Seasonality

Our business experiences a certain level of seasonality due to Banner Midstream’sour 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. But higher fuel costs may adversely affect the transportations business which accounted for approximately 72% of FY 2022 revenue. See the Risk Factors on page 18. 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, including the annual flooding of coastal properties, 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. Also, the volatility of commodities prices and supply chain issues can potentially delay the receipt of critical parts and equipment needed during drilling projects which can both delay the project and add additional costs to the project.

Dependence on One or Few Major Customers

From timetime-to-time we have had and may continue 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.

Employees

AtIn the fiscal year ended March 31, 2020,2022, in our continuing operations, five of our customers, all in the commodity segment, accounted for a total of 75% of our accounts receivable, and one customer accounted for 61% of our total revenues.

Human Capital Resources

As of the date of this Report, we had 36 full timehave 50 full-time employees, 1 part-time employee and 98109 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 leased onare not salaried employees.

We are committed to Pinnacle Frac. Nonethe health, safety, and well-being of our employees and drivers. We follow applicable local, state, and federal laws, regulations, and guidance.

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 our relations with our employees and drivers are represented bysatisfactory.

Proposed Spin-Offs

Subject to completion of the Agora public offering and Nasdaq uplisting described above, the Company intends to issue a labor union orstock dividend through a collective bargaining agreement.  We consider our employee relationspro rata distribution of Agora’s common stock to the Company’s common shareholders and holders of common stock equivalents. The Company plans to distribute 80% of the Agora common stock it holds to its shareholders as of a future record date to be positive.determined upon completion of regulatory compliance. The Company plans to retain its remaining ownership in Agora on its balance sheet until a later date. As a result of the approval by the Board of Directors of the Company to divest Agora, the Company has accounted for this as a disposal other than by sale. Assets to be disposed of other than by sale should continue to be classified as held and used until they are disposed of.

Following the 80% stock dividend of Agora, Ecoark plans to also distribute its ownership of Banner, White River, Zest and the remaining Agora shares to its shareholders. At some point, Ecoark expects that BitNile or an affiliate will present a reverse merger candidate to it which will prevent Ecoark from becoming a shell or losing its Nasdaq listing. However, the parties have only engaged in very preliminary discussions. What the acquisition target will be and what the consideration will be has not been discussed. The Ecoark Board of Directors intends to obtain a valuation from a nationally recognized valuation firm and advice from investment bankers consistent with the exercise of their fiduciary duty.

To date, discussions between BitNile have centered upon Ecoark being able to spin-off to its shareholders each of our subsidiaries. Other than the initial spin-off of 80% of Agora within six months of Agora’s closing of its initial public offering, the timing of the remaining spin-offs as well as any acquisition of another business is uncertain. Our current plans are to expedite the spin-offs and complete them by June 2023. In order to avoid the harsh terms of the Warrant issued to the BitNile subsidiary, we expect that the spin-offs will occur on or before June 7, 2024. BitNile files reports with the SEC which investors are encouraged to review at www.SEC.gov/EDGAR, which reports are not incorporated herein by reference.

Item 1A. Risk Factors

There are numerous risks affecting our business, many of which are beyond our control. An investmentInvesting in our common 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. In addition, as to our new Agora operations, you should also review the additional risks disclosed in the Agora Registration Statement, most recently amended on April 26, 2022, under the heading “Risk Factors,” some of which are described and/or summarized below. 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 tocould 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.

PotentialSummary Risk Factors

Set forth below is a summary of some of the principal risks and uncertainties that could affectwe face with respect to our operating results and financial condition include, without limitation, the following:business:

RISK FACTORS RELATING TO OUR COMPANY

We have experienced losses since our founding. A failure to obtain profitability and achieve consistent positive cash flows would have a significant adverse effect on our business.

Risks Relating to Our Financial Condition

We havehad incurred operatingnet losses on an annual basis since our inception and may continue to experience losses and negative cash flow in the future.

As of July 1, 2022, we had cash (not including restricted cash) of approximately $8,013,181. We have not been profitable on an annual basis since inception and had previously incurred significant operating losses and negative cash flow from operations. We recorded a reported net loss of $12,137approximately $10,554,452 and $20,889,437 for the fiscal years ended March 31, 2022 and 2021. In FY 2022, our net loss was reduced by non-cash net gain of approximately $15.4 million from a change in the fair value of our warrant derivative liabilities due to the weakness of our stock price. FY 2022 also had non-cash charges of approximately $7.3 million. In the year ended March 31, 2020 as compared2021, we incurred non-cash charges of approximately $1.9 million from depreciation and amortization and approximately $18.5 million from the change in the fair value of our warrant derivative liabilities. Although we expect our revenues to $13,650increase from our energy business, we will likely continue to incur losses and experience negative cash flows from operations for the year endedforeseeable 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 may require additional capital and may need or desire to engage in strategic transactions in the future to fund our business objectives and support our growth, our inability to generate and obtain such capital or to enter into strategic transactions, including due to contractual limitations under the DPL Agreement and the Series A, could harm our business, operating results, financial condition and prospects.

Since the Banner acquisition on March 31, 2019. Net cash used in operating activities was $5,490 for the year ended March 31, 2020, as compared to net cash used in operating activities of $9,040 for the year ended March 31, 2019. As of March 31,27, 2020, we had cash (including restricted cash)have increased our operating expenses in supporting our underlying business and consummating acquisitions of $406, a workingoil and gas properties. We intend to continue to make substantial investments to fund our business and support our growth. Further, the recent financing subjects us to certain contractual obligations and restrictions that may hinder our ability to achieve our objectives in the future, including by imposing limitations or prohibitions on future capital deficitraising efforts and on our ability to sell or acquire assets valued over specified thresholds.

Because of $16,689, and an accumulated deficit of $128,023. Some of our debt and equity instrumentsthe new contractual restrictions, the delay in the Agora offering or for other reasons, we may contain derivative liabilities which may resultnot be able to obtain any additional financing or engage in variability in our working capital deficit as these liabilities are re-measured each reporting period. Priorstrategic transactions to the acquisition of Banner Midstream,extent needed or desired in the future on the terms favorable to us, or at all. If we have fundedare unable to obtain adequate financing or enter into strategic transactions on terms satisfactory to us, our operations principally through the sale of our capital stock and debt instruments.

In their audit report for the fiscal year ended March 31, 2019, our independent auditors reported that there is substantial doubt about the Company’s ability to continue as a going concern to carry outsupport our business plan. Although, we alleviatedgrowth and to respond to business challenges could be significantly impaired, and our business may be adversely impacted. In addition, our inability to generate or obtain the substantial doubt for the fiscal year ended March 31, 2020 as a resultfinancial resources needed may require us to delay, scale back, or eliminate some or all of the Company raising over $6 million in the exerciseour operations and business objectives and sell some of warrants and the entering into a $35 million secured funding for our new business venture with Banner Midstream, the global pandemic caused by COVID-19 has brought uncertainty to the global workforce as well as the capital markets.assets.

The COVID-19 worldwide pandemic has disrupted the global economyFurther, if we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and supply chains.any new equity or debt securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

The short-term and long-term effects of the COVID-19 pandemic, including actions taken by businesses and governments, have adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. The extent to which the COVID-19 pandemic adversely affects the Company’s business, financial condition, results of operation and liquidity will depend on future developments, which are uncertain and cannot be predicted. Disruptions and/or uncertainties related to the COVID-19 pandemic for a sustained period of time could result in delays or modifications to the Company’s strategic plans and initiatives and hinder the Company’s ability to achieve its strategic goals.

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. Our Bitcoin mining operations commenced in November 2021 and the revenues are not yet material. 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.

We may require additional financingBecause we must periodically evaluate our goodwill for impairment, we could be required to support our operations. Any new equity financingrecognize 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 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.

We derive a significant portion of our revenue from a small number of customers, and the loss of one of these customers, or a reduction in their demand for our services, could adversely affect our business, financial condition, results of operations and prospects.

Our customer base is highly concentrated, with 75% of our accounts receivable derived from five customers and 61% of our revenue derived from a single customer in FY 2022. A limited number of customers are expected to continue to comprise a substantial dilutiveportion of our revenue for the foreseeable future. Because of the concentration of our revenue and accounts receivable among a small number of customers, the loss of one or more of our major customers could have a material adverse effect on our existing stockholders.results of operations. The revenue derived from our transportation business is factored non-recourse, so the Company has less exposure to payment defaults and more exposure to a future loss of revenue in the event a significant customer is lost. The revenue derived from our oil and gas business is from large midstream customers with a lower risk of insolvency or bankruptcy at today’s commodities prices, because we do not maintain any reserves for payment defaults, a default or delay in payment on a significant scale could adversely affect our business, financial condition, results of operations and prospects. We could lose business from a significant customer for a variety of reasons, including:

As

Since many of March 31, 2020,our customer contracts allow our customers to terminate the contract without cause and on relatively short notice, any such termination could impair our business, financial condition, results of operations and prospects.

If we had cash (including restricted cash)are unable to obtain stockholder approval for our recent transaction with DPL, it will impair our ability to spin-off all of $406,our subsidiaries and may adversely affect our future business and results of operations.

We have publicly disclosed our intent to spin-off 80% of our ownership of Agora to our stockholders within six months of the closing of Agora’s initial public offering. On June 8, 2022, we entered into the DPL Agreement with DPL pursuant to which DPL paid $12 million in exchange for issuing DPL 102,881 shares of our common stock as “Commitment Shares”, the Series A convertible into common stock at $2.10 per share or 5,714,286 shares of common stock, and a workingWarrant to acquire 49% of our common stock (which includes the Commitment Shares and the shares issuable upon conversion of the Series A). We may issue DPL up to 5,246,456 shares of common stock without stockholder approval under Nasdaq Rules. Thus, we may not issue 570,711 shares upon conversion of the Series A or any shares upon exercise of the Warrant until we receive stockholder approval. Under Nasdaq Rules, DPL may not vote on the proposal. In addition, to avoid tracing of the shares underlying the Series A, DPL may not convert the Series A until after the record date for stockholders eligible to vote at a meeting in order to approve the share issuances.

Further, the Warrant will not vest or be exercisable for two years. One of the other conditions of the Warrant vesting and becoming exercisable is for us to spin-off all of our remaining subsidiaries to our stockholders. Under Nevada law, we believe that our stockholders may also have to approve our spin-off of our Common Stock of our oil and gas subsidiary, Banner, if that involves the “sale of all or substantially all” of our assets. Our planned spin-offs are also based upon an expectation that BitNile or an affiliate will sell a business or assets to us in exchange for more common stock or other securities. This will result in a change of control and if BitNile or an affiliate acquires more than 50% of our common stock will also require Nasdaq approval. We cannot assure you we will receive stockholder approval for the transactions contemplated by the Agreement or the subsequent transaction and change of control or that Nasdaq will approve them in the present form. See “June 2022 Private Placement” on page 60.

