

 

 

 

2

 

 

Silver Fuels Processing, LLC

Balance Sheets

as of September 30, 2024 (Unaudited) and December 31, 2023

 

 

 

    September 30,
2024
(Unaudited)
    December 31,
2023
 
Assets                
Current assets                
Cash and cash equivalents     1,699       5,990  
Accounts receivable, Notes 2     0       0  
Prepaid expense     108,889       63,309  
Due from related parties, Note 4     20,712       55,725  
Other current assets     1,013       8,312  
Total current assets     132,313       133,336  
                 
Property and equipment, net, Notes 2 and 3     902,680       1,157,113  
                 
Other Assets                
Security deposits     12,992       2,992  
Total other assets     12,992       2,992  
                 
Total assets     1,047,985       1,293,441  
                 
Liabilities and members’ equity                
Current liabilities                
Accounts payable     36,009       325,807  
Due to related parties, Note 4     282,481       0  
Total current liabilities     318,490       325,807  
                 
Members’ equity     729,495       967,634  
                 
Total liabilities and members’ equity     1,047,985       1,293,441  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

3

 

 

Silver Fuels Processing, LLC

Statements of Operations

for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)

 

 

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2024     2023     2024     2023  
Revenues                                
Sales     189,750       165,000       569,250       465,000  
Reimbursed expenses - related party     23,524       10,825       81,884       100,386  
Total income     213,274       175,825       651,134       565,386  
                                 
Operating expenses                                
Bank charges     110       0       450       0  
Depreciation     83,886       60,410       248,004       180,218  
Insurance     47,238       26,475       127,872       61,775  
Miscellaneous     15,316       833       20,198       8,620  
Office supplies     525       16       608       212  
Payroll     18,565       18,765       55,978       56,449  
Professional fees     26,808       7,250       53,475       31,523  
Repairs and maintenance     12,238       859       36,327       46,944  
Travel     0       1,717       6,094       8,529  
Utilities     6,411       5,481       22,376       21,001  
Rent     16,000       16,000       48,025       45,500  
Contract labor     0       0       5,885       0  
Station     4,040       0       13,675       2,219  
Total operating expenses     231,137       137,806       638,967       462,990  
                                 
Income (loss) from operations     (17,863 )     38,019       12,167       102,396  
                                 
Other income                                
Other income     0       0       0       33,750  
Total other income     0       0       0       33,750  
Net income (loss)     (17,863 )     38,019       12,167       136,146  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

4

 

 

Silver Fuels Processing, LLC
Statements of Members’ Equity
for the three-month and nine-month periods ended September 30, 2024 and 2023 (Unaudited)

 

 

 

Balance, June 30, 2024 (Unaudited)     1,069,664  
         
Net loss     (17,863 )
Members’ contributions     21,500  
Members’ distributions     (343,806 )
         
Balance, September 30, 2024 (Unaudited)     729,495  
         
Balance, December 31, 2023     967,634  
         
Net income     12,167  
Members’ contributions     93,500  
Members’ distributions     (343,806 )
         
Balance, September 30, 2024 (Unaudited)     729,495  
         
Balance, June 30, 2023 (Unaudited)     607,426  
         
Net income     38,019  
Members’ contributions     12,500  
Members’ distributions     0  
         
Balance, September 30, 2023 (Unaudited)     657,945  
         
Balance, December 31, 2022     792,619  
         
Net income     136,146  
Members’ contributions     133,500  
Members’ distributions     (404,320 )
         
Balance, September 30, 2023 (Unaudited)     657,945  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

5

 

 

Silver Fuels Processing, LLC
Statements of Cash Flows
for the nine-month periods ended September 30, 2024 and 2023 (Unaudited)

 

 

 

    Nine Months Ended
September 30,
 
    2024     2023  
Cash flows from operating activities                
Net income     12,167       136,146  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
Depreciation     248,004       180,218  
(Increase) decrease in:                
Accounts receivables     (343,806 )     (579,328 )
Due from related parties     35,013       0  
Prepaid expenses     (45,580 )     (13,189 )
Security deposit     (10,000 )     0  
Other current assets     7,299       0  
Increase (decrease) in:                
Accounts payable     (176,917 )     149,704  
Due to related party     282,481       0  
Net cash provided by (used in) operating activities     8,661       (126,449 )
                 
Cash flows from investing activities                
Purchases of property and equipment     (106,452 )     (21,250 )
Net cash used in investing activities     (106,452 )     (21,250 )
                 
Cash flows from financing activities                
Contributions from members     93,500       133,500  
Distributions to members     0       (30,000 )
Net cash provided by financing activities     93,500       103,500  
                 
Net change in cash and cash equivalents     (4,291 )     (44,199 )
                 
Beginning cash and cash equivalents     5,990       47,015  
                 
Ending cash and cash equivalents     1,699       2,816  
                 
Supplementary non-cash investing and financing activities:                
Assignment of related-party receivable to parent through distributions     343,806       374,320  
Transfer of property improvements to related party     112,880       0  

 

See independent auditors’ review report and accompanying notes to the financial statements.

 

6

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(1) Nature of Business

Silver Fuels Processing, LLC, (the “Company”), organized in January 2018, owns, and operates crude oil transfer stations in Texas, New Mexico, and North Dakota. The Company has operated the stations since June of 2018. The Company is a Texas limited liability company in which Jorgan Development (“Jorgan”) (a Louisiana limited liability company) owns 99% of the equity interest and JBAH Holdings, LLC (“JBAH”) (a Texas limited liability company) owns the remaining 1% of equity interest.

 

(2) Summary of Significant Accounting Policies

Basis of accounting – The financial statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Basis of presentation and 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 and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and cash equivalents – For the purpose of reporting cash flows, cash and cash equivalents include all cash on hand and cash on deposit with maturities of less than three months.

