UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 20192021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 000-53361

ECOARK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

(479) 259-2977(800) 762-7293

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐  No ☒ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐ 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act ( 15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒ 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $42,668,022.$158,069,577.

As of August 16, 2019,June 28, 2021, there were 62,348,30122,820,573 shares of common stock, par value $0.001 per share, outstanding.

This Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, 2019 includes restated audited financial statements (and related disclosures) for the fiscal year ended December 31, 2018. This Form 10-K amends and restates consolidated financial statements of Ecoark Holdings, Inc. (“the Company”), for the fiscal year endedMarch 31, 2018 and an adjustment to the balances as of March 31, 2017 previously reported in the Annual Report onForm 10-K of the Company for the fiscal year ended March 31, 2018, as originally filed with the Securities and Exchange Commission on June 28, 2018 (the “Original Filing”). This Form 10-K amends the Original Filing of the consolidated financial statements for the fiscal year ended March 31, 2018 to reflect the correction of an error in the previously reported fiscal year 2018 and fiscal year 2017 consolidated financial statements related to the Company’s classification of certain warrants as equity rather than as liabilities.

In addition, this Form 10-K provides a revised audit report on the audited consolidated financial statements for the fiscal year ended March 31, 2018.

The Company will be also be filing amended Quarterly Reports for the quarterly periods ended December 31, 2018 and 2017, September 30, 2018 and 2017 and June 30, 2018 and 2017 to restate the previously issued interim financial statements due to the accounting error described above. All earnings press releases and similar communications issued by us, for such period, should not be relied upon and are superseded in their entirety by this Form 10-K.

The Company has concluded that certain warrants issued in March and May 2017 and in March and August 2018 were required to be classified as liabilities since characteristics of derivative instruments were met and the warrants did not qualify for equity classification.  

PART I

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements underwithin the meaning of Section 21E of the Exchange Act , including statements regarding our oil and gas reserves, future operating results, including the expected increase in revenues from the energy business and continued losses and negative cash flows, expected substantial investments to fund our business and support growth, including expenditures related to the joint drilling venture, expected sources of liquidity, future impact of reduced oil and gas prices or reduced demand, expected sources of revenue, potential future acquisitions, our beliefs regarding the classification of drivers and owner-operators as independent contractors, our plans with respect to loss reserves, the sufficiency of our aggregate insurance limits, our expectations with respect to future developments in the ongoing litigation, including the receipt of proceeds, our expectations regarding the availability of licenses to use third party intellectual property, dependence of future success on key management and employees, future dividend policy, and future liquidity. 

All statements other federal securities lawsthan statements of historical facts contained in this Report, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that are subjectwe believe may affect our financial condition, results of operations, business strategy and financial needs. The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to a numberdiffer materially from these forward-looking statements include oil and gas price volatility, to the impact of the COVID-19 pandemic on the economy, the price of, and demand for, oil and gas, our ability to efficiently develop our current oil reserves and economically find or acquire additional recoverable reserves, general risks related to drilling operations, future regulatory changes, including changes related to climate change, any unanticipated losses, potential unfavorable outcome of the ongoing litigation, potential unavailability of licenses to use third party intellectual property, continued service of key management and employees, and the availability of capital on acceptable terms when needed or at all, including as the result of the recent climate change initiatives. Further information on the risks and uncertainties many of which are beyondaffecting our control including without limitation the following: (i)business is contained in Part I. Item 1A. – Risk Factors and our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission (the “Commission” or the “SEC”).

In some cases, you can identify forward-looking statements by terminology such as “may,’’ “will,’’ “should,’’ “could,’’ “expects,’’ “plans,’’ “intends,’’ “anticipates,’’ “believes,’’ “estimates,’’ “predicts,’’ “seeks,” “potential,’’ or “continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements.

These forward-looking statements are made only as of the date hereof. We are underundertake no dutyobligation to publicly update or revise any of these forward-looking statements, afterwhether as the dateresult of this reportnew information, future events or to provide any assurance with respect to future performance or results. You are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Readers are cautioned not to place undue reliance on these forward-looking statements and should read this report thoroughly with the understanding that the actual results may differ materially from those set forth in the forward-looking statements for many reasons, including, without limitation, unforeseen events beyond management’s control and assumptions that prove to be inaccurate or unfounded. The following list of examples, while not exclusive or exhaustive, includes some of the many possible unforeseen developments that may cause actual results to differ from anticipated or desired results:otherwise.

As used in this Annual Report, the terms “we”, “us”, “our”,“we,” “us,” “our,” “Ecoark Holdings” and “Ecoark Holdings”the “Company” mean Ecoark Holdings, Inc., a Nevada corporation and its consolidated subsidiaries, (the “Company”), unless otherwise indicated.

Unless the context otherwise indicates or requires, all product names and trade names used in this Annual Report are the Company's trademarks, although the “®” and “™” trademark designations may have been omitted.

Except as otherwise indicated, dollar amounts and numbers of shares that follow in this report are presented in thousands, except per share amounts.

Item 1 Business

General Corporate History

Ecoark Holdings, Inc. was incorporated in the State of Nevada on November 19, 2007 under the name Magnolia Solar Corporation (“Magnolia Solar”). On March 18, 2016, Magnolia Solar filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada thereby changing its name to Ecoark Holdings, Inc.

Overview

Ecoark Holdings Inc. (“Ecoark Holdings” or the “Company”) is an innovative AgTech company focused on solutions that reducea diversified holding company. Through its wholly-owned subsidiaries, the Company has operations in three areas: (i) oil and gas, including exploration, production and drilling operations and transportation services, (ii) post-harvest shelf-life and freshness food wastemanagement technology, and improve delivered freshness(iii) financial services including consulting, fund administration and product margins for fresh and perishable foods for a wide rangeasset management. The Company’s subsidiaries consist of organizations including growers, processors, distributors and retailers.Banner Midstream Corp., (“Banner Midstream”), White River Holdings Corp. (“White River”), Shamrock Upstream Energy LLC (“Shamrock”), Pinnacle Frac Transport LLC (“Pinnacle Frac”), Capstone Equipment Leasing LLC (“Capstone”), Ecoark, Holdings addresses this through its indirect wholly-owned subsidiary:Inc. (“Ecoark”), Zest Labs, Inc. (“Zest Labs” or “Zest”), and Trend Discovery Holdings Inc. (“Trend Holdings”).

White River and Shamrock are engaged in oil and gas exploration, production, and drilling operations on over 20,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi.

Pinnacle Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield transportation service contractors.

Since the acquisition of Banner Midstream on March 27, 2020, which currently comprises the exploration, production and drilling operations, the Company has focused its efforts to a considerable extent on expanding its exploration and production footprint and capabilities by acquiring real property and working interests in oil and gas mineral leases.

On June 11, 2020, the Company acquired certain energy assets from SR Acquisition I, LLC for $1,000 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of 262 total wells in Mississippi and Louisiana, approximately 9,000 acres of active mineral leases, and drilling production materials and equipment. The 262 total wells include 57 active producing wells, 19 active disposal wells, 136 shut-in with future utility wells, and 50 shut-in pending plugging wells. Included in the assignment are 4 wells in the Tuscaloosa Marine Shale formation.

On June 18, 2020, the Company acquired certain energy assets from SN TMS, LLC for $500 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of wells, active mineral leases, and drilling production materials and equipment.

On August 14, 2020, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) by and among the Company, White River E&P LLC, a Texas Limited Liability Company and a wholly-owned subsidiary of the Company Rabb Resources, LTD. and Claude Rabb, the sole owner of Rabb Resources, LTD. Pursuant to the Asset Purchase Agreement, the Company completed the acquisition of certain assets of Rabb Resources, LTD. The acquired assets consisted of certain real property and working interests in oil and gas mineral leases. The Company committedin June 2020 previously provided for bridge financing to a planRabb Resources, LTD under the $225,000 Senior Secured Convertible Promissory Note. As consideration for entering into the Asset Purchase Agreement, the Company agreed to focus its businesspay Rabb Resources, LTD. A total of $3,500,000 consisting of (i) $1,500,000 in cash, net of $304 in outstanding amounts related to the note receivable and accrued interest receivable, and (ii) $2,000,000 payable in common stock of the Company, which based on Zest Labs and divested non-core assets in 2019 that included assetsthe closing price of Pioneer Products, LLC (“Pioneer Products” or “Pioneer”) and Magnolia Solar, Inc. (“Magnolia Solar”). Those assets are reported as held for sale and their operations are reported as discontinued operations in the consolidated financial statements. The subsidiary Eco3d, LLC (“Eco3d”) was sold on April 14, 2017 and is also reported as held for sale and discontinued operations in the consolidated financial statements. The Company has 20 employees of continuing operations and no employees of discontinued operationscommon stock as of the date of the Asset Purchase Agreement equaled 103,000 shares. The Company accounted for this filing.acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the Rabb Resources, LTD historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

On September 4, 2020, White River SPV 3, LLC, a wholly-owned subsidiary of Banner Midstream entered into an Agreement and Assignment of Oil, Gas and Mineral Lease with a privately held limited liability company (the “Assignor”). Under the Lease Assignment, the Assignor assigned a 100% working interest (75% net revenue interest) in a certain oil and gas lease covering in excess of 1,600 acres (the “Lease”), and White River paid $1,500,000 in cash to the Assignor. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

On October 9, 2020, the Company and White River SPV, entered into a Participation Agreement (the “Participation Agreement”) by and among the Company, White River SPV, BlackBrush Oil & Gas, L.P. (“BlackBrush”) and GeoTerre, LLC, an unrelated privately-held limited liability company (the “Assignor”), to conduct drilling of wells in the Austin Chalk formation.

Pursuant to the Participation Agreement, the Company and White River SPV have agreed, among other things, to pre-fund a majority of the cost, approximately $5,800,000, associated with the drilling and completion of an initial deep horizontal well in the Austin Chalk formation of which $3,387,000 has been expensed as drilling costs. The Participation Agreement requires the estimated amount of the drilling costs that were paid into a designated escrow account by the commencement of drilling in January 2021. BlackBrush has agreed to assign to the other parties to the Participation Agreement, subject to certain exceptions and limitations specified therein, specified portions of its leasehold working interest in certain Austin Chalk formation units. The Participation Agreement provides for an initial allocation of the working interests and net revenue interests among the assignor, BlackBrush and the Company and then a re-allocation upon payout or payment of drilling and completion costs for each well drilled. Prior to payout, the Company will own 90% of the working interest and 67.5% of the net revenue interest in each well. Following payout, the Company will own 70% of working interest and 52.5% net revenue interest in each well.

The Parties to the Participation Agreement, except for the Company, had previously entered into a Joint Operating Agreement, dated September 4, 2020 (the “Operating Agreement”) establishing an area of mutual interest, including the Austin Chalk formation, and governing the parties’ rights and obligations with respect to drilling, completion and operation of wells therein. The Participation Agreement and the Operating Agreement require, among other things, that White River SPV and the Company drill and complete at least one horizontal Austin Chalk well with a certain minimum lateral each calendar year and/or maintain leasehold by paying its proportionate share of any rental payments.

Active drilling commenced on January 15, 2021 and on January 31, 2021 the drilling reached its targeted location in the Austin Chalk formation. On February 13, 2021, the drilling had reached its first milestone which initiated a contractual vesting of asset assignments with the successful drilling of a minimum lateral distance of 2,500 feet. On February 14, 2021, we reached its second milestone, with the conclusion of drilling of a lateral with a full vertical section distance of 4,046 feet. The well was drilled successfully using managed pressure drilling techniques, allowing for visibility of the productive intervals throughout the drilling process in the Austin Chalk.

