DEF: Vivakor Seeks Shareholder Nod on Debt, Split, Asset Sale

Vivakor, Inc. is seeking shareholder approval for significant stock issuances related to debt, a reverse stock split to maintain Nasdaq listing, and ratification of a related-party asset sale.

Summary

• Vivakor, Inc. will hold its 2025 Annual Meeting of Stockholders on September 11, 2025, to vote on nine key proposals.
• Shareholders will vote on the election of four directors: James Ballengee, John R. Harris, Albert Johnson, and Michael Thompson.
• Approval is sought for the issuance of common stock exceeding 19.99% of outstanding shares for a $12,565,000 Junior Secured Promissory Note with J.J. Astor & Co., and for $5,794,117.66 Convertible Promissory Notes with non-affiliated investors.
• Approval is also requested for common stock issuances exceeding 19.99% for dividends or conversion of Series A Preferred Stock, which has a stated value of $1,000 per share and a 6% annual dividend payable in common stock.
• The company is seeking ratification for the sale of Meridian Equipment Leasing, LLC and Equipment Transport, LLC (water trucking businesses) on July 30, 2025, to Jorgan Development, LLC (an entity controlled by CEO James Ballengee) for $11,058,235 paid in Series A Convertible Preferred Stock.
• Discretion is requested for the Board of Directors to implement a reverse stock split in a range from 1:5 to 1:25 by March 15, 2026, to maintain Nasdaq listing compliance, as the closing bid price was $0.951 on August 7, 2025, below the $1.00 minimum.
• The selection of Urish Popeck & Co, LLC as the independent registered public accounting firm for fiscal year ending December 31, 2025, is up for ratification.
• A non-binding advisory vote on executive compensation is also on the agenda.
• Vivakor operates in crude oil transportation services (trucking and Omega Gathering Pipeline) and facility services (injection truck stations and major crude oil terminals).
• A remediation processing center (RPC) is under construction in Harris County, Texas, expected to commence operations in Q4 2025.
• The company acquired Endeavor Entities on October 1, 2024, for a final purchase price of $116.3 million, paid in common stock and Series A Preferred Stock, from sellers beneficially owned by CEO James Ballengee.
• Vivakor entered into a Forbearance Agreement with Maxus Capital Group, LLC on July 30, 2025, acknowledging various events of default and agreeing to a payment schedule totaling over $9 million by November 30, 2025, plus monthly payments and a forbearance fee of $250,000 cash and $250,000 in restricted common shares.

Sentiment

Score: 3

Explanation: The sentiment is negative due to significant financial distress indicators, including Nasdaq delisting risk, multiple debt-related stock issuance proposals leading to high dilution potential, and a forbearance agreement stemming from prior defaults. While there are some operational positives, the financial challenges and governance concerns related to extensive related-party transactions overshadow them, suggesting a precarious financial position.

Positives

• The company is actively pursuing strategic adjustments, including the divestiture of non-core water trucking assets, to focus on crude oil operations.
• Construction of a new remediation processing center (RPC) is underway, expected to commence operations in Q4 2025, potentially adding new revenue streams.
• Existing long-term contracts underpin major crude oil terminaling facilities, including a 10-year contract for 100,000 barrels per month minimum volume commitment in Colorado City, Texas, and a contract with a subsidiary of ExxonMobil Corporation for 60,000 net barrels per month in Delhi, Louisiana.
• The appointment of Kimberly Hawley as the new Chief Financial Officer brings extensive experience in financial operations, strategy, and capital structure initiatives, including securing over $120 million in long-term debt financing in her previous role.

Negatives

• The company received a Nasdaq deficiency letter on March 18, 2025, for failing to maintain a minimum bid price of $1.00, with a compliance deadline of September 15, 2025, indicating potential delisting risk.
• Multiple proposals seek shareholder approval for common stock issuances that could exceed 19.99% of outstanding shares, leading to significant potential dilution for existing shareholders.
• The J.J. Astor Notes and other convertible notes include conversion price discounts (20% normally, 50% in default), which could exacerbate dilution.
• The company entered into a Forbearance Agreement with Maxus Capital Group, LLC due to existing events of default on lease agreements, requiring substantial payments totaling over $9 million by November 30, 2025, plus ongoing monthly payments and a forbearance fee.
• Several key executive officers, including the Chief Financial Officer (Tyler Nelson) and Chief Operating Officer (Russ Shelton), resigned in July and August 2025, respectively, indicating potential instability in senior management.
• The sale of water trucking businesses to an entity controlled by the CEO, James Ballengee, for Series A Preferred Stock raises concerns about related-party transactions and potential conflicts of interest, despite the Board's belief in its benefit to the company.