 

Accounts receivable and allowance for credit losses – All of the Company’s accounts receivable are from one customer, White Claw Crude, LLC (“WCC”), a related party (Note 4). Accounts receivable are generated from fees charged to WCC for the right to use the Company’s crude oil transfer stations to transport their crude oil along various oil pipelines and monthly reimbursable operating expenses. At each balance sheet date, the Company evaluates the need for an allowance for credit loss account and, if deemed necessary, recognizes an expected allowance for credit losses. In addition, also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist.

 

Due to all accounts receivable being due from a related party, and considered 100% collectible, management has not calculated an allowance for credit losses as of September 30, 2024 and December 31, 2023.

 

Property and equipment – Property and equipment is stated at cost. Depreciation is computed by the straight-line method over the assets’ estimated useful lives of 7 years.

 

See independent auditors’ review report.

 

7

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(2) Summary of Significant Accounting Policies (continued)

Impairment of long-lived assets – The Company regularly assesses all of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management reviews all material assets annually for possible impairment. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. No impairment was considered necessary during the periods ended September 30, 2024 and December 31, 2023.

 

Revenue recognition – All of the Company’s revenues are derived from fees charged for the use of their crude oil transfer stations to transport oil along various pipelines and from reimbursement of certain operating expenses related to the facilitation of this process. The Company has one performance obligation in the form of allowing its customer to utilize their transfer stations. The Company has determined that the customer has obtained the promised service when the customer successfully utilizes the Company’s transfer station to transport oil, as such, the Company recognizes revenue at the point in time that the transfer stations are utilized by the customer. Reimbursed expense income is recognized as the related expenses are incurred. There is no significant financing component in transaction price, as the Company’s customer generally pays within the contractual payment terms of 30 to 60 days.

 

Income taxes – The Company is a limited liability company that is taxed as a partnership for federal and state income tax purposes. As such, the Company does not pay income taxes, as any income or loss and credits are included in the tax returns of the individual partners. Accordingly, no provision has been made for income taxes in the financial statements.

 

Under the provisions of FASB ASC 740-10, the Company records a liability for uncertain tax positions when probable that a loss has been incurred and the amount can be reasonably estimated. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

 

Compensated absences – Employees of the Company are entitled to paid vacations, sick days and other time off depending on job classification, length of service and other factors. The Company does not accumulate vacation or sick time, the estimate for the amount of compensation for future absences was immaterial and, accordingly, no liability has been recorded in the accompanying financial statements. The Company’s policy is to recognize the costs of compensated absences when paid to the individual employees.

 

Subsequent events – Management of the Company has evaluated subsequent events, for recognition and disclosure, through December 6, 2024, the date the financial statements were available to be issued.

 

See independent auditors’ review report.

 

8

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(3) Property and Equipment

The following is a summary of property and equipment as of September 30, 2024 and December 31, 2023:

 

      September 30,
2024
    December 31,
2023
 
  Basa station     1,130,787       1,137,216  
  Midland station     87,581       87,581  
  Posse Monroe station     689,557       689,557  
  Wasson station     376,711       376,711  
  Steel Tanks     64,175       64,175  
  Sub-total   $ 2,348,811     $ 2,355,240  
  Less: accumulated depreciation     1,446,131       1,198,127  
  Totals   $ 902,680     $ 1,157,113  

 

Depreciation expense related to property and equipment was $83,886 and $60,410 for the three- month periods ended September 30, 2024 and 2023, respectively, and was $248,004 and $180,218 for the nine-month periods ended September 30, 2024 and 2023, respectively.

 

(4) Related-Party Transactions

As disclosed in Notes 2 and 5, the Company’s only Customer is WCC, a related party owned and managed by Jorgan Development, a Louisiana limited liability company, the majority owner of the Company.

 

During the year ended December 31, 2021 (the “Effective Date”), the Company entered into a 10- year take or pay agreement (the “Agreement”) with WCC. The Agreement requires that WCC transports greater than or equal to 200,000 barrels per month, the minimum volume commitment (“MVC”), through the Company’s crude transfer stations at a rate of $0.25 per barrel, for the period beginning on the Effective Date and ending June 30, 2023, and $0.275 per barrel, for the period beginning on July 1, 2023 and ending upon the expiration of the Agreement, for quantities up to the MVC and $0.125 for amounts that exceed the MVC. Under the terms of the Agreement, each month WCC does not meet the MVC, it is responsible for paying the Company the amount equal to the MVC times the applicable rate. In addition, the Agreement requires that WCC reimburse the Company for certain operating expenses.

 

Effective January 1, 2024, the Company and WCC amended the above Agreement to change the MVC to 230,000 barrels per month, the rate per barrel above and beyond the MVC to $0.15, and to extend the maturity date of the Agreement to December 31, 2034.

 

See independent auditors’ review report.

 

9

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(4) Related-Party Transactions (continued)

Revenues from WCC during the three-month periods ended September 30, 2024 and 2023 totaled $213,274 and $175,825, respectively, which includes $189,750 and $165,000, respectively, of fee income, and $23,524 and $10,825, respectively, of reimbursed expenses. Revenues from WCC during the nine-month periods ended September 30, 2024 and 2023 totaled $651,134 and $565,386, respectively, which includes $569,250 and $465,000, respectively, of fee income and $81,884 and $100,386, respectively, of reimbursed expenses.

 

During the periods ended September 30, 2024 and December 31, 2023, the Company provided and received operating loans to and from various related parties. The operating loans have no stated repayments terms. As of September 30, 2024 and December 31, 2023, the Company was due $20,712 and $55,725, respectively, from its related parties and owed $282,481 and $0, respectively, to its related parties.