Although the DPL Agreement and contemplated transactions including the spin-offs of our assets will result in both a change of control and fundamental change in our business, investors have no information concerning the nature of our future business.

Both the DPL Agreement and our discussions with DPL and its parent company, BitNile, are premised upon our need for capital deficitand our plan to distribute all of $16,689, andour operating assets to our stockholders as dividends. Assuming we can obtain stockholder approval, we expect to acquire an accumulated deficitoperating business at the time of $128,023.our final spin-off. We do not have any information concerning any such acquisition so purchasers of our common stock have no ability to determine the nature of such business, its financial condition, its management or other material information. Unless we seek stockholder approval from these acquisitions, our stockholders will need to rely upon our Board of Directors to approve this acquisition. While we expect that the future Board of Directors and management may include DPL designees or affiliates, it is possible it may not. DPL has the right to designate one director initially.

Risks Relating to Our Oil and Gas Exploration, Production and Transportation and Logistics Services Operations

We have significant ongoing capital requirements that could affect our operations if we are unable to generate sufficient cash can be provided by a $35,000 secured debtfrom operations or obtain financing the final agreement is still pending and not guaranteed to close. on favorable terms.

The Company has also raised substantial operatingannounced that it will commence a drilling plan to extract oil reserves across its 30,000 acres of shallow and deep drilling rights. The Company recently bought a deep drilling rig to vertically integrate its operations. with historically high oil prices, ancillary services related to drilling and producing oil wells have risen significantly.

We expect to pay for projected capital expenditures related to drilling additional oil wells with cash throughflows from operations or the exercise of our warrants issued in capital raises overproceeds from equity sales, including the past two years. We continuerecent DPL financing. 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. To the extent that our working capital is insufficient, we may have to scale back operations including our drilling activity.

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 financing in order to support current operations as well as potential vertical integration of existing assets or operations of similar companies.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.

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, including oil drilling. The Biden Administration is expected to continue to aggressively seek to regulate the energy industry and has stated its goal to eliminate 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. This resulted in the EPA finalizing what it refers to as “the most ambitious federal greenhouse gas emissions standards for passenger cars and light trucks ever” in December 2021. The EPA has also 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.

In November 2021 the EPA released new proposed methane rules which would impose regulations on methane release at existing wells nationwide. These new rules, among other things, would implement a comprehensive monitoring program to require companies to find and fix leaks. Additionally, the new rules would require well operators to place gas that is produced in a pipeline to be sold when possible to prevent wasting the gas, which could force us or well operators on which we rely to sell the gas at lower prices and thereby reduce our revenues. As with most regulations, smaller participants like us will face more burdens due to the compliance and other costs and the limited revenue to absorb such costs. The EPA is expected to issue a supplemental proposal in 2022 in the hopes of identifying additional regulatory means of reducing methane and other emissions, and has indicated an intention to adopt final rules before the end of calendar year 2022.

While a recent U.S. Supreme Court case imposed limitations on the EPA’s authority under the Clean Air Act, including by holding that the EPA’s attempted energy generation shifting entailed an overly broad interpretation of the statute’s delegation of authority, if the EPA adopts the above or other regulations and such regulations are held to be valid, the resulting new regulatory framework could impose additional restrictions and costs on our operations which could materially adversely affect our business. The regulations at issue in the recent case pertained to an attempt to shift a portion of U.S. energy production from coal to natural gas by an enumerated percentage by 2030.

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 sources 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 other regulatory efforts such as California’s 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. President Biden has also stated that the recent retail price rise in the price of gasoline was part of a plant to transition to electric vehicles.

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, operating results and future growth.

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.

Because we expect the SEC will adopt most, if not all of its proposed climate rules, as a small producer and transporter, the compliance costs may adversely affect our future results of operating and financial condition.

On March 21, 2022, the SEC released proposed rule changes that would require new climate-related disclosure in SEC filings, including certain climate-related metrics and greenhouse gas emissions, information about climate-related targets and goals, transition plans, if any, and extensive attestation requirements. In addition to requiring filers to quantify and disclose direct emissions data, the new rules would also require disclosure of climate impact arising from the operations and uses by the filer’s business partners and contractors and end-users of the filer’s products and/or services. If adopted as proposed, the rule changes would result in Ecoark Holdings incurring material additional compliance and reporting costs, including monitoring, collecting, analyzing and reporting the new metrics and implementing systems and procuring additional internal and external personnel with the requisite skills and expertise to serve those functions. Such costs are likely to materially and adversely affect our future results of operations and financial condition. We expect the rule will be adopted in October 2022 and effective beginning at some point after that date. We cannot predict the outcome of litigation which we expect will challenge any new climate change rules.

If Congress enacts the proposed price gouging bill, it could have a material adverse effect on our oil and gas operations and the Company.

Senator Elizabeth Warren and others have introduced legislation aimed at rising gasoline and other prices and would empower the Federal Trade Commission (“FTC”) to investigate and penalize companies with “unconscionably excessive price increases.” The proposed legislation does not define what this phrase means so it will permit the FTC to define it. While we cannot predict whether the legislation will pass, the Congress has Democratic majorities (with the vice president breaking a tie in the Senate) and a Democratic President so there is a likelihood that it will pass. If it does, the FTC will enact Rules although it is possible it may enact an emergency Rule like other regulatory agencies have recently done. Any such legislation will likely affect gasoline prices especially in an election year. We believe price controls will have a material adverse effect on Banner, our oil and gas drilling subsidiary and the Company.

Because of a number of factors, the recent spike in the retail price of gasoline has made our White River oil drilling business attractive but this spike may be adversely affected at a future date by the political pressures to eliminate the reliance on fossil fuels.

Between inflation, supply change shortages and the war in Ukraine, among other factors, the price of oil has spiked in the past six months with peak oil prices over $125 per barrel of oil in March 2022. At some point, the regulatory factors facing fossil fuels and the drilling for oil as well as a recession may make oil drilling financially unattractive. In that event, our results of operations will be materially and adversely affected.

As the price of oil increases, it may indirectly adversely affect the costs of our transportation business if the owner-operators of trucks we utilize pass on some or all of the higher costs incurred by them to us.

While the high prices of oil aids our White River businesses, it has the potential to have an adverse effect on our transportation business, to the extent the owner-operators of trucks we hire to transport fracking materials pass on the higher costs they incur based on the increased price of oil including diesel fuel to us via higher prices for their services. Such a development, in isolation or in combination with other price-driving factors such as the recent truck-driving shortages, could materially increase our operational expenses and increase net losses or reduce our ability to become profitable.

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, cash flows and financial condition.

Although Banner does not rely on hydraulic fracturing or fracking techniques in our exploration and production operations, our transportation business, which accounted for approximately 72% of our operating revenue in FY 2022, 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 Banner’s transportation operations for the future until we spin-off that business.

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 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.

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, and to secure trained personnel and appropriate services.

White River 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 dependent 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 oil, we and other companies with similar production profiles may not be able to attract and retain this talent.  Conversely, many of our competitors have more vertically integrated oil and gas operations that in many cases enable them to both explore and drill wider geographic areas with a greater likelihood of success and/or complete the exploration, drilling, distribution and sale processes at lower costs while also offering related services to third parties.

Our ability to acquire and develop reserves in the future, and maintain and grow our customer base for offering transportation and logistics services to other industry participants will depend on our ability to evaluate and select suitable properties and assets and to consummate transactions in a highly competitive environment for acquiring such properties and assets, marketing oil and gas, securing and compensating trained personnel and meeting demand for our products and services.  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. Further, the current inflation will affect us more that many well capitalized competitors.

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.

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.

The Company currently owns one deep drilling rig which can reach vertical depths of up to 20,000 feet, and 3 workover rigs. The Company, however, does not currently own a drilling rig capable of drilling deep lateral wells in formations on our oil and gas mineral lease properties such as the Tuscaloosa Marine Shale (“TMS”). 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 a deep drilling rig capable of performing lateral drilling projects in the TMS. 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.

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, cash flows, 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:

Currently, oil prices are higher than they have been in prior years, although there can be no certainty as to if, when and to what extent they may decline in the future. Further, while higher oil prices generally provide benefits to our drilling operations to the extent we have productive wells during the high price periods, they also pose increased costs to drilling additional wells.

In the same vein, 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 oil 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 at all,extended decline in commodity prices may materially and anyadversely 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, 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. For example, the Biden Administration issued an executive order banning the federal government’s purchase of new equity financing couldgas vehicles by 2035, although executive orders are subject to change. Additionally, private companies have increasingly pledged to reduce carbon emissions caused by the use of gas vehicles, such as General Motors which in January 2021 announced its plan to sell only zero-emission vehicles by 2035. The impact of the changing demand for oil may have a substantial dilutivematerial adverse effect on our existing stockholdersbusiness, financial condition, results of operations and or contain complex terms subjectcash flows.

We may be required to derivative accounting. Our operating results from our commodities segment and financial segment should be in positionrecord significant non-cash impairment charges related to provide for positive cash flow to assista reduction in the supportcarrying value of our technology segmentproved oil and holding company related costs.gas properties, which could materially and adversely affect our results of operations.

Banner Midstream has devoted substantially allWe will perform assessments of their financial resourcesour oil and gas properties whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. In order to purchase new equipmentperform these assessments, management will use various observable and to acquire existing businessesunobservable 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 states of Texas, Louisiana, Oklahoma and New Mexico (the “Territory”). Banner Midstream had financed their operations primarily throughneed to adjust the issuance of debt securities. The amount of their future net losses will depend, in part, on successful implementation of their business strategy, continuous increase in demand of tracking and freight services to maintain the oil-related enterprises, the ratecarrying 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 expenditurescash flows, the carrying value of the oil and our abilitygas properties may not be recoverable and therefore we may be required to obtain funding throughrecord an impairment charge reducing the issuancecarrying value of our securities, strategic collaborations with key customers. Trucking business development is a highly speculative undertakingthe proved properties to their fair value. If oil and involves a substantial degree of risk. Banner Midstream isnatural gas prices decline in the early stages of acquiring existing businesses and establishing operations of our wholly owned subsidiaries on the Territory. Itfuture, we may be several years, if ever, beforerequired to record impairment charges related to the Company becomes profitable.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 purchaseprocure enough equipmentdrivers to satisfy the demand for freighttransportation 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:

Any additional fundraising efforts may divertBecause we have limited experience operating our management from their day-to-day activities, which may adversely affectoil and gas exploration and transportation businesses, our abilityfailure to controleffectively manage the operational costs.

We cannot guarantee that future financing will be availablerisks and challenges inherent in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of our securities and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or sell other entities and other operating restrictions thatbusinesses could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at 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 of which may have a material adverse effect onaffect our business, operating results, and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of the lines of operations of our wholly owned subsidiaries or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.growth prospects.

