UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒~~(Mark One)~~

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

For the quarterly period ended ~~December 31, 2021~~June 30, 2022

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

For the transition period from _______ to _______

Commission File Number 001-40701

ECOARK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada		30-0680177
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

303 Pearl Parkway, Suite 200, San Antonio, TX		78215
(Address of principal executive offices)		(Zip Code)

(800) 762-7293

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which
registered

Common Stock

ZEST

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

As of ~~February 11,~~August 12, 2022, there were ~~26,364,099~~26,466,980 shares of common stock, par value $0.001 per share, outstanding.

Ecoark Holdings, Inc.

INDEX

		Page No.
Part I. Financial Information		1

Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4554

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6975

Item 4.	Controls and Procedures	6975

Part II. Other Information		7076

Item 1.	Legal Proceedings	7076

Item 1A.	Risk Factors	7076

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7076

Item 3.	Default Upon Senior Securities	7076

Item 4.	Mine Safety Disclosures	7076

Item 5.	Other Information	7076

Item 6.	Exhibits	7177

Signatures		7278

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~DECEMBER 31, 2021~~June 30, 2022

Table of ~~Contents~~Content

Unaudited Condensed Consolidated Balance Sheets	2
Unaudited Condensed Consolidated Statements of Operations	3
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	4
Unaudited Condensed Consolidated Statements of Cash Flows	5
Notes to Unaudited Condensed Consolidated Financial Statements	6 - 4353

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~DECEMBER 31, 2021~~JUNE 30, 2022 (UNAUDITED) AND MARCH 31, ~~2021~~

~~(in thousands, except per share data)~~2022

	DECEMBER 31,			MARCH 31,
	2021			2021				JUNE 30,			MARCH 31,
	(unaudited)							2022			2022
								(unaudited)
ASSETS							ASSETS

CURRENT ASSETS:
Cash ($85 pledged as collateral for credit as of December 31, 2021 and March 31, 2021, respectively and $250 restricted as of December 31, 2021 and March 31, 2021, respectively)	$	864		$	1,316
Accounts receivable, net of allowance of $209 and $709 as of December 31, 2021 and March 31, 2021, respectively		716			1,136
Inventories - Crude Oil		165			122
Cash ($85,000 pledged as collateral for credit as of June 30, 2022 and March 31, 2022, respectively)								$	8,262,263		$	184,524
Accounts receivable									105,983			164,388
Intangible assets, cryptocurrencies									10,145			19,267
Prepaid expenses and other current assets		2,299			1,995				2,683,406			1,388,083
Current assets held for sale									1,513,305			1,623,864

Total current assets		4,044			4,569				12,575,102			3,380,126

NON-CURRENT ASSETS:
Property and equipment, net		10,456			3,695				8,118,523			9,733,109
Intangible assets, net		1,804			2,065				1,652,088			1,716,331
Intangible assets, digital currency		16			-
Power development costs		2,000			-				2,000,000			2,000,000
Oil and gas properties, full cost-method		11,727			12,352
Capitalized drilling costs, net of depletion		2,056			2,567
Secured note receivable and accrued interest receivable									4,258,385			-
Goodwill		10,225			10,225				4,900,873			4,900,873
Right of use assets - financing leases		337			445				264,535			301,126
Right of use assets - operating leases		849			479				480,084			542,309
Non-current assets of discontinued operations		-			194
Other assets									25,948			25,948
Non-current assets of discontinued operations/held for sale									9,375,470			13,377,421

Total non-current assets		39,470			32,022				31,075,906			32,597,117

TOTAL ASSETS	$	43,514		$	36,591			$	43,651,008		$	35,977,243

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	2,567		$	3,614			$	3,069,773		$	3,097,562
Accrued liabilities		1,919			3,591				3,785,453			1,729,424
Warrant derivative liabilities		4,410			7,213				4,712,162			4,318,630
Current portion of long-term debt		698			1,056				719,911			1,181,021
Note payable - related parties		-			578
Current portion of lease liability - financing leases		144			141				141,934			145,174
Current portion of lease liability - operating leases		326			212				153,330			169,512
Current liabilities of discontinued operations		-			9
Current liabilities of discontinued operations/held for sale									857,333			1,133,653

Total current liabilities		10,064			16,414				13,439,896			11,774,976

NON-CURRENT LIABILITIES
Lease liability - financing leases, net of current portion		186			295				117,236			149,884
Lease liability - operating leases, net of current portion		554			309				332,131			378,515
Long-term debt, net of current portion		143			1,012				76,428			135,314
Asset retirement obligations		1,627			1,532
Non-current liabilities of discontinued operations/held for sale									920,676			1,403,966

Total non-current liabilities		2,510			3,148				1,446,471			2,067,679

Total Liabilities		12,574			19,562				14,886,367			13,842,655

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT) (Numbers of shares rounded to thousands)
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding as of December 31, 2021 and March 31, 2021, respectively		-			-
Common stock, $0.001 par value, 40,000 and 30,000 shares authorized, 26,364 and 22,705 shares issued and 26,247 and 22,589 shares outstanding as of December 31, 2021 and March 31, 2021, respectively		26			23
MEZZANINE EQUITY
Series A Convertible Redeemable Preferred Stock, $0.001 par value; 5,000,000 shares authorized; 1,200 and 0 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively									11,806,584			-

STOCKHOLDERS’ EQUITY (DEFICIT)

Series A Preferred stock, $0.001 par value; 5,000,000 shares authorized; 1,200 and 0 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively									-			-
Common stock, $0.001 par value, 40,000,000 shares authorized, 26,466,980 and 26,364,099 shares issued and 26,350,000 and 26,247,000 shares outstanding as of June 30, 2022 and March 31, 2022, respectively									26,467			26,364
Additional paid in capital		180,513			167,588				188,837,222			183,246,061
Accumulated deficit		(147,635	)		(148,911	)			(169,064,738	)		(158,868,204	)
Treasury stock, at cost		(1,671	)		(1,671	)			(1,670,575	)		(1,670,575	)

Total stockholders’ equity before non-controlling interest		31,233			17,029				18,128,376			22,733,646
Non-controlling interest		(293	)		-				(1,170,319	)		(599,058	)

Total stockholders’ equity		30,940			17,029				16,958,057			22,134,588

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	43,514		$	36,591			$	43,651,008		$	35,977,243

See notes to condensed consolidated financial statements.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)~~

~~FOR THE NINE AND THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020~~

~~(in thousands, except per share data)~~

NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2021 2020 2021 2020
(unaudited) (unaudited) (unaudited) (unaudited)
CONTINUING OPERATIONS:

REVENUES $ 19,125 $ 10,056 $ 6,135 $ 4,465
COST OF REVENUES 10,693 6,644 3,527 3,218
GROSS PROFIT 8,432 3,412 2,608 1,247

OPERATING EXPENSES
Salaries and salaries related costs 8,316 5,001 4,478 1,384
Professional and consulting fees 906 652 524 154
Oilfield supplies and repairs 2,262 1,518 1,062 644
Selling, general and administrative costs 9,005 4,799 2,623 2,528
Depreciation, amortization, depletion, and accretion 2,340 1,133 602 509
Research and development - 630 - 264

Total operating expenses 22,829 13,733 9,289 5,483

LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES) (14,397 ) (10,321 ) (6,681 ) (4,236 )

OTHER INCOME (EXPENSE)
Change in fair value of derivative liabilities 15,295 (15,901 ) 10,979 481
Gain (loss) on exchange of warrants for common stock - 19,338 - 2,755
Loss on conversion of long-term debt and accrued expenses - (3,969 ) - -
Gain (loss) on disposal of fixed assets - (105 ) - -
Loss on abandonment of oil and gas property - (83 ) - -
Gain on disposal of ARO related to sale of oil and gas property 8 - - -
Gain on sale of oil and gas property 713 - - -
Forgiveness of debt - 1,850 - 1,850
Interest expense, net of interest income (636 ) (2,473 ) (19 ) (318 )
Total other income (expense) 15,380 (1,343 ) 10,960 4,768

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS AND (PROVISION) FOR INCOME TAXES 983 (11,664 ) 4,279 532

DISCONTINUED OPERATIONS:
Loss from discontinued operations - - - -
Gain on disposal of discontinued operations - - - -
Total discontinued operations - - - -

INCOME (LOSS) FROM OPERATIONS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES 983 (11,664 ) 4,279 532

BENEFIT (PROVISION) FOR INCOME TAXES - - - -

NET INCOME (LOSS) 983 (11,664 ) 4,279 532
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST 323 - 323 -

NET INCOME (LOSS) TO CONTROLLING INTEREST $ 1,306 $ (11,664 ) $ 4,602 $ 532
NET INCOME (LOSS) PER SHARE - BASIC $ 0.05 $ (0.58 ) $ 0.17 $ 0.02
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 24,728 19,950 26,364 21,300
NET INCOME (LOSS) PER SHARE – DILUTED (see NOTE 1) $ (0.57 ) $ 0.21 $ (0.24 ) $ 0.00
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED (see NOTE 1) �� 24,728 24,103 26,364 25,453

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021

	JUNE 30,
	2022			2021
CONTINUING OPERATIONS:
REVENUES	$	5,418,655		$	5,156,213
COST OF REVENUES		4,607,872			3,597,941
GROSS PROFIT		810,783			1,558,272

OPERATING EXPENSES
Salaries and salaries related costs		6,273,380			1,286,711
Professional and consulting fees		253,476			130,486
Selling, general and administrative costs		2,532,045			1,856,150
Depreciation, amortization, and impairment		148,805			252,179
Cryptocurrency impairment losses		9,122			-

Total operating expenses		9,216,828			3,525,526

LOSS FROM CONTINUING OPERATIONS BEFORE OTHER INCOME (EXPENSE)		(8,406,045	)		(1,967,254	)

OTHER INCOME (EXPENSE)
Change in fair value of derivative liabilities		(393,532	)		4,945,819
Gain (loss) on disposal of fixed assets		(950,024	)		-
Interest expense, net of interest income		(44,106	)		(585,499	)
Total other income (expense)		(1,387,662	)		4,360,320

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND DISCONTINUED OPERATIONS		(9,793,707	)		2,393,066

DISCONTINUED OPERATIONS:
(Loss) income from discontinued operations		(1,642,442	)		166,458
Gain on disposal of discontinued operations		711,505			-
Total discontinued operations		(930,937	)		166,458

(LOSS) INCOME FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES		(10,724,644	)		2,559,524

PROVISION FOR INCOME TAXES		-			-

NET (LOSS) INCOME		(10,724,644	)		2,559,524
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		571,261			-

NET (LOSS) INCOME TO CONTROLLING INTEREST	$	(10,153,383	)	$	2,559,524
Less: Preferred Stock Dividends		43,151			-

NET (LOSS) INCOME TO CONTROLLING INTEREST OF COMMON SHAREHOLDERS	$	(10,196,534	)	$	2,559,524

NET (LOSS) INCOME PER SHARE - BASIC
Continuing operations	$	(0.37	)	$	0.10
Discontinued operations		(0.04	)		0.01
	$	(0.41	)	$	0.11

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC		26,388,971			22,804,172

NET (LOSS) PER SHARE - DILUTED (see NOTE 1)	$	(0.41	)	$	(0.09	)

WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (see NOTE 1)		26,388,971			26,372,172

See notes to condensed consolidated financial statements.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER 31,~~JUNE 30, 2022 AND 2021 ~~AND 2020~~

~~(Dollar amounts and number of shares in thousands)~~

									Additional								Non-
	Preferred				Common Stock				Paid-In		Accumulated			Treasury			controlling
	Shares		Amount		Shares		Amount		Capital		Deficit			Stock			Interest			Total

Balance - March 31, 2021		-	$	-		22,705,775	$	22,705	$	167,587,659	$	(148,912,810	)	$	(1,670,575	)	$	-		$	17,026,979

Shares issued in the exercise of stock options, including cashless exercises		-		-		20,265		20		28,277		-			-			-			28,297
Shares issued for services rendered, net of amounts prepaid		-		-		114,796		114		674,886		-			-			-			675,000
Share-based compensation		-		-		-		-		399,173		-			-			-			399,173

Net income for the period		-		-		-		-		-		2,559,524			-			-			2,559,524

Balance - June 30, 2021		-	$	-		22,840,836	$	22,839	$	168,689,995	$	(146,353,286	)	$	(1,670,575	)	$	-		$	20,688,973

Balance - March 31, 2022		-	$	-		26,364,099	$	26,364	$	183,246,061	$	(158,868,204	)	$	(1,670,575	)	$	(599,058	)	$	22,134,588

Shares issued for commitment for preferred stock offering, net of expenses		-		-		102,881		103		193,313		-			-			-			193,416
Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid		-		-		-		-		5,215,287		-			-			-			5,215,287
Share-based compensation		-		-		-		-		182,561		-			-			-			182,561

Net loss for the period		-		-		-		-		-		(10,153,383	)		-			(571,261	)		(10,724,644	)
Preferred stock dividends		-		-		-		-		-		(43,151	)		-			-			(43,151	)

Balance - June 30, 2022		-	$	-		26,466,980	$	26,467	$	188,837,222	$	(169,064,738	)	$	(1,670,575	)	$	(1,170,319	)	$	16,958,057

Additional
Preferred Common Stock Paid-In Accumulated Treasury Non-controlling
Shares Amount Shares Amount Capital Deficit Stock Interest Total

Balance - March 31, 2020 1 $ - 17,175 $ 17 $ 135,424 $ (128,023 ) $ (1,671 ) $ - $ 5,747

Shares issued in the exercise of warrants, net of expenses - - 1,531 2 6,674 - - - 6,676
Shares issued in the exercise of stock options - - 89 - 349 - - - 349
Shares issued in conversion of debt and accrued interest - - 524 1 3,941 - - - 3,942
Shares issued in conversion of accounts payable and accrued expenses - - 93 - 677 - - - 677
Conversion of preferred shares (Series C) to common shares (1 ) - 308 - - - - - -
Share-based compensation - - - - 1,114 - - - 1,114

Net loss for the period - - - - - (21,181 ) - - (21,181 )

Balance - June 30, 2020 - - 19,720 20 148,179 (149,204 ) (1,671 ) - (2,676 )

Shares issued in the conversion of long-term debt and accrued interest - - 192 - 2,635 - - - 2,635
Shares issued services rendered - - 30 - 485 - - - 485
Shares issued in acquisition of oil and gas reserves and fixed assets - - 171 - 2,750 - - - 2,750
Shares issued in the exercise of warrants - - 1,088 1 5,575 - - - 5,576
Shares issued in the exercise of cashless stock options - - 1 - - - - - -
Share-based compensation - - - - 36 - - - 36

Net income for the period - - - - - 8,985 - - 8,985

Balance - September 30, 2020 - - 21,202 21 159,660 (140,219 ) (1,671 ) - 17,791

Shares issued in the exercise of warrants - - 376 - 2,106 - - - 2,106
Shares issued in registered direct offering, net of amount allocated to derivative liability
- - 889 1 3,010 - - - 3,011
Share-based compensation - - - - 419 - - - 419
Fractional adjustment - - 1 - - - - - -

Net income for the period - - - - - 532 - - 532

Balance - December 31, 2020 - $ - 22,468 $ 22 $ 165,195 $ (139,687 ) $ (1,671 ) $ - $ 23,859

Balance - March 31, 2021 - $ - 22,705 $ 23 $ 167,588 $ (148,911 ) $ (1,671 ) $ - $ 17,029

Shares issued in the exercise of stock options, including cashless exercises - - 20 - 28 - - - 28
Shares issued for services rendered - - 115 - 675 - - - 675
Share-based compensation - - - - 399 - - - 399

Net income for the period - - - - - 2,559 - - 2,559

Balance - June 30, 2021 - - 22,840 23 168,690 (146,352 ) (1,671 ) - 20,690

Shares issued for services rendered, net of amounts prepaid - - 45 - 92 - - - 92
Shares issued in registered direct offering, net of amount allocated to derivative liability - - 3,478 3 8,024 - - - 8,027
Share-based compensation - - - - 819 - - - 819
Fractional adjustment - - 1 - - - - - -

Net loss for the period - - - - - (5,855 ) - - (5,855 )

Balance - September 30, 2021 - - 26,364 26 177,625 (152,207 ) (1,671 ) - 23,773

Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid - - - - 2,281 - - - 2,281
Vesting of shares issued in prior quarter - - - - 114 - - - 114
Share-based compensation - - - - 493 - - - 493
Recognition of non-controlling interest
- - - - - (30 ) - 30 -

Net income (loss) for the period - - - - - 4,602 - (323 ) 4,279

Balance - December 31, 2021 - $ - 26,364 $ 26 $ 180,513 $ (147,635 ) $ (1,671 ) $ (293 ) $ 30,940

The accompanying notes are an integral part of these condensed consolidated financial statements.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021

~~FOR THE NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020~~

~~(in thousands, except per share data)~~

	JUNE 30,
	2022			2021
CASH FLOW FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net (loss) income	$	(10,196,534	)	$	2,559,524
Adjustments to reconcile net (loss) income to net cash used in operating activities
Change in non-controlling interest		(571,261	)		-
Depreciation, amortization, and impairment		148,804			249,679
Cryptocurrency impairment losses		9,122			-
Share-based compensation		182,561			399,173
Change in fair value of derivative liabilities		393,532			(4,945,819	)
Loss on disposal of fixed assets		950,024			-
(Gain) on disposal of Trend Discovery Holdings		(711,505	)		-
Common shares issued for services		-			675,000
Common shares issued for services - Agora		5,215,287			-
Warrants granted for interest expense		-			545,125
Commitment fees on long-term debt		17,681			-
Changes in assets and liabilities
Accounts receivable		58,405			(48,089	)
Prepaid expenses and other current assets		(1,295,323	)		77,187
Amortization of right of use asset - financing leases		36,591			35,540
Amortization of right of use asset - operating leases		62,225			17,768
Accrued interest receivable		(8,385	)		-
Interest on lease liability - financing leases		(6,113	)		(2,984	)
Operating lease expense		(62,566	)		(19,547	)
Accounts payable		(27,789	)		432,437
Accrued liabilities		2,056,029			(726,253	)
Total adjustments		6,447,319			(3,310,783	)
Net cash used in operating activities of continuing operations		(3,749,215	)		(751,259	)
Net cash (used in) provided by discontinued operations		(725,259	)		440,391
Net cash used in operating activities		(4,474,474	)		(310,868	)

CASH FLOWS FROM INVESTING ACTIVITES
Proceeds from the sale of fixed assets		580,000			2,500
Net cash provided by investing activities of continuing operations		580,000			2,500
Net cash provided by investing activities of discontinued operations		394,399			-
Net cash provided by investing activities		974,399			2,500

CASH FLOWS FROM FINANCING ACTIVITES
Proceeds from exercise of stock options		-			28,297
Reduction of finance lease liability		(29,775	)		(31,854	)
Proceeds from notes payable - related parties		616,000			-
Repayments of notes payable - related parties		(616,000	)		-
Proceeds from long-term debt		492,171			-
Repayment of long-term debt		(1,029,848	)		(213,957	)
Proceeds from the sale of preferred stock		12,000,000			-
Net cash provided by (used in) financing activities of continuing operations		11,432,548			(217,514	)
Net cash provided by financing activities of discontinued operations		145,266			-
Net cash provided by (used in) financing activities		11,577,814			(217,514	)

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH		8,077,739			(525,882	)

CASH - BEGINNING OF PERIOD		184,524			1,105,227

CASH - END OF PERIOD	$	8,262,263		$	579,345

SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense	$	11,173		$	22,860
Cash paid for income taxes	$	-		$	-

SUMMARY OF NON-CASH ACTIVITIES:

Reclassification of assets of discontinued operations to current operations in fixed assets	$	-		$	193,904
Lease liability recognized for ROU asset	$	-		$	29,049
Issuance costs on mezzanine equity	$	193,416		$	-

2021 2020
(unaudited) (unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ 1,306 $ (11,664 )
Adjustments to reconcile net income (loss) to net cash used in operating activities
Change in non-controlling interest (323 ) -
Depreciation, amortization, depletion, and accretion 2,340 1,133
Impairment of digital assets 1 -
Share-based compensation 1,711 1,569
Bad debt, net of recovery - 184
Change in fair value of derivative liabilities (15,295 ) 15,901
(Gain) on disposal of oil and gas property (18 ) -
Forgiveness of debt - (1,850 )
(Gain) loss on exchange of warrants - (19,338 )
Common shares issued for services 881 485
Common shares issued for services- Agora 2,281 -
Loss on sale of fixed assets - 105
Loss on abandonment of oil and gas property - 83
Warrants granted for interest expense 545 2,042
Warrants granted for commissions 744 308
Loss on conversion of debt and liabilities to common stock - 3,969
Amortization of debt discount - 149
Changes in assets and liabilities
Accounts receivable 420 (454 )
Inventory (53 ) (129 )
Prepaid expenses and other current assets (304 ) (562 )
Intangible assets - digital currencies (17 ) -
Amortization of right of use asset - financing leases 108 109
Amortization of right of use asset - operating leases 137 104
Other assets - (4 )
Interest on lease liability - financing leases (8 ) (11 )
Operating lease expense (148 ) (76 )
Accounts payable (1,056 ) 1,116
Accrued liabilities (1,672 ) (906 )
Total adjustments (9,726 ) 3,927
Net cash used in operating activities of continuing operations (8,420 ) (7,737 )
Net cash used in discontinued operations - -
Net cash used in operating activities (8,420 ) (7,737 )

CASH FLOWS FROM INVESTING ACTIVITIES
Advance of note receivable - (275 )
Payment of power development costs (2,000 ) -
Purchases of oil and gas properties, net of asset retirement obligations (304 ) (3,335 )
Proceeds from the sale of fixed assets 2 43
Purchase of fixed assets (7,085 ) (241 )
Net cash used in investing activities of continuing operations (9,387 ) (3,808 )
Net cash used in discontinued operations - -
Net cash used in investing activities (9,387 ) (3,808 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock in a registered direct offering, net of fees 19,230 7,666
Proceeds from exercise of warrants, net of fees - 14,359
Proceeds from exercise of stock options 28 349
Reduction of finance lease liability (98 ) (91 )
Proceeds from notes payable - related parties - 604
Repayments of notes payable - related parties (578 ) (1,429 )
Proceeds from long-term debt - 1,869
Repayment of long-term debt (1,227 ) (3,891 )
Repayment to prior owners - (316 )
Net cash provided by financing activities 17,355 19,120

NET (DECREASE) INCREASE IN CASH AND RESTRICTED CASH (452 ) 7,575

CASH AND RESTRICTED CASH - BEGINNING OF PERIOD 1,316 406

CASH AND RESTRICTED CASH - END OF PERIOD $ 864 $ 7,981

SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense $ 156 $ 404
Cash paid for income taxes $ - $ -

SUMMARY OF NON-CASH ACTIVITIES:

Reclassification of assets of discontinued operations to current operations in fixed assets $ 194 $ -
Bifurcation of derivative liability in registered direct offering $ 11,203 $ -
Recognition of non-controlling interest $ 30 $ -
Preferred stock converted into common stock $ - $ 2
Conversion of long-term debt and notes payable and accrued interest into common stock $ - $ 6,577
Conversion of accounts payable and accrued liabilities into common stock $ - $ 677
Shares issued for acquisition of oil and gas reserves and fixed assets, net of asset retirement obligations $ - $ 2,750
Note receivable offset against oil and gas reserves in acquisition of Rabb $ - $ 304
Lease liability recognized for ROU asset $ 507 $ 442

See notes to condensed consolidated financial statements.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Dollar amounts and numbers of shares that follow in this report are presented in thousands, except per share amounts and when separately disclosed, or where the context indicates otherwise.~~

Ecoark Holdings Inc. (“Ecoark Holdings” or the “Company”) is a diversified holding company, incorporated in the State of Nevada on November 19, 2007. Through Ecoark ~~Holdings~~Holdings’ wholly owned subsidiaries, the Company has operations in three areas: (i) oil and gas ~~including exploration, production and drilling operations on over 20,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi and~~ transportation services, (ii) post-harvest shelf-life and freshness food management technology, and (iii) Bitcoin mining. The Company recently sold its financial services ~~including preparing~~business, and on July 25, 2022, sold all of its oil and gas production business to ~~launch~~Fortium Holdings, Inc. (“Fortium”) in exchange for Fortium convertible preferred stock. See below in this Note 1 and Note 21 – “Subsequent Events.” Since this disposal represents a ~~Bitcoin mining operation.~~strategic shift that will have a major effect on the Company’s operation and financial results, the Company has reclassified the assets and liabilities related to this business as assets and liabilities held for sale and reclassified the operations of this business as discontinued operations as of June 30, 2022 and for the three months ended June 30, 2022 and 2021. The Company also reclassified the assets and liabilities of this business as assets and liabilities held for sale as of March 31, 2022. See Note 2, “Discontinued Operations” and Note 21, “Subsequent Events” for further information regarding these transactions. Since the acquisition of Banner Midstream Corp. on March 27, 2020, which ~~currently~~ comprises the exploration, production and drilling operations, the Company ~~has~~ focused its efforts to a considerable extent on expanding its exploration and production footprint and capabilities by acquiring real property and working interests in oil and gas mineral leases. The Company’s principal subsidiaries consist of Ecoark, Inc. (“Ecoark”), a Delaware corporation which is the parent of Zest Labs, Inc. (“Zest Labs”), Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and Agora Digital Holdings, Inc., a Nevada corporation (“Agora”) ~~who~~which was assigned the membership interest in Trend Discovery Holdings LLC, a Delaware limited liability corporation (all references to “Trend Holdings” or “Trend” are now synonymous with Agora) from the Company on September 17, 2021 upon its ~~formation.~~formation, which includes Bitstream Mining, LLC, the Company’s Bitcoin mining subsidiary.

As disclosed in these Notes, the Company has decided it is in the best interests of its shareholders that it divest all of its operating assets through a series of spin-offs or stock dividends to the Company’s shareholders. It intends to do so either by engaging in business combinations with existing public companies which have trading symbols and markets like Fortium or by direct dividends. The Company’s plan is also driven by the dividends it must pay to an investor which provided $12 million on June 8, 2022. The Company’s goal is to complete these spin-offs in calendar 2022 and acquire a new business prior to the last spin-off so it does not become a shell corporation. Because all spin-offs require the transactions or the subsidiaries to be registered with the Securities and Exchange Commission, the Company may not complete all spin-offs in 2022.

On March 27, 2020, the Company and Banner Energy Services Corp., a Nevada corporation (“Banner Parent”), entered into a Stock Purchase and Sale Agreement (the “Banner Purchase Agreement”) to acquire Banner Midstream Corp., a Delaware corporation (“Banner Midstream”). Pursuant to the acquisition, Banner Midstream became a ~~wholly owned~~wholly-owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream.

Banner Midstream ~~has~~had four operating subsidiaries: Pinnacle Frac Transport LLC (“Pinnacle Frac”), Capstone Equipment Leasing LLC (“Capstone”), White River Holdings Corp. (“White River”), and Shamrock Upstream Energy LLC (“Shamrock”). Pinnacle Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield transportation service contractors. ~~These two operating subsidiaries of Banner Midstream are revenue producing entities.~~ White River is and Shamrock ~~are~~was engaged in oil and gas exploration, production, and drilling operations on over ~~20,000~~30,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi.

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

On June 18, 2020, the Company acquired certain energy assets from SN TMS, LLC for $1 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of wells, active mineral leases, and drilling production materials and equipment.

~~On August 14, 2020, the Company entered into an Asset Purchase Agreement by and among the Company,~~ White River ~~E&P LLC, a Texas Limited Liability Company and a wholly owned~~was the operating subsidiary of ~~the Company Rabb Resources, LTD.~~Banner Midstream that has been reclassified to assets and Claude Rabb, the sole owner of Rabb Resources, LTD. Pursuant to the Asset Purchase Agreement, the Company completed the acquisition of certain assets of Rabb Resources, LTD. The acquired assets consisted of certain real propertyliabilities held for sale and working interests in oil and gas mineral leases. The Company in June 2020 previously provided for bridge financing to Rabb Resources, LTD under the $225 Senior Secured Convertible Promissory Note. As consideration for entering into the Asset Purchase Agreement, the Company agreed to pay Rabb Resources, LTD. A total of $3,500 consisting of (i) $1,500 in cash, net of $304 in outstanding amounts related to the note receivable and accrued interest receivable, and (ii) $2,000 payable in common stock of the Company, which based on the closing price of the common stock as of the date of the Asset Purchase Agreement equaled 103 shares. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the Rabb Resources, LTD historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.discontinued operations.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

~~On September 4, 2020,~~For a full description of the operations of White River, SPV 3, LLC, a wholly owned subsidiary of Banner Midstream entered into an Agreement and Assignment of Oil, Gas and Mineral Lease with a privately held limited liability company (the “Assignor”). Underrefer to the ~~Lease Assignment,~~Annual Report filed on Form 10-K for the ~~Assignor assigned a 100% working interest (75% net revenue interest) in a certain oil and gas lease covering in excess of 1,600 acres (the “Lease”), and~~year ended March 31, 2022 filed on July 7, 2022. White River ~~paid $1,500 in cash to the Assignor. The Company accounted~~is now part of our assets and liabilities held for ~~this acquisition~~sale and discontinued operations as ~~an asset acquisition under ASC 805~~of June 30, 2022. Shamrock sold off its assets and ~~that the Company has early adopted the amendments~~was inactive as of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.June 30, 2022.

On ~~October 9, 2020,~~July 25, 2022, the Company ~~and White River SPV,~~ entered into and closed a ~~Participation~~Share Exchange Agreement, ~~(the “Participation Agreement”)~~ by and among the Company, White River ~~SPV, BlackBrush Oil & Gas, L.P. (“BlackBrush”)~~ and ~~GeoTerre, LLC, an unrelated privately held limited liability company (the “Assignor”), to conduct drilling of wells in the Austin Chalk formation.~~

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

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

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

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

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

~~On August 16, 2021 the Company and Shamrock Upstream Energy, LLC,~~became a wholly-owned subsidiary of Fortium and issued the Company ~~entered~~non-voting Series A Convertible Preferred Stock (the “Series A”) which convert into an agreement with a privately-held limited liability company to acquire working interests in the Luling Prospect for $250. No other assets were acquired in this transaction, nor was there any recognized ARO for this working interest.approximately 82% of Fortium’s common stock. The ~~Company accounted for this acquisition as an asset acquisition under ASC 805 and that~~Series A is only convertible after the Company elects to spin-off Fortium common stock to the Company’s shareholders and a Registration Statement covering the spin-off has ~~early adopted~~been declared effective. The Company’s Executive Chairman is also the ~~amendments~~Executive Chairman of ~~Regulation S-X dated May 21, 2020~~Fortium and ~~has concluded that this acquisition was not significant. Accordingly, as a result~~the Company’s Chief Financial Officer is the Chief Executive Officer of Fortium. The former Chief Executive Officer and director of Fortium is the son-in-law of the ~~amendment,~~Company’s Executive Chairman. He resigned from all positions and the ~~presentation~~new Board of Directors (the “Board”) of Fortium includes the Company’s Executive Chairman and the Executive Chairman’s daughter as well as three other designees of the ~~historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

On September 1, 2021 the Company and White River Energy, LLC, a wholly-owned subsidiary of the Company entered into an agreement with several individuals to acquire working interests in the various leases in Concordia, LA for $54. No other assets were acquired in this transaction, nor was there any recognized ARO for this working interest. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.Company.

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

~~Effective December 29, 2020, the Company amended its Articles of Incorporation to reduce the authorized common stock from 40,000 shares to 30,000 shares.~~

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

On April 9, 2021, a Little Rock, Arkansas jury awarded Ecoark and Zest a total of $115 million in damages which includes $65 million in compensatory damages and $50 million in punitive damages and found Walmart Inc. (“Walmart”) liable on three counts. The federal jury found that Walmart ~~Inc.~~ misappropriated Zest’s trade secrets, failed to comply with a written contract, and acted willfully and maliciously in misappropriating Zest’s trade secrets. The Company has filed post-trial motions to add an award for their attorneys’ fees as the prevailing party in the litigation. In addition to other post-trial motions, Walmart, Inc. has filed a renewed motion for judgment as a matter of law or, in the alternative, for remittitur or a new trial. As of the date of this Report, the court has not ruled on any of the post-trial motions.secrets See Note 15 – Commitments and Contingencies – Legal Proceedings.

Trend Holdings formed four ~~subsidiaries:~~subsidiaries including: Bitstream Mining, LLC, a Texas ~~Limited Liability Corp.~~limited liability company (“Bitstream”) on May 16, ~~2021, REStream Processing LLC, a Texas Limited Liability Corp (“REStream”) on May 16, 2021,~~2021. In addition, Trend Discovery Exploration LLC, a Texas Limited Liability Corp. (“Trend Exploration”) on May 27, 2021, and OTZI, LLC, a Delaware Limited Liability Corp. (“OTZI”) on September 2, 2021, in addition toHoldings owned Barrier Crest, LLC (“Barrier Crest”) that was acquired along with Trend Capital Management, Inc. (“TCM”) that was acquired by Ecoark on May 31, 2019. On June 17, 2022, Agora sold Trend Holdings to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV and sold Trend Discovery Exploration LLC (“Trend Exploration”) to the Company. See Note 2, “Discontinued Operations”. The Company reclassified the operations of Barrier Crest and TCM, as discontinued operations as the disposal represents a strategic shift that will have a major effect on the Company’s operations and financial results as of March 31, 2022. The Company made this determination for these segments to be held for sale as the criteria established under ASC 205-20-45-1E have been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a) upon the closing of the sale on June 17, 2022 at which time the gain was recognized.

The Company assigned its membership interest in Trend Holdings and its related wholly owned subsidiaries to Agora on September 22, 2021, for the sale of the initial ~~one hundred~~100 shares for ~~ten dollars.~~$10. On October 1, 2021, the Company purchased ~~41,671~~41,671,121 shares of Agora common stock for ~~$4,167~~$4,167,112 which Agora used to purchase equipment to commence the Bitstream operations.

Agora was organized by Ecoark Holdings to enter the ~~digital asset~~Bitcoin mining business. Because of regulatory uncertainty over ~~digital assets~~Bitcoin being deemed to be securities, Agora’s initial focus is on mining Bitcoin which ~~the Securities and Exchange Commission (the “SEC”) administratively determined~~we believe is not a security. Because of regulatory concerns and the changing regulatory environment, Agora intends to seek opportunities to engage with cryptocurrencies that do not involve the offer or sale of any securities. Because of the plunge in the price of Bitcoin and the type of miners Agora acquired pending its attempt to close an initial public offering, Agora determined it was not presently feasible to conduct Bitcoin mining operations and temporarily ceased such activities on March 3, 2022.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

On November 19, 2021 Agora filed a registration statement on Form S-1 (File No. 333-261246) in connection with its initial public offering of 10,000,000 ~~(ten million)~~ units comprised of shares of common stock and warrants to purchase an equal number of shares of common stock. The Agora registration statement has undergone a series of amendments since its initial filing in November 2021 and has not yet been declared effective by the Securities and Exchange ~~Commission.~~Commission (“SEC”). In addition, in connection with Agora public offering, Agora has applied for its common stock and warrants to be listed on The Nasdaq Capital Market. Agora has encountered extensive review of its accounting disclosure policies by the Staff of the Securities and Exchange Commission as the Staff seeks to impose uniformity upon the industry. These delays and the fall of the price of Bitcoin has made the feasibility of the initial public offering uncertain.