 

The Company rents crude oil stations on a month-to-month basis from Endeavor Crude, LLC, a related party owned and managed by Jorgan. Total rent expense related to this lease was $16,000 and $16,000 for the three-month periods ended September 30, 2024 and 2023, respectively, and was $48,025 and $45,500 for the nine-month periods ended September 30, 2024 and 2023, respectively, and is included in rent expense on the accompanying statements of operations.

 

(5) Major Customers and Concentration of Credit Risk

The Company’s only customer is WCC. WCC accounts for 100% of the Company’s revenue for the three and nine-month periods ended September 30, 2024 and 2023.

 

Additionally, the Company and WCC operate in the crude oil industry. The industry concentration has the potential to impact the Company’s overall exposure to credit risk in that WCC may be similarly affected by changes in economic, industry, or other conditions. There is a risk that the Company would not be able to identify and access replacement markets at comparable margins.

 

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to certain limits. The Company has not experienced any losses in such accounts.

 

See independent auditors’ review report.

 

10

 

 

Silver Fuels Processing, LLC

Notes to the Financial Statements

 

 

 

(6) Adoption of New Accounting Standards

In June 2016, the FASB issued guidance (“ASC 326”) which significantly changed how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The most significant change in this standard is a shift from the incurred loss model to the expected loss model. Under the standard, disclosures are required to provide users of the financial statements with useful information in analyzing an entity’s exposure to credit risk and the measurement of credit losses. The Company did not have significant financial assets that are subject to the guidance in ASC 326. Specifically, the Company’s accounts receivable are substantially all related-party receivables from companies under common ownership. FASB ASC 326 excludes such receivables from the expected loss model.

 

The Company adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements.

 

(7) Sale of Membership Interests

On March 21, 2024, the members of the Company entered into a Membership Interest Purchase Agreement with Vivakor, Inc. (“Vivakor”), whereby, at closing, Vivakor will acquire 100% of the membership interests of the Company.

 

Subsequent to September 30, 2024, all closing processes were completed and Vivakor completed its acquisition of 100% of the membership interests of the Company effective October 1, 2024.

 

See independent auditors’ review report.

 

11

 

Exhibit 99.7

 

VIVAKOR, INC., ENDEAVOR CRUDE, LLC, MERIDIAN LEASING EQUIPMENT, LLC,

EQUIPMENT TRANSPORT, LLC AND SILVER FUELS PROCESSING, LLC

Unaudited Pro Forma Consolidated Balance Sheets

December 31, 2023

 

    Vivakor, Inc.*     Endeavor
Entities**
    Silver Fuels
Processing, LLC
    Adjustments     Consolidated  
ASSETS                                        
Current assets:                                        
Cash and cash equivalents   $ 744,307     $ 1,164,555     $ 5,990     $ -     $ 1,914,852  
Cash and cash equivalents, restricted     -       1,262,525       -       -       1,262,525  
Accounts receivable     2,458,730       11,786,096       33,287       (204,329 )(f)     14,073,784  
Accounts receivable-related party     174,083       139,134       30,750       -       343,967  
Prepaid expenses     74,876       546,655       63,309       -       684,840  
Marketable securities     495,826       -       -       -       495,826  
Inventories     44,632       46,784       -       -       91,416  
Other assets     1,118,188       2,953,305       -       -       4,071,493  
Total current assets     5,110,642       17,899,054       133,336       (204,329 )     22,938,703  
                                         
Other investments     4,000       -       -       -       4,000  
Other assets     -       871,655       2,992       -       874,647  
Notes receivable     213,168       -       -       -       213,168  
Property and equipment, net     24,299,317       65,895,192       1,157,113       -       91,351,622  
Right of use assets-operating leases     1,534,870       5,657,160       -       -       7,192,030  
License agreements, net     1,651,324       -       -       -       1,651,324  
Intellectual property, net     23,437,654       -       -       11,552,563 (c)(d)     34,990,217  
Goodwill     14,984,768       -       -       22,327,689 (b)      37,312,457  
Total assets   $ 71,235,743     $ 90,323,061     $ 1,293,441     $ 33,675,923     $ 196,528,168  
                                         
LIABILITIES AND STOCKHOLDERS’ EQUITY                                        
Current liabilities:                                        
Accounts payable and accrued expenses   $ 16,578,642     $ 5,987,368     $ 297,128     $ (22,922 )(f)   $ 22,840,216  
Accounts payable and accrued expenses-related parties     1,933,817       447,638       28,679       -       2,410,134  
Accrued compensation     1,968,063       699,224       -       -       2,667,287  
Operating lease liabilities, current     435,906       2,486,740       -       -       2,922,646  
Finance lease liabilities, current     963,900       6,200,710       -       -       7,164,610  
Line of credit     -       5,575,005               -       5,575,005  
Loans and notes payable, current     2,477,970       17,241,350       -       -       19,719,320  
Loans and notes payable, current-related parties     15,626,168       1,182,193       -       -       16,808,361  
Total current liabilities     39,984,466       39,820,228       325,807       (22,922 )     80,107,579  
                                         
Operating lease liabilities, long term     1,193,915       3,164,086       -       -       4,358,001  
Finance lease liabilities, long term     1,852,178       8,773,041       -       -       10,625,219  
Loans and notes payable, long term     856,034       11,922,733       -       -       12,778,767  
Loans and notes payable, long term-related parties     5,590,008       1,182,193       -       -       6,772,201  
Long-term debt (working interest royalty programs)     4,433,630       -       -       -       4,433,630  
Deferred tax liability     88,323       -       -       -       88,323  
Total liabilities     53,998,554       64,862,281       325,807       (22,922 )     119,163,720  
                                         