Risks

• Failure to regain Nasdaq compliance by September 15, 2025, could lead to delisting of the company's common stock, impacting liquidity and investor confidence.
• Significant potential dilution from the issuance of common stock for J.J. Astor Notes, other convertible notes, and Series A Preferred Stock dividends/conversions, which could reduce current stockholders' percentage interests and depress share price.
• The proposed reverse stock split, while intended to meet Nasdaq requirements, carries the risk that the market price may not react proportionally, and liquidity could be adversely affected.
• The company has acknowledged events of default on existing lease agreements, leading to a forbearance agreement with Maxus Capital Group, LLC, which requires substantial payments and indicates ongoing financial strain.
• Reliance on related-party transactions, including the acquisition of Endeavor Entities and the sale of water trucking businesses to CEO-controlled entities, may present conflicts of interest and raise questions about arm's-length terms.
• The conversion terms of the J.J. Astor Notes and other convertible notes include discounts to market price, which could lead to further dilution, especially in a default scenario (50% discount).
• The company's ability to meet its financial obligations, including the substantial payments required under the Maxus Forbearance Agreement and the weekly installments on the J.J. Astor Notes, poses a liquidity risk.

Future Outlook

The company expects its remediation processing center (RPC) in Harris County, Texas, to commence operations in the fourth quarter of 2025. It is also in negotiations with Kuwait Oil Company to potentially use its full-capacity RPC to clean oil-contaminated sands. The Board of Directors may implement a reverse stock split by March 15, 2026, if necessary, to regain and maintain Nasdaq listing compliance.

Management Comments

• "Your vote is very important. We encourage you to read the Proxy Statement and vote your shares as soon as possible. Whether or not you plan to attend, you can be sure your shares are represented at the Annual Meeting by promptly submitting your vote by the Internet, by telephone or, if you request a paper copy of the proxy materials and receive a proxy card, by mail." James Ballengee, CEO
• "Our Board of Directors has fixed August 13, 2025 as the record date (the Record Date) for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment or postponement of the meeting."
• "The Board of Directors believes that a reverse stock split will increase the price per share of the common stock and assist in meeting the Bid Price Requirement for maintaining Nasdaq listing."
• "The Board of Directors believes the [MEL/ET] transaction greatly benefits the Company and its stockholders."
• "Our Board unanimously recommends that you vote FOR the election of each of the nominees for directors."
• "Our Board unanimously recommends that you vote FOR the J.J. Astor Stock Issuance including an amount above 19.99% of the Company’s outstanding common stock."
• "Our Board unanimously recommends that you vote FOR the Notes Stock Issuance including an amount above 19.99% of the Company’s outstanding common stock."
• "Our Board unanimously recommends that you vote FOR the Preferred Stock Issuances including an amount above 19.99% of the Company’s outstanding common stock."
• "Our Board unanimously recommends that you vote FOR the ratification of the MEL/ET Transaction."
• "The Board of Directors recommends that the stockholders vote FOR granting the Board of Directors discretion (if necessary to maintain a listing of the Company’s common stock on the Nasdaq Capital Market) to amend the Company’s certificate of incorporation to implement a reverse stock split..."
• "Our Board unanimously recommends that you vote FOR the ratification of the selection of our independent registered public accounting firm for fiscal year ending December 31, 2025."
• "The Board recommends a vote FOR the non-binding advisory vote approving the executive compensation of the Company’s named executive officers."

Industry Context

Vivakor operates in the midstream oil and gas industry, focusing on crude oil transportation and facility services in active U.S. basins like the DJ Basin, STACK play, Permian, and Eagle Ford. The company's emphasis on flexible and scalable truck transportation solutions and pipeline infrastructure (Omega Gathering Pipeline) highlights its role in supporting oil and natural gas exploration and development. The construction of a remediation processing center (RPC) and negotiations with Kuwait Oil Company for oil-contaminated sand cleaning indicate a strategic move into environmental solutions within the energy sector, aligning with broader industry trends towards sustainability and waste management.

Comparison to Industry Standards

• The company's need for a reverse stock split to maintain Nasdaq listing due to a bid price below $1.00 indicates a struggle to meet basic exchange requirements, which is a common challenge for smaller, growth-oriented companies in the energy sector during periods of market volatility or operational challenges, unlike larger, more stable industry players.
• The significant reliance on related-party transactions, particularly with entities controlled by the CEO for acquisitions, divestitures, and ongoing operational contracts, is not typical for well-established, publicly traded companies and may raise governance concerns compared to industry best practices that prioritize arm's-length dealings.
• The disclosure of multiple events of default leading to a forbearance agreement with a major creditor (Maxus Capital Group, LLC) suggests a higher level of financial distress and liquidity challenges than typically observed in financially robust midstream energy companies, which generally maintain strong balance sheets and access to diverse capital sources.

Management Changes

Corporate Governance

Legal Proceedings

• The company entered into a Forbearance Agreement with Maxus Capital Group, LLC on July 30, 2025, acknowledging various events of default on Master Lease Agreements (No. 1450, 1452, 1462). Maxus agreed to forbear from further enforcement actions as long as no new defaults occur and specific payment terms are met.

