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Intangible Assets, Net and Goodwill

12 Months Ended

Dec. 31, 2023

Note 13. Intangible Assets, Net and Goodwill

The following table sets forth the components of the Company’s intangible assets at December 31, 2023 and 2022:

Schedule Of intangible assets
	December 31, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Extraction Technology patents	$	113,430	$	18,905	$	94,525	$	113,430	$	12,233	$	101,197
Extraction Technology		16,385,157		7,305,049		9,080,108		16,385,157		6,485,791		9,899,366
Acquired crude oil contracts		16,788,760		2,525,739		14,263,021		19,095,420		844,930		18,250,490
Total Intellectual property	$	33,287,347	$	9,849,693	$	23,437,654	$	35,594,007	$	7,342,954	$	28,251,053

The changes in the carrying amount of goodwill are as follows:

Schedule of goodwill
	Goodwill
January 1, 2021	$	-
Business combination acquisition⁽¹⁾		12,678,108
December 31, 2022	$	12,678,108
Business combination acquisition⁽¹⁾		2,306,660
December 31, 2023	$	14,984,768

(1)

The measurement of assets acquired and liabilities assumed in the business combination is based on preliminary estimates made by management and subject to adjustment within twelve months. Management hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and goodwill within twelve months. Based on the valuation study, we increased the fair value of goodwill and decreased the value of the acquired contracts by $2.3 million in 2023.

On August 1, 2022, the Company closed a Membership Interest Purchase Agreement, (the “MIPA”), with Jorgan Development, LLC, and JBAH Holdings, LLC, as the equity holders of Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”) and White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”) whereby, the Company acquired all of the issued and outstanding membership interests in each of SFD and WCCC making SFD and WCCC wholly owned subsidiaries of the Company. The purchase price for the Membership Interests was approximately $32.9 million, after post-closing adjustments.

In the business combination of acquiring WCCC we also acquired WCCC’s Oil Storage Agreement with White Claw Crude, LLC (“WC Crude”), of which our CEO is a beneficiary. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by WCCC. WC Crude is required to pay $150,000 per month. The agreement expires on December 31, 2031.

In the business combination of acquiring SFD, we acquired an amended Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”), under which WC Crude supplies volumes of Crude Petroleum to SFD, which provides for the delivery to SFD a minimum of 1,000 sourced barrels per day, and includes a guarantee that when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin on the oil purchased from WC Crude, then WC Crude will pay to SFD the difference between the sales price and $5.00 per barrel. In the event that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit-sharing payment in the amount equal to 10% of the excess price over $5.00 per barrel, which amount will be multiplied by the number of barrels associated with the sale. The Supply Agreement expires on December 31, 2031.

The measurement of assets acquired and liabilities assumed in the business combination was based on preliminary estimates made by management and subject to adjustment within twelve months. Management hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and goodwill. Based on the valuation study, we increased the fair value of goodwill and decreased the value of the acquired contracts by $2.3M in 2023. As of December 31, 2023 and 2022, goodwill was $14,984,768 and $12,678,108. As of December 31, 2023 and 2022, the fair values of the acquired contracts (described above) were $16,788,758 and $19,095,420. The acquired contracts are amortized over a 9 year, 5 month life. The amortization expense of the acquired contracts was $844,930 from the date of acquisition on August 1, 2022 through December 31, 2022, and amortization expense for the years 2023 through 2028 is $1,680,809 in each respective year. As of December 31, 2023, the net carrying value of the acquired contracts is $14,263,021.

The Company entered into a Contribution Agreement dated January 5, 2015, where proprietary information and intellectual property related to certain petroleum extraction technology (also known as hydrocarbon extraction technology) suitable to extract petroleum (or hydrocarbons) from tar sands and other sand-based ore bodies, and all related concepts and conceptualizations thereof (the “Extraction Technology”) was contributed to VivaVentures Energy Group, Inc., a 99% majority-owned subsidiary of Vivakor, and was assessed a fair market value of $16,385,157, which consists of the consideration of $11,800,000 and the Company assuming a deferred tax liability in the amount of $4,585,157. All ownership in the Extraction Technology (including all future enhancements, improvements, modifications, supplements, or additions to the Extraction Technology) was assigned to the Company and is currently being applied to the Company Remediation Processing Centers, which are the units that remediate material. The Extraction Technology is amortized over a 20-year life. For the years ended December 31, 2023 and 2022, the amortization expense of the technology was $819,258. Amortization expense for the years 2024 through 2028 is $819,258 in each respective year. As of December 31, 2023 and 2022, the net carrying value of the Extraction Technology is $9,080,108 and $9,899,366.

In 2019, the Company began the process of patenting the Extraction Technology and all of its developments and additions since the acquisition, and we have filed a series of patents and capitalized the costs of these patents. The capitalized costs of these patents are $113,430. The patents were placed in service in 2021 and are amortized over the patents’ useful life of twenty years. For the year ended December 31, 2023 and 2022, the amortization expense of the patents was $6,672. Amortization expense for the years 2024 through 2028 is $5,672 in each respective year. As of December 31, 2023 and 2022, the net carrying value of the patents is $94,52594,525 and $101,197.

The Company entered into an asset purchase agreement dated September 5, 2017, where two patents (US patent number 7282167- Method and apparatus for forming nano-particles and US patent number 9272920- System and method for ammonia synthesis) were purchased and attributed a fair market value of $4,931,380, which consists of the consideration of $3,887,982 and the Company assuming a deferred tax liability in the amount of $1,043,398. The patents grant the Company ownership of a nano catalyst technology that facilitates chemical manufacturing, with a focus on the production of ammonia, specifically for the gas phase condensation process used to create the iron catalyst. As of December 31, 2022, we continued to pursue a test facility or third-party reactor for our nano catalyst technology. The Company received quotes for testing or building our own test facilities with new partners for this venture with estimates of cost being over $4 million. After taking into consideration this information, we noted that the requested capital expenditure to test and scale the business triggered a net impairment loss to fully impair the patents, and the deferred tax liability related to the patents was reduced, yielding a net impairment loss of $1,622,998 for the year ended December 31, 2022. The patents were being amortized over their useful life of 10 years before the impairment was triggered. For the year ended December 31, 2022, the amortization expense of the patents was $493,138.