On September 30, 2020, the Company and White River Energy, LLC (“White River Energy”), a wholly-owned subsidiary of the Company entered into three asset purchase agreements (the “Asset Purchase Agreements”) with privately-held limited liability companies to acquire working interests in the Harry O’Neal oil and gas mineral lease (the “O’Neal OGML”), the related well bore, crude oil inventory and equipment. Immediately prior to the acquisition, White River Energy owned an approximately 61% working interest in the O’Neal OGML oil well and a 100% working interest in any future wells.

The purchase prices of these leases were $126,000, $312,000 and $312,000, respectively, totaling $750,000. The consideration paid to the Sellers was in the form of 68,000 shares of the Company’s common stock. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

In February and March 2021, the Company acquired additional leases for $916,000 under the Blackbrush/Deshotel lease related to the Participation Agreement.

Reverse Stock Split

Effective with the opening of trading on December 17, 2020, the Company implemented a one-for-five reverse split of its issued and outstanding common stock and a simultaneous proportionate reduction of its authorized common stock. The reverse stock split was effected without obtaining stockholder approval as permitted by Nevada law, and the authorized common stock was proportionately reduced to 40,000,000 shares. All share and per share figures are reflected on a post-split basis herein.

Ratification of Authorized Capital Increase

At the special meeting held on December 29, 2020, the stockholders of the Company ratified the previously approved increase of the number of shares of common stock the Company is authorized to issue from 20,000,000 shares to 40,000,000 shares.

Authorized Capital Reduction

Effective December 29, 2020, the Company amended its articles of incorporation to reduce its authorized common stock from 40,000,000 to 30,000,000.

Registered Direct Offering of Common Stock and Warrants

On December 31, 2020, the Company completed a registered direct offering, whereby the Company issued 889,000 shares of common stock and 889,000 accompanying warrants to purchase common stock to one institutional investor under the effective Form S-3 at $9.00 per share and accompanying warrant for a total of $8,000,000 in gross proceeds, before placement agent fees and other offering expenses. The warrants are exercisable for a two-year term at a strike price of $10.00 per share. The Company granted 62,000 warrants to the placement agent as compensation in addition to the $560,000 cash commission received by the placement agent. The placement agent warrants are exercisable at $11.25 per share and expire on January 2, 2023.

Our principal executive offices are located at 5899 Preston Road #505, Frisco, Texas 75034,303 Pearl Parkway, Suite 200, San Antonio, TX 78215, and our telephone number is (479) 259-2977.(800) 762-7293. Our website address is http://zestlabs.com/ecoarkusa.com/. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in and are not considered part of this report.

Impact of COVID-19

The COVID-19 pandemic has had a profound effect on the U.S. and global economy and may continue to affect the economy and the industries in which we operate, depending on the vaccine rollouts and the emergence of virus mutations.

COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets included in this Form 10-K. However, it did have a material impact on our management’s ability to operate effectively. The impact included the difficulties of working remotely from home including slow Internet connection, the inability of our accounting and financial officers to collaborate as effectively as they would otherwise have in an office environment and issues arising from mandatory state quarantines.

While it is not possible at this time to estimate with sufficient certainty the continued impact that COVID-19 could have on the Company’s business, future outbreaks and the measures taken by federal, state, local and foreign governments could disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have also had and may continue to have an adverse impact on global and domestic economic conditions, including the reducing demand for oil, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company has taken temporary precautionary measures intended to help minimize the risk of the virus to its employees, including temporarily requiring employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

The Coronavirus, Aid, Relief and Security Act (“CARES Act”) includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small business are eligible for a loan to fund payroll expenses, rent and related costs. We have received funding under the PPP, and a majority of that as indicated in our Consolidated Statement of Operations has been forgiven.

Description of Business

Ecoark Holdings’ continuingBanner Midstream Corp

Through its indirect wholly-owned operating subsidiaries Pinnacle Frac, Capstone, White River, and Shamrock, the Company is engaged in oil and gas exploration, production, and drilling operations focus on solutions offered by Zest Labs.over 20,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi, as well as transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations, and procurement and financing of equipment to oilfield transportation service contractors.

The Company entered the oil and gas industry following the previously disclosed acquisition of Banner Midstream Corp. on March 27, 2020.

Zest Labs

Through its wholly-owned subsidiary Zest Labs, the Company offers freshness management solutions for fresh food growers, suppliers, processors, distributors, grocers and restaurants. Its Zest Fresh solution is a cloud-based post-harvest shelf-life and freshness management solution that improves delivered freshness of produce and protein and reduces post-harvest losses at the retailer due to temperature handling and processing by 50% or more by intelligently matching customer freshness requirements with actual product freshness. It focuses on four primary value propositions – operational efficiency, consistent food freshness, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence at a pallet level. Zest Labs also offers its Zest Delivery solution that provides real-time monitoring and control for prepared food delivery containers, helping delivery and dispatch personnel ensure the quality and safety of delivered food.

On June 6, 2019, Zest Labsannounced a strategic collaboration between AgroFresh and Zest Labs to strengthen their end-to-end solutions. AgroFresh will incorporate Zest Labs’ Zest Fresh™ solution into its FreshCloud™ Transit Insights platform. The agreement will utilize both companies’ resources and strengths to provide customers with a comprehensive solution that improves operations, increases visibility into produce shelf-life and reduces food waste.

Zest Labs was previously known as Intelleflex Corporation. Effectiveincorporated in the State of Delaware on October 28, 2016, Intelleflex Corporation changed its name to Zest Labs, Inc. to align its corporate name with its mission and the brand name of its products and services.September 23, 2004.

The Zest Fresh value proposition is to reduce fresh food loss by improving quality consistency. In the U.S. produce market, it is reported that roughly 30% of post-harvest fresh food is lost or wasted and therefore not consumed. Both fresh food producers and retailers bear significant expense when harvested food is either rejected due to early spoilage or reduced in value due to early ripening. Zest Labs believes that a significant portion of this waste can be attributed to inconsistent quality or freshness based on variable post-harvest processing and handling. Fresh food producers and retailers manage food distribution and inventory based on the harvest date, with the assumption that all food harvested on the same day will have the same freshness. However, studies have shown that harvest conditions and post-harvest handling can have a significant effect on the actual remaining freshness and, if not properly accounted for, can result in food loss or spoilage ahead of expectations. Zest Fresh empowers fresh food producers and retailers to significantly reduce the post-harvest loss by providing real-time guidance to process adherence, intelligent distribution and best handling practices, with a goal of providing significant financial savings to fresh food producers and retailers. 

Zest Labs has developed the industry’s first freshness metric called the Zest Intelligent Pallet Routing Code (“ZIPR Code”). The ZIPR Code has three main components: (i) Harvest Quality which sets total freshness capacity (for example, 12 days for strawberries), (ii) Handling Impact which reflects aging acceleration due to improper handling, and (iii) Future Handling which accurately reflects how the product will be handled (for example, store shelf temperature may be 40 degrees Fahrenheit instead of the ideal 34 degrees Fahrenheit). 

Zest Fresh is offered to fresh food producers, processors, distributors, restaurants and grocers with pricing based on the number of pallets managed by Zest Fresh, typically from the field harvest through retail grocery delivery. The Zest Fresh service includes a re-usable wireless Internet of Things (“IoT”) condition sensor that travels with the pallet of fresh food from the field or processor through retail delivery, continuously collecting product condition data. The collected pallet product data is analyzed, using artificial intelligence-based predictive analytics in real time by the Zest Fresh cloud-based solution, with the fresh food producers and retailers accessing data through Zest Fresh web and mobile applications. Zest Fresh provides workers with real-time feedback on the current handling or processing of each pallet, empowering best practice adherence to achieve maximum freshness. Zest Fresh also provides dynamic updates as to actual product freshness for each pallet, enabling intelligent routing and inventory management of each pallet in a manner that ensures optimum delivered freshness. Zest Fresh also includes integrated blockchain support to grower and shipper customers via the Zest Fresh platform. 

Zest Labs’ Zest Delivery solution helps to manage prepared food delivery from the restaurant through to the customer. Zest Delivery manages the delivery container environment, both monitoring and controlling the product condition. The value of Zest Delivery is to manage prepared meals in an ideal state for consumption, while accommodating extended pre-staging or delivery times. Extended pre-staging times are associated with “instant delivery” services of prepared meals, where the meals are often pre-staged in a delivery area ahead of demand. While pre-staging enables fast demand response time, it can result in prepared meals being staged for extended periods, which can potentially impact quality, value and safety. Zest Delivery monitors and controls the delivery container environment to preserve the prepared meal in ideal, ready to consume condition. Zest Delivery also provides the dispatcher with real-time remote visibility to the condition of available meals and confirming quality prior to dispatch. Zest Delivery provides automated, real-time visibility for a very distributed fleet of drivers, reflecting prepared meal food safety, quality and availability. Zest Delivery is offered to meal delivery companies based on the quantity of delivery containers and frequency of use.

Zest Labs currently holds rights to 6775 U.S. patents (with additional patents pending), numerous related foreign patents, and U.S. copyrights relating to certain aspects of its Zest software, hardware devices including Radio-Frequency Identification (“RFID”) technology, software, and services. In addition, Zest Labs has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services,” and the Zest, Zest Fresh and Zest Delivery logos, and numerous other trademarks and service marks. Many of Zest Labs’ products have been designed to include licensed intellectual property obtained from third-parties. Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates.

Although most components essential to Zest Labs’ business are generally available from multiple sources, certain key components including, but not limited to, microprocessors, enclosures, certain RFID or other wireless custom integrated circuits, and application-specific integrated circuits are currently obtained by Zest Labs from single or limited sources, principally in Asia.

Zest Labs is part of a very competitive industry that markets solutions to fresh food supply chain users, such as fresh food growers, producers and retailers. Many other companies that are both more established and command much greater resources compete in this market. While Zest Fresh and Zest Delivery offer new technical approaches and new user value, it remains uncertain if Zest Labs will gain sufficient adoption of its products to make them viable in the market. Further, it is unclear what industry competitors are developing that might address similar user needs. Zest Labs’ products provide a new approach for industry participants, and as with any new approach, adoption is uncertain as many in the industry can be slow to embrace new technology and/or new approaches. These market challenges can lead to extended sales cycles that may include extended pilot testing often at Zest Labs’ expense, for which the outcome remains unclear until the completion of each test. For these reasons, and others, forecasting new business adoption and future revenue can be very difficult and volatile.  However,volatile; however, the Company believes that Zest Fresh offers fresh food retailers, growers, shippers, processors and distributors an opportunity to differentiate their businesses in ways that the shipment of canned and boxed food products cannot, as competition in the agriculture, grocery, food service and restaurant markets continues to accelerate. 

The acquisitionOur ability to execute our strategy with respect to our freshness management solutions depends in part on the outcome of 440labs in May 2017 allowed Zest Labsthe litigation related to internally maintain its software development and information solutions for cloud, mobile, and IoT applications. 440labs had been a key development partner with Zest Labsprotection of our intellectual property rights. See “Item 3. Legal Proceedings” for more than four years prior to the May 2017 acquisition, contributing its expertise in scalable enterprise cloud solutions and mobile applications.information.

Discontinued Operations:Trend Capital Management

Pioneer ProductsBefore we acquired Trend Holdings in May 2019 by merging Trend Holdings with and into the Company, Trend Holdings was a financial services holding company with two primary subsidiaries: Trend Discovery Capital Management, LLC, a Delaware limited liability company (“Trend Capital Management”), and Barrier Crest, LLC, a Delaware limited liability company (“Barrier Crest”). 