Subject to completion of the Agora public offering and Nasdaq uplisting described below, the Company intends to issue a stock dividend through a pro rata distribution of Agora’s common stock to Ecoark’s common stockholders and holders of common stock equivalents. Ecoark plans to distribute 80% of the Agora common stock it holds to its stockholders as of a future record date to be determined upon completion of regulatory compliance. Ecoark plans to retain the remaining 20% ownership in Agora on its balance sheet. As a result of the approval by the ~~board of directors of the Company~~Company’s Board 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. Upon disposal, the Company must assess whether the disposed of assets qualify for discontinued operations reporting. If so, the Company will apply the presentation and disclosure requirements of ASC 205-20, and if not, the Company will apply the presentation and disclosure requirements of ASC 360-10. Regardless of the outcome of the proposed initial public offering, Ecoark intends to spin-off Agora to its shareholders either directly or through a business combination.

On August 4, 2021, the Company’s common stock commenced trading on the Nasdaq Capital Market.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

On October 6, 2021, the Company held a Special Meeting of Stockholders, at which the stockholders approved (a) an amendment to the Articles of Incorporation to increase the number of shares of authorized common stock of the Company from ~~30,000~~30,000,000 shares to ~~40,000~~40,000,000 shares; (b) an amendment to the Ecoark Holdings ~~Inc.~~ 2017 Omnibus Incentive Plan to increase the number of shares of common stock authorized for issuance under this plan from ~~800~~800,000 shares to ~~1,300~~1,300,000 shares; and (c) the issuance of ~~272~~272,252 restricted stock units and an additional 6463,998 restricted stock units to the then President of Zest Labs and director of the Company under this ~~plan,~~Plan, in exchange for the cancellation of ~~672~~672,499 previously issued stock options.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Overview of Agora Digital Holdings, Inc.

Bitstream

Bitstream was organized to be our principal ~~cryptocurrency~~Bitcoin mining subsidiary. Bitstream has entered into a series of agreements and arrangements including arranging for a reliable and economical electric power source needed to efficiently mine Bitcoin, ~~ordering~~order miners, housing infrastructure and other infrastructure to mine Bitcoin and ~~locating~~locate a third-party hosting service to operate the miners and the service’s more advanced miners. Agora has spent (and agreed to spend) between $12-$14 million in connection with these agreements, ~~related to establishing and commencing its operations including the agreements for land for Bitcoin mining, but~~ not including future revenue sharing. Agora commenced initial operations for the initial miners in November 2021 and the expectation is that by March 2022 the Bitmain S19 Pro miners supplied by the hosting service will be fully operational.

Bitstream deploys and operates (or hires third parties to operate) modularized data centers (facilities) with the sole purpose of mining digital assets, with Bitcoin initially as the focus. Agora is powering these data centers by acquiring one or more long-term power contract to purchase electric power from the electric grid in Texas. As the business’ operations grow, Bitstream intends to continuously add data center facilities by reinvesting their revenues. All data centers will be remotely managed with onsite personnel for servicing and troubleshooting any operational issues. Bitstream plans to utilize the energy to power its energy intensive operations of digital asset mining. Additionally, if Texas experiences another power shortage during the winter or summer months from extreme weather conditions, Bitstream would be able to arbitrage power at favorable margins. Bitstream will do this by temporarily shutting down their cryptocurrency mining operations and selling their purchased power back to the grid at favorable margins. Last winter, during the blackout, the price per kWh exceeded $10 (ten dollars) at its peak imbalance, whereas Bitstream’s power cost is expected to be $0.023 (two and three one-hundredths cents) per kWh.

~~Bitstream has~~

●

entered into a letter of intent to obtain a source of electric power in West Texas, including the initial 12 megawatts (“MW”) of power with agreement by the retail power provider to increase the available capacity at the substation to 48 MW. We have also entered into a second letter of intent for an additional 30 MW at a second location;

●

paid the power management company $2,423 which includes $2,000 in power development fees and is negotiating definitive agreements (the “Power Agreement”) which if executed will allow for the increase of the facility’s electrical capacity to up to 78 MW; and

	●	ordered 5,000 used Canaan Avalon 841 13 tera hash per second (“TH/s”) miners for $1,350, plus shipping costs to be delivered on 1,000-unit increments, of which 4,000 miners have been delivered as of January 31, 2022; and

	●	~~entered into a long-term lease for 20 acres of land effective December 10, 2021, and a land purchase agreement for a separate 20 acres of land effective January 3, 2022.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

~~Mining Equipment~~

Because Bitstream has secured a source for 48 MW of electrical power with agreement by the power provider to increase the available capacity at the substations to 78 MW as more fully described below and expects to increase the capacity through conditional and unconditional rights to a number of sites across West Texas to up to 372 MW assuming this can be done on acceptable terms. In September 2021 Bitstream ordered 5,000 used Canaan Avalon 841 13 TH/s miners for $1,350. Delivery of the first shipment of 2,000 of these miners occurred in October 2021. Bitstream’s plan is to use trailer or shipping container-like units as housing infrastructure to house our miners. Bitstream will either build their own or partner with another third-party vendor to build entry level housing infrastructure to deploy the initial mining equipment in November 2021.

In August 2021, Bitstream entered into an agreement with a third party which will supply Bitstream with more advanced housing infrastructure in exchange for approximately $375. Delivery of these enhanced housing infrastructure is expected in early 2022. On December 10, 2021 Bitstream executed a lease agreement for 20 acres of land near the power substation upon which Bitstream will place the housing infrastructure. On January 3, 2022, the Company finalized a land purchase agreement for a separate parcel of 20 acres of land ($12.5 per acre) in West Texas for $250. The Company has an option to sell back this land to the sellers at $0.4 per acre upon cessation of the land being used as a data center.

In September 2021, Bitstream entered into a binding agreement referred to as a Memorandum of Understanding with Elite Mining Inc. (the “Hosting Company”) that will supply high speed miners, host the Company’s data center and operate the miners it installs. In Phase 1 which is a beta test phase, Bitstream paid $600 to the Hosting Company which will also supply 6 MW capacity’s worth of very high speed and efficient miners. Bitstream has an option to purchase these high-speed miners at replacement cost (which may be higher than current cost). The Hosting Company may provide hosting for third parties during Phase 1 which reduces the cash flow for Bitstream. This agreement will also allow Bitstream to utilize a minimum of 25 MW of electricity under the initial power purchase agreement in Phase 2. Bitstream can terminate the hosting agreement as soon as Bitstream has secured sufficient capital to replace the hosted Bitmain S19 Pros with their own. Once Bitstream purchases the high-efficiency miners, the Hosting Company cannot host third parties.

The Hosting Company uses immersion cooling, and other technological enhancements, for the miners it will install for Bitstream. Immersion cooling is a technique where Bitcoin mining units are submerged in a dielectric fluidAll significant accounting policies related to keep the integrated circuits operating at lower temperatures. When successful, this has the potential to: prolong equipment life, enhance hashing efficiencies, and provides the opportunity to “overclock” the processors, i.e., running at speeds beyond factory specified design. Overclocking, including when assisted by immersion cooling, is a technique that can be used to increase a miner’s overall hash rate.

Phase 2 is planned to begin in May 2022 which is subject to Bitstream agreeing to proceed. If Bitstream elects to enter Phase 2, it will be required to loan the Hosting Company the funds to develop a production facility in Texas on terms to be negotiated. Bitstream will have certain rights to the production facility capacity from Phase 2 and will pay the Hosting Company for its services.

In October 2021 Bitstream secured an additional 36 MWs of electrical capacity at a different West Texas location. This supplements the Company’s prior agreement to secure 12 MWs and as a result the Company will have a total of 48 MWs of electric power for immediate use and benefit to Bitstream at that location. We have also entered into a second letter of intent for an additional 30 MW at a second location. Bitstream also plans to participate in the Electric Reliability Council of Texas’ (“ERCOT”) responsive reserve market by relinquishing its power back to the Texas grid as power stabilization events are needed. Additionally, Bitstream has procured mining infrastructure to power the 42 MWs and expects the equipment and infrastructure to be delivered over the next 120 days. This mining infrastructure includes twenty-one 2,600 kilo-volt amp (KVA) or similar transformers and the Company’s first shipment of Bitcoin mining application-specific integrated circuits (“ASIC”). The Company has agreed to pay a total $3,376 for the new equipment and infrastructure as follows: (i) $506 upon the order which has been paid, (ii) $506 by November 11, 2021 which has been paid, (iii) $816 by December 15, 2021 which has been paid; and (iii) the remaining $1,857 by February 2022.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

In connection with the increase in electrical capacity, Bitstream entered into a second binding letter of intent with the power management company pursuant to which the Company has paid a total of $2,955, consisting of a $2,628 development fee and a $327 reimbursement for payments made by the power management company to the electric utility to secure the power. In addition, the Company agreed to pay a total of $450 upon the power management company signing a binding agreement to acquire or lease 20 or more acres of usable land for Bitstream’s facility and construct a transmission line to the mining site.

Once the business is operational, Bitstream intends to continuously add data center platforms by reinvesting cash and potentially utilizing leverage to scale operations. All data centers will be remotely managed with onsite personnel for servicing and troubleshooting any operational issues.

White River, Shamrock, Barrier Crest provides fund administration and related services for small hedge funds. Trend Capital Management was founded in 2011. Trend Capital Management is the investment manager of and provides services and collects fees from Trend Discovery LP (“Trend LP”) and Trend Discovery ~~SPV I, LLC (“Trend SPV”), both of which invest in securities. Trend~~ Capital Management is not the beneficial owner of Ecoark securities held by Trend LP since it assigned to a third party not affiliated with Ecoark the power to vote and dispose of Ecoark securities. The investment capital in Trend LP and Trend SPV is from individual limited partners, and not from the Company.

Trend Exploration was assigned an 80% working interest in fourteen wells from White River SPV 2, LLC and White River E&P LLC (“Assignors”) on July 1, 2021. In accordance with ASC 205-20, there is a scope exception for oil and gas properties that use the full-cost method of accounting. Under the full-cost method of accounting, all costs associated with property acquisition, exploration, and development activitieshave been removed as these entities are capitalized to cost centers, which are established on a country-by-country basis. The definition of discontinued operations, however, applies to disposals of components of an entity, which is defined as the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. As a result, the definition of discontinued operations will not be operable under the full-cost method of accounting because of differences in the tracking and allocation of costs, which is at a much higher level. The Company as a result has not reflected ~~the working interest on the fourteen wells~~ in discontinued operations. ~~The Trend Exploration business is identical~~For full details on the policies refer to the ~~business noted herein~~Annual Report on Form 10-K for ~~Banner Midstream.~~the year ended March 31, 2022 filed on July 7, 2022.

Principles of Consolidation

The condensed consolidated financial statements of Ecoark Holdings and its subsidiaries and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been included. Such adjustments are of a normal, recurring nature.

The unaudited condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021. Therefore, the interim unaudited condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K.

On May 31, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Trend Discovery Holdings Inc., a Delaware corporation for the Company to acquire 100% of Trend Discovery Holdings, LLC pursuant to a merger of Trend with and into the Company (the “Merger”). Trend Discovery Holdings, Inc. ceased doing business upon completion of the merger and Trend Discovery Holdings LLC is the subsidiary of the Company. Upon the formation of Agora on September 17, 2021, Ecoark assigned the membership interest they owned in Trend Holdings to Agora on September 22, 2021 when the Company purchased 100 shares of Agora common stock for ~~ten dollars.~~$10.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

Subject to completion of the Agora public offering and Nasdaq uplisting described above, the Company intends to issue a stock dividend through a pro rata distribution of Agora’s common stock to Ecoark’s common stockholders and holders of common stock equivalents. Ecoark plans to distribute 80% of the Agora common stock it holds to its stockholders as of a future record date to be determined upon completion of regulatory compliance. Ecoark plans to retain the remaining 20% ownership in Agora on its balance sheet. As a result of the approval by the ~~board of directors of the Company~~Board 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. Upon disposal, the Company must assess whether the disposed of assets qualify for discontinued operations reporting.

If so, the Company will apply the presentation and disclosure requirements of ASC 205-20, and if not, the Company will apply the presentation and disclosure requirements of ASC 360-10.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

On March 27, 2020, the Company and Banner Parent, entered into the Banner Purchase Agreement to acquire Banner Midstream. Pursuant to the acquisition, Banner Midstream became a wholly owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream.

The Company applies the guidance of Topic 810 Consolidation of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—are consolidated except when control does not rest with the parent. Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.

The Company has utilized the guidance under ASC 810-10-55-4B, Case A for a Change that has resulted in the recognition of non-controlling interest. On October 1, 2021, Agora issued restricted common stock to non-employee directors, management, employees and advisors. As a result of the restricted common share issuances, the Company owns now owns less than 100% of Agora (approximately 90.1%), The Company expects it will continue to control Agora until it completes the distribution of Agora common stock to its security holders described above; after that event occurs, it may still have sufficient equity ownership to control Agora unless one or more third parties acquire a larger equity position.

~~Pursuant to 810-10-55-4M, the Company has provided below the effects of ASC 810-10-50-1A(d) to disclose the effects of the~~There were no changes in ~~the Company’s ownership interest in Agora on the Company’s equity for~~ the three months ended ~~December 31, 2021:~~June 30, 2022 related to the non-controlling interest the Company has in Agora.

Net income (loss) attributable to the Company’s stockholders $ 4,602
Increase in the Company’s additional paid-in capital for the issuance of the 4,600 restricted common shares of Agora 2,281
Change from net income (loss) attributable to the Company’s stockholders and transfers to noncontrolling interest $ 6,883

Reclassifications

The Company has reclassified certain amounts in the ~~December 31, 2020 unaudited~~June 30, 2021 condensed consolidated financial statements to be consistent with the ~~December~~June 30, 2022 presentation, including the reclassification of Barrier Crest, TCM, and White River assets and liabilities from continuing operations to held for sale and reclassifications of operations of Barrier Crest, TCM, and White River to discontinued operations. The March 31, 2022 consolidated balance sheet has been reclassified to include the assets and liabilities held for sale for White River as well. Additionally, we have removed all rounding of amounts and shares from the June 30, 2021 presentation to conform to the June 30, 2022 presentation. These changes had no impact on the Company’s financial position or result of operations for the periods presented.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Noncontrolling Interests

In accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated Financial Statements, the Company classifies noncontrolling interests as a component of equity within the consolidated balance sheet. In October 2021, with the issuance of restricted common stock to directors, management and advisors, the Company no longer owns 100% of Agora. As of ~~December~~June 30, 2022 and March 31, ~~2021,~~2022, approximately 9.1% is reflected as non-controlling interest of that entity.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, including goodwill, asset retirement obligations, estimates of discount rates in lease, liabilities to accrue, fair value of derivative liabilities associated with warrants, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes and determination of the fair value of stock awards.

Actual results could differ from those estimates.

The estimates of proved, probable and possible oil and gas reserves are used as significant inputs in determining the depletion of oil and gas properties and the impairment of proved and unproved oil and gas properties. There are numerous uncertainties inherent in the estimation of quantities of proven, probable and possible reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves and commodity price outlooks. Actual results could differ from the estimates and assumptions utilized.

~~Oil and Gas Properties~~Revenue Recognition

The Company ~~uses~~recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the ~~full cost method~~revenue standard is that a company should recognize revenue to depict the transfer of ~~accounting~~promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for its investment in oil and natural gas properties. Under the full cost method of accounting, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs are capitalized. General and administrative costs related to production and general overhead are expensed as incurred.those goods or services.

~~All capitalized costs of oil and gas properties, including the estimated future costs~~The following five steps are applied to develop proved reserves, are amortized on the unit of production method using estimates of proved reserves. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in operations. Unproved properties and development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicateachieve that ~~the properties are impaired, the amount of the loss from operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.~~core principle:

~~There was $1,445 and $380 and $305 and $254 in depletion expense for the Company’s oil and gas properties for the nine and three months ended December 31, 2021 and 2020, respectively.~~

●

Step 1: Identify the contract with the customer

~~Limitation on Capitalized Costs~~

●

Step 2: Identify the performance obligations in the contract

Under the full-cost method of accounting, we are required, at the end of each reporting period, to perform a test to determine the limit on the book value of our oil and gas properties (the “Ceiling” test). If the capitalized costs of our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed the Ceiling, the excess or impairment is charged to expense. The expense may not be reversed in future periods, even though higher oil and gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of: (a) the present value, discounted at 10% and assuming continuation of existing economic conditions, of (1) estimated future gross revenues from proved reserves, which is computed using oil and gas prices determined as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month hedging arrangements pursuant to Staff Accounting Bulletin (“SAB”) 103, less (2) estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves; plus, (b) the cost of properties being amortized; plus, (c) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; net of (d) the related tax effects related to the difference between the book and tax basis of our oil and natural gas properties. A ceiling test was performed as of December 31, 2021 and there was no indication of impairment on the oil and gas properties.

●

Step 3: Determine the transaction price

●

Step 4: Allocate the transaction price to the performance obligations in the contract

●

Step 5: Recognize revenue when the Company satisfies a performance obligation

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

~~Oil~~In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and ~~Gas Reserves~~identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

~~Reserve engineering~~If a good or service is not distinct, the good or service is combined with other promised goods or services until a ~~subjective process~~bundle of goods or services is identified that is dependent upon the quality of available data and interpretation thereof, including evaluations and extrapolations of well flow rates and reservoir pressure. Estimates by different engineers often vary sometimes significantly. In addition, physical factors such as results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Because proved reserves are required to be estimated using recent prices of the evaluation, estimated reserve quantities can be significantly impacted by changes in product prices.

~~Joint Interest Activities~~

Certain of our exploration, development and production activities are conducted jointly with other entities and, accordingly, the consolidated financial statements reflect only our proportionate interest in such activities.

~~Inventories~~

Crude oil, products and merchandise inventories are carried at the lower of cost (last-in-first-out (LIFO)) or net realizable value. Inventory costs include expenditures and other charges directly and indirectly incurred in bringing the inventory to its existing condition and location.

~~Accounting for Asset Retirement Obligation~~

Asset retirement obligations (“ARO”) primarily represent the estimated present value of the amount the Company will incur to plug, abandon and remediate its producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. The Company determined its ARO by calculating the present value of the estimated cash flows related to the obligation. The retirement obligation is recorded as a liability at its estimated present value as of the obligation’s inception, with an offsetting increase to proved properties or to exploration costs in cost of revenue.

~~Revenue Recognition~~distinct.

The ~~Company accounts~~transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

●

Variable consideration

●

Constraining estimates of variable consideration

●

The existence of a significant financing component in the contract

●

Noncash consideration

●

Consideration payable to a customer

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue ~~in accordance~~recognized will not occur when the uncertainty associated with ~~ASC Topic 606,~~ ~~Revenue from Contracts with Customers~~.the variable consideration is subsequently resolved.

The Company accounts for a contract when it has been approved and committed to, each party’s rights regarding the goods or services to be transferred have been identified, the payment terms have been identified, the contract has commercial substance, and collectabilitytransaction price is ~~probable. Revenue is generally recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.~~

Revenue recognition for multiple-element arrangements requires judgment to determine if multiple elements exist, whether elements can be accounted for as separate units of accounting, and if so, the fair value for each of the elements.

Revenue from software license agreements of Zest Labs is recognized over time or at a point in time depending on the evaluation of when the customer obtains control of the promised goods or services over the term of the agreement. For agreements where the software requires continuous updates to provide the intended functionality, revenue is recognized over the term of the agreement. For software as a service (“SaaS”) contracts that include multiple performance obligations, including hardware, perpetual software licenses, subscriptions, term licenses, maintenance and other services, the Company allocates revenueallocated to each performance obligation ~~based~~ on ~~estimates of~~a relative standalone selling price basis. The standalone selling price is the price that would be charged to the customer for each promised product or service if it were sold on a standalone basis. For contracts for new products and services where standalone pricing has not been established,at which the Company ~~allocates revenue~~would sell a promised service separately to a customer. The relative selling price for each performance obligation ~~based on estimates~~is estimated using the adjusted market assessment approach, the expected cost plus a margin approach or the residual approach as appropriate under the circumstances. Contracts are typically on thirty-day payment terms from whenobservable objective evidence if it is available. If observable objective evidence is not available, the Company satisfies the performance obligation in the contract. The Company did not have material revenue from software license agreements in the nine and three months ended December 31, 2021 and 2020, respectively.

~~Revenue under master service agreements is recorded upon the performance obligation being satisfied. Typically, the satisfaction~~uses its best estimate of the ~~performance obligation occurs upon~~selling price for the ~~frac sand load being delivered to~~promised service. In instances where the ~~customer site and this load being successfully invoiced and accepted by the Company’s factoring agent.~~Company does not sell a service separately, establishing standalone selling price requires significant judgment.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

The Company recognizes revenue upon satisfaction of its performance obligation at a point in time in accordance with ASC 606-10-25-30 for its contracts in its Commodities segment or over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.

The Company accounts for incremental costs of obtaining a contract with a customer and contract fulfillment costs in accordance with ASC 340-40, Other Assets and Deferred Costs. These costs should be capitalized and amortized as the performance obligation is satisfied if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The Company recognizes the cost of sales of a contract as expense when incurred or when a performance obligation is satisfied. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies.

Bitcoin Mining

The discussion here should be understood as being applicable while Agora was conducting mining operations which it temporarily ceased beginning March 3, 2022, and will apply at such time as it mines again. As consideration for providing computing power, Agora received Bitcoin from the mining pool in which it participates. Income from Bitcoin mining (mining earnings are made up of the baseline block reward and transaction fees, defined as “rewards”) which is measured based on the fair value of the Bitcoin received.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Providing computing power in Bitcoin transaction verification services (known as “mining”) is an output of Agora’s ordinary activities. The provision of computing power is the only performance obligation in Agora’s contracts with mining pool operators, its customers. At such time as Agora re-commences mining activities, it will recognize income from Bitcoin mining for the provision of computing power upon satisfaction of its performance obligation. As consideration for the provision of computing power, Agora is entitled to payment in Bitcoin, which is a form of noncash consideration. Noncash consideration is measured at fair value at contract inception. Fair value of the Bitcoin consideration is determined using the quoted price on Agora’s primary trading platform of the Bitcoin at the beginning of the contract period, which is considered to be the beginning of each twenty-four-hour period (at contract inception). Specifically, fair value at contract inception is based on the market price at the beginning of the contract term, at the single Bitcoin level (one Bitcoin). This amount is recognized in revenue over the contract term as hash rate is provided. Changes in the fair value of the noncash consideration due to form of the consideration (changes in the market price of Bitcoin) are not included in the transaction price and hence are not included in revenue. Changes in fair value of the noncash consideration post-contract inception that are due to reasons other than form of consideration (other than changes in the market value of bitcoin) are measured based on the guidance on variable consideration, including the constraint on estimates of variable consideration.

Because the consideration to which Agora expects to be entitled for providing computing power is entirely variable, as well as being noncash consideration, the Company assesses the estimated amount of the variable noncash consideration to which it expects to be entitled for providing computing power at contract inception and subsequently, to determine when and to what extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty associated with the variable consideration is subsequently resolved (the “constraint”). Only when significant revenue reversal is concluded probable of not occurring can estimated variable consideration be included in revenue. Based on evaluation of likelihood and magnitude of a reversal in applying the constraint, the estimated variable noncash consideration is constrained from inclusion in revenue until the end of the contract term, when the underlying uncertainties have been resolved and number of Bitcoin to which Agora is entitled becomes known.

Bitcoin is recorded on the consolidated balance sheet, as intangible asset — Bitcoin.

Agora has entered into a Bitcoin mining pool with the mining pool operator F2Pool, to provide computing power to the mining pool. The arrangement is terminable at any time by either party and Agora’s enforceable right to Bitcoin compensation only begins when Agora provides computing power to the mining pool operator.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Agora’s performance obligation extends over the contract term given the Company’s continuous provision of hash rate. This period of time corresponds with the period of service for which the mining pool operator determines compensation due Agora. Given cancelation terms of the contracts, all contracts effectively provide Agora with the option to renew for successive contract terms of twenty-four hours. The options to renew are not material rights because they are offered at the standalone selling price of computing power. In exchange for providing computing power, Agora is entitled to consideration equal to a fractional share of the fixed Bitcoin reward the mining pool operator receives (referred to as a “block reward”) after such amount has been reduced by a digital asset transaction fee retained by the mining pool operator, and potentially network transaction fees. Agora’s fractional share is based on the proportion of computing power Agora contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm, over the contract term. Agora is entitled to compensation for providing computing power to a mining pool even if a block is not successfully placed. The block reward provides an incentive for Bitcoin miners to process transactions made with Bitcoin. Creating an immutable record of these transactions is vital for Bitcoin to work as intended. The blockchain is like a decentralized bank ledger, one that cannot be altered after being created. The miners are needed to verify the transactions and keep this ledger up to date. Block rewards, and to a lesser extent, network transaction fees, are their payment for doing so.

The terms of the agreement with the mining pool operator provide that neither party can dispute settlement terms after thirty-five days following settlement.

For the mining pool in which Agora participates, Agora is entitled to a transaction price, calculated by Agora’s mining pool operator. Specifically, the mining pool operator determines the amount of block rewards to which Agora is entitled by using the Pay-Per-Shares-Plus (PPS+) payment method, retaining 2.5% to cover costs of operating the pool (the “digital asset transaction fee”), and includes network transaction fees as applicable. When Agora’s number of Bitcoin reaches the minimum threshold of 0.005 Bitcoin, Agora receives a payout and the pool transfers the Bitcoin consideration to Agora’s designated wallet within 8 hours, between 00:00 and 08:00 UTC.

The PPS+ payment method pays miners for the number of shares they contribute to the pool (effectively, the amount of computing power provided to the pool) plus network transaction fees. Shares can be described as discrete amounts of valid work each miner or mining farm contributes to the pool. The value of each share contributed is determined by the Bitcoin’s current network difficulty and the number of total shares contributed from miners and mining farms. Bitcoin rewards are received regardless if a pool successfully found a block because the mining pool operator understands that, probabilistically, blocks will be successfully found in a statistically predictable manner by the pool depending on the total amount of hashing power (shares) contributed by the miners and mining farms and therefore, pays out as if a block was found. This is a strategy that provides regular payments to miners and allows consistent payouts.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Network transaction fees, however, are paid out based on blocks actually found and solved and therefore the network transaction fee revenue is not consistently paid out. We expect that network transaction fees will be a very small contributor to total miner Bitcoin rewards.

Agora’s cost of Bitcoin revenue consists primarily of direct costs of earning the Bitcoin related to mining operations, namely electric power costs, other utilities, labor, insurance whether incurred directly from self-mining operations or reimbursed, including any revenue sharing arrangements under ~~ASC 606~~hosting agreements, but excluding depreciation and amortization, which are separately stated in the Company’s Consolidated Statement of Operations.

Commodities

The Company recognized revenue for their proportionate share of oil and gas drilling revenue when: (i) the Company receives notification of the successful sale of a load of crude oil to a buyer; (ii) the buyer will provide a price based on the average monthly price of crude oil in the most recent month; and (iii) cash is received the following month from the crude oil buyer.

The Company will recognize income from digital currency mining from the provision of transaction services within digital currency networks, commonly termed “cryptocurrency mining”. As consideration for those services, the Company will receive digital currency from each specific network in which it participates (“coins”). Income from digital currency mining is measured based on the fair value of the coins received. The fair value is determined using the spot price of the coin on the date of receipt. The coins are recorded on the consolidated balance sheet, as intangible asset – digital currency, at their fair value less costs to sell and re-measured each reporting date, if not sooner. Revaluation gains or losses on the sale of coins for traditional (fiat) currencies will be included in the consolidated statements of operations.

The Company has entered into digital asset mining pools by executing contracts, as amended from time to time, with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company’s entitled to a fractional share of the fixed cryptocurrency reward the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain. The terms of the agreement provides that neither party can dispute settlement terms after thirty-five days following settlement. The Company’s fractional share of the cryptocurrency generated by the pool is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation on the Company in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the reward from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time the revenue is recognized. There is no significant financing component in these transactions.

Fair value of the digital asset reward received is determined using the quoted price of the related digital asset at the time of receipt. The block reward provides an incentive for Bitcoin miners to process transactions made with the cryptocurrency. Creating an immutable record of these transactions is vital for the digital assets to work as intended. The blockchain is like a decentralized bank ledger, one that cannot be altered after being created. The miners are needed to verify the transactions and keep this ledger up to date. Block rewards, and to a lesser extent, transaction fees, are their payment for doing so. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for digital assets recognized as revenue and held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

The Company’s cost of revenue for digital assets consists primarily of direct costs of earning the digital asset related to mining operations, including mining pool fees, electric power costs, other utilities, labor, insurance whether incurred directly from self-mining operations or reimbursed, including any revenue sharing arrangements under the hosting agreements, but excluding depreciation and amortization, which are separately stated in the Company’s Consolidated Statement of Operations.

~~The Company accounts for contract costs in accordance with ASC Topic 340-40,~~ ~~Contracts with Customers~~. The Company recognizes the cost of sales of a contract as expense when incurred or at the time a performance obligation is satisfied. The Company recognizes an asset from the costs to fulfil a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

Cost of sales for Pinnacle Frac includes all direct expenses incurred to produce the revenue for the period. This includes, but is not limited to, direct employee labor, direct contract labor and fuel.

Revenue under master service agreements is recorded upon the performance obligation being satisfied. Typically, the satisfaction of the performance obligation occurs upon the frac sand load being delivered to the customer site and this load being successfully invoiced and accepted by the Company’s factoring agent.

Accounts Receivable and Concentration of Credit Risk

The Company considers accounts receivable, net of allowance for doubtful accounts, to be fully collectible. The allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses, credit insurance and economic conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized, however credit insurance is obtained for some customers. Past-due status is based on contractual terms.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

For Pinnacle Frac, accounts receivable is comprised of unsecured amounts due from customers that have been conveyed to a factoring agent for both with and without recourse. Pinnacle Frac receives an advance from the factoring agent of 98% of the amount invoiced to the customer within one business day. The Company recognizes revenue for 100% of the gross amount invoiced, records an expense for the 2% finance charge by the factoring agent, and realizes cash for the 98% net proceeds received.

~~White River has recognized an allowance for doubtful accounts of $209 and $209 as of December 31, 2021 and March 31, 2021, respectively.~~

Fair Value Measurements

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with ~~GAAP,~~U.S. generally accepted accounting principles (“GAAP”), and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

Level 1 inputs: Quoted prices for identical instruments in active markets.

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 inputs: Instruments with primarily unobservable value drivers.

The carrying values of the Company’s financial instruments such as cash, accounts payable, and accrued expenses approximate their respective fair values because of the short-term nature of those financial instruments.

~~Level 3 inputs: Instruments with primarily unobservable value drivers.~~

~~Digital assets will consist of cryptocurrency denominated assets and will be included in non-current assets. Digital~~Bitcoin assets will be carried at their fair value determined by the spot rate less costs to sell. The digital asset market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant changepresented in ~~the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position.~~current assets. Fair value will be determined by taking the price of the coins from the ~~exchanges~~trading platforms which ~~the Company~~Agora will most frequently use.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

~~Digital Assets~~Bitcoin

~~Digital currencies will be~~Bitcoin is included in ~~non-current~~current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. ~~Digital assets are~~Bitcoin is recorded at cost less impairment.

The Company accounts for ~~its digital assets~~Agora’s Bitcoin as indefinite-lived intangible assets in accordance with ~~ASC 350.~~Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

The Company determines the fair value ~~which~~of Agora’s Bitcoin on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active trading platform that Agora has determined is ~~measured using~~its principal market for Bitcoin (Level 1 inputs). Agora performs an analysis each day comparing the ~~quoted price~~carrying amount of the ~~digital currency~~Agora’s Bitcoin with their fair value based on the lowest market price that day at the ~~time its fair value is being measured. In testing for~~single Bitcoin level (one bitcoin). The excess, if any, represents a recognized impairment loss. Impairment losses are recorded in the ~~Company has~~line item “Bitcoin impairment losses” in the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. Company’s Consolidated Statements of Operations.

To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.

Bitcoin awarded to Agora through its mining activities are included as an adjustment to reconcile net loss to cash provided by (or used in) operating activities on the accompanying Consolidated Statements of Cash Flows. The sales (if any) of Bitcoin are included within investing activities in the accompanying Consolidated Statements of Cash Flows and any realized gains or losses (if any) from such sales are included in operating income in the Company’s Consolidated Statement of Operations. The Company ~~determines the fair value~~accounts for sales of ~~its~~ Bitcoin ~~on a nonrecurring basis~~ in accordance with ~~ASC 820, based on quoted (unadjusted) prices on~~ the ~~active exchange that the Company has determined is its principal market for Bitcoin (Level 1 inputs). The Company performs an analysis each quarter to identify whether events or changes~~first in ~~circumstances, principally decreases in the quoted (unadjusted) prices on the active exchange, indicate that it is more likely than not that any~~first out (FIFO) method of the assets are impaired. In determining if an impairment has occurred, the Company considers the lowest price of one Bitcoin quoted on the active exchange at any time since acquiring the specific Bitcoin held by the Company. If the carrying value of a Bitcoin exceeds that lowest price, an impairment loss has occurred with respect to that Bitcoin in the amount equal to the difference between its carrying value and such lowest price.accounting.

Impairment losses are recognized as “Digital asset impairment losses” in the Company’s Consolidated Statements of Operations in the period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains (if any) are not recorded until realized upon sale, at which point they would be presented net of any impairment losses in the Company’s Consolidated Statement of Operations. In determining the gain to be recognized upon sale, the Company calculates the difference between the sales price and the carrying value of the specific Bitcoin sold immediately prior to sale.

~~Any impairment losses~~ related to ~~digital assets are~~Bitcoin is included in the ~~Digital Assets~~Bitcoin Mining segment.

Impairment of Long-lived Assets

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Segment Information

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~
JUNE 30, 2022

The Company classified their reporting segments in these three divisions through March 31, 2022, when the Company determined that pursuant to ASC 205-20-45-1E that the operations related to the Financial Services segment would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. As a result of this reclassification, the Company’s segment reporting has removed the Financing segment for the three months ended June 30, 2021. Effective April 1, 2022, the Company has classified their segments in the Commodity Segment, Technology Segment and Bitcoin Mining Segment. They now charge a monthly overhead charge to the Technology Segment and to the Transportation component and Oil and Gas Production component (each part of the Commodities Segment). On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment. The Company determined that pursuant to ASC 205-20-45-1E that the operations related to White River’s oil and gas production business would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of July 25, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the three months ended June 30, 2022.