Stockholders’ equity:                                        
Preferred stock, $0.001 par value; 15,000,000 shares authorized, 54,955 outstanding     -       -       -       55 (a)      55  
Common stock, $0.001 par value; 200,000,000 and 41,666,667 shares authorized; 36,242,029 and 18,064,838 were issued and outstanding as December 31, 2023 and 2022, respectively     26,221       -       -       10,021 (a)(e)      36,242  
Additional paid-in capital     83,097,553       -       -       64,966,543 (a)(e)      148,064,096  
Treasury stock, at cost     (20,000 )     -       -       -       (20,000 )
Accumulated deficit     (65,908,406 )     25,460,780       967,634       (31,277,774 )(b)(d)(e)(f)     (70,757,766 )
Total Vivakor, Inc. stockholders’ equity     17,195,368       25,460,780       967,634       33,698,845       77,322,627  
Noncontrolling interest     41,821       -       -       -       41,821  
Total stockholders’ equity     17,237,189       25,460,780       967,634       33,698,845       77,364,448  
Total liabilities and stockholders’ equity   $ 71,235,743     $ 90,323,061     $ 1,293,441     $ 33,675,923     $ 196,528,168  

 

 

Notes

* Includes Vivakor, Inc. and all of its active wholly and majority-owned subsidiaries and any consolidated variable interest entities as reported in its Form 10-K for the year ended December 31, 2023.
** Includes Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and active subsidiaries Equipment Transport, LLC and CPE Gathering Midcon, LLC.
   
(a) To record the aggregate acquisition consideration, which is currently estimated to be approximately $61.6 million (subject to a full valuation report under our purchase price allocation to be completed by the Company by September 30, 2025) and is payable in shares of the Company’s common and preferred stock currently anticipated to consist of 6,724,219 shares of the Company's common stock and 54,955 shares of the Company’s Series A Preferred Stock.
(b) To eliminate the capital structures of the acquired companies, and to record goodwill, and adjustments to the net assets with goodwill and such adjustments having been valued as of the actual date of close (October 1, 2024) with any variance due to the pro forma period of reporting being attributed to goodwill.
(c) To allocate an estimated 20% of goodwill to intangible assets subject to a full valuation report to be completed by the Company by September 30, 2025.
(d) To record amortization expense assuming a remaining useful life of 10 years on the intangible assets acquired if the acquisition had occurred on January 1, 2023. The life of the intangibles is an estimate subject to a full valuation report that will be completed by the Company by September 30, 2025.
(e) To record the estimated dividends payable related to the cumulative 6% preferred stock to be issued as consideration if the acquisition had occurred on January 1, 2023.
(f) To eliminate intercompany transactions between the acquired entities and Vivakor, Inc.*

 

 

 

 

VIVAKOR, INC., ENDEAVOR CRUDE, LLC, MERIDIAN LEASING EQUIPMENT, LLC,

EQUIPMENT TRANSPORT, LLC AND SILVER FUELS PROCESSING, LLC

Unaudited Pro Forma Consolidated Statement of Operations

For the Year Ended December 31, 2023

 

    Vivakor, Inc.*     Endeavor
Entities**
    Silver Fuels
Processing, LLC
    Adjustments     Consolidated  
Revenues                                        
Product revenue - third parties   $ 46,252,141     $ -     $ -     $ -     $ 46,252,141  
Product revenue - related party     13,069,611       -       -       -       13,069,611  
Services revenue - third parties     -       52,243,703       -       (658,182 )(c)     51,585,521  
Services revenue - related party     -       265,486       630,000       -       895,486  
Total revenues     59,321,752       52,509,189       630,000       (658,182 )     111,802,759  
Cost of revenues     54,300,788       22,953,043       128,766       -       77,382,597  
Gross profit     5,020,964       29,556,146       501,234       (658,182 )     34,420,161  
Operating expenses:                                        
Sales and marketing     3,070       -       -       -       3,070  
General and administrative     7,416,810       16,910,628       265,264       (658,182 )(c)     23,934,519  
Bad debt expense     -       39,197       -       -       39,197  
Amortization and depreciation     3,932,744       7,820,817       252,147       1,370,651 (b)     13,376,359  
Total operating expenses     11,352,624       24,770,642       517,411       712,469       37,353,146  
Income (loss) from operations     (6,331,660 )     4,785,504       (16,177 )     (1,370,651 )     (2,932,984 )
Other income (expense):                                        
Unrealized loss on marketable securities     (1,156,928 )     -       -       -       (1,156,928 )
Loss on disposition of asset     -       (48,630 )     -       -       (48,630 )
Gain on deconsolidation of variable interest entity     438,099       -       -       -       438,099  
Gain on oil commodity hedging transactions     -       686,096       -       -       686,096  
Interest income     14,953       70,696       -       -       85,649  
Interest expense     (966,137 )     (2,338,911 )     -       -       (3,305,048 )
Interest expense-related parties     (3,058,940 )     -       -       -       (3,058,940 )
Other income     318,041       416,920       160,432       -       895,393  
Total other income (expense)     (4,410,912 )     (1,213,829 )     160,432       -       (5,464,309 )
Income (loss) before provision for income taxes     (10,742,572 )     3,571,675       144,255       (1,370,651 )     (8,397,293 )
Provision for income taxes     (92,703 )     -       -       -       (92,703 )
Consolidated net income (loss)     (10,835,275 )     3,571,675       144,255       (1,370,651 )     (8,489,996 )
Less: Net loss attributable to noncontrolling interests     (96,650 )     -       -       -       (96,650 )
Net income (loss) attributable to Vivakor, Inc.   $ (10,738,625 )   $ 3,571,675     $ 144,255     $ (1,370,651 )   $ (8,393,346 )
                                         
Basic and diluted net loss per share   $ (0.56 )                           $ (0.32 )
                                         
Basic weighted average common shares outstanding     19,261,143                       10,021,521 (a)     26,583,845  

 

 

Notes

* Includes Vivakor, Inc. and all of its active wholly and majority-owned subsidiaries and any consolidated variable interest entities as reported in its Form 10-K for the year ended December 31, 2023.
** Includes Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, and active subsidiaries Equipment Transport, LLC and CPE Gathering Midcon, LLC.