Pioneer ProductsTrend Capital Management was locatedfounded in Rogers, Arkansas2011 and was involvedTrend Holding’s primary asset.  Trend Capital Management provides services and collects fees from entities including Trend LP and Trend SPV, both of which invest in securities.  Trend Capital Management neither invests in securities nor have any role in Trend LP and Trend SPV’s purchase of securities.  The investment capital in Trend LP and Trend SPV is from individual limited partners, and not from the selling of recycled plastic products and other products. It sold to the world’s largest retailer. Pioneer Products recovered plastic waste from retail supply chains and converted the reclaimed material into new consumer products which completed a closed loop and reduced waste sent to landfills. Pioneer Products was purchased by Ecoark in 2012. Pioneer Products acquired Sable Polymer Solutions, LLC (“Sable”) in a stock transaction on May 3, 2016. Since that date, Sable’s results have been included with Pioneer Products. In May 2018 the Ecoark Holdings Board of Directors (“Board”) approved a plan to sell Pioneer and Sable. Pioneer concluded operations in February 2019, and the sale of Sable assets was completed in March 2019. Relevant assets and liabilities are classified as held for sale and operations are classified as discontinued in the consolidated financial statements.Company. 

Magnolia SolarIn the near-term, Trend LP’s performance will be driven by its investment in Volans-i, a fully autonomous vertical takeoff and landing drone delivery platform (“Volans”).  Trend LP currently owns approximately 1% of Volans and has participation rights to future financings to maintain such ownership at 1% indefinitely. More information can be found at website. www.flyvoly.com, the contents of which are not incorporated into this report. 

Barrier Crest provides fund administration and fund formation services to institutional investors.  Barrier Crest provides fund administration services to Trend LP and Trend SPV.

Magnolia Solar is located in Albany, New York and is principally engaged in the development and commercialization of nanotechnology-based, high-efficiency, thin-film technology that can be deposited on a variety of substrates, including glass and flexible structures. Magnolia Solar was a subsidiary of Magnolia Solar Corporation that merged with Ecoark Inc. (“Ecoark”) on March 24, 2016 to create Ecoark Holdings and continued as a subsidiary of Ecoark Holdings. In May 2018 the Ecoark Holdings Board approved a plan to sell Magnolia Solar, and the sale was completed in May 2019. Relevant assets and liabilities are classified as held for sale and operations are classified as discontinued in the consolidated financial statements.

Competition 

Zest Labs operates in markets forThe Company faces intense competition with respect to its products and services that are highly competitive and face aggressive competition in all areasmarkets in which it operates.

In the oil and gas industry, we are producing and selling crude oil as a commodity so we compete against. All producers including individual well owners through the supermajor oil companies. Some of their business. these competitors at the major and supermajor categories possess greater financial, technical, human and other resources than we do and our financial resources are relatively limited when contrasted with those of many of these competitors.

The market for cloud-based, real-time supply chain analytic solutions—the market in which Zest Labs competes—is highly competitive and is rapidly evolving. There are several new competitors with competing technologies, including companies that have greater resources than Ecoark Holdings, which operate in this space. Some of these companies are subsidiaries of large publicly traded companies that have brand recognition, established customer relationships with retailers, and own the manufacturing process.

Trend Holdings and its subsidiaries have significant competition from larger companies with greater assets and resources.

Sales and Marketing

Through Banner Midstream and its subsidiaries, the Company sells and provides services to its customers via a blanket master services agreement (MSA). Banner Midstream sells hydrocarbon to midstream providers such as Plains Marketing L.P. and Shell Trading (US) Company.

The Company markets its technology products and services principally through direct sales efforts and the utilization of third-party agents. Zest Labs has marketing operations and programs for demand generation, public relations, and branding/messaging that are scaled based on market engagement and available resources.

Trend Holdings and its subsidiaries provide fund administration and fund formation services to institutional investors and market their services through private marketing.

Government Regulations

Banner Midstream

Oil and gas production is regulated under a wide range of federal and state statutes, rules, orders and regulations. State and federal statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. The states in which we operate, Texas, Louisiana, Oklahoma and New Mexico (the “Territory”), have regulations governing conservation matters, including provisions for the unitization or pooling of oil and gas properties, the establishment of maximum rates of production from oil and gas wells, the regulation of spacing, and requirements for plugging and abandonment of wells. Also, states in the Territory impose a severance tax on production and sales of oil, and gas within its jurisdiction. Failure to comply with these rules and regulations can result in substantial penalties. Our competitors in the oil and gas industry are subject to the same regulatory requirements and restrictions that affect our operations.

Zest Labs

Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates.  The Federal Communications Commission (the “FCC”), is responsible for the assignment of spectrum for non-government use in the United States in accordance with regulations established by an international organization known as the International Telecommunications Union (the “ITU”). Any ITU or FCC reallocation of radio frequency spectrum, including frequency band segmentation or sharing of spectrum, could cause interference with the reception of GPS signals and may materially and adversely affect the utility and reliability of Zest Labs’ products, which would, in turn, cause a material adverse effect on our operating results.

Environmental Compliance Expenses

We are currently not experiencing any material expenses related to the environmental compliance. Please review Risk Factors in Item 1A of this report with regard to potential environmental compliance expenses.

Environmental, Social and Governance Strategy (ESG)

We are currently evaluating an environmentally conscious cryptocurrency mining approach to focus on and analyze innovative and valuable ways to deploy capital. We are focused on opportunities related to ESG technologies for hydrocarbon emissions and reductions in energy waste. We have formulated an approach to pursue regionally constrained energy that is otherwise lost due to a lack of commercial infrastructure to economically process and/or transport the natural gas to market. This approach is designed to drive significant molecule value through the energy intensive process of cryptocurrency mining. This strategy is anticipated to incubate green energy project development and growth by balancing regional power grid demands during times of heightened use.

Research and Development

We have devoted a substantial amount of our resources to software and hardware development activities in recent years, principally for the Zest Labs initiatives. Ecoark Holdings believes that, analyzing the competitive factors affecting the market for the solutions and services its subsidiaries provide, its products/products and services compete favorably by offering integrated solutions to their customers. The Company has incurred research and development expenses of $3,320$883,000 and $5,576$2,472,000 in the years ended March 31, 20192021 and 2018,2020, respectively, to develop its solutions and differentiate those solutions from competitive offerings. We incurred no capitalized software development costs in the years ended March 31, 2021 and 2020.

Intellectual Property

The Company, through Zest Labs, currently holds rights to 75 U.S. patents (with additional patents pending), numerous related foreign patents, and U.S. copyrights relating to certain aspects of its Zest software, hardware devices including Radio-Frequency Identification (“RFID”) technology, software, and services. In addition, Zest Labs has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services,” and the Zest, Zest Fresh and Zest Delivery logos, and numerous other trademarks and service marks. Many of Zest Labs’ products have been designed to include licensed intellectual property obtained from third-parties. Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates. 

No Foreign Operations

No foreign operations are expected in connection with the Company’s business. 

Seasonality

Our business experiences a certain level of seasonality due to our oil and gas exploration and transportation business. Demand for oil, natural gas and energy is typically higher in the third and fourth quarters resulting in higher prices. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of the results that may be realized on an annual basis. Seasonal weather conditions and lease stipulations can limit drilling and producing activities and other oil and natural gas operations in a portion of our operating areas of trucking business. These seasonal anomalies can pose challenges for the drilling objectives and can increase competition for equipment, supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay operations, thus, lowering the demand for trucking services.

Dependence on One or Few Major Customers

From time to time we may have customers generating 10 percent or more of the Company’s consolidated revenues, and loss of such customers could have a material adverse effect on the Company.

Human Capital Resources

As of the date of this report, we have 45 full-time employees and 106 owner-operator truck drivers.

Our ability to successfully execute our strategic initiatives is highly dependent on recruiting and retaining skilled personnel and qualified drivers. Our compensation philosophy is based on incentivizing and rewarding performance, with alignment of individual, corporate, and stockholder interests. Compensation includes salaries, benefits, and equity participation. Our owner operator drivers are not salaried employees.

We are committed to the health, safety, and well-being of our employees and drivers. We follow applicable local, state, and federal laws, regulations, and guidance. In response to the COVID-19 pandemic, we implemented measures to enable employees to work remotely and have utilized cloud-based productivity and communications systems to facilitate distributed work.

Our Code of Business Conduct and Ethics is designed to ensure that all employees maintain the highest standards of business conduct in every aspect of their dealings with each other, customers, suppliers, vendors, service providers, stockholders, and governmental authorities.

We believe the relations with our employees and drivers are satisfactory.

Item 1A. Risk Factors

There are numerous risks affecting our business, many of which are beyond our control. An investmentInvesting in our common stockCommon Stock involves a high degree of risk. You should carefully consider the following risk and may not be appropriate for investors who cannot affordfactors, together with the other information appearing elsewhere in this Annual Report on Form 10-K before deciding to lose their entire investment. Ifinvest in our Common Stock. The occurrence of any of the following risks actually occur,could have a material adverse effect on our business, reputation, financial condition, or operating results could be materially harmed. This could causeof operations and future growth prospects, as well as our ability to accomplish our strategic objectives. As a result, the trading price of our common stock toCommon Stock could decline and you maycould lose all or part of your investment. In addition to the risks outlined below,Additional risks and uncertainties not presently known to us or that we currently considerdeem immaterial may also impair our business operations.operations and stock price.

Potential

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that could affectyou should consider before investing in our operating results and financial condition include, without limitation,common stock. Set forth below is a summary of the following:principal risks we face:

RISK FACTORS RELATING TO OUR OPERATIONS

We have experienced losses since our founding. A failureRisk Factors Relating to obtain profitability and achieve consistent positive cash flows would have a significant adverse effect on our business.Our Financial Condition

We havehad incurred operatingnet losses on an annual basis since our inception including a reported net loss of $13,650 for the year ended March 31, 2019. Net cash used in operating activities for the year ended March 31, 2019 was $9,040. We expect toand may continue to incur operatingexperience losses through at leastand negative cash flow in the fiscal year ended March 31, 2020. future.

As of March 31, 2019,June 22, 2021, we had cash (including restricted cash) of $244, a working capital deficitapproximately $1,194,235. Prior to the acquisition of $5,045, and an accumulated deficit of $115,886. Some of our debt and equity instruments may contain derivative liabilities which may result in variability in our working capital deficit as these liabilities are re-measured each reporting period. To date,Banner Midstream, we have funded our operations principally through the sale of our capital stock and debt instruments. On December 31, 2020, we raised approximately $7,666,000 in net proceeds from the sale of 889,000 shares of common stock and short-term warrants to purchase an aggregate of up to 889,000 shares of common stock in a registered direct offering. We have also raised substantial operating cash through the exercise of our warrants issued in capital raises over the past two years. Banner Midstream had financed its operations primarily through the issuance of debt securities. We have not been profitable on an annual basis since inception and had previously incurred significant operating losses. We recorded a net loss of approximately $20,888,000 for the fiscal year ended March 31, 2021. Approximately 42% of the reported net loss for this fiscal year was due to non-cash charges, including a $18,518,000 non-cash charge from a change in the fair value of our warrant derivative liabilities and $21,084,000 in gain on exchange of warrants. While our warrant derivative liabilities cause us to incur a non-cash loss if our stock price goes up in a given quarter or a non-cash gain if it goes down in a quarter, we have experienced substantial exercises since the date of our July 28, 2020 prospectus registering the underlying shares of Common Stock. As of March 31, 2021, no warrants remained unexercised out of approximately 1,176,000 warrants (on a post-reverse split basis) we issued in 2020. However, we have an additional approximately 1,035,000 warrants (on a post-reverse split basis) which have derivative liabilities that will impact our future operating results. Although we expect our revenues to increase from our energy business, we will likely continue to incur losses and experience negative cash flows from operations for the foreseeable future. If we cannot achieve positive cash flow from operations or net income, it may make it more difficult to raise capital based on our Common Stock on acceptable terms.

Because we require additional capital to fund our business and support our growth, our inability to generate and obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.