Related Party Transactions

• The acquisition of Endeavor Entities on October 1, 2024, for $116.3 million (in common and Series A Preferred Stock) was from sellers beneficially owned by James Ballengee, the company's Chairman, President, and Chief Executive Officer.
• The sale of Meridian Equipment Leasing, LLC and Equipment Transport, LLC (water trucking businesses) on July 30, 2025, for $11,058,235 (in Series A Convertible Preferred Stock) was to Jorgan Development, LLC, an entity controlled by James Ballengee.
• A Secured Promissory Note dated August 15, 2022, with Jorgan Development, LLC (controlled by James Ballengee) was amended to reduce payments from 99% to 50% of Monthly Free Cash Flow from certain terminal operations.
• James Ballengee and certain Ballengee Family Office Affiliates voluntarily suspended their right to receive dividends and distributions on Series A Convertible Preferred Stock held by them from August 1, 2025, to January 1, 2026.
• The Colorado City, Texas facility's Oil Storage Agreement (WCCC Take-or-Pay) is with Jorgan Development, LLC, requiring Jorgan to store or pay for a minimum of 120,000 barrels of crude oil per month, generating approximately $1,800,000 in revenue for Vivakor in both 2024 and 2023.
• The Delhi, Louisiana facility's Crude Petroleum Supply Agreement (SFD Take-or-Pay) is with Jorgan (successor-in-interest to White Claw Crude, LLC), involving crude oil purchases of $41,777,857 in 2024 and $36,740,922 in 2023, and NGL sales of $10,790,417 in 2024 and $11,268,005 in 2023.
• A promissory note of up to $1,500,000 was issued to Ballengee Holdings, LLC (beneficially owned by James Ballengee) on May 23, 2024, for working capital, with a principal balance and accrued interest of $1,208,030 as of December 31, 2024.
• A loan of $500,000 was received from Ballengee Holdings, LLC on July 5, 2024, with a principal and accrued interest balance of $524,456 as of December 31, 2024.
• Dividends on Series A Preferred Stock, including 1,384,311 shares issued to Jorgan Development, LLC and 13,983 shares to JBAH Holdings, LLC (both controlled by James Ballengee), were issued on May 20, 2025.

Stakeholder Impact

• **Shareholders**: Face significant potential dilution from multiple stock issuances for debt conversion and preferred stock dividends. The proposed reverse stock split could impact share price and liquidity. The Nasdaq delisting risk poses a threat to investment value and trading accessibility. Related-party transactions may raise concerns about fairness and transparency.
• **Employees**: Experienced recent changes in key executive leadership (CFO, COO resignations, new CFO appointment, COO promotion), which could impact morale and operational stability.
• **Creditors**: The company has acknowledged events of default and entered into a forbearance agreement with Maxus Capital Group, LLC, indicating financial strain and potential risks to debt repayment. The J.J. Astor Notes and other convertible notes introduce complexity and potential for conversion into equity, impacting the debt-to-equity structure.
• **Customers/Suppliers**: The divestiture of water trucking operations and focus on crude oil services may streamline operations but could also alter service offerings. Long-term contracts with entities like Jorgan Development, LLC and Denbury Onshore, LLC provide stability but also highlight reliance on specific relationships.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on September 11, 2025, to vote on the proposed matters.
• Elect four members to the Board of Directors for a term expiring at the 2026 annual meeting.
• Seek shareholder approval for stock issuances related to J.J. Astor Loan Agreement, Convertible Promissory Notes, and Series A Preferred Stock to comply with Nasdaq Listing Rule 5635(d).
• Ratify the sale of Meridian Equipment Leasing, LLC and Equipment Transport, LLC to Jorgan Development, LLC.
• Potentially implement a reverse stock split (1:5 to 1:25) by March 15, 2026, if necessary, to regain Nasdaq bid price compliance.
• Ratify the selection of Urish Popeck & Co, LLC as the independent registered public accounting firm for fiscal year ending December 31, 2025.
• Continue construction and aim for commencement of operations of the remediation processing center (RPC) in Harris County, Texas, in the fourth quarter of 2025.
• Continue negotiations with Kuwait Oil Company regarding the use of the RPC for cleaning oil-contaminated sands.
• Make required payments to Maxus Capital Group, LLC under the forbearance agreement by specified dates (September 1, 2025, October 1, 2025, November 30, 2025, and ongoing monthly payments).

Key Dates

Recommendation

The filing reveals a company in significant financial distress, evidenced by the Nasdaq minimum bid price deficiency and the need for a reverse stock split to avoid delisting. The extensive reliance on debt, particularly convertible notes with steep discounts (up to 50% in default), and the need for shareholder approval for massive potential dilution (exceeding 19.99% of outstanding shares for multiple instruments) indicate a highly dilutive financing strategy. Furthermore, the disclosure of multiple events of default leading to a forbearance agreement with a major creditor (Maxus Capital Group, LLC) underscores severe liquidity and operational challenges. The pervasive related-party transactions, including the acquisition and divestiture of assets with CEO-controlled entities, raise serious corporate governance concerns regarding potential conflicts of interest and the fairness of terms. Recent executive resignations add to the instability. Given these compounding negative factors, the risk to existing shareholders is exceptionally high, making a 'strong sell' recommendation appropriate for any current holdings.

Keywords

Vivakor, oil and gas, midstream, crude oil transportation, terminaling, remediation, Nasdaq listing, reverse stock split, stock issuance, convertible notes, Series A Preferred Stock, related party transactions, corporate governance, SEC filing, proxy statement, financial distress, dilution