We will not be ableUntil we acquired Banner on March 27, 2020, we had no experience in operating its oil and gas businesses. Through Jay Puchir, Banner’s Chief Executive Officer who also serves as our Chief Financial Officer, continues to develop or continue our business ifrun the oil and gas businesses following the Banner Midstream acquisition, 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 attracteffectively manage the risks and retain key personnel.

Our future success depends onchallenges inherent in such businesses, 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. The loss 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.

Our success will depend to a significant degree upon the continued contributions 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, 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 acquisitions 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.

Risks Factors Relating to Zest Labs

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

We have invested significant resources in developing and marketing our 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,operating 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 cancondition would 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.affected.

Additionally, some of our services and products are designed for corporate customers, which requires us to maintain a sales force that understands the needs of these customers, engages in extensive negotiations and provides 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 stock to decline.

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.

Through Zest Labs, 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.

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.

If we do not 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 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 claims that we have infringed the 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 monetary amounts as 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 royalty or licensing arrangements that we may seek in such circumstances will 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.

Periods 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 many of our customers. Lower budgets could have a material adverse effect on the demand for our services and products, 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.

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.

A failure by such manufacturers to provide manufacturing services to us, or any disruption in such manufacturing services, may adversely affect our business results. 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 business 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 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 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 Banner Midstream

Our near-term success is dependent upon our ability to grow our oilfield services and transportation operations.

Our success will depend, in part, upon our ability to commence operation of our oilfield and transportation services operations. Attracting new customers and joining networks and demand-supply chains requires substantial time and expense. Any failure to commence operations timely would adversely affect our operating results. Many factors could affect the market acceptance and commercial success of our services, including:

The transportation industry is affected by industry-wide economic and business risksfactors that are largely beyondoutside our control.

The transportation industry is highly cyclical, andmajority of our business is dependent on a number of factors that may have a negative impact on our operating results, many of which are beyond our control. Our revenue is from customersoperations in the oil exploration and production industry.industry, both from our own energy resource production efforts and to a larger extent through providing services to customers engaged in similar endeavors. 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. In recent months, the economy has been bombarded with unique challenges, including supply chain shortages, inflation and Federal Reserve interest rate increases in response, stock market volatility and recession fears.

The risks associated with these factors are heightened when the United States economy is weakened. Recently, many Chief Executive Officers of large companies believe our economy is entering a recessionary period. If the U.S. economy enters a recession, among other potential adverse consequences, demand for our products and services and customer and consumer spending patterns will diminish in a manner and possibly to an extent that is materially adverse to our business. Some of the other 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 materially and adversely affect our profitability.results of operations.

In addition, events outside our control, such as strikes or other work stoppages at our facilities or at customer, port, border or othercustomers, shipping locations, ports, distribution facilities, 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.locations. Such events or enhanced security measures in connection with such events could impair our operations and result in higher operating costs.

The transportation industry is highly competitive and fragmented, which subjects us to competitive pressures pertaining to pricing, capacity and service.

Our operating segments compete with many trucking carriers. The trucking industry in our Territory is highly competitive and fragmented. Some of our customers may utilize their own private fleets rather than outsourcing loads to us. Some of our competitors may have greater access to equipment, a larger fleet, a wider range of services, preferential dedicated customer contracts, greater capital resources or other competitive advantages. Numerous competitive factors could impair our ability to maintain or improve our profitability. These factors include the following:

We may be affected by labor issues in the broader transportation industry.

Difficulty in attracting drivers could affect our profitability and ability to grow. Periodically, the trucking industry experiences difficulty in attracting and retaining qualified drivers, including independent contractors, resulting in intense competition for drivers. We have from time to time experienced underutilization and increased expenses due to a shortage of qualified drivers. If we are unable to attract drivers when needed or contract with independent contractors when needed, we could be required to further adjust our driver compensation packages or let trucks sit idle, which could adversely affect our growth and profitability. If we are unable to retain drivers, our business, financial condition and results of operations could be harmed.

We have several major customers, the loss of one or more of which could have a material adverse effect on our business.

A significant portion of our operating revenue is generated from a number of major customers, the loss of one or more of which could have a material adverse effect on our business. Economic and capital markets conditions may adversely affect our customers and their ability to remain solvent. Our customers’ financial difficulties can negatively impact our business and operating results and financial condition. Generally, we do not have contractual relationships with our customers that guarantee any minimum volumes, and our customer relationships may not continue as presently in effect. We generally do not have long-term contractual relationships with our customers, including our dedicated customers, and certain of these contracts contain clauses that permit cancellation on a short-term basis without cause, and accordingly any of our customers may not continue to utilize our services, renew our existing contracts or continue at the same volume levels. Despite the existence of contract arrangements with our customers, certain of our customers may nonetheless engage in competitive bidding processes that could negatively impact our contractual relationship. In addition, certain of our major customers may increasingly use their own trucking and delivery fleets, which would reduce our freight volumes. A reduction in or termination of our services by one or more of our major customers could have a material adverse effect on our business and operating results.

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

Fuel represents a significant expense for us.our transportation business while the sale of oil provides revenues for our business. Diesel fuel prices fluctuate greatly due to factors beyond our control, such as political events, terrorist activities, armed conflicts, inflation and the depreciation of the dollar against other currencies and weather, such as hurricanes, tornadoes 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 ourBanner’s transportation 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. In recent months, fuel prices have soared to the highest levels in history, increasing our operating costs. While a portionthe majority 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 Annual Report, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations, nor arefluctuations. As our oil production levels increase, and if oil prices remain at historically high levels, we awarewill explore entering into derivative contracts to hedge the price of existence thereof.oil.

Difficulties attracting and retaining qualified drivers, including through

If we fail to retain owner-operators, it could materially adversely affect our profitabilityresults of operations and abilityfinancial condition.

In our transportation operations, we rely 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 maintain or grow our fleet.

Like many carriers,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 we may experiencetime-to-time, difficulty in attracting and retaining sufficient numbersnumber of qualified independent contractor drivers. Additionally, our agreements with independent contractor drivers including through owner-operators,are terminable by either party without penalty and driver shortages may recur in the future. Our challenge with attracting and retaining qualified drivers stems from intense market competition and our driver quality standards, which subjects us to increased payments for driver compensation and owner-operator contracted rates.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. FailureIf we are unable to retain our existing independent contractor drivers or recruit high-quality, safenew qualified independent contractor drivers, that meet our testing standardsbusiness and results of operations could diminish the safety of our fleetbe materially and could have a materially adverse effect on our customer relationships and our business.adversely affected.

Our Company drivers are generally compensated on a per-mile basis, and the rate per-mile generally increases with the drivers’ length of service. Owner-operators contracting with us are generally compensated on a percentage of revenue basis. The compensationrates we offer our independent contractor drivers and owner-operators is alsoare subject to market conditions and labor supply. Weconditions. Accordingly, we may in future periodsbe required to increase company driver and owner-operator compensation which will be more likelyor take other measures to the extent that economic conditions improveretain existing and industry regulation exacerbates driver shortages forcing driver compensation higher. The recent electronic logging device regulations, requiring compliance by nearly all carriers has further tightened the market for eligibleattract new qualified independent contractor drivers. In addition, with any driver voluntary turnover rate, we may suffer a loss of company drivers. Such turnover rate could require us to continually recruit a substantial number of drivers in order to operate our revenue-producing fleet equipment, including trucks, chassis and specialty equipment. If we are unable to continue to attract and retain a sufficient number of high-quality companyindependent contractor drivers, and contract with suitable owner-operators, we could be requiredin a position where we would have to adjust our compensation packages,turn down customer requests to deliver loads of freight or operate with fewer trucks and face difficulty meeting shipper demands, all offrac sand which could adversely affect our profitability and ability to maintain our size or grow.

Our use of owner-operators to provide a portion of our truck fleet exposes us to different risks than we face with our owned trucks.

We may contract with owner-operators and use more owner-operator trucks than some of our competitors. We are therefore more dependent on owner-operator trucks than some of our competitors. Failure to maintain owner-operator business and relationships and increased industry competition for owner-operators could have a materially adverse effect on our operating results. During times of increased economic activity, we face heightened competition for owner-operators from other carriers. To the extent our turnover increases, we may be required to increase owner-operator compensation or take other measures to remain an attractive option for owner-operators. If we cannot attract sufficient owner-operators, or it becomes economically difficult for owner-operators to survive, we may not be able to maintain the percentage of our fleet provided by owner-operators or maintain our delivery schedules.

We may provide financing to certain qualified owner-operators who qualify for financingwould in order to lease trucks from us. If we are unable to provide such financing in the future, due to liquidity constraints or other restrictions, we may experience a decrease in the number of owner-operators available to fully operate our assets. Further, if owner-operators operating the trucks we finance default under or otherwise terminate the financing arrangement and we are unable to find a replacement owner-operator, we may incur losses on amounts owed to us with respect to the truck in addition to any losses we may incur as a result of idling the truck.

Our lease contracts with owner-operators may be governed by the federal and other leasing regulations, which impose specific requirements on us and/or on owner-operators. It is possible that we could face lawsuits alleging the violation of leasing obligations or failure to follow the contractual terms, which could result in liability.

We may utilize owner-operators to complete our services. These owner-operators are subject to similar regulation requirements, such as the electronic on-board recording and driver Hours of Service (HOS) requirements that apply to larger carriers, which may have a more significant impact on their operations, causing them to exit the transportation industry. Aside from when these third parties may use our trailing equipment to fulfill loads, we do not own the revenue equipment or control the drivers delivering these loads. The inability to obtain reliable third-party owner-operators couldturn have a material adverse effect on our operating results and business growth.financial condition.

If owner-operators and drivers that we are unablerely upon in our transportation business were to recruit, develop and retain our key associates,be classified as employees instead of independent contractors, our business financial conditionwould be materially and operating results couldadversely affected.

State Regulation

A number of companies in the logistics industry have been faced with legislation or regulation that requires that many independent contractors be adversely affected.

We are highly dependent upon the services of certain keytreated as employees including our team of managers. We currentlyand receive benefits only available to employees which increases costs. Moreover, states have also adopted provisions for severe fines and stop-work orders for employers that misclassify employees as independent contractor. To date, this legislation and regulation has been limited to, or considered in, states where we do not have employment agreementsoperate, such as California, New Jersey, and Virginia.

Some companies recently 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, and 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.

Federal Regulation

We also may encounter risk if the Department of Labor (“DOL”) or the National Labor Relations Board (“NLRB”) were to pass rules expanding the definition of an employee, this could occur under the Biden administration.

On June 3, 2022, DOL announced that it is developing a proposed rule on determining employee or independent contractor status under the Fair Labor Standards Act. DOL anticipates submitting a draft Notice of Proposed Rulemaking for interagency review in the summer of 2022.