Since the Banner Midstream acquisition on March 27, 2020, we have increased our operating expenses in supporting our underlying business and consummating acquisitions of oil and gas properties. We intend to continue to make substantial investments to fund our business and support our growth. Among other things, we need to generate significant revenuesraise capital through the issuance of equity or debt in order to achieve profitability, and we cannot assure you that we will ever realize revenues at such levels. Iffund the drilling of oil wells for our previously announced joint venture with a Texas exploration company. Since we do achieve profitability innot currently have a debt facility to support our growth and acquisition strategy, we are seeking to fund our growth through equity offerings at opportune times when the price of our Common Stock and external factors provide an opportunity. The availability and terms of any period, wefuture financing will be dependent upon a variety of other factors which may affect the price of our Common Stock including among other things:

We may not be able to sustainobtain such additional financing on the terms favorable to us, or increaseat all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our profitability on a quarterly or annual basis.

We require additional financingability to continue to support our operations. Such financingbusiness growth and to respond to business challenges could be significantly impaired, and our business may only be availableadversely impacted. In addition, our inability to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate some or all of our operations and sell some of our assets. For example, in May 2021, we assigned certain of our working interests in oil and gas leases in exchange for $600,000 in order to obtain the necessary working capital. If we were forced to delay, scale back, or eliminate some or all of our operations or sell a significant portion of our assets it would have a material adverse impact on disadvantageous terms,our business, operating results and financial condition.

Further, if we raise additional funds through future issuances of equity or may not be available at all. Anyconvertible debt securities, our existing stockholders could suffer significant dilution, and any new equity or debt securities we issue could have rights, preferences and privileges superior to those of holders of our Common Stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

The COVID-19 pandemic has caused and may continue to cause a significant disruption to the United States and global economy, and its continuation for any extended period of time may have a material adverse effect on our business, results of operations, and future prospects.

The global COVID-19 pandemic and the unprecedented actions taken by U.S. federal, state and local governments and governments around the world in order to stop the spread of the virus have had and continue to have a profound impact on the U.S. and global economy, disrupting global supply chains and creating significant volatility in the financial markets. The contraction of the economy caused by the pandemic has, among other things, severely impacted demand for fossil fuels resulting in sharp decline in oil and gas prices. Oil demand significantly deteriorated as a result of the COVID-19 pandemic and corresponding preventative measures taken around the world to mitigate its spread, including “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Although oil prices have increased in the past few months due to, among other things, the Biden administration anti-fossil fuel agenda, the vaccine rollouts and the decision by OPEC to restrain output into mid-2021, there can be no assurance that this increase will continue.

Future disruptions and/or uncertainties related to the COVID-19 pandemic, including, among others, delays in vaccine rollouts and the emergence of new variants of the virus, for a sustained period of time could have a substantial dilutive effectmaterial adverse impact on our existing stockholders.business, our ability to execute our strategy and to realize the full benefits of the Banner Midstream acquisition. Our production and transportation businesses will likely be significantly affected if there is another reduction in oil prices or reduced demand for our services, caused by a global recession due to the ongoing effects of COVID-19. 

Furthermore, the effect of the pandemic on financial markets and on our Company may limit our ability to raise additional capital in the future on the terms acceptable to us at the time we need it, or at all.

We will need additional capital to support our operations and growth.

As of March 31, 2019,

Until we had cash of $244, a working capital deficit of $5,045, and an accumulated deficit of $115,886. Whileachieve sustained profitability, we expect cash will be provided by a $10,000 credit facility, we may need to raise additional capital and our cash position may decline in the future. We may not be successful in maintaining an adequate level of cash resources. We continue to seek additionalthrough public or private financing in ordertransactions or secure a debt facility to support our operations.operations and execute our growth strategy. We may not be able to obtain additional financing in sufficient amounts or on satisfactory terms acceptable to us, if at all. We could also be required to seek funds through arrangements with collaborative partners or otherwise at all,an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our current master service agreements or otherwise agree to terms unfavorable to us, any new equity financing couldof which may have a substantial dilutivematerial adverse effect on our existing stockholdersbusiness, operating results and or contain complex terms subject to derivative accounting. Ifprospects. Even if we cannot obtain additional financing, we will not be able to achieve the sales growthbelieve that we need to coverhave sufficient funds for our costs, and our results of operations would be negatively affected.current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

The Company, specifically Zest Labs,If we are able to close an equity financing, it may be very dilutive to our existing stockholders. There is engaged in discussions with potential customersno assurance that we will complete any financing or secure a debt facility. If we are unable to obtain funding on a timely basis, we may be unable to expand our operations or otherwise capitalize on our business opportunities, as desired and partnersmay be required to significantly increase revenues and expand operations. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statementscurtail, delay or discontinue one or more of the Company do not include any adjustments that may result from the outcomelines of the uncertainties.operations and/or sell more assets, which could materially affect our business, financial condition and results of operations.

We cannot predict our future results because we have a limited operating history.

We acquired our oil and gas business on March 27, 2020, which currently accounts for almost all of our revenues. Given our limited operating history, it may be difficult to evaluate our future performance or prospects. You should consider the uncertainties that we may encounter as a company that should still be considered an early stage company. These uncertainties include:

If we are not able to address successfully some or all of these uncertainties, we may not be able to expand our business, compete effectively or achieve profitability.

Recent salesBecause we must periodically evaluate our goodwill for impairment, we could be required to recognize non-cash impairment charges in future periods which could have a material adverse impact on our operating results.

A considerable portion of our consolidated assets consists of goodwill. The Company recorded approximately $3.2 million of goodwill in connection with the Trend Holdings acquisition in May 2019, and approximately $7.0 million in connection with the Banner Midstream acquisition in March 2020. We assess goodwill for impairment annually during the fourth fiscal quarter and whenever facts or circumstances indicate that the carrying value of the Company’s goodwill may be impaired. Impairment analysis involves comparing the estimated fair value of a reporting unit to its carrying value. If the carrying value of a reporting unit exceeds its estimated fair value, we record an impairment charge. Determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Those assessments may be affected by (i) positive or negative reserve adjustments, (ii) results of drilling activities, (iii) management’s outlook for commodity prices and costs and expenses, (iv) changes in our market capitalization, (v) changes in our weighted average cost of capital and (vi) changes in income taxes. If we are required to recognize noncash charges related to impairment of goodwill, our results of operations would be materially and adversely affected. 

Risk Factors Relating to Our Exploration and Production and Transportation Operations

We have significant ongoing capital requirements that could affect our profitability if we are unable to generate sufficient cash from operations or obtain financing on favorable terms.

The Company has pre-funded approximately $5,800,000 of the cost, associated with the drilling and completion of an initial deep horizontal well in the Austin Chalk formation of which $3,387,000 has been expensed as drilling costs, and we expect to continue to incur expenses related to our previously announced joint drilling venture. In addition, our transportation business is capital intensive and asset heavy, and our policy of maintaining a young, technology-equipped fleet requires us to expend significant amounts in capital expenditures annually. We expect to pay for projected capital expenditures with cash flows from operations or the proceeds from equity sales. If we were unable to generate sufficient cash from operations, we would need to seek alternative sources of capital, including financing, to meet our capital requirements. In the event that we are unable to generate sufficient cash from operations or obtain financing on favorable terms in the future, we may have to limit our fleet size, enter into less favorable financing arrangements or operate our revenue equipment for longer periods, any of which could have a materially adverse effect on our profitability.

Competition in the oil and natural gas industry is intense, making it more difficult for us to market the oil and gas we produce, to acquire interests in new leases, to secure trained personnel and appropriate services, and to raise capital.

Banner Midstream is a relatively small participant in its industry and we face significant competition from major energy companies with substantial financial, management, technical and other resources as well as large and other privately held businesses which have competitive advantages. Our cost of operations is highly concentrateddependent on third-party services, and competition for these services can be significant, especially in times when commodity prices are rising.  Similarly, we compete for trained, qualified personnel, and in times of lower prices for the commodities we produce, we and other companies with similar production profiles may not be able to attract and retain this talent.  Our ability to acquire and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a few major customers,highly competitive environment for acquiring properties, marketing oil and gas and securing trained personnel.  Also, there is substantial competition for capital available for investment in the oil and gas industry.  Our competitors may be able to pay more for personnel, property and services and to attract capital at lower rates.  This may become more likely if prices for natural gas increase faster than prices for oil, as oil comprises a greater percentage of our overall production and transportation business. Because of our small size, we may be more affected than larger competitors.

Unless we replace our existing reserves with new ones and develop those reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations.

Producing oil reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Unless we conduct successful ongoing exploration and development activities or continually acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced. Our future reserves and production, and therefore our future cash flow and results of operations, are highly dependent on our success in efficiently developing our current reserves and economically finding or acquiring additional recoverable reserves. We may not be able to develop, find or acquire sufficient additional reserves to replace our current and future production. If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations would be materially and adversely affected.

Drilling for and producing crude oil involves significant risks and uncertainties that could adversely affect our business, financial condition or results of operations.

Our drilling and production activities are subject to many risks, including the risk that we will not discover commercially productive reservoirs. Drilling for crude oil can be unprofitable, not only from dry holes, but from productive wells that do not produce sufficient revenues to return a profit. In addition, our drilling and producing operations may be curtailed, delayed or cancelled as a result of other factors, including but not limited to:

Any of these risks can cause substantial losses, including personal injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution, environmental contamination, clean-up responsibilities, loss of wells, repairs to resume operations; and regulatory fines or penalties. Further, our exposure to operational risks may increase as our drilling activity expands.

We may not be insured or fully insured against certain of the above operational risks, either due to unavailability of such insurance or the high premiums and deductibles. The occurrence of an event that is not covered in full or in part by insurance could have a material adverse impact on our business, financial condition and results of operations.

Legislation, regulations or government actions related to climate change, greenhouse gas emissions and sustainability initiatives and other ESG laws, regulations and government action, could result in increased compliance and operating costs and reduced demand for fossil fuels, and concern in financial and investment markets over greenhouse gasses and fossil fuel production could adversely affect demand for our products, limit our access to capital and depress the price of our Common Stock.

Since he took office in January 2021, President Biden has signed a series of executive orders seeking to adopt new regulations to address climate change and to suspend, revise, or rescind certain prior agency actions which were part of the Trump Administration’s de-regulatory push, and the Biden Administration is expected to continue to aggressively seek to regulate the energy industry and seek to eliminate in time the use of fossil fuels. The new executive orders include, among other things, orders requiring a review of current federal lands leasing and permitting practices, as well as a temporary halt of new leasing of federal lands and offshore waters available for oil and gas exploration, directing federal agencies to eliminate subsidies for fossil fuels, and to develop a plan to improve climate-related disclosures.

In January 2021, President Biden also issued an executive order calling for methane emissions regulations to be reviewed and for the United States Environmental Protection Agency (the “EPA”) to establish new standards by September 2021. The EPA has adopted regulations under existing provisions of the Clean Air Act that, among other things, establish Prevention of Significant Deterioration (the “PSD”), construction and Title V operating permit reviews for certain large stationary sources.  Facilities required to obtain PSD permits for their greenhouse gas emissions also will be required to meet “best available control technology” standards that will be established on a case-by-case basis.  The EPA also has adopted rules requiring the monitoring and reporting of greenhouse gas emissions from specified onshore and offshore natural gas and oil production sources in the United States on an annual basis, which include certain of our operations.

Although Congress from time to time has considered legislation to reduce emissions of greenhouse gases, there has not been significant activity in the form of adopted legislation to reduce greenhouse gas emissions at the federal level in recent years.  In the absence of such federal climate legislation, a number of states, including states in which we operate, have enacted or passed measures to track and reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and regional greenhouse gas cap-and-trade programs.  Most of these cap-and-trade programs require major customer wouldsources of emissions or major producers of fuels to acquire and surrender emission allowances, with the number of allowances available for purchase reduced each year until the overall greenhouse gas emission reduction goal is achieved.  These reductions may cause the cost of allowances to escalate significantly over time. We will be further subject to our regulatory efforts such as California announced goal of eliminating the sale of vehicles which use gas by 2035. Automobile manufacturers are beginning to announce that they will only manufacture electric vehicles in the future.