Earnings (Loss) Per Share of Common Stock

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.

Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.

The Company has adjusted the diluted EPS for the three months ended June 30, 2021 for warrants classified as derivative liabilities in accordance with ASC 260-10-45 as ~~follows:~~follows. No calculation is necessary for the three months ended June 30, 2022 because to do so would be anti-dilutive.

Nine Months Ended
December 31, Three Months Ended
December 31,
2021 2020 2021 2020
Diluted EPS:
Net income (loss) to controlling interest $ 1,306 $ (11,664 ) $ 4,602 $ 532
Change in fair value of derivative liability (15,295 ) 15,901 (10,979 ) (481 )

Adjusted net income (loss) $ (13,989 ) $ 4,237 $ (6,377 ) $ 51

Weighted Average Shares Outstanding 24,728 24,103 26,364 25,453
Adjusted earnings (loss) per share $ (0.57 ) $ 0.21 $ (0.24 ) $ 0.00

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

	June 30, 2021
Diluted EPS:
Net income to controlling interest	$	2,559,525
Change in fair value of derivative liability		(4,945,819	)

Adjusted net loss	$	(2,386,294	)

Weighted Average Shares Outstanding		26,372,172
Adjusted (loss) per share	$	(0.09	)

Derivative Financial Instruments

The Company does not currently use derivative instruments to hedge exposures to cash flow, market, or foreign currency ~~risks.~~risks, but may explore hedging oil prices in the current fiscal year. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-measured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

Recently Issued Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.

The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company ~~is currently evaluating the impact that~~does not believe this new guidance will have a material impact on its consolidated financial statements.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company ~~is currently evaluating the~~does not believe this new guidance will have a material impact ~~of this standard~~ on its consolidated financial statements.

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Liquidity

For the ~~nine~~three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ the Company had a net income (loss) of ~~$983~~$(10,196,534) and ~~($11,664),~~$2,559,525, respectively, has a working capital deficit of ~~$6,020~~$864,794 and ~~$11,845~~$8,394,850 as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021,~~2022, and has an accumulated deficit as of ~~December 31, 2021~~June 30, 2022 of ~~$147,635.~~$(169,064,738). As of ~~December 31, 2021,~~June 30, 2022, the Company has ~~$864~~$8,325,121 in cash and cash equivalents ~~from continuing operations. The Company alleviated~~which includes $3,000,000 transferred to White River prior to the substantial doubt regarding this uncertainty as of March 31, 2020 which continues to be alleviated at December 31, 2021 as a result of the Company’s acquisition of Banner Midstream on March 27, 2020, coupled with the raising of funds through the exercise of warrants and options and the sale of common stock and warrants during the year ended March 31, 2021 and through the nine months ended December 31, 2021.Fortium sale.

IfSee Note 13, “Mezzanine Equity” for information on the Company’s recent $12 million convertible preferred stock financing. That financing has restrictive covenants that require approval of the investor for the Company ~~raises additional funds by issuing~~to engage in any equity ~~securities, its stockholders would experience dilution. Additional~~or debt financing, ~~if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt~~and it is not likely approval for any financing ~~or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which diverts resources~~will be obtained unless from ~~other activities. If the Company is unable to obtain additional financing, it may be required to significantly scale back its business and operations.~~ such investor.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

The Company’s ability to raise additional capital will also be impacted by the ~~heightened societal and regulatory focus on~~SEC’s proposed climate change rules which are expected to become effective in the 2023 fiscal year and may also be impacted by the COVID-19 pandemic including the current supply chain shortages.

The Company believes that the current cash on hand and anticipated cash from operations is sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements.

Impact of COVID-19

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

~~Impact of~~ COVID-19

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

COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the ~~nine and~~ three months ended ~~December~~June 30, 2022 or year ended March 31, ~~2021~~2022 in contrast to the material impact it had in the prior fiscal year.

COVID-19 has also contributed to the supply chain disruptions which have not yet had a material effect for the Company. The Company will continue to monitor the supply chain shortages affecting ~~the world.~~its business.

Because the federal government and some state and local authorities are reacting to the current Omicron variant of COVID-19, it is creating uncertainty on whether these actions could disrupt the operation of the Company’s business and have an adverse effect on the Company. The extent to which ~~the~~ COVID-19 ~~outbreak~~ may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

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

In April 2020, the Company and one of its subsidiaries entered into PPP loans with financial institutions. Of the $1,869 in PPP loans obtained this fiscal year, the Company was informed that $1,850 (including $11 in accrued interest) had been forgiven in the three months ended December 31, 2020. The remaining $30 with accrued interest of $2 was converted into a loan that is due in May 2022, with payments of $2 per month that commenced December 19, 2020. The Company repaid this loan in full in September 2021.23

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

NOTE 2: DISCONTINUED OPERATIONS

On June 17, 2022, the Company sold Trend Discovery to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV for a three-year $4,250,000 secured note (see Note 4). Each of the Trend Discovery subsidiaries including Barrier Crest guaranteed the note and provided Agora with a first lien on its assets. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a). The Company had reclassified the operations of Barrier Crest and Trend Discovery Capital Management (the other entities were inactive) as discontinued operations as the disposal represents a strategic shift that will have a major effect on the Company’s operations and financial results. The Company made this determination for these segments to be held for sale as the criteria established under ASC 205-20-45-1E had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022 as well as for the period April 1, 2022 through June 17, 2022. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a) on June 17, 2022 at which time the gain was recognized. As a result of this reclassification, the Company identified the following assets and liabilities that were reclassified from continuing operations to discontinued operations as they are discontinued.

On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment. The Company determined that pursuant to ASC 205-20-45-1E that the operations related to the oil and gas production business would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of July 25, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the three months ended June 30, 2022.

Current assets as of June 30, 2022 and March 31, 2022 – Discontinued Operations:

	June 30, 2022		March 31, 2022
Cash	$	62,858	$	291,673
Accounts receivable		795,178		658,481
Inventory		136,007		107,026
Prepaid expenses		519,262		313,593
	$	1,513,305	$	1,370,773

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Non-current assets as of June 30, 2022 and March 31, 2022 – Held for Sale / Discontinued Operations:

	June 30, 2022		March 31, 2022
Goodwill	$	2,100,374	$	5,323,173
Property and equipment, net		1,182,034		596,464
Oil and gas properties, full cost-method		5,536,495		6,626,793
Capitalized drilling costs, net of depletion		348,725		604,574
Right of use asset – operating leases		207,842		226,417
	$	9,375,470	$	13,377,421

~~Pursuant~~

Current liabilities as of June 30, 2022 and March 31, 2022 – Held for Sale / Discontinued Operations:

	June 30, 2022		March 31, 2022
Accounts payable and accrued expenses	$	659,660	$	985,447
Current portion of long-term debt		41,414		-
Current portion of lease liability – operating leases		156,259		148,206
	$	857,333	$	1,133,653

Non-current liabilities as of June 30, 2022 and March 31, 2022 – Held for Sale / Discontinued Operations:

	June 30, 2022		March 31, 2022
Lease liabilities – operating leases, net of current portion	$	70,762	$	100,215
Long-term debt		103,853		-
Asset retirement obligations		746,061		1,303,751
	$	920,676	$	1,403,966

The Company reclassified the following operations to ~~ASC 205-20, Presentation~~discontinued operations for the three months ended June 30, 2022 and 2021, respectively.

	2022			2021
Revenue	$	1,741,106		$	1,722,779
Operating expenses		3,781,504			2,155,181
Other (income) loss		(397,956	)		(598,860	)
Net (loss) income from discontinued operations	$	(1,642,442	)	$	166,458

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

The following represents the calculation of ~~Financial Statements – Discontinued Operations, ASC-20-45-1B, paragraph 360-10-45-15,~~the gain on disposal of Trend Discovery at June 17, 2022:

	2022			2021
Secured Note Receivable	$	4,250,000		$	-
Cash		(27,657	)		-
Accounts receivable		(222,400	)		-
Prepaid expenses		(99,566	)		-
Goodwill		(3,222,799	)		-
Other assets		(284	)		-
Accounts payable and accrued expenses		34,211			-
Gain on disposal of discontinued operations	$	711,505		$	-

As of April 1, 2021, all of the equipment assets and accounts payable of Pinnacle Vac Services LLC (“Pinnacle Vac”) were transitioned into Capstone to continue servicing the debt. As a result, there are no assets or liabilities of discontinued operations that remain, and no income or loss from discontinued operations for the nine and three months ended December 31, 2021 and 2020.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

NOTE 3: REVENUE

The Company recognizes revenue when it transfers promised services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those services.

The following table disaggregates the Company’s revenue by major source for the ~~nine and~~ three months ended ~~December 31:~~June 30 for continuing operations:

Three Months Ended
December 31, Nine Months Ended
December 31,
2021 2020 2021 2020
Revenue:
Financial Services $ 175 $ 165 $ 523 $ 359
Digital asset mining 17 - 17 -
Oil and Gas Production 1,748 641 4,585 1,317
Transportation Services 4,139 3,541 13,756 8,090
Fuel Rebate 48 80 202 157
Equipment Rental 8 38 42 133
$ 6,135 $ 4,465 $ 19,125 $ 10,056

	2022		2021
Revenue from continuing operations:	(unaudited)		(unaudited)
Bitcoin mining	$	-	$	-
Transportation Services		5,348,225		5,037,994
Fuel Rebate		63,095		92,406
Equipment Rental and other		7,335		25,813
	$	5,418,655	$	5,156,213

There were no significant contract asset or contract liability balances for all periods presented. The Company elected the practical expedients in paragraphs 606-10-50-14 and 50-14A and does not disclose the ~~value~~amount of ~~unsatisfied~~transaction price allocated to remaining performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services ~~performed.~~performed, or variable consideration related to future service periods.

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

~~NOTE 4: INVENTORIES~~

The Company’s inventory as of December 31, 2021 and March 31, 2021 of $165 and $122, respectively, consisted of crude oil of approximately 5,187 and 6,198 barrels of unsold crude oil (these amounts are not rounded in thousands), respectively, using the lower of cost (LIFO) or net realizable value.

~~NOTE 5: NOTE RECEIVABLE~~

The Company entered into a $225 senior secured convertible promissory note on June 18, 2020 with Rabb Resources, LTD. The Company had an existing note in the amount of $25 that had not been secured, and rolled an additional $200 into Rabb Resources, LTD, whereby the entire amount became secured. The note was non-interest bearing if paid or converted within forty-five days of the issuance date of June 18, 2020 (August 2, 2020, which is the maturity date). If not paid or converted, the note bore interest at 11% per annum, paid in cash on a quarterly basis.26

This note was convertible into shares of Rabb Resources, LTD. based on a valuation of Rabb Resources, LTD. into shares of that company at a value of the $225. The Company advanced an additional $50 on July 8, 2020 and $25 on August 7, 2020 to bring the total note receivable to $300. This amount plus the accrued interest receivable of $4 was due as of August 14, 2020.

On August 14, 2020, the Company entered into an Asset Purchase Agreement with Rabb Resources, LTD. which included the acquisition of real property. The purchase price for this acquisition was $3,500, of which $1,196 was paid in cash (after applying the outstanding principal of the note receivable and accrued interest receivable against the $1,500 agreed upon cash consideration) and the balance was paid in common stock of the Company. The Company accounted for this acquisition as an asset purchase (see Note 18). There were no amounts outstanding as of December 31, 2021 and March 31, 2021, respectively.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

Bitcoin Mining

Providing computing power to solve complex cryptographic algorithms in support of Bitcoin blockchains, in a process known as “solving a block”, is an output of the Company’s ordinary activities. The provision of computing power is the only performance obligation in the Company’s contracts with mining pool operators, its customers. When the Company engaged in mining, satisfied its performance obligation over time as it provides computing power.

The contract term is short, limited to the period of time the Company’s miners were contributing to the mining pool computational operations in support of the blockchain, measured in “hash rate” or “hashes per second”. The contract term was the payout period under the Company’s mining pool contracts, which is a twenty-four-hour period. After each contract period, the Company had the right to renew the contract for subsequent, successive payout periods.

Bitcoin received in exchange for providing computing power represents noncash consideration. The fair value of the noncash consideration determined at contract inception was recognized in revenue as the Company performed over the contract term using an output method based on hash rate contributed. Changes in the fair value of the noncash consideration post-contract consideration due to reasons other than form of consideration (that is, other than the price of bitcoin or ether) were estimated under the expected value method but constrained from inclusion in the transaction price (and hence revenue) until end of the contract term when the uncertainty has been resolved and amount was known.

The Company received payment for its provision of hash rate under the Pay-Per-Shares-Plus (“PPS+”) payment method. The payment method contains two components, (1) the block rewards issued by the blockchain network and paid by the mining pool operator, and (2) transaction fees generated from (paid by) blockchain users and distributed (paid out) to individual miners by the mining pool operator. The pool, as a collective entity, develops its own technology that, on one end, gathers individual miner’s hash rate, and on the other end contributes hash rate to the network to compete for block rewards from the network.

For PPS+, as long as individual miners contribute hash rate to the pool, the Company (as an individual miner) is entitled to receive its corresponding amount of block rewards based on the mining pool’s calculation methodology, which is standard across pool operators.

Block rewards are the new coins awarded to Bitcoin miners by the network (bitcoin for the bitcoin network) and is a theoretical number calculated by the mining pool operator based on inputs including difficulty level, network hash rate, and block rewards (for example, 6.25 for Bitcoin). Transaction fees refers to the total fees paid by users of the network to execute transactions.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Digital asset transaction fees are payable to the mining pool operator to cover the costs of maintaining the pool and are deducted from the block reward payout. This fee was deducted from the block reward the Company received and recorded as a reduction of revenue because it does not represent payment for a distinct good or service.

NOTE ~~6: DIGITAL ASSETS~~4: SENIOR SECURED PROMISSORY NOTE RECEIVABLE

Agora was issued a Senior Secured Promissory Note by Trend Ventures, LP (“Trend Ventures Note”) on June 16, 2022. The Trend Ventures Note was the consideration paid to Agora for the acquisition of Trend Discovery Holdings. The Trend Ventures Note is in the principal amount of $4,250,000, bears interest at the rate of 5% per annum, and matures June 16, 2025. Under Trend Ventures Note, Trend Ventures, LP has agreed to make interest-only payments, in arrears on a monthly basis commencing on June 30, 2022 and continuing thereafter until June 16, 2023. Beginning on June 30, 2023, Trend Ventures, LP agreed to make 24 consecutive equal monthly payments of principal each in an amount which would fully amortize the principal, plus accrued interest. All principal and any unpaid accrued interest will be due and payable on or before the maturity date. The Trend Ventures Note will be granted a first lien senior secured interest as set forth in the Security Agreement executed on the same date as the Trend Ventures Note, by and among Trend Ventures, LP, its future subsidiaries (each a Guarantor) and Agora dated as of June 16, 2022.

As of June 30, 2022, the Company has recognized $8,385 in interest income and accrued interest receivable.

NOTE 5: BITCOIN

Agora commenced their ~~digital asset~~Bitcoin mining operations in November 2021. ~~During~~Through June 30, 2022, Agora mined 0.57361732 Bitcoins (none in the ~~period~~three months ended ~~December 31, 2021, the Company mined 0.34422307 Bitcoins.~~June 30, 2022). Agora temporarily ceased Bitcoin mining on March 3, 2022. The value of the Bitcoin mined was ~~approximately $17.~~$26,495 of which $16,351 has been impaired through June 30, 2022. During the ~~period~~three months ended ~~December 31, 2021,~~June 30, 2022, the Company recognized Bitcoin impairment losses of ~~digital assets of $1,~~$9,122, to bring the carrying value of the ~~digital assets~~Bitcoin down to its fair value. The carrying value at ~~December 31, 2021~~June 30, 2022 was ~~$16,~~$10,145, which represents the lowest fair value of the Bitcoins at any time since their mining. ~~The Company~~Agora did not sell any of its ~~digital assets~~Bitcoin at any point during this period.

The following table presents additional information about Agora’s Bitcoin holdings during the ~~period~~three months ended ~~December 31, 2021.~~June 30, 2022:

Beginning balance – April 1, 2022	$	19,267
Bitcoin mined at initial fair value		-
Bitcoin impairment losses		(9,122	)
Ending balance – June 30, 2022	$	10,145

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

NOTE 7:6: PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021:~~2022:

	December 31, 2021			March 31, 2021			June 30, 2022			March 31, 2022
	(unaudited)						(unaudited)
Zest Labs freshness hardware	$	2,493		$	2,493
Computers and software costs		222			222
Zest Labs freshness hardware, equipment and computer costs							$	2,915,333		$	2,915,333
Land		140			140			125,000			125,000
Buildings		236			236			-			-
Leasehold improvements – Pinnacle Frac		18			18			18,052			18,052
Mining technology equipment – Digital Asset		7,066			-
Machinery and equipment – Technology		200			200
Mining technology equipment– Bitcoin								7,065,640			7,065,640
Machinery and equipment – Bitcoin								91,132			91,132
Machinery and equipment – Commodities		3,596			3,385			699,512			3,256,686
Total property and equipment		13,971			6,694			10,914,669			13,471,843
Accumulated depreciation and impairment		(3,515	)		(2,999	)		(2,796,146	)		(3,738,734	)
Property and equipment, net	$	10,456		$	3,695		$	8,118,523		$	9,733,109

As of ~~December~~March 31, ~~2021 and 2020,~~2022, the Company performed an evaluation of the recoverability of these long-lived assets. ~~The analysis resulted in~~As a result of the evaluation, there was no impairment as of ~~related to these assets.~~the fixed assets necessary.

On April 1, 2021, the Company placed back in service equipment of ~~$201~~$201,388 with accumulated depreciation of $7$7,484 which were part of discontinued operations related to Pinnacle Vac. These assets are equipment related to Capstone who is servicing the debt related to the assets. The Company has $6,720,809 in assets that have not placed into service as of March 31, 2022.

The Company in April 2021 traded in a truck with a value of $5$5,447 for a new truck with a value of $3$2,532 and received cash of $2$2,500 in the exchange. In February 2022, the Company traded in a vehicle valued at $51,806 for a new vehicle valued at $91,132.

On April 11, 2022, the Company sold equipment of $2,557,172, that had accumulated depreciation of $1,027,148 for a net value of $1,530,024 for $580,000. The result was a loss on sale of $950,024.

Depreciation expense for the ~~nine and~~ three months ended ~~December 31,~~June 30, 2022 and 2021 was $84,561 and ~~2020 was $516 and $513, and $170 and $172,~~$164,975, respectively.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

NOTE 8:7: INTANGIBLE ASSETS AND GOODWILL

Intangible assets consisted of the following as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021:~~ 2022:

	December 31, 2021			March 31, 2021			June 30, 2022			March 31, 2022
	(unaudited)						(unaudited)
Patents	$	1,013		$	1,013		$	1,012,672		$	1,012,672
Customer relationships		2,100			2,100			2,100,000			2,100,000
Non-compete agreements – Banner Midstream		250			250			250,000			250,000
Outsourced vendor relationships		1,017			1,017			1,016,736			1,016,736
Non-compete agreements – Zest Labs		340			340			340,215			340,215
Total intangible assets		4,720			4,720			4,719,623			4,719,623
Accumulated amortization and impairment		(2,916	)		(2,655	)		(3,067,535	)		(3,003,292	)
Intangible assets, net	$	1,804		$	2,065		$	1,652,088		$	1,716,331

In the acquisition of Banner Midstream, the Company acquired the customer relationships and non-compete agreements valued at $2,350. The estimated useful lives of the customer relationships are ten years based on the estimated cash flows from those customer contracts, and the estimated useful lives of the non-compete agreement is five years amortized over a straight-line method.

Amortization expense for the ~~nine and~~ three months ended ~~December 31,~~June 30, 2022 and 2021 was $64,243 and ~~2020 was $261 and $214, and $87 and $72,~~$87,204, respectively.

The following is the future amortization of the intangibles as of ~~December 31:~~June 30:

2022	$	280
2023		263	$	259,103
2024		263		264,512
2025		230		251,129
2026		205		214,923
2027				201,111
Thereafter		563		461,310
	$	1,804	$	1,652,088

In addition to the statutory based intangible assets noted above, the Company recorded a total of ~~$10,225~~$7,001,247 of goodwill in connection with the purchase of ~~Trend~~Banner Midstream. Of this amount, $2,100,374 is included in assets held for sale as it relates to the oil and ~~Banner Midstream.~~gas production business.

~~Accordingly, goodwill was as follows as of December 31, 2021:~~

Acquisition – Trend Discovery $ 3,223
Acquisition – Banner Midstream 7,002
Goodwill – December 31, 2021 $ 10,225

The Company assessed the criteria for impairment, and there were no indicators of impairment present as of ~~December~~March 31, ~~2021,~~2022, and therefore no impairment is necessary. There have been no indicators of impairment present in the three months ended June 30, 2022.

The goodwill from the Trend acquisition of $3,222,799 had been reclassified to non-current assets held for sale as of March 31, 2022. With the June 2022 sale of Trend, this amount was written down and included in gain from disposal in the three months ended June 30, 2022.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

NOTE 9:8: POWER DEVELOPMENT ~~FEE~~COST

~~The Company~~Agora has paid ~~$1,000~~$1,000,000 each under two separate agreements for two different land sites to a non-related third party for a total of ~~$2,000~~$2,000,000 in connection with the commencement of Bitstream’s Bitcoin mining operations. The payments represent the fee for securing 48 MW and 30 MW, respectively of utility capacity as defined and agreed by ERCOT West Load Zone in the Oncor Electric Delivery Company LLC (“Utility”) at the “one-span” tariff rate classification of “6.1.1.1.5 Primary greater than 10kw”. If the Utility is unable to deliver these terms as defined in the facilities extension agreement, the non-related third party is obligated to secure a new location for ~~the Company~~Bitstream with at least the stated capacity and same rate tariff. The non-related third party secured the 48 MW and 30 MW of available capacity by signing a distribution facilities extension agreement with the Utility and posting the required collateral.

The ~~$2,000~~$2,000,000 was used to purchase this right to the distribution facilities extension agreement which gives ~~the Company~~Bitstream immediate access to the 78 MW electric capacity from the Utility.

~~The Company~~Bitstream also reimbursed the utility deposits paid by the non-related third party in connection with these agreements in the amount of ~~$96~~$96,000 and ~~$327,~~$326,500, respectively. The power development fees are deemed non-refundable unless the non-related third party cannot find a suitable location within 6 months. ~~The Company~~Bitstream and the non-related third party are still negotiating a definitive power agreement.

The Company has classified these payments as “Power Development Costs” as a noncurrent asset on the Consolidated Balance Sheets.

NOTE ~~10:~~9: ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	December 31, 2021		March 31, 2021		June 30, 2022		March 31, 2022
	(unaudited)				(unaudited)
Professional fees and consulting costs	$	116	$	801	$	553,995	$	394,660
Vacation and paid time off		162		107		111,088		101,954
Legal fees		91		86		342,363		68,723
Compensation		136		734		302,128		245,179
Interest		-		65		28,087		2,223
Insurance		956		1,013		1,973,224		384,394
Dividend						43,151		-
Other		458		785		431,417		532,291
Total	$	1,919	$	3,591	$	3,785,453	$	1,729,424

During the year ended March 31, 2021, the Company converted $1,228 of amounts due to prior owners into shares of common stock which resulted in a loss on conversion of $1,248, and $814 was paid in cash in the year ended March 31, 2021.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

NOTE ~~11:~~10: WARRANT DERIVATIVE LIABILITIES

The Company issued common stock and warrants in several private placements and two public offerings (“Derivative Warrant Instruments”) and some of these warrants have been classified as liabilities. The Derivative Warrant Instruments have been accounted for utilizing ASC 815 “Derivatives and Hedging.” The Company has incurred a liability for the estimated fair value of Derivative Warrant Instruments. The estimated fair value of the Derivative Warrant Instruments has been calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense).

The Company identified embedded features in some of the warrant agreements which were classified as a liability. These embedded features included (a) the implicit right for the holders to request that the Company settle the warrants in registered shares. Since maintaining an effective registration of shares is potentially outside the control of the Company, these warrants were classified as liabilities as opposed to equity; (b) included the right for the holders to request that the Company cash settle the warrant instruments from the holder by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the Derivative Warrant Instruments on the date of the consummation of a fundamental transaction; and (c) certain price protections in the agreements. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as derivatives as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.

On November 14, 2020, the Company granted 6060,000 two-year warrants exercisable at $7.75 per share in exchange for the early conversion of a portion of the September 24, 2020 warrants. The fair value of the November 14, 2020 warrants was estimated to be $251,497 at inception, and $3,666 as of June 30, 2022.

On December 30, 2020, the Company granted 888,889 two-year warrants, with a strike price of ~~$7.75 per share with a term of two-years.~~$10.00, in the registered direct offering. The fair value of those warrants was estimated to be ~~$251~~$4,655,299 at ~~inception, and $13 as of December 31, 2021.~~

On December 30, 2020, the Company granted 889 warrants, in the direct registered offering under the effective Form S-3, with a strike price of $10.00 with a term of two-years (maturity January 2, 2023). The fair value of those warrants was estimated to be $4,655 at inception and $4,653 as of December 31, 2020.inception. During the three months ended March 31, 2021, ~~176~~176,000 warrants were exercised for ~~$1,760,~~$1,760,000, and no shares were exercised during the ~~nine~~year ended March 31, 2022 and three months ended ~~December 31, 2021.~~June 30, 2022. The fair value of the remaining warrants at ~~December 31, 2021~~June 30, 2022 is ~~$133.~~$44,726.

On December 30, 2020, the Company granted 6262,222 two-year warrants to the placement agent as additional compensation in connection with the registered direct offering closed December 31, 2020, exercisable at a strike price of $11.25 per ~~share for a term of two-years (expiring January 2, 2023).~~share. The fair value of those warrants was estimated to be ~~$308~~$308,205 at inception and ~~$10~~$2,849 as of ~~December 31, 2021.~~ June 30, 2022.

~~The fair value of the 200 warrants that remain outstanding from the 250 warrants granted on September 24, 2020 as of December 31, 2021 is $21.~~

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

The fair value of the 200,000 warrants that remain outstanding from the 250,000 warrants granted on September 24, 2020 as of June 30, 2022 is $1,127.

On June 30, 2021, the Company granted ~~200~~200,000 two-year warrants ~~subject~~with a strike price of $10.00 per share, pursuant to a purchase agreement entered into the same day with the warrant ~~holder, with a strike price of $10.00 per share with a term of two-years.~~holder. The fair value of those warrants was estimated to be ~~$545~~$545,125 at inception, on June 30, 2021 and ~~$74~~$54,291 as of ~~December 31, 2021.~~June 30, 2022.

On August 6, 2021, the Company closed a ~~$20,000~~$20,000,000 registered direct ~~offering in which H.C. Wainwright & Co., LLC acted as the exclusive placement agent.~~offering. The Company sold ~~3,478~~3,478,261 shares of common stock and ~~3,478~~3,478,261 warrants at $5.75 per share. The warrants are exercisable ~~for a three- and one-half-year period beginning when the Company increases its authorized common stock to 40,000 shares, which occurred on October~~through April 8, ~~2021.~~2025. The Company also issued the placement agent ~~243~~243,478 warrants exercisable at $7.1875 per share over the same period as the investor warrants but expiring on the earlier of the three- and one-half year anniversary of the date the placement agent warrants first become exercisable and August 4, 2026.share. Further information on the offering and compensation to the placement agent is contained in the prospectus supplement dated August 4, 2021. The fair value of the investor warrants was estimated to be ~~$11,203~~$11,201,869 at inception and ~~$3,908~~$4,331,296 as of ~~December 31, 2021.~~June 30, 2022. The fair value of the placement agent warrants was estimated to be ~~$744~~$744,530 at inception and ~~$251~~$274,207 as of ~~December 31, 2021.~~June 30, 2022.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of ~~December 31, 2021~~June 30, 2022 and ~~March 31,~~ 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following assumptions were used on ~~December 31, 2021 and~~June 30, 2022, March 31, ~~2021~~2022 and at inception:

~~Nine~~Three Months Ended
~~December 31,~~June 30,
~~2021~~2022

Year Ended
March 31,
~~2021~~2022

Inception

Expected term

~~0.5~~

0.24 – ~~3.50~~2.60 years

~~4.58 - 5~~

0.5 – 2.85 years

5.00 years

Expected volatility

~~110 - 113%~~

108

~~94 - 101%~~

110 – 113

91% ~~- 107%~~– 107

Expected dividend yield

Risk-free interest rate

~~0.61 - 1.74%~~

2.98

~~0.61 - 1.74%~~

0.25 – 0.42

1.50% ~~- 2.77%~~– 2.77

Market price

$~~2.00 - $12.95~~

1.59 – $2.80

$~~3.05~~

2.00 - ~~$10.00~~$5.89

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

The Company’s remaining derivative liabilities as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021~~2022 associated with warrant offerings are as follows. All fully extinguished warrants liabilities are not included in the chart below.

December 31,
2021 March 31,
2021 Inception
Fair value of 200 (originally 250) September 24, 2020 warrants $ 21 $ 1,349 $ 1,265
Fair value of 60 November 14, 2020 warrants 13 458 251
Fair value of 889 December 31, 2020 warrants 133 4,993 4,655
Fair value of 62 December 31, 2020 warrants 10 413 308
Fair value of 200 June 30, 2021 warrants 74 - 545
Fair value of 3,478 August 6, 2021 warrants 3,908 - 11,203
Fair value of 243 August 6, 2021 warrants 251 - 744
$ 4,410 $ 7,213

	June 30, 2022 (unaudited)		March 31, 2022		Inception
Fair value of 200,000 (originally 250,000) September 24, 2020 warrants	$	1,127	$	8,354	$	1,265,271
Fair value of 60,000 November 14, 2020 warrants		3,666		7,695		251,497
Fair value of 888,889 December 31, 2020 warrants		44,726		82,436		4,655,299
Fair value of 62,222 December 31, 2020 warrants		2,849		5,741		308,205
Fair value of 200,000 June 30, 2021 warrants		54,291		60,866		545,125
Fair value of 3,478,261 August 6, 2021 warrants		4,331,296		3,904,575		11,201,869
Fair value of 243,478 August 6, 2021 warrants		274,207		248,963		744,530
	$	4,712,162	$	4,318,630

During the ~~nine and~~ three months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ the Company recognized changes in the fair value of the derivative liabilities of ~~$15,295~~$(393,532) and ~~$(15,901), and $10,979 and $481,~~$4,945,819, respectively. In addition, the Company recognized ~~$1,289~~$0 and $0$545,125 in expenses related to the warrants granted for the ~~nine and~~ three months ended ~~December 31,~~June 30, 2022 and 2021.

Activity related to the warrant derivative liabilities for the three months ended June 30, 2022 is as follows:

Beginning balance as of March 31, 2022	$	4,318,630
Issuances of warrants – derivative liabilities		-
Warrants exchanged for common stock		-
Change in fair value of warrant derivative liabilities		393,532
Ending balance as of June 30, 2022	$	4,712,162

Activity related to the warrant derivative liabilities for the three months ended June 30, 2021 is as follows:

Beginning balance as of March 31, 2021	$	7,213,407
Issuances of warrants – derivative liabilities		545,125
Warrants exchanged for common stock		-
Change in fair value of warrant derivative liabilities		(4,945,819	)
Ending balance as of June 30, 2021	$	2,812,713

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

~~Activity related to the warrant derivative liabilities for the nine months ended December 31, 2021 is as follows:~~NOTE 11: LONG-TERM DEBT

Beginning balance as of March 31, 2021 $ 7,213
Issuances of warrants – derivative liabilities 12,492
Warrants exchanged for common stock (- )
Change in fair value of warrant derivative liabilities (15,295 )
Ending balance as of December 31, 2021 $ 4,410

~~Activity related to the warrant derivative liabilities for the year ended March 31, 2021 is as follows:~~

Beginning balance as of March 31, 2020 $ 2,775
Issuances of warrants – derivative liabilities 13,118
Warrants exchanged for common stock (27,198 )
Change in fair value of warrant derivative liabilities 18,518
Ending balance as of March 31, 2021 $ 7,213

~~NOTE 12: CAPITALIZED DRILLING COSTS AND OIL AND GAS PROPERTIES~~

~~Capitalized Drilling Costs~~

In January 2021, the Company commenced a drilling program on their Deshotel 24H well included in their proved reserves. The Company incurred $6,084 in costs related to this program of which $3,387 was expensed directly as drilling costs. The Company, pursuant to ASC 932 will amortize the remaining $2,697 of these costs, under the full-cost method based on the units of production method. Depletion expense for the nine and three months ended December 31, 2021 for the capitalized drilling costs was $511 and $92, respectively. As of December 31, 2021, the capitalized drilling costs were $2,056. There were no such costs for the nine and three months ended December 31, 2020.

~~Oil and Gas Properties~~

~~The Company’s holdings in oil and gas mineral lease (“OGML”) properties as of December 31, 2021 and March 31, 2021 are as follows:~~

~~Trend Exploration was assigned an 80% working interest in fourteen wells from the Assignors on July 1, 2021.~~

December 31,
2021 March 31,
2021
(unaudited)
Total OGML Properties Acquired $ 11,727 $ 12,352

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

~~The Company acquired the following from Banner Midstream on March 27, 2020:~~

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

O’Neal Family OGML 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 respectively in exchange for a $125 drilling credit to be applied by Livland, LLC on subsequent drilling operations.

~~Taliaferro Family OGML including shallow drilling rights was acquired by White River on June 10, 2019 from Lagniappe Operating, LLC.~~

~~Kingrey Family OGML including both shallow and deep drilling rights was entered into by White River and the Kingrey Family on April 3, 2019.~~

Peabody Family OGML including both shallow and deep drilling rights was acquired by White River on June 18, 2019 from SR Acquisition I, LLC, a subsidiary of Sanchez Energy Corporation, for a 1% royalty retained interest in conjunction with White River executing a lease saving operation in June 2019.

As discussed in Note 18, the Company acquired certain leases on June 11, 2020 and June 18, 2020 in Mississippi and Louisiana valued at $2. These assets were paid entirely in cash. In addition, the Company impaired $83 of property as it let certain leases lapse.

As discussed in Note 18, on August 14, 2020, the Company entered into an Asset Purchase Agreement with Rabb Resources, LTD which included the acquisition of real property. The purchase price for this acquisition was $3,500. Of this amount, $3,224, is reflected as Oil and Gas Properties.

As discussed in Note 18, on September 4, 2020, the Company entered into a Lease Assignment agreement. The purchase price for this acquisition was $1,500. Of this amount, $1,500, is reflected as Oil and Gas Properties.