On December 27, 2021, the NLRB invited parties to submit briefs addressing whether NLRB should reconsider its standard for determining the independent contractor status of workers under the National Labor Relations Act (“NLRA”). If the NLRB adopts a more expansive standard for determining who qualifies as an employee, the number of individuals who may unionize or bring unfair labor practices charges under the NLRA would likely increase.

Conclusion

Because of the Biden administration’s regulatory push, we expect DOL will enact a rule narrowly defining independent contractors which will adversely affect Banner’s transportation business and increase its costs. If NLRB passes a rule expanding the definition of an employee, or a court or an administrative agency determines 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 of our managers, and the loss of any of their services could negatively impact our operations and future profitability. Inadequate succession planning or unexpected departure of key managers could cause substantial disruptionsuch reclassification would require us to change our business operations, deplete our institutional knowledge basemodel, and erode our competitive advantage. Additionally, we mayconsequently have to continue to recruit, develop and retain skilled and experienced service center managers if we are to realize our goal of expanding our operations and continuing our growth. Failure to recruit, develop and retain a core group of service center managers could have a materiallyan adverse effect on our business.business and financial condition. Expansion of state legislation that broadly defines an employee into states where we operate could also have a material adverse effect on Banner.

Efforts by labor unions could divert management’s attention andSimilar to many companies, we have experienced a spike in our insurance costs, which could have a materiallymaterial adverse effect on our operating results.

We face the risk that Congress or one or more states will issue or approve legislation significantly affectingInsurance premiums have recently escalated, and we are facing a similar increase in our business and our relationship with our associates. We also face the risk that our associates, including drivers, may attempt to organize. Any attempt to organize by our associates could result in increased legal and other associatedinsurance costs. In addition, if we were to enter into a collective bargaining agreement, the terms could negatively affect our costs, efficiency and ability to generate acceptable returns on the affected operations. Moreover, any labor disputes or work stoppages, whether or not our other associates unionize, could disrupt our operations and reduce our revenues.

Insurance and claims expenses could significantly reduce our earnings.

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 associateassociated 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 aggregategeneral liability and related insurance limits should be sufficient to cover reasonably expected claims, it is possible that 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. Insurance carriers have raised premiums for many businesses, including transportation companies. 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 exceedsexceed our estimates, (ii) we experience a claimthere is one or more claims in excess of our coverage limits, (iii) our insurance carriers failrefuse to pay on our insurance claims or (iv) we experience a claim for which coverage is not provided.

Risks Relating to Agora and Its Bitcoin Mining Business

If the Agora Registration Statement is not declared effective by the SEC and the proposed underwritten public offering is not consummated, it could adversely impact the repayment of certain indebtedness that we extended to Agora and may materially adversely impact our future results of operationsOur.

The Agora Registration Statement has undergone a series of amendments since its initial filing in October 2021 and has not yet been declared effective by the SEC. In addition, in connection with Agora public offering, Agora has applied for its common stock and warrants to be listed on Nasdaq.

On November 13, 2021, Agora issued the Company, a $7.5 million term note with 10% per annum interest. From the DPL $12 million Series A offering, we disclosed we would loan up to $5 million to Agora. As of June 30, 2022, the principal balance of $5,614,367 is outstanding pursuant to the $7.5 million line of credit. Agora will be required to repay any sums it borrowed on March 31, 2023, with accrued interest. While Agora plans to repay the loan with cash flow from operations, it may not be able to generate positive cash flow and may be required to use the proceeds from the planned underwritten public offering. The Agora Registration Statement has been amended eight times and at least one more amendment is required. The SEC Staff comments for the last four amendments have been limited to accounting comments and seem focused on creating uniformity among Bitcoin miners including the many publicly-held competitors that have not been as carefully reviewed and whose accounting Agora tried to emulate. Agora is continuing to communicate with the SEC Staff and cannot predict when it will file the next amendment (which requires the audit for the year ended March 31, 2022) and how the ongoing review will be resolved.

Because of the recent collapse in the price of Bitcoin and the weakness in the stock market, we are uncertain whether Agora can complete its initial public offering or, if it can, how much money it can raise or how dilutive it will be to its stockholders including the Company which owns over 90% of outstanding shares. If the underwritten public offering is not consummated, Agora may not have the ability to repay this loan which would adversely affect our financial condition.

Because of the recent decline in the cryptocurrency markets in general and in the price of Bitcoin specifically, our loan to Agora and its business may be adversely affected.

Agora’s principal business is focused on Bitcoin mining. Its planned initial public offering is seeking to raise capital to purchase Bitcoin miners and accelerate its presence in this sector. To date, Agora has engaged in limited mining with less effective miners. The price of Bitcoin has been volatile and recently it has traded at its lowest level in the last year. On May 16, 2021, Bitcoin traded at approximately $46,750. It fell to approximately $29,796 on July 20, 2021, rose to approximately $69,000 on November 9, 2021 and fell to a low of approximately $17,614 on June 20, 2022. While lower prices may reduce the prices for high speed miners, the low prices may make the Bitcoin mining business unattractive and unprofitable. To the extent that recent low prices adversely affect Agora’s ability to complete its initial public offering or reduce its gross proceeds, it could either prevent us from receiving payment of our loan to Agora or adversely affect our future business and financial condition.

Agora lacks an operating history in the Bitcoin mining space, and its new business is subject to various environmental lawsa number of significant risks and regulations,uncertainties which affect its future viability.

As of June 30, 2022, Agora has invested approximately $9 million and agreed to invest up to $5 million additionally towards the violationdevelopment of its new Bitcoin mining business. That business, Bitstream, has been formed and entered agreements and arrangements for equipment and services but has only recently commenced Bitcoin mining operations. In order to proceed, Agora is installing miners and mining infrastructure at its first mining facility in Texas, and needs to enter into a long-term contract to purchase electric power from the power grid in Texas and use the power to mine Bitcoin as well as take advantage of future power shortages such as the one that affected Texas in the winter of 2021 and may be beginning to occur in Texas in June 2022. Among the risks and uncertainties are:

For all of these reasons, Agora’s Bitcoin mining business may not be successful.

Agora is subject to risks associated with its need for sufficient real property and a continuous source of significant electric power at economically favorable prices, and its current efforts and negotiations for these resources to commence and grow operations at its West Texas facilities may ultimately be unsuccessful.

Agora’s Bitcoin mining operations require both land on which to install mining equipment and significant amounts of electric power to operate such equipment. On December 10, 2021, Bitstream entered into a lease agreement pursuant to which Bitstream leased 20 acres of land for an initial term of 10 years and a subsequent term of 10 years to set up mining equipment in West Texas in exchange for monthly payments equal to 3% of the electricity costs. If Bitstream does not use the leased land for 12 consecutive months, the lease will terminate. On January 3, 2022, Agora finalized a land purchase agreement for a separate parcel of 20 acres of land ($12,500 per acre) in West Texas for $250,000, of which could result$125,000 was paid for by Priority Power Management (“PPM”) to assist in substantial finesthe funding as Agora goes through the registration statement process. Agora has no obligation to repay PPM and they have no ownership of the land. Agora has an option to sell back this land to the sellers at $400 per acre upon cessation of the land being used as a data center.

Additionally, Agora has already paid $1,096,000 to a power broker for assistance in obtaining 12 megawatts (“MW”) of electricity at this site, with the potential to increase the available capacity at the substation to 48 MW. Agora has entered into a second letter of intent for a second location in October 2021 where it has already paid $1,326,500 and committed to pay $1,628,000 upon the closing of this offering or penalties.

We areexecution of a definitive agreement; however these high costs and uncertainties may harm its ability to become profitable, particularly if the price of Bitcoin declines further or if Agora is unable to enter into definitive agreements for the power on favorable terms or at all. While Agora has arranged for the delivery of the transformers necessary to use up to 42 MW (with agreement to go to 78 MW in the next six to twelve months) of electricity, Agora has conditional and unconditional rights to two sites in West Texas for up to 372 MW, subject to various environmental lawsapproval by the local government, which is the only required approval needed. If Agora or the third parties with whom it contracts fail to obtain, deliver and regulations dealing withinstall the haulingnecessary items for the required energy as and handlingwhen needed and on commercially viable terms, its results of hazardous materials, wasteoperations and financial condition will be materially adversely affected. There may not be an alternative source of electricity, or the resources needed to access it, and the establishment and growth of Agora’s Bitcoin mining operations may be stifled or hindered as a result.

To the extent Agora purchases additional miners or acquires new miners which require greater surface areas and/or higher energy inputs, its land and electricity requirements would grow. If Agora is unable to continue to obtain sufficient electric power to operate its miners on a cost-effective basis, it may not realize the anticipated benefits of its significant capital investments in new miners. Further, if Agora is unable to locate and acquire new locations to expand its mining operations, its prospects will be hindered. There can be no guarantee that Agora’s operational costs will not increase in the future, in which case there can be no assurance that it can obtain the needed energy at acceptable prices, volume and other oil, fuel storage tanks, air emissionsterms, if at all.

Additionally, Agora’s mining operations could be materially and adversely affected by prolonged power outages, and it may have to reduce or cease its operations in the event of an extended power outage, or as a result of the unavailability or increased cost of electric power as occurred in Texas in the winter of 2021. While Agora intends to participate in the responsive reserve program of the Electric Reliability Council of Texas, or ERCOT, should this issue arise, which could offset some or all of the revenue losses, were this were to occur, its business and results of operations could nonetheless be materially and adversely affected, particularly if the reserve program fails.

Agora’s mining operating costs could outpace its mining revenues, which would continue to put a strain on its business or increase its losses.

Agora’s mining operations will be costly and its expenses may increase in the future. This expense increase may not be offset by a corresponding increase in revenue. Agora’s expenses may be greater than it anticipates, and its investments to make its Bitcoin mining business more efficient may not succeed and may outpace monetization efforts. For example, if prices of Bitcoin decline or remain low, absent a similar decrease in costs, Agora’s ability to become profitable will also decline. Similarly, increases in Agora’s costs without a corresponding increase in its revenue would increase our losses and could seriously harm our financial condition.

The cost of obtaining new and replacement miners and parts will likely continue to be highly capital intensive which may have a material and adverse effect on Agora’s business and results of operations.

