Financial Performance - For the three months ended March 31, 2024, the company reported revenues of 16,021,391,anincreaseof476,519 or 3.07% compared to 15,544,872inthesameperiodof2023[121].−ThecostofrevenueforthethreemonthsendedMarch31,2024,was14,953,254, representing an increase of 921,540or6.5714,031,714 in 2023, primarily due to rising oil prices [123]. - Gross profit for the three months ended March 31, 2024, decreased to 1,068,137,adeclineof445,021 or 29.41% compared to 1,513,158in2023[124].−OperatingexpensesforthethreemonthsendedMarch31,2024,were2,685,059, an increase of 47,029or1.782,638,030 in 2023, attributed to increased amortization and a shift from consulting to full-time employees [125]. - Interest expense decreased by 761,629,or63.171,205,669 in Q1 2023 to 444,040inQ12024duetoatroubleddebtrestructuring[126].−Unrealizedlossonmarketablesecuritiesdecreasedfrom495,826 in Q1 2023 to 82,638inQ12024,reflectingimprovedmarketconditions[127].−Netcashusedinoperatingactivitiesincreasedfrom1,276,123 in Q1 2023 to 1,829,679inQ12024,indicatinghigheroperationalcosts[129].−TheaccumulateddeficitasofMarch31,2024,wasapproximately67.8 million, with a working capital deficit of about 37million[130].−Cashandcashequivalentsslightlyincreasedfrom744,307 as of December 31, 2023, to 767,273asofMarch31,2024[131].−Thecompanyraisedapproximately3 million through debt financing in Q1 2024, contributing to its liquidity [132]. Acquisition and Financing - The Company entered into a Membership Interest Purchase Agreement to acquire all issued and outstanding membership interests in Endeavor and its subsidiaries for a purchase price of 120million[101].−TheacquisitionwillbefinancedthroughacombinationofCompanycommonstockandSeriesAPreferredStock,whichwillhaveacumulativeannualdividendof61 per share after the first anniversary of issuance [101]. - The acquisition is expected to be completed within approximately 90 days of the Execution Date, subject to satisfaction of closing conditions [101]. - The purchase price for the acquisition is subject to a post-Closing working capital adjustment, with a target working capital amount of 150,000[103].−IftheEBITDAforthecompany′s2024fiscalyearexceeds12,000,000, the seller earn-out payment could reach up to 49,000,000[105].−Thepurchasepricecanbeadjustedtoamaximumof169,000,000 or reduced to a minimum of 71,000,000basedonperformancemetrics[105].−Thecompanywillfilearegistrationstatementfortheresaleofsharesrelatedtotheacquisitionwithin45daysofclosing[106].−Theacquisitioninvolvescustomaryrepresentationsandwarranties,includingafairnessopinionfromafinancialadvisor[107].−Thesellerswillenterinto18−monthlock−upagreementsregardingthecommonstockconsiderationreceived[102].DebtandObligations−Thecompanyhasasecuredpromissorynoteof3,000,000 issued to Cedarview Opportunities Master Fund LP, with a 3% origination fee deducted from the proceeds [74][75]. - The company plans to repay the note with interest-only payments for the first three months, followed by twelve equal monthly installments including 250,000,duebyMay5,2025[76].−TheCompanyreceivedaloanof1 million at an interest rate of 10% per annum, maturing on December 31, 2024, with 100,000 restricted shares issued as part of the agreement [99]. - The loan is personally guaranteed by the Company's CEO, James Ballengee, who is not a related party to the lender [99]. - Contractual obligations for finance lease liabilities totaled 1,789,473asofMarch31,2024,withoperatingleaseobligationsamountingto3,760,107 [137]. Merger and Corporate Structure - The merger agreement with Empire Energy Acquisition Corp. involves the exchange of 67,200,000 shares of the parent company's common stock, valued at 67,200,000[79].−Empireisrequiredtomaintainaminimumof2,500,000 in unrestricted net cash at the closing of the merger [81]. - The board of directors will consist of seven members post-merger, including three chosen by Empire and two by the parent company [84]. - The Merger Agreement includes indemnification provisions with a Parent Cap of 500,000andathresholdof250,000 for claims [89]. - The Parent's obligations to consummate the transactions are contingent upon various conditions, including the accuracy of representations and warranties [88]. - A lock-up agreement will be executed by Empire Stockholders representing at least 65% of the issued shares, restricting their shares for 12 months post-Closing [95]. - The Escrow Agreement will hold 5,040,000 shares as security for the Parent's obligations, effective on the Closing Date and terminating 12 months thereafter [97]. Operational Highlights - The company operates crude oil gathering, storage, and transportation facilities, with one facility selling up to 60,000 barrels of crude oil per month [72]. - The company focuses on soil remediation services, particularly in Kuwait and Houston, Texas, utilizing patented processes to recover hydrocarbons [73]. - The company has a 120,000 barrel crude oil storage tank connected to the Lotus pipeline system, with plans to connect to major pipeline systems [72]. - Capitalized interest on construction in process was 318,447inQ12024,withanticipatedfurtherconstructioncostsofapproximately1.5 million for new facilities [135]. Risks and Uncertainties - The company emphasizes that forward-looking statements are subject to risks and uncertainties, and actual results may differ significantly from expectations [68][69]. - The company faces potential adverse effects on capital access due to market conditions and lender perceptions, which may impact growth strategies [136].