As discussed in Note 18, on September 30, 2020, the Company entered into three Asset Purchase Agreements. The purchase prices for these acquisitions were $750. Of this amount, $760, is reflected as Oil and Gas Properties.

As discussed in Note 18, on October 1, 2020, the Company entered into three Asset Purchase Agreements. The purchase price for these acquisitions were $22. Of this amount, $22, is reflected as Oil and Gas Properties.

As discussed in Note 18, on October 9, 2020, the Company entered into three Asset Purchase Agreements. The purchase price for these acquisitions were $615. Of this amount, $615, is reflected as Oil and Gas Properties.

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

~~On May 13, 2021, the Company’s subsidiaries White River Energy LLC and White River Operating LLC entered into a Letter Agreement for a .60 of 8/8~~^thEarned Working Interest with TSEA Partners LLC (“TSEA”) for their Harry O’Neal 20-10 lease in Holmes County, MS (“Letter Agreement”). Under the terms of the Letter Agreement, TSEA paid $600 to the Company to transfer the working interest to TSEA and TSEA received a $300 drilling or workover credit to use towards any authority for expenditure at Horseshoe Field. There were no amounts valued as oil and gas properties for this particular property, and as a result, the entire $600 is reflected as a gain on sale of property as well as the removal of the asset retirement obligation of $1 which brought the total gain to $601.

Effective on July 1, 2021, the Company’s subsidiary White River SPV 2, LLC closed on the sale of the Weyerhauser OGML Lease. The Company did not record a value for the property as it was acquired in a group of properties on June 11, 2021 as the entire group of properties were purchased for $1. As a result, the entire sales price of $112, which includes the sale of the existing inventory and related expenses of $12 on this well and removal of the accumulated depletion, asset retirement obligation brought the total gain to $121.

The Company had an analysis completed by an independent petroleum consulting company in March 2021 to complete the acquisition analysis within the required one-year period. There were no adjustments required from the original asset allocation on March 27, 2020.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

~~The following table summarizes the Company’s oil and gas activities by classification for the nine months ended December 31, 2021 and year ended March 31, 2021.~~

Activity Category March 31,
2021 Adjustments (1) December 31,
2021
Proved Developed Producing Oil and Gas Properties
Cost $ 7,223 $ - $ 7,223
Accumulated depreciation, depletion and amortization (739 ) (929 ) (1,668 )
Changes in estimates - - -
Total $ 6,484 $ (929 ) $ 5,555

Undeveloped and Non-Producing Oil and Gas Properties
Cost $ 5,868 $ 304 $ 6,172
Changes in estimates (- ) (- ) (- )
Total $ 5,868 $ 304 $ 6,172

Grand Total $ 12,352 $ (625 ) $ 11,727

Activity Category March 31,
2020 Adjustments (1) March 31,
2021
Proved Developed Producing Oil and Gas Properties
Cost $ 167 $ 737 $ 904
Accumulated depreciation, depletion and amortization - (739 ) (739 )
Changes in estimates - 6,319 6,319
Total $ 167 $ 6,317 $ 6,484

Undeveloped and Non-Producing Oil and Gas Properties
Cost $ 5,968 $ 6,219 $ 12,187
Changes in estimates - (6,319 ) (6,319 )
Total $ 5,968 $ (100 ) $ 5,868

Grand Total $ 6,135 $ 6,217 $ 12,352

~~(1)~~

Relates to acquisitions and dispositions of reserves. For the nine months ended December 31, 2021, the Company acquired various leases in Concordia, LA and Caldwell, TX for $304, and sold a lease for $6 in Lasalle, LA.

~~In addition, on July 1, 2021, the Company assigned an 80% working interest in fourteen wells to their subsidiary, Trend Exploration.~~

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

~~NOTE 13: LONG-TERM DEBT~~

Long-term debt consisted of the following as of ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021.~~2022. All debt instruments repaid during the year ended March 31, ~~2021~~2022 are not included in the below chart and the chart only reflects those instruments that had a balance owed as of these dates.

December 31,
2021 March 31,
2021
(unaudited)
Note payable – Alliance Bank (a) $ 303 $ 1,033
Commercial loan – Firstar Bank (b) 328 626
Auto loan 1 – Firstar Bank (c) 20 29
Auto loan 2 – Firstar Bank (d) - 38
Auto loan 3 – Ally Bank (e) 27 34
Auto loan 4 – Ally Bank (f) 29 35
Auto loan 7 – Ally Bank (g) - 69
Tractor loan 6 – Tab Bank (h) 134 180
Ecoark – PPP Loan (i) - 24
Total long-term debt 841 2,068
Less: current portion (698 ) (1,056 )
Long-term debt, net of current portion $ 143 $ 1,012

	June 30, 2022			March 31, 2022
	(unaudited)
Credit facility -Trend Discovery SPV 1, LLC (a)	$	516,036		$	595,855
Note payable – Alliance Bank (b)		169,341			236,755
Commercial loan – Firstar Bank (c)		-			245,217
Auto loan 1 – Firstar Bank (d)		13,792			16,839
Auto loan 4 – Ally Bank (e)		20,615			23,012
Tractor loan 6 – Tab Bank (f)		-			118,332
Auto loan – Ford (g)		76,555			80,325
Total long-term debt		796,339			1,316,335
Less: current portion		(719,911	)		(1,181,021	)
Long-term debt, net of current portion	$	76,428		$	135,314

(a)

On December 28, 2018, the Company entered into a $10,000,000 credit facility that includes a loan and security agreement (the “Agreement”) where the lender agreed to make one or more loans to the Company, and the Company may make a request for a loan or loans from the lender, subject to the terms and conditions. The Company is required to pay interest biannually on the outstanding principal amount of each loan calculated at an annual rate of 12%. The loans are evidenced by demand notes executed by the Company. The Company is able to request draws from the lender up to $1,000,000 with a cap of $10,000,000. In the year ended March 31, 2022, the Company borrowed $595,855, which includes $25,855 in commitment fees, with the balance of $575,000 being deposited directly into the Company. In the three months ended June 30, 2022, the Company borrowed $505,181, which includes $17,681 in commitment fees, with the balance of $487,500 being deposited directly into the Company, and repaid $585,000 in the three months ended June 30, 2022. Interest incurred for the three months ended June 30, 2022 was $25,864, and accrued as of June 30, 2022 was $28,087. There were no advances in the three months ended June 30, 2021.

(b)

Original loan date of June 14, 2019 with an original maturity date of April 14, 2020. The Company extended this loan for ~~$1,239~~$1,238,500 at 4.95% with a new maturity date of April 14, 2025. On September 24, 2021, the Company repaid ~~$550~~$550,000 of this amount as a condition of the underlying guarantee of the note.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

~~(b)~~(c)

Original loan date of February 28, 2018, due December 31, 2022 at 4.75%. The Company repaid the entire amount on April 11, 2022 with the proceeds from the sale of equipment of $580,000.

~~(c)~~(d)

On July 20, 2018, entered into a long-term secured note payable for ~~$56~~$56,300 for a service truck maturing July 20, 2023. The note is secured by the collateral purchased and accrued interest annually at 6.50% with principal and interest payments due monthly. There is no accrued interest as of ~~December 31, 2021.~~June 30, 2022.

~~(d)~~

On August 3, 2018, entered into a long-term secured note payable for $73 for a service truck maturing August 3, 2023. The note is secured by the collateral purchased and accrued interest annually at 6.50% with principal and interest payments due monthly. The collateral underlying the loan was stolen in March 2021, and the Company received an insurance settlement in May 2021 and promptly used those proceeds to pay off the remainder of the loan balance.

(e)

On July 18, 2018, entered into a long-term secured note payable for $56 for a service truck maturing August 17, 2024. The note is secured by the collateral purchased and accrued interest annually at 9.00% with principal and interest payments due monthly. There is no accrued interest as of December 31, 2021.

~~(f)~~

On July 26, 2018, entered into a long-term secured note payable for ~~$54~~$55,268 for a service truck maturing September 9, 2024. The note is secured by the collateral purchased and accrued interest annually at 7.99% with principal and interest payments due monthly. There is no accrued interest as of ~~December 31, 2021.~~June 30, 2022.

~~(g)~~

On November 5, 2018, entered into four long-term secured notes payable for $140 maturing on November 5, 2021. The notes are secured by the collateral purchased and accrued interest annually at rates ranging between 6.89% and 7.87% with principal and interest payments due monthly. These loans were paid in full on the maturity date.

~~(h)~~(f)

On November 7, 2018, entered into a long-term secured note payable for ~~$301~~$301,148 maturing on November 22, 2023. The note is secured by the collateral purchased and accrued interest annually at 10.25% with principal and interest payments due monthly. The Company repaid the entire amount on April 11, 2022 with the proceeds from the sale of equipment of $580,000.

(g)

On February 16, 2022, entered into long-term secured note payable for $80,325 for a service truck maturing February 13, 2028. The note is secured by the collateral purchased and accrued interest annually at 5.79% with principal and interest payments due monthly. There is no accrued interest as of ~~December 31, 2021.~~

~~(i)~~

PPP loan received by Ecoark Holdings Inc. in April 2020. Loan bears interest at 1% per annum and matures April 2022. On November 19, 2020, the Company received confirmation that $356 in principal and $2 in accrued interest has been forgiven, and this amount has been reflected in forgiveness of debt. The remaining $29, were to be due in monthly installments of $2 through maturity in MayJune 30, 2022 ~~however, the Company repaid the remaining balance of $15 on August 24, 2021.~~

The following is a list of maturities as of June 30:

2023	$	719,911
2024		24,083
2025		13,195
2026		13,980
2027		14,811
Thereafter		10,359
	$	796,339

During the three months ended June 30, 2022, the Company received proceeds of $487,500, repaid $1,029,848, secured notes payable for trucks valued at $149,937, and incurred $17,681 in commitment fees added to the credit facility with Trend Discovery SPV 1, LLC.

During the three months ended June 30, 2021, the Company repaid $213,957.

Interest expense on long-term debt during the three months ended June 30, 2022 and 2021 are $38,018 and $22,860, respectively.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

~~The following is a list of maturities as of December 31:~~

2022 $ 698
2023 127
2024 16
$ 841

~~During the nine months ended December 31, 2021, the Company repaid $1,227 in long-term debt.~~

During the year ended March 31, 2021, the Company received proceeds of $1,869 in new long-term debt, repaid $4,100 in existing long-term debt, converted $830 in existing long-term debt that resulted in a loss on conversion of $1,337, and had $1,850 forgiven in long-term debt and accrued interest. In addition, the Company converted $65 of accrued interest and paid $361 in accrued interest during this period. The Company recognized a loss of $146 on conversion of the accrued interest to common stock in the year ended March 31, 2021.

~~Interest expense on long-term debt during the three and nine months ended December 31, 2021 and 2020 are $19 and $113 and $66 and $362, respectively.~~

NOTE ~~14:~~12: NOTES PAYABLE - RELATED PARTIES

Notes payable to related parties consisted of the following as of ~~December~~March 31, ~~2021~~2022 and ~~March 31,~~ 2021. All notes payable to related parties instruments repaid during the year ended March 31, ~~2021~~2022 are not included in the below chart and the chart only reflects those instruments that had a balance owed as of these dates.

December 31,
2021 March 31,
2021
(unaudited)
Ecoark Holdings Board Member (a) $ - $ 578
Total Notes Payable – Related Parties - 578
Less: Current Portion of Notes Payable – Related Parties (- ) (578 )
Long-term debt, net of current portion $ - $ -

~~(a)~~

A board member advanced $578 to the Company through August 8, 2021, under the terms of notes payable that bears interest at rates ranging between 10% and 15% interest per annum. On August 9, 2021, the Company repaid the entire $578 to the board member with accrued interest of $43. Interest expense on the notes for the nine and three months ended December 31, 2021 and 2020 was $0 and $72 and $25 and $99, respectively.

A Board member advanced $577,500 to the Company through August 8, 2021, under the terms of notes payable that bears interest at rates ranging between 10% and 15% interest per annum. On August 9, 2021, the Company repaid the entire $577,500 to the Board member with accrued interest of $42,535. Interest expense on the notes for the three months ended June 30, 2021 was $17,514.

An officer of the Company advanced ~~$45~~$116,000 and was repaid this amount during the ~~nine months~~year ended ~~December~~March 31, ~~2021.~~

~~During~~2022, and $25,000 was advanced and repaid during the year ended March 31, ~~2021,~~2022 from an officer of Agora. In the ~~Company received proceeds~~three months ended June 30, 2022, the Company’s Chief Executive Officer and Chief Financial Officer advanced a total of ~~$954~~$591,000 which was fully repaid in ~~notes payable – related parties,~~the same period; and an officer of Agora advanced $25,000 which was fully repaid ~~$1,973~~ in ~~existing notes payable – related parties,~~the same period. These were short-term advances and ~~converted $575 in existing notes payable – related parties that resulted in~~no interest was charged as the amounts were outstanding for just a ~~loss on conversion of $1,239. In addition, the Company converted $15 of accrued interest during this period.~~few weeks.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

NOTE ~~15: STOCKHOLDERS’~~13: MEZZANINE EQUITY ~~(DEFICIT)~~

On June 8, 2022, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Digital Power Lending, LLC, a California limited liability company (the “Purchaser”), pursuant to which the Company sold the Purchaser 1,200 shares of Series A Convertible Redeemable Preferred Stock (the “Ecoark Series A”), 102,881 shares of common stock (the “Commitment Shares”) and a warrant to purchase shares of common stock (the “Warrant,” and together with the Ecoark Series A and the Commitment Shares, the “Securities”) for a total purchase price of $12,000,000. The Purchaser is a subsidiary of BitNile Holdings, Inc. [NYSE American: NILE]. The Company determined that the classification of the Ecoark Series A is Mezzanine Equity as the option to convert the shares belongs to the Purchaser. A description of the material transaction components are as follows:

Ecoark Series A

Conversion Rights

Each share of Ecoark Series A has a stated value of $10,000 and is convertible into shares of common stock at a conversion price of $2.10 per share, subject to certain adjustment provisions. The holder’s conversion of the Ecoark Series A is subject to a beneficial ownership limitation of 19.9% of the issued and outstanding common stock as of any conversion date of the Ecoark Series A, unless and until the Company obtains shareholder and The Nasdaq Stock Market (“Nasdaq”) approval for the conversion of more than that amount, in order to comply with Nasdaq Rules. In addition, the conversion rights in general did not become effective until July 23, 2022, which is one day after the record date for the shareholders meeting seeking such shareholder approval. The shares of Ecoark Series A as amended are also subject to a 4.99% beneficial ownership limitation, which may be increased to up to 9.9% by the holder by giving 61 days’ notice to the Company.

Voting Rights

The Ecoark Series A is entitled to vote with the common stock as a single class on an as-converted basis, subject to applicable law and the Nasdaq Rules. In addition, as long as the holder continues to hold at least 25% of the shares of Ecoark Series A issued to it on the issuance date, the holder is entitled to elect a number of directors to the Company’s Board equal to a percentage determined by (i) the number of Ecoark Series A beneficially owned by the holder, calculated on an “as converted” basis, (ii) divided by the sum of the number of shares of common stock outstanding plus the number of Ecoark Series A outstanding on an “as converted” basis; and such director(s) so elected may only be removed without cause by the affirmative vote of the holder. Initially, the Purchaser may designate one director.

The holders of record of the shares of common stock and of any other class or series of voting stock (including the Ecoark Series A), exclusively and voting together as a single class, are entitled to elect the balance of the total number of directors of the Company. The Purchaser is not eligible to vote at the shareholders meeting on the proposal to approve the issuance of more than 19.9% of shares outstanding on June 8, 2022.

Dividend Rights

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

If the Company fails to make one or more dividend payments, whether or not consecutive, a default dividend rate of 18% per annum will apply until all accumulated dividend payments have been made.

Liquidation Rights

The shares of Ecoark Series A have a liquidation preference over the common stock and any subsequent series of junior preferred stock of $1,200 per share of Ecoark Series A, plus accrued but unpaid dividends.

Redemption

At any time beginning on or after June 8, 2024, the holder of Ecoark Series A may cause the Company to redeem some or all of the shares of Ecoark Series A it holds at a redemption price of $1,200 per share, plus any accumulated and unpaid dividends thereon.

Negative Covenants and Approval Rights

The Ecoark Series A Certificate of Designation (the “Certificate”) subjects the Company to negative covenants restricting its ability to take certain actions without prior approval from the holder(s) of a majority of the outstanding shares of Ecoark Series A for as long as the holder(s) continue to hold at least 25% (or such higher percentage as set forth in the Certificate (as defined below)) of the Ecoark Series A shares issued on the closing date under the Agreement. These restrictive covenants include the following actions by the Company, subject to certain exceptions and limitations:

(i) payment or declaration of any dividend (other than pursuant to the Ecoark Series A Certificate);

(ii) investment in, purchase or acquisition of any assets or capital stock of any entity for an amount that exceeds $100,000 in any one transaction or $250,000, in the aggregate;

(iii) issuance of any shares of common stock or other securities convertible into or exercisable or exchangeable for shares of common stock;

(iv) incurrence of indebtedness, liens, or guaranty obligations, in an aggregate amount in excess of $50,000 in any individual transaction or $100,000 in the aggregate with customary exceptions.

(v) sale, lease, transfer or disposal of any of its properties having a value calculated in accordance with GAAP of more than $50,000;

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

(vi) increase in any manner the compensation or fringe benefits of any of its directors, officers, employees; and

(vii) merger or consolidation with, or purchase a substantial portion of the assets of, or by any other manner the acquisition or combination with any business or entity.

The above and other negative covenants in the Series A Certificate do not apply to a reverse merger with an entity with securities quoted on a market operated by OTC Markets or listed on a national securities exchange.

Warrant

The Warrant, as amended and filed on July 15, 2022, provides the Purchaser or its assignees (the “Holder”) with the right to purchase a number of shares of common stock as would enable the holder together with its affiliates to beneficially own 49% of the Company’s common stock, calculated on a fully diluted basis, at an exercise price of $0.001 per share, including the Commitment Shares and Conversion Shares unless sold. Subject to shareholder approval, the Warrant shall vest and becomes exercisable into shares of the Company’s stock if as of June 8, 2024: (i) the Company has failed to complete the distributions to the Company’s security holders or to any other subsidiary of the Company’s equity ownership of its three principal subsidiaries: Agora, Banner Midstream and Zest Labs (or their principal subsidiaries) (the “Distributions”), and/or (ii) the Holder together with its affiliates does not beneficially own at least 50% of the Company’s outstanding common stock. Provided, the Company must retain 20% of its common stock of Agora. The Warrant may be exercised on a cashless basis and expires on June 8, 2027. In the event that the Company or its transfer agent fails to issue the shares of common stock within three business days following delivery of a notice of exercise, the Warrant provides that the Company must pay the Holder a fee of $2.4 million. The Warrant shall not be exercisable prior to vesting.

Based upon the terms of the Warrant, the Company has concluded the Warrant is classified as a liability pursuant to ASC 480. However, since the vesting and exercise of the Warrant is subject to shareholder approval, which is outside the control of the Company, the Company has concluded that, when and if the Warrant vests, the Company will account for the Warrant as a liability pursuant to ASC 480.

Registration Rights

Pursuant to the Agreement, the Company has agreed to register the sale by the Purchaser of up to 5,246,456 shares of common stock, representing the Commitment Shares issued at the closing plus 5,143,575 of the shares of common stock issuable upon conversion of the Ecoark Series A. This amount equals 19.9% of the Company’s outstanding common stock immediately prior to the closing. The Company registered the sale by filing a prospectus supplement pursuant to the Company’s registration statement on Form S-3 (File No. 333-249532), originally filed with the SEC on October 16, 2020, as amended, which became effective on December 29, 2020, and the base prospectus included therein.

The value of the Commitment Shares of $193,416 were considered issuance costs and have been reflected in the total for Mezzanine Equity of $11,806,584 as of June 30, 2022.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

The description above is not a substitute for reviewing the full text of the referenced documents, which were attached as exhibits to the Company’s Current Report on Form 8-K as filed with the SEC on June 9, 2022 and the Company’s Current Report on Form 8-K as filed with the SEC on July 15, 2022 when we filed the Amended Warrant and the Second Amendment to the Ecoark Series A Certificate.

NOTE 14: STOCKHOLDERS’ EQUITY (DEFICIT)

Ecoark Holdings Preferred Stock

On March 18, 2016, the Company created ~~5,000~~5,000,000 shares of “blank check” preferred stock, par value $0.001. ~~The Company has designated Series B and C out of the total Preferred Shares authorized.~~

~~The Company has entered into agreements to issue preferred stock over the past several years. Currently as~~As of ~~December 31, 2021 and~~ March 31, ~~2021,~~2022, there ~~are~~were no shares of any series of preferred stock issued and outstanding. ~~The remaining~~On June 8, 2022, as noted in Note 13, “Mezzanine Equity”, the Company issued 1,200 Series A Preferred shares, and as of June 30, 2022, there are 1,200 shares of preferred ~~shares were converted during the year ended March 31, 2021.~~stock issued and outstanding.

Ecoark Holdings Common Stock

The Company is authorized to issue ~~40,000~~40,000,000 shares of common stock, par value $0.001. Effective with the opening of trading on December 17, 2020, the Company implemented a one-for-five reverse split of its issued and outstanding common stock and a simultaneous proportionate reduction of its authorized common stock. All share and per share figures are reflected on a post-split basis herein. Effective December 29, 2020, the Company amended its articles of incorporation to reduce its authorized common stock from ~~40,000~~40,000,000 shares to ~~30,000~~30,000,000 shares. On August 6, 2021, the Company’s board of directors approved the increase of the authorized common shares to ~~40,000.~~40,000,000. The increase became effective on October 8, 2021, following the approval in a Special Meeting of ~~Ecoark’s~~Ecoark Holdings’ Stockholders.

In the three months ended June 30, 2020, the Company issued 308 shares of common stock in April and May 2020 to convert the remaining shares of Series B Preferred Stock and Series C Preferred Stock; 1,531 shares of common stock in the exercise of warrants; 89 shares in the exercise of stock options; 93 shares of common stock in the conversion of accounts payable and accrued expenses; and 524 shares of common stock in the conversion of long-term debt, notes payable – related parties and accrued interest.

In the three months ended September 30, 2020, the Company issued 1,088 shares of common stock in the exercise of warrants; one share in the exercise of stock options; 31 shares of common stock for services rendered; 171 shares of common stock to acquire assets; and 192 shares of common stock in the conversion of long-term debt, notes payable – related parties and accrued interest.

~~In the three months ended December 31, 2020, the Company issued 376 shares of common stock in the exercise of warrants.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

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

~~In the three months ended March 31, 2021, the Company issued 176 shares of common stock in the exercise of warrants for $1,760, and 59 shares for the exercise of stock options for $153.~~

In the three months ended June 30, 2021, the Company issued ~~115~~114,796 shares of common stock ~~valued at $675~~ which had been accrued for at March 31, 2021 in consulting fees under a contract entered into February 2, 2021. In addition, the Company issued 2020,265 shares of common stock infor the exercise of stock ~~options for cash ($28) and in a cashless exercise.~~options.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

In the three months ended ~~September~~June 30, ~~2021,~~2022, the Company issued ~~3,478~~102,881 shares of common stock which were the commitment shares in ~~a registered direct offering for $20,000, and 45~~the BitNile transaction as discussed in Note 13.

As of June 30, 2022, 26,466,980 shares of common stock ~~for services rendered valued at $241. A portion~~were issued and 26,349,865 shares of ~~the shares ($149) issued are for future services and will be expensed upon completion~~common stock were outstanding, net of ~~these services.~~117,115 treasury shares.

Agora Common Stock

Agora is authorized to issue 250,000,000 shares of common stock, par value $0.001. On September 22, 2021, the Company purchased 100 shares of Agora for $10.

On October 1, 2021, the Company purchased 41,671,121 shares of Agora common stock for $4,167,112 which Agora used to purchase equipment to commence the Bitstream operations.

In addition, between October 1 and December 7, 2021, Agora issued 4,600,000 restricted common shares to its management, non-employee directors, employees and advisors. After issuance of these shares, Ecoark controls approximately 90% of Agora. The future stock-based compensation related to these shares that will be measured consists of $12,166,680 over a three-year period in service-based grants ($9,611,145 in year one, $1,861,096 in year two, and $694,436 in year 3) and $10,833,320 in performance based grants ($5,416,660 for the deployment of 20 MW in the State of Texas, and $5,416,660 for the deployment of 40 MW in the State of Texas) for a total of $23,000,000. These restricted common shares were measured pursuant to ASC 718-10-50 at an estimated value per share of $5.00, and consist of both service based and performance based criteria.

Of the 4,600,000 restricted shares of common stock — 2,433,336 shares of restricted stock are considered service grants and 2,166,664 are considered performance grants. The service grants vest over three years as follows: 1,550,010 restricted common shares in one year; 466,665 restricted common shares in two years and 416,661 restricted common shares in three years. On April 12, 2022, Agora upon board of director approval accelerated 250,000 restricted shares that were service based grants with Agora’s former Chief Financial Officer. Only awards granted to management directly related to the Bitcoin mining operation have awards that contain both service and performance conditions. The remaining awards granted, contain only service-based conditions.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

The performance grants vest as follows: 1,083,332 restricted common shares upon Agora deploying a 20 MW power contract in Texas; and 1,083,332 restricted common shares upon the Company deploying a 40 MW power contract in Texas. As of March 31, 2022, none of the performance criteria are probable as no contracts have been signed as the proper funding has not been secured, therefore no compensation expense is recognized in accordance with ASC 718-10-25-20 related to the performance grants. On April 12, 2022, Agora upon board of director approval accelerated the vesting of 250,000 restricted shares for deploying a 20 MW power contract in Texas; and 250,000 restricted shares for deploying a 40 MW power contract in Texas with Agora’s former Chief Financial Officer. All remaining performance grants remain unvested.

The Company recognized $5,215,287 in stock-based compensation for the three months ended ~~December 31, 2021,~~June 30, 2022, which represented $2,090,287 in service grants related, and $3,125,000 in the ~~Company did not issue any shares~~accelerated vesting of ~~common stock.~~the former CFO’s grants ($625,000 in service based grants and $2,500,000 in performance grants). The unrecognized stock-based compensation expense as of June 30, 2022 is $8,333,320 in performance based grants and $4,767,637 in service based grants for a total of $13,100,957.

The Company accounts for stock-based payments in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”). During the year ended March 31, 2022, in addition to the value measured by the 4,600,000 restricted stock grants, stock-based compensation consists primarily of RSUs granted to a Company employee while employed by Ecoark Holdings. The Company measures compensation expense for RSUs based on the fair value of the award on the date of grant. The grant date fair value is based on the closing market price of Ecoark Holdings’ common stock on the date of grant.

Share-based Compensation Expense

Share-based compensation ~~expense of $1,795 and $1,569 and $577 and $419, respectively~~for employees is included in ~~selling, general~~salaries and ~~administrative expense~~salary related costs and directors and services are included in professional fees and consulting in the ~~condensed~~ consolidated ~~statements~~statement of operations for the ~~nine and~~ three months ended ~~December 31,~~June 30, 2022 and 2021.

Share-based compensation for the three months ended June 30, 2022 and 2021 for stock options and ~~2020, respectively for~~RSUs granted under the 2013 Incentive Stock Plan and 2017 Omnibus Incentive Stock Plan and ~~for the Company’s Non-Qualified Stock Options. There~~non-qualified stock options were ~~no expenses related to warrant grants in these periods.~~ $182,561 and $399,173, respectively.

There is ~~$84~~$182,561 in share-based compensation expense for the three months ended ~~December 31, 2021 that has been~~June 30, 2022, and $129,620 in share-based compensation is accrued as of ~~December 31, 2021.~~June 30, 2022.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

In order to have sufficient authorized capital to raise the ~~$20,000,~~$20,000,000, on August 4, 2021, ana then officer and director of the Company agreed to cancel stock options in exchange for a lesser number of restricted stock units, subject to future vesting. In accordance with the restricted stock agreement, the director was granted ~~272~~272,252 RSUs that vest over 12 quarterly increments, in exchange for cancelling ~~672~~672,499 stock options. In addition, on October 6, 2021, this officer and director received 6463,998 additional RSUs. The expense related to the modification of these grants is included in the share-based compensation expense in the ~~three months~~year ended ~~September 30, 2021.~~

~~As of December~~March 31, ~~2021, 26,364 shares of common stock were issued and 26,247 shares of common stock were outstanding, net of 117 treasury shares.~~

~~Agora Common Stock~~2022.

~~Agora is authorized to issue 250,000 shares of common stock, par value $0.001. On September 22, 2021, the Company purchased one hundred shares of Agora for ten dollars.~~

~~On October 1, 2021, the Company purchased 41,671 shares of Agora common stock for $4,167 which Agora used to purchase equipment to commence the Bitstream operations.~~

In addition, between October 1 and December 7, 2021, Agora issued 4,600 restricted common shares to its management team and directors. After issuance of these restricted shares, Ecoark controls approximately 90.1% of Agora, and will recognize a non-controlling interest. The future stock-based compensation related to these restricted shares that will be measured over a three-year period is $23,000. These restricted common shares were measured pursuant to ASC 718-10-50 at an estimated value per share of $5.00 and consist of both service based and performance based criteria. The stock-based compensation recognized for the nine and three months ended December 31, 2021 for these restricted shares is $2,281.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

NOTE ~~16:~~15: COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are presently involved in the following legal proceedings. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company.

●

On August 1, 2018, Ecoark Holdings ~~Inc.~~ and Zest ~~Labs, Inc.~~ filed a complaint against Walmart Inc. (“Walmart”) in the United States District Court for the Eastern District of Arkansas, Western Division. The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the Federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. On April 9, 2021, a Little Rock, Arkansas jury awarded Ecoark Holdings and Zest a total of $115 million in damages which includes $65 million in compensatory damages and $50 million in punitive damages and found Walmart Inc. liable on three claims. The federal jury found that Walmart Inc. misappropriated Zest’s trade secrets, failed to comply with a written contract, and acted willfully and maliciously in misappropriating Zest’s trade secrets. ~~We expect~~The Court entered a judgment on April 13, 2021 in favor of the Plaintiffs.

On May 21, 2021, Walmart to continue to vigorously defend the litigation and to oppose the verdict in post-trial motions and an appeal. The Company has filed post-trial motions to add an award for their attorneys’ fees as the prevailing party in the litigation. In addition to other post-trial motions, Walmart, Inc. has filed a ~~renewed~~motion a motion for judgment as a matter of law ~~or, in~~(“JMOL”) containing six categories of relief. On June 15, 2022, the ~~alternative,~~Court entered an order on Walmart’s motion denying five of Walmart’s categories of relief sought and granting one which reduced the judgment by $5 million because the Court found certain damages duplicative of other damages (the “June 15 Order”). The plaintiffs’ motion for ~~remittitur or a~~attorneys’ fees remains undecided. On June 21, 2022, the Court amended the June 15 Order indicating that Walmart’s motion for new ~~trial. As of the date of this Report, the court has not ruled on any of the post-trial motions.~~trial is still under advisement.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Walmart also filed a motion seeking post-trial discovery of plaintiff’s privileged work-product materials. The Court granted Walmart’s motion and in its June 15 Order the Court required the plaintiffs to produce 52 documents which the plaintiffs contend include privileged material, including mental impressions and opinions of its counsel. Because the June 15 Order denied plaintiffs motion for leave to file an interlocutory appeal on this discovery issue, plaintiffs on June 21, 2022, filed a petition in the United States Court of Appeals for the Eighth Circuit for a writ of mandamus.

●

On September 21, 2021, Ecoark Holdings ~~Inc.~~ and Zest Labs ~~Inc.~~ filed a complaint against Deloitte Consulting, LLP (“Deloitte”) in the Eight Judicial District Court in Clark County, Nevada. The complaint is for violation of the Nevada Uniform Trade Secret Act and will also be seeking a preliminary and permanent injunction, attorney’s fees, and punitive damages. The damages at issue are in the hundreds of millions of dollars. Zest Labs ~~Inc.~~ began working with Deloitte in 2016, in a confidential matter in a pilot program that Zest Labs ~~Inc.~~ had been engaged for by a large customer. Zest Labs ~~Inc.~~ engaged in significant discussions, presentations, demonstrations, and information downloads with Deloitte who specifically acknowledged that this information was confidential. ~~This complaint is~~Deloitte filed an answer in ~~the very early stages,~~due course. Discovery commenced in July 2022 with ~~motions filed on both sides and an initial hearing set for March 8, 2022.~~a trial anticipated in late calendar 2023. The Company cannot reasonably determine the outcome ~~and potential reward~~r at this time.

●

On April 22, 2022, BitStream Mining and Ecoark Holdings had a petition filed in Travis County District Court (Docket #79176-0002) by Print Crypto Inc. in the amount of $256,733.28 for failure to pay for equipment purchased to operate the Company’s Bitcoin mining operation. The Company intends to vigorously defend themselves and has filed counterclaims in the 353^rd Judicial District in Travis County, Texas on May 6, 2022 for fraudulent inducement breach of contract, and for payment of attorney’s fees and costs. The Company has accrued the full amount of the claim in their consolidated financial statements as of March 31, 2022.

On July 15, 2021, the Company and its directors entered into a Settlement and Mutual Release resolving the legal fees it agreed to pay when it settled a class action that was settled without any financial consequences other than paying agreed upon legal fees. The Company paid $50 to the Plaintiff’s attorneys.

In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon the Company’s financial condition, results of operations or cash flows.

~~Joint Participation Agreement~~

On October 9, 2020, the Company and White River SPV, entered into a Participation Agreement (the “Participation Agreement”) by and among the Company, White River SPV, BlackBrush Oil & Gas, L.P. (“BlackBrush”) and GeoTerre, LLC, an unrelated privately-held limited liability company (the “Assignor”), to conduct drilling of wells in the Austin Chalk formation.45

Pursuant to the Participation Agreement, the Company and White River SPV funded 100% of the cost, approximately $5,800, associated with the drilling and completion of an initial deep horizontal well in the Austin Chalk formation. The Participation Agreement required the drilling costs that were paid into a designated escrow account at the commencement of the drilling in January 2021, which it was. BlackBrush agreed to assign to the other parties to the Participation Agreement, subject to certain exceptions and limitations specified therein, specified portions of its leasehold working interest in certain Austin Chalk formation units. The Participation Agreement provides for an initial allocation of the working interests and net revenue interests among the assignor, BlackBrush and the Company and then a re-allocation upon payout or payment of drilling and completion costs for each well drilled. Prior to payout, the Company will own 90% of the working interest and 67.5% of the net revenue interest in each well. Following payout, the Company will own 70% of working interest and 52.5% net revenue interest in each well.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Bitstream Commitments on Purchase Obligations

As discussed in the overview of Bitstream in Note 1, Bitstream has entered into a number of agreements for the procurement of land, electricity and ~~equipment necessary to run its business.~~equipment. Bitstream has estimated this commitment to be approximately $12-$14 million ~~over the next three months~~ inclusive of what has been spent to date.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

NOTE ~~17:~~16: CONCENTRATIONS

Customer Concentration. ~~Four~~Two and ~~three~~two customers, all in the commodity segment accounted for more than 10% of the accounts receivable balance at ~~December 31, 2021~~June 30, 2022 and March 31, ~~2021~~2022 for a total of ~~75%~~100% and ~~76%~~88% of accounts receivable, respectively. In addition, ~~two~~three and ~~one~~two customers represent approximately 72% and ~~61% of total revenues for the Company for the nine months ended December 31, 2021 and 2020, respectively. In addition, one and three customers represent approximately 57% and 87%~~96% of total revenues for the Company for the three months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ respectively.