 

(a) Reflects the issuance of 6,724,219 Vivakor, Inc. common shares at acquisition (as calculated on actual close date of October 1, 2024) and 3,297,302 common shares related to the 6% preferred stock dividend-PIK as if the acquisition had occurred on January 1, 2023.
(b) To record amortization of intangible expense of $1,370,651 upon close of the acquisition as if the acquisition had occurred on January 1, 2023.
(c) To eliminate intercompany transactions between Vivakor, Inc. and the acquired entities.

 

2

 

 

VIVAKOR, INC., ENDEAVOR CRUDE, LLC, MERIDIAN LEASING EQUIPMENT, LLC,

EQUIPMENT TRANSPORT, LLC AND SILVER FUELS PROCESSING, LLC

Unaudited Pro Forma Consolidated Balance Sheets June 30, 2024

 

    Vivakor, Inc.*     Endeavor
Entities**
    Silver Fuels
Processing, LLC
    Adjustments     Consolidated  
ASSETS                              
Current assets:                                        
Cash and cash equivalents   $ 94,970     $ 1,122,432     $ 4,673     $ -     $ 1,222,075  
Cash and cash equivalents, restricted     -       2,630,164       -       -       2,630,164  
Accounts receivable     3,372,685       19,976,647       -       (686,334 )(f)      22,662,998  
Accounts receivable-related party     106,000       5,420,074       207,055       -       5,733,129  
Prepaid expenses     180,385       3,193,156       169,627       -       3,543,168  
Marketable securities     413,188       -       -       -       413,188  
Inventories     75,167       134,810       -       -       209,977  
Other assets     1,511,254       -       8,312       -       1,519,566  
Total current assets     5,753,649       32,477,283       389,667       (686,334 )     37,934,265  
                                         
Other investments     4,000       -       -       -       4,000  
Other assets     -       1,194,614       12,992       -       1,207,606  
Notes receivable     217,781       -       -       -       217,781  
Property and equipment, net     27,641,821       61,738,454       986,566       -       90,366,841  
Right of use assets-operating leases     1,353,507       4,424,081       -       -       5,777,588  
License agreements, net     1,590,910       -       -       -       1,590,910  
Intellectual property, net     22,133,251       1,476,652       -       10,622,549 (c)(d)      34,232,452  
Goodwill     14,984,768       -       -       32,078,902 (b)      47,063,670  
Total assets   $ 73,679,687     $ 101,311,084     $ 1,389,225     $ 42,015,117     $ 218,395,113  
                                         
LIABILITIES AND STOCKHOLDERS’ EQUITY                                        
Current liabilities:                                        
Accounts payable and accrued expenses   $ 18,307,013     $ 14,026,873     $ 1,093     $ (221,507 )(f)   $ 32,113,471  
Accounts payable and accrued expenses-related parties     3,242,052       2,285,588       -       -       5,527,640  
Accrued compensation     834,448       621,706       -       -       1,456,154  
Line of credit     -       13,409,798       -       -       13,409,798  
Operating lease liabilities, current     153,985       1,240,870       -       -       1,394,855  
Finance lease liabilities, current     481,950       3,195,725       -       -       3,677,675  
Loans and notes payable, current     3,960,231       19,812,798       -       -       23,773,029  
Loans and notes payable, current-related parties     16,740,820       3,569,988       318,468       -       20,629,276  
Total current liabilities     43,720,499       58,163,346       319,561       (221, 507 )     101,981,899  
                                         
Operating lease liabilities, long term     1,291,488       3,241,445       -       -       4,532,933  
Finance lease liabilities, long term     2,096,882       9,705,171       -       -       11,802,053  
Loans and notes payable, long term     879,645       12,978,246       -       -       13,857,891  
Loans and notes payable, long term-related parties     5,590,008       -       -       -       5,590,008  
Long-term debt (working interest royalty programs)     4,947,524       -       -       -       4,947,524  
Deferred tax liability     120,076       -       -       -       120,076  
Total liabilities     58,646,122       84,088,208       319,561       (221,507 )     142,832,384  
                                         
Stockholders’ equity:                                        
Preferred stock, $0.001 par value; 15,000,000 shares authorized, 54,955 outstanding     -       -       -       55 (a)     55  
Common stock, $0.001 par value; 200,000,000 shares authorized; 37,508,017 and 26,220,508 were issued and outstanding as of June 30, 2024 and December 31, 2023, respectively     29,136       -       -       8,373 (a)(e)      37,509  
Additional paid-in capital     86,134,795       -       -       63,319,540 (a)(e)      149,454,335  
Treasury stock, at cost     (20,000 )     -       -       -       (20,000 )
Accumulated deficit     (71,103,639 )     17,222,876       1,069,664       (21,091,344 )(b)(d)(e)(f)     (73,902,443 )
Total Vivakor, Inc. stockholders’ equity     15,040,292       17,222,876       1,069,664       42,236,625       75,569,457  
Noncontrolling interest     (6,727 )     -       -       -       (6,727 )
Total stockholders’ equity     15,033,565       17,222,876       1,069,664       42,236,625       75,562,730  
Total liabilities and stockholders’ equity   $ 73,679,687     $ 101,311,084     $ 1,389,225     $ 42,015,117     $ 218,395,113  

 

 

Notes

* Includes Vivakor, Inc. and all of its active wholly and majority-owned subsidiaries and any consolidated variable interest entities as reported in its Form 10-Q for the six months ended June 30, 2024.
**

Includes Endeavor Crude, LLC, Equipment Transport, LLC, and Meridian Equipment Leasing, LLC, and active subsidiary CPE Gathering Midcon, LLC.

