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Customer Relationships, Net and Goodwill

12 Months Ended

Dec. 31, 2024

Customer Relationships Net And Goodwill

Customer Relationships, Net and Goodwill

Note 11. Customer Relationships, Net and Goodwill

The following table sets forth the components of the Company’s customer relationships at December 31, 2024 and 2023:

Schedule of customer relationships
	December 31, 2024							December 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Oil Storage Agreement	$	7,387,054	$	(1,895,793	)	$	5,491,261	$	7,387,054	$	(1,111,327	)	$	6,275,727
Crude Petroleum Supply Agreement		9,401,706		(2,412,823	)		6,988,883		9,401,706		(1,414,412	)		7,987,294
Customer relationships		31,304,400		(763,522	)		30,540,878		-		-			-
Total customer relationships	$	48,093,160	$	(5,072,138	)	$	43,021,022	$	16,788,760	$	(2,525,739	)	$	14,263,021

On October 1, 2024, we acquired all of the issued and outstanding membership interests in 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 with their subsidiaries, the “Endeavor Entities”), making those entities wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately $116.3 million, after post-closing adjustments, including assumed debt and an earn-out adjustment

Upon the Closing of our acquisition of the Endeavor Entities, we acquired Trucking Transportation Agreement & Addendum with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude must, through its own operations or source for the Company, a minimum volume of 75,000 bbls per day for our trucking logistics services. The agreement expires on December 31, 2034.

Upon the Closing of our acquisition of the Endeavor Entities, we acquired a Station Throughput Agreement with Posse Wasson, LLC (Posse Monroe, LLC) (“Possee”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, Possee must source for the Company, a minimum volume of 230,000 bbls per month through our storage facility at $0.275 per barrel, guaranteeing $759,000 of throughput revenue on an annual basis. The agreement expires on December 31, 2034.

In the 2022 business combination acquisition of White Claw Colorado City, LLC, we acquired an 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 2022 business combination acquisition of Silver Fuels Delhi, LLC, 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 $2.3 million in 2023. As of December 31, 2024 and 2023, goodwill was $68,885,853 and $14,984,768. As of December 31, 2024 and 2023, the fair values of the acquired contracts and customer relationships (described above) were $43,021,022 and $14,263,021. The acquired contracts are amortized over their useful life which ranges from 9 to 10.25 years. The amortization expense of the acquired contracts and customer relationships was $1,608,452 and $844,930 for the year ended December 31, 2024 and 2023, and amortization expense for the years 2025 through 2031 is $3,899,018 in each respective year, and from 2032 through 2035 is $3,054,088, in each respective year.

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

Schedule of goodwill
	Goodwill
January 1, 2023	$	12,678,108
Business combination⁽¹⁾		2,306,660
December 31, 2023	$	14,984,768
Business combination⁽²⁾		53,901,085
December 31, 2024	$	68,885,853

	(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 2024.
	(2)	See Note 4 for a description of the goodwill associated with the business combination that closed on October 1, 2024.