Supplier Concentration. Certain of the raw materials, components and equipment used by the Company in the manufacture of its products are available from single-sourced vendors. Shortages could occur in these essential materials and components due to an interruption of supply or increased demand in the industry. If the Company were unable to procure certain materials, components or equipment at acceptable prices, it would be required to reduce its manufacturing operations, which could have a material adverse effect on its results of operations. In addition, the Company may make prepayments to certain suppliers or enter into minimum volume commitment agreements. Should these suppliers be unable to deliver on their obligations or experience financial difficulty, the Company may not be able to recover these prepayments.

The Company occasionally maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.

Commodity price risk

WeIncluded in discontinued operations, we are exposed to fluctuations in commodity prices for oil and natural gas. Commodity prices are affected by many factors, including but not limited to, supply and demand.

~~NOTE 18: ACQUISITIONS~~

~~The following represent acquisitions for the nine months ended December 31, 2021 and year ended March 31, 2021.~~

~~Energy Assets~~

The Company accounted for these acquisitions as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the Rabb Resources, LTD. historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

~~Rabb Resources~~

On August 14, 2020, the Company entered into an Asset Purchase Agreement by and among the Company, White River E&P LLC, a Texas Limited Liability Company and a wholly-owned subsidiary of the Company Rabb Resources, LTD. and Claude Rabb, the sole owner of Rabb Resources, LTD. Pursuant to the Asset Purchase Agreement, the Company completed the acquisition of certain assets of Rabb Resources, LTD. The acquired assets consisted of certain real property and working interests in oil and gas mineral leases. The Company in June 2020 previously provided for bridge financing to Rabb Resources, LTD under the $225 Senior Secured Convertible Promissory Note. As consideration for entering into the Asset Purchase Agreement, the Company agreed to pay Rabb Resources, LTD. A total of $3,500 consisting of (i) $1,500 in cash, net of $304 in outstanding amounts related to the note receivable and accrued interest receivable, and (ii) $2,000 payable in common stock of the Company, which based on the closing price of the common stock as of the date of the Asset Purchase Agreement equaled 103 shares. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the Rabb Resources, LTD. historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

Building $ 236
Land 140
Oil and Gas Properties 3,224
Asset retirement obligation (100 )
$ 3,500

~~Unrelated Third Party~~

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

~~O’Neal Family~~

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

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

Oil and Gas Properties $ 760
Asset retirement obligation (10 )
$ 750

~~Luling Prospect~~

On August 16, 2021 the Company and Shamrock Upstream Energy, LLC, a wholly-owned subsidiary of the Company entered into an agreement with a privately-held limited liability company to acquire working interests in the Luling Prospect for $250. No other assets were acquired in this, nor was there any recognized ARO for this working interest. The manager of the privately held limited liability company is related through marriage to the Chairman and CEO of the Company, however the acquisition was determined to be at arms’ length. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

Oil and gas properties $ 250
$ 250

~~Concordia Leases~~

On September 1, 2021 the Company and White River Energy, LLC, a wholly-owned subsidiary of the Company entered into an agreement with several individuals to acquire working interests in the various leases in Concordia, LA for $54. No other assets were acquired in this, nor was there any recognized ARO for this working interest. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

Working interest in oil and gas wells $ 54
$ 54

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

NOTE ~~19:~~17: FAIR VALUE MEASUREMENTS

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

Level 1 – quoted prices for identical instruments in active markets;

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments consist principally of cash, accounts receivable and other receivables, accounts payable and accrued liabilities, notes payable, and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the ~~nine~~three months ended ~~December 31, 2021~~June 30, 2022 and ~~2020.~~2021. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The Company records the fair value of the of the warrant derivative liabilities disclosed in accordance with ASC 815, Derivatives and Hedging. The fair values of the derivatives were calculated using the Black-Scholes Model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in other income (expense) in the consolidated statement of operations. The following table presents assets and liabilities that are measured and recognized at fair value on a recurring basis as of:

Level 1 Level 2 Level 3 Total Gains
and (Losses)
December 31, 2021
Warrant derivative liabilities $ - $ - $ 4,410 $ 15,295
Digital assets 16 - - (1 )

March 31, 2021
Warrant derivative liabilities $ - $ - $ 7,213 $ (18,518 )

	Level 1		Level 2		Level 3		Total Gains and (Losses)
June 30, 2022
Warrant derivative liabilities	$	-	$	-	$	4,712,162	$	(393,532	)
Bitcoin		10,145		-		-		(9,122	)

March 31, 2022
Warrant derivative liabilities	$	-	$	-	$	4,318,630	$	15,386,301
Bitcoin		19,267		-		-		(7,228	)

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

NOTE ~~20:~~18: SEGMENT INFORMATION

The Company follows the provisions of ASC 280-10 ~~Disclosures about Segments of an Enterprise and Related Information~~Segment Reporting. . This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. The Company and its chief operating decision makers determined that the Company’s operations effective with the May 31, 2019, acquisition of Trend Holdings and the March 27, 2020 acquisition of Banner Midstream consisted of 3 segments, Financial, Commodities and Technology. Effective July 1, 2021, the Company’s chief operating decision makers in discussion with the finance team determined that the Company would add a fourth reporting segment to account for their ~~Digital Asset~~Bitcoin mining business. Additionally, on July 1, 2021 the Company ~~began reporting~~now reports its home office costs into the Commodity segment, ~~charge~~and charged its Technology segment a monthly overhead fee, and has recorded typical overhead expenses in their ~~Finance and Digital Asset~~Bitcoin Mining segments to account for this home office allocation. The Company classified their reporting segments in these three divisions through March 31, 2022, when the Company determined that pursuant to ASC 205-20-45-1E that the operations related to the Financial Services segment would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. As a result of this reclassification, the Company’s segment reporting has removed the Financing segment for the three months ended June 30, 2021. Effective April 1, 2022, the Company has classified their segments in the Commodity Segment, Technology Segment and Bitcoin Mining Segment. They now charge a monthly overhead charge to the Technology Segment and to the Transportation component and Oil and Gas Production component (each part of the Commodities Segment).

Nine Months Ended December 31, 2021 Digital
Assets Commodities Financial Technology Total
Segmented operating revenues $ 18 $ 18,583 $ 524 $ - $ 19,125
Cost of revenues 93 10,600 - - 10,693
Gross profit (loss) (75 ) 7,983 524 - 8,432
Total operating expenses net of depreciation, amortization, depletion, accretion and impairment 3,694 13,784 686 2,325 20,489
Depreciation, amortization, depletion, accretion and impairment 21 2,176 - 143 2,340
Other (income) expense 29 (14,094 ) (216 ) (1,099 ) (15,380 )
Income (loss) from continuing operations $ (3,819 ) $ 6,117 $ 54 $ (1,369 ) $ 983

On July 25, 2022, the Company sold its oil and gas production business (White River) which was part of the Commodities segment. The Company determined that pursuant to ASC 205-20-45-1E that the operations related to the oil and gas production business would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of July 25, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the three months ended June 30, 2022.

Three Months Ended December 31, 2021 Digital
Assets Commodities Financial Technology Total
Segmented operating revenues $ 18 $ 5,941 $ 176 $ - $ 6,135
Cost of revenues 93 3,434 - - 3,527
Gross profit (loss) (75 ) 2,507 176 - 2,608
Total operating expenses net of depreciation, amortization, depletion, accretion and impairment 3,286 4,254 415 732 8,687
Depreciation, amortization, depletion, accretion and impairment 21 549 - 32 602
Other (income) expense 29 (10,993 ) 4 - (10,960 )
Income (loss) from continuing operations $ (3,411 ) $ 8,697 $ (243 ) $ (764 ) $ 4,279

Segmented assets as of December 31, 2021
Property and equipment, net $ 7,045 $ 3,262 $ - $ 149 $ 10,456
Oil and Gas Properties/Capitalized drilling costs $ - $ 13,783 $ - $ - $ 13,783
Intangible assets, net $ - $ 1,804 $ - $ - $ 1,804
Goodwill $ - $ 7,002 $ 3,223 $ - $ 10,225
Capital expenditures $ 7,066 $ 19 $ - $ - $ 7,085

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~DECEMBER 31, 2021~~

Nine Months Ended December 31, 2020 Commodities Financial Technology Total
Segmented operating revenues $ 9,697 $ 359 $ - $ 10,056
Cost of revenues 6,644 - - 6,644
Gross profit 3,053 359 - 3,412
Total operating expenses net of depreciation, amortization, depletion and accretion 9,916 331 2,353 12,600
Depreciation, amortization, depletion and accretion 945 - 188 1,133
Other (income) expense 1,501 (26 ) (132 ) 1,343
Income (loss) from continuing operations $ (9,309 ) $ 54 $ (2,409 ) $ (11,664 )

Three Months Ended December 31, 2020 Commodities Financial Technology Total
Segmented operating revenues $ 4,300 $ 165 $ - $ 4,465
Cost of revenues 3,218 - - 3,218
Gross profit 1,082 165 - 1,247
Total operating expenses net of depreciation, amortization, depletion and accretion 3,965 137 872 4,974
Depreciation, amortization, depletion and accretion 447 - 62 509
Other (income) expense (3,769 ) (166 ) (833 ) (4,768 )
Income (loss) from continuing operations $ 439 $ 194 $ (101 ) $ 532
Segmented assets as of December 31, 2020
Property and equipment, net $ 3,567 $ - $ 354 $ 3,921
Oil and Gas Properties $ 11,795 $ - $ - $ 11,795
Intangible assets, net $ 2,136 $ - $ - $ 2,136
Goodwill $ 7,002 $ 3,223 $ - $ 10,225
Capital expenditures $ 617 $ - $ - $ 617

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

The charts below represent the continuing operations of the Company before the non-controlling interest, provision for income taxes and preferred stock dividends.

Three Months Ended June 30, 2022	Bitcoin Mining			Commodities			Technology			Total
Segmented operating revenues	$	-		$	5,418,655		$	-		$	5,418,655
Cost of revenues		93,861			4,514,011			-			4,607,872
Gross profit (loss)		(93,861	)		904,644			-			810,783
Total operating expenses net of depreciation, amortization, and impairment		6,312,064			2,292,264			454,573			9,058,901
Depreciation, amortization, and impairment		45,097			112,830			-			157,927
Other (income) expense		121,134			1,266,528			-			1,387,662
Loss from continuing operations	$	(6,572,156	)	$	(2,766,978	)	$	(454,573	)	$	(9,793,707	)
Segmented assets as of June 30, 2022
Property and equipment, net	$	7,190,396		$	928,127		$	-		$	8,118,523
Intangible assets, net	$	10,145		$	1,652,088		$	-		$	1,662,233
Goodwill	$	-		$	4,900,873		$	-		$	4,900,873

Three Months Ended June 30, 2021	Commodities			Technology			Total
Segmented operating revenues	$	5,156,213		$	-		$	5,156,213
Cost of revenues		3,597,941			-			3,597,941
Gross profit		1,558,272			-			1,558,272
Total operating expenses net of depreciation, amortization, and impairment		3,021,721			251,626			3,273,347
Depreciation, amortization, and impairment		196,263			55,916			252,179
Other (income) expense		(4,360,320	)		-			(4,360,320	)
Income (loss) from continuing operations	$	2,700,608		$	(307,542	)	$	2,393,066

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

NOTE ~~21:~~19: LEASES

The Company has adopted ASU No. 2016-02, Leases (Topic 842), as of April 1, 2019 and will account for their leases in terms of the right of use assets and offsetting lease liability obligations under this pronouncement. The Company had had only short-term leases up through the acquisition of Banner Midstream. The Company acquired a right of use asset and lease liability on March 27, 2020. The Company recorded these amounts at present value, in accordance with the standard, using discount rates ranging between 2.5% and 11.36%. The right of use asset is composed of the sum of all lease payments, at present value, and is amortized straight line over the life of the expected lease term. For the expected term of the lease the Company used the initial terms ranging between 42 and 60 months. Upon the election by the Company to extend the lease for additional years, that election will be treated as a lease modification and the lease will be reviewed for re-measurement.

The Company has chosen to implement this standard using the modified retrospective model approach with a cumulative-effect adjustment, which does not require the Company to adjust the comparative periods presented when transitioning to the new guidance. The Company has also elected to utilize the transition related practical expedients permitted by the new standard. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a modified retrospective approach. Adoption of the new standard did not result in an adjustment to retained earnings for the Company.

The Company’s portfolio of leases contains both finance and operating leases that relate primarily to the commodity and ~~digital asset~~Bitcoin mining segments. As of ~~December 31, 2021,~~June 30, 2022, the value of the unamortized lease right of use asset is ~~$1,186,~~$744,619, of which ~~$337~~$264,535 is from financing leases (through maturity at June 30, 2024) and ~~$849~~$480,084 is from operating leases (through maturity at October 31, 2026). As of ~~December 31, 2021,~~June 30, 2022, the Company’s lease liability was ~~$1,210,~~$744,631, of which ~~$330~~$259,170 is from financing leases and ~~$880~~$485,461 is from operating leases.

Maturity of lease liability for the operating leases for the period ended June 30,
2023	$	175,701
2024	$	130,966
2025	$	96,157
2026	$	99,042
2027	$	33,337
Imputed interest	$	(49,742	)
Total lease liability	$	485,461

Disclosed as:
Current portion	$	153,330
Non-current portion	$	332,131

Maturity of lease liability for the financing leases for the period ended June 30,
2023	$	146,982
2024	$	118,677
Imputed interest	$	(6,489	)
Total lease liability	$	259,170

Disclosed as:
Current portion	$	141,934
Non-current portion	$	117,236

Maturity of lease liability for the operating leases for the period ended December 31,
2022 $ 329
2023 $ 301
2024 $ 87
2025 $ 92
2026 $ 82
Imputed interest $ (11 )
Total lease liability $ 880

Disclosed as:
Current portion $ 326
Non-current portion $ 554

Maturity of lease liability for the financing leases for the period ended December 31,
2022 $ 151
2023 $ 143
2024 $ 52
2025 $ -
Imputed interest $ (16 )
Total lease liability $ 330

Disclosed as:
Current portion $ 144
Non-current portion $ 186

Amortization of the right of use asset for the period ended December 31,
2022 $ 461
2023 $ 416
2024 $ 144
2025 $ 88
2026 $ 77

Total $ 1,186

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

Amortization of the right of use asset for the period ended June 30,
2023	$	301,289
2024	$	236,557
2025	$	85,565
2026	$	90,101
2027	$	31,107

Total	$	744,619

~~Total Lease Cost~~

Total Lease Cost

Individual components of the total lease cost incurred by the Company is as follows:

Three months ended
December 31,
2021 Nine months ended
December 31,
2021
(unaudited) (unaudited)
Operating lease expense $ 72 $ 178

Finance lease expense
Depreciation of capitalized finance lease assets 57 127
Interest expense on finance lease liabilities 2 8
Total lease cost $ 131 $ 313

Three months ended
December 31,
2020 Nine
months ended
December 31,
2020
(unaudited) (unaudited)
Operating lease expense $ 54 $ 106

Finance lease expense
Depreciation of capitalized finance lease assets 34 103
Interest expense on finance lease liabilities 3 11

Total lease cost $ 91 $ 220

	Three months ended June 30, 2022		Three months ended June 30, 2021
	(unaudited)		(unaudited)
Operating lease expense	$	52,140	$	19,942

Finance lease expense
Depreciation of capitalized finance lease assets		56,576		34,838
Interest expense on finance lease liabilities		1,934		2,984
Total lease cost	$	110,650	$	57,764

~~NOTE 22: ASSET RETIREMENT OBLIGATIONS~~

In conjunction with the approval permitting the Company to resume drilling in the existing fields, the Company has recorded an asset retirement obligation (“ARO”) based upon the plan submitted in connection with the permit. The ARO results from the Company’s responsibility to abandon and reclaim their net share of all working interest properties and facilities.

~~The following table summarizes activity in the Company’s ARO for the nine months ended December 31, 2021 and year ended March 31, 2021:~~

December 31,
2021 March 31,
2021
(unaudited)
Balance, beginning of period $ 1,532 $ 295
Accretion expense 118 64
Reclamation obligations settled - -
Disposition due to sale of property (23 ) -
Additions - 111
Changes in estimates - 1,062
Balance, end of period $ 1,627 $ 1,532

Total ARO at December 31, 2021 and March 31, 2021 shown in the table above consists of amounts for future plugging and abandonment liabilities on our wellbores and facilities based on third-party estimates of such costs, adjusted for inflation for the periods ended December 31, 2021 and March 31, 2021, respectively. These values are discounted to present value at 10% per annum for the periods ended December 31, 2021 and March 31, 2021. The Company disposed of a portion of their properties and wrote off the balance of ARO associated with that disposal of $23 in sales of some of the Company’s properties.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021

NOTE ~~23:~~20: RELATED PARTY TRANSACTIONS

On May 31, 2019 the Company acquired Trend Holdings. Pursuant to the merger, the one thousand issued and outstanding shares of common stock of Trend Holdings were converted into 1,100 shares of the Company’s Common Stock with an approximate dollar value of $3,237 based on the closing price per share of Common Stock on the closing date of the merger. William B. Hoagland, the Company’s Chief Financial Officer, was President and a principal stockholder of Trend Holdings and received 550 shares of Common Stock, pursuant to the merger.

Trend Capital Management ~~is the general partner or manager of,~~was founded in 2011 and ~~provides services and collects fees from entities including~~through June 30, 2021, was Trend ~~LP and Trend SPV, respectively. However,~~Holding’s primary asset. Trend Capital Management is not the investment manager of these entities, nor the beneficial owner of Ecoark securities held by Trend Discovery LP (“Trend LP”) nor Trend Discovery SPV I, LLC (“Trend SPV”) since it assigned the ~~sole~~ power to vote and ~~direct all investment activities which will impact the entities’ economic performance~~dispose of securities to ~~an independent~~a third party not affiliated with Ecoark. The investment capital in Trend LP and Trend SPV is from individual limited partners and members, and not from the Company. Trend Capital Management does not have the obligation to absorb losses or the right to receive benefits that could be significant as a result of the entities’ performance. Trend Capital Management does not have any ownership of or a controlling financial interest in Trend LP nor Trend SPV and therefore management has concluded consolidation of these entities with Trend Capital Management is not required. Trend Capital Management provides services and collects fees from entities which include Trend LP and Trend SPV.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2022

Trend Discovery which held Barrier Crest and Trend Capital Management was sold on June 17, 2022.

Jay Puchir, the Company’s Chief Financial Officer, Secretary and Treasurer, served as a consultant to the Company from May 2019 to March 2020 and was paid solely in stock options totaling 4040,000 stock options at an exercise price of $3.15 per share. In addition, any outstanding notes with Mr. Puchir have been repaid along with all accrued interest.

Gary Metzger, a director, advanced ~~$578~~$577,500 to the Company through March 31, 2020, under the terms of notes payable that bears interest at rates ranging between 10% and 15% interest per annum. These notes along with all accrued interest were repaid in August 2021.

On March 27, 2020, the Company issued 1,789 shares of its common stock to Banner Energy Services, Inc. (“Banner Energy”) and assumed approximately $11,774 in debt and lease liabilities of Banner Midstream. The Company’s Chief Executive Officer and another then director, John Cahill, recused themselves from all board discussions on the acquisition of Banner Midstream as they were stockholders and/or noteholders of Banner Midstream. The transaction was approved by all of the disinterested members of the Board. The Chairman and CEO of Banner Energy is the Treasurer of the Company and Chief Executive Officer and President of Banner Midstream. Included in the shares issued in this transaction, John Cahill received 164 shares of common stock and Jay Puchir received 548 shares of common stock. At the time of this transaction, Mr. Cahill and his brother were also members of Shamrock Upstream Energy LLC, a subsidiary of Banner Midstream.

In the Banner Midstream acquisition, Randy S. May, Chief Executive Officer and Chairman, was the holder of approximately ~~$1,242~~$1,242,000 in notes payable by Banner Midstream and its subsidiaries, which were assumed by the Company in the transaction. Additionally, Mr. May held a note payable by Banner Energy in the amount of ~~$2,000~~$2,000,000 in principal and accrued interest, which was converted into ~~2,740~~2,740,000 shares of ~~Common Stock~~common stock (on a pre-reverse stock split basis) as a result of the transaction. Neither of these amounts remain outstanding.

On August 31, 2021, William B. Hoagland, the then Chief Financial Officer of the Company, and now Chief Executive Officer of Agora, transferred ~~550~~550,000 shares of Ecoark Holdings common stock to Trend LP, of which Mr. Hoagland owns an approximately 25% of Trend LP. ~~He also owns 39.6% of Trend SPV. Following the transfer, Trend LP owns 713 shares of Ecoark common stock.~~ Additionally, Trend SPV holds ~~344~~344,000 shares of Ecoark Holdings common stock and ~~460~~460,000 warrants to purchase Ecoark Holdings common stock.

Ecoark Holdings has made periodic loans to Agora to permit it to begin its ~~cryptocurrency~~Bitcoin mining business. On November 13, 2021, Agora issued Ecoark Holdings a $7.5 million term note which accrues 10% per annum interest and is due September 30, 2022. As of ~~December 31, 2021,~~June 30, 2022, Agora owed principal of ~~$4,459~~$5,614,367 and interest of ~~$32~~$273,537 to ~~Ecoark.~~Ecoark Holdings. These amounts have been eliminated in consolidation.

On February 2, 2022, Peter Mehring, a director and executive officer, gave notice of his intent to resign as an executive officer and director effective on February 11, 2022. Mr. Mehring resigned as a result of his entering into an Employment Agreement with a leading Internet service company. He also entered into a Consulting Agreement with the Company.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 2021JUNE 30, 2022

Under the Consulting Agreement, Mr. Mehring will advise the Company (including Zest Labs) on its current intellectual property litigation and matters relating to Zest Lab’s intellectual property as well as provide transition services. The Consulting Agreement is for a one-year term. The Company agreed to pay Mr. Mehring $16,667 per month. His unvested stock awards will continue to vest during the term and the expiration date on any stock awards will be extended for one year following the termination.

Between February 1 and March 1, 2022, Trend Exploration assigned several working interests to Sky3D, LLC, a limited liability company controlled by Randy May, our Chief Executive Officer, in connection with non-interest bearing loans made by Mr. May to us in the amount of $727,737. These loans included $227,737 paid to drill an oil well on a 9,615 acre lease on which the Company is required to drill a well every 270 days and working capital loans. In exchange, Sky3D, LLC assigned the Company a 2.5% working interest in an oil well owned Sky3D, LLC and the loans were cancelled. This transaction occurred because both Agora and Trend Exploration lacked the capital to pay for required drilling by the due date. In exchange, Trend Exploration assigned a small percentage of the ORRI interest to a White River entity. The Company has a $96,000 net receivable due from Sky3D, LLC for expenses incurred on the wells assigned to them.

On April 1, 2022, White River assigned several wells to Third Arm, LLC, a related party. The Company received $999,999 in cash in this transaction. The assignment resulted in a loss of $159,961 which is included in loss from discontinued operations.

NOTE ~~24:~~21: SUBSEQUENT EVENTS

Subsequent to ~~December 31, 2021,~~June 30, 2022, the Company had the following transactions:

On July 26, 2022, the Company filed a Definitive Proxy Statement with respect to its 2022 Annual Meeting of the Shareholders, being held virtually at t 1:00 p.m., Eastern Time, on September 9, 2022, at which the shareholders of the Company are being asked to approve the following proposals:

	(1)	Approve for purposes of complying with Listing Rule 5635 of the Nasdaq Stock Market, the issuance by the Company of shares of the Company’s Common Stock pursuant to the terms of the private placement financing transaction pursuant to the Securities Purchase Agreement dated June 8, 2022 between the Company and Digital Power Lending, LLC, a California limited liability company, without giving effect to any beneficial ownership limitations contained therein;

	(2)	Approve an amendment to the Company’s Articles of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue from 40,000,000 shares to 100,000,000 shares;

(3)

Elect four members to the Company’s Board of Directors for a one-year term expiring at the next annual meeting of stockholders;

(4)

Ratify the selection of RBSM LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023; and

(5)

Approve the adjournment of the Annual Meeting to a later date or time, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Annual Meeting, there are not sufficient votes to approve any of the other proposals before the Annual Meeting.

On July 25, 2022, the Company entered into a Share Exchange Agreement pursuant to which that day it sold to Fortium its oil and gas production business (White River) which is part of the Commodities segment. The Company determined that pursuant to ASC 205-20-45-1E that the operations related to the oil and gas production business would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of July 25, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the three months ended June 30, 2022. The Company will receive 1,200 of Fortium’s Series A Convertible Preferred Stock, which becomes convertible into 42,253,521 shares of Fortium common stock upon such time as (A) Fortium has filed a Form S-1 or Form 10, or other applicable form, with the SEC and such Form S-1 or other registration statement has been declared effective, or such Form 10 or other applicable form is no longer subject to comments from the Staff of the SEC, and (B) Ecoark elects to distribute shares of its common stock to its shareholders. The transaction was previously disclosed in the Company’s Current Report on Form 8-K filed on July 29, 2022.

On ~~January 3,~~August 11, 2022 the Company ~~finalized~~executed a ~~land purchase~~definitive agreement with HUMBL, Inc. (“HUMBL”) (OTC: HMBL) to transfer up to 100% of the issued and outstanding common stock of its majority owned subsidiary Agora Digital Holdings, Inc. (“Agora Digital”) to HUMBL in exchange for up to 6,000 shares of Series C preferred stock valued at $10,000 per share which will be filed prior to closing. The definitive agreement has certain closing conditions which have yet to be fulfilled at the time of this filing including a ~~parcel~~closing condition whereby the Company is required to source a minimum of ~~20 acres~~$10,000,000 in capital for HUMBL prior to the transfer of ~~land ($12.5 per acre) in West Texas~~ownership of Agora Digital to HUMBL. The definitive agreement contemplates that some or all of Agora’s minority shareholders, which consists of Agora’s directors, officers and consultants (some of whom are also directors and officers of the Company including our Chief Executive Officer and Chief Financial Officer) owning a total of up to 5,000,000 of the outstanding shares of Agora common stock, may also execute the agreement and exchange their shares of Agora common stock for ~~$250. This land purchase relates~~the HUMBL Series C. Additional details will be provided at a future date via a Form 8-K to ~~a separate parcel from the 20 acre parcel covered by a lease agreement entered into~~be filed by the Company in December 2021. The Company has an option to sell back the purchased land to the sellers at $0.4 per acre upon cessation of the land being used as a data center. Additionally, we have already paid approximately $1,100 to a power broker for 12 MW of electricity at this site, and we have committed to pay approximately $3,200 by completion of the facility anticipated to be paid over the two-month period commencing January 2022 for the infrastructure and source of 30 MW of electricity needed to operate at the capacity intended at our West Texas facilities

~~Under the Consulting Agreement, Mr. Mehring will advise the Company (including Zest Labs) on its current intellectual property litigation~~definitive agreement and matters relating to ZEST’s intellectual property as well as provide transition services. The Consulting Agreement is for a one-year term. The Company agreed to pay Mr. Mehring $17 per month. His unvested stock awards will continue to vest during the term and the expiration date on any stock awards will be extended for one year following the termination.

Trend Exploration completed the auction of two lots of overriding royalty interests (ORRIs). Trend Exploration posted them to EnergyNet and the auction ended February 3, 2022. The sale is for the Mississippi ORRIs and the Louisiana ORRIs for a total of $335. The buyers in the auction have two business days to place funds into escrow and then up to ten business days for the funds to leave escrow.other transaction documents.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and notes thereto presented in this Report as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, ~~2021.~~2022.

Effective with the opening of trading on December 17, 2020, the Company implemented a one-for-five reverse split of its issued and outstanding common stock and a simultaneous proportionate reduction of its authorized common stock. All share and per share figures are reflected on a post-split basis herein.

Dollar amounts and number of shares in this Item 2 are expressed in thousands, except per share ~~and per barrel~~ amounts and when separately disclosed, or where the context indicates otherwise.

Overview

~~OVERVIEW~~

Ecoark Holdings, Inc. (“Ecoark,” “Ecoark Holdings,” or the “Company”) is a diversified holding company ~~incorporated in the state of Nevada on November 19, 2007. Through Ecoark Holdings wholly~~which, through wholly-owned or majority owned subsidiaries ~~the Company has operations~~operates in three areas: (i) oil and gas ~~including exploration, production~~transportation and ~~drilling operations on over 20,000 cumulative acres~~logistics services focused in the Southern states in the U.S., (ii) development and maintenance of ~~active mineral leases in Texas, Louisiana, and Mississippi and transportation services, (ii)~~ post-harvest shelf-life and freshness food management technology and related intellectual property, and (iii) ~~financial services including investing~~Agora Digital Holdings, Inc. (“Agora”) which was engaged in ~~a select number of early stage startups, and (iv) a recently launched cryptocurrency~~the Bitcoin mining business until late in the fiscal year ended March 31, 2022. Agora’s business is also designed to assist with electric power opportunities in a deregulated market which exists in Texas.

The Company also previously operated a financial services segment through Trend Holdings until June 17, 2022 when (i) Trend Holdings assigned Bitstream Mining LLC (“Bitstream”) to Agora and Trend Exploration to Ecoark Holdings, and (ii) following those transactions, Agora, the Company’s approximately 90% owned subsidiary, sold Trend Holdings to a third party in exchange for a $4.25 million secured promissory loan secured by the assets of the purchaser and guaranteed by the subsidiaries ~~include Banner Midstream Corp. (“Banner Midstream”),~~that were sold. As a result of the transaction, Agora’s sole operating subsidiary is Bitstream through which it mines Bitcoin.

Following the period covered by this Report, on July 25, 2022 the Company sold White River Holdings Corp. (“White River”), ~~Shamrock Upstream Energy~~its indirect wholly-owned subsidiary, and with it its oil and gas production business to Fortium Holdings Corp. (“Fortium”) in exchange for 1,200 shares of Fortium’s non-voting Series A Convertible Preferred Stock (the “Fortium Series A”). Subject to certain terms and conditions set forth in the Certificate of Designation of the Fortium Series A, the Fortium Series A will become convertible into 42,253,521 shares of Fortium’s common stock upon such time as (A) Fortium has filed a Form S-1 or Form 10, or other applicable form, with the Securities and Exchange Commission (the “SEC”) and such Form S-1 or other registration statement has been declared effective, or such Form 10 or other applicable form is no longer subject to comments from the Staff of the SEC, and (B) Ecoark elects to distribute shares of its common stock to its shareholders. Fortium is a holding company which following the transaction now operates primarily in oil and gas drilling through White River, and is also in the early stages of operations in the online sporting goods space through Norr LLC, and is developing a business plan for the commencement of operations as a retail distributor of cannabis products in California through Elysian Premium Corp. The cannabis operations are subject to full payment of and receipt of regulatory for the Company’s purchase of two cannabis licenses in California under an agreement entered into in October 2021.

The Company’s goal is to spin-off all of its active subsidiaries and Fortium to the Company’s shareholders by December 31, 2022, although because of regulatory delays we may not meet that deadline. At the same time, we expect to acquire another business so we do not become a shell corporation. This will result in a change of control and may or may not be subject to shareholder approval. As of the date of this Report, we have not had any discussions about any such acquisition.

June 2022 Private Placement

On June 8, 2022 the Company entered into a Securities Purchase Agreement with Digital Power Lending, LLC (“~~Shamrock”~~DPL”), pursuant to which the Company sold DPL 1,200 shares of Series A Convertible Redeemable Preferred Stock (the “Ecoark Series A”) , 102,881 Commitment Shares, and a warrant to purchase shares of common stock (the “Warrant”) in exchange for $12,000,000. DPL is a subsidiary of BitNile Holdings, Inc. (NYSE American: NILE]) (“BitNile”).

Each share of Ecoark Series A has a stated value of $10,000 and is convertible into shares of common stock at a conversion price of $2.10 per share, subject to certain adjustment provisions. The holder’s conversion of the Series A is subject to a beneficial ownership limitation of 19.9% of the issued and outstanding common stock as of any conversion date of the Ecoark Series A, unless the Company obtains shareholder and Nasdaq approval for the conversion of more than that amount, in order to comply with Nasdaq Rules. In addition, the conversion rights in general did not become effective until July 23, 2022, the first day after the record date for the shareholders meeting seeking such shareholder approval. There are also standard 4.99% and 9.9% beneficial ownership limitations. The Ecoark Series A is entitled to vote with the common stock as a single class on an as-converted basis, subject to certain limitations. Initially, the holder may designate one director.

The holder of shares of the Ecoark Series A is entitled to receive cumulative cash dividends at an annual rate of 12.6% of the stated value, which is equivalent to $1,260 per year per share, payable monthly beginning on the issuance date and continuing until the earlier of (a) June 8, 2024, and (b) the date on which the holder no longer holds any shares of Ecoark Series A. If the Company fails to make one or more dividend payments, whether or not consecutive, a default dividend rate of 18% per annum will apply until all accumulated dividend payments have been made. Additionally, at any time beginning on or after June 8, 2024, the holder of Ecoark Series A may cause the Company to redeem some or all of the shares of Ecoark Series A it holds at a redemption price of $1,200 per share, plus any accumulated and unpaid dividends thereon.

The Ecoark Series A Certificate of Designation (the “Series A Certificate”) subjects the Company to negative covenants restricting its ability to take certain actions without prior approval from the holder(s) of a majority of the outstanding shares of Ecoark Series A for as long as the holder(s) continue to hold at least 25% (or such higher percentage as set forth in the Series A Certificate) of the Ecoark Series A shares issued on the closing date of the financing. These restrictive covenants include the following actions by the Company, subject to certain exceptions and limitations:

(i)

payment or declaration of any dividend (other than pursuant to the Series A Certificate);

(ii)

investment in, purchase or acquisition of any assets or capital stock of any entity for an amount that exceeds $100,000 in any one transaction or $250,000, in the aggregate;

(iii)

issuance of any shares of common stock or other securities convertible into or exercisable or exchangeable for shares of common stock;

(iv)

incurrence of indebtedness, liens, or guaranty obligations, in an aggregate amount in excess of $50,000 in any individual transaction or $100,000 in the aggregate;

(v)

sale, lease, transfer or disposal of any of its properties having a value calculated in accordance with GAAP of more than $50,000;

(vi)

increase in any manner the compensation or fringe benefits of any of its directors, officers, employees; and

(vii)

merger or consolidation with, or purchase a substantial portion of the assets of, or by any other manner the acquisition or combination with any business or entity.

The Warrant issued to DPL is structured as a poison pill in order to insure the Company will spin-off its subsidiaries and favorably consider a proposed business combination. The Amended Warrant provides the Purchaser or its assignees (together, the “Holder”) with the right to purchase a number of shares of common stock as would enable the Holder together with its affiliates to beneficially own 49% of our common stock (the “Warrant Shares”) calculated on a fully diluted basis at an exercise price of $0.001 per share, including the Commitment Shares and Conversion Shares unless sold. Subject to shareholder approval, the Amended Warrant will vest and become exercisable if on June 8, 2024: (i) the Holder (together with its affiliates) beneficially owns less than 50% of our outstanding common stock (on a fully diluted basis) and (ii) the Company has failed to complete the Distributions. Provided, we must retain 20% of our common stock of Agora. The Amended Warrant may be exercised on a cashless basis and expires on June 8, 2027. In the event that the Company or its transfer agent fails to issue the shares of common stock within three business days following delivery of a notice of exercise, the Amended Warrant provides that the Company must pay the Holder a fee of $2.4 million.

Future Spin-Offs

As described in this Report, Ecoark’s goal is to spin-off all of its active subsidiaries and acquire an operating business. The first spin-off is expected to be of the Fortium common stock underlying the Fortium Series A. Ecoark plans to also distribute its ownership of Banner, Zest and Agora shares to Ecoark’s security holders either directly or through a business combination with a third party. To that end, on August 11, 2022 Ecoark executed a definitive agreement with HUMBL, Inc. to transfer up to 100% of the issued and outstanding common stock of its majority owned subsidiary Agora to HUMBL in exchange for up to 6,000 shares of Series C preferred stock valued at $10,000 per share which will be filed prior to closing. The definitive agreement has certain closing conditions which have yet to be fulfilled at the time of this filing including a closing condition whereby Ecoark is required to source a minimum of $10,000,000 in capital for HUMBL prior to the transfer of ownership of Agora to HUMBL. Furthermore, on August 11, 2022, the Company entered into a non-binding letter of intent to divest Banner, in an all-stock transaction to a public company also engaged in oilfield services, although there can be no assurances the letter of intent will result in the execution of a definitive agreement or the closing of a business combination. Upon the successful closing of all business combinations or stock dividends of the subsidiaries described above, Ecoark plans to move forward with the acquiring companies to have registration statements filed with the SEC to register the shares of capital stock for each such entity and then execute a stock dividend to distribute 100% of such capital stock to Ecoark’s shareholders of record as of one or more future to be determined record dates.

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, either directly or through the business combinations. Our current plans are to expedite the spin-offs and complete them by December 31, 2022, although we may not reach our goal by then. 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.

Following the above transactions, the Company’s active subsidiaries include Banner Midstream Corp. (“Banner” or “Banner Midstream”), Pinnacle Frac Transport LLC (“Pinnacle Frac”), Capstone Equipment Leasing LLC (“Capstone”), Zest Labs, Inc. (“Zest Labs”), and Agora ~~Digital Holdings, Inc., a Nevada corporation (“Agora”) who was assigned the membership interest in Trend Discovery Holdings LLC, a Delaware limited liability corporation (“Trend Holdings”)~~ as well as all of Agora’s ~~recently formed~~ subsidiaries as discussed herein ~~(all references to “Trend Holdings” or “Trend” are now synonymous with Agora)~~ from the Company on September 17, 2021 upon its formation.

~~On August 4, 2021,~~The following is an overview of our operating subsidiaries as of June 30, 2022:

Banner Midstream Corp

The Company entered the oil and gas industry following the previously disclosed acquisition of Banner in March 2020. Below are descriptions of the Company’s ~~common stock commenced trading on the Nasdaq Capital Market.~~subsidiaries and operations through Banner.

Pinnacle Frac

Through Pinnacle Frac, the Company provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. ~~Capstone procures~~Our transportation services entail using third party drivers who assist in transporting sand and ~~finances equipment~~related materials to ~~oilfield~~customers’ locations for the customers’ hydraulic fracturing, or fracking. The logistics services Pinnacle Frac provides for its customers’ fracking and drilling enterprises, include the operation of a 24/7 dispatch service center based in Texas through which we dispatch the trucks for hauling frac sand and related equipment. Pinnacle Frac uses independent third party owner-operators of trucks to service its customers in their fracking operations by transporting materials, mainly frac sand. Our transportation and logistics services operations are primarily centered in the Southern United States, although we also occasionally service ~~contractors.~~fracking operations in the Northeastern United States.

White River ~~and Shamrock~~

Through White River, ~~and Shamrock,~~ we ~~are~~were engaged in oil and gas exploration, production, and drilling operations on over ~~20,000~~30,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi. As described above, White River and our oil and gas exploration, production and drilling operations were sold in July 2022. Shamrock Upstream Energy LLC (“Shamrock”) is a Banner Midstream subsidiary which previously was engaged in oil drilling. We have sold all of its properties and it is now inactive.

Zest Labs

Through its wholly-owned subsidiary Zest ~~Labs’ goal is to~~Labs, the Company has developed intellectual property that can offer freshness management solutions for fresh food growers, suppliers, processors, distributors, grocers and restaurants. Our efforts with respect to the freshness food management solution have to a considerable degree been focused on preparing for trial and appeals in our previously disclosed lawsuit against Walmart, Inc. and Deloitte Consulting.

~~Agora Digital Holdings, Inc.~~

~~Through Agora we provide financial services and collect fees from entities which invest in securities and operate a digital asset mining company as described in more detail below.~~

The Company assigned its membership interest in Trend Holdings and its related wholly owned subsidiaries to Agora on September 22, 2021, for the sale of the initial one hundred shares for ten dollars. On October 1, 2021, the Company purchased 41,671 shares of Agora common stock for $4,167 which Agora used to purchase equipment to commence the Bitstream operations.

Trend Holdings formed four subsidiaries, Bitstream Mining, LLC, a Texas Limited Liability Company (“Bitstream”) on May 16, 2021, REStream Processing LLC, a Texas Limited Liability Corp (“REStream”). on May 16, 2021, Trend Discovery Exploration LLC, a Texas Limited Liability Corp. (“Trend Exploration”) on May 27, 2021, and OTZI, LLC, a Delaware Limited Liability Corp. (“OTZI”) on September 2, 2021, in addition to Barrier Crest, LLC (“Barrier Crest”) that was acquired along with Trend Capital Management, Inc. (“TCM”) that was acquired by Ecoark on May 31, 2019. REStream and OTZI are currently inactive subsidiaries.

Agora was organized by Ecoark to enter the digital asset mining business. Because of regulatory uncertainty over digital assets being deemed to be securities, Agora’s initial focus is on mining Bitcoin which the SEC administratively determined is not a security. Because of regulatory concerns and the changing regulatory environment, Agora intends to seek opportunities to engage with cryptocurrencies that do not involve the offer or sale of any securities.

On November 19, 2021 Agora filed a registration statement on Form S-1 in connection with its initial public offering of 10,000,000 (ten million) units comprised of shares of common stock and warrants to purchase an equal number of shares of common stock. The Form S-1 has not yet been declared effective. See Note to the Consolidated Financial Statements.

Subject to completion of the Agora public offering and Nasdaq uplisting, the Company intends to issue a stock dividend through a pro rata distribution of Agora’s common stock to Ecoark’s common stockholders and holders of common stock equivalents. Ecoark plans to distribute 80% of the Agora common stock it holds to its stockholders as of a future record date to be determined upon completion of regulatory compliance. Ecoark plans to retain the remaining 20% ownership in Agora on its balance sheet. 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. Upon disposal, the Company must assess whether the disposed of assets qualify for discontinued operations reporting. If so, the Company will apply the presentation and disclosure requirements of ASC 205-20, and if not, the Company will apply the presentation and disclosure requirements of ASC 360-10.

~~Overview of~~ Agora Digital Holdings, Inc.

~~The following~~Following the Company’s sale of Trend Holdings sale, Agora’s only operating subsidiary, Bitstream, engaged in the mining of Bitcoin. For this reason, and because of the substantial investments the Company has made in Bitstream (and Trend Holdings prior to the sale) through loans to Agora totaling $4,760,759 which are outstanding and mature in March 2023, set forth below is ~~a brief~~an overview of ~~each of~~Bitstream’s developments, planned operations and the ~~principal subsidiaries that the Company operates through Agora, the Company’s newly formed, majority-owned subsidiary.~~Bitcoin assets and industry in which it operates.

Bitstream

Bitstream was organized to be our ~~principal cryptocurrency~~Bitcoin mining subsidiary. Bitstream has entered into a series of agreements including procuring land to install Bitcoin mining equipment, arranging for a reliable and economical electric power source needed to efficiently mine Bitcoin, ordering miners, housing infrastructure and other infrastructure to mine Bitcoin and locating a third-party hosting service to operate the miners and the service’s more advanced miners. Agora has spent (and agreed to spend) between ~~$12-$14~~$12 - $14 million in connection with these agreements, not including future revenue sharing. Agora brought online entry level miners that began operating in early November 2021, ~~the~~with plans to obtain more productive Bitmain S19 Pro miners ~~supplied by~~from the hosting ~~service.~~

Bitstream anticipates that they will deploy and operate modularized data centers (facilities) with the sole purpose of mining digital assets, with Bitcoin initially as the focus. Agora is powering these data centers through acquiring a long-term power contract to purchase electric power from the electric grid in Texas. Once the business’ operations grow, Bitstream intends to continuously add data center facilities by reinvesting their revenues. All data centers will be remotely managed with onsite personnel for servicing and troubleshooting any operational issues. Bitstream plans to utilize the energy to power its energy intensive operations of digital asset mining. Additionally, if Texas experiences another power shortage during the winter or summer months from extreme weather conditions, Bitstream would be able to arbitrage power at favorable margins. Bitstream will do this by temporarily shutting down their cryptocurrency mining operations and sell their purchased power back to the grid at favorable margins. Last winter, during the blackout, the price per kWh exceeded $10 (ten dollars) at its peak imbalance, whereas Bitstream’s power cost is expected to be $0.023 (two and three one hundredths) per kWh.

Bitstream is expected to be the focal point of the Company’s Agora operations during the next 12 months. For this reason, set forth below is a more detailed overview of Bitstream’s developments, planned operations and the cryptocurrency assets and industry in which it operates.

~~Trend Exploration~~

On July 1, 2021, Trend Exploration acquired oil and gas leases with producing oil wells in Louisiana. Trend Exploration was formed to provide an environmental, social and governance (“ESG”) solution to Bitstream’s need for affordable electric power does not intend to be an oil and gas exploration company. Trend Exploration was assigned an 80% working interest in fourteen wells from White River SPV 2, LLC and White River E&P LLC (“Assignors”) on July 1, 2021. In accordance with ASC 205-20, there is a scope exception for oil and gas properties that use the full-cost method of accounting. Under the full-cost method of accounting, all costs associated with property acquisition, exploration, and development activities are capitalized to cost centers, which are established on a country-by-country basis. The definition of discontinued operations, however, applies to disposals of components of an entity, which is defined as the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. As a result, the definition of discontinued operations will not be operable under the full-cost method of accounting because of differencesservice provider in the ~~tracking~~year ending March 31, 2023 if Agora can obtain the necessary capital and ~~allocation of costs, which is at~~subject to a much higher level. The Company as a result has not reflected the working interest on the fourteen wells in discontinued operations. The Trend Exploration business is identical to the business noted herein for Banner Midstream.

~~Trend Capital Management~~

Trend Capital Management is the general partner or manager of, and provides services and collects fees from entities including Trend Discovery LP (“Trend LP”) and Trend Discovery SPV I, LLC (“Trend SPV”), respectively. However, Trend Capital Management is not the investment manager of these entities, nor the beneficial owner of Ecoark securities held by Trend LP nor Trend SPV since it assigned the sole power to vote and direct all investment activities which will impact the entities’ economic performance to an independent third party not affiliated with Ecoark. The investment capital in Trend LP and Trend SPV is from individual limited partners and members, and not from the Company. Trend Capital Management does not have the obligation to absorb losses or the right to receive benefits that could be significant as a result of the entities’ performance. Trend Capital Management does not have any ownership of or a controlling financial interest in Trend LP nor Trend SPV and therefore management has concluded consolidation of these entities with Trend Capital Management is not required.

~~Barrier Crest~~

Barrier Crest provides fund administration and fund formation services to institutional investors. Barrier Crest provides fund administration services to Trend LP and Trend SPV. Barrier Crest provides fund administration and related services for small hedge funds. Trend Holdings owns an entity which is the general partner but not the investment manager of two investment funds. These investment funds own shares of Ecoark and one also owns warrants of Ecoark.

~~Part of the financial services strategy envisions the acquisition of a broker-dealer to engage~~material increase in the ~~digital assets markets. As~~market price of ~~the date of this Report, we are not negotiating any potential acquisition. We plan to focus~~Bitcoin. Bitstream temporarily ceased mining on ~~a target as soon as we can.~~

March 3, 2022.

~~Cryptocurrency Mining Overview~~

Distributed blockchain technology is a decentralized or distributed and encrypted ledger that is designed to offer a secure, efficient, verifiable, and permanent way of storing records and other information without the need for intermediaries. Cryptocurrencies serve multiple purposes. They can serve as a medium of exchange, store of value or unit of account. Examples of cryptocurrencies include Bitcoin, Bitcoin Cash, and Litecoin.

Bitcoin was first introduced in 2008 and was first introduced as a means of exchange in 2009. Bitcoin is a consensus network that enables a new payment system and a completely new form of digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitstream believes Bitcoin can be viewed as cash for the Internet. The Bitcoin network shares a public ledger called the “blockchain.” This ledger contains every transaction ever processed, allowing a user’s computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, allowing all users to have full control over sending Bitcoins rewards from their own Bitcoin addresses. In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in Bitcoins for this service. This process is often called “mining.”

In November 2021, Bitstream commenced the mining of Bitcoin by acquiring miners to solve complex cryptographic algorithms to support the Bitcoin blockchain (in a process known as “solving a block”). In return for solving a block, Bitstream receives a Bitcoin.

Bitstream mines Bitcoin using specialized computer equipment referred to as “miners.” Miners measure their capability in terms of processing power, which is known in the industry as “hashing” power. Hashing power is measured in terms of the number of hashing algorithms solved (or “hashes”) per second, which is the miner’s “hash rate.” Generally speaking, miners with greater hashing power and in turn a higher hash rate relative to other miners attempting to solve a block have a higher chance of solving the block and receiving a cryptocurrency award. However, although newer generations of miners advertise improved energy efficiency, increasing hash rate generally requires greater electrical power, which increases the cost of solving a block and, therefore, the relative cost of mining a cryptocurrency. As additional miners competed for the limited supply of blocks, individuals found that they were working for months without finding a block and receiving any reward for their mining efforts. To address this variance, miners started organizing into pools to share mining rewards more evenly on a pro rata basis based on total hashing capacity contributed to the mining pool. Bitstream will be participating in a mining pool. As of the date of this Report, Bitstream is in the process of paying for and receiving delivery of the necessary infrastructure and equipment to commence mining operations using a total of 48 megawatts (“MW”) of electricity, which through conditional and unconditional rights to two sites in West Texas may be increased to up to 372 MW assuming this can be done so on acceptable terms.

Transportation Services Segment

~~Mining Equipment~~

In September 2021 Bitstream ordered 5,000 used Canaan Avalon 841 13 TH/s miners for $1,350. Delivery of 4,000 of these miners occurred as of January 31, 2022. Bitstream’s plan is to use trailer or shipping container-like units as housing infrastructure to house our miners. Bitstream will either build their own or partner with another third-party vendor to build entry level housing infrastructure to deploy the initial mining equipment in November. In August 2021, Bitstream entered into an agreement with a third party which will supply Bitstream with more advanced housing infrastructure in exchange for approximately $375. Delivery of these enhanced housing infrastructure is expected in the first calendar quarter of 2022.

Effective December 10, 2021, Bitstream entered into a lease agreement for 20 acres of land near the power substation upon which we will place the housing infrastructure. The lease is for an initial term of 10 years and a subsequent term of 10 years, pursuant to which Bitstream will pay the lessor a monthly payment equal to 3% of the electricity cost. If we do not use the leased land for 12 consecutive months, the lease will terminate. On January 3, 2022, the Company entered into a land purchase agreement for a separate parcel of twenty acres of land ($12.5 per acre) in West Texas for $250. The Company has an option to sell back this land to the sellers at $0.4 (four hundred) per acre upon cessation of the land being used as a data center.

In September 2021, Bitstream entered into a binding agreement referred to as a Memorandum of Understanding with Elite Mining Inc. (the “Hosting Company”) that will supply high speed miners, host the Company’s data center and operate the miners it installs. In Phase 1 which is a beta test phase, Bitstream paid $600 to the Hosting Company which will also supply 6 MW capacity’s worth of very high speed and efficient miners in the first calendar quarter of 2022. Bitstream has an option to purchase these high-speed miners at replacement cost (which may be higher than current cost). The Hosting Company may provide hosting for third parties during Phase 1 which reduces the cash flow for Bitstream. This agreement will also allow Bitstream to utilize a minimum of 25 MW of electricity under the initial power purchase agreement in Phase 2. Bitstream can terminate the hosting agreement as soon as Bitstream has secured sufficient capital to replace the hosted Bitmain S19 Pros with their own. Once Bitstream purchases the high-efficiency miners, the Hosting Company cannot host third parties.

In late 2021 Bitstream secured an additional 36 MWs of electrical capacity at a different West Texas location. This supplements Agora’s prior agreement to secure 12 MWs and as a result Agora will have a total of 48 MWs of electric power for immediate use and benefit to Agora at that location. Bitstream also entered into a second letter of intent for an additional 30 MW at a second location. Bitstream also plans to participate in the Electric Reliability Council of Texas’ (“ERCOT”) responsive reserve market by relinquishing its power back to the Texas grid as power stabilization events are needed.

Additionally, Bitstream has procured mining infrastructure to power the 48 MWs at one location and expects the equipment and infrastructure to be delivered over the next 135 days. This mining infrastructure includes twenty-one 2,600 kilo-volt amp (KVA) or similar transformers and Agora’s first shipment of Bitcoin mining application-specific integrated circuits (“ASIC”). Agora has agreed to pay a total $3,685 for the new equipment and infrastructure as follows: (i) $506 upon the order which has been paid, (ii) $506 by November 11, 2021, which has been paid and (iii) $816 paid on December 15, 2021; (iv) $1,856 by February 2022.

In connection with the increase in electrical capacity, Bitstream entered into a second binding letter of intent with the power management company pursuant to which the Company has paid a total of $2,955, consisting of a $2,628 development fee and a $327 reimbursement for payments made by the power management company to the electric utility to secure the power. ~~Of this amount $1,326 has already been paid.~~ In addition, the Company agreed to pay a total of $450 upon the power management company signing a binding agreement to acquire or lease 20 or more acres of usable land. Bitstream is currently negotiating an agreement for this but as of the date of this Report, no agreement has been executed.

~~Commodities Segment~~

For the ~~nine and~~ three months ended ~~December 31, 2021,~~June 30, 2022, the Company’s consolidated revenues from continuing operations consisted almost exclusively of the revenues from, and most of our expenses were related to, the ~~Commodities~~Transportation services segment. In our ~~Commodities~~Transportation services segment, our activities are ~~primarily~~almost exclusively directed at our frac sand logistics business, Pinnacle Frac, and we expect a majority of our revenues to be derived from that business for the conventional enhancement and development of all productive formations throughout our Louisiana and Mississippi leasehold positions of over 20,000 acres. We intend to continue to enhance and develop our reserves and increase production through exploration activities on our prolific inventory of potential drilling locations.near future.

~~Key Terms and Metrics~~

In connection with the management of our businesses, we identify, measure and assess a variety of operating metrics. In the Commodities segment, the principal metrics we use in managing our businesses are set forth below:

“Bbl” – Bbl means barrel of crude oil. Metric used by management to specify the unit of measure (“in barrels”) from which the Company’s midstream customers use to incrementally purchase oil from the Company. Barrels are used as a unit of measure universally across the oil industry so the Company’s adoption of barrels to measure units of oil is a standard practice.

~~“Mbbl” – Mbbl means a thousand barrels of oil. See comments on “Bbl” metric. “Mbbl” is a standard for measuring larger quantities of barrels of oil in thousands of units.~~

“Production (Gross)” – Production (Gross) is defined as barrels of oil produced before accounting for working interests from non-mineral owning parties. Metric used by management to specify the total number of barrels of oil produced from a given oil well. Gross production includes both the barrels owned by the oil and gas mineral owners as well as the drilling and investing group who funded and drilled the well which are considered the working interest owners. Gross production is a standard term used universally across the oil industry, so the Company’s adoption of this term is a standard practice.

“Production (Net)” – Production (Net) is defined as the net barrels of oil produced after deducting the ownership portion owned by the mineral owning parties. Unless otherwise specified, management assumes that the mineral ownership portion of a well is 25%, so a 100% working interest would result in a 75% Net Production or Net Revenue interest after accounting for the ownership portion of oil production owned by the mineral owners.

Segment Reporting for the ~~Nine and~~ Three Months Ended ~~December 31, 2021~~June 30, 2022 and ~~2020:~~2021:

Prior to August 26, 2021, the Company operated in three segments. The segments are Financial Services (Trend Holdings), Technology (Zest Labs), and ~~Commodities~~Transportation Services (Banner Midstream). Effective July 1, 2021, the Company’s chief operating decision makers in discussion with the finance team determined that the Company would add a fourth reporting segment to account for their Digital Asset mining business. Additionally, beginning on July 1, 2021 the Company began reporting its home office costs into the Commodity segment, charging its Technology segment a monthly overhead fee, and has recorded typical overhead expenses in their Finance and Digital Asset segments to account for this home office allocation.

Three Months Ended December 31, 2020 Commodities Financial Technology Total
Segmented operating revenues $ 4,300 $ 165 $ - $ 4,465
Cost of revenues 3,218 - - 3,218
Gross profit 1,082 165 - 1,247
Total operating expenses net of depreciation, amortization, depletion and accretion 3,965 137 872 4,974
Depreciation, amortization, depletion and accretion 447 - 62 509
Other (income) expense (3,769 ) (166 ) (833 ) (4,768 )
Income (loss) from continuing operations $ 439 $ 194 $ (101 ) $ 532

Segmented assets as of December 31, 2020
Property and equipment, net $ 3,567 $ - $ 354 $ 3,921
Oil and Gas Properties $ 11,795 $ - $ - $ 11,795
Intangible assets, net $ 2,136 $ - $ - $ 2,136
Goodwill $ 7,002 $ 3,223 $ - $ 10,225
Capital expenditures $ 617 $ - $ - $ 617

~~Third Quarter 2021 Operating Highlights~~

Three Months Ended June 30, 2022	Bitcoin Mining			Commodities			Technology			Total
Segmented operating revenues	$	-		$	5,418,655		$	-		$	5,418,655
Cost of revenues		93,861			4,514,011			-			4,607,872
Gross profit (loss)		(93,861	)		904,644			-			810,783
Total operating expenses net of depreciation, amortization, and impairment		6,312,064			2,292,264			454,573			9,058,901
Depreciation, amortization, and impairment		45,097			112,830			-			157,927
Other (income) expense		121,134-			1,266,528			-			1,387,662
Loss from continuing operations	$	(6,572,156	)	$	(2,766,978	)	$	(454,573	)	$	(9,793,707	)
Segmented assets as of June 30, 2022
Property and equipment, net	$	7,190,396		$	928,127		$	-		$	8,118,523
Intangible assets, net	$	10,145		$	1,652,088		$	-		$	1,662,233
Goodwill	$	-		$	4,900,873		$	-		$	4,900,873

Three Months Ended June 30, 2021	Commodities			Technology			Total
Segmented operating revenues	$	5,156,213		$	-		$	5,156,213
Cost of revenues		3,597,941			-			3,597,941
Gross profit		1,558,272			-			1,558,272
Total operating expenses net of depreciation, amortization, and impairment		3,021,721			251,626			3,273,347
Depreciation, amortization, and impairment		196,263			55,916			252,179
Other (income) expense		(4,360,320	)		-			(4,360,320	)
Income (loss) from continuing operations	$	2,700,608		$	(307,542	)	$	2,393,066

First Quarter 2023 Highlights

●

~~Revenue~~In June 2022, Agora sold Trend Discovery Holdings, LLC to a third party purchaser in exchange for ~~three months ended December 31, 2021 were $6,135, an increase~~a $4.25 million senior secured promissory note issued by the purchaser, and Agora thereby became solely focused on Bitcoin mining through Bitstream.

●

In June 2022, we raised $12 million from the sale of ~~$1,670 compared~~Series A Convertible Preferred Stock, commitment shares of common stock and a Warrant to ~~same period in prior year.~~support our operational requirements and strategic objectives.

●

Subsequent to June 30, 2022, the Company sold White River, which comprised the oil and gas operations at June 30, 2022 to Fortium Holdings, Inc. (“Fortium”). See Notes 1 and 21 of the Consolidated Financial Statements.

●

~~We recorded net income of $4,279 for the third quarter ended December 31, 2021, as a result of a $10,979 increase in the fair value of derivative liabilities.~~

●

~~Our average production was 231 Gross (164 Net) barrels of oil per day during the three months ended December 31, 2021.~~

●

~~During the three months ended December 31, 2021, we had no new successful drilling activity as the focus has been on well re-entries.~~

●

We have entered into a number of agreements through Bitstream for the procurement of land, electricity and equipment necessary to run its business. Bitstream has estimated this commitment to be approximately $12-$14 million over the next three months inclusive of what has been spent to date.

Key Trends

~~Commodity Prices~~Impact of Inflation

In ~~early March 2020,~~2022, data indicates a sharp rise in inflation in the U.S. and globally. In the U.S., inflation has been triggered by constrained supplies and increasing demand of certain goods and services as recovery from the COVID-19 pandemic continues. The Company’s revenues, capital and operating costs are influenced to a larger extent by specific price changes in the oil and natural gas industry and allied industries rather than by changes in general inflation. Crude oil prices ~~dropped sharply~~generally reflect the balance between supply and ~~continued~~demand, with crude oil prices being particularly sensitive to ~~decline, briefly reaching negative~~OPEC production levels, ~~as a result~~the Biden Administration’s efforts to reduce drilling and transition away from fossil fuels and/or attitudes of ~~multiple factors affecting the~~traders concerning supply and demand in ~~global~~the future. Prices for oil and gas related services such as those we supply though Pinnacle Frac and truck drivers we procure to assist in those efforts are also affected by the worldwide prices for crude oil. As a result of increasing prices for oil and natural gas, ~~markets, including (i) actions taken by OPEC members~~in 2021 and thus far in 2022, higher costs for goods and services in the oil and gas industry are being observed.

In response to recent inflationary pressures in the U.S., the Federal Reserve commenced interest rate hikes in calendar year 2022 in an effort to combat inflation. Because of these and other ~~exporting nations impacting commodity price~~developments, a recession is expected in the coming months by many economic analysts, which may, among other things, reduce demand for our products and ~~production levels and (ii) a significant decrease in demand due~~services as well as increase operating costs to the ~~ongoing COVID-19 pandemic. However, certain restrictions on conducting business that were implemented in response~~extent we are unable to ~~the COVID-19 pandemic have been lifted as improved treatments and vaccinations for COVID-19 have been rolled-out globally since late 2020.~~ procure required resources to continue our operations.

As a result oil and natural gas market prices have improved in response to the increase in demand and global and United States reductions in drilling. However, in recent periods oil and natural gas prices have experienced increased volatility due to the uncertainty related to the Delta and Omicron variant of the ~~virus.~~overall volatility of oil prices, it is not possible to predict the Company’s future cost of oil it produces or services it uses or provides.

During 2020 and 2021, the posted NYMEX WTI price for crude oil ranged from $(37.63) to $84.65 per Bbl. On December 31, 2021, the NYMEX WTI price for crude oil was $75.21 per Bbl. Commodity prices have historically been volatile and we cannot predict events which may lead to future fluctuations in these prices.

Impact of COVID-19

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

COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the fiscal ~~2021~~quarter ended June 30, 2022 included in this Form 10-Q in contrast to the material impact it had in the prior fiscal year.

Because of the ~~federal government~~possibility of new variants of the virus and ~~some state and local authorities are reacting to the current Omicron variant of COVID-19, it~~any governmental or economic reactions that may result, there is ~~creating~~inherent uncertainty on whether ~~these actions~~any such developments could disrupt the operation of the Company’s business and have an adverse effect on the Company. For example, outbreaks in early calendar year 2022 arising from the more contagious Omicron variant resulted in labor shortages including with respect to truck drivers. Additionally, the pandemic has been a contributing factor in supply shortages which have been pervasive in many industries. The extent to which the COVID-19 outbreak and other adverse developments may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

Results of Operations For Continuing Operations For the Three Months Ended June 30, 2022 and 2021

Revenues

The following table shows revenues for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022		2021
Revenue from continuing operations:
Bitcoin mining	$	-	$	-
Transportation Services		5,348,225		5,037,994
Fuel Rebate		63,095		92,406
Equipment Rental and Other		7,335		25,813
Total	$	5,418,655	$	5,156,213

Revenues for the fiscal quarter ended June 30, 2022 (“Q1 2023”) were $5,418,655 as compared to $5,156,213 for the fiscal quarter ended June 30, 2021 (“Q1 2022”).

Revenues were comprised of $5,348,225 in the transportation services segment, with no revenue from the Bitcoin mining segment for Q1 2023 and Q1 2022, respectively. Additionally, revenue from fuel rebates were $63,095 and $92,406, and revenue from equipment rental and other sources were $7,335 and $25,813 for Q1 2023 and Q1 2022, respectively. There were no revenues from our technology segment during Q1 2023 or Q1 2022.

Due to the sale of Trend and White River, which together constituted all of the Company’s revenue generating oil and gas production activities, as of July 25, 2022, the Company’s former oil and gas exploration, production and drilling operations are now treated as discontinued operations, and therefore are not included in the revenue from continuing operations for Q1 2023 and Q1 2022.

The Company’s Bitcoin operations began in the fiscal year ended March 31, 2022 and temporarily ceased on March 3, 2022 due to the low price of Bitcoin and the inability of Agora to timely complete its initial public offering which created a working capital issue. Therefore no amounts are reflected for that segment for the quarters ended June 30, 2022 and 2012.

Cost of Revenues and Gross Profit

The following table shows costs of revenues for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022		2021
Total	$	4,607,872	$	3,597,941

Cost of revenues for Q1 2023 was $4,607,872 as compared to $3,597,941 for Q1 2022, primarily because of higher costs related to independent third party owner-operator trucks and higher fuel costs. The decrease in gross profit margins to 14.9% in Q1 2023 compared to 30.2% in Q1 2022 was primarily due to costs related to independent third party owner-operator costs and costs related to Bitcoin mining segment. .. Cost of revenues was comprised of $4,514,010 and $3,597,941 in the transportation services segment and $93,861 and $0 in the Bitcoin mining segment for Q1 2023 and Q1 2022, respectively. There were no cost of revenues in the technology segment for Q1 2023 and Q1 2022.

Operating Expenses

The following table shows operating expenses by segment for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022		2021
Segment
Transportation Services segment	$	2,405,094	$	3,217,984
Technology segment		454,573		307,542
Bitcoin segment		6,357,161		-
Total	$	9,216,828	$	3,525,526

The following table shows operating expenses for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022		2021
Operating Expenses
Salaries and salaries related costs	$	6,273,380	$	1,286,711
Professional and consulting fees		253,476		130,486
Selling, general and administrative costs		2,532,045		1,856,150
Depreciation, amortization, depletion, and accretion		148,805		252,179
Cryptocurrency impairment cost		9,122		-
	$	9,216,828	$	3,525,526

Selling, General and Administrative

The following table shows selling, general and administrative expenses for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022		2021
Selling, General and Administrative Costs
Capital Raising Costs	$	25,000	$	275,000
Insurance		559,007		672,281
Legal/Audit/Accounting		662,822		259,812
Factoring Expense		96,401		120,291
Equipment Rental		116,566		116,741
Development Costs		391,103		-
Other		681,146		412,025

	$	2,532,045	$	1,856,150

Depreciation and Amortization

The following table shows depreciation and amortization expenses for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022		2021
Depreciation of sand frac transportation equipment	$	48,587	$	109,059
Depreciation of technology segment assets		-		55,916
Depreciation of Bitstream mining assets		35,975		-
Amortization of intangible assets		64,243		87,204

Depreciation and amortization expense	$	148,805	$	252,179

Total depreciation and amortization expense was $148,805 in Q1 2023, compared to $252,179 in Q1 2022. The change was primarily due to the sale of several trucks and trailers in our sand frac transportation business in Q1 2023, assets being fully depreciated in Q1 2023 compared to Q1 2022 in the technology segment, and depreciation in Bitstream mining in Q1 2023 compared to none in Q1 2022.

Other Income (Expense)

The following table shows other income (expense) for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022			2021
Change in fair value of derivative liabilities	$	(393,532	)	$	4,945,819
Gain (loss) on disposal of fixed assets		(950,024	)		-
Interest expense, net of interest income		(44,106	)		(585,499	)
Other income (expense)	$	(1,387,662	)	$	4,360,320

Total other (expense) was $(1,387,662) in Q1 2023, compared to total other income of $4,360,320 in Q1 2022. Change in fair value of derivative liabilities for Q1 2023 was a non-cash loss of $(393,532) as compared to a non-cash gain of $4,945,819 for Q1 2022.

There was a (loss) on disposal of fixed assets of $(950,024) as a result of sale of multiple company owned tractors and trailers. Proceeds from sale were $580,000. Many of the trucks/trailers were non-operating. There was no corresponding gain or loss in Q1 2022.

Interest expense, net of interest income, for Q1 2023 was $(44,106) as compared to $(585,499) for Q1 2022. The decrease in interest expense was the result of the value related to the granting of warrants for interest of $545,125 in Q1 2022.

Net Income (loss)

The following table shows net income (loss) from continuing operations for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,
	2022			2021
Transportation Services Segment	$	(2,766,978	)	$	2,700,608
Bitcoin Segment		(6,572,156	)		-
Technology Segment		(454,573	)		(307,542	)
Net Income (loss)	$	(9,793,707	)	$	2,393,066

Net (loss) from continuing operations for Q1 2023 was $(9,793,707) as compared to net income from continuing operations of $2,393,066 for Q1 2022. The decrease was primarily due to an increase in salaries and salaries related costs arising from compensation of Agora employees and consultants in connection with the development of our Bitcoin mining operations. The decrease was also due to a net expense of $393,532 in the change in fair value of derivative liabilities in Q1 2023 compared to $4,945,819 income in Q1 2022.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are revenue generated from operations, levels of accounts receivable and accounts payable and capital expenditures.

Net cash used in operating activities for continuing operations was $(3,749,215) for the quarter ended June 30, 2022, as compared to $(751,258) for the same quarter of 2021. Cash used in operating activities for the quarter ended June 30, 2022 was primarily caused by the $10,196,534 net loss from continuing operations including $6,572,156 related to Agora’s operations offset by $5,215,287 in non cash compensation related to the issuances Agora restricted common stock for services.

Net cash provided by investing activities was $974,399 for the quarter ended June 30, 2022, compared to $2,500 for the quarter ended June 30, 2021. Net cash used in investing activities in the quarter ended June 30, 2022 were comprised of proceeds received from the sale of equipment.

Net cash provided by financing activities for the quarter ended June 30, 2022 was $11,577,814 which comprised net proceeds from our June 2022 sale of the Ecoark Series A, Commitment Shares and the Warrant as more particularly described below under “June 2022 Private Placement.” This compared with the quarter ended June 30, 2021 net cash used in financing activities of $217,514.

As of August 8, 2022, the Company has $2,660,651 in cash and cash equivalents. The Company believes this cash plus revenue from operations from our transportation services business is sufficient to meet our cash needs for the 12 months following the filing of this Report.

To date we have financed our operations through sales of common stock, convertible preferred stock and other derivative securities and the issuance of debt.

Agora Line of Credit

As of August 2, 2022, the Company has advanced a total of $5,889,057 to Agora under a $7.5 million term line of credit note issued to the Company by Agora which bears interest at a rate of 10% per annum. Agora will be required to repay any sums we lend it on March 31, 2023 with accrued interest.

Trend Ventures Note

The secured note from the sale of Trend is due June 16, 2025 and bears interest at a rate of 5% per year, subject to increase to 10% while an event of default has occurred and is continuing. The purchaser’s obligations under the note are secured by a first lien secured interest in the assets of the purchaser, and are also guaranteed by the Purchaser’s newly acquired subsidiaries.

2018 Line of Credit

On December 28, 2018, the Company entered into a $10,000,000 credit facility that includes a loan and security agreement (the “Agreement”) where the lender agreed to make one or more loans to the Company, and the Company may make a request for a loan or loans from the lender, subject to the terms and conditions. The Company is required to pay interest biannually on the outstanding principal amount of each loan calculated at an annual rate of 12%. The loans are evidenced by demand notes executed by the Company. The Company is able to request draws from the lender up to $1,000,000 with a cap of $10,000,000. In the year ended March 31, 2022, the Company borrowed $595,855, which includes $25,855 in commitment fees, with the balance of $575,000 being deposited directly into the Company. In the three months ended June 30, 2022, the Company borrowed $505,181, which includes $17,681 in commitment fees, with the balance of $487,500 being deposited directly into the Company, and repaid $585,000 in the three months ended June 30, 2022. Interest incurred for the three months ended June 30, 2022 was $25,864, and accrued as of June 30, 2022 was $28,086. There were no advances in the three months ended June 30, 2021. With the sale of Trend Holdings, we no longer can access this line of credit.

Cautionary Note Regarding Forward Looking Statements

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the potential terms, timing and success of the closings of the various transactions and the planned spin-offs by us to our security holders of certain subsidiaries or other entity’s capital stock (either directly or through one or more business combinations) and plans to file registration statements in connection therewith, including with respect to a definitive agreement with HUMBL and Agora, a non-binding letter of intent with Banner and an undisclosed public company and the planned spin-off of Fortium common stock underlying the Fortium Series A, the expected revenues of our transportation services business, future operating results following our discontinued oil and gas drilling business as a result of the sale of White River to Fortium, anticipated or potential transactions with BitNile and/or its affiliates, expected substantial investments to fund our business and support growth, our Bitcoin mining operations through Agora and Agora’s initial public offering which may be abandoned particularly if the HUMBL transaction closes, expected use of proceeds of our recent financing with DPL and cash generated from our, our expectations with respect to future developments in our ongoing litigation, and future liquidity. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The ~~CARES Act includes, among~~results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include the ability to complete and timelines of business combinations with and our planned spin-offs of the capital stock of our subsidiaries and certain other ~~things, provisions~~entities and any regulatory, registration or other delays or obstacles that may arise with respect thereto, including delays or challenges in obtaining the requisite approvals, any inability to close the Agora or Banner business combinations, including the requirement under the HUMBL agreement that we secure at least $10 million in financing for HUMBL which we may be unable to accomplish due to a recessionary environment, inflation, the declined price of Bitcoin, or other factors beyond our control, risks and uncertainties relating to ~~payroll tax credits~~undisclosed liabilities or the integration of such entities with the acquiring entity if any such transaction closes, a possible drop in value of stock prices prior to any planned distribution to our shareholders, failure to meet Nasdaq continued listing requirements, the impact of future strains of COVID-19, the Russian invasion of the Ukraine, inflation and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligibleFederal Reserve interest rate increases in response thereto on the economy including the potential for a ~~loan~~recession which may result, supply chain shortages, the future prices of, and demand for, oil and gas and Bitcoin, future adverse regulatory changes with respect to ~~fund payroll expenses, rent~~the oil and ~~related costs. We~~gas industry we serve, Bitcoin, and classification of independent contractors as employees, any issues which could result in unfavorable outcomes of one or both of our ongoing lawsuits, continued service of key management and employees, and the availability of capital on acceptable terms when needed or at all, including as the result of the recent climate change initiatives and economic volatility. In addition, with respect to the Agora transaction and planned spin-off, Agora had ~~received funding under~~substantial difficulty clearing accounting comments with the ~~PPP,~~SEC Staff and never heard back from the office of chief accountant after several weeks. There can be no assurance that a ~~majority~~registration statement by Ecoark or HUMBL will be declared effective or clear comments, as the case may be, without which the spin-off of ~~that~~Agora or HUMBL stock cannot occur. Further, it is unclear when Ecoark shareholder approval will be required or if it will be obtained, and further Nasdaq may delist us as ~~indicated~~a result of our planned spin offs or acquisition activities. Further information on the risks and uncertainties affecting our business is contained in our ~~Consolidated Statement~~Annual Report on Form 10-K for the fiscal year ended March 31, 2022 under Part I. Item 1A. – Risk Factors. Further, with respect to Agora and its operations, Agora’s registration statement on Form S-1 (File No. 333-261246), as amended, sets forth additional risks and uncertainties specific to its business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of ~~Operations has been forgiven.~~new information, future events or otherwise.

Critical Accounting Policies, Estimates and Assumptions

The critical accounting policies listed below are those the Company deems most important to their operations.

Use of Estimates

Actual results could differ from those estimates.

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

●

Step 1: Identify the contract with the customer

●

Step 2: Identify the performance obligations in the contract

●

Step 3: Determine the transaction price

●

Step 4: Allocate the transaction price to the performance obligations in the contract

●

Step 5: Recognize revenue when the Company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

●

Variable consideration

●

Constraining estimates of variable consideration

●

The existence of a significant financing component in the contract

●

Noncash consideration

●

Consideration payable to a customer

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised service separately to a customer. The relative selling price for each performance obligation is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the promised service. In instances where the Company does not sell a service separately, establishing standalone selling price requires significant judgment. The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time. The Company recognizes revenue upon satisfaction of its performance obligation at either a point in time in accordance with ASC 606-10-25-30 for its contracts in its Oil and Gas ~~Properties~~and Financial Services segments or over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.

The Company ~~uses~~accounts for incremental costs of obtaining a contract with a customer and contract fulfillment costs in accordance with ASC 340-40, Other Assets and Deferred Costs. These costs should be capitalized and amortized as the ~~full cost method~~performance obligation is satisfied if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of ~~accounting for its investment~~obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in ~~oil~~satisfying a performance obligation in the future and ~~natural gas properties. Under~~ the ~~full cost method of accounting, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead~~ costs are ~~capitalized. General and administrative~~expected to be recovered. The Company recognizes the cost of sales of a contract as expense when incurred or when a performance obligation is satisfied. The incremental costs ~~related to production and general overhead~~of obtaining a contract are ~~expensed as incurred.~~capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies.

~~All capitalized costs~~Bitcoin Mining

For purposes of ~~oil~~the following discussion of Bitcoin mining accounting policies, reference to “the Company” refers to Agora. As stated earlier, Agora temporarily ceased Bitcoin mining on March 3, 2022 and ~~gas properties, including~~does not expect to resume its mining operations until the ~~estimated future costs~~price of Bitcoin rebounds and Agora has sufficient capital to ~~develop proved reserves,~~purchase state of the art miners. Currently, Agora management continues discussions with third party miners about some joint venture using Agora’s access to less expensive power.

As consideration for providing computing power, the Company receives Bitcoin from the mining pool in which it participates. Income from Bitcoin mining (mining earnings are ~~amortized~~made up of the baseline block reward and transaction fees, defined as “rewards”) which is measured based on the ~~unit~~fair value of ~~production method~~the Bitcoin received.

Providing computing power in Bitcoin transaction verification services (known as “mining”) is an output of the Company’s ordinary activities. The provision of computing power is the only performance obligation in the Company’s contracts with mining pool operators, its customers. The Company will recognize income from Bitcoin mining for the provision of computing power upon satisfaction of its performance obligation. As consideration for the provision of computing power, the Company is entitled to payment in Bitcoin, which is a form of noncash consideration. Noncash consideration is measured at fair value at contract inception. Fair value of the Bitcoin consideration is determined using ~~estimates~~the quoted price on the Company’s primary trading platform of ~~proved reserves. Disposition~~the Bitcoin at the beginning of ~~oil and gas properties are accounted for as a reduction~~the contract period, which is considered to be the beginning of ~~capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter~~each twenty-four-hour period (at contract inception). Specifically, fair value at contract inception is based on the ~~relationship between capitalized costs and proved reserves~~market price at the beginning of ~~oil and gas, in which case~~ the ~~gain or loss~~contract term, at the single Bitcoin level (one Bitcoin). This amount is recognized in ~~operations. Unproved properties and development projects~~revenue over the contract term as hash rate is provided. Changes in the fair value of the noncash consideration due to form of the consideration (changes in the market price of Bitcoin) are not ~~amortized until proved reserves~~included in the transaction price and hence are not included in revenue. Changes in fair value of the noncash consideration post-contract inception that are due to reasons other than form of consideration (other than changes in the market value of bitcoin) are measured based on the guidance on variable consideration, including the constraint on estimates of variable consideration.

Because the consideration to which the Company expects to be entitled for providing computing power is entirely variable, as well as being noncash consideration, the Company assesses the estimated amount of the variable noncash consideration to which it expects to be entitled for providing computing power at contract inception and subsequently, to determine when and to what extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty associated with the ~~projects~~variable consideration is subsequently resolved (the “constraint”). Only when significant revenue reversal is concluded probable of not occurring can estimated variable consideration be ~~determined or~~included in revenue. Based on evaluation of likelihood and magnitude of a reversal in applying the constraint, the estimated variable noncash consideration is constrained from inclusion in revenue until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the loss from operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

~~Limitation on Capitalized Costs~~

~~Under the full-cost method of accounting, we are required, at~~ the end of ~~each reporting period,~~the contract term, when the underlying uncertainties have been resolved and number of Bitcoin to ~~perform a test to determine~~which the ~~limit~~Company is entitled becomes known.

Bitcoins are recorded on the ~~book value~~consolidated balance sheet, as intangible asset — Bitcoin.

The Company has entered into a Bitcoin mining pool with the mining pool operator F2Pool, to provide computing power to the mining pool. The arrangement is terminable at any time by either party and the Company’s enforceable right to Bitcoin compensation only begins when the Company provides computing power to the mining pool operator.

The Company’s performance obligation extends over the contract term given the Company’s continuous provision of ~~our oil and gas properties (the “Ceiling” test). If~~hash rate. This period of time corresponds with the ~~capitalized costs~~period of ~~our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed~~service for which the ~~Ceiling,~~mining pool operator determines compensation due the excess or impairment is charged to expense. The expense may not be reversed in future periods, even though higher oil and gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of: (a) the present value, discounted at 10% and assuming continuation of existing economic conditions, of (1) estimated future gross revenues from proved reserves, which is computed using oil and gas prices determined as the unweighted arithmetic averageCompany. Given cancelation terms of the ~~first-day-of-the-month~~contracts, all contracts effectively provide the Company with the option to renew for successive contract terms of twenty-four hours. The options to renew are not material rights because they are offered at the standalone selling price of computing power. In exchange for ~~each month within~~providing computing power, the ~~12-month hedging arrangements pursuant~~Company is entitled to ~~Staff Accounting Bulletin (“SAB”~~consideration equal to a fractional share of the fixed Bitcoin reward the mining pool operator receives (referred to as a “block reward”) ~~103, less (2) estimated future expenditures (based~~after such amount has been reduced by a digital asset transaction fee retained by the mining pool operator, and potentially network transaction fees. The Company’s fractional share is based on ~~current costs) to be incurred in developing and producing~~ the ~~proved reserves; plus, (b)~~proportion of computing power the ~~cost of properties being amortized; plus, (c) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; net of (d) the related tax effects related~~Company contributed to the ~~difference between~~mining pool operator to the ~~book~~total computing power contributed by all mining pool participants in solving the current algorithm, over the contract term. The Company is entitled to compensation for providing computing power to a mining pool even if a block is not successfully placed. The block reward provides an incentive for Bitcoin miners to process transactions made with the cryptocurrency. Creating an immutable record of these transactions is vital for the cryptocurrency to work as intended. The blockchain is like a decentralized bank ledger, one that cannot be altered after being created. The miners are needed to verify the transactions and ~~tax basis of our oil~~keep this ledger up to date. Block rewards, and ~~natural gas properties.~~to a lesser extent, network transaction fees, are their payment for doing so.

~~Oil and Gas Reserves~~

Reserve engineering is a subjective process that is dependent upon the quality of available data and interpretation thereof, including evaluations and extrapolations of well flow rates and reservoir pressure. Estimates by different engineers often vary sometimes significantly. In addition, physical factors such as results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Because proved reserves are required to be estimated using recent prices of the evaluation, estimated reserve quantities can be significantly impacted by changes in product prices.

~~Inventories~~

~~Accounting for Asset Retirement Obligation~~

~~Revenue Recognition~~The terms of the agreement with the mining pool operator provide that neither party can dispute settlement terms after thirty-five days following settlement.

~~The~~For the mining pool in which the Company ~~accounts for revenue in accordance with ASC Topic 606,~~ ~~Revenue from Contracts with Customers~~.participates, the Company is entitled to a transaction price calculated by the Company’s mining pool operator. Specifically, the mining pool operator determines the amount of block rewards to which the Company is entitled by using the Pay-Per-Shares-Plus (PPS+) payment method, retaining 2.5% to cover costs of operating the pool (the “digital asset transaction fee”), and includes network transaction fees as applicable. When the Company’s number of Bitcoin reaches the minimum threshold of 0.005 Bitcoin, the Company receives a payout and the pool transfers the cryptocurrency consideration to the Company’s designated wallet within 8 hours, between 00:00 and 08:00 UTC.

The ~~Company accounts~~PPS+ payment method pays miners for ~~a contract when it has been approved and committed~~the number of shares they contribute to ~~each party’s rights regarding~~ the ~~goods or services~~pool (effectively, the amount of computing power provided to ~~be transferred have been identified,~~ the payment terms have been identified, the contract has commercial substance, and collectability is probable. Revenue is generally recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.

~~Revenue recognition for multiple-element arrangements requires judgment to determine if multiple elements exist, whether elements~~pool) plus network transaction fees. Shares can be ~~accounted for~~described as ~~separate units~~discrete amounts of ~~accounting,~~valid work each miner or mining farm contributes to the pool. The value of each share contributed is determined by the Bitcoin’s current network difficulty and the number of total shares contributed from miners and mining farms. Bitcoin rewards are received regardless if ~~so,~~a pool successfully finds a block because the ~~fair value for each of~~mining pool operator understands that, probabilistically, blocks will be successfully found in a statistically predictable manner by the ~~elements.~~

~~Revenue from software license agreements of Zest Labs is recognized over time or at a point in time~~pool depending on the ~~evaluation~~total amount of ~~when~~hashing power (shares) contributed by the ~~customer obtains control of~~miners and mining farms and therefore, pays out as if a block was found. This is a strategy that provides regular payments to miners and allows consistent payouts.

Network transaction fees, however, are paid out based on blocks actually found and solved and therefore the ~~promised goods or services over the term of the agreement. For agreements where the software requires continuous updates to provide the intended functionality,~~network transaction fee revenue is ~~recognized over~~not consistently paid out. We expect that network transaction fees will be a very small contributor to total miner Bitcoin rewards.

The Company’s cost of Bitcoin revenue consists primarily of direct costs of earning the ~~term of the agreement. For software as a service (“SaaS”) contracts that include multiple performance obligations,~~Bitcoins related to mining operations, namely electric power costs, other utilities, labor, insurance whether incurred directly from self-mining operations or reimbursed, including ~~hardware, perpetual software licenses, subscriptions, term licenses, maintenance~~any revenue sharing arrangements under hosting agreements, but excluding depreciation and other services, the Company allocates revenue to each performance obligation based on estimates of the price that would be charged to the customer for each promised product or service if it were sold on a standalone basis. For contracts for new products and services where standalone pricing has not been established, the Company allocates revenue to each performance obligation based on estimates using the adjusted market assessment approach, the expected cost plus a margin approach or the residual approach as appropriate under the circumstances. Contractsamortization, which are ~~typically on thirty-day payment terms from when the Company satisfies the performance obligation~~separately stated in the ~~contract.~~Company’s Consolidated Statement of Operations.

The Company recognizes revenue for their proportionate share of revenue ~~under ASC 606~~ when: (i) the Company receives notification of the successful sale of a load of crude oil to a buyer; (ii) the buyer will provide a price based on the average monthly price of crude oil in the most recent month; and (iii) cash is received the following month from the crude oil buyer.

~~The Company will recognize income from digital currency mining from the provision of transaction services within digital currency networks, commonly termed “cryptocurrency mining”.~~ As consideration for those services, the Company will receive digital currency from each specific network in which it participates (“coins”). Income from digital currency mining is measured based on the fair value of the coins received. The fair value is determined using the spot price of the coin on the date of receipt. The coins are recorded on the consolidated balance sheet, as intangible asset – digital currency, at their fair value less costs to sell and re-measured each reporting date, if not sooner. Revaluation gains or losses onstated earlier, with the sale of ~~coins for traditional (fiat) currencies will be included in~~White River, the ~~consolidated statements of operations.~~Company no longer has any oil wells.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of such computing power is the only performance obligation on the Company in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the reward from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time the revenue is recognized. There is no significant financing component in these transactions.

~~Fair Value Measurements~~Revenue under master service agreements is recorded upon the performance obligation being satisfied. Typically, the satisfaction of the performance obligation occurs upon the frac sand load being delivered to the customer site and this load being successfully invoiced and accepted by the Company’s factoring agent.

~~ASC 820~~ ~~Fair Value Measurements~~Bitcoin defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

~~Level 1 inputs: Quoted prices for identical instruments in active markets.~~

~~Level 3 inputs: Instruments with primarily unobservable value drivers.~~

~~Digital assets will consist of cryptocurrency denominated assets and will be~~Bitcoin is included in noncurrent assets. Digital assets will be carried at their fair value determined by the spot rate less costs to sell. The digital asset market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s earnings and financial position. Fair value will be determined by taking the price of the coins from the exchanges which the Company most frequently uses.

~~Digital Assets~~

~~Digital currencies will be included in non-current~~current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. ~~Digital assets are~~Bitcoin is recorded at cost less impairment.

The Company accounts for its ~~digital assets~~Bitcoins as indefinite-lived intangible assets in accordance with ~~ASC 350.~~Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair ~~value, which is measured using~~value. The Company determines the ~~quoted price of the digital currency at the time its~~ fair value ~~is being measured. In testing for impairment,~~of its Bitcoins on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active trading platform that the Company has determined is its principal market for Bitcoin (Level 1 inputs). The Company performs an analysis each day, comparing the ~~option to first perform~~carrying amount of the Company’s Bitcoin with their fair value based on the lowest market price that day at the single Bitcoin level (one bitcoin). The excess, if any, represents a ~~qualitative assessment to determine whether It is more likely than not that an~~recognized impairment ~~exists. If it is determined that it is not more likely than not that an~~loss. Impairment losses are recorded in the line item “Bitcoin impairment ~~exists, a quantitative impairment test is not necessary. If~~losses” in the ~~Company concludes otherwise, it is required to perform a quantitative impairment test.~~ Company’s Consolidated Statements of Operations.

To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.

~~The~~ Bitcoin awarded to the Company ~~determines the fair value of~~through its ~~Bitcoin on a nonrecurring basis in accordance with ASC 820, based on quoted (unadjusted) prices~~mining activities are included as an adjustment to reconcile net loss to cash provided by (or used in) operating activities on the active exchange that the Company has determined is its principal market for Bitcoin (Level 1 inputs). The Company performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices on the active exchange, indicate that it is more likely than not that any of the assets are impaired. In determining if an impairment has occurred, the Company considers the lowest price of one Bitcoin quoted on the active exchange at any time since acquiring the specific Bitcoin held by the Company. If the carrying value of a Bitcoin exceeds that lowest price, an impairment loss has occurred with respect to that Bitcoin in the amount equal to the difference between its carrying value and such lowest price.

~~Impairment losses are recognized as “Digital asset impairment losses” in the Company’s~~accompanying Consolidated Statements of ~~Operations~~Cash Flows. The sales (if any) of Bitcoin are included within investing activities in the ~~period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time~~accompanying Consolidated Statements of ~~impairment~~Cash Flows and ~~this new cost basis will not be adjusted upward for~~ any ~~subsequent increase in fair value. Gains~~realized gains or losses (if any) from such sales are ~~not recorded until realized upon sale, at which point they would be presented net of any impairment losses~~included in operating income in the Company’s Consolidated Statement of Operations. ~~In determining~~The Company accounts for sales of Bitcoins in accordance with the ~~gain to be recognized upon sale, the Company calculates the difference between the sales price and the carrying value~~first in first out (FIFO) method of ~~the specific Bitcoin sold immediately prior to sale.~~accounting.

~~Any impairment~~Impairment losses related to ~~digital assets are~~Bitcoin is included in the ~~Digital Assets~~Bitcoin Mining segment.

~~Impairment of Long-lived Assets~~Fair Value Measurements

~~Management reviews long-lived assets~~ASC 820 Fair Value Measurements defines fair value, establishes a framework for ~~impairment whenever events~~measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

Level 1 inputs: Quoted prices for identical instruments in active markets.

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or ~~changes~~similar instruments in ~~circumstances indicate~~markets that ~~the~~are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 inputs: Instruments with primarily unobservable value drivers.

The carrying ~~amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison~~values of the ~~carrying amount of an asset to undiscounted future~~Company’s financial instruments such as cash, ~~flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount~~accounts payable, and accrued expenses approximate their respective fair values because of the short-term nature of those financial instruments.

Bitcoin will consist of Bitcoin assets ~~exceeds~~and will be presented in current assets. Fair value will be determined by taking the ~~fair value~~price of the ~~assets.~~coins from the trading platforms which Agora will most frequently use.

Segment Information

The Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. The Company and its chief operating decision makers determined that the Company’s operations effective with the May 31, 2019, acquisition of Trend Holdings and the March 27, 2020 acquisition of Banner Midstream ~~now consist~~consisted of three segments, ~~Agora (Finance), Banner Midstream (Commodities)~~Financial, Commodities and ~~Zest Labs (Technology).~~Technology. Effective July 1, 2021, the Company’s chief operating decision makers in discussion with the finance team determined that the Company would add a fourth reporting segment to account for their ~~Digital Asset~~Bitcoin mining business. Additionally, ~~effective~~ on July 1, 2021 the Company ~~will report~~now reports its home office costs into the Commodity segment, ~~charge~~and charged its Technology segment a monthly overhead fee, and has recorded typical overhead expenses in their ~~Finance and Digital Asset~~Bitcoin Mining segments to account for this home office allocation. The Company classified their reporting segments in these three divisions through March 31, 2022, when the Company determined that pursuant to ASC 205-20-45-1E that the operations related to the Financial Services segment would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. As a result of this reclassification, the Company’s segment reporting has removed the Financing segment for the three months ended June 30, 2021. Effective April 1, 2022, the Company has classified their segments in the Commodity Segment, Technology Segment and Bitcoin Mining Segment. They now charge a monthly overhead charge to the Technology Segment and to the Transportation component and Oil and Gas Production component (each part of the Commodities Segment).

On July 25, 2022, the Company entered into an agreement to sell their oil and gas production business (White River) which is part of the Commodities segment. The Company determined that pursuant to ASC 205-20-45-1E that the operations related to the oil and gas production business would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of July 22, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the three months ended June 30, 2022.

Derivative Financial Instruments

The Company does not currently use derivative instruments to hedge exposures to cash flow, market, or foreign currency ~~risks.~~risks, but may explore hedging oil prices in the current fiscal year. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is ~~re-measured~~remeasured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities.

Recently Issued Accounting Standards

In May 2021, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company ~~is currently evaluating the~~does not believe this new guidance will have a material impact ~~of this standard~~ on its consolidated financial statements.

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

~~Production Data – Nine and Three Months Ended December 31, 2021~~

~~The following tables set forth our production data for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended December 31,
2021 2020
Bbls Bbls
Gross Net Gross Net
Production Data:
By State/County
Mississippi
Holmes 1,657 1,243 - -
Amite 9,540 7,621 9,963 7,956
Wilkinson 10,576 8,197 7,565 6,046
Pike 1,192 923 481 391
22,965 17,984 18,009 14,393

Louisiana
Catahoula 4,871 3,649 2,711 2,159
Concordia 6,463 3,039 4,592 2,105
Tensas 2,627 1,970 1,737 1,291
Lasalle 609 330 887 480
Avoyelles 37,976
25,858
2,204 1,668
52,546 34,847 12,132 7,703

Total 75,511 52,830 30,141 22,096

~~The following tables set forth our production data for the three months ended December 31, 2021 and 2020:~~

Three Months Ended December 31,
2021 2020
Bbls Bbls
Gross Net Gross Net
Production Data:
By State/County
Mississippi
Holmes 1,518 1,139 - -
Amite 3,357 2,694 4,011 3,207
Wilkinson 3,086 2,392 2,710 2,169
Pike 433 339 368 299
8,395 6,563 7,089 5,674

Louisiana
Catahoula 1,626 1,439 1,224 955
Concordia 3,044 1,379 2,070 987
Tensas 941 705 578 429
Lasalle - - 315 171
Avoyelles 7,269 4,980 701 531
12,880 8,504 4,888 3,073

Total 21,275 15,067 11,977 8,747

~~RESULTS OF OPERATIONS FOR CONTINUING OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2021 AND 2020~~

~~Revenues~~

~~The following table shows revenues for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Oil and Gas Operations $ 4,585 $ 1,317
Transportation Services and Other Revenue 14,000 8,380
Financial Segment 523 359
Digital Asset Segment 17 -
Technology Segment - -
Total $ 19,125 $ 10,056

~~Oil, Natural Gas and Natural Gas Liquids Revenues.~~ ~~Our revenues are a function of oil production volumes sold and average sales prices received for those volumes.~~

Nine Months Ended
December 31,
2021 2020
Revenues:
Oil and natural gas sales, net of taxes $ 4,766 $ 1,316
Other 35 -
Total revenues $ 4,801 $ 1,316

Our oil revenues for the nine months ended December 31, 2021 increased by $3,450, or 262%, to $4,766 from $1,316 as compared to the nine months ended December 31, 2020. There was an increase in revenue for the three months ended December 31, 2021 versus the three months ended September 30, 2021 due to higher average oil prices in the three months ended December 31, 2021, offset by slower production in our main producing well.

The increase in oil production during the nine months ended December 31, 2021 as compared to the same period in 2020 resulted in $1,959 of the total increase due to more wells operational in 2021 versus 2020. The remaining revenue increase of $1,491 was due to an increase in oil prices during the nine months ended December 31, 2021 as compared to the same period in 2020.

Average daily production sold increased by 92 barrels of oil per day (“BOPD”) to 199 BOPD during the nine months ended December 31, 2021 from 107 BOPD during the nine months ended December 31, 2020.

~~Cost of Revenues and Gross Profit~~

~~The following table shows costs of revenues for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Total $ 10,693 $ 6,644

The increase in cost of revenue was primarily due to increased owner operator and fuel expenses of $10,094 for the nine months ended December 31, 2021 compared to $5,865 for the nine months ended December 31, 2020.

~~Operating Expenses~~

~~The following table shows operating expenses by segment for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Segment
Commodity segment $ 15,960 $ 10,861
Technology segment 2,468 2,541
Digital Assets Segment 3,715 -
Financial Segment 686 331
Total $ 22,829 $ 13,733

~~The following table shows operating expenses for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Operating Expenses
Salaries and salaries related costs $ 8,316 $ 5,001
Professional and consulting fees 906 652
Oilfield supplies and repairs 2,262 1,518
Selling, general and administrative costs 9,005 4,799
Depreciation, amortization, depletion, and accretion 2,340 1,133
Research and development - 630
$ 22,829 $ 13,733

~~Selling, General and Administrative~~

~~The following table shows selling, general and administrative expenses for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Selling, general and administrative costs
Capital Raising Costs $ 2,130 $ 773
Insurance 2,346 839
Legal/Audit/Accounting expenses 1,071 1,116
Factoring expenses 319 214
Equipment Rental 283 38
Development Costs 105 -
Other 2,751 1,819
$ 9,005 $ 4,799

~~Insurance expense for nine months ended December 31, 2020 included a one-time adjustment in commodity segment.~~

~~Depreciation, Amortization, Depletion and Accretion~~

~~The following table shows depreciation, amortization, depletion and accretion expenses for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Depletion of proved oil and natural gas properties $ 934 $ 380
Depletion of drilled wells 510 -
Depreciation of sand frac transportation equipment 344 324
Depreciation of midstream assets 8 1
Depreciation of technology segment assets 143 188
Depreciation of Bitstream mining assets 21 -
Amortization of intangible assets 262 214
Asset retirement obligation accretion 118 26
Depreciation, depletion and amortization expense $ 2,340 $ 1,133

The increase in depletion of proved oil and natural gas properties of $554 for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020 is primarily due to full nine months of operations in 2021 compared to less than seven months in 2020. Increase in depletion of drilled wells due to completion of Deshotel #24 well in March 2021.

~~Research and Development~~

Research and development expense decreased from $630 in the nine months ended December 31, 2020 to zero in the nine months ended December 31, 2021. The $630 reduction in costs is due to the completion of the development of the Zest Labs freshness solutions.

~~Other Income (Expense)~~

~~The following table shows other income (expense) for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Change in fair value of derivative liabilities $ 15,295 $ (15,901 )
Gain (loss) on exchange of warrants for common stock - 19,338
Loss on conversion of long-term debt and accrued expenses - (3,969 )
Gain (loss) on disposal of fixed assets - (105 )
Loss on abandonment of oil and gas property - (83 )
Gain on disposal of ARO related to sale of oil and gas property 8 -
Gain on sale of oil and gas property 713 -
Forgiveness of debt - 1,850
Interest expense, net of interest income (636 ) (2,473 )
Other income (expense) $ 15,380 $ (1,343 )

Change in fair value of derivative liabilities for the nine months ended December 31, 2021 was a non-cash gain as compared to a non-cash loss for the nine months ended December 31, 2020. The $31,196 increase was a result of the fluctuation in the stock price at December 31, 2021 compared to December 31, 2020.

There was a gain in the period ended December 31, 2020 from the extinguishment of the derivative liabilities that when converted to shares of common stock of $19,338. In addition, in the period ended December 31, 2020, there was a loss on the conversion of debt and other liabilities to shares of common stock of $3,969.

Interest expense, net of interest income, for the nine months ended December 31, 2020 was the result of the interest incurred on the debt assumed in the Banner Midstream acquisition, the amortization of debt discount of $149 as well as the value related to the granting of warrants for interest of $1,265. For the nine months ended December 31, 2021, value related to the granting of warrants for interest was $545.

~~Oil, Natural Gas and Natural Gas Liquids Costs and Expenses~~

Nine Months Ended
December 31,
2021 2020
Costs and expenses (income):
Production $ 407 $ 516
Exploration, abandonment, and impairment 397 8
Oilfield supplies and repairs 1,517 1,423
Oil & Gas production taxes 162 106
General and administrative 1,552 3,245
Depreciation and amortization 25 115
Depletion 1,445 380
Accretion 118 26
Gain on sale of oil and gas property (721 ) -
Loss on abandonment of oil and gas property - 82

~~Net Income (loss)~~

~~The following table shows net income (loss) for the nine months ended December 31, 2021 and 2020:~~

Nine Months Ended
December 31,
2021 2020
Commodities Segment $ 6,117 $ (9,309 )
Financial Segment 54 54
Digital Assets Segment (3,819 ) -
Technology Segment (1,369 ) (2,409 )
Net Income (loss) $ 983 $ (11,664 )

Net income from continuing operations for the nine months ended December 31, 2021 increased primarily due to the non-cash changes in the fair value of the derivative liability of $15,295 and the non-cash losses incurred on the conversion of debt and expense to equity in the nine months ended December 31, 2020 of $3,969, offset by the non-cash gain on the exchange of warrants for common stock in the nine months ended December 31, 2020 of $19,338.

~~RESULTS OF OPERATIONS FOR CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020~~

~~Revenues~~

~~The following table shows revenues for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Oil and Gas Operations $ 1,748 $ 641
Transportation Services and Other Revenue 4,195 3,659
Financial Segment 175 165
BTC Mining 17 -
Technology Segment - -
Total $ 6,135 $ 4,465

~~Oil, Natural Gas and Natural Gas Liquids Revenues.~~ ~~Our revenues are a function of oil production volumes sold and average sales prices received for those volumes.~~

Three Months Ended
December 31,
2021 2020
Revenues:
Oil and natural gas sales, net of taxes $ 1,957 $ 640
Other - -
Total revenues $ 1,957 $ 640

Our oil revenues for the three months ended December 31, 2021 increased by $1,317, or 206%, to $1,957 from $640 during the three months ended December 31, 2020. The increase in oil production during the three months ended December 31, 2021 as compared to the same period in 2020 resulted in $782 of the total increase due to more wells operational in 2021 versus 2020. The remaining revenue increase of $535 was due to an increase in oil prices during the three months ended December 31, 2021 as compared to the same period in 2020.

Average daily production sold increased by 71 barrels of oil per day (“BOPD”) to 163 BOPD during the three months ended December 31, 2021 from 92 BOPD during the three months ended December 31, 2020.

~~Cost of Revenues and Gross Profit~~

~~The following table shows costs of revenues for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Total $ 3,527 $ 3,218

The increase in cost of revenue was primarily due to increased owner operator and fuel expenses of $3,367 for the three months ended December 31, 2021 compared to $2,733 for the three months ended December 31, 2020.

~~Operating Expenses~~

~~The following table shows operating expenses by segment for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Segment
Commodity segment $ 4,803 $ 4,412
Technology segment 764 934
Digital Assets segment 3,307 -
Financial segment 415 137
Total $ 9,289 $ 5,483

~~The following table shows operating expenses for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Operating Expenses
Salaries and salaries related costs $ 4,478 $ 1,384
Professional and consulting fees 524 154
Oilfield supplies and repairs 1,062 644
Selling, general and administrative costs 2,623 2,528
Depreciation, amortization, depletion, and accretion 602 509
Research and development - 264
$ 9,289 $ 5,483

~~Selling, General and Administrative~~

~~The following table shows selling, general and administrative expenses for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Selling, general and administrative costs
Capital Raising Costs $ 4 $ 773
Insurance 820 552
Legal/Audit/Accounting expenses 424 407
Factoring expenses 98 135
Equipment Rental 124 4
Development Costs 105 -
Other 1,048 657
$ 2,623 $ 2,528

~~Depreciation, Amortization, Depletion and Accretion~~

~~The following table shows depreciation, amortization, depletion and accretion expenses for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Depletion of proved oil and natural gas properties $ 212 $ 255
Depletion of drilled wells 92 -
Depreciation of sand frac transportation equipment 117 110
Depreciation of technology segment assets 32 62
Depreciation of Bitstream mining assets 21 -
Amortization of intangible assets 88 72
Asset retirement obligation accretion 40 10
Depreciation, depletion and amortization expense $ 602 $ 509

The decrease in depletion of proved oil and natural gas properties of $43 for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020 is primarily due to an adjustment of projected lifetime production at wells purchased in August 2020, offset by additional wells being depleted. Increase in depletion of drilled wells was due to completion of Deshotel #24 well in March 2021.

~~Research and Development~~

Research and development expense decreased from $264 in the three months ended December 31, 2020 to zero in the three months ended December 31, 2021. The $264 reduction in costs is due to the completion of the development of the Zest Labs freshness solutions.

~~Other Income (Expense)~~

~~The following table shows other income (expense) for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Change in fair value of derivative liabilities $ 10,979 $ 481
Gain (loss) on exchange of warrants for common stock - 2,755
Loss on conversion of long-term debt and accrued expenses - -
Gain on disposal of ARO related to sale of oil and gas property - -
Gain on sale of oil and gas property - -
Forgiveness of debt - 1,850
Interest expense, net of interest income (19 ) (318 )
Other income (expense) $ 10,960 $ 4,768

Change in fair value of derivative liabilities for the three months ended December 31, 2021 was a non-cash gain, same as for the three months ended December 31, 2020. The $10,498 increase was a result of the fluctuation in the stock price at December 31, 2021 compared to December 31, 2020 as well as issuance of warrants August 2021

There was a gain in the period ended December 31, 2020 from the extinguishment of the derivative liabilities that when converted to shares of common stock of $2,755. In addition, in the period ended December 31, 2020, there was a loss on the conversion of debt and other liabilities to shares of common stock of $1,775.

Interest expense, net of interest income, for the three months ended December 31, 2020 was the result of the interest incurred on the debt assumed in the Banner Midstream acquisition, the amortization of debt discount of $149 as well as the value related to the granting of warrants for interest of $1,265. For the three months ended December 31, 2021, value related to the granting of warrants for interest was $0.

~~Oil, Natural Gas and Natural Gas Liquids Costs and Expenses~~

Three Months Ended
December 31,
2021 2020
Costs and expenses (income):
Production $ 128 $ 352
Exploration, abandonment, and impairment - 8
Oilfield supplies and repairs 750 630
Oil & Gas production taxes 83 47
General and administrative 624 1,099
Depreciation and amortization 9 110
Depletion 305 254
Accretion 40 10
Gain on sale of oil and gas property - -
Loss on abandonment of oil and gas property - -

~~Net Income (loss)~~

~~The following table shows net income (loss) for the three months ended December 31, 2021 and 2020:~~

Three Months Ended
December 31,
2021 2020
Commodities Segment $ 8,697 $ 439
Financial Segment (243 ) 194
Digital Assets Segment (3,411 ) -
Technology Segment (764 ) (101 )
Net Income (loss) $ 4,279 $ 532

Net income from continuing operations for the three months ended December 31, 2021 increased primarily due to the non-cash changes in the fair value of the derivative liability and the non-cash gain on the exchange of warrants for common stock in the three months ended December 31, 2021 and 2020, offset by the non-cash losses incurred on the conversion of debt and expense to equity in the three months ended December 31, 2020.

~~LIQUIDITY AND CAPITAL RESOURCES~~

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

Net cash used in operating activities was ($8,420) for the nine months ended December 31, 2021, as compared to net cash used in operating activities of ($7,737) for the nine months ended December 31, 2020. Cash used in operating activities is related to the Company’s net income (loss) partially offset by non-cash expenses, including share-based compensation and the change in the fair value of the derivative liability and net losses incurred in the conversion of debt and liabilities to shares of common stock as well as losses on the sale of fixed assets and abandonment of oil and gas properties.

Net cash provided by (used in) investing activities was $(9,387) for the nine months ended December 31, 2021, as compared to ($3,808) net cash used in investing activities for the nine months ended December 31, 2020. Net cash used in investing activities in 2021 related to the purchase of fixed assets of ($7,085), payment for power development costs of ($2,000) and oil and gas properties of $(304), offset by sale of fixed assets of $2. For the nine months ended December 31, 2020, the cash used in investing activities related to advancement of a note receivable of ($275), and the net purchases of fixed assets and oil and gas properties including drilling costs of $(3,533).

Net cash provided (used) in financing activities for the nine months ended December 31, 2021 was $17,355 that included $19,230 of proceeds from issuance of common stock and warrants, net of fees, and $28 in proceeds received from the exercise of stock options, offset by $1,805 in repayments of debt. This compared with the cash provided by financing activities in the nine months ended December 31, 2020 of $19,120 that included $14,359 from the exercise of warrants, $349 from the exercise of stock options, $2,473 from proceeds received from debt form related and non-related parties, $7,666 from issuance of common stock, net of fees offset by ($5,320) from payments on debt to both related and non-related parties and ($316) in payments to prior owners.

On August 6, 2021, the Company closed a registered direct offering (the “Offering”) of 3,478 shares of the Company’s common stock and warrants to purchase 3,478 shares of common stock (the “Warrants”) to institutional investors at a purchase price per share and accompanying Warrant of $5.75 and received net proceeds of approximately $18,249 after deducting fees payable to the placement agent and offering expenses payable by the Company. We have spent and will continue to spend a majority of the net proceeds from this offering to pay the expenses and equipment related to our digital asset mining operation and a portion of the proceeds will continue to be spent on new drilling projects as previously announced. Additionally, approximately $1,000 will be used to fund new intellectual property litigation legal fees and filings.

~~The Warrants have an exercise price equal to $5.75 per share and will expire April 8, 2025.~~

At December 31, 2021 we had cash (including restricted cash) of $864 and $205 as of February 10, 2022 from continuing operations. We had a working capital deficit of $6,020 and $11,845 as of December 31, 2021 and March 31, 2021, respectively. The decrease in the working capital deficit is the result of the non-cash change in the fair value of the derivative liabilities and repayments of long-term debt offset by the net changes in accounts payable and accrued expenses.

~~The Company has adequate capital resources to meet its cash requirements during the next 12 months.~~

We expect that in the long term the revenue generating operations in our Commodities segment will continue to improve the liquidity of the Company moving forward. The Company’s capital program for production enhancement and development is expected to be significantly focused on exploiting legacy acreage positions that are economically viable at today’s oil prices. We anticipate that management’s focus on legacy acreage enhancement and development will positively benefit the balance sheet by producing hydrocarbons during a time of increasing demand after the negative impacts of COVID-19.

The amount and timing of our capital expenditures are largely discretionary and within our control. We could choose to defer a portion of these planned capital expenditures depending on a variety of factors, including but not limited to the success of our drilling activities, prevailing and anticipated prices for oil, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners. We currently continue to execute on our strategy to reinvest cash flow from operations to enhance, develop and increase oil production, strengthening our balance sheet. We intend to continue monitoring commodity prices and overall market conditions and can adjust capital deployment in response to changes in commodity prices and overall market conditions.

We monitor and adjust our projected capital expenditures for our operations in response to the results of our drilling activities, changes in prices, availability of financing, drilling and acquisition costs, industry conditions, the timing of regulatory approvals, the availability of rigs, contractual obligations, internally generated cash flow and other factors both within and outside our control. If we require additional capital, we may seek such capital through traditional reserve base borrowings, joint venture partnerships, production payment financing, asset sales, offerings of debt and/or equity securities or other means. There is no assurance that the needed capital will be available on acceptable terms or at all. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our drilling programs, which could result in a loss of acreage through lease expirations. In addition, we may not be able to complete acquisitions that may be favorable to us or finance the capital.

~~Bitstream Expenditures~~

As of February 10, 2022, the Company has paid unaffiliated third parties a total of $4,755 and is obligated to pay certain of these third parties an additional $8,686 in connection with Bitstream and the establishment of its cryptocurrency mining facilities and operations. Depending upon the availability of capital, Bitstream may spend material additional sums.

~~Contractual Obligations~~

Our contractual obligations are included in our Notes to the Unaudited Condensed Consolidated Financial Statements. To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.

~~Off-Balance Sheet Arrangements~~

~~As of December 31, 2021 and March 31, 2021, we had no off-balance sheet arrangements.~~

~~Cautionary Note Regarding Forward Looking Statements~~

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the expected revenues from existing and new drilling projects in our oil and gas operations, plans and prospects for our new digital assets mining business including developing mining facilities and delivery of related infrastructure, power and equipment, increasing the electric power supply for our cryptocurrency mining operations, our planned participation in ERCOT and ability to sell power at favorable margins during shortages, the use and benefits of immersion cooling technology for our cryptocurrency mining operations, prospective future litigation, the initial public offering and uplisting of Agora’s securities and our anticipated stock dividend involving Agora common stock thereafter, regulatory changes in the oil and gas industry, our capital program for production enhancement and development, the potential acquisition of a broker-dealer, our anticipated capital expenditures, and future liquidity. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include, among other things, volatility of oil and Bitcoin prices, the risks arising from the new impact of the COVID-19 pandemic, including its future effect on the U.S. and global economies including the oil and gas and cryptocurrency markets, competition, government regulation or action, the costs and results of drilling and cryptocurrency mining activities, risks inherent in drilling operations, availability of equipment, services, resources and personnel required to conduct operating activities, ability to replace reserves and uncertainties related to reserve estimates, contingencies in our development of cryptocurrency mining facilities in West Texas including the need for sufficient land and energy and regulatory approvals and uncertainties related to ongoing litigation, risks related to potential impact of natural disasters, any delays or difficulties in the completion of the initial public offering and uplisting of Agora securities or our planned distribution of Agora common stock thereafter, including delays or challenges in obtaining the requisite approvals, risks and uncertainties related to the new digital asset mining business, and cybersecurity risks. Further information on our risk factors is contained in our filings with the SEC, including our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2021 filed on November 10, 2021, our Annual Report on Form 10-K for the year ended March 31, 2021 filed on June 30, 2021 and our prospectus supplement dated August 4, 2021. Further, with respect to Agora and its subsidiaries, Agora’s registration statement on Form S-1 (File No. 333-261246) sets forth additional risks and uncertainties specific to its business after giving effect to its initial public offering and related transactions and events more particularly described therein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, our principal executive and financial officers have concluded that as of the end of the period covered by this report the Company’s disclosure controls and procedures were effective.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no material changes in our internal control over financial reporting that occurred during the fiscal quarter ended ~~December 31, 2021~~June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other than discussed below, during the period covered by this report, there were no material developments in the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended March 31, ~~2021.~~2022.

●

As previously disclosed, on August 1, 2018, Ecoark Holdings, Inc. and Zest Labs, Inc. filed a complaint against Walmart Inc. in the United States District Court for the Eastern District of Arkansas, Western Division. The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the Federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. On April 9, 2021, a Little Rock, Arkansas jury awarded Ecoark and Zest a total of $115 million in damages which includes $65 million in compensatory damages and $50 million in punitive damages and found Walmart Inc. liable on three claims. The federal jury found that Walmart Inc. misappropriated Zest’s trade secrets, failed to comply with a written contract, and acted willfully and maliciously in misappropriating Zest’s trade secrets. We expect Walmart to continue to vigorously defend the litigation and to oppose the verdict in post-trial motions and an appeal. The Company has filed post-trial motions to add an award for their attorneys’ fees as the prevailing party in the litigation. In addition to other post-trial motions, Walmart, Inc. has filed a renewed motion for judgment as a matter of law or, in the alternative, for remittitur or a new trial. As of the date of this Report, the court has not ruled on any of the post-trial motions.

●

On September 21, 2021, Ecoark Holdings, Inc. and Zest Labs, Inc. filed a complaint against Deloitte Consulting, LLP (“Deloitte”) in the Eight Judicial District Court in Clark County, Nevada. The complaint alleges violation of the Nevada Uniform Trade Secret Act and in addition to compensatory damages will also be seeking a preliminary and permanent injunction, attorney’s fees, and punitive damages. The damages at issue are in the hundreds of millions of dollars. Zest Labs, Inc. began working with Deloitte in 2016, in a confidential matter in a pilot program that Zest Labs, Inc. had been engaged for by a large customer. Zest Labs, Inc. engaged in significant discussions, presentations, demonstrations, and information downloads with Deloitte who specifically acknowledged that this information was confidential. This complaint is in the very early stages, with motions filed on both sides and an initial hearing set for March 8, 2022. The Company cannot reasonably determine the outcome and potential reward at this time.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. Investors should review the risk factors described in our ~~Quarterly Report on Form 10-Q for the six months ended September 30, 2021 filed on November 10, 2021, in addition to those disclosed in our~~ Annual Report on Form 10-K for the year ended March 31, ~~2021 filed on June 30, 2021.~~2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Incorporated by Reference
Filed or
Furnished

Exhibit No. Exhibit Description Form Date Number Herewith
3.1(a) Articles of Incorporation, as amended 10-Q 2/12/21 3.1
3.1(b) Certificate of Amendment to Articles of Incorporation 8-K 10/12/21 3.1
3.2(a) Amended and Restated Bylaws 8-K 4/28/17 3.1
3.2(b) Amendment to Bylaws 8-K 8/30/21 3.1
4.1 Form of Warrant 8-K 8/5/21 4.1
4.2 Form of Placement Agent Warrant 8-K 8/5/21 4.2
10.1 Restricted Stock Unit Agreement, dated October 6, 2021, between the Company and Peter Mehring** 8-K 10/12/21 10.1
10.2 Peter Mehring Consulting Agreement
8-K

2/4/22

10.1

31.1 Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 Filed
31.2 Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 Filed
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished*
32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished*
101.INS Inline XBRL Instance Document. Filed
101.SCH Inline XBRL Taxonomy Extension Schema Document. Filed
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. Filed
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). Filed

		Incorporated by Reference			Filed or Furnished
Exhibit No.	Exhibit Description	Form	Date	Number	Herewith
2.1	Agreement and Plan of Merger between the Company and Trend Holdings, dated May 31, 2019	8-K	6/6/19	2.1
2.2	Stock Purchase and Sale Agreement, dated March 27, 2020, by and between the Company and Banner Energy Services Corp.	8-K	4/2/20	10.1
2.3	Asset Purchase Agreement by and among the Company, White River E&P LLC, Rabb Resources, Ltd. and Claude Rabb, dated August 14, 2020*	8-K	8/20/20	2.1
3.1(a)	Articles of Incorporation, as amended	10-Q	2/12/21	3.1
3.1(b)	Certificate of Amendment to Articles of Incorporation	8-K	10/12/21	3.1
3.1(c)	Certificate of Designation for the Series A Convertible Redeemable Preferred Stock	8-K	6/9/22	3.1
3.1(d)	Certificate of Amendment to the Certificate of Designation for the Series A Convertible Redeemable Preferred Stock	8-K	6/27/22	3.1
3.1(e)	Second Certificate of Amendment to the Certificate of Designation for the Series A Convertible Redeemable Preferred Stock	8-K	7/15/22	3.1
3.2(a)	Amended and Restated Bylaws	8-K	4/28/17	3.1
3.2(b)	Amendment to Bylaws	8-K	8/30/21	3.1
3.2(c)	Amendment to Bylaws	8-K	6/9/22	3.2
10.1	Form of Securities Purchase Agreement*	8-K	6/9/22	10.1
10.2	Form of Warrant	8-K	6/9/22	10.2
10.3	Form of Membership Interest Purchase Agreement*	8-K	6/21/22	10.1
10.4	Form of Secured Promissory Note	8-K	6/21/22	10.2
10.5	Form of Security Agreement	8-K	6/21/22	10.3
10.6	Form of Guaranty Agreement*	8-K	6/21/22	10.4
10.7	Form of Amended and Restated Warrant	8-K	7/15/22	10.1
10.8	Form of Share Exchange Agreement	8-K	7/29/22	10.1
10.9	Form of Fortium Series A Certificate of Designation	8-K	7/29/22	10.2
31.1	Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002				Filed
31.2	Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002				Filed
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished**
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished**
101.INS	Inline XBRL Instance Document.				Filed
101.SCH	Inline XBRL Taxonomy Extension Schema Document.				Filed
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.				Filed
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.				Filed
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.				Filed
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.				Filed
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).				Filed

Certain schedules and other attachments have been omitted. The Company undertakes to furnish the omitted schedules and attachments to the Securities and Exchange Commission upon request.

This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

**	~~Exhibits and/or Schedules have been omitted. The Company hereby agrees to furnish to the SEC upon request any omitted information.~~

Portions of this exhibit have been omitted as permitted by the rules of the SEC. The information excluded is both (i) not material and (ii) would be competitively harmful if publicly disclosed. The Company undertakes to submit a marked copy of this exhibit for review by the SEC Staff, to the extent it has not been previously provided, and provide supplemental materials to the SEC Staff promptly upon request.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at Ecoark Holdings, Inc., 303 Pearl Parkway Suite #200, San Antonio, Texas 78215.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Ecoark Holdings, Inc.

Date: ~~February 11,~~August 12, 2022	By:	/s/ Randy May
		Randy May
		Chief Executive Officer

Date: ~~February 11,~~August 12, 2022	By:	/s/ ~~William B. Hoagland~~Jay Puchir
		~~William B. Hoagland~~	Jay Puchir
		Chief Financial Officer

iso4217:USD ~~compsci:item~~xbrli:shares

		NINE MONTHS ENDED						THREE MONTHS ENDED
		DECEMBER 31,						DECEMBER 31,
		2021			2020			2021			2020
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
CONTINUING OPERATIONS:

REVENUES		$	19,125		$	10,056		$	6,135		$	4,465
COST OF REVENUES			10,693			6,644			3,527			3,218
GROSS PROFIT			8,432			3,412			2,608			1,247

OPERATING EXPENSES
Salaries and salaries related costs			8,316			5,001			4,478			1,384
Professional and consulting fees			906			652			524			154
Oilfield supplies and repairs			2,262			1,518			1,062			644
Selling, general and administrative costs			9,005			4,799			2,623			2,528
Depreciation, amortization, depletion, and accretion			2,340			1,133			602			509
Research and development			-			630			-			264

Total operating expenses			22,829			13,733			9,289			5,483

LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)			(14,397	)		(10,321	)		(6,681	)		(4,236	)

OTHER INCOME (EXPENSE)
Change in fair value of derivative liabilities			15,295			(15,901	)		10,979			481
Gain (loss) on exchange of warrants for common stock			-			19,338			-			2,755
Loss on conversion of long-term debt and accrued expenses			-			(3,969	)		-			-
Gain (loss) on disposal of fixed assets			-			(105	)		-			-
Loss on abandonment of oil and gas property			-			(83	)		-			-
Gain on disposal of ARO related to sale of oil and gas property			8			-			-			-
Gain on sale of oil and gas property			713			-			-			-
Forgiveness of debt			-			1,850			-			1,850
Interest expense, net of interest income			(636	)		(2,473	)		(19	)		(318	)
Total other income (expense)			15,380			(1,343	)		10,960			4,768

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS AND (PROVISION) FOR INCOME TAXES			983			(11,664	)		4,279			532

DISCONTINUED OPERATIONS:
Loss from discontinued operations			-			-			-			-
Gain on disposal of discontinued operations			-			-			-			-
Total discontinued operations			-			-			-			-

INCOME (LOSS) FROM OPERATIONS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES			983			(11,664	)		4,279			532

BENEFIT (PROVISION) FOR INCOME TAXES			-			-			-			-

NET INCOME (LOSS)			983			(11,664	)		4,279			532
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST			323			-			323			-

NET INCOME (LOSS) TO CONTROLLING INTEREST		$	1,306		$	(11,664	)	$	4,602		$	532
NET INCOME (LOSS) PER SHARE - BASIC		$	0.05		$	(0.58	)	$	0.17		$	0.02
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC			24,728			19,950			26,364			21,300
NET INCOME (LOSS) PER SHARE – DILUTED (see NOTE 1)		$	(0.57	)	$	0.21		$	(0.24	)	$	0.00
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED (see NOTE 1)	��		24,728			24,103			26,364			25,453

										Additional
	Preferred					Common Stock				Paid-In		Accumulated			Treasury			Non-controlling
	Shares			Amount		Shares		Amount		Capital		Deficit			Stock			Interest			Total

Balance - March 31, 2020		1		$	-		17,175	$	17	$	135,424	$	(128,023	)	$	(1,671	)	$	-		$	5,747

Shares issued in the exercise of warrants, net of expenses		-			-		1,531		2		6,674		-			-			-			6,676
Shares issued in the exercise of stock options		-			-		89		-		349		-			-			-			349
Shares issued in conversion of debt and accrued interest		-			-		524		1		3,941		-			-			-			3,942
Shares issued in conversion of accounts payable and accrued expenses		-			-		93		-		677		-			-			-			677
Conversion of preferred shares (Series C) to common shares		(1	)		-		308		-		-		-			-			-			-
Share-based compensation		-			-		-		-		1,114		-			-			-			1,114

Net loss for the period		-			-		-		-		-		(21,181	)		-			-			(21,181	)

Balance - June 30, 2020		-			-		19,720		20		148,179		(149,204	)		(1,671	)		-			(2,676	)

Shares issued in the conversion of long-term debt and accrued interest		-			-		192		-		2,635		-			-			-			2,635
Shares issued services rendered		-			-		30		-		485		-			-			-			485
Shares issued in acquisition of oil and gas reserves and fixed assets		-			-		171		-		2,750		-			-			-			2,750
Shares issued in the exercise of warrants		-			-		1,088		1		5,575		-			-			-			5,576
Shares issued in the exercise of cashless stock options		-			-		1		-		-		-			-			-			-
Share-based compensation		-			-		-		-		36		-			-			-			36

Net income for the period		-			-		-		-		-		8,985			-			-			8,985

Balance - September 30, 2020		-			-		21,202		21		159,660		(140,219	)		(1,671	)		-			17,791

Shares issued in the exercise of warrants		-			-		376		-		2,106		-			-			-			2,106
Shares issued in registered direct offering, net of amount allocated to derivative liability		-			-		889		1		3,010		-			-			-			3,011
Share-based compensation		-			-		-		-		419		-			-			-			419
Fractional adjustment		-			-		1		-		-		-			-			-			-

Net income for the period		-			-		-		-		-		532			-			-			532

Balance - December 31, 2020		-		$	-		22,468	$	22	$	165,195	$	(139,687	)	$	(1,671	)	$	-		$	23,859


Balance - March 31, 2021		-		$	-		22,705	$	23	$	167,588	$	(148,911	)	$	(1,671	)	$	-		$	17,029

Shares issued in the exercise of stock options, including cashless exercises		-			-		20		-		28		-			-			-			28
Shares issued for services rendered		-			-		115		-		675		-			-			-			675
Share-based compensation		-			-		-		-		399		-			-			-			399

Net income for the period		-			-		-		-		-		2,559			-			-			2,559

Balance - June 30, 2021		-			-		22,840		23		168,690		(146,352	)		(1,671	)		-			20,690

Shares issued for services rendered, net of amounts prepaid		-			-		45		-		92		-			-			-			92
Shares issued in registered direct offering, net of amount allocated to derivative liability		-			-		3,478		3		8,024		-			-			-			8,027
Share-based compensation		-			-		-		-		819		-			-			-			819
Fractional adjustment		-			-		1		-		-		-			-			-			-

Net loss for the period		-			-		-		-		-		(5,855	)		-			-			(5,855	)

Balance - September 30, 2021		-			-		26,364		26		177,625		(152,207	)		(1,671	)		-			23,773

Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid		-			-		-		-		2,281		-			-			-			2,281
Vesting of shares issued in prior quarter		-			-		-		-		114		-			-			-			114
Share-based compensation		-			-		-		-		493		-			-			-			493
Recognition of non-controlling interest		-			-		-		-		-		(30	)		-			30			-

Net income (loss) for the period		-			-		-		-		-		4,602			-			(323	)		4,279

Balance - December 31, 2021		-		$	-		26,364	$	26	$	180,513	$	(147,635	)	$	(1,671	)	$	(293	)	$	30,940

Net income (loss) attributable to the Company’s stockholders	$	4,602
Increase in the Company’s additional paid-in capital for the issuance of the 4,600 restricted common shares of Agora		2,281
Change from net income (loss) attributable to the Company’s stockholders and transfers to noncontrolling interest	$	6,883

	Nine Months Ended December 31,						Three Months Ended December 31,
	2021			2020			2021			2020
Diluted EPS:
Net income (loss) to controlling interest	$	1,306		$	(11,664	)	$	4,602		$	532
Change in fair value of derivative liability		(15,295	)		15,901			(10,979	)		(481	)

Adjusted net income (loss)	$	(13,989	)	$	4,237		$	(6,377	)	$	51

Weighted Average Shares Outstanding		24,728			24,103			26,364			25,453
Adjusted earnings (loss) per share	$	(0.57	)	$	0.21		$	(0.24	)	$	0.00

Acquisition – Trend Discovery	$	3,223
Acquisition – Banner Midstream		7,002
Goodwill – December 31, 2021	$	10,225

Beginning balance as of March 31, 2020	$	2,775
Issuances of warrants – derivative liabilities		13,118
Warrants exchanged for common stock		(27,198	)
Change in fair value of warrant derivative liabilities		18,518
Ending balance as of March 31, 2021	$	7,213

Activity Category	March 31, 2021			Adjustments (1)			December 31, 2021
Proved Developed Producing Oil and Gas Properties
Cost	$	7,223		$	-		$	7,223
Accumulated depreciation, depletion and amortization		(739	)		(929	)		(1,668	)
Changes in estimates		-			-			-
Total	$	6,484		$	(929	)	$	5,555

Undeveloped and Non-Producing Oil and Gas Properties
Cost	$	5,868		$	304		$	6,172
Changes in estimates		(-	)		(-	)		(-	)
Total	$	5,868		$	304		$	6,172

Grand Total	$	12,352		$	(625	)	$	11,727

Activity Category	March 31, 2020		Adjustments (1)			March 31, 2021
Proved Developed Producing Oil and Gas Properties
Cost	$	167	$	737		$	904
Accumulated depreciation, depletion and amortization		-		(739	)		(739	)
Changes in estimates		-		6,319			6,319
Total	$	167	$	6,317		$	6,484

Undeveloped and Non-Producing Oil and Gas Properties
Cost	$	5,968	$	6,219		$	12,187
Changes in estimates		-		(6,319	)		(6,319	)
Total	$	5,968	$	(100	)	$	5,868

Grand Total	$	6,135	$	6,217		$	12,352

	December 31, 2021			March 31, 2021
	(unaudited)
Ecoark Holdings Board Member (a)	$	-		$	578
Total Notes Payable – Related Parties		-			578
Less: Current Portion of Notes Payable – Related Parties		(-	)		(578	)
Long-term debt, net of current portion	$	-		$	-

Building	$	236
Land		140
Oil and Gas Properties		3,224
Asset retirement obligation		(100	)
	$	3,500

Nine Months Ended December 31, 2021	Digital Assets			Commodities			Financial			Technology			Total
Segmented operating revenues	$	18		$	18,583		$	524		$	-		$	19,125
Cost of revenues		93			10,600			-			-			10,693
Gross profit (loss)		(75	)		7,983			524			-			8,432
Total operating expenses net of depreciation, amortization, depletion, accretion and impairment		3,694			13,784			686			2,325			20,489
Depreciation, amortization, depletion, accretion and impairment		21			2,176			-			143			2,340
Other (income) expense		29			(14,094	)		(216	)		(1,099	)		(15,380	)
Income (loss) from continuing operations	$	(3,819	)	$	6,117		$	54		$	(1,369	)	$	983

Three Months Ended December 31, 2021	Digital Assets			Commodities			Financial			Technology			Total
Segmented operating revenues	$	18		$	5,941		$	176		$	-		$	6,135
Cost of revenues		93			3,434			-			-			3,527
Gross profit (loss)		(75	)		2,507			176			-			2,608
Total operating expenses net of depreciation, amortization, depletion, accretion and impairment		3,286			4,254			415			732			8,687
Depreciation, amortization, depletion, accretion and impairment		21			549			-			32			602
Other (income) expense		29			(10,993	)		4			-			(10,960	)
Income (loss) from continuing operations	$	(3,411	)	$	8,697		$	(243	)	$	(764	)	$	4,279

Segmented assets as of December 31, 2021
Property and equipment, net	$	7,045		$	3,262		$	-		$	149		$	10,456
Oil and Gas Properties/Capitalized drilling costs	$	-		$	13,783		$	-		$	-		$	13,783
Intangible assets, net	$	-		$	1,804		$	-		$	-		$	1,804
Goodwill	$	-		$	7,002		$	3,223		$	-		$	10,225
Capital expenditures	$	7,066		$	19		$	-		$	-		$	7,085

Nine Months Ended December 31, 2020	Commodities			Financial			Technology			Total
Segmented operating revenues	$	9,697		$	359		$	-		$	10,056
Cost of revenues		6,644			-			-			6,644
Gross profit		3,053			359			-			3,412
Total operating expenses net of depreciation, amortization, depletion and accretion		9,916			331			2,353			12,600
Depreciation, amortization, depletion and accretion		945			-			188			1,133
Other (income) expense		1,501			(26	)		(132	)		1,343
Income (loss) from continuing operations	$	(9,309	)	$	54		$	(2,409	)	$	(11,664	)

Three Months Ended December 31, 2020	Commodities			Financial			Technology			Total
Segmented operating revenues	$	4,300		$	165		$	-		$	4,465
Cost of revenues		3,218			-			-			3,218
Gross profit		1,082			165			-			1,247
Total operating expenses net of depreciation, amortization, depletion and accretion		3,965			137			872			4,974
Depreciation, amortization, depletion and accretion		447			-			62			509
Other (income) expense		(3,769	)		(166	)		(833	)		(4,768	)
Income (loss) from continuing operations	$	439		$	194		$	(101	)	$	532
Segmented assets as of December 31, 2020
Property and equipment, net	$	3,567		$	-		$	354		$	3,921
Oil and Gas Properties	$	11,795		$	-		$	-		$	11,795
Intangible assets, net	$	2,136		$	-		$	-		$	2,136
Goodwill	$	7,002		$	3,223		$	-		$	10,225
Capital expenditures	$	617		$	-		$	-		$	617

	Three months ended December 31, 2021		Nine months ended December 31, 2021
	(unaudited)		(unaudited)
Operating lease expense	$	72	$	178

Finance lease expense
Depreciation of capitalized finance lease assets		57		127
Interest expense on finance lease liabilities		2		8
Total lease cost	$	131	$	313

	Three months ended December 31, 2020		Nine months ended December 31, 2020
		(unaudited)		(unaudited)
Operating lease expense	$	54	$	106

Finance lease expense
Depreciation of capitalized finance lease assets		34		103
Interest expense on finance lease liabilities		3		11

Total lease cost	$	91	$	220

	Nine Months Ended December 31,
	2021				2020
	Bbls				Bbls
	Gross		Net		Gross		Net
Production Data:
By State/County
Mississippi
Holmes		1,657		1,243		-		-
Amite		9,540		7,621		9,963		7,956
Wilkinson		10,576		8,197		7,565		6,046
Pike		1,192		923		481		391
		22,965		17,984		18,009		14,393

Louisiana
Catahoula		4,871		3,649		2,711		2,159
Concordia		6,463		3,039		4,592		2,105
Tensas		2,627		1,970		1,737		1,291
Lasalle		609		330		887		480
Avoyelles		37,976		25,858		2,204		1,668
		52,546		34,847		12,132		7,703

Total		75,511		52,830		30,141		22,096

	Three Months Ended December 31,
	2021				2020
	Bbls				Bbls
	Gross		Net		Gross		Net
Production Data:
By State/County
Mississippi
Holmes		1,518		1,139		-		-
Amite		3,357		2,694		4,011		3,207
Wilkinson		3,086		2,392		2,710		2,169
Pike		433		339		368		299
		8,395		6,563		7,089		5,674

Louisiana
Catahoula		1,626		1,439		1,224		955
Concordia		3,044		1,379		2,070		987
Tensas		941		705		578		429
Lasalle		-		-		315		171
Avoyelles		7,269		4,980		701		531
		12,880		8,504		4,888		3,073

Total		21,275		15,067		11,977		8,747

		Incorporated by Reference			Filed or Furnished
Exhibit No.	Exhibit Description	Form	Date	Number	Herewith
3.1(a)	Articles of Incorporation, as amended	10-Q	2/12/21	3.1
3.1(b)	Certificate of Amendment to Articles of Incorporation	8-K	10/12/21	3.1
3.2(a)	Amended and Restated Bylaws	8-K	4/28/17	3.1
3.2(b)	Amendment to Bylaws	8-K	8/30/21	3.1
4.1	Form of Warrant	8-K	8/5/21	4.1
4.2	Form of Placement Agent Warrant	8-K	8/5/21	4.2
10.1	Restricted Stock Unit Agreement, dated October 6, 2021, between the Company and Peter Mehring**	8-K	10/12/21	10.1
10.2	Peter Mehring Consulting Agreement	8-K	2/4/22	10.1
31.1	Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002				Filed
31.2	Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002				Filed
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished*
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished*
101.INS	Inline XBRL Instance Document.				Filed
101.SCH	Inline XBRL Taxonomy Extension Schema Document.				Filed
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.				Filed
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.				Filed
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.				Filed
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.				Filed
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).				Filed