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Commitments and Contingencies
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 8. Commitments and Contingencies

 

Finance Leases

 

We acquired Silver Fuels Delhi, LLC (SFD) and White Claw Colorado City, LLC (WCCC) in a business combination in August 2022, in which we acquired certain finance lease contracts and liabilities as described below:

 

On March 17, 2020, SFD entered into two sale and leaseback transactions with Maxus Capital Group, LLC (“Maxus”). The first transaction involved the Company assigning twelve storage tanks and other equipment and the second transaction involved the Company assigning the remaining property at the oil gathering facility with the exception of land, to Maxus Future minimum lease payments for each of the next three years under the Maxus lease obligations is as follows: 2023 $123,036, 2024 $492,144, and 2025 $123,036.

 

On December 28, 2021, WCCC entered into a sale and leaseback transaction with Maxus, where WCCC assigned the crude oil, natural gas liquids, condensate, and liquid hydrocarbon receipt, throughput, processing, gathering, and delivery terminal, commonly known as the China Grove Station (the “China Grove Station”), located in Colorado City, Texas to Maxus. Future minimum lease payments for each of the next four years under the Maxus lease obligation are as follows: 2023 $117,939, 2024 $471,756, 2025 $471,756, and 2026 $471,756.

 

On May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under a two year agreement, which Maxus agreed to finance the build-out of our new facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. We expect Maxus to fund approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease for the wash plant, and we will lease the wash plant facility financed by Maxus under WCCC’s supplement to the Master Agreement. We expect our lease payments to Maxus under the supplement to be approximately $57,962 per month over 4 years, with an early buyout option of approximately $685,000 or lease-end option to purchase the facilities for the fair market value. We anticipate that the lease will commence in the fourth quarter of 2023 at which time the final amount funded and lease payments will be determined. During the construction phase the Company controls the asset with construction costs funded by Maxus recorded as a liability (see Note 6).

 

The following table reconciles the undiscounted cash flows for the finance leases as of September 30, 2023 to the finance lease liability recorded on the balance sheet:

 

       
2023   $ 240,975  
2024     963,900  
2025     594,792  
2026     471,756  
Total undiscounted lease payments     2,271,423  
Less: Imputed interest     1,061,556  
Present value of lease payments     1,209,867  
Add: carrying value of lease obligation at end of lease term     1,753,000  
Total finance lease obligations   $ 2,962,867  
         
Finance lease liabilities, current   $ 963,900  
Finance lease liabilities, long-term   $ 1,998,967  
         
Weighted-average discount rate     18.00 %
Weighted-average remaining lease term (months)     32.17  

 

Operating Leases

 

Commencing on September 15, 2019, the Company entered into a five-year lease with Jamboree Center 1 & 2 LLC covering approximately 6,961 square feet of office space in Irvine, CA. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $21,927, Year 2 $22,832, Year 3 $23,737, Year 4 $24,712, Year 5 $25,686. As a condition of the lease, we were required to provide a $51,992 security deposit.

 

On February 1, 2022, the Company entered into a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March 1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $2,258, Year 2 $2,336, Year 3 $2,418. As a condition of the lease, we were required to provide a $2,418 security deposit.

 

On March 28, 2022, the Company entered into a lease agreement for approximately 1,469 square feet of office space located in Lehi, Utah. Commencing on April 1, 2022, the Company entered into a three-year lease with Victory Holdings, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 is comprised of April to May 2022 $857, June 2022 to March 2023 $3,550, Year 2 $3,657, Year 3 $3,766. As a condition of the lease, we were required to provide a $3,766 security deposit.

 

On December 16, 2022, our subsidiary, VivaVentures Remediation Corp. entered into a Land Lease Agreement (the “Land Lease”) with W&P Development Corporation, under which we agreed to lease approximately 3.5 acres of land in Houston, Texas. The Land Lease is for an initial term of 126 months and may be extended for an additional 120 months at our discretion. Our monthly rent is $0 for the first three months and then at month 4 it is approximately $7,000 (based on a 50% reduction) and increases to approximately $13,000 in month 7 and then increases annually up to approximately $16,000 per month by the end of the initial term. We plan to place one or more of our RPC machines on the property, as well as store certain equipment.

 

On June 26, 2023, our subsidiary VivaVentures Remediation Corp., entered into a five year RPC Equipment Lease Agreement with Viva Wealth Fund I, LLC (“VWF”), under which VivaVentures Remediation Corp. agreed to lease the Remediation Processing Center (“RPC”) owned by VWF. VWF previously raised approximately $13.7 million and used the funds to have our subsidiary, RPC Design and Manufacturing, LLC, build an RPC, which we are now leasing from VWF in exchange for 25% of the gross proceeds from the RPC’s oil extraction production services, with a minimum $400,000 annual payment beginning nine months after the RPC is fully operational as defined in the RPC Equipment Lease Agreement. We anticipate that the RPC will be fully operational in the fourth quarter of 2023 at which time the minimum annual lease payment of $400,000 and could increase to an amount equal to 25% of the gross proceeds from the RPC’s oil extraction production services.

 

In July and August 2023, the Company entered into two six month lease agreements with Regus Management Group, LLC for individual offices and shared amenities located in Laguna Hills, California. The leases require an aggregate monthly lease payment of $3,080.

 

The following table reconciles the undiscounted cash flows for the leases as of September 30, 2023 to the operating lease liability recorded on the balance sheet:

 

       
2023   $ 130,245  
2024     435,906  
2025     162,545  
2026     136,975  
2027     153,089  
Thereafter     2,931,500  
Total undiscounted lease payments     3,950,260  
Less: Imputed interest     2,232,911  
Present value of lease payments   $ 1,717,349  
         
Operating lease liabilities, current   $ 535,960  
Operating lease liabilities, long-term   $ 1,181,389  
         
Weighted-average remaining lease term     213.47  
Weighted-average discount rate     10.13 %

 

Employment Agreement

 

On July 1, 2023, we hired a Vice President of Operations & Construction. In this position, Mr. Patterson is in charge of managing the development and operations for our facilities. In connection with his hiring we signed an Executive Employment Agreement with Mr. Patterson. Under the terms of the Agreement, Mr. Patterson will receive $150,000 in annual salary, shares of our common stock equal to $25,000 annually, and two one-time bonuses of shares of our common stock equal to $125,000 each, with the first bonus payable on the one year anniversary of his employment, and the second bonus payable on the eighteen month anniversary of his employment agreement. Mr. Patterson is entitled to other bonuses and benefits on par with our general employment policies.