Agora’s mining operations can only be successful and ultimately profitable if the costs, including hardware and electricity costs, associated with mining Bitcoin are lower than the price of the Bitcoin Agora mines when it sells them. Agora’s miners and related equipment will be subject to ordinary wear and tear from our vehiclesoperation and facilities, engine idlingmay also face more significant malfunctions caused by factors which may be beyond its control. For example, certain miner models have displayed glitches and dischargedefects in the past, such that many operators were forced to repair or replace them. To launch its Bitcoin operations, Agora purchased and retentionreceived delivery of storm water. Our truck terminals often5,000 miners which operate at a lower hash rate than certain superior and/or newer models. Agora’s third-party hosting company is expected to deploy Bitmain S19 Pro miners which Agora will share by the quarter ending September 30, 2022. Further, the initial AvalonMiner 841 miners Agora began using in November 2021 are locatedless effective at mining Bitcoin than the Bitmain S19 Pro miners because they operate at a lower hash rate, meaning Agora’s initial revenue will be lower than the potential of its mining facility due to less effective equipment as well as lower electricity access. Therefore, while risk of loss of the initial miners during the facility set up process will be mitigated due to the lower price of such miners, in industrial areas where groundwaterthis case the reduction in revenue potential is the tradeoff. Contingencies such as these are one of the factors that render Bitcoin mining highly cost intensive and pose a serious potential hindrance on Agora’s mining operations and ability to generate revenue or obtain profitability.

Inevitably, Agora’s older miners and related equipment it deploys will need to be repaired or replaced as a product of ordinary wear and tear and depreciation and/or competitive forces in the marketplace or other forms of environmental contamination could occur. Our operations involvefactors rendering Agora’s current miners obsolete. Any upgrading Agora may need or choose to undertake will require substantial capital investment, and Agora may face challenges in locating the risks of fuel spillage or seepage, environmental damage and hazardous waste disposal, among others. Certain of our facilities have waste oil or fuel storage tanks and fueling islands. If we are involvedrequisite capital in a spilltimely manner and/or on terms favorable to Agora or not highly dilutive to investors. If Agora is unable to obtain adequate numbers of new and replacement miners in sufficient quantities or without delay, Agora may be unable to compete in its highly competitive and continuously developing industry. If this happens, Agora may not be able to mine Bitcoin as efficiently or in sufficient amounts relative to its competition or at all and, as a result, its business and financial results could suffer.

If politics in the United States, particularly the climate change movement, begins to affect Bitcoin mining, it could materially and adversely affect Agora’s business and future results of operation and financial condition.

Bitcoin mining uses very large amounts of electricity to operate the high speed computers used in mining. Because West Texas presently has low electricity rates, Agora arranged for power supplies there to support its planned operations. Very recently in the U.S., the State of New York legislature passed a bill which, if signed by the Governor, would impose a two-year moratorium on certain cryptocurrency mining, including Bitcoin mining. While this action does not directly impact Agora’s current operations which are conducted in Texas, it may be the beginning of a new wave of climate change regulations aimed at preventing or reducing the growth of Bitcoin mining in jurisdictions in the U.S., including potentially jurisdictions in which Agora now operates or may in the future operate. While New York is currently a state under Democratic control and very supportive of climate change regulations in contrast to Texas, there is a risk that Democrats may gain control of Texas and enact legislation that would make Agora’s operations in Texas not economically viable. Further if other Democratic states begin to adopt legislation that makes cryptocurrency mining prohibitively expensive or bans it, it could create a surge of demand in Texas and increase the cost of power there. The above-described developments could also demonstrate the beginning of a regional or global regulatory trend in response to environmental and energy preservation or other accident involving hazardous substances, if there are releasesconcerns surrounding cryptocurrencies, and similar action in a jurisdiction in which Agora operates or in general could have devastating effects to our operations. If further regulation follows, it is possible that the Bitcoin mining industry may not be able to adjust to a sudden and dramatic overhaul to our ability to deploy energy towards the operation 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 costsmining equipment.

Governmental action against cryptocurrencies and incur related liabilities, including substantial fines or penalties or civil and criminal liability, any of which couldBitcoin mining may have a materially adverse effect on our businessthe industry, and operating results.

We have significant ongoing capital requirements that could affect our profitabilityAgora if wewidely adopted.

Agora and the Bitcoin on which its operations depend are and could become subject to bans and other regulations aimed at preventing what are perceived as some of the negative attributes of Bitcoin and Bitcoin mining. For example, on September 24, 2021, China declared all transactions in and mining of cryptocurrencies, including Bitcoin, illegal. While the ultimate long-term effect of this ban remains uncertain, it could significantly hinder Agora’s prospects by limiting a large market for Bitcoin within a growing economy. In the hours following China’s announcement of the ban, the price of Bitcoin, which is tied to some extent to public perception of its future value as a form of currency, dropped by nearly $4,000. The ban followed piecemeal regulatory action within China against cryptocurrencies, which was due in part to concerns about the potential for manipulative practices and excessive energy consumption.

Because Agora is unable to generate sufficient cash from operationsinfluence or obtain financing on favorable terms.

The trucking industry generally,predict future regulatory actions taken by governments, it may face difficulty monitoring and our trucking business in particular, are capital intensive and asset heavy, and our policy of maintaining a young, technology-equipped fleet requires usresponding to expend significant amounts in capital expenditures annually. We expect to pay for projected capital expenditures with cash flows from operations, proceeds from equity sales or financing available under our existing debt instruments. 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, werapid regulatory developments affecting Bitcoin mining, which 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.its industry and, therefore, its business and results of operations. If further regulatory action is taken by governments in the United States or elsewhere, Agora’s business may be materially harmed.

Because there are several competitors in Bitcoin mining industry that are purchasing mining equipment at scale and due to supply chain disruptions, Agora may encounter delays or difficulty in obtaining new miners, which could materially and adversely affect its business and results of operations.

Many of the competitors in Agora’s industry have been purchasing mining equipment at scale, which has caused a world-wide shortage of mining equipment and components used to produce them, as well as delayed delivery schedules for new miner purchases. There can be no assurances the mining equipment manufacturers on which Agora will rely will be able to keep pace with the surge in demand for mining equipment when it obtains, upgrades and/or expands upon its current miners. The seasonal pattern generally experiencedsupply chain disruptions Agora is facing may adversely affect it including the shortages of transformers needed to power its miners. Additionally, the supply of the materials used to produce miners, such as the application-specific integrated circuit (“ASIC”) computer chips that are the primary feature in their computing power, may become subject to shortages, which could also either increase the cost beyond what Agora can reasonably afford or reduce their availability without unreasonable delay or at all. It is uncertain how manufacturers will respond to these trends and whether they can deliver on the schedules promised to any or all of their customers in the trucking industryfuture. In the event manufacturers of mining equipment or component parts or materials are not able to keep pace with demand or avoid supply shortages, Agora may not be able to purchase such products in sufficient quantities, at reasonable prices or on the delivery schedules that meet its business needs, which could have a material adverse effect on its business and results of operations.

Bitcoin is subject to halving, meaning that the Bitcoin rewarded for solving a block will be reduced in the future and its value may not commensurately adjust to compensate Agora for such reductions, and the overall supply of Bitcoin is finite.

Bitcoin is subject to “halving,” which is the process by which the Bitcoin reward for solving a block is reduced by 50% every 210,000 blocks that are solved. This means that the amount of Bitcoin Agora (or any other mining company) is rewarded for solving a block in the blockchain is permanently cut in half. For example, the latest halving having occurred in May 2020, with a revised payout of 6.25 Bitcoin per block solved, down from the previous reward rate of 12.5 Bitcoin per block solved. There can be no assurance that the price of Bitcoin will sufficiently increase to justify the increasingly high costs of mining for Bitcoin given the halving feature. If a corresponding and proportionate increase in the trading price of Bitcoin does not follow these anticipated halving events, the revenue Agora earns from its mining operations would see a corresponding decrease, which would have a material adverse effect on its business and operations. To illustrate, even if the price of Bitcoin remains at its price as of today, all other factors being equal (including the same number of miners and a stable hash rate) Agora’s revenue would decrease substantially upon the next halving.

Further, due to the halving process, unless the underlying code of the Bitcoin blockchain is altered (which may be unlikely given its decentralized nature), the supply of Bitcoin is finite. Once 21 million Bitcoin have been generated by virtue of solving blocks in the blockchain, the network will stop producing more which is anticipated to occur at approximately 2140. Currently, there are approximately 19 million Bitcoin in circulation representing about 90% of the total supply of Bitcoin under the current source code. For the foregoing reasons, the halving feature exposes Agora to inherent uncertainty and reliance upon the historically volatile price of Bitcoin. If the price of Bitcoin does not significantly increase in value, Agora’s Bitcoin mining operations could fail to become profitable.

Agora’s mining operations, including the miners, the housing infrastructure, the land and the facilities as a whole in which its miners are operated, are subject to risks related to uninsured or underinsured losses and potential damage and contingencies for which it may not be adequately prepared.

Agora’s initial facilities are, and any future facilities it may establish will be, subject to a variety of risks relating to housing all of its operations, which include keeping expensive revenue-generating equipment at a single physical location. While Agora has insurance covering general liability, it may not cover all potential losses fully or at all. For example, Agora’s facilities could be rendered inoperable, temporarily or permanently, as a result of a fire or other natural disaster or by a terrorist or other attack on a facility. The security and other measures Agora takes to protect against these risks may not be sufficient. In the event of an uninsured or under-insured loss, including a loss in excess of insured limits, at any of the miners in Agora’s network, such miners may not be adequately repaired in a timely manner or at all and Agora may lose some or all of the future revenues which could have otherwise been derived from such miners. To the extent the miners, the housing infrastructure in which they are held, or the land itself is permanently damaged, Agora may not be able to bear the cost of repair or replacement. Should any of these events transpire, Agora may not be able to recover, could lose a material amount of potential revenue, and its business and results of operations could be materially harmed as a result.

Agora will be relying upon a third party to establish and grow its mining efforts and will have limited ability to control their operations.

Agora has entered into a binding agreement with a third party pursuant to which it will host a third party’s miners. Agora will receive a portion of the resulting revenue. Under the agreement, Agora will also have the ability to purchase the hosted miners in a “virtual swap” transaction wherein Agora pays for replacement equipment and in turn have the mining revenue from the hosted miners routed to its digital account. Agora’s agreement gives it limited ability to control the initial mining efforts or oversee the operations. Further the equipment to be used will also include new state-of-the art miners using immersion technology to cool the computer hardware. If this technology fails to work as anticipated, it will adversely affect our periodic results during traditionally slower shipping periodsfuture operations. Further Agora’s agreement is ambiguous, provides no remedies and winter months.is subject to possible legal uncertainties.

In the trucking industry, revenue generally follows a seasonal pattern which may affect our operating results. Operating levelsBecause of the oil industryreliance on third-party mining pool service providers for Agora’s mining, such pools’ operations may have a negative impact on Agora’s results of operations.