Additionally, the United States rejoined, effective February 19, 2021, the non-binding international treaty to reduce global greenhouse gas emissions (the “Paris Agreement”), adopted by over 190 countries in December 2015.  The Paris Agreement entered into force in November 2016 after more than 70 nations, including the United States, ratified or otherwise indicated their intent to be bound by the agreement. The United States had previously withdrawn from the Paris Agreement effective November 4, 2020. Following the United States rejoining the Paris Agreement, President Biden announced in April 2021 the United States’ pledge to achieve an approximately 50% reduction from 2005 levels in “economy-wide” net greenhouse gas emissions by 2030. To the extent that the United States implements this agreement or imposes other climate change regulations on the oil and natural gas industry, or that investors insist on compliance regardless of legal requirements, it could have an adverse effect on our business.business, operating results and future growth. In February 2021, the Acting Chair of the SEC issued a statement directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings and in March 2021 the SEC announced the creation of a Climate and ESG Task Force in the Division of Enforcement.

The adoption and implementation of these and other similar regulations could require us to incur material costs to monitor and report on greenhouse gas emissions or install new equipment to reduce emissions of greenhouse gases associated with our operations.  In addition, these regulatory initiatives could drive down demand for our products and services in the oil and gas industry by stimulating demand for alternative forms of energy that do not rely on combustion of fossil fuels that serve as a major source of greenhouse gas emissions, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. This could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.

Federal, state, and local legislative and regulatory initiatives in the United States relating to hydraulic fracturing or fracking could result in decreased demand for our transportation services, which would have a material adverse effect on our results of operations, financial condition and cash flows.

Although we do not rely on hydraulic fracturing or fracking techniques in our exploration and production operations, our transportation business, which accounted for approximately 79% of our operating revenue in the fiscal year ended March 31, 2021, depends to a considerable extent on a continued use of such techniques. We expect to continue to derive a substantial portion of our revenue from our transportation operations for the foreseeable future.

In the United States, hydraulic fracturing is currently generally exempt from regulation under the Underground Injection Control program established under the federal Safe Drinking Water Act, and is typically regulated by state oil and gas commissions or similar agencies. From time to time, the U.S. Congress has considered adopting legislation intended to provide for federal regulation of hydraulic fracturing and to require disclosure of the additives used in the hydraulic-fracturing process. In addition, certain states have adopted, and other states are considering adopting, regulations that could impose new or more stringent permitting, disclosure, disposal and well-construction requirements on hydraulic-fracturing operations. The adoption of any federal, state or local laws or the implementation of regulations regarding hydraulic fracturing could cause a decrease in the completion of new oil and gas wells and an associated decrease in demand for our transportation services, which would have a material adverse effect on our results of operations, financial condition and cash flows.

Our operating results fluctuate due to the effect of seasonality in the oil and gas industry.

Operating levels of the oil industry have historically been lower in the winter months because of adverse weather conditions. Accordingly, our revenue generally follows a seasonal pattern. Revenue can also be affected by other adverse weather conditions, holidays and the number of business days during a given period because revenue is directly related to the available working days. From time to time, we may also suffer short-term impacts from severe weather and similar events, such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes, and explosions that could harm our results of operations or make our results of operations more volatile.

We may be subject to various claims and lawsuits in the ordinary course of business, and increases in the amount or severity of these claims and lawsuits could adversely affect us.

We are exposed to various claims and litigation related to commercial disputes, personal injury, property damage, environmental liability and other matters. Proceedings include claims by third parties, and certain proceedings have been certified or purport to be class actions. Developments in regulatory, legislative or judicial standards, material changes to litigation trends, or a catastrophic accident or series of accidents, involving any or all of property damage, personal injury, and environmental liability could have a material adverse effect on our operating results, financial condition and liquidity.

The extension of our active oil and gas mineral leases may be subject to performing continuous drilling operations.

Our oil and gas mineral leases may contain acreage that is either held by production or not. In order to extend the leased acreage not held by production, the Company must maintain minimum continuous drilling operations in order to extend these leases to future periods. The Company’s inability to perform operations during any given period could result in the Company’s losing the rights to future operations on that lease.

The potential lack of availability of, or cost of, drilling rigs, equipment, supplies, personnel and crude oil field services could adversely affect our ability to execute on a timely basis our exploration and development plans within our budget.

When the prices of crude oil increase, or the demand for equipment and services is greater than the supply in certain areas, we could encounter an increase in the cost of securing drilling rigs, equipment and supplies. In addition, larger producers may be more likely to secure access to such equipment by offering more lucrative terms. If we are unable to acquire access to such resources, or can obtain access only at higher prices, our ability to convert our reserves into cash flow could be delayed and the cost of producing those reserves could increase significantly, which would adversely affect our results of operations and financial condition.

Our exploration and production and transportation operations are subject to stringent environmental, oil and gas-related and occupational safety and health laws and regulations, and noncompliance with such laws and regulations could expose us to material costs and liabilities.

Our exploration and production operations are subject to stringent federal, state and local laws and regulations governing, among other things, the drilling activities, production rates, the size and shape of drilling and spacing units or proration units, the transportation and sale of crude oil, gas, and the discharging of materials into the environment and environmental protection. These laws and regulations may limit the amount of oil and gas we can produce or limit the number of wells or the locations where we can drill.

Further, we are required to obtain and maintain numerous environmental and oil and gas-related permits, approvals and certificates from various federal, state and local governmental agencies in connection with our exploration and production operations, and may incur substantial costs in doing so. The need to obtain permits could potentially delay, curtail or cease the development of oil and gas projects. The Company may in the future be charged royalties on gas emissions or required to incur certain capital expenditures for air pollution control equipment or other air emissions-related issues. Additionally, our operations are subject to a number of federal and state laws and regulations, including the federal occupational safety and health and comparable state statutes, aimed at protecting the health and safety of employees.

We are also subject to various environmental laws and regulations dealing with the hauling and handling of hazardous materials, air emissions from our vehicles and facilities, and engine idling and discharge. Our transportation operations often involve traveling on unpaved roads located in rural areas, increasing the risk of accidents, and our staging pads often are located in areas where groundwater or other forms of environmental contamination could occur. Our operations involve the risks of environmental damage and hazardous waste disposal, among others. If we are involved in an accident involving hazardous substances, if there are releases of hazardous substances we transport, if soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in violation of applicable environmental laws or regulations, we could owe cleanup costs and incur related liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and operating results.

Failure to comply with these laws and regulations may subject the Company to sanctions, including administrative, civil or criminal penalties, remedial cleanups or corrective actions, delays in permitting or performance of projects, natural resource damages and other liabilities. In addition, these laws and regulations may be amended and additional laws and regulations may be adopted in the future with more stringent legal requirements.

Because oil prices are highly volatile, any sustained decline in oil prices could adversely affect our business, financial condition and results of operations and our ability to meet our capital expenditure obligations and financial commitments.

Our future revenues from exploration and production operations, profitability, cash flows, future growth and carrying value of our oil and gas properties will depend on oil prices. Commodity prices, including oil, are highly volatile and may fluctuate widely in response to relatively minor changes in supply and demand and market uncertainty. Additional factors which may affect oil prices and which are beyond our control include but are not limited to, the following factors:

While lower oil prices are helpful to our transportation business since it reduces our costs, it has an inverse effect on our exploration and production business. Lower commodity prices may reduce our cash flows and borrowing ability. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to develop future reserves could be adversely affected. Also, using lower prices in estimating proved reserves may result in a reduction in proved reserve volumes due to economic limits.

If we are required to curtail our drilling program, we may be unable to continue to hold leases that are scheduled to expire, which may further reduce our reserves. As a result, a substantial or extended decline in commodity prices may materially and adversely affect our future business, financial condition, results of operations, liquidity and ability to finance planned capital expenditures.

Conservation measures and technological advances could reduce demand for oil and natural gas.

Fuel conservation measures, alternative requirements, future legislation and regulation increasing consumer demand for alternatives to oil, and natural gas, technological advances in fuel economy and energy generation devices could reduce demand for oil. The impact of the changing demand for oil may have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be required to record significant non-cash impairment charges related to a reduction in the carrying value of our proved oil and gas properties, which could materially and adversely affect our results of operations.

We will perform assessments of our oil and gas properties whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. In order to perform these assessments, management will use various observable and unobservable inputs, including management’s outlooks for (i) proved reserves and risk-adjusted probable and possible reserves, (ii) commodity prices, (iii) production costs, (iv) capital expenditures and (v) production. Significant or extended price declines could result in the need to adjust the carrying value of our proved oil and gas properties by recording non-cash impairment charges. To the extent such assessments indicate a reduction of the estimated useful life or estimated future cash flows, the carrying value of the oil and gas properties may not be recoverable and therefore we may be required to record an impairment charge reducing the carrying value of the proved properties to their fair value. If oil and natural gas prices decline in the future, we may be required to record impairment charges related to the oil and gas properties acquired as part of the Banner Acquisition, which would materially and adversely affect our results of operations in the period incurred.

Our future revenue will depend upon the size of the markets which we target and our ability to achieve continuous and sufficient market acceptance.

Even if we enter all necessary agreements with key customers in the oil industry and purchase enough equipment to satisfy the demand for freight services in the market, our future revenue will depend upon the size of the markets which we target and our ability to achieve continuous and sufficient market acceptance, and such factors as pricing, reimbursement from third-party payors and adequate market share for our services at the target markets.

We anticipate that the Banner Midstream expenses will increase substantially if and as they:

We may not be able to successfully identify acquisition targets and complete strategic acquisitions to execute our growth strategy, and even if we are able to do so, we may not realize the anticipated benefits of these acquisitions.

As part of our growth strategy, we intend to pursue opportunities to acquire companies or assets that will enable us to expand our product and service offerings and to increase our geographic footprint. We routinely review potential acquisitions. However, identifying suitable acquisition targets can be difficult, costly and time-consuming, and we may not be able to do so or complete acquisitions in a timely manner, on a cost-effective basis or at all. Even if completed, we may not realize the anticipated benefits of such acquisitions. Our acquisitions have previously required, and any similar future transactions may also require, significant efforts and expenditures, in particular with respect to integration of acquired assets and business into our legacy operations. We may encounter unexpected difficulties, or incur unexpected costs, in connection with strategic acquisitions and integration efforts, including without limitation:

Failure to successfully identify suitable acquisition targets, complete strategic acquisitions, or realize the anticipated benefits of completed acquisitions, would undermine our ability to execute on our growth strategy, which would in turn have a material adverse effect on our results of operations and future prospects.

Because we have limited experience operating our oil and gas exploration and transportation businesses, our failure to effectively manage the risks and challenges inherent in such businesses could adversely affect our business, operating results, financial condition and growth prospects.

Until we acquired Banner Midstream on March 27, 2020, we had no experience in operating its oil and gas businesses. Although Jay Puchir, Banner Midstream’s Chief Executive Officer joined us initially as our Chief Accounting Officer and then Treasurer and has continued to run the oil and gas businesses following the Banner Midstream acquisition, and Julia Olguin was appointed as the Chief Executive Officer of White River Holdings Corp (“White River”), our indirect wholly-owned subsidiary, we have limited experience operating these businesses, and, as a result, may encounter challenges and risks inherent in operating such businesses. If we fail to effectively manage the risks and challenges inherent in such businesses, our business, operating results, financial condition and growth prospects would be materially and adversely affected.