 

(a) To record the aggregate acquisition consideration, which is currently estimated to be approximately $61.6 million (subject to a full valuation report under our purchase price allocation to be completed by the Company by September 30, 2025) and is payable in shares of the Company’s common and preferred stock currently anticipated to consist of  6,724,219 shares of the Company's common stock and 54,955 shares of the Company’s Series A Preferred Stock. 
(b) To eliminate the capital structures of the acquired companies, and to record goodwill, and adjustments to the net assets with goodwill and such adjustments having been valued as of the actual date of close (October 1, 2024) with any variance due to the pro forma period of reporting being attributed to goodwill.
(c) To allocate an estimated 20% of goodwill to intangible assets subject to a full valuation report to be completed by the Company by September 30, 2025.
(d) To record amortization expense assuming a remaining useful life of 9 years on the intangible assets acquired if the acquisition had occurred on January 1, 2024. The life of the intangibles is an estimate subject to a full valuation report that will be completed by the Company within by September 30, 2025.
(e) To record the estimated dividends payable related to the cumulative 6% preferred stock to be issued as consideration if the acquisition had occurred on January 1, 2024.
(f) To eliminate intercompany transactions between the acquired entities and Vivakor, Inc.*

 

3

 

 

VIVAKOR, INC., ENDEAVOR CRUDE, LLC, MERIDIAN LEASING EQUIPMENT, LLC,

EQUIPMENT TRANSPORT, LLC AND SILVER FUELS PROCESSING, LLC

Unaudited Pro Forma Consolidated Statement of Operations

For the Six Months Ended June 30, 2024

 

    Vivakor, Inc.*     Endeavor
Entities**
    Silver Fuels
Processing, LLC
    Adjustments     Consolidated  
Revenues                                        
Product revenue - third parties   $ 26,223,680     $ -     $ -     $ -     $ 26,223,680  
Product revenue - related party     5,978,833       -       -       -       5,978,833  
Services revenue - third parties     -       41,491,414       379,500       (444,560 )(c)      41,426,354  
Services revenue - related party     -       5,347,008       58,360       -       5,405,368  
Total revenues     32,202,513       46,838,422       437,860       (444,560 )     79,034,235  
Cost of revenues     30,023,562       10,196,478       67,387       -       40,287,427  
Gross profit     2,178,951       36,641,944       370,473       (444,560 )     38,746,808  
Operating expenses:                                        
Sales and marketing     11,668       -       -       -       11,668  
General and administrative     4,639,146       27,591,588       176,325       (444,560 )(c)      31,962,499  
Amortization and depreciation     1,997,473       7,890,989       164,118       685,326 (b)      10,737,906  
Total operating expenses     6,648,287       35,482,577       340,443       240,766       42,712,073  
Income (loss) from operations     (4,469,336 )     1,159,367       30,030       (685,326 )     (3,965,265 )
Other income (expense):                                     0  
Unrealized loss on marketable securities     (82,638 )     -       -       -       (82,638 )
Loss on disposition of asset     -       (18,630 )     -       -       (18,630 )
Gain deconsolidation of subsidiary     177,550       -       -       -       177,550  
Interest income     4,613       35,500       -       -       40,113  
Interest expense     (923,987 )     (3,825,511 )     -       -       (4,749,498 )
Other income     84,000       58,932       -       -       142,932  
Total other income (expense)     (740,462 )     (3,749,709 )     -       -       (4,490,171 )
Income (loss) before provision for income taxes     (5,209,798 )     (2,590,342 )     30,030       (685,326 )     (8,455,436 )
Provision for income taxes     (33,983 )     -       -       -       (33,983 )
Consolidated net income (loss)     (5,243,781 )     (2,590,342 )     30,030       (685,326 )     (8,489,419 )
Less: Net loss attributable to noncontrolling interests     (48,548 )     -       -       -       (48,548 )
Net income (loss) attributable to Vivakor, Inc.   $ (5,292,329 )   $ (2,590,342 )   $ 30,030     $ (685,326 )   $ (8,537,967 )
                                         
Basic and diluted net loss per share   $ (0.19 )                           $ (0.25 )
                                         
Basic weighted average common shares outstanding     27,189,918                       8,372,870 (a)      34,312,712  

 

 

Notes

 

* Includes Vivakor, Inc. and all of its active wholly and majority-owned subsidiaries and any consolidated variable interest entities as reported in its Form 10-Q for the six months ended June 30, 2024.
** Includes Endeavor Crude, LLC, Equipment Transport, LLC, and Meridian Equipment Leasing, LLC, and active subsidiary CPE Gathering Midcon, LLC.

 

(a) Reflects the issuance of 6,724,219 Vivakor, Inc. common shares at acquisition (as calculated on actual close date of October 1, 2024) and 1,648,651 common shares related to the 6% preferred stock dividend-PIK as if the acquisition had occurred on January 1, 2024.
(b) To record amortization of intangible expense of $685,326 upon close of the acquisition as if the acquisition had occurred on January 1, 2024.
(c) To eliminate intercompany transactions between Vivakor, Inc. and the acquired entities

 

4

 

 

VIVAKOR, INC., ENDEAVOR CRUDE, LLC, MERIDIAN LEASING EQUIPMENT, LLC,

EQUIPMENT TRANSPORT, LLC AND SILVER FUELS PROCESSING, LLC

Unaudited Pro Forma Consolidated Balance Sheets September 30, 2024

 