The third party hosting company has arranged Agora’s Bitcoin mining operations using a mining pool, in which multiple Bitcoin mining operators agree to join together and if any of them are rewarded Bitcoin for mining a block on the blockchain, the pool participants receive a portion of such reward based on the computing power contributed to mining that block. If Agora is able to participate in a mining pool, it would receive Bitcoin mining rewards from its mining activity through a third-party mining pool operator. Mining pools allow miners to combine their processing power, increasing their chances of solving a block and getting paid by the network. Should the pool operator’s system suffer downtime due to a cyber-attack, software malfunction or other similar issues, it will negatively impact Agora’s ability to mine and receive revenue. Furthermore, Agora is dependent on the accuracy of the mining pool operator’s record keeping to accurately record the total processing power provided to the pool for a given Bitcoin mining application in order to assess the proportion of that total processing power Agora provided. Agora would have limited means of recourse against the mining pool operator if we determine the proportion of the reward paid out to it by the mining pool operator is incorrect, other than leaving the pool. If Agora is unable to consistently obtain accurate proportionate rewards from its mining pool operators, it may experience reduced reward for its efforts, which would have an adverse effect on its business and operations.

Because of Agora’s focus on Bitcoin mining and the recent decline in the prices of Bitcoin and the cryptocurrency market generally, investors are subject to pricing risks, including “bubble” type risks and volatility.

Because of Agora’s dependence on Bitcoin, there may be adverse effects on its operational results when the value of Bitcoin drops. Bitcoin prices have historically been lower in the winter months becausevolatile and are impacted by a variety of adverse winter weather conditions. 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,factors. Furthermore, 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.

Weprices may be subject to various claimsfactors such as those that impact commodities, more so than business activities, which could be subjected to additional influence from fraudulent or illegitimate actors, real or perceived scarcity, and lawsuitspolitical, economic, regulatory or other conditions. Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the ordinary coursevalue of business,cryptocurrencies, or our share price, making their market prices more volatile or creating “bubble” type risks for the trading price of Bitcoin.

During 2021 and increasesthus far in 2022 the amounttrading price of Bitcoin has been volatile. Given the recent drastic and sustained decline of the prices of Bitcoin, it is possible that the prior higher prices which peaked in late 2021 were the product of a “bubble” similar to the housing market bubble of 2008, which would mean that the value previously ascribed to Bitcoin by members of the public were overinflated and the prices of Bitcoin, and the cryptocurrency market generally, could never return to those levels again. Accordingly, since the revenue Agora generates will depend on the price of Bitcoin and in turn, to some extent, on the success of the cryptocurrency market more generally, if the trading price of Bitcoin continues to experience a significant decline or severityremains at much lower levels than it had in late 2021, Agora could experience a similar decline in revenue. While a possible ability to obtain miners at reduced prices may counteract some of the negative impacts of the recent Bitcoin price decline, it may not be enough to offset the reduction in Agora’s revenue potential, and the long-term impacts remain uncertain. If this occurs, Agora’s results of operations and prospects could be materially adversely affected.

The Bitcoin that Agora mines may be subject to loss, damage, theft or restriction on access.

There is a risk that some or all of the Bitcoin that Agora mines could be lost or stolen. In general, Bitcoin is stored in Bitcoin storage sites commonly referred to as “wallets” by holders of Bitcoin which may be accessed to exchange a holder’s Bitcoin. Access to Agora’s Bitcoin could also be restricted by cybercrime (such as a denial of service attack). While Agora plans to take steps to attempt to secure the Bitcoin it holds, there can be no assurance its efforts to protect its Bitcoin will be successful.

Hackers or malicious actors may launch attacks to steal, compromise or secure Bitcoin, such as by attacking the Bitcoin network source code, exchange miners, third-party platforms, cold and hot storage locations or software, or by other means. Any of these claimsevents may adversely affect Agora’s operations and, lawsuitsconsequently, its ability to generate revenue and become profitable. The loss or destruction of a private key required to access Agora’s digital wallets may be irreversible and Agora may be denied access for all time to its Bitcoin holdings. Agora’s loss of access to its private keys or its experience of a data loss relating to its digital wallets could adversely affect us.its business.

Bitcoin is controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which they are held, which wallet’s public key or address is reflected in the network’s public blockchain. Agora will be required to publish the public key relating to digital wallets in use when it verifies the receipt of transfers and disseminate such information into the network, but Agora will need to safeguard the private keys relating to such digital wallets. To the extent such private keys are lost, destroyed or otherwise compromised, Agora will be unable to access its Bitcoin rewards and such private keys may not be capable of being restored by any network. Any loss of private keys relating to digital wallets used to store Agora’s mined Bitcoin could have a material adverse effect on its results of operations and ability to continue as a going concern, which could have a material adverse effect on its business, prospects or operations and potentially the value of any Bitcoin it mines. For example, the New York Times reported in January 2021 that about 20% of existing Bitcoin appears to be “lost” due to password issues.

Incorrect or fraudulent Bitcoin transactions may be irreversible.

Bitcoin transactions are irrevocable and stolen or incorrectly transferred Bitcoin may be irretrievable. As a result, any incorrectly executed or fraudulent Bitcoin transactions, such as a result of a cybersecurity breach against Agora’s Bitcoin holdings, could adversely affect Agora’s investments and assets. This is because Bitcoin transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the Bitcoin from the transaction. Once a transaction has been verified and recorded in a block that is added to a blockchain, an incorrect transfer of Bitcoin or a theft thereof generally will not be reversible and Agora may not have sufficient recourse to recover its losses from any such transfer or theft. Further, it is possible that, through computer or human error, or through theft or criminal action, Agora’s Bitcoin rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. If an errant or fraudulent transaction in Agora’s Bitcoin were to occur, Agora would have very limited means of seeking to reverse the transaction or seek recourse. To the extent that Agora is unable to recover its losses from such action, error or theft, such events could have a material adverse effect on its business.

Agora will rely on one or more third parties for depositing, storing and withdrawing the Bitcoin it mines, which could result in loss of assets, disputes and other liabilities or risks which could adversely impact its business.

Agora currently uses a Coinbase digital wallet to store the Bitcoin it mines, although it may change to another digital wallet provider or use multiple providers at any time. In order to own, transfer and use Bitcoin on the blockchain network, Agora must have a private and public key pair associated with a network address, commonly referred to as a “wallet”. Each wallet is associated with a unique “public key” and “private key” pair, each of which is a string of alphanumerical characters. To deposit Bitcoin into its digital wallet, Agora must “sign” a transaction that consists of the private key of the wallet from where the Bitcoin is being transferred, the public key of a wallet that Coinbase controls and provides to Agora, and broadcast the deposit transaction onto the underlying blockchain network. Similarly, to withdraw Bitcoin from its Coinbase account, Agora must provide Coinbase with the public key of the wallet that the Bitcoin are to be transferred to, and Coinbase then “signs” a transaction authorizing the transfer. In addition, some Bitcoin networks require additional information to be provided in connection with any transfer of Bitcoin.

A number of errors or other adverse events can occur in the process of depositing, storing or withdrawing Bitcoin into or from Coinbase, such as typos, mistakes, or the failure to include the information required by the blockchain network. For instance, a user may incorrectly enter Agora’s wallet’s public key or the desired recipient’s public key when depositing and withdrawing Bitcoin. Additionally, Agora’s reliance on third parties such as Coinbase and the maintenance of keys to access and utilize its digital wallet will expose it to enhanced cybersecurity risks from unauthorized third parties deploying illicit activities such as hacking, phishing and social engineering, notwithstanding the security systems and safeguards employed by Agora and others. Cyberattacks upon systems across a variety of industries, including the cryptocurrency industry, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded, and organized groups and individuals. For example, attacks may be designed to deceive employees and service providers into releasing control of the systems on which Agora depends to a hacker, while others may aim to introduce computer viruses or malware into such systems with a view to stealing confidential or proprietary data. These attacks may occur on Agora’s digital wallet or the systems of its third-party service providers or partners, which could result in asset losses and other adverse consequences. Alternatively, Agora may inadvertently transfer Bitcoin to a wallet address that it does not own, control or hold the private keys to. In addition, a Bitcoin wallet address can only be used to send and receive Bitcoin, and if the Bitcoin is inadvertently sent to an Ethereum or other cryptocurrency wallet address, or if any of the foregoing errors occur, all of the Bitcoin will be permanently and irretrievably lost with no means of recovery. Such incidents could result in asset loss or disputes, any of which could materially adversely affect Agora’s business.

If Coinbase or another Bitcoin exchange where Agora deposits its Bitcoin experiences financial difficulties, there is a risk that creditors of the exchange will be able to treat its Bitcoin as an asset of the exchange which may result in a loss of some or all of its Bitcoin.

In its Quarterly Report for the quarter ended March 31, 2022, filed with the SEC on May 10, 2022 (the “Coinbase 10-Q”), Coinbase Global, Inc. (“Coinbase”) disclosed that uncertainties in or changes to regulatory or financial accounting standards could result in the need to change Coinbase’s accounting methods and restate its financial statements and impair its ability to provide timely and accurate financial information, which could adversely affect its financial statements, result in a loss of investor confidence, and more generally impact its business, operating results, and financial condition. Coinbase’s disclosure caused many retail customers concern that their cryptocurrency assets on the exchange remain at a high risk of loss in the event of the exchange’s bankruptcy since an unsecured creditor typically loses most of their funds if the exchange declares bankruptcy. Coinbase went on to disclose that digital assets it holds on behalf of its customers could be subject to bankruptcy proceedings brought against Coinbase. Agora uses Coinbase to store the Bitcoin it mines. As a result of recent disclosure in the Coinbase 10-Q alerting investors to this possible risk, Agora has decided to no longer permit Coinbase or other exchanges to have access to its private key to its Bitcoin holdings. Agora believes this means it will be treated as a traditional escrow account which would impair the rights of the creditors of the exchange and protect Agora’s Bitcoin. However, no court has decided this and it is possible that one or more courts may disagree with Agora’s position and Agora could sustain losses, which losses may be material.

If a malicious actor or botnet obtains control of more than 50% of the processing power on the Bitcoin network, such actor or botnet could manipulate blockchains to adversely affect Agora, which would adversely affect Agora.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining Bitcoin, it may be able to alter blockchains on which transactions of Bitcoin reside and rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new units or transactions using such control. The malicious actor could “double-spend” its own Bitcoin (i.e., spend the same Bitcoin in more than one transaction) and prevent the confirmation of other users’ transactions for as long as it maintained control. To the extent that such malicious actor or botnet does not yield its control of the processing power on the network or the Bitcoin community does not reject the fraudulent blocks as malicious, reversing any changes made to blockchains may not be possible. The foregoing description is not the only means by which the entirety of blockchains or Bitcoin may be compromised but is only an example. Although there are no known reports of malicious activity or control of blockchains achieved through controlling over 50% of the processing power on the network, it is believed that certain mining pools may have exceeded the 50% threshold in Bitcoin. The possible crossing of the 50% threshold indicates a greater risk that a single mining pool could exert authority over the validation of Bitcoin transactions. If such a development were to occur, the public may lose confidence in the Bitcoin blockchain, and blockchain technology more generally. This would likely have a material and adverse effect on the price of Bitcoin, which could have a material adverse effect on Agora’s business, financial results and operations, and harm investors.