Our transportation business is affected by industry-wide economic factors that are largely outside our control.

With the exception of minimal revenue from our investment advisory business, our revenue is from customers in the oil exploration and production industry. As such, our volumes are largely dependent on the economy and our results may be more susceptible to trends in unemployment and how it affects oil prices than carriers that do not have this focus. We believe that some of the most significant factors beyond our control that may negatively impact our operating results are economic changes that affect supply and demand in transportation markets.

The risks associated with these factors are heightened when the United States economy is weakened. Some of the principal risks during such times are as follows:

Economic conditions that decrease shipping demand or increase the supply of capacity in the trucking transportation industry on the Territory can exert downward pressure on rates and equipment utilization, thereby decreasing asset productivity. Declining freight levels and rates, a prolonged recession or general economic instability could result in declines in our results of operations, which declines may be material.

We also are subject to cost increases outside our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Such cost increases include, but are not limited to, fuel and energy prices, driver wages, taxes and interest rates, tolls, license and registration fees, insurance premiums, regulations, revenue equipment and related maintenance costs and healthcare and other benefits for our associates. We cannot predict whether, or in what form, any such cost increase or event could occur. Any such cost increase or event could adversely affect our profitability.

In addition, events outside our control, such as strikes or other work stoppages at our facilities or at customer, port, border or other shipping locations, weather, actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state or heightened security requirements could lead to reduced economic demand, reduced availability of credit or temporary closing of shipping locations or United States borders. Such events or enhanced security measures in connection with such events could impair our operations and result in higher operating costs.

Fluctuations in the price or availability of fuel, the volume and terms of diesel fuel purchase commitments and surcharge collection may increase our costs related to our transportation operations, which could materially and adversely affect our margins.

Fuel represents a significant expense for our transportation business while the sale of oil and to a lesser extent natural gas provides revenues for our business. Diesel fuel prices fluctuate greatly due to factors beyond our control, such as political events, terrorist activities, armed conflicts, depreciation of the dollar against other currencies and weather, such as hurricanes, and other natural or man-made disasters, each of which may lead to an increase in the cost of fuel. Fuel prices also are affected by the rising demand in developing countries and could be adversely impacted by diminished drilling activity and by the use of crude oil and oil reserves for other purposes. Such events may lead not only to increases in fuel prices, but also to fuel shortages and disruptions in the fuel supply chain. Because our operations are dependent upon diesel fuel, and a portion of our business is based on fuel purchased on the spot market at prevailing market rates, significant diesel fuel cost increases, shortages or supply disruptions could materially and adversely affect our operating results and financial condition.

Increases in fuel costs, to the extent not offset by rate per mile increases or fuel surcharges, have an adverse effect on our operations and profitability. While a portion of our fuel costs are covered by pass-through provisions in customer contracts and compensatory fuel surcharge programs, we also incur fuel costs that cannot be recovered even with respect to customers with which we maintain fuel surcharge programs, such as those associated with unbilled miles, or the time when our engines are idling. Because our fuel surcharge recovery lags behind changes in fuel prices, our fuel surcharge recovery may not capture the increased costs we pay for fuel, especially when prices are rising, leading to fluctuations in our levels of reimbursement. Further, during periods of low freight volumes, shippers can use their negotiating leverage to impose less compensatory fuel surcharge policies. In addition, the terms of each customer’s fuel surcharge agreement vary, and customers may seek to modify the terms of their fuel surcharge agreements to minimize recoverability for fuel price increases. Such fuel surcharges may not be maintained indefinitely or may not be sufficiently effective. As of the date of this prospectus, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

If we fail to retain and attract qualified drivers, including owner-operators, it could materially adversely affect our results of operations and financial condition.

In our transportation operations, we rely almost exclusively on the fleet of vehicles owned and operated by independent contractors. These independent contractors are responsible for maintaining and operating their own equipment and paying their own fuel, insurance, licenses and other operating costs. Due to high turnover rates, the pool of qualified independent contractor drivers is often limited, which increases competition for their services, especially during times of increased economic activity. We currently face and may in the future continue to face from time- to-time, difficulty in attracting and retaining sufficient number of qualified independent contractor drivers. Additionally, our agreements with independent contractor drivers are terminable by either party without penalty and upon short notice. Our specialty equipment services targeting servicing oil exploration and oil development industries require special training to handle unique operating requirements. We may be legally obligated or otherwise subjected by the industry standards to use physical function tests and hair follicle and urine testing to screen and test all driver applicants, which we believe is a rigorous standard and could decrease the pool of qualified applicants available to us. If we are unable to retain our existing independent contractor drivers or recruit new qualified independent contractor drivers, our business and results of operations could be materially and adversely affected.

The rates we offer our independent contractor drivers are subject to market conditions. Accordingly, we may be required to increase owner-operator compensation or take other measures to retain existing and attract new qualified independent contractor drivers. If we are unable to continue to attract and retain a sufficient number of independent contractor drivers, we could be required to increase our mileage rates and accessorial pay or operate with fewer trucks and face difficulty meeting our clients’ demands, which would in turn have a material adverse effect on our financial condition and operating results.

If owner-operators and their drivers that we rely upon in our transportation business were to be classified as employees instead of independent contractors, our business would be materially and adversely affected.

A number of companies in the logistics industry have been faced with legislation that requires that many independent contractors be treated as employees and receive benefits only available to employees which increases costs. To date, this legislation has been limited to California and is being considered in states where we do not operate. Some companies recently been involved in lawsuits, including class actions, and state tax and other administrative proceedings that claim that owner-operators or their drivers should be treated as employees, rather than independent contractors. These lawsuits and proceedings involve substantial monetary damages (including claims for unpaid wages, overtime, failure to provide meal and rest periods, unreimbursed business expenses and other items), injunctive relief, or both. While we believe that owner-operators and their drivers are properly classified as independent contractors rather than as employees, if their independent contractor status is challenged, we may not be successful in defending against such challenges in some or all jurisdictions in which we offer transportation services. We also may encounter a risk if the National Labor Relations Board (“NLRB”) were to pass a rule to this effect, which could occur under the Boden administration. Furthermore, the costs associated with defending or resolving lawsuits relating to the independent contractor status of owner-operators and their drivers could be material to our business.

If legislation is passed in states where we operate, the NLRB passes a rule, or a court or an administrative agency were to determine that owner-operators and their drivers must be classified as employees rather than independent contractors, we could become subject to additional regulatory requirements, including but not limited to tax, wages, and wage and hour laws and requirements (such as those pertaining to minimum wage and overtime); employee benefits, social security, workers’ compensation and unemployment; discrimination, harassment, and retaliation under civil rights laws; claims under laws pertaining to unionizing, collective bargaining, and other concerted activity; and other laws and regulations applicable to employers and employees. Compliance with such laws and regulations would require us to incur significant additional expenses, potentially including without limitation, expenses associated with the application of wage and hour laws (including minimum wage, overtime, and meal and rest period requirements), employee benefits, social security contributions, taxes, and penalties. Additionally, any such reclassification would require us to change our business model, and consequently have an adverse effect on our business and financial condition.

Similar to many companies, we have experienced a spike in our insurance costs, which could have a material adverse effect on our operating results.

Insurance premiums have recently escalated, and we are facing a similar increase in our insurance costs. Our future insurance and claims expense might exceed historical levels, which could reduce our earnings. We self-insure or maintain a high deductible for a portion of our claims exposure resulting from workers’ compensation, auto liability, general liability, cargo and property damage claims, as well as associate health insurance. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. This, along with legal expenses, incurred but not reported claims and other uncertainties can cause unfavorable differences between actual claim costs and our reserve estimates. We plan to reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.

We maintain insurance with licensed insurance carriers above the amounts which we retain. Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would be required to bear the excess, in addition to our other self-insured/retained amounts. As a result, our insurance and claims expense could increase, or we could raise our self-insured retention or deductible when our policies are renewed or replaced. Our operating results and financial condition could be materially and adversely affected if (i) cost per claim, premiums, or the number of claims significantly exceed our estimates, (ii) there is one or more claims in excess of our coverage limits, (iii) our insurance carriers refuse to pay our insurance claims or (iv) we experience a claim for which coverage is not provided.

Risks Factors Relating to Our Technology Solutions

Our ability to execute our strategy with respect to our technology segment, depends to a large extent on the outcome of the litigation related to protection of our intellectual property rights.

As previously disclosed, in April 2021, a federal jury found in our consolidated financial statements, salesfavor on three claims and awarded us damages in the amount of $115 million in the lawsuit against Walmart Inc. Specifically, the jury found that Walmart misappropriated Zest’s trade secrets, failed to major customers represent significant percentagescomply with a written contract, and acted willfully and maliciously in misappropriating Zest’s trade secrets. We had filed the complaint against Walmart Inc. in the United States District Court for the Eastern District of total sales. SuchArkansas, Western Division, in August 2018. The complaint included claims for violation of the Arkansas Trade Secrets Act, violation of the Federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. On April 27, 2021, we filed with the United States District Court for the Eastern District of Arkansas, Central Division a loss couldmotion for attorneys’ fees in the amount of $46 million or alternatively, $13,537,000, pre-judgment interest in the amount of $16,701,000 and 0.06% post-judgment interest, accruing from April 13, 2021.

Additionally, we expect to file an appeal arguing among other things, that we should have a negative impact onan opportunity to prove the full extent of our businessdamages. We expect that Walmart will appeal the jury verdict and cash flows.any award of attorneys’ fees. Intellectual property and similar litigation is subject to uncertainty. There is no assurance that we will be successful in our efforts related to this lawsuit or if we are, which amounts we will be able to recover.

If we are unable to develop and generate additional demand for our technology services or products, we will likely suffer serious harm to our business.

We have invested significant resources in developing and marketing our technology services and products. Some of our services and products are often considered complex and involve a new approach to the conduct of business by our customers. As a result, intensive marketing and sales efforts may be necessary to educate prospective customers regarding the uses and benefits of our services and products in order to generate additional demand. The market for our services and products may weaken, competitors may develop superior offerings, or we may fail to develop acceptable solutions to address new market conditions. Any one of these events could have a material adverse effect on our business, results of operations, cash flow and financial condition.

Undetected errors or failures in our software, products or services could result in loss or delay in the market acceptance for our products or lost sales.

Because our software services and products, and the environments in which they operate, are complex, our software and products may contain errors that can be detected at any point in its lifecycle. While we continually test our services and products for errors, errors may be found at any time in the future. Detection of any significant errors may result in, among other things, loss of, or delay in, market acceptance and sales of our services and products, diversion of development resources, injury to our reputation, increased service and warranty costs, license terminations or renegotiations or costly litigation. Additionally, because our services and products support or rely on other systems and applications, any software or hardware errors or defects in these systems or applications may result in errors in the performance of our service or products, and it may be difficult or impossible to determine where the error resides.

We may not be competitive, and increased competition could seriously harm our business.

Relative to us, some of our current competitors or potential competitors of our products and services may have one or more of the following advantages:

Although no single competitive factor is dominant, current and potential competitors may establish cooperative relationships among themselves or with third parties to enhance their offerings that are competitive with our products and services, which may result in increased competition. We cannot assure that we will be able to compete successfully against current or future competitors. Increased competition in mobile data capture products, software, and related products and solutions, or supplies may result in price reductions, low gross profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and customer support. Some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or companies that produce complementary products, which may create additional pressures on our competitive position in the marketplace.

Sales to many of our target customers involve long sales and implementation cycles, which may cause revenues and operating results to vary significantly.

A prospective customer’s decision to purchase our services or products may often involve lengthy evaluation and product qualification processes. Throughout the sales cycle, we anticipate often spending considerable time educating and providing information to prospective customers regarding the use and benefits of our services and products. Budget constraints and the need for multiple approvals within these organizations may also delay the purchase decision. Failure to obtain the timely required approval for a particular project or purchase decision may delay the purchase of our services or products. As a result, we expect that the sales cycle for some of our services and products will typically range to more than 360 days, depending on the availability of funding to the prospective customer. These long cycles may cause delays in any potential sale, and we may spend a large amount of time and resources on prospective customers who decide not to purchase our services or products, which could materially and adversely affect our business.

Additionally, some of our services and products are designed for corporate customers, which requireswill require us to maintainrecruit a sales force that understands the needs of these customers, engagesengage in extensive negotiations and providesprovide support to complete sales. If we do not successfully market our services and products to these targeted customers, our operating results will be below our expectations and the expectations of investors and market analysts, which would likely cause the price of our common stockCommon Stock to decline.

We will not be ablePatents, trademarks, copyrights and licenses are important to developour technology business, and the inability to defend, obtain or continue our business if we fail to attract and retain key personnel.renew such intellectual property could adversely affect the Company’s operating results.

Our future success depends on our abilityThrough Zest Labs, the Company currently holds rights to attract, hire, trainpatents and retaincopyrights relating to certain aspects of its RFID technology, software, and services. In addition, the Company has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of highly skilled employeesforeign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services”, the Zest logo, and numerous other trademarks and service marks. Although the Company believes the ownership of such patents, copyrights, trademarks and service marks is an important factor in its business and that its success does depend in part on the serviceownership thereof, the Company relies primarily on the innovative skills, technical competence, and performancemarketing abilities of our senior management teamits personnel.

Many of Zest Labs’ products are designed to include intellectual property obtained from third parties. While it may be necessary in the future to seek or renew licenses relating to various aspects of its products and other key personnel. The lossbusiness methods, the Company believes, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee that such licenses could be obtained at all. Loss of a significant number of licenses may have an adverse effect of the services of our executive officers or other key employees could adversely affect our business. Competition for qualified personnel possessing the skills necessary to implement our strategy is intense, and we may fail to attract or retain the employees necessary to execute our business model successfully. We have obtained “key person” life insurance policies covering certain employees.Company’s operations.

Our success will dependThe Company relies on licenses to a significant degree uponthird-party patents and intellectual property, and the continued contributionsCompany’s future results could be materially adversely affected if it is alleged or found to have infringed intellectual property rights.

Many of our key management, engineeringZest Labs’ products are designed to use third-party intellectual property, and other personnel, manyit may be necessary in the future to seek or renew licenses relating to various aspects of whomits products and business methods. Although the Company believes that, based on past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms, there is no assurance that the necessary licenses would be difficult to replace. In particular, we believe that our future success is highly dependent on Randy May, our Chief Executive Officer, and Peter Mehring, President of Zest Labs. If Messrs. May or Mehring, or any other key members of our management team, leave our employment, our business could suffer, and the share price of our common stock could decline.

Our acquisition strategy involves a number of risks.

We intend to pursue continued growth through opportunities to acquire companies or assets that will enable us to expand our product and service offerings and to increase our geographic footprint. We routinely review potential acquisitions. However, we may be unable to implement this growth strategy if we cannot reach agreement on potential strategic acquisitionsavailable on acceptable terms or for other reasons. Moreover, our acquisition strategy involves certain risks, including: 

Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on current attractive market terms.at all.

If we do notfail to protect our proprietary information and prevent third parties from making unauthorized use of our products and technology, our financial results could be harmed.

Much of our software and underlying technology is proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and through copyright, patent, trademark, and trade secret laws. However, all of these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Any patent licensed by us or issued to us could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore, patent applications that we file may not result in issuance of a patent or, if a patent is issued, the patent may not be issued in a form that is advantageous to us. Despite our efforts to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property in a cost-effective manner.

Third parties claiming that we infringe on their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products and services.

From time to time, we might receive claimsthird parties may claim that we have infringed theon their intellectual property rights, of others, including claims regarding patents, copyrights, and trademarks. Because of constant technological change in the markets in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow.In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us the confidential or proprietary information of these former employers. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we are not successful in defending such claims, we could be required to stop selling, delay shipments of, or redesign our products, pay monetarysignificant amounts as monetary damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our customers. We cannot assure you that any royaltyRoyalty or licensing arrangements that we may seek in such circumstances willmay not be available to us on commercially reasonable terms or at all. We may incur significant expenditures to investigate, defend and settle claims related to the use of technology and intellectual property rights as part of our strategy to manage this risk.

PeriodsWe rely on third-party manufacturers for the final assembly of sustained economic adversity and uncertainty could negatively affect our business, results of operations and financial condition.

Demand for our services and products depend in large part upon the level of capital and maintenance expenditures by manycertain of our customers. Lower budgets could have a material adverse effectproduct related to our technology offerings. If these third-party manufacturers were to become unavailable, we may not be able to replace them on the demand for our services and products,economical terms or at all, and our business results of operations, cash flow and overall financial condition would suffer.

Disruptions in the financial markets may have an adverse impact on regional and world economies and credit markets, which could negatively impact the availability and cost of capital for us and our customers. These conditions may reduce the willingness or ability of our customers and prospective customers to commit funds to purchase our services or products, or their ability to pay for our services after purchase. These conditions could result in bankruptcy or insolvency for some customers, which would impact our revenue and cash collections. These conditions could also result in pricing pressure and less favorable financial terms in our contracts and our ability to access capital to fund our operations.

Patents, trademarks, copyrights and licenses are important to the Company’s business, and the inability to defend, obtain or renew such intellectual property could adversely affect the Company’s operating results.

The Company currently holds rights to patents and copyrights relating to certain aspects of its RFID technology, software, and services. In addition, the Company has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services”, the Zest logo, and numerous other trademarks and service marks. Although the Company believes the ownership of such patents, copyrights, trademarks and service marks is an important factor in its business and that its success does depend in part on the ownership thereof, the Company relies primarily on the innovative skills, technical competence, and marketing abilities of its personnel. Loss of a significant number of licenses may have an adverse effect of the Company’s operations.

Many of Zest Labs’ products are designed to include intellectual property obtained from third parties. While it may be necessary in the future to seek or renew licenses relating to various aspects of its products and business methods, the Company believes, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee that such licenses could be obtained at all.

Final assembly of certain products is performed by third-party manufacturers. We may be dependent on these third-party manufacturers as a sole-source of supply for the manufacture of such products.harmed.

A failure by such manufacturers to provide manufacturing services to us, or any disruption in such manufacturing services, may adversely affect our business results.business. We may incur increased business disruption risk due to the dependence on these third-party manufacturers, as we are not able to exercise direct control over the assembly or related operations of certain of our products. If these third-party manufacturers experience businessfinancial difficulties or fail to meet our manufacturing needs, then we may be unable to satisfy customer product demands, lose sales, and be unable to maintain customer relationships. Longer production lead times may result in shortages of certain products and inadequate inventories during periods of unanticipated higher demand. Without such third parties continuing to manufacture our products, we may have no other means of final assembly of certain of our products until we are able to secure the manufacturing capability at another facility or develop an alternative manufacturing facility. This transition could be costly and time consuming.

Failure of information technology systems and breaches in data security could adversely affect the Company’s financial condition and operating results.

Information technology system failures and breaches of data security could disrupt the Company’s operations by causing delays or cancellation of customer orders, impeding the manufacture or shipment of products, or resulting in the unintentional disclosure of customer or Company information. Management has taken steps to address these concerns by implementing sophisticated network security and internal control measures. There can be no assurance, however, that a system failure or data security breach will not have a material adverse effect on the Company’s financial condition and operating results.

Failure in our operational systems or cyber security attacks on any of our facilities, or those of third parties, may adversely affect our financial results.

Our business is dependent upon our operational systems to process a large amount of data and complex transactions. If any of our financial, operational, or other data processing systems fail or have other significant shortcomings, our financial results could be adversely affected. Our financial results could also be adversely affected if an employee causes our operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our operational systems. Due to increased technology advances, we have become more reliant on technology to help increase efficiency in our business. We use computer programs to help run our financial and operations sectors, and this may subject our business to increased risks. Any future cyber security attacks that affect our facilities, our customers and any financial data could have a material adverse effect on our business. In addition, cyber-attacks on our customer and employee data may result in a financial loss, including potential fines for failure to safeguard data, and may negatively impact our reputation. Third-party systems on which we rely could also suffer operational system failure. Any of these occurrences could disrupt our business, result in potential liability or reputational damage or otherwise have an adverse effect on our financial results.

The Company relies on licenses to third-party patents and intellectual property, and the Company’s future results could be materially adversely affected if it is alleged or found to have infringed intellectual property rights.

Many of Zest Labs’ products are designed to use third-party intellectual property, and it may be necessary in the future to seek or renew licenses relating to various aspects of its products and business methods. Although the Company believes that, based on past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms, there is no assurance that the necessary licenses would be available on acceptable terms or at all.

The Company is subject to risks associated with laws, regulations and industry-imposed standards related to wireless communications devices.

Laws and regulations related to wireless communications devices in the many jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Such changes, which could include but are not limited to restrictions on production, manufacture, distribution, and use of the device, may have a material adverse effect on the Company’s financial condition and operating results.

Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates, which may have a material adverse effect on the Company’s financial condition and operating results.

Because of technological changes in the business software, web and device applications, sensors and sensor-based devices, and RFID and wireless communication industries, current extensive patent coverage, and the rapid issuance of new patents, it is possible that certain components of Zest Labs’ products and business methods may unknowingly infringe the patents or other intellectual property rights of third parties. From time to time, Zest Labs may be notified that it may be infringing such rights. Responding to such claims, regardless of their merit, can consume significant time and expense. In certain cases, the Company may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. If there is a temporary or permanent injunction prohibiting the Company from marketing or selling certain products or a successful claim of infringement against the Company requires it to pay royalties to a third party, the Company’s financial condition and operating results could be materially adversely affected.

The inability to obtain certain components could adversely impact the Company’s ability to deliver on its contractual commitments which could negatively impact our results of operations and cash flows.

Although most components essential to the Company’s business are generally available from multiple sources, certain key components including, but not limited to, microprocessors, enclosures, certain RFID custom integrated circuits, and application-specific integrated circuits are currently obtained by the Company from single or limited sources. Some key components, while currently available to the Company from multiple sources, are at times subject to industry-wide availability constraints and pricing pressures. If the supply of a key or single-sourced component to the Company were to be delayed or curtailed or in the event a key manufacturing vendor delayed shipment of completed products to the Company, the Company’s ability to ship related products in desired quantities, and in a timely manner, could be adversely affected. The Company’s business and financial performance could also be adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source. Continued availability of these components may be affected if suppliers were to decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements. The Company attempts to mitigate these potential risks by working closely with these and other key suppliers on product introduction plans, strategic inventories, coordinated product introductions, and internal and external manufacturing schedules and levels. Consistent with industry practice, the Company acquires components through a combination of formal purchase orders, supplier contracts, and open orders based on projected demand information. However, adverse changes in the supply chain of the Company’s vendors may adversely impact the supply of key components.

RISK FACTORS RELATING TO OUR COMMON STOCK AND WARRANTS

General Risks

Our future success depends on our ability to retain and attract high-quality personnel, and the efforts, abilities and continued service of our senior management.

Our future success depends on our ability to attract, hire, train and retain a number of highly skilled employees and on the service and performance of our senior management team and other key personnel, including service center managers. The loss of the services of our executive officers or other key employees and inadequate succession planning could cause substantial disruption to our business operations, deplete our institutional knowledge base and erode our competitive advantage, which would adversely affect our business. Competition for qualified personnel possessing the skills necessary to implement our strategy is intense, and we may fail to attract or retain the employees necessary to execute our business model successfully. We do not have “key person” life insurance policies covering any of our executive officers, other than Peter Mehring, the president of Zest Labs.