   Vivakor, Inc.*   Endeavor
Entities**
   Silver Fuels
Processing, LLC
   Adjustments    Consolidated 
ASSETS                          
Current assets:                          
Cash and cash equivalents  $687,172   $710,366   $1,699   $-    $1,399,237 
Cash and cash equivalents, restricted   -    3,258,649    -    -     3,258,649 
Accounts receivable   691,895    10,318,678    -    (607,957 )(f)   10,402,617 
Accounts receivable-related party   137,000    871,797    20,712    -     1,029,509 
Prepaid expenses   81,484    3,232,191    108,889    -     3,422,564 
Marketable securities   1,239,565    -    -    -     1,239,565 
Inventories   184,882    126,298    -    -     311,180 
Other assets   1,639,084    -    1,013    -     1,640,097 
Total current assets   4,661,082    18,517,979    132,313    (607,957 )   22,703,417 
                           
Other investments   4,000    -    -    -     4,000 
Other assets   -    1,149,824    12,992    -     1,162,816 
Notes receivable   220,088    -    -    -     220,088 
Property and equipment, net   28,348,642    58,813,934    902,680    -     88,065,256 
Right of use assets-operating leases   1,283,378    3,899,499    -    -     5,182,877 
License agreements, net   1,560,703    -    -    -     1,560,703 
Intellectual property, net   21,481,049    738,326    -    10,965,212 (c)(d)   33,184,587 
Goodwill   14,984,768    -    -    40,221,894 (b)   55,206,662 
Total assets  $72,543,710   $83,119,562   $1,047,985   $50,579,149    $207,290,406 
                           
LIABILITIES AND STOCKHOLDERS’ EQUITY                          
Current liabilities:                          
Accounts payable and accrued expenses  $19,635,178   $9,540,065   $36,009   $(225,548 )(f)  $28,985,703 
Accounts payable and accrued expenses-related parties   778,559    1,389,267    282,481    -     2,450,307 
Accrued compensation   1,046,481    682,877    -    -     1,729,358 
Operating lease liabilities, current   177,249    617,935    -    -     795,184 
Finance lease liabilities, current   717,828    1,693,233    -    -     2,411,061 
Loans and notes payable, current   3,236,529    22,131,967    -    -     25,368,496 
Loans and notes payable, current-related parties   21,538,331    2,690,208    -    -     24,228,539 
Line of credit   -    10,835,696    -    -     10,835,696 
Total current liabilities   47,130,154    49,581,248    318,490    (225,548    96,804,344 
                           
Operating lease liabilities, long term   1,199,082    3,281,564    -    -     4,480,646 
Finance lease liabilities, long term   1,734,193    10,121,022    -    -     11,855,215 
Loans and notes payable, long term   355,812    11,743,663    -    -     12,099,475 
Long-term debt (working interest royalty programs)   5,264,818    -    -    -     5,264,818 
Deferred tax liability   120,076    -    -    -     120,076 
Total liabilities   55,804,135    74,727,497    318,490    (225,548    130,624,574 
                           
Stockholders’ equity:                          
Preferred stock, $0.001 par value; 15,000,000 shares authorized, 54,955 outstanding   -    -    -    55 (a)   55 
Common stock, $0.001 par value; 200,000,000 shares authorized; 42,835,540 and 26,220,508 were issued and outstanding as of September 30, 2024 and December 31, 2023, respectively   33,638    -    -    9,197 (a)(e)    42,835 
Additional paid-in capital   89,576,500    -    -    64,143,041 (a)(e)    153,719,541 
Treasury stock, at cost   (20,000)   -    -    -     (20,000)
Accumulated deficit   (72,791,791)   8,392,065    729,495    (13,347,597 )(b)(d)(e)(f)    (77,017,828)
Total Vivakor, Inc. stockholders’ equity   16,798,347    8,392,065    729,495    50,804,697     76,724,604 
Noncontrolling interest   (58,772)   -    -    -     (58,772)
Total stockholders’ equity   16,739,575    8,392,065    729,495    50,804,697     76,665,832 
Total liabilities and stockholders’ equity  $72,543,710   $83,119,562   $1,047,985   $50,579,149    $207,290,406 

 

 
Notes
* Includes Vivakor, Inc. and all of its active wholly and majority-owned subsidiaries and any consolidated variable interest entities as reported in its Form 10-Q for the nine months ended September 30, 2024.
**

Includes Endeavor Crude, LLC, Equipment Transport, LLC, and Meridian Equipment Leasing, LLC, and active subsidiary CPE Gathering Midcon, LLC.

   
(a) To record the aggregate acquisition consideration, which is currently estimated to be approximately $61.6 million (subject to a full valuation report under our purchase price allocation to be completed by the Company by September 30, 2025) and is payable in shares of the Company’s common and preferred stock currently anticipated to consist of  6,724,219 shares of the Company's common stock and 54,955 shares of the Company’s Series A Preferred Stock. 
(b) To eliminate the capital structures of the acquired companies, and to record goodwill, and adjustments to the net assets with goodwill and such adjustments having been valued as of the actual date of close (October 1, 2024) with any variance due to the pro forma period of reporting being attributed to goodwill.
(c) To allocate an estimated 20% of goodwill to intangible assets subject to a full valuation report to be completed by the Company by September 30, 2025.
(d) To record amortization expense assuming a remaining useful life of 9 years on the intangible assets acquired if the acquisition had occurred on January 1, 2024. The life of the intangibles is an estimate subject to a full valuation report that will be completed by the Company by September 30, 2025.
(e) To record the estimated dividends payable related to the cumulative 6% preferred stock to be issued as consideration if the acquisition had occurred on January 1, 2024.
(f) To eliminate intercompany transactions between the acquired entities and Vivakor, Inc.*

 

5

 

 

VIVAKOR, INC., ENDEAVOR CRUDE, LLC, MERIDIAN LEASING EQUIPMENT, LLC,

EQUIPMENT TRANSPORT, LLC AND SILVER FUELS PROCESSING, LLC

Unaudited Pro Forma Consolidated Statement of Operations

For the Nine Months Ended September 30, 2024

 

    Vivakor, Inc.*     Endeavor
Entities**
    Silver Fuels
Processing, LLC
    Adjustments     Consolidated  
Revenues                                        
Product revenue - third parties   $ 30,999,451     $ -     $ -     $ -     $ 30,999,451  
Product revenue - related party     17,119,485       -       -       -       17,119,485  
Services revenue - third parties     -       68,568,366       569,250       (607,449 )(c)     68,530,167  
Services revenue - related party     -       2,107,086       81,884               2,188,970  
Total revenues     48,118,936       70,675,452       651,134       (607,449 )     118,838,073  
Cost of revenues     44,213,635       33,226,531       60,977       -       77,501,143  
Gross profit     3,905,301       37,448,921       590,157       (607,449 )     41,336,930  
Operating expenses:                                        
Sales and marketing     18,318       -       -       -       18,318  
General and administrative     7,252,540       23,714,693       221,795       (607,449 )(c)     30,581,579  
Amortization and depreciation     3,062,416       11,552,335       180,218       1,027,989 (b)     15,822,958  
Total operating expenses     10,333,274       35,267,028       402,013       420,539       46,422,854  
Income (loss) from operations     (6,427,973 )     2,181,893       188,144       (1,027,989 )     (5,085,925 )
Other income (expense):                                        
Unrealized gain on marketable securities     743,739       -       -       -       743,739  
Loss on disposition of asset     -       (18,630 )     -       -       (18,630 )
Gain deconsolidation of subsidiary     177,550       -       -       -       177,550  
Interest income     6,920       65,595       -       -       72,515  
Credit losses     -       (106,725 )     -       -       (106,725 )
Interest expense     (1,565,231 )     (6,727,054 )     -       -       (8,292,285 )
Interest expense-related parties     -       -       -       -       -  
Other income     115,000       59,351       33,750       -       208,101  
Total other income (expense)     (522,022 )     (6,727,463 )     33,750       -       (7,215,735 )
Income (loss) before provision for income taxes     (6,949,995 )     (4,545,570 )     221,894       (1,027,989 )     (12,301,660 )
Provision for income taxes     (33,983 )     -       -       -       (33,983 )
Consolidated net income (loss)     (6,983,978 )     (4,545,570 )     221,894       (1,027,989 )     (12,335,643 )
Less: Net loss attributable to noncontrolling interests     (100,593 )     -       -       -       (100,593 )
Net income (loss) attributable to Vivakor, Inc.   $ (6,883,385 )   $ (4,545,570 )   $ 221,894     $ (1,027,989 )   $ (12,235,050 )
                                         
Basic and diluted net loss per share   $ (0.24 )                           $ (0.34 )
                                         
Basic weighted average common shares outstanding     28,282,472                       9,197,195 (a)     35,844,608  

 

 

Notes

* Includes Vivakor, Inc. and all of its active wholly and majority-owned subsidiaries and any consolidated variable interest entities as reported in its Form 10-Q for the nine months ended September 30, 2024.
** Includes Endeavor Crude, LLC, Equipment Transport, LLC, and Meridian Equipment Leasing, LLC, and active subsidiary CPE Gathering Midcon, LLC.

 

(a) Reflects the issuance of 6,724,219 Vivakor, Inc. common shares at acquisition (as calculated on actual close date of October 1, 2024) and 2,472,976 common shares related to the 6% preferred stock dividend-PIK as if the acquisition had occurred on January 1, 2024.
(b) To record amortization of intangible expense of $770,991 upon close of the acquisition as if the acquisition had occurred on January 1, 2024.
(c) To eliminate intercompany transactions between Vivakor, Inc. and the acquired entities

 

6

v3.24.3
Cover
Oct. 01, 2024
Cover [Abstract]  
Document Type 8-K/A
Amendment Flag true
Amendment Description On October 7, 2024, Vivakor, Inc. (the “Company”), a Nevada corporation, filed a Current Report on Form 8-K (the “Initial Report”) to report that on October 1, 2024, the Company, 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 Endeavor Crude, LLC, a Texas limited liability company, Equipment Transport, LLC, a Pennsylvania limited liability company, Meridian Equipment Leasing, LLC, a Texas limited liability company, and Silver Fuels Processing, LLC, a Texas limited liability company (collectively, the “Endeavor Entities”) closed the transactions that were the subject of the previously-disclosed Membership Interest Purchase Agreement among them dated March 21, 2024, as amended (the “MIPA”).   This Current Report on Form 8-K/A (this “Amendment”) amends and supplements the Initial Report to provide financial statements of the Endeavor Entities, and the pro forma financial statements of the Company required by Item 9.01 of Form 8-K. No other modifications to the Initial Report are being made by this Amendment. This Amendment should be read in connection with the Initial Report, which provides a more complete description of the MIPA and transactions contemplated thereby. The financial statements of the Endeavor Entities are presented in two sets of financial statements for each period reported, with one set of financial statements being the combined financial statements of Endeavor Crude, LLC, which includes the combined financial results of Endeavor Crude, LLC, Equipment Transport, LLC and Meridian Equipment Leasing, LLC, and the second set of financial statements being the financial statements of Silver Fuels Processing, LLC.
Document Period End Date Oct. 01, 2024
Entity File Number 001-41286
Entity Registrant Name VIVAKOR, INC.
Entity Central Index Key 0001450704
Entity Tax Identification Number 26-2178141
Entity Incorporation, State or Country Code NV
Entity Address, Address Line One 5220 Spring Valley Road
Entity Address, Address Line Two Suite 500
Entity Address, City or Town Dallas
Entity Address, State or Province TX
Entity Address, Postal Zip Code 75254
City Area Code (949)
Local Phone Number 281-2606
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock
Trading Symbol VIVK
Security Exchange Name NASDAQ
Entity Emerging Growth Company false

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