Current interpretations require the regulation of Bitcoin under the Commodity Exchange Act by the Commodity Futures Trading Commission, and Agora may be required to register and comply with such regulations. Any disruption of Agora’s operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

Current and future legislation, regulation by the Commodity Futures Trading Commission (the “CFTC”) and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which Bitcoin is treated for classification and clearing purposes. In particular, derivatives on these assets are not excluded from the definition of “commodity future” by the CFTC. Agora cannot be certain as to how future regulatory developments will impact the treatment of Bitcoin under the law.

Bitcoins have been deemed to fall within the definition of a commodity and Agora may therefore be required to register and comply with additional regulation under the Commodity Exchange Act, including additional periodic report and disclosure standards and requirements. Moreover, Agora may be required to register as a commodity pool operator and to register as a commodity pool with the CFTC through the National Futures Association. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting Agora. If Agora determines not to comply with such additional regulatory and registration requirements, Agora may seek to cease certain of its operations. Any such action may adversely affect Agora.

Additionally, governments may develop and deploy their own blockchain-based cryptocurrencies, which may have a material adverse impact on Bitcoin’s price and utility.

We are exposedRisks Relating to various claims andOur 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 commercial disputes, personal injury,protection of our intellectual property damage, environmental liabilityrights.

As previously disclosed, in April 2021, a federal jury found in our favor on three claims and awarded us damages in our lawsuit against Walmart Inc. and judgment was entered in our favor that same month. For more information including disclosure on recent events, see Item 3. “Legal Proceedings” in this Report.

If Walmart is unsuccessful in the District Court, we expect it will appeal. 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.

General Risks

Because the COVID-19 pandemic has had a material adverse effect on crude oil prices and the economy, the uncertainty relating to its continuation may have a future 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 had a profound impact on the U.S. and global economy, disrupting global supply chains and creating significant volatility in the financial markets.

While COVID-19 seems to no longer threaten the economy as it did, supply chain shortages seem to have evolved from COVID-19. Moreover, the risk of a serious new COVID-19 strain or other serious virus evolving remains.

Disruptions and/or uncertainties related to a new strain of COVID-19 for a sustained period of time could have a material adverse impact on our business, results of operations and financial condition. Supply chain delays and shortages of Bitcoin miners and other matters. Proceedings include claims by third parties, and certain proceedings have been certifiedequipment such as transformers may adversely affect Agora especially its plans to fully develop its Bitcoin mining business. Increased transportation, electrical supply, labor 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 liabilityother costs which may result from COVID-19 could have a material adverse effect on our operating results, financial condition and liquidity.results of operations.

IfFurthermore, the effect of another serious COVID-19 outbreak 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 commenceneed it, or at all.

Because of the Russian invasion of Ukraine, as well as high inflation and increase Federal Reserve interest rates in response, the effect on the capital markets and the economy is uncertain, and we may have to deal with a recessionary economy and economic uncertainty including possible adverse effects upon the oil and gas industry and Bitcoin mining industry.

As a result of the Russian invasion of Ukraine, certain events are beginning to affect the global and United States economy including increased inflation, Federal Reserve interest rate increases in response, substantial increases in the prices of oil and gas, dramatic declines in the capital markets and in the price of Bitcoin, and large Western companies ceasing to do business in Russia. The duration of this war and its impact are at best uncertain, and continuation may result in Internet access issues if Russia, for example, began illicit cyber activities. Ultimately the economy may turn into a recession with uncertain and potentially severe impacts upon public companies and us. We cannot predict how this will affect the market for oil and gas and related services or on Bitcoin, but the impact may be adverse.

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 for each of our subsidiaries particularly with the planned spin-offs. 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 produce oil from a drilling, thenunless we replaceerode our reserves with new reserves and develop those reserves, our reserves and production will decline,competitive advantage, which would adversely affect our future cash flowsbusiness. Competition for qualified personnel possessing the skills necessary to implement our strategy is intense, and resultswe 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 operations. our executive officers.

Once we start oil production, then producing oil reservoirs generally are characterized by declining production rates that vary dependingOur success will depend to a significant degree upon reservoir characteristicsthe continued efforts of our key management, engineering and other factors. Unlesspersonnel, many of whom would be difficult to replace. In particular, 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 thereforebelieve that our future cash flow and results of operations, aresuccess is highly dependent on Randy May, our success in efficiently developingChief Executive Officer, Jay Puchir, our current reservesChief Financial Officer, William Hoagland, Chief Executive Officer of Agora, and economically finding or acquiring additional recoverable reserves. We may not be able to develop, find or acquire sufficient additional reserves to replaceBritt Swann, Chief Financial Officer of Agora. If any members of our currentmanagement team leave our employment, our business could suffer, and future production. the share price of our common stock could decline.

If we are unable to replacecannot manage our current and future production, the value ofgrowth effectively, our reserves will decrease, and our business, financial condition and results of operations would be materially and adversely affected.

Drilling forWe have recently experienced significant growth commencing with and producing crudefollowing the Banner acquisition. Our business model relies on our rapidly growing our oil are high risk activitiesand gas drilling and transportation businesses, as well as our newer Bitcoin mining operations through Agora. 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 withmany uncertainties that 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 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, 2022, 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 orresults of operations.

Our proposed drilling and operating activities will be 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:results.

AnyWe 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 risks can causedigital 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 losses, including personal injuryadditional expenses, result in potential liability or loss of life; severereputational 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.

Insurance against all operational risks may not be available to us or not affordable for us. Additionally, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. The occurrence of an event that is not covered in full or in part by insurance couldotherwise have a material adverse impacteffect on our business activities, financial condition and results of operations. We only have standard business liability and casualty insurance asoperating results.

For example, the operator of the dateColonial Pipeline was forced to pay $4.4 million in ransom to hackers as the result of this Annual Report. We will not paya cyberattack disabling the pipeline for or require,several days in May 2021. The attack also resulted in gasoline price increases and cannot afford, insurance covering drilling, productionshortages across the East Coast of the United States. As we depend on the availability and storageprice of oil and establishing oil rigs until we receive sufficient funding from this Annual Report.

The extension ofgasoline in 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 duringtransportation business, 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 abilityto 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 ansignificant increase in the costprice and/or shortage 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.

We are subject to environmental, health and safety laws and regulations and related compliance expenditures and liabilities.

Once commenced, our oil drilling and production operations will be subject to numerous and significant federal, state, local and foreign laws, and other requirements governing or relating to the environment. Our facilities could experience incidents, malfunctions and other unplanned events,gasoline such as spills of hazardous materials that may result in personal injury, penalties and property damage. In addition, certain environmental laws may result in liability, regardless of fault, concerning contamination at a range of properties, including properties currently leased or operated by us and properties where we disposed of, or arranged for disposal of, waste and other hazardous materials. As such,experienced from the operation of our facilities carries an inherent risk of environmental liabilities and may result in our involvement from time to time in administrative and judicial proceedings relating to such matters. While we will implement environmental management programs designed to continually improve environmental, health and safety performance, we cannot assure you that such liabilities including significant required capital expenditures, as well as the costs for complying with environmental laws and regulations, will notMay 2021 cyberattack would have a material adverse effect on our business financial condition, results ofand operating results. Additionally, our Agora operations and cash flows.

Oil prices are volatile.  Once we commence oil production, 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. 

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The prices we receive for our oil production will heavily influence our revenue, profitability, access to capital, future rate of growth and carrying value of our properties. Oil is a commodity and its price may fluctuate widely in response to relatively minor changes in the supply of and demand for oil and market uncertainty. 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.

Historically, oil prices have been volatile. The prices we receive for our production, and the levels of our production, depend on numerous factors beyond our control,the functioning of Bitcoin mining computers and digital wallets maintained by third parties, which include the following: 

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

Fuel conservation measures, alternative fuel requirements, 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.

Climate change legislation and regulations restricting or regulating emissions of greenhouse gases (“GHGs”) could result in increased operating costs and reduced demand for the oil and natural gas while the potential physical effects of climate change could disrupt our production and cause us to incur significant costs in preparing for or responding to those effects. 

Climate change continues to attract considerable public and scientific attention. As a result, numerous proposals have been made and are likely to continue to be made at the international, national, regional, and state levels of government to monitor and limit emissions of GHGs. While no comprehensive climate change legislation has been implemented at the federal level, the Environmental Protection Agency or “EPA” and states or groupings of states have pursued legal initiatives in recent years that seek to reduce GHG emissions through efforts that include consideration of cap-and-trade programs, carbon taxes, GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources. In particular, the EPA has adopted rules under authority of the U.S. Clean Air Act of “CAA” that, among other things, establish certain permit reviews for GHG emissions from certain large stationary sources, which reviews could require securing permits at covered facilities emitting GHGs and meeting defined technological standards for those GHG emissions.

The EPA has also adopted rules requiring the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, including, among others, onshore production. 

Federal agencies also have begun directly regulating emissions of methane, a GHG, from oil and natural gas operations. In June 2016, the EPA published a final rule establishing NSPS Subpart OOOOa, that requires certain new, modified or reconstructed facilities in the oil and natural gas sector to reduce these methane gas and VOC emissions. However, in April 2017, the EPA announced that it would review this 2016 methane rule and would initiate reconsideration proceedings to potentially revise or rescind portions of the rule. Subsequently, effective June 2, 2017, the EPA issued a 90-day stay of certain requirements under the methane rule, but this stay was vacated by a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit on July 3, 2017 and on August 10, 2017, the D.C. Circuit rejected petitions for an en banc review of its July 3, 2017 ruling. In the interim, on July 16, 2017, the EPA issued a proposed rule that would stay subpart OOOOa for two years, but this proposed rule is not yet final and may be subject to legal challenges. The court affirmed that the EPA must go through the formal rule change procedures under the Administrative Procedure Act (“APA”) to amend the 2016 rule on methane gas emissions. The EPA continued to evaluate the rule and proposed additional amendments. On October 15, 2018, EPA proposed rule changes to reduce restrictions on methane emissions from oil and gas production. 

The Bureau of Land Management (“BLM”) also finalized rules regarding the control of methane emissions rules in November 2016 (“Revision Rule”) that apply to oil and natural gas exploration and development activities on public and tribal lands. The rules seek to minimize venting and flaring of emissions from storage tanks and other equipment, and also impose leak detection and repair requirements. The U.S. Department of the Interior attempted to suspend this rule, however on February 22, 2018, a U.S. District Court blocked the suspension. On September 18, 2018, BLM releases the final version of the Revision Rule, which was published in the Federal Register on September 28, 2018 and was to go into effect on November 27, 2018. On November 27, 2018, the attorneys general for California and New Mexico filed suit alleging BLM violated the Administrative Procedure Act, Mineral Leasing Act, and National Environmental Policy Act. On September 28, 2018, 18 environmental groups also legally challenged the Revision Rule.