Our success will depend to a significant degree upon the continued efforts of our key management, engineering and other personnel, many of whom would be difficult to replace. In particular, we believe that our future success is highly dependent on Randy May, our Chief Executive Officer, William Hoagland, our Chief Financial Officer, Jay Puchir, our Treasurer and CEO and President of Banner Midstream Corp., Peter Mehring, President of Zest Labs, and Julia Olguin, the Chief Executive Officer of White River. If any members of our management team leave our employment, our business could suffer, and the share price of our Common Stock could decline.

If we cannot manage our growth effectively, our results of operations would be materially and adversely affected.

We have recently experienced significant growth commencing with and following the Banner Acquisition. Our business model relies on our rapidly growing our oil and gas drilling and transportation businesses. Businesses that grow rapidly often have difficulty managing their growth while maintaining their compliance and quality standards. If we continue to grow as rapidly as we anticipate, we will need to expand our management by recruiting and employing additional executive and key personnel capable of providing the necessary support. There can be no assurance that our management, along with our staff, will be able to effectively manage our growth. Our failure to meet the challenges associated with rapid growth could materially and adversely affect our business and operating results.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

We are subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Sarbanes-Oxley Act which requires, among other things, that public companies maintain effective disclosure controls and procedures and internal control over financial reporting.

Although our management concluded that our disclosure controls and procedures were effective as of March 31, 2021, any failure to maintain effective controls or any difficulties encountered in their implementation or improvement in the future could cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired, which could result in loss of investor confidence and could have an adverse effect on our stock price.

Failure of information technology systems or data security breaches, including as the result of cyber security attacks, affecting us, our business associates, or our industry, may adversely affect our financial condition and operating results.

We depend on information technology systems and services in conducting our business. We and others in the industries in which we operate use these technologies for internal purposes, including data storage and processing, transmissions, as well as in our interactions with our business associates. Examples of these digital technologies include analytics, automation, and cloud services. If any of our financial, operational, or other data processing systems are compromised, fail or have other significant shortcomings, it could disrupt our business, require us to incur substantial additional expenses, result in potential liability or reputational damage or otherwise have a substantial numbermaterial adverse effect on our financial condition and operating results.

For example, the operator of authorized commonthe Colonial Pipeline was forced to pay $4.4 million in ransom to hackers as the result of a cyberattack disabling the pipeline for several days in May 2021. The attack also resulted in gasoline price increases and preferred shares availableshortages across the East Coast of the United States. As we depend on the availability and price of gasoline in our transportation business, any significant increase in the price and/or shortage of gasoline would have a material adverse effect on our business and operating results.

Because our Common Stock trades on the OTCQB, we are subject to the unwillingness of most institutional investors to purchase our Common Stock as well as the general limited liquidity of that trading market.

Our Common Stock is currently traded on the OTCQB, which is not a national securities exchange. Most institutional investors will only purchase securities which trade on one of the markets operated by the Nasdaq Stock Market or the New York Stock Exchange. As a result, the OTCQB is generally less liquid than the leading stock exchanges. While the market for our Common Stock has been relatively active, we believe our failure to be listed on a leading national securities exchange has reduced our liquidity. We cannot assure you that our recent liquidity will be maintained or that investors will not encounter difficulties in selling their Common Stock in the future issuance that could cause dilutionat present levels or if the absence of sufficient liquidity will harm our stockholders in the future.

Future sales of our stockholders’ interestsCommon Stock in the public market could lower the price of our Common Stock and adversely impact the rightsimpair our ability to raise funds in future securities offerings.

Of 22,820,573 shares of Common Stock outstanding as of June 15, 2021, approximately 17,832,456 shares are held by investors who are not our affiliates or holders of our commonrestricted stock.

We have a total All of 100,000these shares of commonunrestricted stock and 5,000 shares of preferred stock authorized for issuance. As of August 8, 2019, we have shares of common stock issued and outstanding and no preferred shares issued or outstanding. As of August 16, 2019, we had 37,652 shares of common stock and 5,000 shares of preferred stock available for issuance. Further, out of the unissued shares of common stock, as of August 16, 2019, we have unexercised options for 7,139 shares. Up to 3,529are freely tradeable. The remaining shares may be issued uponsold subject to the exercisevolume limits of warrants. We may seek financing that could resultRule 144 which limits sales by any affiliate to 1% of outstanding shares in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock. We may also make acquisitions that result in issuances of additional shares of our capital stock. Those additional issuances of capital stock would result in a significant reduction of the percentage interest of existing or future investors. Furthermore, the book value per share of our common stock may be reduced. This reduction would occur if the exercise price of any issued warrants, the conversion price of any convertible notes or the conversion ratio of any issued preferred stock is lower than the book value per share of our common stock at the time of such exercise or conversion.

The additionthree-month period. Future sales of a substantial number of shares of our common stock intoCommon Stock in the public market, or by the registration of any of our other securities under the Securities Actperception that such sales may significantly and negativelyoccur, could adversely affect the then prevailing market price for our common stock. The future sales of shares of our common stock issuable upon the exercise of outstanding warrants and options may have a depressive effect on the market price of our common stock, as such warrantsCommon Stock and options would becould make it more difficult for us to raise funds in the future through an offering of our securities.

The price of our Common Stock is subject to volatility, including for reasons unrelated to our operating performance, which could lead to losses by investors and costly securities litigation.

The trading price of our Common Stock is likely to be exercised at a time when the price of our common stock is greater than the exercise price.

There may not be an active market for shares of our common stock.

Our common stock is quoted on the OTCQX which is maintained by the OTC Market Group Inc. under the symbol “ZEST”. However, no assurance can be given that an active trading market for our common stock will further develophighly volatile and continue. As a result, it may become more difficult to purchase, dispose of and obtain accurate quotations as to the value of our common stock. If we are unable to achieve a listing on a national securities exchange, our common stock would continue to trade on the OTCQX.

The market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.

Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that we will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.

Our stock could be subject to volatility.

The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyondmay be outside our control, including:including but not limited to, the following factors:

We may not pay dividends on our commonThe stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the foreseeable future.

We havemarket price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not paid any dividends on our common stock to date. We are unlikely to pay dividends at any time in the foreseeable future; rather, we are likely to retain earnings, if any, to fund our operations and to develop and expand our business.

Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.

We continue to issue additional securities to raise capital. Future sales and issuances of our capital stock or rights to purchase our capital stocksuccessful, could result in substantial dilution to our existing stockholders. We may sell common stock, convertible securitiescosts and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, our stockholders may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holdersdiversion of our common stock.management’s attention and Company resources, which could harm our business and financial condition.

Future changes in the fair value of outstanding warrants could result in income volatility.volatility of our reported results of operations.

ChangesBecause of the derivative liability caused by our outstanding warrants, the increase or decrease in our Common Stock price each quarter (measured from the first day to the last day) is either a non-cash expense or income. If the price rises as it did in the fairfiscal quarter ended March 31, 2021, we are required to report the expense, which increases our actual operating loss. Contrarily a price decrease in a given quarter will cause us to report income. This could cause our reporting results to fluctuate otherwise as the result of our performance, which would increase volatility in our stock price.

We have recently experienced fluctuations in the market price of our Common Stock and if it again becomes subject to the “penny stock” rules, brokers will not generally solicit the purchase of our Common Stock, which would adversely affect the liquidity and market price of our Common Stock.

We have recently experienced wide fluctuations in the price of our Common Stock. For example, our stock price decreased from approximately $12.00 per share in early April 2021 to approximately $3.25 in mid-May 2021, resulting in our Common Stock to be considered a “penny stock” under SEC rules. The SEC has adopted regulations which generally define “penny stock” as an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. Such exceptions include among others any equity security listed on a national securities exchange and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three years, net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average annual revenue of at least $6,000,000 for the last three years. Although the market price of our Common Stock on OTCQB was $6.25 per share as of June 28, 2021, there is no assurance that our stock price will rise or stay above $5.00 per share. The “penny stock” designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our Common Stock and therefore reduce its liquidity.

Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, a growing number of broker-dealers decline to permit investors, or otherwise make it difficult, to purchase and sell “penny stocks.” The “penny stock” designation may have a depressive effect upon our Common Stock price.

Because we can issue “blank check” preferred stock without stockholder approval, it could adversely impact the rights of holders of our Common Stock.

Under our Articles of Incorporation our Board of Directors may approve an issuance of up to 5,000,000 shares of “blank check” preferred stock without seeking stockholder approval. Any additional shares of preferred stock that we issue in the future may rank ahead of our Common Stock in terms of dividend or liquidation rights and may have greater voting rights than our Common Stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of Common Stock, which could dilute the value of Common Stock to current stockholders and could adversely affect the warrant liabilities caused bymarket price of our Common Stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company. Although we have no present intention to issue any additional shares of authorized preferred stock, there can be no assurance that we will not do so in the future.

The approval of the application to list our Common Stock on the Nasdaq Capital Market was significantly delayed due to factors outside our control; because our stock price volatilityis below the required minimum bid price of $4, our listing application may not be approved in the near future or other factors impacting the fair value determined by the Black Scholes model will impact other income or expense.at all, which would have a material adverse effect on our stock price and liquidity.

Last year we applied to list our Common Stock on The Nasdaq Capital Market (“Nasdaq”). In December 2020 we effected a one-for-five reverse split of the Company’s issued and outstanding Common Stock and conducted a registered offering of Common Stock and warrants, in each case to meet the Nasdaq quantitative initial listing requirements. Following the reverse split and the December 2020 capital raise we believe we continued to meet the Nasdaq initial listing standards until a decrease in our stock price mid-April 2021. As of the date of this Form 10-K our listing application remained pending.

At the time we effected the reverse stock split, we did not know that the approval of our listing application was being delayed by Nasdaq pending an inquiry by FINRA involving potential manipulation of our Common Stock. Since we never engaged in any investor relations activities, we always assumed any alleged manipulation did not involve Ecoark or its management. Nasdaq recently advised us that the FINRA inquiry will no longer prevent it from approving our listing application once we satisfy the $4 minimum bid price requirement.

Even if we meet the $4 bid price requirement, there is no assurance that our listing application will be approved in the near future or at all. We have no intention at this time to effect another reverse stock split. If our listing application is not approved, our Common Stock will continue to trade on the OTCQB, which would affect the liquidity and price of our Common Stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Company does not own any real property. It currently leases office and production space in San Jose, California.Antonio, Texas. The current property lease is considered adequate for operations and does not extend beyond five years.this lease runs through November 2023. In addition a subsidiary leases space in Kilgore, Texas for a term of 42 months through September 30, 2022.

As of March 31, 2021, our acreage is comprised of approximately 20,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi. We acquired certain oil and gas properties as part of the Banner Midstream acquisition on March 27, 2020, and during the fiscal year ended March 31, 2021 continued to focus on expanding our exploration and production footprint and capabilities by acquiring real property and working interests in oil and gas mineral leases.

The Company had an analysis completed by an independent petroleum consulting company in March 2021 to complete the acquisition analysis within the required one-year period. The analysis required an asset allocation of the oil and gas reserves from the acquisitions noted above and also required the Company to impair certain reserves acquired.

Oil and Natural Gas Reserves

As of March 31, 2021 and 2020, all of our proved oil and natural gas reserves were located in the United States, in the States of Texas, Mississippi and Louisiana. The Company did not have any proved oil and natural gas reserves prior to the acquisition of Banner Midstream on March 27, 2020.

The following tables set forth summary information with respect to our proved reserves as of March 31, 2021 and 2020. For additional information see Supplemental Information “Oil and Gas Producing Activities (Unaudited)” to our consolidated financial statements in “Item 8 – Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Proved reserves as of March 31, 2021 (Numbers in thousands, except per barrel):