The BLM rules on rolling back methane gas emissions under the Revision Rule remains in place at this time, but the future status of the rule change is unclear.

President Trump’s Administration has rolled back, cancelled or sought to roll back or cancel numerous rules restricting GHGs in the energy industry. These efforts have been mostly challenged in court. Whether the roll back of environmental regulations to cap or reduce GHGs will continue or survive legal challenges, as well as the impact on these rollback efforts by Democratic Party taking control of the U.S. House of Representatives in 2019, is uncertain as of the date of this prospectus. Company believes there is growing public support for the anti-GHG/environmental movement that may result in future changes in regulation, more anti-GHG rulings in courts and legal requirements for oil and gas production that may reduce the demand for oil and gas in the future, perhaps near future, as well as making oil and gas production more expensive and difficult in terms of regulation to conduct. The success of President Trump appointing conservative jurists to federal courts since 2017 presents another possible factor in future GHG regulation, which factor is not possible to ascertain in terms of impact on GHG regulation as of the date of this prospectus. In December 2015, the United States joined the international community at the 21^st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France that prepared an agreement requiring member countries to review and “represent a progression” in their intended nationally determined contributions, which set GHG emission reduction goals every five years beginning in 2020. This “Paris Agreement” was signed by the United States in April 2016 and entered into force in November 2016; however, this agreement does not create any binding obligations for nations to limit their GHG emissions. On June 1, 2017, President Donald Trump announced that the United States plans to withdraw from the Paris Agreement and to seek negotiations either to re-enter the Paris Agreement on different terms or to establish a new framework agreement. The Paris Agreement provides for a four-year exit date of November 2020. The United States’ adherence to the exit process and/or the terms on which the United States may re-enter the Paris Agreement or a separately negotiated agreement are unclear at this time. 

The adoption and implementation of any international, federal or state legislation or regulations that require reporting of GHGs or otherwise restrict emissions of GHGs could result in increased compliance costs or additional operating restrictions and could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 

Increasing concentrations of GHG in the Earth’s atmosphere may in all likelihood and based on current and widespread scientific opinion produce climate changes that have significant, perhaps catastrophic, physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events. If any such climatic events were to occur, they could have an adverse effect on our financial condition and results of operations and the financial condition and operations of our end user customers and oil and gas product consumers.  Climate changes may force radical, unexpected changes in regulation of GHG and energy industries like oil and gas. 

RISK FACTORS RELATING TO OUR COMMON STOCK AND WARRANTS

Our common stock is quoted on the OTCQB, which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTCQB, which is a significantly more limited trading market than the New York Stock Exchange, or the NASDAQ Stock Market. The quotation of the Company’s shares on the OTCQB may result in a less liquid market available for existing and potential shareholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

There is limited liquidity on the OTCQB, which may result in stock price volatility and inaccurate quote information.

When fewer sharesenhanced risks of a security are being traded on the OTCQB, price volatility may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may becyberattack as a lower likelihood of one’s orders for shares of our common stock being executed, and current prices may differ significantly from the price one was quoted at the time of one’s order entry.result.

If we are unable to adequately fund our operations, we may be forced to voluntarily file for deregistration of our common stock with the SEC.

Compliance with the periodic reporting requirements required by the SEC consumes a considerable amount of both internal, as well external, resources and represents a significant cost for us. If we are unable to continue to devote adequate funding and the resources needed to maintain such compliance, while continuing our operations, we could be forced to deregister with the SEC. After the deregistration process, our common stock would only be tradable on the “Pink Sheets” and could suffer a decrease in or absence of liquidity.

Because we became public by means of a “reverse merger”, we may not be able to attract the attention of major brokerage firms.

Additional risks may exist since we became public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. We cannot assure you that brokerage firms will want to conduct any secondary offerings on behalf of our Company in the future.

Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings.

Of 26,364,099 shares of common stock outstanding as of June 8, 2022, approximately 24,136,165 shares are held by investors who are not our affiliates or holders of restricted stock. Of these 24,136,165 shares, 22,989,885 shares are unrestricted freely tradeable stock and 1,146,280 shares are being held as restricted shares. The remaining shares may be sold subject to the volume limits of Rule 144 which limits sales by any affiliate to the greater of 1% of outstanding shares in any three-month period or the average weekly trading volume over a four-week period. Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a publican offering of our securities.

Our common stock is thinly traded, so you may be unable to sell at or near asking prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

Currently, the Company’s common stock is quoted in the OTCQB and future trading volume may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in OTCQB stocks and certain major brokerage firms restrict their brokers from recommending OTCQB stocks because they are considered speculative, volatile and thinly traded. The OTCQB market is an inter-dealer market much less regulated than the major exchanges andprice of our common stock is subject to abuses, volatility, and shorting. Thus, there is currently no broadly followed and established trading market for the Company’s common stock. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there.

Our common stock is subject to price volatility unrelated to our operations.

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company’s competitors or the Company itself. In addition, the OTCQB is subject to extreme price and volume fluctuations in general. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to theirour operating performance, and could have the same effect on our common stock.

We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

Our common stock is currently quoted on the OTCQB. Our common stock is subject to the requirements of Rule 15(g)-9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser’s consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on a national exchange that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.

Because we do not intend to pay dividends, shareholders will benefit from an investment in our common stock only if it appreciates in value.

We have never declared or paid any cash dividends on our preferred stock or common stock. For the foreseeable future, it is expected that earnings, if any, generated from our operations will be used to finance the growth of our business, and that no dividends will be paid to holders of the Company’s common stock. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There can be no guarantee that our common stock will appreciate in value.

The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.

The trading price of our common stock is likely to be highly volatile and could fluctuate in response to a number of factors, such as:some of which may be outside our control, including but not limited to, the following factors:

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market 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 successful, could result in substantial costs and diversion of our management’s attention and Company resources, which could harm our business and financial condition.

Investors mayYou will experience dilution of their ownership interests becauseif we issue additional equity securities in future financing transactions or under derivative securities outstanding as of the future issuancedate of additionalthis Report.

We have stock options and warrants outstanding that are exercisable for shares of our common stock.

We intend to continue to seek financing through the issuancestock, and as a result of equity or convertibleour recent sale of securities to fund our operations. InDPL, DPL could convert additional shares of the Series A and/or exercise the Warrant it holds in the future we may also issue additional equity securities resulting inand cause further dilution to the dilutionCompany’s other investors. When it becomes vested, the Warrant alone will be exercisable into 49% of the ownership interests of our present shareholders. We may also issue additionaloutstanding common stock. To the extent that such outstanding securities are converted or exercised into shares of our common stock, or other securities that are convertible into or exercisable forissued in future financings, our common stockinvestors may experience dilution with respect to their investment in connection with hiring or retaining employees, future acquisitions or for other business purposes. The future issuance of any such additional shares of common stock will result in dilution to our shareholders and may create downward pressure on the trading price of our common stock.us.

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 beyond our control, including:

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

Changes in the fair valueBecause of the warrant liabilitiesderivative 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, we are required to report the expense, which increases our actual operating loss. Contrarily a price decrease in a given quarter will cause to report income. The risk is investors will react to our reported bottom line, which will increase volatility or other factors impacting the fair value determined by the Black Scholes model will impact other income or expense.

Our board of directors has authorized the designation of preferred stock without shareholder approval that have voting rights that adversely affect the voting power of holders of the Company’s common stock and may have an adverse effect on itsin our stock price.

We are authorized toBecause we can issue “blank check” preferred stock without stockholder approval, whichit could adversely impact the rights of holders of our common stock.

OurUnder our Articles of Incorporation, authorize ussubject to issuethe approval of the Series A holder(s), our Board of Directors, may approve an issuance of up to 5,0005,000,000 shares of “blank check:check” preferred stock.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 priority or liquidation premiumsrights 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 market price if any, 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.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.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Ecoark Holdings Headquarters

The Company does not own any real property. It currently leases office space in Frisco, Texas.San Antonio, Texas for its headquarters but recently subleased the office space out to a new tenant as the Company is minimizing its office space to save costs. The current property lease runs through November 2023. An oil and gas subsidiary owns a property in Ferriday, LA which is considered adequateused for administrative operations and this lease runs through April 2021.large equipment storage. In addition, the Company’s subsidiarytransportation division leases space in Kilgore, Texas for a term of 42 months through September 30, 2022.

Cherry et al OGML including shallow drilling rights was acquired by Shamrock from Hartoil Company on July 1, 2018.

O’Neal Family OGMLBitcoin Mining Facilities

Bitstream leases 20 acres of land for an initial term of 10 years and Weyerhaeuser OGML including shallow drilling rights were acquired by White River on July 1, 2019 from Livland, LLC and Hi-Tech Onshore Exploration, LLC respectivelya subsequent term of 10 years to operate Bitcoin mining equipment in West Texas in exchange for a $125 drilling creditmonthly payments equal to be applied by Livland, LLC on subsequent drilling operations.3% of the electricity costs. If Bitstream does not use the leased land for 12 consecutive months, the lease will terminate.

Taliaferro Family OGML including shallow drilling rightsAgora owns a separate parcel of 20 acres of in West Texas which it purchased for $250,000 on January 3, 2022, of which $125,000 was acquiredpaid for by White River on June 10, 2019 from Lagniappe Operating, LLC.PPM to assist in the funding as Agora goes through the registration statement process. Agora has no obligation to repay PPM and they have no ownership of the land. Agora has an option to sell back this land to the sellers at $400 per acre upon cessation of the land being used as a data center. Agora intends to use the land for its Bitcoin mining operations.

Kingrey Family OGML including both shallowOil and deep drilling rights was entered into by White RiverGas Properties

As of March 31, 2022, our oil and gas acreage is comprised of approximately 30,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi. We acquired certain oil and gas properties as part of the Banner acquisition on March 27, 2020, and in FY 2022 and the Kingrey Familyfiscal year ended March 31, 2021 (“FY 2021”) we continued to focus on April 3, 2019.expanding our exploration and production footprint and capabilities by acquiring real property and working interests in oil and gas mineral leases.

Peabody Family OGML including both shallow and deep drilling rightsThe Company had an analysis completed by an independent petroleum consulting company as of March 31, 2022. Based on this analysis, there was acquired by White River on June 18, 2019 from SR Acquisition I, LLC, a subsidiaryno impairment noted to our proved reserves as of Sanchez Energy Corporation, for a 1% royalty retained interest in conjunction with White River executing a lease saving operation in June 2019.March 31, 2022.

Oil and Natural Gas Reserves

As of March 31, 2020,2022 and 2021, all of our proved oil and natural gas reserves were located in the United States, specifically 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, therefore there is no comparative information for March 31, 2019.

The following tables set forth summary information with respect to our proved reserves as of March 31, 2020.2022 and 2021. All reserves are located in the United Stated. 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.Report.

Proved reserves as of March 31, 2020:2022: