0001213900-17-011607.txt : 20171108 0001213900-17-011607.hdr.sgml : 20171108 20171108172758 ACCESSION NUMBER: 0001213900-17-011607 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 92 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171108 DATE AS OF CHANGE: 20171108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Ecoark Holdings, Inc. CENTRAL INDEX KEY: 0001437491 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 000000000 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53361 FILM NUMBER: 171187623 BUSINESS ADDRESS: STREET 1: 3333 PINNACLE HILLS PARKWAY, SUITE 220 CITY: ROGERS STATE: AR ZIP: 72758 BUSINESS PHONE: 479-259-2977 MAIL ADDRESS: STREET 1: 3333 PINNACLE HILLS PARKWAY, SUITE 220 CITY: ROGERS STATE: AR ZIP: 72758 FORMER COMPANY: FORMER CONFORMED NAME: Magnolia Solar Corp DATE OF NAME CHANGE: 20100107 FORMER COMPANY: FORMER CONFORMED NAME: Mobilis Relocation Services Inc. DATE OF NAME CHANGE: 20080612 10-Q 1 f10q0917_ecoarkholdings.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

  

☒   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2017

 

☐   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from ___ to ___

 

Commission File No. 000-53361

 

  Ecoark Holdings, Inc.  
  (Exact name of Registrant as specified in its charter)  

 

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

 

3333 S Pinnacle Hills Parkway, Suite 220, Rogers AR 72758

(Address of principal executive offices) (Zip Code)

 

(479) 259-2977

(Registrant’s telephone number, including area code)

 

Not applicable 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 at least the past 90 days. Yes ☒     No ☐

 

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

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer ☐ (Do not check if a smaller reporting company) 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 Exchange Act). Yes ☐   No ☒

 

There were 46,271,795 shares of the Registrant’s $0.001 par value common stock outstanding as of November 6, 2017.

 

 

 

 

 

 

Ecoark Holdings, Inc.

 

INDEX

 

    Page No.
     
Part I. Financial Information 1
     
Item 1. Financial Statements 1
     
  Consolidated Balance Sheets 2
     
  Consolidated Statements of Operations 3
     
  Consolidated Statement of Changes in Stockholders’ Equity 4
     
  Consolidated Statements of Cash Flows 5
     
  Notes to Consolidated Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 46
     
Item 4. Controls and Procedures 47
     
Part II. Other Information 48
     
Item 1. Legal Proceedings 48
     
Item 1A. Risk Factors 48
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 48
     
Item 3. Default Upon Senior Securities 48
     
Item 4. Mine Safety Disclosures 48
     
Item 5. Other Information 48
     
Item 6. Exhibits 49
     
Signatures 50

 

 

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017 AND 2016

 

Table of Contents

 

Balance Sheets 2
Statements of Operations 3
Statement of Changes in Stockholders’ Equity 4
Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 32

 

 1 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   (Dollars in thousands, 
   except per share data) 
   September 30,   March 31, 
   2017   2017 
   (Unaudited)     
ASSETS        
CURRENT ASSETS        
Cash ($265 pledged as collateral for credit)  $8,316   $8,648 
Accounts receivable, net of allowance of $50 and $76 as of September 30, 2017 and March 31, 2017 respectively   1,032    1,627 
Inventory, net of reserves   2,925    2,104 
Prepaid expenses   656    2,006 
Assets held for sale - production equipment   -    158 
Other current assets   130    - 
Current assets held for sale - (Note 2)   -    1,404 
Total current assets   13,059    15,947 
NON-CURRENT ASSETS          
Property and equipment, net   2,297    2,308 
Intangible assets, net   2,021    1,567 
Non-current assets held for sale - (Note 2)   -    366 
Other assets   53    53 
Total non-current assets   4,371    4,294 
TOTAL ASSETS  $17,430   $20,241 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable  $1,673   $1,720 
Accrued liabilities   1,131    2,620 
Current portion of long-term debt   500    - 
Current portion of long-term debt – related party   100    - 
Current liabilities held for sale - (Note 2)   -    463 
Total current liabilities   3,404    4,803 
NON-CURRENT LIABILITIES          
Long-term debt, net of current portion   -    500 
Long-term debt, net of current portion - related party   -    100 
COMMITMENTS AND CONTINGENCIES          
Total liabilities   3,404    5,403 
           
STOCKHOLDERS’ EQUITY (Numbers of shares rounded to thousands)          
           
Preferred stock, $0.001 par value; 5,000 shares authorized; none issued   -    - 
Common stock, $0.001 par value; 100,000 shares authorized, 46,369 shares issued and 46,174 shares outstanding as of September 30, 2017 and 42,330 shares issued and outstanding as of March 31, 2017   46    42 
Additional paid-in-capital   110,565    85,025 
Accumulated deficit   (95,805)   (70,229)
Treasury stock, at cost   (780)   - 
Total stockholders’ equity   14,026    14,838 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $17,430   $20,241 

 

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

 

 2 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   (Dollars in thousands, except per share data) 
   Three Months Ended   Six Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
       (Restated)       (Restated) 
                 
CONTINUING OPERATIONS:                
REVENUES                
Revenue from product sales  $1,869   $3,859   $4,330   $6,221 
Revenue from services   36    30    80    61 
    1,905    3,889    4,410    6,282 
COST OF REVENUES                    
Cost of product sales, including $89 and $73 of depreciation expense on manufacturing equipment for three months and $156 and $119 for six months in 2017 and 2016, respectively   2,285    3,819    5,038    6,252 
Cost of services   10    25    51    28 
    2,295    3,844    5,089    6,280 
GROSS PROFIT (LOSS)   (390)   45    (679)   2 
OPERATING EXPENSES:                    
Salaries and salary related costs, including share-based compensation of $6,161 and $565 for three months and $14,714 and $877 for six months in 2017 and 2016, respectively   7,479    1,567    17,157    2,848 
Professional fees and consulting, including share-based compensation of $444 and $0 for three months and $1,645 and $2,500 for six months in 2017 and 2016, respectively   833    1,681    2,741    4,841 
Selling, general and administrative   499    662    1,043    1,094 
Depreciation, amortization, and impairment   1,024    150    1,205    260 
Research and development   1,659    2,435    3,232    3,378 
Total operating expenses   11,494    6,495    25,378    12,421 
Loss from continuing operations before other expenses   (11,884)   (6,450)   (26,057)   (12,419)
                     
OTHER EXPENSE:                    
Interest expense, net of interest income   (15)   (80)   (30)   (167)
Loss on retirement of assets   (61)   (25)   (61)   (25)
Total other expenses   (76)   (105)   (91)   (192)
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES   (11,960)   (6,555)   (26,148)   (12,611)
DISCONTINUED OPERATIONS:                    
Income (loss) from discontinued operations   -    42    (57)   224 
Gain on disposal of discontinued operations   -    -    636    - 
Total discontinued operations   -    42    579    224 
PROVISION FOR INCOME TAXES   (7)   -    (7)   - 
NET LOSS   (11,967)   (6,513)   (25,576)   (12,387)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST   -    52    -    116 
NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST  $(11,967)  $(6,565)  $(25,576)  $(12,503)
                     
NET (LOSS) INCOME PER SHARE                    
Basic: Continuing operations  $(0.27)  $(0.18)  $(0.59)  $(0.39)
            Discontinued operations  $-   $-   $0.01   $0.01 
Total  $(0.27)  $(0.18)  $(0.58)  $(0.38)
Diluted: Continuing operations  $(0.27)  $(0.18)  $(0.59)  $(0.39)
                Discontinued operations  $-   $-   $0.01   $0.01 
Total  $(0.27)  $(0.18)  $(0.58)  $(0.38)
                     
SHARES USED IN CALCULATION OF NET LOSS PER SHARE                    
Basic and diluted   45,101    36,193    44,184    32,683 

 

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

 

 3 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30, 2017

 

   (Dollar amounts and number of shares in thousands) 
   Preferred   Common Stock   Additional Paid-in    Accumulated   Treasury     
   Shares   Amount   Shares   Amount   Capital    Deficit   Stock   Total 
Balances at March 31, 2017   -   $-    42,330   $42   $85,025    $(70,229)   -   $14,838 
                                          
Shares issued for cash in private placement, net of expenses   -    -    2,500    3    9,103     -    -    9,106 
                                          
Share-based compensation - stock - Board of Directors   -    -    65    -    250     -    -    250 
                                          
Share-based compensation - stock - employees   -    -    1,385    2    12,971     -    -    12,973 
                                          
Share-based compensation - options - employees   -    -    -    -    241     -    -    241 
                                          
Share-based compensation due to employment agreement   -    -    300    -    1,500     -    -    1,500 
                                          
Warrant conversion - cashless   -    -    49    -    -     -    -    - 
                                          
Shares issued for company acquisition   -    -    300    -    1,500     -    -    1,500 
                                          
Shares received from sale of company, subsequently retired   -    -    (560)   (1)   (25)    -    -    (26)
                                          
Purchase of treasury shares from employees   -    -    -    -    -     -    (780)   (780)
                                          
Net loss for the period   -    -    -    -    -     (25,576)   -    (25,576)
                                          
Balances at September 30, 2017   -   $-    46,369   $46   $110,565    $(95,805)  $(780)  $14,026 

 

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

 4 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 

 

   (Dollars in thousands) 
   2017   2016 
Cash flows from operating activities:        
Net loss attributable to controlling interest  $(25,576)  $(12,503)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation, amortization and impairment, including $156 in 2017 and $119 in 2016 included in cost of product sales   1,366    422 
Shares of common stock issued for services rendered   1,645    2,500 
Share-based compensation – stock - employees   12,973    - 
Share-based compensation – options   241    876 
Change in non-controlling interest on cash   -    117 
Cash acquired in acquisition   -    41 
Share-based compensation due to employment agreements   1,500    - 
(Income) loss from discontinued operations   57    (224)
Gain on sale of discontinued operations   (636)   - 
Loss on retirement of assets   61    25 
Changes in assets and liabilities:          
Accounts receivable   525    (1,041)
Inventory   (821)   102 
Prepaid expenses   (38)   (26)
Other current assets   (119)   - 
Other assets   4    (164)
Accounts payable   (72)   396 
Accrued liabilities   (1,653)   1,659 
Net cash used in operating activities of continuing operations   (10,543)   (7,820)
Net cash provided by discontinued operations   92    197 
Net cash used in operating activities   (10,451)   (7,623)
           
Cash flows from investing activities:          
Proceeds from sale of Eco3d   2,029    - 
Purchases of short-term investments   -    (3,500)
Pre-acquisition advance to Sable Polymer Solutions, LLC   -    (600)
Purchases of property and equipment   (236)   (582)
Net cash provided by (used in) investing activities   1,793    (4,682)
           
Cash flows from financing activities:          
Proceeds from issuance of common stock, net of fees   9,106    7,793 
Purchase of treasury shares from employees   (780)   - 
Repayments of debt - related parties   -    (63)
Repayments of debt   -    (58)
Net cash provided by financing activities   8,326    7,672 
NET DECREASE IN CASH   (332)   (4,633)
Cash - beginning of period   8,648    8,744 
Cash - end of period  $8,316   $4,111 
           
SUPPLEMENTAL DISCLOSURES:          
Cash paid for interest  $30   $90 
Cash paid for income taxes  $-   $- 
           
SUMMARY OF NONCASH ACTIVITIES:          
Assets and liabilities acquired via acquisition of companies:          
Receivables, net  $-   $1,250 
Inventory  $-   $759 
Property and equipment  $-   $2,822 
Identifiable intangible assets  $1,435   $1,028 
Goodwill  $65   $1,264 
Other assets  $28   $36 
Payables and liabilities assumed  $-   $883 
Debt assumed  $-   $2,531 

 

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

 

 5 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Ecoark Holdings, Inc. (“Ecoark Holdings”) is an innovative AgTech company that is focused on modernizing the post-harvest fresh food supply chain for a wide range of organizations including growers, distributors and retailers. Ecoark Holdings is a holding company that supports the businesses of its subsidiaries. Ecoark Holdings is the parent company of Ecoark, Inc. and Magnolia Solar Inc.

 

Ecoark, Inc. (“Ecoark”) was founded in 2011 and is located in Rogers, Arkansas, the home office for Ecoark and Ecoark Holdings. Ecoark merged into a wholly-owned subsidiary of Magnolia Solar Corporation (“MSC”) on March 24, 2016, with Ecoark as the surviving entity. At the merger (“Merger”), MSC changed its name to Ecoark Holdings, Inc. Ecoark is the parent company of Eco360, Pioneer Products and Zest Labs (formerly known as Intelleflex Corporation). Ecoark was also the parent company of Eco3d until it was sold in April 2017, as discussed below. 

 

Eco3d, LLC (“Eco3d”) is located in Phoenix, Arizona and provides customers with 3d technologies. Eco3d was formed by Ecoark in November 2013 and Ecoark owned 65% of the LLC. The remaining 35% was reflected as non-controlling interest until September 2016 when Ecoark Holdings issued shares of stock in exchange for the 35% non-controlling interest. Eco3d provides 3d mapping, modeling, and consulting services for clients in retail, construction, healthcare, and other industries throughout the United States. As described further in Note 2, in March 2017 the Ecoark Holdings Board of Directors (“Ecoark Holdings Board”) approved a plan to sell Eco3d, and the sale was completed in April 2017. 

 

Eco360, LLC (“Eco360”) is located in Rogers, Arkansas and has engaged in research and development activities. Eco360 was formed in November 2014 by Ecoark. Eco360 does not currently have any active operations.

 

Pioneer Products, LLC (“Pioneer Products” or “Pioneer”) is located in Rogers, Arkansas and is involved in the selling of recycled plastic products and other products. It sells to the world’s largest retailer. This subsidiary recovers plastic waste from retail supply chains that is converted to new consumer products from the reclaimed materials, completing a closed loop and reducing waste sent to landfills. Pioneer Products was purchased by Ecoark in 2012. Pioneer Products acquired Sable Polymer Solutions, LLC in a stock transaction on May 3, 2016.

 

Sable Polymer Solutions, LLC (“Sable”) is located in Flowery Branch, Georgia and specializes in the purchase, processing and sale of post-consumer and post-industrial plastic materials. It provides materials to a variety of suppliers and customers throughout the plastics processing industry, from small extruders, molders and scrap collectors to large corporations.

 

Zest Labs, Inc. (“Zest Labs” or “Zest”) is located in San Jose, California and offers food retailers and suppliers intelligent, on-demand solutions for the retailers and companies that ship and store products for perishable food quality management. Zest Labs’ Zest Data Services is a secure, multi-tenant cloud-based data collection platform for aggregating and real-time permission-based sharing and analysis of information. Zest Fresh, a fresh food management solution that utilizes the Zest Data Services platform, focuses on three primary value propositions – consistent food quality, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence at a pallet level. Zest Delivery offers real-time monitoring and control for prepared food delivery containers, helping delivery and dispatch personnel ensure the quality and safety of delivered food. Zest Labs (then known as Intelleflex Corporation) was purchased by Ecoark in September 2013. Effective October 28, 2016, Intelleflex Corporation changed its name to Zest Labs, Inc. to align its corporate name with its mission and the brand name of its products and services. Zest Labs acquired 440labs, Inc. in a stock transaction on May 23, 2017.

 

440labs, Inc. (“440labs”) is located in Boston, Massachusetts and is a software development and information solutions provider for cloud, mobile, and IoT (Internet of Things) applications. 440labs has been a key development partner with Zest Labs for more than four years, contributing its expertise in scalable enterprise cloud solutions and mobile applications.

 

Magnolia Solar Inc. (“Magnolia Solar”) is located in Woburn, Massachusetts and is principally engaged in the development and commercialization of nanotechnology-based, high-efficiency, thin-film technology that can be deposited on a variety of substrates, including glass and flexible structures. Magnolia Solar was a subsidiary of MSC that merged with Ecoark on March 24, 2016 to create Ecoark Holdings and continues operations as a subsidiary of Ecoark Holdings.

 

 6 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Fiscal Year-End Change

 

On January 19, 2017, the Ecoark Holdings Board approved a change from a fiscal year ending on December 31 to a fiscal year ending on March 31 as permitted by the bylaws of Ecoark Holdings. The change applied to all subsidiaries except Eco3d which was sold in April 2017.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Ecoark Holdings and its direct and indirect subsidiaries, collectively referred to as “the Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Ecoark Holdings is a holding company that holds 100% of Ecoark and Magnolia Solar. Ecoark holds 100% of Eco360, Pioneer Products (which owns 100% of Sable), Zest Labs (which owns 100% of 440labs) and, until April 2017, Eco3d. As described further in Note 2, in March 2017 the Ecoark Holdings Board approved a plan to sell Eco3d, and the sale was completed in April 2017. Ecoark previously owned 65% of Eco3d and the remaining 35% interest was owned by executives of Eco3d until September 2016 when the executives’ 35% interest was acquired in exchange for 525 shares of Ecoark Holdings stock. In conjunction with the sale of Eco3d in April 2017, the 525 shares were reacquired by the Company and canceled.  

 

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.

 

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 September 2016, the 35% noncontrolling interest of Eco3d was acquired in exchange for 525 shares of Ecoark Holdings stock, which eliminated the noncontrolling interest. On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d, and the 525 shares of Ecoark Holdings were returned as part of the sales proceeds and were subsequently canceled. 

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”). It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

 

Reclassification

 

The Company has reclassified certain amounts in the 2016 consolidated financial statements to be consistent with the 2017 presentation. These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as certain research and development expenses. Reclassifications relating to the discontinued operations of Eco3d are described further in Note 2. The reclassifications had no impact on operations or cash flows for the six months ended September 30, 2016. 

 

 7 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

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, obsolete or slow-moving inventory, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, liabilities to accrue, allocation of home office expenses for segment reporting and determination of the fair value of stock awards and forfeiture rates. Actual results could differ from those estimates. 

 

Cash

 

Cash consists of cash, demand deposits and money market funds with an original maturity of three months or less. The Company holds no cash equivalents. The Company maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.

 

Inventory

 

Inventory is stated at the lower of cost or market. Inventory cost is determined on average cost and at standard cost, which approximates average costs in accordance with ASC 330-10-30-12. Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their estimated useful or scrap values. The Company establishes reserves for this purpose. Effective April 1, 2017, the Company changed its inventory costing method at Sable from first-in first-out (“FIFO”) to average cost. FIFO costs approximated average cost. The change was made in conjunction with a system conversion that enabled the Company to move from a periodic to a perpetual inventory system. In accordance with ASC 250-10-45-11 through 45-13, management determined that the change was preferable because it provides better operational control and visibility into inventory levels and costs, and it facilitates cost analysis at a batch level that was not available previously. The effect of the change was not material to the Company’s fiscal first or second quarter consolidated financial statements.

 

Property and Equipment and Long-Lived Assets

 

Property and equipment is stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to ten years for all classes of property and equipment, except leasehold improvements which are depreciated over the term of the lease when shorter than the estimated useful life of the improvements.

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has early adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

ASC 360-10 addresses criteria to be considered for long-lived assets expected to be disposed of by sale. Six criteria are listed in ASC 360-10-45-9 that must be met in order for assets to be classified as held for sale. Once the criteria are met, long-lived assets classified as held for sale are to be measured at the lower of carrying amount or fair value less costs to sell. In December 2016, management decided to outsource its densification activities at the Sable facility in Georgia. All six criteria were met and thus the densification and related equipment have been adjusted to fair value and reclassified to current assets in the balance sheets. During the six months ended September 30, 2017, the most significant of these assets were sold and the immaterial balances of the remaining assets were written off.

 

 8 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Intangible assets with definite useful lives are stated at cost less accumulated amortization and impairment. Identifiable intangible assets capitalized represent the valuation of the Company-owned patents, customer lists, outsourced vendor relationships and non-compete agreements. These intangible assets are being amortized on a straight-line basis over their estimated average useful lives of thirteen and a half years for the patents, three years for the customer lists and outsourced vendor relationships and two years for the non-compete agreements. Expenditures on intangible assets through the Company’s filing of patent and trademark protection for Company-owned inventions are expensed as incurred. 

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company tested the carrying value of its intangible assets for recoverability during the six months ended September 30, 2017, and impairments were recorded during this period. 

 

Advertising Expense

 

The Company expenses advertising costs as incurred. Advertising expenses for the six months ended September 30, 2017 and 2016, which were nominal, are included in selling, general and administrative costs.

 

Software Costs

 

The Company accounts for software development costs in accordance with ASC 985-730 Software Research and Development, and ASC 985-20 Costs of Software to be Sold, Leased or Marketed. ASC 985-20 requires that costs related to the development of the Company’s products be capitalized as an asset when incurred subsequent to the point at which technological feasibility of the enhancement is established and prior to when a product is available for general release to customers. ASC 985-20 specifies that technological feasibility can be established by the completion of a detailed program design. Costs incurred prior to achieving technological feasibility are expensed. The Company does utilize detailed program designs; however, the Company’s products are expected to be released soon after technological feasibility has been established and as a result software development costs have been expensed as incurred.

 

Research and Development Costs

 

Research and development costs are expensed as incurred. These costs include internal salaries and related costs and professional fees for activities related to development. The majority of these costs relate to the Zest Data Services platform, Zest Fresh and Zest Delivery.

 

Subsequent Events

 

Subsequent events were evaluated through the date the consolidated financial statements were filed.

 

 9 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Shipping and Handling Costs

 

The Company reports shipping and handling revenues and their associated costs in product revenue and cost of revenue, respectively. Shipping revenues and costs for the six months ended September 30, 2017 and 2016 were nominal.

 

Revenue Recognition

 

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company early adopted effective April 1, 2017. No cumulative adjustment to accumulated deficit was required as a result of this adoption, and the early adoption did not have a material impact on our consolidated financial statements as no material arrangements prior to the adoption were impacted under the new pronouncement.

 

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 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 can be accounted for as separate units of accounting, and if so, the fair value for each of the elements.

 

Product revenue consists primarily of the sale of recycled plastics products by Pioneer and Sable. Contracts for products are for products held in inventory and typically are on thirty- to sixty-day payment terms. Management’s evaluation of credit risk involves judgement and may include securing insurance coverage on the recoverability of the receivables. Revenues are recognized when obligations under the terms of a contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products are shipped to the customer. Expected costs of standard warranties and claims are recognized as expense.

 

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 contracts that include multiple performance obligations, including hardware, perpetual software licenses, subscriptions, term licenses, maintenance 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. Contracts are typically on thirty- to sixty-day payment terms from when the Company satisfies the performance obligation in the contract.

 

Services contracts include research contracts for the government. The contracts define delivery dates for which the performance obligation will be satisfied over time. Revenue is recognized over time based on the output method to measure the Company’s progress toward complete satisfaction of a performance obligation.

 

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 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 incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

 

 10 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Accounts Receivable and Concentration of Credit Risk

 

The Company considers accounts receivable, net of allowance for returns and 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.

 

Uncertain Tax Positions

 

The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates tax positions on an annual basis.

  

The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they were filed.

 

Vacation and Paid-Time-Off Compensation

 

The Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable to services already rendered, will be paid even if an employee is terminated, payment is probable and the amount can be estimated.

 

 11 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has early adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting as of July 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual forfeitures when estimating the forfeiture rate. The Company facilitates payment of the employee tax withholdings resulting from the issuances of these awards by remitting the employee taxes and recovering the resulting amounts due from the employee either via payments from employees or from the sale of shares issued sufficient to cover the amounts due the Company. 

 

The Company measures compensation expense for its non-employee share-based compensation under ASC 505-50 Equity-Based Payments to Non-Employees. The fair values of options and shares issued are used to measure the transactions, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged either directly to expense, or to a prepaid expense if shares of common stock are issued in advance of services being rendered, and to additional paid-in capital.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting effective April 1, 2017. Cash paid when shares were directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.

 

Fair Value of Financial Instruments

 

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments. The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments. The carrying amount of the Company’s debt instruments also approximates fair value.

 

Leases

 

The Company follows ASC 840 Leases in accounting for leased properties. The Company leases several office facilities and production facilities for terms typically ranging from three to five years. Rent escalations over the term of a lease are considered at the inception of the lease such that the monthly average for all payments is recorded as straight-line rent expense with any differences recorded in accrued liabilities.

 

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 per share include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options, grants 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 basic weighted average number of common shares are used in the computations.

 

Fair Value Measurement

 

ASC 820 Fair Value Measurement 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 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.

 

 12 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

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. For fiscal year 2018 the Company and its Chief Operating Decision Maker determined that the Company’s operations were divided into two segments: Zest Labs and Pioneer Products. See Note 14 for segment information disclosures.

 

Related-Party Transactions

 

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions (see Note 10). All transactions are recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.

 

Recently Adopted Accounting Pronouncements

 

In May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09 Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, and ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, respectively, which implement ASC Topic 606. ASU 2017-13 issued in September 2017 clarifies SEC Staff guidance on the transition to ASC 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under U.S. GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company adopted the above ASUs (ASC Topic 606) effective April 1, 2017. The adoption of these ASUs did not have a material impact on our consolidated financial statements.

 

In May 2017, the FASB issued ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The FASB issued this update to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this update are required for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017 and early adoption is permitted. The Company adopted ASU 2017-09 as of July 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements. 

 

In January 2017, the FASB issued ASU 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The amendments in this update are required for public business entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The update is intended to simplify the annual or interim goodwill impairment test. A public business entity that is a U.S. SEC filer must adopt the amendments in this update for its annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted ASU 2017-04 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805), Clarifying the Definition of a Business. The amendments in this update are required for public business entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The update is intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. Public business entities must apply the amendments in this update to annual periods beginning after December 15, 2017. Early application is permitted under certain conditions. The Company adopted ASU 2017-01 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

 

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The amendments in this update provided guidance on eight specific cash flow issues. This update provided specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 31, 2017. Early adoption is permitted. The Company adopted ASU 2016-15 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting effective April 1, 2017. Cash paid when shares were directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.

 13 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Recent Accounting Pronouncements Pending Adoption

 

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 changes the accounting for leased assets, principally by requiring balance sheet recognition of assets under lease arrangements. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The Company does not expect that adoption of ASU 2016-02 will have a material impact on our consolidated financial statements.

 

There were other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries or transactions that are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. 

 

Going Concern

 

The Company has experienced losses from operations resulting in an accumulated deficit of $95,805 since inception. The accumulated deficit together with losses of $25,576 for the six months ended September 30, 2017, and net cash used in operating activities in the six months ended September 30, 2017 of $10,451, have resulted in the uncertainty of the Company’s ability to continue as a going concern.

 

These consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time.

 

The Company raised $9,106 of additional capital, net of expenses, in the six months ended September 30, 2017, as compared with over $12,000 raised in the three-month transition period ended March 31, 2017. The Company’s ability to raise additional capital through future equity and debt securities issuances is unknown. The Company disclosed its intention to raise up to a cumulative amount of $80,000 pursuant to its shelf registration filed with the SEC (approximately $23,000 has been raised with $57,000 remaining through August 2019). Obtaining additional financing and the successful development of the Company’s strategic plan to achieve profitability are necessary for the Company to continue operations. There can be no assurance that such capital will be available or on terms acceptable to the Company. The Company intends to further develop its product offerings and customer bases. The Company’s plans to achieve profitability include evaluating the cost structure and processes of its operations, both at the margin and operating expense levels, as well as pursuing additional strategic acquisitions and dispositions. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern as determined by management. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

 14 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 2: DISCONTINUED OPERATIONS

 

On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d to a group led by executives of Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction of the Company. The Company received $2,029 in cash through September 30, 2017 and 560 shares of the Company’s common stock (including 525 shares that had been exchanged for the noncontrolling interest in September 2016) that was held by executives of Eco3d, which were canceled upon receipt. Additional payments of $30 will be received in November. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company had reflected amounts relating to Eco3d as a disposal group classified as held for sale at March 31, 2017 and has included amounts relating to Eco3d as part of discontinued operations for the six months ended September 30, 2017 and 2016. Eco3d had been included in the Services segment, and segment disclosures in Note 14 no longer include amounts relating to Eco3d following the reclassification to discontinued operations. There will be no significant continuing involvement with Eco3d.

 

Carrying amounts of major classes of assets and liabilities classified as held for sale and included as part of discontinued operations in the consolidated balance sheets consisted of the following: 

 

  

September 30,

2017

  

March 31,

2017

 
   (Unaudited)     
Cash  $     -   $34 
Accounts receivable, net of allowance   -    1,293 
Prepaid expenses   -    67 
Other current assets   -    10 
Current assets - held for sale  $-   $1,404 
           
Property and equipment, net  $-   $362 
Other assets   -    4 
Non-current assets - held for sale  $-   $366 
           
Accounts payable  $-   $67 
Accrued liabilities   -    396 
Current liabilities - held for sale  $-   $463 

 

Major line items constituting income (loss) of discontinued operations in the consolidated statements of operations for the six months ended September 30 consisted of the following:

 

   2017   2016 
Revenue from services  $188   $2,531 
Cost of services   103    942 
Gross profit   85    1,589 
Operating expenses   142    1,341 
Allocated interest expense   -    24 
Income (loss) of discontinued operations  $(57)  $224 

 

After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance due to the uncertainty of realizing income tax benefit for 2017, and the income tax provision for 2016 was considered immaterial. Thus, no separate tax provision or benefit relating to discontinued operations is included here or on the face of the consolidated statements of operations.

 

Gain on the sale of Eco3d of $636 was recognized in discontinued operations in the three months ended June 30, 2017. 

 

 15 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 3: REVENUE

 

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company early adopted effective April 1, 2017. No cumulative adjustment to accumulated deficit was required, and the early adoption did not have a material impact on our consolidated financial statements, as no material arrangements prior to the adoption were impacted by the new pronouncement.

 

The following table disaggregates the Company’s revenue by major source:

 

   Three months ended September 30, 2017   Three months ended September 30, 2016   Six months ended September 30, 2017   Six months ended September 30, 2016 
Revenue:                
Pioneer and Sable  $1,885   $3,872   $4,389   $6,260 
Zest Labs   20    17    21    22 
   $1,905   $3,889   $4,410   $6,282 

 

The $20 of Zest Labs revenues in the three months ended September 30, 2017 were from Software as a Service (“SaaS”) revenues from produce growers. Zest revenues prior to that period were from hardware sales. Pioneer and Sable revenues were from the sale of recycled plastic and products made from that plastic. There were no contract asset or contract liability balances at September 30, 2017 and March 31, 2017, respectively. We do not disclose the value of unsatisfied 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.

 

NOTE 4: INVENTORY

 

Inventory, net of reserves, consisted of the following:

 

   September 30,
2017
   March 31,
2017
 
   (Unaudited)     
         
Inventory  $3,265   $2,456 
Inventory reserves   (340)   (352)
Total  $2,925   $2,104 

 

 16 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 5: PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

  

September 30,

2017

  

March 31,

2017

 
   (Unaudited)     
Machinery and equipment  $2,931   $2,724 
Computers and software costs   406    406 
Furniture and fixtures   107    107 
Leasehold improvements   4    4 
Total property and equipment   3,448    3,241 
Accumulated depreciation and impairment   (1,151)   (933)
Property and equipment, net  $2,297   $2,308 

 

Depreciation expense for the six months ended September 30, 2017 and 2016 was $220 and $222, respectively, which includes $156 and $119, respectively, depreciation on manufacturing equipment that is classified as cost of product sales.

 

An impairment charge of $245 was recorded in March 2017 ($45 related to assets reclassified to held for sale and $200 for other equipment at Sable). The Company decided to outsource its densification process and therefore sold the densifiers and related equipment acquired in the Sable acquisition. An asset with a fair value of $5 was placed back in service, $58 of equipment was sold at a loss of $30 and the remainder of that equipment was written off. As described in Note 9 below, the ownership interest in Sable (that includes equipment and other assets) serves as collateral for the remaining outstanding convertible notes.

 

Additionally, the Company retired equipment valued at $34, with accumulated depreciation of $1 for a trade in of $2 cash for a net loss on disposition of $31 in the six months ended September 30, 2017. The total loss on disposition between the property and equipment and assets held for sale in the six months ended September 30, 2017 was $61.

 

 17 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 6: INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

   September 30,
2017
   March 31,
2017
 
   (Unaudited)     
Customer lists  $5,008   $5,008 
Patents   1,090    1,090 
Outsourced vendor relationships   1,016    - 
Non-compete agreements   419    - 
Goodwill, net of impairment   65    582 
Total intangible assets   7,598    6,680 
Accumulated amortization and impairment   (5,577)   (5,113)
Intangible assets, net  $2,021   $1,567 

 

The outsourced vendor relationships, non-compete agreements and $65 of goodwill were recorded as part of the acquisition of 440labs described in Note 16 below.

 

Amortization expense for the six months ended September 30, 2017 and 2016 was $371 and $201, respectively. Amortization amounts for the next five years are: $332, $630, $440, $117 and $75. The Company performed a review of its customers and business results at Sable in 2017 to assess the recoverability of the carrying value of intangibles. As a result, impairment charges of $98 against the customer lists and a related write-down of goodwill of $582 from the initially recorded amount of $1,264 were recorded in the six months ended September 30, 2017. Following that write-down, remaining goodwill of $65 relates to the 440labs acquisition.

 

NOTE 7: ACCRUED LIABILITIES

 

Accrued liabilities consisted of the following:

 

   September 30,
2017
  

March 31, 2017

 
   (Unaudited)     
Professional fees and consulting costs  $186   $1,777 
Inventory in transit   127    89 
Vacation and paid time off   390    359 
Payroll and employee expenses   123    163 
Legal fees   43    112 
Straight-line rent   91    95 
Other   171    25 
Total  $1,131   $2,620 

 

 18 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 8: NOTE PAYABLE

 

The Company had a note payable pursuant to a line of credit maintained with a bank. The note was secured by the accounts receivable, inventory and equipment of Sable and had a 5.5% interest rate with interest payable monthly and a balloon payment due on November 18, 2017. The note, formerly guaranteed by the former owner of Sable, then a stockholder of the Company, originated July 15, 2015 with a maximum amount of $1,500. The balance of the note was $1,500 for the period from acquisition on May 3, 2016 to March 16, 2017. The Company had pledged a $1,500 certificate of deposit as collateral, and the guaranty of the former owner of Sable was eliminated. The note had standard covenants, and the Company was not in default of any covenant. The note along with all accrued interest was repaid on March 17, 2017. Interest expense on the note for the six months ended September 30, 2016 was $28.

 

NOTE 9: LONG-TERM DEBT

 

Long-term debt consisted of the following:

 

   September 30,
2017
   March 31,
2017
 
   (Unaudited)     
Secured convertible promissory note  $500   $500 
Less: current portion   (500)   - 
Long-term debt, net of current portion  $-   $500 

 

The Company has a secured convertible promissory note (“convertible note”) bearing interest at 10% per annum, entered into on January 10, 2017 for $500 with the principal due in one lump sum payment on or before July 10, 2018. The convertible note was part of the financing the Company entered into in the three months ended March 31, 2017, that raised $4,300 (of a maximum of $5,000) in convertible notes ($700 of which were from related parties, see Note 10) bearing interest at 10% per annum. On March 30, 2017, $3,700 of these notes were converted (and $600 of the $700 in connection with the related parties) into shares of common stock, along with the related accrued interest on those notes. The interest is due and payable quarterly, in arrears, on December 31, 2017, and March 31, and June 30, 2018.

 

The Company granted note holders a security interest for the holder’s ratable share of the series notes in the Company’s ownership interest in Sable as collateral. The note holders had the right at the holders’ option to convert all or any portion of the principal amount at a conversion rate per share which ranges from $4.15 to $7.10 per share (the only non-related party note still outstanding has a conversion price of $4.50). In February 2017, the Company amended the convertible note whereby certain holders (not including related parties) received a warrant to purchase 10 shares of common stock for every $100 principal amount if the holder converted the note on or before March 31, 2017.

 

Interest expense on long-term debt for the six months ended September 30, 2017 and 2016 was $25 and $158 respectively.

 

See Note 10 for long-term debt transactions with related parties.

 

 19 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 10: RELATED-PARTY TRANSACTIONS

 

Long-term debt – related parties consisted of a $100 note payable purchased by the Company’s Chief Administrative Officer, Troy Richards, in February 2017, who declined the warrants. The convertible note has terms consistent with those described in Note 9 above, including being due in one lump sum payment on or before July 10, 2018 and remains outstanding as of September 30, 2017. The related party note is convertible into shares of common stock at a conversion price of $4.15.

 

In February 2017, in addition to Mr. Richards’ note, an independent director on the Company’s Board, who is a significant shareholder, purchased $500 of the series notes, and an officer of the Company purchased $100 of the series notes. The officers and director declined the warrants. The $600 of notes were converted in March 2017.

 

Interest expense on the convertible notes held by related parties for the six months ended September 30, 2017 was $5.

 

On February 28, 2017, the Company entered into a Securities Purchase Agreement related to the issuance and sale of up to 1,100 shares of common stock held by Randy May, Chairman of the Board and CEO, and Gary Metzger, an independent director on the Company’s Board and a significant shareholder. The purchase agreement is pursuant to the Company’s Form S-3 registration statement filed on August 17, 2016. The selling securityholders may sell or distribute the securities included in this prospectus supplement through underwriters, through agents, to dealers, in private transactions, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices. The Company will not receive any of the proceeds from sales of the common stock made by the selling securityholders.

 

NOTE 11: STOCKHOLDERS’ EQUITY

 

Ecoark Holdings Preferred Stock

 

On March 18, 2016, the Company created 5,000 shares of “blank check” preferred stock, par value $0.001. No preferred shares have been issued.

 

Ecoark Holdings Common Stock

 

The Company has 100,000 shares of common stock, par value $0.001 which were authorized on March 18, 2016.

 

In May 2017, the Company issued 2,500 shares of the Company’s common stock pursuant to a private placement offering for $9,106, net of expenses (see Securities Purchase Agreement – Institutional Funds below).

 

The Company issued 28 shares in the quarter ended June 30, 2017, valued at $125 and 37 shares in the quarter ended September 30, 2017, valued at $125, to members of the Board as compensation for their services.

 

During the six months ended September 30, 2017, the Company issued 20 shares to a consultant and 1,199 shares to employees in stock grants vested under the 2013 Ecoark Holdings Incentive Stock Plan (“2013 Incentive Stock Plan”). During the six months ended September 30, 2017, the Company issued 166 shares to employees in stock grants vested under the 2017 Ecoark Holdings Omnibus Incentive Plan (“2017 Omnibus Incentive Plan”). The total employee share-based compensation expense for the six months ended September 30, 2017 was $12,973. The Company acquired 195 shares of common stock from employees in lieu of amounts required to satisfy minimum tax withholding requirements of $780 upon vesting of the employees’ stock.

 

The Company issued 300 shares upon the execution of employment agreements with employees of 440labs valued at $1,500 recorded as share-based compensation for the three months ended June 30, 2017.

 

The Company issued 300 shares for the acquisition of 440labs valued at $1,500.

  

In May 2017, the Company issued 49 shares for the cashless exercise of 100 warrants to a consultant. The remaining 51 shares were forfeited.

 

 20 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d to a group led by executives of Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction of the Company. The Company received $2,029 in cash and 560 shares of the Company’s common stock that was held by executives of Eco3d, which shares were canceled.

 

Securities Purchase Agreement – Institutional Funds

 

On May 22, 2017, the Company completed a reserved private placement agreement related to the issuance and sale of 2,500 shares of common stock for $10,000 ($9,106 net of expenses) to institutional purchasers at $4.00 per share. The purchase agreement is pursuant to the Company’s Form S-3 registration statement filed on August 17, 2016. The purchasers also received warrants to purchase 1,875 shares of common stock equal to 50% of the purchaser’s shares for $5.50 for up to 5 years from the date the transaction completed. The investment bankers for the transaction received warrants to purchase 175 shares of common stock for $5.50 for up to 5 years, the same terms as the investors.

 

As of September 30, 2017, 46,565 total shares were issued and 46,370 shares were outstanding, net of 195 treasury shares.

 

Warrants

 

MSC had issued warrants for 15 shares (post-merger, formerly 3,785) that were converted into shares of common stock in accordance with the Merger agreement with Ecoark. Consistent with the terms of the Merger, warrants for 13 shares were converted to shares at the time of the Merger. The remaining warrants for 2 shares were exercised in a cashless exchange for shares during the second quarter of 2016.

 

During 2016, the Company issued 4,337 warrants as part of the private placement that was completed on April 28, 2016, of which 98 of these warrants were exercised for common shares totaling $487, leaving warrants for 4,239 shares outstanding that have a strike price of $5.00 per share and expire on December 31, 2018.

 

Warrants were issued in October 2016 to a consultant. The warrants were exercisable into 100 shares of common stock with a strike price of $2.50 per share that vested October 31, 2016 with an expiration date of October 31, 2018. In May 2017, 49 shares of the warrants were exercised in a cashless exchange and the remaining 51 shares were forfeited.

 

As discussed in Note 9, the Company on March 30, 2017 issued warrants to the convertible note holders that converted their notes into shares of common stock in accordance with the amended secured convertible promissory note. The warrants are exercisable into 310 shares of common stock with a strike price of $7.50 per share, and expire on December 31, 2018. The warrants were valued using the Black-Scholes model, which incorporated a volatility of 82% and a discount yield of 1.27%. The value of the warrants of $370 was included in interest expense for the three months ended March 31, 2017 and additional paid in capital.

 

On March 14, 2017, the Company issued 1,000 warrants to institutional investors that purchased 2,000 shares of common stock in a private placement. The warrants have a strike price of $5.00 and mature in March 2022. In addition, the brokers of the transaction received 140 warrants with the same terms as the investors.

 

As discussed above, on May 22, 2017, the Company issued 1,875 warrants to the institutional investors that purchased the 2,500 shares of common stock in the reserved private placement. The warrants have a strike price of $5.50 and mature in November 2022. In addition, the brokers of the transaction received 175 warrants with the same terms as the investors.

 

 21 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Changes in the warrants are described in the table below:

 

   Number of Warrants   Weighted
Average
Exercise
Price
   Weighted Average Remaining Contractual Life (Years) 
Balance at December 31, 2015   15   $35.00    1.0 
Granted   4,437   $4.94    2.0 
Exercised pre-Merger   (13)          
Exercised pre-Merger   (98)  $(5.00)     
Exercised cashless, post-Merger   (2)          
Forfeited   -           
Cancelled   -           
Balance at December 31, 2016   4,339   $4.94    2.0 
Granted   1,450   $5.53    4.3 
Exercised Cash   -           
Exercised Cashless   -           
Forfeited   -           
Cancelled   -           
Balance at March 31, 2017   5,789   $5.09    2.6 
Granted   2,050   $5.50    5.2 
Exercised Cash   -           
Exercised Cashless   (49)          
Forfeited   (51)          
Cancelled   -           
Balance at September 30, 2017   7,739   $5.26    3.3 
Intrinsic value of warrants  $-           

 

2013 Option Plan

 

On February 16, 2013, the Board of Directors of Ecoark approved the 2013 Ecoark Stock Option Plan (“2013 Option Plan”). The purposes of the 2013 Option Plan were to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants, and to promote the success of the business. The 2013 Option Plan was expected to contribute to the attainment of these objectives by offering employees, directors and consultants the opportunity to acquire stock ownership interests in Ecoark, and to thereby provide them with incentives to put forth maximum efforts for the success of Ecoark.

 

Awards under the 2013 Option Plan were only granted in the form of nonstatutory stock options (“Options”) to purchase Ecoark’s Series C Stock prior to the Merger with MSC. Under the terms of the 2013 Option Plan and the Merger, the Options converted into the right to purchase shares of the Company.

 

In May 2014, Ecoark had granted Options to purchase 693 shares to various employees and consultants of Ecoark. The Options had an exercise price of $1.25 per share and a term of 10 years. The Options were to vest over a three-year period as follows: 25% immediately; 25% on the first anniversary date; 25% on the second anniversary date; and 25% on the third anniversary date. During 2015 Ecoark issued additional Options on 625 shares of common stock. At the end of 2015, Options under the 2013 Option Plan were outstanding to purchase 1,318 shares of common stock. The total original number of Options to purchase 1,318 shares of Ecoark common stock was divided by two in conjunction with the exchange ratio required by the Merger agreement and converted to Options to purchase 659 shares of Ecoark Holdings with an adjusted exercise price of $2.50. In September 2016, the remaining vesting was accelerated to have those Options 100% vested. In 2016, the Company issued Options to purchase 125 shares of stock at a strike price of $2.50 per share to a consultant. These options vested immediately and expire on March 31, 2018. In the Company’s fourth quarter of 2016, an option holder forfeited 125 options and thus, at December 31, 2016, Options on 659 shares of the Company were outstanding with an adjusted exercise price of $2.50. The Board adjusted the expiration date of these options to March 28, 2018.

 

 22 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Management valued the Options utilizing the Black-Scholes model with the following criteria: stock price - $2.50; exercise price - $2.50; expected term – 10 years; discount rate – 0.25%; and volatility – 55%.

 

Options for 250 shares were issued to a consultant in 2017 with an exercise price of $2.50 and an expiration date of March 28, 2018, and Options were exercised for 25 shares in March 2017, at $2.50 per share providing $62 in cash to the Company. As of September 30, 2017, the number of Options outstanding was 884.

 

Changes in the Options under the 2013 Option Plan are described in the table below:

 

   Number of Options   Weighted
Average
Exercise
Price
   Weighted Average Remaining Contractual Life (Years) 
Balance at December 31, 2015   659   $2.50    2.1 
Granted   125   $2.50    0.4 
Exercised   -           
Forfeited   (125)  $2.50      
Balance at December 31, 2016   659   $2.50    1.2 
Granted   250   $2.50    1.0 
Exercised   (25)  $2.50      
Forfeited   -           
Balance at March 31, 2017   884   $2.50    1.0 
Granted   -           
Exercised   -           
Forfeited   -           
Balance at September 30, 2017   884   $2.50    0.8 
Intrinsic value of options  $309           

 

2013 Incentive Stock Plan

 

The 2013 Incentive Stock Plan was registered on February 7, 2013. Under the 2013 Incentive Stock Plan, the Company may grant incentive stock in the form of Stock Options, Stock Awards and Stock Purchase Offers of up to 5,500 shares of common stock to Company employees, officers, directors, consultants and advisors. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant. At the time of the Merger, 5,497 shares were available to issue under the 2013 Incentive Stock Plan. The Board has authorized blocks of incentive stock totaling 5,486 shares to be issued to various employees, consultants, advisors and directors of the Company through September 30, 2017 and 141 shares have been forfeited, leaving 152 shares available to grant.

 

The Company engaged the services of consultants to assist it with efforts to raise capital, identify potential acquisitions, recruit talent, and perform acquisition due diligence. In June 2017, the Company issued 20 shares to a consultant for grants that were fully vested with a grant value of $98.

 

The Company has issued 1,219 shares to employees for grants that were fully vested, with grant values of $6,089 during the six months ended September 30, 2017.

 

As of September 30, 2017, the Company has issued 2,219 shares for fully vested grants and granted awards for 3,129 shares that will be expensed through the completion of vesting at December 31, 2018, resulting in 152 shares available for award. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $12,968. Share-based compensation costs of approximately $6,800 for grants not yet recognized will be recognized as expense through December 31, 2018, subject to any changes for actual versus estimated forfeitures.

 

 23 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

A reconciliation of the shares available under the 2013 Incentive Stock Plan is presented in the table below through September 30, 2017.

 

   Number of Shares 

Available under the 2013 Incentive Stock Plan

   5,500 
Granted pre-Merger   (13)
Shares cancelled pre-Merger   10 
Available at the Merger date   5,497 
Shares granted post-Merger   (476)
Options granted post-Merger   - 
Balance at December 31, 2016   5,021 
Shares granted   (5,010)
Balance at March 31, 2017   11 
Shares granted   - 
Shares forfeited   141 
Balance at September 30, 2017   152 
Vested stock awards at September 30, 2017   2,225 

 

Shares issued under the 2013 Incentive Stock Plan through September 30, 2017:

 

   Number of Shares Issued 
Balance at December 31, 2015   3 
Issued post-merger   159 
Balance at December 31, 2016   162 
Issued   813 
Balance at March 31, 2017   975 
Issued   1,244 
Balance at September 30, 2017   2,219 

 

2017 Omnibus Incentive Plan

 

The 2017 Omnibus Incentive Plan was registered on June 14, 2017. Under the 2017 Omnibus Incentive Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 4,000 shares of common stock to Company employees, officers, directors, consultants and advisors are available under the 2017 Omnibus Incentive Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant. The Board has authorized awards totaling 1,916 shares to employees and directors of the Company through September 30, 2017, comprised of 611 incentive stock options, 1,105 of service-based restricted stock shares, 135 of performance-based restricted stock shares and 65 shares to the independent members of the Board.

  

The Company has issued 166 shares to employees for fully vested grants and granted awards for 1,685 shares that will be expensed through the completion of vesting at June 30, 2021. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $559. Share-based compensation costs of approximately $4,200 for grants not yet recognized will be recognized as expense through June 30, 2021 subject to any changes for actual versus estimated forfeitures.

 

On June 30, 2017, the Company issued 28 shares of common stock and on September 30, 2017, the Company issued 37 shares of common stock to independent directors that were fully vested with a grant value of $125 in each quarter, for a total of 65 shares with a grant value of $250. A total of $25 in shares was issued to each independent director for their participation on the Company’s Board in each quarter. The shares were issued based on the average closing share price of the Company’s stock for each quarter.

 

 24 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

The Company records share-based compensation in accordance with ASC 718 for employees and ASC 505 for non-employees, and has recorded share-based compensation of $241 for the six months ended September 30, 2017 relating to the options. Management valued the options utilizing the Black-Scholes model with the following criteria ranges: stock price - $3.02 to $3.76 exercise price - $3.02 to $3.76; expected term – 10 years; discount rate – 2.20% to 2.27%; and volatility – 89 to 94%. Changes in the options under the 2017 Omnibus Incentive Plan are described in the table below 

 

   Number of Options   Weighted Average Exercise Price   Weighted Average Remaining Contractual Life (Years) 
Granted   611           
Exercised   -           
Forfeited   -           
Balance at September 30, 2017   611   $3.38    9.7 
Intrinsic value of options  $-           

 

In June 2017, the Board authorized awards of 135 shares of restricted stock whose vesting is contingent upon annual reviews, which may include specific performance metrics. The values were based on grant date fair value as of June 28, 2017 ($3.36 per share), will be expensed through the completion of the vesting in 2020 and were accrued assuming that performance goals will be achieved. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $72.

 

A summary of the activity for performance grants as of September 30, 2017 and since inception in June 2017 is presented below:

 

   Number of
Performance
Shares
   Weighted Average Remaining Contractual Life (Years) 
Granted   135    2.7 
Forfeited   -      
Balance at September 30, 2017   135    2.7 
Vested stock awards at September 30, 2017   -      

 

 25 

 

  

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

In June 2017, the Board authorized awards of 1,105 shares of restricted stock whose vesting is contingent upon completion of periods of service to employees that vest through 2020. The values were based on grant date fair value of June 28, 2017 ($3.36 per share) and will be expensed through the completion of the vesting. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $1,328.

 

A summary of the activity for service-based grants as of September 30, 2017 and since inception in June 2017 is presented below:

  

   Number of
Grants
Issued
   Weighted Average Remaining Contractual Life (Years) 
Granted   1,105    2.7 
Forfeited   -      
Balance at September 30, 2017   1,105    2.7 

 

Share-based compensation costs of approximately $2,692 for performance and service grants not yet recognized will be recognized as expense through 2020, subject to any changes for actual versus estimated forfeitures.

 

A reconciliation of the shares available under the 2017 Omnibus Incentive Plan is presented in the table below through September 30, 2017:

 

   Number of Shares 
Available under the Omnibus Incentive Plan   4,000 
Shares granted   (1,916)
Shares forfeited   - 
Balance at September 30, 2017   2,084 
Vested stock awards at September 30, 2017   232 

 

Shares issued under the 2017 Omnibus Incentive Plan through September 30, 2017:

 

   Number of Shares Issued 
     
Issued   232 
Balance at September 30, 2017   232 

 

 26 

 

  

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 12: COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company leases many of its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements. These leases expire at various dates through 2021. Rent expense was approximately $332 and $284 for the six months ended September 30, 2017 and 2016, respectively. The amount for 2017 and 2016 includes $153 and $119 in rent for Sable’s production facility which is included in cost of product sales. Future minimum lease payments required under the operating leases are as follows: 2018 - $315, 2019 - $578, 2020 - $496, 2021 - $386.

 

Corporate Card Program

 

The Company has established a corporate credit card program with a bank and has approximately $265 in an interest-bearing account at the bank to secure charges from the corporate card program.

 

Royalties

 

The Company has cross-licensing agreements with several technology companies that require payment of royalties upon the sale and or use of certain patented technologies. One of these agreements requires minimum annual payments of $50 until the last of the patents expire.

 

Contract Related Fees

 

Prior to the Merger, a subsidiary of the Company, as part of a contract to develop its products, has agreed to pay the contractor 1.5% of future New York state manufactured sales, and 5% of future non-New York state manufactured sales until the entire funds paid by a contractor have been repaid (or three times the funds if non-New York manufactured), or 15 years after start of sales. As of September 30, 2017, the subsidiary has $1,252 of contract-related expenses. These funds will be owed to the contractor, as described above, contingent upon the sale of the subsidiary’s product related to that contract.

 

The Company has determined that a liability need not be accrued because management has determined that it is not probable sales will occur in this technology.

 

 27 

 

  

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 13: INCOME TAXES

 

The Company accounts for income taxes under ASC Topic 740 Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement basis and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company has a net operating loss carryforward for tax purposes totaling approximately $82,880 at September 30, 2017, expiring through the year 2037. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after certain ownership shifts.

 

The provision (benefit) for income taxes for the six months ended September 30, 2017 and 2016 differs from the amount expected as a result of applying statutory tax rates to the losses before income taxes principally due to establishing a valuation allowance to fully offset the income tax benefit other than minimum state income taxes payable of $7. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. As the achievement of required taxable income is uncertain, the Company has recorded a full valuation allowance against deferred tax assets.

 

The Company’s deferred tax assets are summarized as follows:

    

  

September 30,

2017

  

March 31,

2017

 
Net operating loss carryover  $27,961   $20,671 
Depreciable and amortizable assets   1,628    1,464 
Share-based compensation   4,542    1,003 
Accrued liabilities   167    122 
Inventory reserve   116    119 
Allowance for bad debts   162    154 
Other   328    4 
Less: valuation allowance   (34,904)   (23,537)
Net deferred tax asset  $-   $- 

 

After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at September 30, 2017 and March 31, 2017, due to the uncertainty of realizing the deferred income tax assets. The valuation allowance increased by $11,367 in the six months ended September 30, 2017. The Company has not identified any uncertain tax positions and has not received any notices from tax authorities.

 

 28 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 14: SEGMENT INFORMATION

 

The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions. As of September 30, 2017, and for the six months ended September 30, 2017 and 2016, the Company operated in two segments. The segments are Pioneer (principally consisting of Pioneer Products’ operations consisting of sales of recycled plastic products and materials) and Zest Labs (principally consisting of costs associated with developing Zest Labs solutions). Amounts related to Eco3d’s mapping, modeling and consulting services business have been reclassified to discontinued operations and thus are excluded from the amounts in the tables below. The reclassification of Eco3d to discontinued operations caused the reportable segments to change from the previously reported Products and Services to the current reporting of Pioneer and Zest Labs. The principal change was the removal of Eco3d from the Services segment. Prior period segment information has been restated as a result. Home office costs are allocated to the two segments based on the relative support provided to those segments.

 

Three months ended September 30, 2017  Pioneer   Zest Labs   Total 
Segmented operating revenues  $1,885   $20   $1,905 
Cost of revenues   2,276    19    2,295 
Gross profit (loss)   (391)   1    (390)
Total operating expenses net of depreciation, amortization and impairment, and interest expense, net   311    10,220    10,531 
Depreciation, amortization and impairment   828    196    1,024 
Interest expense, net of interest income   -    15    15 
Loss from continuing operations before income taxes  $(1,530)  $(10,430)  $(11,960)
Segmented assets               
Property and equipment, net  $2,117   $180   $2,297 
Intangible assets, net  $11   $2,010   $2,021 
Capital expenditures  $181   $10   $191 

 

Three months ended September 30, 2016  Pioneer   Zest Labs   Total 
Segmented operating revenues  $3,872   $17   $3,889 
Cost of revenues   3,832    12    3,844 
Gross profit   40    5    45 
Total operating expenses net of depreciation, amortization and impairment, and interest expense, net   502    5,868    6,370 
Depreciation, amortization and impairment   90    60    150 
Interest expense, net of interest income   20    60    80 
Loss from continuing operations before income taxes  $(572)  $(5,983)  $(6,555)
Segmented assets               
Property and equipment, net  $2,953   $217   $3,170 
Intangible assets, net  $2,187   $810   $2,997 
Capital expenditures  $123   $-   $123 

 

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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

Six months ended September 30, 2017  Pioneer   Zest Labs   Total 
Segmented operating revenues  $4,389   $21   $4,410 
Cost of revenues   5,056    33    5,089 
Gross (loss)   (667)   (12)   (679)
Total operating expenses net of depreciation, amortization and impairment, and interest expense, net   1,568    22,666    24,234 
Depreciation, amortization and impairment   881    324    1,205 
Interest expense, net of interest income   -    30    30 
Loss from continuing operations before income taxes  $(3,116)  $(23,032)  $(26,148)
Segmented assets               
Property and equipment, net  $2,117   $180   $2,297 
Intangible assets, net  $11   $2,010   $2,021 
Capital expenditures  $214   $22   $236 

 

Six months ended September 30, 2016  Pioneer   Zest Labs   Total 
Segmented operating revenues  $6,260   $22   $6,282 
Cost of revenues   6,269    11    6,280 
Gross profit (loss)   (9)   11    2 
Total operating expenses net of depreciation, amortization and impairment, and interest expense, net   633    11,553    12,186 
Depreciation, amortization and impairment   148    112    260 
Interest expense, net of interest income   37    130    167 
Loss from continuing operations before income taxes  $(827)  $(11,784)  $(12,611)
Segmented assets               
Property and equipment, net  $2,953   $217   $3,170 
Intangible assets, net  $2,187   $810   $2,997 
Capital expenditures  $232   $77   $309 

 

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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

NOTE 15: CONCENTRATIONS

 

During the six months ended September 30, 2017 and 2016, the Company had three major customers, respectively, comprising 73% of revenue. A major customer is defined as a customer that represents 10% or greater of total sales. Additionally, the Company had three and four customers as of September 30, 2017 and 2016, respectively, with accounts receivable balances of 74% of the total accounts receivable at both dates.

 

In addition, during the six months ended September 30, 2017 and 2016, the Company had one major vendor comprising 32% and 30% of purchases, respectively. A major vendor is defined as a vendor that represents 10% or greater of total purchases. Additionally, the Company had two vendors as of September 30, 2017 and March 31, 2017 with accounts payable balances of 46% and 42% respectively, of total accounts payable.

 

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

 

NOTE 16: ACQUISITIONS

 

Sable

 

On May 3, 2016, the Company entered into a Share Exchange Agreement (the “Agreement”) by and among the Company, Pioneer Products, Sable, and the holder of all of Sable’s membership interests, an entity controlled by a stockholder of the Company.

 

The Company issued 2,000 shares of the Company’s common stock (the “Shares”) in exchange for all of Sable’s membership interests. Sable has since been a wholly-owned subsidiary of Pioneer Products.

 

The seller was subject to a lock-up agreement (the “Lock-Up Agreement”) that released shares from the Lock-Up Agreement over a period of one year (the “Lock-Up Period”). Under the Lock-Up Agreement, the seller was permitted to sell 33.3% of the Shares received by the seller after the six-month anniversary of the closing of the transaction. Thereafter, an additional 33.3% of the Shares was released at the end of each subsequent three-month period until the end of the Lock-Up Period.

 

No cash was paid relating to the acquisition of Sable. Sable operates a polymer manufacturing facility north of Atlanta, Georgia.

 

The Company acquired the assets and liabilities noted below in exchange for the 2,000 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:

 

Cash  $41 
Receivables, net   1,250 
Inventory   759 
Property and equipment   2,822 
Identifiable intangible assets   1,028 
Goodwill   1,264 
Other assets   36 
Accounts payable and other liabilities   (883)
Notes payable and current debt   (2,100)
Long-term debt   (431)
   $3,786 

 

The intangible assets represent customer lists that were being amortized over three years. The goodwill recognized reflected expected synergies from combining operations of Sable and the Company as well as intangible assets that did not qualify for separate recognition including polymer formulas and formulations. The goodwill is not expected to be deductible for tax purposes. The goodwill was not amortized but was tested for impairment. As a result of the impairment testing, the remaining balance of goodwill was written off, and the unamortized intangible assets were fully impaired. Since the acquisition, Sable has recorded $7,527 in revenues (net of intercompany elimination) and a loss of $5,220 that are both included in the consolidated results.

 

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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

The following table shows pro-forma results for the six months ended September 30, 2016 as if the acquisition had occurred on April 1, 2016. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Sable and the Company.

   

Revenues  $6,782 
Net loss attributable to controlling interest  $(13,192)
Net loss per share  $(0.54)

 

440labs

 

On May 18, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”) with Zest Labs, 440labs, SphereIt, LLC, a Massachusetts limited liability company (“SphereIt”) and three of 440labs’ executive employees. Pursuant to the Exchange Agreement, on May 23, 2017 the Company acquired all of the shares of 440labs in exchange for 300 shares of the Company’s common stock issued to SphereIt. 440labs’ three executive employees signed employment agreements pursuant to which each of the three executive employees received 100 shares of the Company’s common stock and became employed by Zest Labs.

 

No cash was paid relating to the acquisition of 440labs. 440labs is a software development and information solutions provider for cloud, mobile, and IoT applications. 440labs’ experienced leadership and engineering teams will augment Zest Labs’ development of modern, enterprise scale solutions that robustly connect to distributed IoT deployments. 440labs blends onshore and offshore resources to optimize development and provide extended runtime operations coverage, critical to broad-based deployments.

 

The Company acquired the assets and liabilities noted below in exchange for the 300 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:

  

Identifiable intangible assets  $1,435 
Goodwill   65 
   $1,500 

 

The primary business of 440labs is providing development services to Zest Labs. In consolidation, the revenues of 440labs prior to the acquisition would have been eliminated against the expenses of Zest Labs that were paid to 440labs, resulting in an insignificant impact to the net losses of the Company. The goodwill is not expected to be deductible for tax purposes. The goodwill will not be amortized but will be tested at least annually for impairment.

 

NOTE 17: SUBSEQUENT EVENTS

 

On September 25, 2017, Charles Rateliff notified the Company that he would be voluntarily relinquishing his positions as Chief Financial Officer and Treasurer, and as a member of the Board, effective October 1, 2017. Following his departure, Mr. Rateliff will continue as an advisor to the Company. Upon relinquishment of the position as Chief Financial Officer and Treasurer, Mr. Rateliff forfeited 150 shares in the 2017 Omnibus Incentive Plan. In his capacity as an advisor to the Company, Mr. Rateliff will receive 75 shares of stock grants under the 2017 Omnibus Incentive Plan of which 25 shares vested upon commencement of the advisor agreement and were issued October 1, 2017, 25 shares vest on April 1, 2018 and 25 shares vest based on the earliest of the Company achieving a performance metric or October 1, 2018.

 

Effective October 13, 2017, the Compensation Committee of the Board of Directors of the Company issued new option awards to individuals in replacement of existing restricted stock and restricted stock unit awards previously granted. In addition, the Committee approved new option awards that vest over a four-year period to induce certain employees to accept the replacement options, to compensate them for diminution in value of their existing awards and in consideration of a number of other factors, including each individual’s role and responsibility with the Company, their years of service to the Company, and market precedents and standards for modification of equity awards. With respect to the replacement options, grantees agreed to forfeit the existing awards covering 2,303 shares of the Company’s common stock and were granted the replacement options to purchase an equal number shares of Company common stock at an exercise price set at 100% of the fair market value of the Company’s stock price on the effective date of the grants (October 13, 2017). In consideration of the agreements, the majority of the replacement options vested immediately upon grant. The remaining replacement options will vest in 12 equal installments, with the first installment vesting on January 15, 2018, and additional installments vesting on the last day of each of the eleven successive three-month periods, subject to continued employment by the Company. The replacement options were issued under the 2017 Omnibus Incentive Plan or 2013 Incentive Stock Plan to correspond with the plan under which the existing awards were issued. With respect to the new options, the individuals were granted options to purchase 2,909 shares of Company common stock that vest at a rate of 25% per year on October 13th of each year from 2018 to 2021, subject to continued employment by the Company. As with the replacement options, the new options have an exercise price set at 100% of the fair market value of the Company’s stock price on the effective date of the grant. The new options were not granted under any of the Company’s existing equity compensation plans. The modifications referred to above are expected to result in incremental expense of $6,048 being recorded in the Company’s third fiscal quarter.

 

Subsequent to September 30, 2017, the Company has issued 64 shares of common stock pursuant to stock awards granted from the 2013 Incentive Stock Plan and 75 shares of common stock pursuant to stock awards granted from the 2017 Omnibus Incentive Plan. The Company acquired 42 shares of common stock from employees in lieu of amounts required to satisfy minimum withholding requirements upon vesting of the employees’ stock.

 

On October 26, 2017, the Company entered into a consulting agreement for $8 per month-to-month basis unless otherwise terminated and agreed to issue warrants for 75 shares of common stock at $2.10 per share, vesting at 20% per month and with a term of five years.

 

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

 

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). 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. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words. Such forward-looking statements may be contained in the sections “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Notes to Consolidated Financial Statements (Unaudited)” among other places in this Form 10-Q. 

 

Dollar amounts and number of shares below are expressed in thousands, except per share amounts.

 

Ecoark Holdings, Inc.

 

Ecoark Holdings, Inc. (“Ecoark Holdings”) is a Nevada corporation incorporated on November 19, 2007 that has developed over the years through key acquisitions described below and organic growth. Ecoark Holdings is an innovative AgTech company that is focused on modernizing the post-harvest fresh food supply chain for a wide range of organizations including growers, distributors and retailers. The Company’s Zest Fresh solution, a breakthrough approach to quality management of post-harvest fresh food, is specifically designed to help substantially reduce the $161,000,000 amount of food loss the U.S. experiences each year. Ecoark Holdings operates through two wholly-owned operating subsidiaries, Ecoark, Inc. (“Ecoark”) and Magnolia Solar, Inc. (“Magnolia Solar”). Further, Ecoark has two operating subsidiaries: Zest Labs, Inc. (“Zest Labs” or “Zest”) and Pioneer Products, LLC (“Pioneer Products” or “Pioneer”). The subsidiary Eco3d, LLC (“Eco3d”) was sold on April 14, 2017 and is reported as discontinued operations in the consolidated financial statements in this report.

 

Our principal executive offices are located at 3333 S. Pinnacle Hills Parkway, Suite 220, Rogers, Arkansas 72758, and our telephone number is (479) 259-2977. Our website address is http://ecoarkusa.com/. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and are not considered part of, this report.

 

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Acquisition of Sable

 

On May 3, 2016, the Company entered into a share exchange agreement by and among the Company, Pioneer Products, Sable Polymer Solutions, LLC, an Arkansas limited liability company (“Sable”), and the holder of all of Sable’s membership interests. The Company issued 2,000 shares of the Company’s common stock in exchange for all of Sable’s membership interests. Sable has since been a wholly-owned subsidiary of Pioneer Products.

 

Sale of Eco3d

 

On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d to a group led by executives of Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction of the Company. The Company received $2,029 in cash, future payments of $30 to be received and 560 shares of the Company’s common stock that were held by executives of Eco3d, which shares were canceled. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company reflected amounts relating to Eco3d as a disposal group classified as held for sale at March 31, 2017 and included them as part of discontinued operations for the six months ended September 30, 2017 and 2016. Eco3d had been included in the Services segment, and segment disclosures no longer include amounts relating to Eco3d following the reclassification to discontinued operations. There will be no significant continuing involvement with Eco3d. Gain on the sale of $636 was recognized in the Company’s quarter ended June 30, 2017.

 

Acquisition of 440 Labs

 

On May 18, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”) with Zest Labs, 440labs, Inc., a Massachusetts corporation (“440labs”), SphereIt, LLC, a Massachusetts limited liability company (“SphereIt”) and three of 440labs’ executive employees. Pursuant to the Exchange Agreement, on May 23, 2017 the Company acquired all of the shares of 440labs in exchange for 300 shares of the Company’s common stock issued to SphereIt. 440labs is a cloud and mobile software developer which is now a subsidiary of Zest Labs. 440labs’ three executive employees signed employment agreements pursuant to which each of the three executive employees received 100 shares of the Company’s common stock and became employed by Zest Labs.

 

New Corporate Strategy

 

On September 26, 2017, the Company announced that its Board of Directors has unanimously approved a new corporate strategy. The Company is transitioning from a diversified holding company into a company focused solely on its Zest Labs asset. The Company will explore divesting all non-core holdings and will appropriate all proceeds toward working capital for Zest. The Company will be focusing on three separate areas: The primary focus will continue to be the commercialization of the Zest Fresh solution at both retailers and suppliers across the country and abroad. The next area will be on licensing, partnerships, or joint ventures to apply a branding of the Zest Fresh certification to various perishable consumer goods and products. The final area will be to identify any bolt-on technologies that can be acquired to open up new sales and distribution channels for the Zest solution.

 

Description of Business

 

Ecoark Holdings operates through two wholly-owned operating subsidiaries, Ecoark and Magnolia Solar. Further, Ecoark has two operating subsidiaries: Zest Labs and Pioneer Products.

 

Zest Labs

 

Zest Labs’ Zest Data Services is a secure, multi-tenant cloud-based data collection platform for aggregating and real-time permission-based sharing and analysis of information. Zest Fresh, a fresh food management solution that utilizes the Zest Data Service platform, focuses on three primary value propositions – consistent food quality, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence on every pallet of delivered fresh food. Zest Delivery offers real-time monitoring and control for prepared food delivery containers, helping delivery and dispatch personnel ensure the quality and safety of delivered food. Zest Labs was previously known as Intelleflex Corporation. Effective on October 28, 2016, Intelleflex Corporation changed its name to Zest Labs, Inc. to align its corporate name with its mission and the brand name of its products and services.

 

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

 

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

 

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

 

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

 

Zest Labs currently holds rights to 68 U.S. patents (four additional patents pending), numerous related foreign patents, and U.S. copyrights relating to certain aspects of its Zest software, hardware devices including Radio-Frequency Identification (“RFID”) technology, software, and services. In addition, Zest Labs has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services,” and the Zest logo, and numerous other trademarks and service marks. Many of Zest Labs’ products have been designed to include licensed intellectual property obtained from third-parties. Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates.

 

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

 

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

 

The acquisition of 440labs in May 2017 allowed Zest Labs to internally maintain its software development and information solutions for cloud, mobile, and IoT applications. 440labs has been a key development partner with Zest Labs for more than four years, contributing its expertise in scalable enterprise cloud solutions and mobile applications.

 

Pioneer Products

 

Pioneer Products began by creating new consumer products using plastic reclaimed from post-consumer and retailers’ waste streams. One of these products is Pioneer Products’ “closed-loop” 45-gallon trash can. Pioneer Products generates revenue from the sale of products such as plastic trash cans to 3,700 retail stores of the largest retailer in the continental U.S., Walmart, a major customer of the Company. Pioneer Products’ competitors include large consumer products companies such as Rubbermaid and Hefty. Pioneer’s offerings enable Ecoark to play a key role in supporting and working to achieve one of Walmart’s goals of retail-level sustainability: reduction of waste within its supply chain and operations.

 

The acquisition of Sable in May 2016 allowed Pioneer to purchase, process and sell quality post-consumer and post-industrial plastic materials. In addition to providing plastic for Pioneer’s trash cans, Sable sells to other customers in the plastics processing industry.

 

Magnolia Solar

 

Magnolia Solar is principally engaged in the development and commercialization of nanotechnology-based, high-efficiency, thin-film technology that can be deposited on a variety of substrates, including glass and flexible structures. Magnolia Solar believes that this technology has the potential to capture a larger part of the solar spectrum to produce high-efficiency solar cells and incorporates a unique nanostructure-based antireflection coating technology to possibly further increase the solar cell’s performance. If these goals are met, there is the potential of significantly reducing the cost per watt. Since its inception, Magnolia Solar has not generated material revenues or earnings as a result of its activities. In September 2017, the U.S. Air Force Research Laboratory awarded Magnolia Solar a fixed price contract for research that is expected to provide $150 in funding through April 2018. The first payment of $30 was received in October 2017. Magnolia Solar currently holds 8 U.S. patents related to its technologies.

 

Competition

 

The Company’s subsidiaries operate in markets for products and services that are highly competitive and face aggressive competition in all areas of their business.

 

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

 

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Pioneer Products competes in the market for recycled products to support sustainability programs of its customers. There are currently hundreds of sustainability programs available in the market. These programs are offered through retailers, manufacturers, and service providers. Several competitors operating in this industry are vertically integrated and offer recycled products similar to those sold by Pioneer.

 

The market for electricity from renewable sources—the market in which Magnolia Solar competes—is still evolving and is dependent on government incentives and subsidies in the U.S. Several large companies and some foreign nation states aggressively compete to expand their portfolio of products/services for renewable energy solutions. Intense competition in the solar power energy sector has created financial pressures for many market participants.

 

Sales and Marketing

 

We sell our products and services principally through direct sales efforts and the utilization of third-party agents.

 

Research and Development

 

We have devoted a substantial amount of our resources to software and hardware development activities in recent years, principally for the Zest initiatives. Ecoark Holdings believes that, analyzing the competitive factors affecting the market for the solutions and services its subsidiaries provide, its products and services compete favorably by offering integrated solutions to customers. The Company has incurred research and development expenses of $3,232 and $3,378 in the six months ended September 30, 2017 and 2016, respectively, to develop its solutions and differentiate those solutions from competitive offerings. We incurred no capitalized software development costs in the six months ended September 30, 2017 and 2016.

 

Intellectual Property

 

Ecoark Holdings and its subsidiaries have had 76 patents issued by the United States Patent and Trademark Office, and about 22 additional patent applications are currently pending.

 

RESULTS OF OPERATIONS

 

Overview

 

The discussion below addresses the Company’s operations and liquidity which were significantly impacted by the acquisitions of Sable in May 2016, 440labs in May 2017 and the sale of Eco3d in April 2017 as described above. No activity from 440labs and only five months of activity from Sable are included in the 2016 results for the six months ended September 30 as the Sable acquisition occurred May 3, 2016. Results from Eco3d are included as discontinued operations in the statements of operations. Therefore, Eco3d revenues and expenses are not included in the amounts and discussion of results of continuing operations below, except in the Net Loss summary.

 

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Results of Continuing Operations for the Three Months Ended September 30, 2017 and 2016

 

Revenues, Cost of Revenues and Margins

 

The Company’s principal source of revenues in 2017 and 2016 was Pioneer Products’ sale of recycled plastic products and materials, which includes the sales of Sable, its wholly-owned subsidiary. Pioneer sales for the three months ended September 30, 2017 decreased to $1,885 from $3,872 during the same period in 2016, a decrease of $1,987 or 51% due primarily to Sable’s business plan to restructure its customer base and establish the foundation to enhance sales prices and volumes and not engaging in brokerage sales. Pioneer had a small decrease in sales of consumer trash cans made from recycled materials due to fewer promotions by a customer.

 

Zest Labs generated its first Software as a Service (“SaaS”) revenue associated with deploying the Zest Fresh solution to multiple growers of fresh produce during the quarter.

 

The Company’s cost of revenues for the three months ended September 30, 2017 and 2016 was also principally from Pioneer, including Sable. Cost of revenues for Pioneer of $2,276 in 2017 decreased $1,556 from the same period in 2016, or 41%. The decrease in cost of revenues resulted primarily from Sable due to the aforementioned restructure of its customer base and associated restructure of its vendor base. Sable also did not engage in brokerage sales in 2017.

 

Resulting margins on Pioneer sales were negative 21% in 2017 or a gross loss of $391 compared to a small gross profit of $40 in 2016. The worsening margin in 2017 reflects lower sales volumes that prevented Sable from covering fixed overhead costs. Sable also converted its inventory to a perpetual average cost method to support the manufacturing of product associated with the aforementioned changes.

 

Operating Expenses

 

Operating expenses for the three months ended September 30, 2017 were $11,494 as compared to $6,495 for the same period in 2016. The increase of $4,999 was primarily attributable to the increase in operating expenses for our Zest Labs segment, including non-cash share-based compensation in 2017 and the impairment of goodwill and identifiable intangible assets relating to Sable of $675. The Pioneer operational activities described above are charged with direct allocations for required home office support. Other operating expenses described below, except for the impairment of Sable assets, were allocated to the Zest Labs segment to reflect the considerable resources provided to Zest Labs.

 

Salaries and Salary Related Costs

 

Salaries and related costs for the three months ended September 30, 2017 were $7,479 compared to $1,567 for the three months ended September 30, 2016. The $5,912 increase was due to share-based compensation of $6,161 in 2017 compared to $565 in 2016 that did not require cash payments and salaries and related costs related to the acquisition of 440labs in May 2017.

 

The Company elected to make stock awards a significant part of the total compensation packages offered in order to provide incentives for employees without requiring cash expenditures at this stage of the Company’s development. This also aligns employee goals with those of stockholders. The 2017 cost was principally derived from amortization of stock awards granted in March 2017 under the 2013 Incentive Stock Plan and amortization of stock awards under the 2017 Omnibus Incentive Plan that amounted to $6,164 in the quarter ended September 30, 2017. Under those award programs, the Company issues shares of Company stock to employees’ accounts and has engaged a broker-dealer to “sell to cover” a sufficient number of shares from the employees’ accounts to cover the required taxes related to the income attributable to the employees. The cost of the awards is amortized over the expected service period of the employees.

 

The 2016 expense represented estimates of stock option expense related to the 2013 Incentive Stock Plan calculated using a Black-Scholes model, results of which can vary based on assumptions utilized. Additional information on equity expense can be found in Note 11 to the consolidated financial statements, which complies with critical accounting policies driven by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 718-10.

 

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Professional Fees and Consulting

 

Professional fees and consulting expenses for the three months ended September 30, 2017 of $833 were down $848, or 50% from $1,681 incurred for the three months ended September 30, 2016. The decrease was due primarily to consultant services associated with a pilot in 2016, offset by $319 of share-based compensation in 2017 related to shares awarded to consultants.

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the three months ended September 30, 2017 were $499 compared with $662 for the three months ended September 30, 2016. The 25% decrease was principally due to efforts to control general and administrative costs including travel and travel-related costs in 2017.

 

Depreciation, Amortization and Impairment

 

Depreciation, amortization and impairment expenses for the three months ended September 30, 2017 were $1,024 compared to $150 for the three months ended September 30, 2016 (net of $89 and $73 included in cost of product sales related to production equipment at Sable for 2017 and 2016, respectively). The $874 increase primarily resulted from the impairment of intangible assets of Sable of $675 and the acquisition of 440labs in May 2017 and the amortization of the related identifiable intangible assets for the period subsequent to the May 23, 2017 acquisition.

 

Research and Development

 

Research and development expense decreased $776 or 32% to $1,659 in the three months ended September 30, 2017 compared with $2,435 during the same period in 2016. These costs related to development of the Zest Fresh solution. Pilots of the solution expanded in 2017 and additional wages and development costs for research and development activities were incurred. These increases were more than offset by consulting costs related to the pilot in 2016 that did not recur in 2017. Significant research and development expenditures related to Zest Fresh are expected to continue.

 

Interest Expense

 

Interest expense, net of interest income, for the three months ended September 30, 2017 was $15 as compared to $80 for the three months ended September 30, 2016. The $65 decrease is the result of the retirement of $2,327 of debt during the three-month transition period ended March 31, 2017. The only debt now outstanding is $600 of convertible notes with an annual interest rate of 10%.

 

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Net Loss

 

Net loss for the three months ended September 30, 2017 was $11,967 as compared to $6,513 for the three months ended September 30, 2016. The $5,454 increase in net loss was primarily due to the $6,040 increase in non-cash share-based compensation and the $675 from the impairment of intangible assets of Sable, offset by the $848 decrease in professional fees and $776 decrease in research and development. As described in Note 13 to the consolidated financial statements, the Company has a net operating loss carryforward for income tax purposes totaling approximately $82,880 at September 30, 2017 that can potentially be utilized to reduce future income taxes. A valuation allowance has been estimated such that no deferred tax assets have been recognized in the financial statements, and no tax benefit has been accrued for either continuing or discontinued operations.

 

Results of Continuing Operations for the Six Months Ended September 30, 2017 and 2016

 

Revenues, Cost of Revenues and Margins

 

The Company’s principal source of revenues in 2017 and 2016 was Pioneer Products’ sale of recycled plastic products and materials, which includes the sales of Sable, its wholly-owned subsidiary. Pioneer sales for the six months ended September 30, 2017 decreased to $4,389 from $6,260 during the same period in 2016, a decrease of $1,871 or 30% due primarily to Sable’s business plan to restructure its customer base and establish the foundation to enhance sales prices and volumes and not engaging in brokerage sales. Pioneer had a small decrease in sales of consumer trash cans made from recycled materials due to fewer promotions by a customer.

 

Zest Labs generated its first Software as a Service (“SaaS”) revenue associated with deploying the Zest Fresh solution to multiple growers of fresh produce during the three months ended September 30, 2017 and small amounts of revenue from hardware sales in the prior quarter.

 

The Company’s cost of revenues for the six months ended September 30, 2017 and 2016 was also principally from Pioneer, including Sable. Cost of revenues for Pioneer of $5,056 in 2017 decreased $1,213 from the same period in 2016, or 19%. The decrease in cost of revenues resulted primarily from Sable due to the aforementioned restructure of its customer base and associated restructure of its vendor base. Sable also did not engage in brokerage sales in 2017.

 

Gross loss on Pioneer sales was $667 in 2017 compared to $9 in 2016. The worsening margin in 2017 reflects lower sales volumes that prevented Sable from covering fixed overhead costs. Sable also converted its inventory to a perpetual average cost method to support the manufacturing of product associated with the aforementioned changes.

  

Operating Expenses

 

Operating expenses for the six months ended September 30, 2017 were $25,378 as compared to $12,421 for the same period in 2016. The increase of $12,957 was primarily attributable to the increase in operating expenses for our Zest Labs segment, including share-based compensation in 2017. The Pioneer Products operational activities described above are charged with direct allocations for required home office support. Other operating expenses described below were allocated to the Zest Labs segment to reflect the considerable resources provided to Zest Labs.

 

Salaries and Salary Related Costs

 

Salaries and related costs for the six months ended September 30, 2017 were $17,157 compared to $2,848 for the six months ended September 30, 2016. The $14,309 increase was almost entirely due to share-based compensation of $14,714 in 2017 compared to $877 in 2016 that did not require cash payments and salaries and related costs associated with the acquisition of 440labs in May 2017.

 

The Company elected to make stock awards a significant part of the total compensation packages offered in order to provide incentives for employees without requiring cash expenditures at this stage of the Company’s development. This also aligns employee goals with those of stockholders. The 2017 cost was principally derived from amortization of stock awards granted in March 2017 under the 2013 Incentive Stock Plan and amortization of stock awards under the 2017 Omnibus Incentive Plan that amounted to $13,214 in the six months ended September 30, 2017. Under that award program, the Company issues shares of Company stock to employees’ accounts and has engaged a broker dealer to “sell to cover” a sufficient number of shares from the employees’ accounts to cover the required taxes related to the income attributable to the employees. The cost of the awards is amortized over the expected service period of the employees. In addition to these costs, $1,500 of non-cash share-based compensation was expensed in 2017 related to shares issued upon the execution of employment agreements with employees of 440labs when that entity was acquired in May 2017 and those individuals became employees of Zest Labs.

 

The 2016 expense represented estimates of stock option expense calculated using a Black-Scholes model, results of which can vary based on assumptions utilized. Additional information on equity expense can be found in Note 11 to the consolidated financial statements, which complies with critical accounting policies driven by FASB ASC 718-10.

 

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Professional Fees and Consulting

 

Professional fees and consulting expenses for the six months ended September 30, 2017 of $2,741 were down $2,100, or 43% from $4,841 incurred for the six months ended September 30, 2016. The decrease was due primarily to $2,500 of non-cash share-based compensation to investment and legal advisors in 2016 related to the Merger described in Note 1 to the consolidated financial statements and consulting services associated with a Zest pilot in 2016, partially offset by the accelerated amortization of share-based compensation in 2017 previously recorded as a prepaid asset but expensed upon termination of a contract with a consultant engaged by the Company, along with additional share-based compensation for a small number of consultants.

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the six months ended September 30, 2017 were $1,043 compared with $1,094 for the six months ended September 30, 2016. The 5% decrease was principally due to efforts to control general and administrative costs, including travel.

 

Depreciation, Amortization and Impairment

 

Depreciation, amortization and impairment expenses for the six months ended September 30, 2017 were $1,205 compared to $260 for the six months ended September 30, 2016 (net of $156 and $119 included in cost of product sales related to production equipment at Sable for 2017 and 2016, respectively). The $945 increase primarily resulted from the impairment of intangible assets at Sable of $675 and the acquisition of 440labs in May 2017 and the amortization of the related identifiable intangible assets for the period subsequent to the May 23, 2017 acquisition.

 

Research and Development

 

Research and development expense decreased $146 or 4% to $3,232 in the six months ended September 30, 2017 compared with $3,378 during the same period in 2016. These costs related to development of the Zest Fresh solution. Pilots of the solution expanded in 2017 and additional wages and development costs for research and development activities were incurred. These increases were more than offset by consulting costs related to the pilot in 2016 that did not recur in 2017. Significant research and development expenditures related to Zest Fresh are expected to continue.

 

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Interest Expense

 

Interest expense, net of interest income, for the six months ended September 30, 2017 was $30 as compared to $167 for the six months ended September 30, 2016. The $137 decrease is the result of the retirement of $2,327 of debt during the three-month transition period ended March 31, 2017. The only debt now outstanding is $600 of convertible notes with an annual interest rate of 10%.

 

Net Loss

 

Net loss for the six months ended September 30, 2017 was $25,576 as compared to $12,387 for the six months ended September 30, 2016. The $13,189 increase in net loss was primarily due to the $12,982 increase in non-cash share-based compensation, the $146 decrease in research and development expense and an unfavorable change from income from discontinued operations of $224 in 2016 to a $57 loss from discontinued operations in 2017 and other smaller increased costs, offset by the $636 gain from the sale of Eco3d. As described in Note 13 to the consolidated financial statements, the Company has a net operating loss carryforward for income tax purposes totaling approximately $82,880 at September 30, 2017 that can potentially be utilized to reduce future income taxes. A valuation allowance has been estimated such that no deferred tax assets have been recognized in the financial statements, and no tax benefit has been accrued for either continuing or discontinued operations.

 

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.

 

To date we have financed our operations through sales of common stock and the issuance of debt.

 

At September 30, 2017 and March 31, 2017, we had cash of $8,316 and $8,648, respectively. Working capital of $9,655 at September 30, 2017 compared unfavorably with working capital of $11,144 at March 31, 2017. The decrease in working capital was principally due to net cash used in operating activities of $10,451, amortization of prepaid expenses, and reclassification of $600 of convertible notes from long-term to current offset by the May 2017 issuance of common stock to institutional investors for $9,106 net of expenses and the $2,029 proceeds from the sale of Eco3d, offset by net operating losses. The Company is dependent upon raising additional capital from future financing transactions until such time that cash flow from operations is positive. The Company disclosed its intention to raise up to a cumulative amount of $80,000 pursuant to its shelf registration filed with the SEC (approximately $23,000 has been raised with $57,000 remaining through August 2019).

 

Net cash used in operating activities was $10,451 in the six months ended September 30, 2017, as compared to net cash used in operating activities of $7,623 in the same period in 2016. Cash used in operating activities is related to the Company’s net loss partially offset by non-cash expenses, including share-based compensation and depreciation, amortization and impairments.

 

Net cash provided by investing activities in the six months ended September 30, 2017 was $1,793 reflecting the $2,029 proceeds from the sale of Eco3d, offset by $236 of capital expenditures. In the six months ended September 30, 2016, investing activities consisted of $582 of capital expenditures (including $273 for discontinued operations), a $600 advance to Sable prior to the acquisition and the purchase of $3,500 certificates of deposit.

 

Net cash provided by financing activities in the six months ended September 30, 2017 was $8,326 as a result of the issuance of stock for $9,106 net of expenses offset by the purchase of $780 treasury shares of common stock acquired from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon vesting of the employees’ stock. In the six months ended September 30, 2016, $7,672 net cash was provided by financing activities, notably $7,793 in proceeds from the issuance of common stock net of fees offset by repayments of debt of $121.

 

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At September 30, 2017, $600 of Ecoark Holdings’ convertible notes payable are due in July 2018. Future minimum lease payments required under operating leases are as follows (by fiscal year): 2018 - $315, 2019 - $578, 2020 - $496, and 2021 - $386. Other less significant commitments and contingencies are disclosed in Note 12 to the consolidated financial statements. 

 

Since our inception, the Company has experienced negative cash flow from operations and may experience significant negative cash flow from operations in the future. We will need to raise additional funds in the future to continue to expand the Company’s operations and meet its obligations. The inability to obtain additional capital may restrict our ability to grow and may reduce the ability to continue to conduct business operations as a going concern.

 

Critical Accounting Policies and Estimates

 

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on revenue, income (loss) from operations and net income (loss), as well as the value of certain assets and liabilities on our balance sheet. The application of our critical accounting policies requires an evaluation of a number of complex criteria and significant accounting judgments by us. Our management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We evaluate our estimates on a regular basis and make changes accordingly. Senior management has discussed the development, selection and disclosure of these estimates. Actual results may materially differ from these estimates under different assumptions or conditions. If actual results were to materially differ from these estimates, the resulting changes could have a material adverse effect on our financial condition.

 

Our critical accounting polices include the following:

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Ecoark Holdings and its direct and indirect subsidiaries, collectively referred to as “the Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Ecoark Holdings is a holding company that holds 100% of Ecoark and Magnolia Solar. Ecoark holds 100% of Eco360, Pioneer Products (which owns 100% of Sable), Zest Labs (which owns 100% of 440labs) and previously Eco3d until April 2017. In March 2017, the Ecoark Holdings Board approved a plan to sell Eco3d, and the sale was completed in April 2017. Ecoark previously owned 65% of Eco3d and the remaining 35% interest was owned by executives of Eco3d until September 2016 when the executives’ 35% interest was acquired in exchange for 525 shares of Ecoark Holdings stock. In conjunction with the sale of Eco3d in April 2017, the 525 shares were reacquired by the Company and canceled.

 

The Company applies the guidance of Topic 810 Consolidation of the FASB ASC to determine whether and how to consolidate another entity. Pursuant to ASC 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except when control does not rest with the parent. Pursuant to ASC 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. 

 

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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 non-collectible accounts receivable, obsolete or slow-moving inventory, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, liabilities to accrue, allocation of home office expenses for segment reporting and determination of the fair value of stock awards issued and forfeiture rates. Actual results could differ from those estimates. 

 

Inventory

 

Inventory is stated at the lower of cost or market. Inventory cost is determined on an average cost basis and at standard cost, which approximates average costs in accordance with ASC 330-10-30-12. Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their estimated useful or scrap values. The Company establishes reserves for this purpose. Effective April 1, 2017, the Company changed its inventory costing method at Sable from first-in first-out (“FIFO”) to average cost. FIFO costs approximated average cost. The change was made in conjunction with a system conversion that enabled the Company to move from a periodic to a perpetual inventory system. In accordance with ASC 250-10-45-11 through 45-13, management determined that the change was preferable because it provides better operational control and visibility into inventory levels and costs, and it facilitates cost analysis at a batch level that was not available previously. The effect of the change was not material to the Company’s fiscal first or second quarter consolidated financial statements.

 

Property and Equipment and Long-Lived Assets

 

Property and equipment is stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from three to ten years for all classes of property and equipment, except leasehold improvements which are depreciated over the shorter of 10 years or the term of the lease.

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

Intangible assets with definite useful lives are stated at cost less accumulated amortization. Intangible assets represent the valuation of the Company-owned patents, customer lists, outsourced vendor relationships and non-compete agreements. These intangible assets are being amortized on a straight-line basis over their estimated average useful lives of thirteen and a half years for the patents and three years for the customer lists and outsourced vendor relationships and two years for the non-compete agreements. Expenditures on intangible assets through the Company’s filing of patent and trademark protection for Company-owned inventions are expensed as incurred.

 

Ecoark assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

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Revenue Recognition

 

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company early adopted effective April 1, 2017. No cumulative adjustment to accumulated deficit was required as a result of this adoption, and the early adoption did not have a material impact on our consolidated financial statements as no material arrangements prior to the adoption were impacted under the new pronouncement.

 

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 has 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 can be accounted for as separate units of accounting, and if so, the fair value for each of the elements.

 

Product revenue consists primarily of the sale of recycled plastics products by Pioneer and Sable. Contracts for products are for products held in inventory and typically are on thirty- to sixty-day payment terms. Management’s evaluation of credit risk involves judgement and may include securing insurance coverage on the recoverability of the receivables. Revenues are recognized when obligations under the terms of a contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products are shipped to the customer. Expected costs of standard warranties and claims are recognized as expense.

 

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 contracts that include multiple performance obligations, including hardware, perpetual software licenses, subscriptions, term licenses, maintenance 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. Contracts are typically on thirty- to sixty-day payment terms from when the Company satisfies the performance obligation in the contract.

 

Services contracts include research contracts for the government. The contracts define delivery dates for which the performance obligation will be satisfied over time. Revenue is recognized over time based on the output method to measure the Company’s progress toward complete satisfaction of a performance obligation.

 

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 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 incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

 

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Share-Based Compensation

 

The Company follows ASC 718 Compensation – Stock Compensation and has early adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting as of July 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual forfeitures when estimating the forfeiture rate. The Company facilitates payment of the employee tax withholdings resulting from the issuances of these awards by remitting the employee taxes and recovering the resulting amounts due from the employee either via payments from employees or from the sale of shares issued sufficient to cover the amounts due the Company. 

 

The Company measures compensation expense for its non-employee share-based compensation under ASC 505-50 Equity-Based Payments to Non-Employees. The fair values of options and shares issued are used to measure the transactions, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged either directly to expense, or to a prepaid expense if shares of common stock are issued in advance of services being rendered, and to additional paid-in capital.

 

The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting effective April 1, 2017. Cash paid when shares were directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.

 

Recoverability of Long-Lived Assets

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying value or fair value less estimated costs to sell.

 

Fair Value Measurements

 

ASC 820 Fair Value Measurements 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 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.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2017, and March 31, 2017, we had no off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

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ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Exchange Act, as of September 30, 2017, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s current management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), who 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 changes in our internal control over financial reporting that occurred during our most recent fiscal quarter 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.

 

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PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. We are not presently involved in any pending legal proceeding or litigation. 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.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes to the risk factors affecting our business that were discussed in Part I. “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 15, 2017.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

We did not sell any securities during the quarter ended September 30, 2017, which were not registered under the Securities Act of 1933, as amended.

 

The following table contains information regarding shares of common stock withheld from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon vesting of the employees’ stock during the three months ended September 30, 2017. The shares of common stock withheld to satisfy tax withholding obligations may be deemed purchases of such shares required to be disclosed pursuant to this Item 2.

 

(Number of shares in thousands)  Total Number of Shares Purchased   Average Price Paid Per Share (1)   Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs   Approximate Dollar Amount of Shares That May Yet to Be Purchased 
                 
July 1, 2017 to July 31, 2017   -   $-           
August 1, 2017 to August 31, 2017   -   $-           
September 1, 2017 to September 30, 2017   67   $3.02           

 

(1) The average price paid per share is the weighted-average of the fair market prices at which we calculated the number of shares withheld to cover tax withholdings for the employees.

 

ITEM 3. DEFAULT UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS 

 

Exhibit No.    Description of Exhibit
10.1*   Non-Qualified Stock Option Agreement by and between Ecoark Holdings, Inc. and Peter Mehring dated October 13, 2017
10.2*   Non-Qualified Stock Option Agreement by and between Ecoark Holdings, Inc. and Jay Oliphant dated October 13, 2017
10.3*   Employment Agreement by and between Ecoark Holdings, Inc. and Randy May
31.1*   Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
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
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
101.INS   XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

*  Filed herewith.

 

 49 

 

 

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.
  (Registrant)
     
Date: November 8, 2017 By: /s/ RANDY MAY
    Randy May
    Chief Executive Officer
    (Principal Executive Officer)
     
Date: November 8, 2017 By: /s/ JAY OLIPHANT
    Jay Oliphant
    Principal Financial and Accounting Officer 

 

 

50

 

 

 

 

EX-10.1 2 f10q0917ex10-1_ecoarkhold.htm NON-QUALIFIED STOCK OPTION AGREEMENT BY AND BETWEEN ECOARK HOLDINGS, INC. AND PETER MEHRING DATED OCTOBER 13, 2017

Exhibit 10.1

 

Ecoark Holdings, Inc.

 

Notice of Non-Qualified Stock Option Grant

 

You (the “Optionee”) have been granted the following option (the “Option”) to purchase Common Stock of Ecoark Holdings, Inc. (the “Company”), par value $0.001 per share (“Share”):

 

Name of Optionee: Peter Mehring
   
Total Number of Shares  
Subject to Option: 2,017,500
   
Type of Option: Non-Qualified Stock Options (NQSOs)
   
Exercise Price Per Share: $2.60
   
Effective Date of Grant: October 13, 2017
   
Vesting Schedule: The Options shall become vested and nonforfeitable if the Grantee shall have remained in the continuous employ of the Company through the vesting dates set forth below with respect to the percentage of Options set forth next to such date:

 

      Percentage of 
      NQSOs Vesting on 
  Vesting Date   Such Vesting Date 
        
  10/13/2018   25%
  10/13/2019   25%
  10/13/2020   25%
  10/13/2021   25%

 

Expiration Date: If the Optionee’s employment or service as a Director or Consultant, as the case may be, is terminated, the Option shall expire on the earliest of the following occasions: (i) three months following the termination of the Optionee’s employment or service for any reason other than Cause, death, or Disability; (ii) one year following the termination of the Optionee’s employment or service due to death or Disability; or (iii) the date of termination of the Optionee’s employment or service for Cause.  The foregoing notwithstanding, however, no Option shall be exercisable later than the tenth (10th) anniversary date of its grant.

 

 

 

This grant is subject to all of the terms and conditions set forth in the Non-Qualified Stock Option Agreement (the “Agreement”). This grant is made and granted as a stand-alone award and is not granted under or pursuant to the Company’s 2017 Omnibus Incentive Plan (the “Plan”). However, unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.

 

By your signature and the signature of the Company’s representative below, you and the Company agree and acknowledge that this Option is governed by the terms and conditions of the attached Non-Qualified Stock Option Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Non-Qualified Stock Option Agreement.

 

Grantee:  Ecoark Holdings, Inc.

 

By:   By:
Name: Peter Mehring   Name: Randy May
      Title: Chief Executive Officer

 

-2-

 

 

Ecoark Holdings, Inc.

 

Non-Qualified Stock Option Agreement

 

Section 1. Grant of Option.

 

(a) Option. On the terms and conditions set forth in the Notice of Non-Qualified Stock Option Grant (the “Grant Notice”) and this Non-Qualified Stock Option Agreement (the “Agreement”), the Company grants to the Optionee on the Effective Date of Grant the option (the “Option”) to purchase at the Exercise Price the number of Shares set forth in the Grant Notice.

 

(b) Plan and Defined Terms. The Option granted by this Agreement is granted as a stand-alone grant, separate and apart from, and outside of, the Plan, and shall not constitute an award granted under or pursuant to the Plan. Notwithstanding the foregoing, the terms, conditions, and definitions set forth in the Plan shall apply to the Option as though the Option had been granted under the Plan, and the Option shall be subject to such terms, conditions, and definitions, which are hereby incorporated into this Agreement by reference; provided that, for the avoidance of doubt, the Option granted by this Agreement shall not reduce and shall have no impact on the number of shares available for grant under the Plan. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of this Agreement will govern. All capitalized terms that are used in the Grant Notice or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.

 

Section 2. Right to Exercise.

 

The Option hereby granted shall be exercised by written notice to the Committee, specifying the number of Shares the Optionee desires to purchase together with provision for payment of the Exercise Price. Subject to such limitations as the Committee may impose (including prohibition of one more of the following payment methods), payment of the Exercise Price may be made by (a) check payable to the order of the Company, for an amount in United States dollars equal to the aggregate Exercise Price of such Shares, (b) by tendering to the Company Shares having an aggregate Fair Market Value equal to such Exercise Price, (c) by broker-assisted exercise, or (d) by a combination of such methods. The Company may require the Optionee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise and (ii) to comply with or satisfy the requirements of the Securities Act of 1933, as amended, the Exchange Act, applicable state or non-U.S. securities laws or any other law.

 

Section 3. Term and Expiration.

 

(a) Basic Term. Subject to earlier termination pursuant to the terms here, the Option shall expire on the expiration date set forth in the Grant Notice.

 

(b) Termination of Employment or Service. If the Optionee’s employment or service as a Director or Consultant, as the case may be, is terminated, the Option shall expire on the earliest of the following occasions:

 

(i) The expiration date set forth in the Grant Notice;

 

-3-

 

 

(ii) Three months following the termination of the Optionee’s employment or service for any reason other than Cause, death, or Disability;

 

(iii) One year following the termination of the Optionee’s employment or service due to death or Disability; or

 

(iv) The date of termination of the Optionee’s employment or service for Cause.

 

The Optionee may exercise all or part of this Option at any time before its expiration under the preceding sentence, but, subject to the following sentence, only to the extent that the Option had become vested before the Optionee’s employment or service terminated. When the Optionee’s employment or service terminates, this Option shall expire immediately with respect to the number of Shares for which the Option is not yet vested. If the Optionee dies after termination of employment or service, but before the expiration of the Option, all or part of this Option may be exercised (prior to expiration) by the personal representative of the Optionee or by any person who has acquired this Option directly from the Optionee by will, bequest or inheritance, but only to the extent that the Option was vested and exercisable upon termination of the Optionee’s employment or service.

 

(c) Definition of “Cause.” The term “Cause” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Cause,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Cause” shall mean (i) the willful engaging by the Optionee in misconduct that is demonstrably injurious to the Company or any Parent or Subsidiary (monetarily or otherwise), (ii) the Optionee’s conviction of, or pleading guilty or nolo contendere to, a felony involving moral turpitude, or (iii) the Optionee’s violation of any confidentiality, non-solicitation, or non-competition covenant to which the Optionee is subject.

 

(d) Definition of “Disability.” The term “Disability” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Disability,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Disability” shall mean the Optionee’s entitlement to long-term disability benefits pursuant to the long-term disability plan maintained by the Company or in which the Company’s employees participate.

 

Section 4. Transferability of Option.

 

The Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the Option shall be exercisable during the Optionee’s lifetime only by the Optionee or on his or her behalf by the Optionee’s guardian or legal representative.

 

Section 5. Investment Intent; Restrictions on Transfer.

 

Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon such exercise of this Option in whole or in part, Optionee (or any person or persons entitled to exercise this Option under the provisions hereof) shall furnish to the Company a written statement to such effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the foregoing investment representation and agreement and shall not be required to furnish the Company with the foregoing written statement.

 

-4-

 

 

Optionee further represents that Optionee has had access to the financial statements or books and records of the Company, has had the opportunity to ask questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information.

 

Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE ’SECURITIES ACT’) OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

 

and/or such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company’s transfer agent.

 

Section 5. Miscellaneous Provisions.

 

(a) Acknowledgements.

 

(i) The Optionee hereby acknowledges that he or she has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their respective terms and conditions. The Optionee acknowledges that there may be tax consequences upon the exercise or transfer of the Option and that the Optionee should consult an independent tax advisor prior to any exercise of the Option.

 

(ii) Optionee and the Company acknowledge and agree that (A) Optionee and Company entered into that certain Restricted Stock Award Agreement dated March 21, 2017, as amended (the “Restricted Stock Award”); (B) Optionee and the Company entered into that certain Restricted Stock Unit Grant Agreement dated June 28, 2017 (the “RSU Award”); (C) in addition to this Agreement, Optionee and Company have agreed to the terms of an Incentive Stock Option Award Agreement, a Nonstatutory Option Award Agreement, and a Stock Option Grant Agreement, each of which are dated October 13, 2017 (collectively, with this Agreement, the “Option Agreements”); and (D) by his signature on the Option Agreements, Optionee agrees to forfeit the Restricted Stock Award and the RSU Award, and agrees that the Option Agreements are a fair and equitable substitute for the Restricted Stock Award, the RSU Award, and for all services that Optionee has provided to the Company as of the date of the Option Agreements.

 

-5-

 

 

(b) Tax Withholding. Pursuant to Article 20 of the Plan, the Company shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the Optionee’s FICA obligations) required by law to be withheld with respect to this Option. The Committee may condition the delivery of Shares upon the Optionee’s satisfaction of such withholding obligations. The Optionee may elect to satisfy all or part of such withholding requirement by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal, state and local tax purposes, as applicable, including payroll taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing, signed by the Optionee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

(c) Notice Concerning Disqualifying Dispositions. If the Option is an Incentive Stock Option, the Optionee shall notify the Committee of any disposition of Shares issued pursuant to the exercise of the Option if the disposition constitutes a “disqualifying disposition” within the meaning of Sections 421 and 422 of the Code (or any successor provision of the Code then in effect relating to disqualifying dispositions). Such notice shall be provided by the Optionee to the Committee in writing within 10 days of any such disqualifying disposition.

 

(d) Rights as a Stockholder. Neither the Optionee nor the Optionee’s transferee or representative shall have any rights as a stockholder with respect to any Shares subject to this Option until the Option has been exercised and Share certificates have been issued to the Optionee, transferee or representative, as the case may be.

 

(e) Ratification of Actions. By accepting this Agreement, the Optionee and each person claiming under or through the Optionee shall be conclusively deemed to have indicated the Optionee’s acceptance and ratification of, and consent to, any action taken under this Agreement and Grant Notice by the Company, the Board, or the Committee.

 

(f) Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided in writing to the Company.

 

(g) Choice of Law. This Agreement and the Grant Notice shall be governed by, and construed in accordance with, the laws of the State of Nevada, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause this Agreement or the Grant Notice to be governed by or construed in accordance with the substantive law of another jurisdiction.

 

-6-

 

 

(h) Arbitration. Any dispute or claim arising out of or relating to this Agreement or the Grant Notice shall be settled by binding arbitration before a single arbitrator in Nevada and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of this Agreement and the Grant Notice, provided that all substantive questions of law shall be determined in accordance with the state and Federal laws applicable in the state in which the Company is incorporated, without regard to internal principles relating to conflict of laws.

 

(i) Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to Article 4.3 of the Plan may be made without such written agreement.

 

(j) Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.

 

(k) References to Plan. All references to the Plan shall be deemed references to the Plan as may be amended from time to time.

 

(l) Section 409A Compliance. To the extent applicable, it is intended that this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Agreement and the Grant Notice shall be interpreted accordingly.

 

 

-7-

 

EX-10.2 3 f10q0917ex10-2_ecoarkhold.htm NON-QUALIFIED STOCK OPTION AGREEMENT BY AND BETWEEN ECOARK HOLDINGS, INC. AND JAY OLIPHANT DATED OCTOBER 13, 2017

Exhibit 10.2

 

Ecoark Holdings, Inc.

 

Notice of Non-Qualified Stock Option Grant

 

You (the “Optionee”) have been granted the following option (the “Option”) to purchase Common Stock of Ecoark Holdings, Inc. (the “Company”), par value $0.001 per share (“Share”):

 

Name of Optionee: Jay Oliphant
   
Total Number of Shares  
Subject to Option: 66,320
   
Type of Option: Non-Qualified Stock Options (NQSOs)
   
Exercise Price Per Share: $2.60
   
Effective Date of Grant: October 13, 2017
   
Vesting Schedule: The Options shall become vested and nonforfeitable if the Grantee shall have remained in the continuous employ of the Company through the vesting dates set forth below with respect to the percentage of Options set forth next to such date:

 

      Percentage of 
      NQSOs Vesting on 
  Vesting Date   Such Vesting Date 
        
  10/13/2018   25%
  10/13/2019   25%
  10/13/2020   25%
  10/13/2021   25%

 

Expiration Date: If the Optionee’s employment or service as a Director or Consultant, as the case may be, is terminated, the Option shall expire on the earliest of the following occasions: (i) three months following the termination of the Optionee’s employment or service for any reason other than Cause, death, or Disability; (ii) one year following the termination of the Optionee’s employment or service due to death or Disability; or (iii) the date of termination of the Optionee’s employment or service for Cause.  The foregoing notwithstanding, however, no Option shall be exercisable later than the tenth (10th) anniversary date of its grant.

 

 

 

This grant is subject to all of the terms and conditions set forth in the Non-Qualified Stock Option Agreement (the “Agreement”). This grant is made and granted as a stand-alone award and is not granted under or pursuant to the Company’s 2017 Omnibus Incentive Plan (the “Plan”). However, unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.

 

By your signature and the signature of the Company’s representative below, you and the Company agree and acknowledge that this Option is governed by the terms and conditions of the attached Non-Qualified Stock Option Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Non-Qualified Stock Option Agreement.

 

Grantee:      Ecoark Holdings, Inc.  
     
By:     By:  
Name: Jay Oliphant   Name: Randy May
      Title: Chief Executive Officer

 

-2-

 

 

Ecoark Holdings, Inc.

 

Non-Qualified Stock Option Agreement

 

Section 1. Grant of Option.

 

(a) Option. On the terms and conditions set forth in the Notice of Non-Qualified Stock Option Grant (the “Grant Notice”) and this Non-Qualified Stock Option Agreement (the “Agreement”), the Company grants to the Optionee on the Effective Date of Grant the option (the “Option”) to purchase at the Exercise Price the number of Shares set forth in the Grant Notice.

 

(b) Plan and Defined Terms. The Option granted by this Agreement is granted as a stand-alone grant, separate and apart from, and outside of, the Plan, and shall not constitute an award granted under or pursuant to the Plan. Notwithstanding the foregoing, the terms, conditions, and definitions set forth in the Plan shall apply to the Option as though the Option had been granted under the Plan, and the Option shall be subject to such terms, conditions, and definitions, which are hereby incorporated into this Agreement by reference; provided that, for the avoidance of doubt, the Option granted by this Agreement shall not reduce and shall have no impact on the number of shares available for grant under the Plan. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of this Agreement will govern. All capitalized terms that are used in the Grant Notice or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.

 

Section 2. Right to Exercise.

 

The Option hereby granted shall be exercised by written notice to the Committee, specifying the number of Shares the Optionee desires to purchase together with provision for payment of the Exercise Price. Subject to such limitations as the Committee may impose (including prohibition of one more of the following payment methods), payment of the Exercise Price may be made by (a) check payable to the order of the Company, for an amount in United States dollars equal to the aggregate Exercise Price of such Shares, (b) by tendering to the Company Shares having an aggregate Fair Market Value equal to such Exercise Price, (c) by broker-assisted exercise, or (d) by a combination of such methods. The Company may require the Optionee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise and (ii) to comply with or satisfy the requirements of the Securities Act of 1933, as amended, the Exchange Act, applicable state or non-U.S. securities laws or any other law.

 

Section 3. Term and Expiration.

 

(a) Basic Term. Subject to earlier termination pursuant to the terms here, the Option shall expire on the expiration date set forth in the Grant Notice.

 

(b) Termination of Employment or Service. If the Optionee’s employment or service as a Director or Consultant, as the case may be, is terminated, the Option shall expire on the earliest of the following occasions:

 

(i) The expiration date set forth in the Grant Notice;

 

-3-

 

 

(ii) Three months following the termination of the Optionee’s employment or service for any reason other than Cause, death, or Disability;

 

(iii) One year following the termination of the Optionee’s employment or service due to death or Disability; or

 

(iv) The date of termination of the Optionee’s employment or service for Cause.

 

The Optionee may exercise all or part of this Option at any time before its expiration under the preceding sentence, but, subject to the following sentence, only to the extent that the Option had become vested before the Optionee’s employment or service terminated. When the Optionee’s employment or service terminates, this Option shall expire immediately with respect to the number of Shares for which the Option is not yet vested. If the Optionee dies after termination of employment or service, but before the expiration of the Option, all or part of this Option may be exercised (prior to expiration) by the personal representative of the Optionee or by any person who has acquired this Option directly from the Optionee by will, bequest or inheritance, but only to the extent that the Option was vested and exercisable upon termination of the Optionee’s employment or service.

 

(c) Definition of “Cause.” The term “Cause” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Cause,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Cause” shall mean (i) the willful engaging by the Optionee in misconduct that is demonstrably injurious to the Company or any Parent or Subsidiary (monetarily or otherwise), (ii) the Optionee’s conviction of, or pleading guilty or nolo contendere to, a felony involving moral turpitude, or (iii) the Optionee’s violation of any confidentiality, non-solicitation, or non-competition covenant to which the Optionee is subject.

 

(d) Definition of “Disability.” The term “Disability” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Disability,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Disability” shall mean the Optionee’s entitlement to long-term disability benefits pursuant to the long-term disability plan maintained by the Company or in which the Company’s employees participate.

 

Section 4. Transferability of Option.

 

The Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the Option shall be exercisable during the Optionee’s lifetime only by the Optionee or on his or her behalf by the Optionee’s guardian or legal representative.

 

Section 5. Investment Intent; Restrictions on Transfer.

 

Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon such exercise of this Option in whole or in part, Optionee (or any person or persons entitled to exercise this Option under the provisions hereof) shall furnish to the Company a written statement to such effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the foregoing investment representation and agreement and shall not be required to furnish the Company with the foregoing written statement.

 

-4-

 

 

Optionee further represents that Optionee has had access to the financial statements or books and records of the Company, has had the opportunity to ask questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information.

 

Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

 

and/or such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company's transfer agent.

 

Section 5. Miscellaneous Provisions.

 

(a) Acknowledgements.

 

(i) The Optionee hereby acknowledges that he or she has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their respective terms and conditions. The Optionee acknowledges that there may be tax consequences upon the exercise or transfer of the Option and that the Optionee should consult an independent tax advisor prior to any exercise of the Option.

 

(ii) Optionee and the Company acknowledge and agree that (A) Optionee and Company entered into that certain Restricted Stock Award Agreement dated March 21, 2017, as amended (the “Restricted Stock Award”); (B) in addition to this Agreement, Optionee and Company have agreed to the terms of an Incentive Stock Option Award Agreement and a Nonstatutory Option Award Agreement, each of which are dated October 13, 2017 (collectively, with this Agreement, the “Option Agreements”); and (C) by his signature on the Option Agreements, Optionee agrees to forfeit the Restricted Stock Award and agrees that the Option Agreements are a fair and equitable substitute for the Restricted Stock Award and for all services that Optionee has provided to the Company as of the date of the Option Agreements.

 

-5-

 

 

(b) Tax Withholding. Pursuant to Article 20 of the Plan, the Company shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the Optionee’s FICA obligations) required by law to be withheld with respect to this Option. The Committee may condition the delivery of Shares upon the Optionee’s satisfaction of such withholding obligations. The Optionee may elect to satisfy all or part of such withholding requirement by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal, state and local tax purposes, as applicable, including payroll taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing, signed by the Optionee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

(c) Notice Concerning Disqualifying Dispositions. If the Option is an Incentive Stock Option, the Optionee shall notify the Committee of any disposition of Shares issued pursuant to the exercise of the Option if the disposition constitutes a “disqualifying disposition” within the meaning of Sections 421 and 422 of the Code (or any successor provision of the Code then in effect relating to disqualifying dispositions). Such notice shall be provided by the Optionee to the Committee in writing within 10 days of any such disqualifying disposition.

 

(d) Rights as a Stockholder. Neither the Optionee nor the Optionee’s transferee or representative shall have any rights as a stockholder with respect to any Shares subject to this Option until the Option has been exercised and Share certificates have been issued to the Optionee, transferee or representative, as the case may be.

 

(e) Ratification of Actions. By accepting this Agreement, the Optionee and each person claiming under or through the Optionee shall be conclusively deemed to have indicated the Optionee’s acceptance and ratification of, and consent to, any action taken under this Agreement and Grant Notice by the Company, the Board, or the Committee.

 

(f) Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided in writing to the Company.

 

(g) Choice of Law. This Agreement and the Grant Notice shall be governed by, and construed in accordance with, the laws of the State of Nevada, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause this Agreement or the Grant Notice to be governed by or construed in accordance with the substantive law of another jurisdiction.

 

-6-

 

 

(h) Arbitration. Any dispute or claim arising out of or relating to this Agreement or the Grant Notice shall be settled by binding arbitration before a single arbitrator in Nevada and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of this Agreement and the Grant Notice, provided that all substantive questions of law shall be determined in accordance with the state and Federal laws applicable in the state in which the Company is incorporated, without regard to internal principles relating to conflict of laws.

 

(i) Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to Article 4.3 of the Plan may be made without such written agreement.

 

(j) Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.

 

(k) References to Plan. All references to the Plan shall be deemed references to the Plan as may be amended from time to time.

 

(l) Section 409A Compliance. To the extent applicable, it is intended that this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Agreement and the Grant Notice shall be interpreted accordingly.

 

 

-7-

 

EX-10.3 4 f10q0917ex10-3_ecoarkhold.htm EMPLOYMENT AGREEMENT BY AND BETWEEN ECOARK HOLDINGS, INC. AND RANDY MAY

Exhibit 10.3

 


 

September 23, 2017

 

Mr. Randy May

 

Dear Mr. May:

 

Ecoark Holdings, Inc., a Nevada corporation (the “Company”), is pleased to provide this offer to you in connection with your service as the Company’s Chief Executive Officer. This letter shall constitute an agreement (the “Agreement”) between you and the Company and contains all of the terms and conditions relating to the services you will provide. You will, of course, continue to serve as the Chairman of the Company’s Board of Directors, and nothing in this Agreement impacts your service as the Company’s Chairman.

 

1. Term. The term of this Agreement (“Term”) will commence on October 1, 2017, and shall continue until terminated in accordance with Paragraph 5 below.

 

2. Services. You agree to render services as the Company’s Chief Executive Officer, consistent with the scope of duties as set forth in the Company’s Bylaws and other governing documents. The services described in this Section 2 are referred to as your “Duties.”

 

3. Compensation. You will receive cash compensation of $200,000 per year, payable in accordance with the Company’s standard payroll practices, during the Term of this Agreement. This annual salary will increase to $350,000, contingent upon the Company achieving positive cash flow from operations for two consecutive quarters. You will also be reimbursed for reasonable, documented expenses incurred by you in connection with the performance of the Duties. In addition, you will be eligible to participate in regular health insurance and other employee benefit plans established by the Company for its employees from time to time.

 

4. Confidential Information; Non-Disclosure. In consideration of your access to the premises of the Company and/or your access to certain Confidential Information of the Company, you hereby represent and agree as follows:

 

4.1. Definition. For purposes of this Agreement, “Confidential Information” means: (a) any information that the Company possesses that has been created, discovered, or developed by or for the Company, and that has or could have commercial value or utility in Company’s business; or (b) any information that is related to the Company’s business and is generally not known by non-Company personnel. By way of illustration, but not limitation, Confidential Information includes trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics, and agreements. Notwithstanding the foregoing, the term Confidential Information does not include: (a) any information that becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you; (b) information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and (c) information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

 

 

 

4.2. Non-Disclosure. You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You agree to hold all Confidential Information in strict confidence and to safeguard all Confidential Information with a commercially reasonable degree of care. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this Section 4.2 will survive termination of this Agreement. You agree to promptly return any Confidential Information, along with any reproductions or copies to the Company upon the Company’s demand, upon termination of this Agreement, or upon your termination or resignation, as set forth in Section 5 herein.

 

5. Termination and Resignation. Your position as Chief Executive Officer may be terminated in accordance with the terms set forth in the Company’s Bylaws. You may also resign your position for any or no reason on the terms set forth in the Company’s Bylaws, and such resignation will be effective upon its acceptance by the Company’s Board of Directors. Upon the effective date of any such termination or resignation, your right to compensation hereunder will terminate subject to the Company’s obligations to pay you any compensation that you have already earned and to reimburse you for approved expenses already incurred in connection with the performance of your Duties as of the effective date of such termination or resignation.

 

6. No Assignment. Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7. Adherence to Relevant Policies. You have been provided copies of the Company’s relevant policies and procedures, including, among others, the Delegation of Authority Policy, Anti-Corruption Policy, Related Party Policy, Insider Trading Policy, Financial Disclosure Policy, Human Resources Policy, Hiring Compensation Policy, Code of Ethics, Supplier Code of Ethics, Whistle Blower Policy, Information Security Policies, End User Computing Policy, IT Strategies Policy, and other policies adopted by Ecoark Holdings, Inc. (the “Policies”). You agree to adhere to the Policies and, to the extent necessary, will separately sign acknowledgements confirming your agreement to abide by the terms of the Policies.

 

8. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Arkansas, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Arkansas.

  

9. Miscellaneous. This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the mutual written consent of the parties. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. If any provision of this Agreement is found to be invalid, the parties agree that such invalidity shall not affect the validity of the remaining portions of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement.

 

 2 

 

 

This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

  Sincerely,
     
  ECOARK HOLDINGS, INC.
     
  By:
    Name:  Jay Puchir
    Title:    Chief Executive Officer

  

AGREED AND ACCEPTED:

 

   

Randy May

 

 

3

 

EX-31.1 5 f10q0917ex31-1_ecoarkhold.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934

 

CERTIFICATION

 

I, Randy May, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Ecoark Holdings, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 8, 2017 /s/ Randy May
  Randy May
  Chief Executive Officer and
Principal Executive Officer

 

EX-31.2 6 f10q0917ex31-2_ecoarkhold.htm CERTIFICATION

Exhibit 31.2

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934

 

CERTIFICATION

 

I, Jay Oliphant, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Ecoark Holdings, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 8, 2017 /s/ Jay Oliphant
  Jay Oliphant
  Principal Financial and Accounting Officer

 

EX-32.1 7 f10q0917ex32-1_ecoarkhold.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Ecoark Holdings, Inc., (the “Company”) on Form 10-Q for the September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Randy May, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1) The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 8, 2017 /s/ Randy May
  Randy May
  Chief Executive Officer and
Principal Executive Officer

 

EX-32.2 8 f10q0917ex32-2_ecoarkhold.htm CERTIFICATION

Exhibit 32.2

 

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Ecoark Holdings, Inc., (the “Company”) on Form 10-Q for the period September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay Oliphant, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1) The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 8, 2017 /s/ Jay Oliphant
  Jay Oliphant
  Principal Financial and Accounting Officer

 

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The remaining replacement options will vest in 12 equal installments, with the first installment vesting on January 15, 2018, and additional installments vesting on the last day of each of the eleven successive three-month periods, subject to continued employment by the Company. The replacement options were issued under the 2017 Omnibus Incentive Plan or 2013 Incentive Stock Plan to correspond with the plan under which the existing awards were issued. With respect to the new options, the individuals were granted options to purchase 2,909 shares of Company common stock that vest at a rate of 25% per year on October 13<sup>th</sup>&#160;of each year from 2018 to 2021, subject to continued employment by the Company. As with the replacement options, the new options have an exercise price set at 100% of the fair market value of the Company&#8217;s stock price on the effective date of the grant. 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These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as certain research and development expenses. Reclassifications relating to the discontinued operations of Eco3d are described further in Note 2. 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These estimates include, but are not limited to, management&#8217;s estimate of provisions required for uncollectible accounts receivable, obsolete or slow-moving inventory, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, liabilities to accrue, allocation of home office expenses for segment reporting and determination of the fair value of stock awards and forfeiture rates. 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    Document and Entity Information - shares
    6 Months Ended
    Sep. 30, 2017
    Nov. 06, 2017
    Document and Entity Information [Abstract]    
    Entity Registrant Name Ecoark Holdings, Inc.  
    Entity Central Index Key 0001437491  
    Trading Symbol EARK  
    Amendment Flag false  
    Current Fiscal Year End Date --03-31  
    Document Type 10-Q  
    Document Period End Date Sep. 30, 2017  
    Document Fiscal Period Focus Q2  
    Document Fiscal Year Focus 2018  
    Entity Filer Category Accelerated Filer  
    Entity Common Stock, Shares Outstanding   46,271,795
    XML 17 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Consolidated Balance Sheets - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    CURRENT ASSETS    
    Cash ($265 pledged as collateral for credit) $ 8,316 $ 8,648
    Accounts receivable, net of allowance of $50 and $76 as of September 30, 2017 and March 31, 2017 respectively 1,032 1,627
    Inventory, net of reserves 2,925 2,104
    Prepaid expenses 656 2,006
    Assets held for sale - production equipment 158
    Other current assets 130
    Current assets held for sale - (Note 2) 1,404
    Total current assets 13,059 15,947
    NON-CURRENT ASSETS    
    Property and equipment, net 2,297 2,308
    Intangible assets, net 2,021 1,567
    Non-current assets held for sale - (Note 2) 366
    Other assets 53 53
    Total non-current assets 4,371 4,294
    TOTAL ASSETS 17,430 20,241
    CURRENT LIABILITIES    
    Accounts payable 1,673 1,720
    Accrued liabilities 1,131 2,620
    Long-term Debt, Current Maturities 500
    Current portion of long-term debt - related party 100
    Current liabilities held for sale - (Note 2) 463
    Total current liabilities 3,404 4,803
    NON-CURRENT LIABILITIES    
    Long-term debt, net of current portion 500
    Long-term debt, net of current portion - related party 100
    COMMITMENTS AND CONTINGENCIES
    Total liabilities 3,404 5,403
    STOCKHOLDERS' EQUITY (Numbers of shares rounded to thousands)    
    Preferred stock, $0.001 par value; 5,000 shares authorized; none issued
    Common stock, $0.001 par value; 100,000 shares authorized, 46,369 shares issued and 46,174 shares outstanding as of September 30, 2017 and 42,330 shares issued and outstanding as of March 31, 2017 46 42
    Additional paid-in-capital 110,565 85,025
    Accumulated deficit (95,805) (70,229)
    Treasury stock, at cost (780)
    Total stockholders' equity 14,026 14,838
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,430 $ 20,241
    XML 18 R3.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Consolidated Balance Sheets (Parenthetical) - USD ($)
    shares in Thousands, $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Statement of Financial Position [Abstract]    
    Pledged as collateral for credit $ 265 $ 265
    Allowance for doubtful accounts $ 50 $ 76
    Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
    Preferred stock, shares authorized 5,000 5,000
    Preferred stock, shares issued
    Common stock, par value (in dollars per share) $ 0.001 $ 0.001
    Common stock, shares authorized 100,000 100,000
    Common stock, shares issued 46,369 42,330
    Common stock, shares outstanding 46,174 42,330
    XML 19 R4.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Consolidated Statements of Operations (Unaudited) - USD ($)
    shares in Thousands, $ in Thousands
    3 Months Ended 6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Sep. 30, 2017
    Sep. 30, 2016
    REVENUES        
    Revenue from product sales $ 1,869 $ 3,859 $ 4,330 $ 6,221
    Revenue from services 36 30 80 61
    Total Revenues 1,905 3,889 4,410 6,282
    COST OF REVENUES        
    Cost of product sales, including $89 and $73 of depreciation expense on manufacturing equipment for three months and $156 and $119 for six months in 2017 and 2016, respectively 2,285 3,819 5,038 6,252
    Cost of services 10 25 51 28
    Total cost of revenues 2,295 3,844 5,089 6,280
    GROSS PROFIT (LOSS) (390) 45 (679) 2
    OPERATING EXPENSES:        
    Salaries and salary related costs, including share-based compensation of $6,161 and $565 for three months and $14,714 and $877 for six months in 2017 and 2016, respectively 7,479 1,567 17,157 2,848
    Professional fees and consulting, including share-based compensation of $444 and $0 for three months and $1,645 and $2,500 for six months in 2017 and 2016, respectively 833 1,681 2,741 4,841
    Selling, general and administrative 499 662 1,043 1,094
    Depreciation, amortization, and impairment 1,024 150 1,205 260
    Research and development 1,659 2,435 3,232 3,378
    Total operating expenses 11,494 6,495 25,378 12,421
    Loss from continuing operations before other expenses (11,884) (6,450) (26,057) (12,419)
    OTHER EXPENSE:        
    Interest expense, net of interest income (15) (80) (30) (167)
    Loss on retirement of assets (61) (25) (61) (25)
    Total other expenses (76) (105) (91) (192)
    LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES (11,960) (6,555) (26,148) (12,611)
    DISCONTINUED OPERATIONS:        
    Income (loss) from discontinued operations 42 (57) 224
    Gain on disposal of discontinued operations     636  
    Total discontinued operations 42 579 224
    PROVISION FOR INCOME TAXES (7) (7)
    NET LOSS (11,967) (6,513) (25,576) (12,387)
    NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST 52 116
    NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST $ (11,967) $ (6,565) $ (25,576) $ (12,503)
    NET (LOSS) INCOME PER SHARE        
    Basic: Continuing operations $ (0.27) $ (0.18) $ (0.59) $ (0.39)
    Discontinued operations 0.01 0.01
    Total (0.27) (0.18) (0.58) (0.38)
    Diluted: Continuing operations (0.27) (0.18) (0.59) (0.39)
    Discontinued operations 0.01 0.01
    Total $ (0.27) $ (0.18) $ (0.58) $ (0.38)
    SHARES USED IN CALCULATION OF NET LOSS PER SHARE        
    Basic and diluted 45,101 36,193 44,184 32,683
    XML 20 R5.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)
    $ in Thousands
    3 Months Ended 6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Sep. 30, 2017
    Sep. 30, 2016
    Consolidated Statements of Operations [Abstract]        
    Cost of product sales, including depreciation expense $ 89 $ 73 $ 156 $ 119
    Salaries and salary related costs 6,161 565 14,714 877
    Professional fees and consulting $ 444 $ 0 $ 1,645 $ 2,500
    XML 21 R6.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 6 months ended Sep. 30, 2017 - USD ($)
    shares in Thousands, $ in Thousands
    Total
    Preferred
    Common Stock
    Additional Paid-in Capital
    Accumulated Deficit
    Treasury Stock
    Balances, value at Mar. 31, 2017 $ 14,838 $ 0 $ 42 $ 85,025 $ (70,229) $ 0
    Balances, shares at Mar. 31, 2017   0 42,330      
    Shares issued for cash in private placement, net of expenses, value 9,106 $ 0 $ 3 9,103 0 0
    Shares issued for cash in private placement, net of expenses, shares   0 2,500      
    Share-based compensation - stock - Board of Directors, value 250 $ 0 250 0 0
    Share-based compensation - stock - Board of Directors, shares   0 65      
    Share-based compensation - stock - employees, value 12,973 $ 0 $ 2 12,971 0 0
    Share-based compensation - stock - employees, shares   0 1,385      
    Share-based compensation - options - employees, value 241 $ 0 $ 0 241 0 0
    Share-based compensation - options - employees, shares   0 0      
    Share based compensation due to employment agreement, value 1,500 $ 0 $ 0 1,500 0 0
    Share based compensation due to employment agreement, shares   0 300      
    Warrant conversion - cashless, value 0 $ 0 $ 0 0 0 0
    Warrant conversion - cashless, shares   0 49      
    Shares issued for company acquisition, value 1,500 $ 0 $ 0 1,500 0 0
    Shares issued for company acquisition, shares   0 300      
    Shares received from sale of company, subsequently retired, value (26) $ 0 $ (1) (25) 0 0
    Shares received from sale of company, subsequently retired, Shares   0 (560)      
    Purchase of treasury shares from employees, value (780) $ 0 $ 0 0 0 (780)
    Purchase of treasury shares from employees, shares   0 0      
    Net loss for the period (25,576) $ 0 $ 0 (25,576) 0
    Balances, value at Sep. 30, 2017 $ 14,026 $ 0 $ 46 $ 110,565 $ (95,805) $ (780)
    Balances , shares at Sep. 30, 2017   0 46,369     0
    XML 22 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Consolidated Statements of Cash Flows (Unaudited) - USD ($)
    $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Cash flows from operating activities:    
    Net loss attributable to controlling interest $ (25,576) $ (12,503)
    Adjustments to reconcile net loss to net cash used in operating activities:    
    Depreciation, amortization and impairment, including $156 in 2017 and $119 in 2016 included in cost of product sales 1,366 422
    Shares of common stock issued for services rendered 1,645 2,500
    Share-based compensation - stock - employees 12,973
    Share-based compensation - options 241 876
    Change in non-controlling interest on cash 117
    Cash acquired in acquisition 41
    Share-based compensation due to employment agreements 1,500
    (Income) loss from discontinued operations 57 (224)
    Gain on sale of discontinued operations (636)
    Loss on retirement of assets 61 25
    Changes in assets and liabilities:    
    Accounts receivable 525 (1,041)
    Inventory (821) 102
    Prepaid expenses (38) (26)
    Other current assets (119)
    Other assets 4 (164)
    Accounts payable (72) 396
    Accrued liabilities (1,653) 1,659
    Net cash used in operating activities of continuing operations (10,543) (7,820)
    Net cash provided by discontinued operations 92 197
    Net cash used in operating activities (10,451) (7,623)
    Cash flows from investing activities:    
    Proceeds from sale of Eco3d 2,029  
    Purchases of short-term investments (3,500)
    Pre-acquisition advance to Sable Polymer Solutions, LLC (600)
    Purchases of property and equipment (236) (582)
    Net cash provided by (used in) investing activities 1,793 (4,682)
    Cash flows from financing activities:    
    Proceeds from issuance of common stock, net of fees 9,106 7,793
    Purchase of treasury shares from employees (780)
    Repayments of debt - related parties (63)
    Repayments of debt (58)
    Net cash provided by financing activities 8,326 7,672
    NET DECREASE IN CASH (332) (4,633)
    Cash - beginning of period 8,648 8,744
    Cash - end of period 8,316 4,111
    SUPPLEMENTAL DISCLOSURES:    
    Cash paid for interest 30 90
    Cash paid for income taxes
    Assets and liabilities acquired via acquisition of companies:    
    Receivables, net 1,250
    Inventory 759
    Property and equipment 2,822
    Identifiable intangible assets 1,435 1,028
    Goodwill 65 1,264
    Other assets 28 36
    Payables and liabilities assumed 883
    Debt assumed $ 2,531
    XML 23 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Consolidated Statements of Cash Flows (Parenthetical) (Unaudited) - USD ($)
    $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Statement of Cash Flows [Abstract]    
    Depreciation, amortization and impairment, included in cost of product sales $ 156 $ 119
    XML 24 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Organization and Summary of Significant Accounting Policies
    6 Months Ended
    Sep. 30, 2017
    Organization and Summary of Significant Accounting Policies [Abstract]  
    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     

    Ecoark Holdings, Inc. (“Ecoark Holdings”) is an innovative AgTech company that is focused on modernizing the post-harvest fresh food supply chain for a wide range of organizations including growers, distributors and retailers. Ecoark Holdings is a holding company that supports the businesses of its subsidiaries. Ecoark Holdings is the parent company of Ecoark, Inc. and Magnolia Solar Inc.

     

    Ecoark, Inc. (“Ecoark”) was founded in 2011 and is located in Rogers, Arkansas, the home office for Ecoark and Ecoark Holdings. Ecoark merged into a wholly-owned subsidiary of Magnolia Solar Corporation (“MSC”) on March 24, 2016, with Ecoark as the surviving entity. At the merger (“Merger”), MSC changed its name to Ecoark Holdings, Inc. Ecoark is the parent company of Eco360, Pioneer Products and Zest Labs (formerly known as Intelleflex Corporation). Ecoark was also the parent company of Eco3d until it was sold in April 2017, as discussed below. 

     

    Eco3d, LLC (“Eco3d”) is located in Phoenix, Arizona and provides customers with 3d technologies. Eco3d was formed by Ecoark in November 2013 and Ecoark owned 65% of the LLC. The remaining 35% was reflected as non-controlling interest until September 2016 when Ecoark Holdings issued shares of stock in exchange for the 35% non-controlling interest. Eco3d provides 3d mapping, modeling, and consulting services for clients in retail, construction, healthcare, and other industries throughout the United States. As described further in Note 2, in March 2017 the Ecoark Holdings Board of Directors (“Ecoark Holdings Board”) approved a plan to sell Eco3d, and the sale was completed in April 2017. 

     

    Eco360, LLC (“Eco360”) is located in Rogers, Arkansas and has engaged in research and development activities. Eco360 was formed in November 2014 by Ecoark. Eco360 does not currently have any active operations.

     

    Pioneer Products, LLC (“Pioneer Products” or “Pioneer”) is located in Rogers, Arkansas and is involved in the selling of recycled plastic products and other products. It sells to the world’s largest retailer. This subsidiary recovers plastic waste from retail supply chains that is converted to new consumer products from the reclaimed materials, completing a closed loop and reducing waste sent to landfills. Pioneer Products was purchased by Ecoark in 2012. Pioneer Products acquired Sable Polymer Solutions, LLC in a stock transaction on May 3, 2016.

     

    Sable Polymer Solutions, LLC (“Sable”) is located in Flowery Branch, Georgia and specializes in the purchase, processing and sale of post-consumer and post-industrial plastic materials. It provides materials to a variety of suppliers and customers throughout the plastics processing industry, from small extruders, molders and scrap collectors to large corporations.

     

    Zest Labs, Inc. (“Zest Labs” or “Zest”) is located in San Jose, California and offers food retailers and suppliers intelligent, on-demand solutions for the retailers and companies that ship and store products for perishable food quality management. Zest Labs’ Zest Data Services is a secure, multi-tenant cloud-based data collection platform for aggregating and real-time permission-based sharing and analysis of information. Zest Fresh, a fresh food management solution that utilizes the Zest Data Services platform, focuses on three primary value propositions – consistent food quality, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence at a pallet level. Zest Delivery offers real-time monitoring and control for prepared food delivery containers, helping delivery and dispatch personnel ensure the quality and safety of delivered food. Zest Labs (then known as Intelleflex Corporation) was purchased by Ecoark in September 2013. Effective October 28, 2016, Intelleflex Corporation changed its name to Zest Labs, Inc. to align its corporate name with its mission and the brand name of its products and services. Zest Labs acquired 440labs, Inc. in a stock transaction on May 23, 2017.

     

    440labs, Inc. (“440labs”) is located in Boston, Massachusetts and is a software development and information solutions provider for cloud, mobile, and IoT (Internet of Things) applications. 440labs has been a key development partner with Zest Labs for more than four years, contributing its expertise in scalable enterprise cloud solutions and mobile applications.

     

    Magnolia Solar Inc. (“Magnolia Solar”) is located in Woburn, Massachusetts and is principally engaged in the development and commercialization of nanotechnology-based, high-efficiency, thin-film technology that can be deposited on a variety of substrates, including glass and flexible structures. Magnolia Solar was a subsidiary of MSC that merged with Ecoark on March 24, 2016 to create Ecoark Holdings and continues operations as a subsidiary of Ecoark Holdings.

     

    Fiscal Year-End Change

     

    On January 19, 2017, the Ecoark Holdings Board approved a change from a fiscal year ending on December 31 to a fiscal year ending on March 31 as permitted by the bylaws of Ecoark Holdings. The change applied to all subsidiaries except Eco3d which was sold in April 2017.

     

    Principles of Consolidation

     

    The consolidated financial statements include the accounts of Ecoark Holdings and its direct and indirect subsidiaries, collectively referred to as “the Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Ecoark Holdings is a holding company that holds 100% of Ecoark and Magnolia Solar. Ecoark holds 100% of Eco360, Pioneer Products (which owns 100% of Sable), Zest Labs (which owns 100% of 440labs) and, until April 2017, Eco3d. As described further in Note 2, in March 2017 the Ecoark Holdings Board approved a plan to sell Eco3d, and the sale was completed in April 2017. Ecoark previously owned 65% of Eco3d and the remaining 35% interest was owned by executives of Eco3d until September 2016 when the executives’ 35% interest was acquired in exchange for 525 shares of Ecoark Holdings stock. In conjunction with the sale of Eco3d in April 2017, the 525 shares were reacquired by the Company and canceled.  

     

    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.

     

    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 September 2016, the 35% noncontrolling interest of Eco3d was acquired in exchange for 525 shares of Ecoark Holdings stock, which eliminated the noncontrolling interest. On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d, and the 525 shares of Ecoark Holdings were returned as part of the sales proceeds and were subsequently canceled. 

     

    Basis of Presentation

     

    The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”). It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

     

    Reclassification

     

    The Company has reclassified certain amounts in the 2016 consolidated financial statements to be consistent with the 2017 presentation. These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as certain research and development expenses. Reclassifications relating to the discontinued operations of Eco3d are described further in Note 2. The reclassifications had no impact on operations or cash flows for the six months ended September 30, 2016.

     

    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, obsolete or slow-moving inventory, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, liabilities to accrue, allocation of home office expenses for segment reporting and determination of the fair value of stock awards and forfeiture rates. Actual results could differ from those estimates. 

     

    Cash

     

    Cash consists of cash, demand deposits and money market funds with an original maturity of three months or less. The Company holds no cash equivalents. The Company maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.

     

    Inventory

     

    Inventory is stated at the lower of cost or market. Inventory cost is determined on average cost and at standard cost, which approximates average costs in accordance with ASC 330-10-30-12. Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their estimated useful or scrap values. The Company establishes reserves for this purpose. Effective April 1, 2017, the Company changed its inventory costing method at Sable from first-in first-out (“FIFO”) to average cost. FIFO costs approximated average cost. The change was made in conjunction with a system conversion that enabled the Company to move from a periodic to a perpetual inventory system. In accordance with ASC 250-10-45-11 through 45-13, management determined that the change was preferable because it provides better operational control and visibility into inventory levels and costs, and it facilitates cost analysis at a batch level that was not available previously. The effect of the change was not material to the Company’s fiscal first or second quarter consolidated financial statements.

     

    Property and Equipment and Long-Lived Assets

     

    Property and equipment is stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to ten years for all classes of property and equipment, except leasehold improvements which are depreciated over the term of the lease when shorter than the estimated useful life of the improvements.

     

    ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has early adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

     

    ASC 360-10 addresses criteria to be considered for long-lived assets expected to be disposed of by sale. Six criteria are listed in ASC 360-10-45-9 that must be met in order for assets to be classified as held for sale. Once the criteria are met, long-lived assets classified as held for sale are to be measured at the lower of carrying amount or fair value less costs to sell. In December 2016, management decided to outsource its densification activities at the Sable facility in Georgia. All six criteria were met and thus the densification and related equipment have been adjusted to fair value and reclassified to current assets in the balance sheets. During the six months ended September 30, 2017, the most significant of these assets were sold and the immaterial balances of the remaining assets were written off.

     

    Intangible assets with definite useful lives are stated at cost less accumulated amortization and impairment. Identifiable intangible assets capitalized represent the valuation of the Company-owned patents, customer lists, outsourced vendor relationships and non-compete agreements. These intangible assets are being amortized on a straight-line basis over their estimated average useful lives of thirteen and a half years for the patents, three years for the customer lists and outsourced vendor relationships and two years for the non-compete agreements. Expenditures on intangible assets through the Company’s filing of patent and trademark protection for Company-owned inventions are expensed as incurred. 

     

    The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

     

    1. Significant underperformance relative to expected historical or projected future operating results;

     

    2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

     

    3. Significant negative industry or economic trends.

     

    When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company tested the carrying value of its intangible assets for recoverability during the six months ended September 30, 2017, and impairments were recorded during this period. 

     

    Advertising Expense

     

    The Company expenses advertising costs as incurred. Advertising expenses for the six months ended September 30, 2017 and 2016, which were nominal, are included in selling, general and administrative costs.

     

    Software Costs

     

    The Company accounts for software development costs in accordance with ASC 985-730 Software Research and Development, and ASC 985-20 Costs of Software to be Sold, Leased or Marketed. ASC 985-20 requires that costs related to the development of the Company’s products be capitalized as an asset when incurred subsequent to the point at which technological feasibility of the enhancement is established and prior to when a product is available for general release to customers. ASC 985-20 specifies that technological feasibility can be established by the completion of a detailed program design. Costs incurred prior to achieving technological feasibility are expensed. The Company does utilize detailed program designs; however, the Company’s products are expected to be released soon after technological feasibility has been established and as a result software development costs have been expensed as incurred.

     

    Research and Development Costs

     

    Research and development costs are expensed as incurred. These costs include internal salaries and related costs and professional fees for activities related to development. The majority of these costs relate to the Zest Data Services platform, Zest Fresh and Zest Delivery.

     

    Subsequent Events

     

    Subsequent events were evaluated through the date the consolidated financial statements were filed.

     

    Shipping and Handling Costs

     

    The Company reports shipping and handling revenues and their associated costs in product revenue and cost of revenue, respectively. Shipping revenues and costs for the six months ended September 30, 2017 and 2016 were nominal.

     

    Revenue Recognition

     

    The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company early adopted effective April 1, 2017. No cumulative adjustment to accumulated deficit was required as a result of this adoption, and the early adoption did not have a material impact on our consolidated financial statements as no material arrangements prior to the adoption were impacted under the new pronouncement.

     

    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 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 can be accounted for as separate units of accounting, and if so, the fair value for each of the elements.

     

    Product revenue consists primarily of the sale of recycled plastics products by Pioneer and Sable. Contracts for products are for products held in inventory and typically are on thirty- to sixty-day payment terms. Management’s evaluation of credit risk involves judgement and may include securing insurance coverage on the recoverability of the receivables. Revenues are recognized when obligations under the terms of a contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products are shipped to the customer. Expected costs of standard warranties and claims are recognized as expense.

     

    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 contracts that include multiple performance obligations, including hardware, perpetual software licenses, subscriptions, term licenses, maintenance 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. Contracts are typically on thirty- to sixty-day payment terms from when the Company satisfies the performance obligation in the contract.

     

    Services contracts include research contracts for the government. The contracts define delivery dates for which the performance obligation will be satisfied over time. Revenue is recognized over time based on the output method to measure the Company’s progress toward complete satisfaction of a performance obligation.

     

    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 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 incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

     

    Accounts Receivable and Concentration of Credit Risk

     

    The Company considers accounts receivable, net of allowance for returns and 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.

     

    Uncertain Tax Positions

     

    The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates tax positions on an annual basis.

      

    The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they were filed.

     

    Vacation and Paid-Time-Off Compensation

     

    The Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable to services already rendered, will be paid even if an employee is terminated, payment is probable and the amount can be estimated.

     

    Share-Based Compensation

     

    The Company follows ASC 718 Compensation – Stock Compensation and has early adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting as of July 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual forfeitures when estimating the forfeiture rate. The Company facilitates payment of the employee tax withholdings resulting from the issuances of these awards by remitting the employee taxes and recovering the resulting amounts due from the employee either via payments from employees or from the sale of shares issued sufficient to cover the amounts due the Company. 

     

    The Company measures compensation expense for its non-employee share-based compensation under ASC 505-50 Equity-Based Payments to Non-Employees. The fair values of options and shares issued are used to measure the transactions, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged either directly to expense, or to a prepaid expense if shares of common stock are issued in advance of services being rendered, and to additional paid-in capital.

     

    The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting effective April 1, 2017. Cash paid when shares were directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.

     

    Fair Value of Financial Instruments

     

    ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments. The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments. The carrying amount of the Company’s debt instruments also approximates fair value.

     

    Leases

     

    The Company follows ASC 840 Leases in accounting for leased properties. The Company leases several office facilities and production facilities for terms typically ranging from three to five years. Rent escalations over the term of a lease are considered at the inception of the lease such that the monthly average for all payments is recorded as straight-line rent expense with any differences recorded in accrued liabilities.

     

    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 per share include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options, grants 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 basic weighted average number of common shares are used in the computations.

     

    Fair Value Measurement

     

    ASC 820 Fair Value Measurement 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 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.

     

    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. For fiscal year 2018 the Company and its Chief Operating Decision Maker determined that the Company’s operations were divided into two segments: Zest Labs and Pioneer Products. See Note 14 for segment information disclosures.

     

    Related-Party Transactions

     

    Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions (see Note 10). All transactions are recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.

     

    Recently Adopted Accounting Pronouncements

     

    In May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09 Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, and ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, respectively, which implement ASC Topic 606. ASU 2017-13 issued in September 2017 clarifies SEC Staff guidance on the transition to ASC 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under U.S. GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company adopted the above ASUs (ASC Topic 606) effective April 1, 2017. The adoption of these ASUs did not have a material impact on our consolidated financial statements.

     

    In May 2017, the FASB issued ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The FASB issued this update to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this update are required for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017 and early adoption is permitted. The Company adopted ASU 2017-09 as of July 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements. 

     

    In January 2017, the FASB issued ASU 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The amendments in this update are required for public business entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The update is intended to simplify the annual or interim goodwill impairment test. A public business entity that is a U.S. SEC filer must adopt the amendments in this update for its annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted ASU 2017-04 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805), Clarifying the Definition of a Business. The amendments in this update are required for public business entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The update is intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. Public business entities must apply the amendments in this update to annual periods beginning after December 15, 2017. Early application is permitted under certain conditions. The Company adopted ASU 2017-01 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The amendments in this update provided guidance on eight specific cash flow issues. This update provided specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 31, 2017. Early adoption is permitted. The Company adopted ASU 2016-15 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting effective April 1, 2017. Cash paid when shares were directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.


    Recent Accounting Pronouncements Pending Adoption

     

    In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 changes the accounting for leased assets, principally by requiring balance sheet recognition of assets under lease arrangements. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The Company does not expect that adoption of ASU 2016-02 will have a material impact on our consolidated financial statements.

     

    There were other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries or transactions that are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. 

     

    Going Concern

     

    The Company has experienced losses from operations resulting in an accumulated deficit of $95,805 since inception. The accumulated deficit together with losses of $25,576 for the six months ended September 30, 2017, and net cash used in operating activities in the six months ended September 30, 2017 of $10,451, have resulted in the uncertainty of the Company’s ability to continue as a going concern.

     

    These consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time.

     

    The Company raised $9,106 of additional capital, net of expenses, in the six months ended September 30, 2017, as compared with over $12,000 raised in the three-month transition period ended March 31, 2017. The Company’s ability to raise additional capital through future equity and debt securities issuances is unknown. The Company disclosed its intention to raise up to a cumulative amount of $80,000 pursuant to its shelf registration filed with the SEC (approximately $23,000 has been raised with $57,000 remaining through August 2019). Obtaining additional financing and the successful development of the Company’s strategic plan to achieve profitability are necessary for the Company to continue operations. There can be no assurance that such capital will be available or on terms acceptable to the Company. The Company intends to further develop its product offerings and customer bases. The Company’s plans to achieve profitability include evaluating the cost structure and processes of its operations, both at the margin and operating expense levels, as well as pursuing additional strategic acquisitions and dispositions. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern as determined by management. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

    XML 25 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Discontinued Operations
    6 Months Ended
    Sep. 30, 2017
    Discontinued Operations [Abstract]  
    DISCONTINUED OPERATIONS

    NOTE 2: DISCONTINUED OPERATIONS

     

    On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d to a group led by executives of Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction of the Company. The Company received $2,029 in cash through September 30, 2017 and 560 shares of the Company’s common stock (including 525 shares that had been exchanged for the noncontrolling interest in September 2016) that was held by executives of Eco3d, which were canceled upon receipt. Additional payments of $30 will be received in November. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company had reflected amounts relating to Eco3d as a disposal group classified as held for sale at March 31, 2017 and has included amounts relating to Eco3d as part of discontinued operations for the six months ended September 30, 2017 and 2016. Eco3d had been included in the Services segment, and segment disclosures in Note 14 no longer include amounts relating to Eco3d following the reclassification to discontinued operations. There will be no significant continuing involvement with Eco3d.

     

    Carrying amounts of major classes of assets and liabilities classified as held for sale and included as part of discontinued operations in the consolidated balance sheets consisted of the following: 

     

      

    September 30,

    2017

      

    March 31,

    2017

     
      (Unaudited)    
    Cash $     -  $34 
    Accounts receivable, net of allowance  -   1,293 
    Prepaid expenses  -   67 
    Other current assets  -   10 
    Current assets - held for sale $-  $1,404 
             
    Property and equipment, net $-  $362 
    Other assets  -   4 
    Non-current assets - held for sale $-  $366 
             
    Accounts payable $-  $67 
    Accrued liabilities  -   396 
    Current liabilities - held for sale $-  $463 

     

    Major line items constituting income (loss) of discontinued operations in the consolidated statements of operations for the six months ended September 30 consisted of the following:

     

      2017  2016 
    Revenue from services $188  $2,531 
    Cost of services  103   942 
    Gross profit  85   1,589 
    Operating expenses  142   1,341 
    Allocated interest expense  -   24 
    Income (loss) of discontinued operations $(57) $224 

     

    After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance due to the uncertainty of realizing income tax benefit for 2017, and the income tax provision for 2016 was considered immaterial. Thus, no separate tax provision or benefit relating to discontinued operations is included here or on the face of the consolidated statements of operations.

     

    Gain on the sale of Eco3d of $636 was recognized in discontinued operations in the three months ended June 30, 2017.

    XML 26 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Revenue
    6 Months Ended
    Sep. 30, 2017
    Revenue [Abstract]  
    REVENUE

    NOTE 3: REVENUE

     

    The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company early adopted effective April 1, 2017. No cumulative adjustment to accumulated deficit was required, and the early adoption did not have a material impact on our consolidated financial statements, as no material arrangements prior to the adoption were impacted by the new pronouncement.

     

    The following table disaggregates the Company’s revenue by major source:

     

      Three months ended September 30, 2017  Three months ended September 30, 2016  Six months ended September 30, 2017  Six months ended September 30, 2016 
    Revenue:            
    Pioneer and Sable $1,885  $3,872  $4,389  $6,260 
    Zest Labs  20   17   21   22 
      $1,905  $3,889  $4,410  $6,282 

     

    The $20 of Zest Labs revenues in the three months ended September 30, 2017 were from Software as a Service (“SaaS”) revenues from produce growers. Zest revenues prior to that period were from hardware sales. Pioneer and Sable revenues were from the sale of recycled plastic and products made from that plastic. There were no contract asset or contract liability balances at September 30, 2017 and March 31, 2017, respectively. We do not disclose the value of unsatisfied 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.

    XML 27 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Inventory
    6 Months Ended
    Sep. 30, 2017
    Inventory [Abstract]  
    INVENTORY

    NOTE 4: INVENTORY

     

    Inventory, net of reserves, consisted of the following:

     

      September 30,
    2017
      March 31, 
    2017
     
      (Unaudited)    
           
    Inventory $3,265  $2,456 
    Inventory reserves  (340)  (352)
    Total $2,925  $2,104 
    XML 28 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Property and Equipment
    6 Months Ended
    Sep. 30, 2017
    Property and Equipment [Abstract]  
    PROPERTY AND EQUIPMENT

    NOTE 5: PROPERTY AND EQUIPMENT

     

    Property and equipment consisted of the following:

     

      

    September 30,

    2017

      

    March 31,

    2017

     
      (Unaudited)    
    Machinery and equipment $2,931  $2,724 
    Computers and software costs  406   406 
    Furniture and fixtures  107   107 
    Leasehold improvements  4   4 
    Total property and equipment  3,448   3,241 
    Accumulated depreciation and impairment  (1,151)  (933)
    Property and equipment, net $2,297  $2,308 

     

    Depreciation expense for the six months ended September 30, 2017 and 2016 was $220 and $222, respectively, which includes $156 and $119, respectively, depreciation on manufacturing equipment that is classified as cost of product sales.

     

    An impairment charge of $245 was recorded in March 2017 ($45 related to assets reclassified to held for sale and $200 for other equipment at Sable). The Company decided to outsource its densification process and therefore sold the densifiers and related equipment acquired in the Sable acquisition. An asset with a fair value of $5 was placed back in service, $58 of equipment was sold at a loss of $30 and the remainder of that equipment was written off. As described in Note 9 below, the ownership interest in Sable (that includes equipment and other assets) serves as collateral for the remaining outstanding convertible notes.

     

    Additionally, the Company retired equipment valued at $34, with accumulated depreciation of $1 for a trade in of $2 cash for a net loss on disposition of $31 in the six months ended September 30, 2017. The total loss on disposition between the property and equipment and assets held for sale in the six months ended September 30, 2017 was $61.

    XML 29 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Intangible Assets
    6 Months Ended
    Sep. 30, 2017
    Intangible Assets [Abstract]  
    INTANGIBLE ASSETS

    NOTE 6: INTANGIBLE ASSETS

     

    Intangible assets consisted of the following:

     

      September 30,
    2017
      March 31, 
    2017
     
      (Unaudited)    
    Customer lists $5,008  $5,008 
    Patents  1,090   1,090 
    Outsourced vendor relationships  1,016   - 
    Non-compete agreements  419   - 
    Goodwill, net of impairment  65   582 
    Total intangible assets  7,598   6,680 
    Accumulated amortization and impairment  (5,577)  (5,113)
    Intangible assets, net $2,021  $1,567 

     

    The outsourced vendor relationships, non-compete agreements and $65 of goodwill were recorded as part of the acquisition of 440labs described in Note 16 below.

     

    Amortization expense for the six months ended September 30, 2017 and 2016 was $371 and $201, respectively. Amortization amounts for the next five years are: $332, $630, $440, $117 and $75. The Company performed a review of its customers and business results at Sable in 2017 to assess the recoverability of the carrying value of intangibles. As a result, impairment charges of $98 against the customer lists and a related write-down of goodwill of $582 from the initially recorded amount of $1,264 were recorded in the six months ended September 30, 2017. Following that write-down, remaining goodwill of $65 relates to the 440labs acquisition.

    XML 30 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Accrued Liabilities
    6 Months Ended
    Sep. 30, 2017
    Accrued Liabilities [Abstract]  
    ACCRUED LIABILITIES

    NOTE 7: ACCRUED LIABILITIES

     

    Accrued liabilities consisted of the following:

     

      September 30, 
    2017
      

    March 31, 2017

     
      (Unaudited)    
    Professional fees and consulting costs $186  $1,777 
    Inventory in transit  127   89 
    Vacation and paid time off  390   359 
    Payroll and employee expenses  123   163 
    Legal fees  43   112 
    Straight-line rent  91   95 
    Other  171   25 
    Total $1,131  $2,620 
    XML 31 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Note Payable
    6 Months Ended
    Sep. 30, 2017
    Note Payable/ Long-Term Debt [Abstract]  
    NOTE PAYABLE

    NOTE 8: NOTE PAYABLE

     

    The Company had a note payable pursuant to a line of credit maintained with a bank. The note was secured by the accounts receivable, inventory and equipment of Sable and had a 5.5% interest rate with interest payable monthly and a balloon payment due on November 18, 2017. The note, formerly guaranteed by the former owner of Sable, then a stockholder of the Company, originated July 15, 2015 with a maximum amount of $1,500. The balance of the note was $1,500 for the period from acquisition on May 3, 2016 to March 16, 2017. The Company had pledged a $1,500 certificate of deposit as collateral, and the guaranty of the former owner of Sable was eliminated. The note had standard covenants, and the Company was not in default of any covenant. The note along with all accrued interest was repaid on March 17, 2017. Interest expense on the note for the six months ended September 30, 2016 was $28.

    XML 32 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Long-Term Debt
    6 Months Ended
    Sep. 30, 2017
    Note Payable/ Long-Term Debt [Abstract]  
    LONG-TERM DEBT

    NOTE 9: LONG-TERM DEBT

     

    Long-term debt consisted of the following:

     

      September 30, 
    2017
      March 31,
    2017
     
      (Unaudited)    
    Secured convertible promissory note $500  $500 
    Less: current portion  (500)  - 
    Long-term debt, net of current portion $-  $500 

     

    The Company has a secured convertible promissory note (“convertible note”) bearing interest at 10% per annum, entered into on January 10, 2017 for $500 with the principal due in one lump sum payment on or before July 10, 2018. The convertible note was part of the financing the Company entered into in the three months ended March 31, 2017, that raised $4,300 (of a maximum of $5,000) in convertible notes ($700 of which were from related parties, see Note 10) bearing interest at 10% per annum. On March 30, 2017, $3,700 of these notes were converted (and $600 of the $700 in connection with the related parties) into shares of common stock, along with the related accrued interest on those notes. The interest is due and payable quarterly, in arrears, on December 31, 2017, and March 31, and June 30, 2018.

     

    The Company granted note holders a security interest for the holder’s ratable share of the series notes in the Company’s ownership interest in Sable as collateral. The note holders had the right at the holders’ option to convert all or any portion of the principal amount at a conversion rate per share which ranges from $4.15 to $7.10 per share (the only non-related party note still outstanding has a conversion price of $4.50). In February 2017, the Company amended the convertible note whereby certain holders (not including related parties) received a warrant to purchase 10 shares of common stock for every $100 principal amount if the holder converted the note on or before March 31, 2017.

     

    Interest expense on long-term debt for the six months ended September 30, 2017 and 2016 was $25 and $158 respectively.

     

    See Note 10 for long-term debt transactions with related parties.

    XML 33 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Related-Party Transactions
    6 Months Ended
    Sep. 30, 2017
    Related-Party Transactions [Abstract]  
    RELATED-PARTY TRANSACTIONS

    NOTE 10: RELATED-PARTY TRANSACTIONS

     

    Long-term debt – related parties consisted of a $100 note payable purchased by the Company’s Chief Administrative Officer, Troy Richards, in February 2017, who declined the warrants. The convertible note has terms consistent with those described in Note 9 above, including being due in one lump sum payment on or before July 10, 2018 and remains outstanding as of September 30, 2017. The related party note is convertible into shares of common stock at a conversion price of $4.15.

     

    In February 2017, in addition to Mr. Richards’ note, an independent director on the Company’s Board, who is a significant shareholder, purchased $500 of the series notes, and an officer of the Company purchased $100 of the series notes. The officers and director declined the warrants. The $600 of notes were converted in March 2017.

     

    Interest expense on the convertible notes held by related parties for the six months ended September 30, 2017 was $5.

     

    On February 28, 2017, the Company entered into a Securities Purchase Agreement related to the issuance and sale of up to 1,100 shares of common stock held by Randy May, Chairman of the Board and CEO, and Gary Metzger, an independent director on the Company’s Board and a significant shareholder. The purchase agreement is pursuant to the Company’s Form S-3 registration statement filed on August 17, 2016. The selling securityholders may sell or distribute the securities included in this prospectus supplement through underwriters, through agents, to dealers, in private transactions, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices. The Company will not receive any of the proceeds from sales of the common stock made by the selling securityholders.

    XML 34 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity
    6 Months Ended
    Sep. 30, 2017
    Stockholders' Equity [Abstract]  
    STOCKHOLDERS' EQUITY

    NOTE 11: STOCKHOLDERS’ EQUITY

     

    Ecoark Holdings Preferred Stock

     

    On March 18, 2016, the Company created 5,000 shares of “blank check” preferred stock, par value $0.001. No preferred shares have been issued.

     

    Ecoark Holdings Common Stock

     

    The Company has 100,000 shares of common stock, par value $0.001 which were authorized on March 18, 2016.

     

    In May 2017, the Company issued 2,500 shares of the Company’s common stock pursuant to a private placement offering for $9,106, net of expenses (see Securities Purchase Agreement – Institutional Funds below).

     

    The Company issued 28 shares in the quarter ended June 30, 2017, valued at $125 and 37 shares in the quarter ended September 30, 2017, valued at $125, to members of the Board as compensation for their services.

     

    During the six months ended September 30, 2017, the Company issued 20 shares to a consultant and 1,199 shares to employees in stock grants vested under the 2013 Ecoark Holdings Incentive Stock Plan (“2013 Incentive Stock Plan”). During the six months ended September 30, 2017, the Company issued 166 shares to employees in stock grants vested under the 2017 Ecoark Holdings Omnibus Incentive Plan (“2017 Omnibus Incentive Plan”). The total employee share-based compensation expense for the six months ended September 30, 2017 was $12,973. The Company acquired 195 shares of common stock from employees in lieu of amounts required to satisfy minimum tax withholding requirements of $780 upon vesting of the employees’ stock.

     

    The Company issued 300 shares upon the execution of employment agreements with employees of 440labs valued at $1,500 recorded as share-based compensation for the three months ended June 30, 2017.

     

    The Company issued 300 shares for the acquisition of 440labs valued at $1,500.

      

    In May 2017, the Company issued 49 shares for the cashless exercise of 100 warrants to a consultant. The remaining 51 shares were forfeited.

      

    On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d to a group led by executives of Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction of the Company. The Company received $2,029 in cash and 560 shares of the Company’s common stock that was held by executives of Eco3d, which shares were canceled.

     

    Securities Purchase Agreement – Institutional Funds

     

    On May 22, 2017, the Company completed a reserved private placement agreement related to the issuance and sale of 2,500 shares of common stock for $10,000 ($9,106 net of expenses) to institutional purchasers at $4.00 per share. The purchase agreement is pursuant to the Company’s Form S-3 registration statement filed on August 17, 2016. The purchasers also received warrants to purchase 1,875 shares of common stock equal to 50% of the purchaser’s shares for $5.50 for up to 5 years from the date the transaction completed. The investment bankers for the transaction received warrants to purchase 175 shares of common stock for $5.50 for up to 5 years, the same terms as the investors.

     

    As of September 30, 2017, 46,565 total shares were issued and 46,370 shares were outstanding, net of 195 treasury shares.

     

    Warrants

     

    MSC had issued warrants for 15 shares (post-merger, formerly 3,785) that were converted into shares of common stock in accordance with the Merger agreement with Ecoark. Consistent with the terms of the Merger, warrants for 13 shares were converted to shares at the time of the Merger. The remaining warrants for 2 shares were exercised in a cashless exchange for shares during the second quarter of 2016.

     

    During 2016, the Company issued 4,337 warrants as part of the private placement that was completed on April 28, 2016, of which 98 of these warrants were exercised for common shares totaling $487, leaving warrants for 4,239 shares outstanding that have a strike price of $5.00 per share and expire on December 31, 2018.

     

    Warrants were issued in October 2016 to a consultant. The warrants were exercisable into 100 shares of common stock with a strike price of $2.50 per share that vested October 31, 2016 with an expiration date of October 31, 2018. In May 2017, 49 shares of the warrants were exercised in a cashless exchange and the remaining 51 shares were forfeited.

     

    As discussed in Note 9, the Company on March 30, 2017 issued warrants to the convertible note holders that converted their notes into shares of common stock in accordance with the amended secured convertible promissory note. The warrants are exercisable into 310 shares of common stock with a strike price of $7.50 per share, and expire on December 31, 2018. The warrants were valued using the Black-Scholes model, which incorporated a volatility of 82% and a discount yield of 1.27%. The value of the warrants of $370 was included in interest expense for the three months ended March 31, 2017 and additional paid in capital.

     

    On March 14, 2017, the Company issued 1,000 warrants to institutional investors that purchased 2,000 shares of common stock in a private placement. The warrants have a strike price of $5.00 and mature in March 2022. In addition, the brokers of the transaction received 140 warrants with the same terms as the investors.

     

    As discussed above, on May 22, 2017, the Company issued 1,875 warrants to the institutional investors that purchased the 2,500 shares of common stock in the reserved private placement. The warrants have a strike price of $5.50 and mature in November 2022. In addition, the brokers of the transaction received 175 warrants with the same terms as the investors.

     

    Changes in the warrants are described in the table below:

     

       
        Number of Warrants     Weighted
    Average
    Exercise
    Price
        Weighted Average Remaining Contractual Life (Years)  
    Balance at December 31, 2015     15     $ 35.00       1.0  
    Granted     4,437     $ 4.94       2.0  
    Exercised pre-Merger     (13 )              
    Exercised pre-Merger     (98 )   $ (5.00 )        
    Exercised cashless, post-Merger     (2 )                
    Forfeited     -                  
    Cancelled     -                  
    Balance at December 31, 2016     4,339     $ 4.94       2.0  
    Granted     1,450     $ 5.53       4.3  
    Exercised Cash     -                  
    Exercised Cashless     -                
    Forfeited     -                  
    Cancelled     -                  
    Balance at March 31, 2017     5,789     $ 5.09       2.6  
    Granted     2,050     $ 5.50       5.2  
    Exercised Cash     -                  
    Exercised Cashless     (49 )                
    Forfeited     (51 )                
    Cancelled     -                
    Balance at September 30, 2017     7,739     $ 5.26       3.3  
    Intrinsic value of warrants   $ -                  

     

    2013 Option Plan

     

    On February 16, 2013, the Board of Directors of Ecoark approved the 2013 Ecoark Stock Option Plan (“2013 Option Plan”). The purposes of the 2013 Option Plan were to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants, and to promote the success of the business. The 2013 Option Plan was expected to contribute to the attainment of these objectives by offering employees, directors and consultants the opportunity to acquire stock ownership interests in Ecoark, and to thereby provide them with incentives to put forth maximum efforts for the success of Ecoark.

     

    Awards under the 2013 Option Plan were only granted in the form of nonstatutory stock options (“Options”) to purchase Ecoark’s Series C Stock prior to the Merger with MSC. Under the terms of the 2013 Option Plan and the Merger, the Options converted into the right to purchase shares of the Company.

     

    In May 2014, Ecoark had granted Options to purchase 693 shares to various employees and consultants of Ecoark. The Options had an exercise price of $1.25 per share and a term of 10 years. The Options were to vest over a three-year period as follows: 25% immediately; 25% on the first anniversary date; 25% on the second anniversary date; and 25% on the third anniversary date. During 2015 Ecoark issued additional Options on 625 shares of common stock. At the end of 2015, Options under the 2013 Option Plan were outstanding to purchase 1,318 shares of common stock. The total original number of Options to purchase 1,318 shares of Ecoark common stock was divided by two in conjunction with the exchange ratio required by the Merger agreement and converted to Options to purchase 659 shares of Ecoark Holdings with an adjusted exercise price of $2.50. In September 2016, the remaining vesting was accelerated to have those Options 100% vested. In 2016, the Company issued Options to purchase 125 shares of stock at a strike price of $2.50 per share to a consultant. These options vested immediately and expire on March 31, 2018. In the Company’s fourth quarter of 2016, an option holder forfeited 125 options and thus, at December 31, 2016, Options on 659 shares of the Company were outstanding with an adjusted exercise price of $2.50. The Board adjusted the expiration date of these options to March 28, 2018.

    Management valued the Options utilizing the Black-Scholes model with the following criteria: stock price - $2.50; exercise price - $2.50; expected term – 10 years; discount rate – 0.25%; and volatility – 55%.

     

    Options for 250 shares were issued to a consultant in 2017 with an exercise price of $2.50 and an expiration date of March 28, 2018, and Options were exercised for 25 shares in March 2017, at $2.50 per share providing $62 in cash to the Company. As of September 30, 2017, the number of Options outstanding was 884.

     

    Changes in the Options under the 2013 Option Plan are described in the table below:

     

      
        Number of Options     Weighted
    Average
    Exercise
    Price
        Weighted Average Remaining Contractual Life (Years)  
    Balance at December 31, 2015     659     $ 2.50       2.1  
    Granted     125     $ 2.50       0.4  
    Exercised     -                  
    Forfeited     (125 )   $ 2.50          
    Balance at December 31, 2016     659     $ 2.50       1.2  
    Granted     250     $ 2.50       1.0  
    Exercised   (25 )   $ 2.50        
    Forfeited     -                  
    Balance at March 31, 2017     884     $ 2.50       1.0  
    Granted     -                  
    Exercised     -                  
    Forfeited     -                  
    Balance at September 30, 2017     884     $ 2.50       0.8  
    Intrinsic value of options   $ 309                  

     

    2013 Incentive Stock Plan

     

    The 2013 Incentive Stock Plan was registered on February 7, 2013. Under the 2013 Incentive Stock Plan, the Company may grant incentive stock in the form of Stock Options, Stock Awards and Stock Purchase Offers of up to 5,500 shares of common stock to Company employees, officers, directors, consultants and advisors. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant. At the time of the Merger, 5,497 shares were available to issue under the 2013 Incentive Stock Plan. The Board has authorized blocks of incentive stock totaling 5,486 shares to be issued to various employees, consultants, advisors and directors of the Company through September 30, 2017 and 141 shares have been forfeited, leaving 152 shares available to grant.

     

    The Company engaged the services of consultants to assist it with efforts to raise capital, identify potential acquisitions, recruit talent, and perform acquisition due diligence. In June 2017, the Company issued 20 shares to a consultant for grants that were fully vested with a grant value of $98.

     

    The Company has issued 1,219 shares to employees for grants that were fully vested, with grant values of $6,089 during the six months ended September 30, 2017.

     

    As of September 30, 2017, the Company has issued 2,219 shares for fully vested grants and granted awards for 3,129 shares that will be expensed through the completion of vesting at December 31, 2018, resulting in 152 shares available for award. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $12,968. Share-based compensation costs of approximately $6,800 for grants not yet recognized will be recognized as expense through December 31, 2018, subject to any changes for actual versus estimated forfeitures.

     

     

    A reconciliation of the shares available under the 2013 Incentive Stock Plan is presented in the table below through September 30, 2017.

     

    11 
        Number of Shares  

    Available under the 2013 Incentive Stock Plan

        5,500  
    Granted pre-Merger     (13 )
    Shares cancelled pre-Merger     10  
    Available at the Merger date     5,497  
    Shares granted post-Merger     (476 )
    Options granted post-Merger     -  
    Balance at December 31, 2016     5,021  
    Shares granted     (5,010 )
    Balance at March 31, 2017      
    Shares granted     -  
    Shares forfeited   141  
    Balance at September 30, 2017     152  
    Vested stock awards at September 30, 2017     2,225  

     

    Shares issued under the 2013 Incentive Stock Plan through September 30, 2017:

     

        Number of Shares Issued  
    Balance at December 31, 2015     3  
    Issued post-merger     159  
    Balance at December 31, 2016     162  
    Issued     813  
    Balance at March 31, 2017     975  
    Issued     1,244  
    Balance at September 30, 2017     2,219  

     

    2017 Omnibus Incentive Plan

     

    The 2017 Omnibus Incentive Plan was registered on June 14, 2017. Under the 2017 Omnibus Incentive Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 4,000 shares of common stock to Company employees, officers, directors, consultants and advisors are available under the 2017 Omnibus Incentive Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant. The Board has authorized awards totaling 1,916 shares to employees and directors of the Company through September 30, 2017, comprised of 611 incentive stock options, 1,105 of service-based restricted stock shares, 135 of performance-based restricted stock shares and 65 shares to the independent members of the Board.

      

    The Company has issued 166 shares to employees for fully vested grants and granted awards for 1,685 shares that will be expensed through the completion of vesting at June 30, 2021. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $559. Share-based compensation costs of approximately $4,200 for grants not yet recognized will be recognized as expense through June 30, 2021 subject to any changes for actual versus estimated forfeitures.

     

    On June 30, 2017, the Company issued 28 shares of common stock and on September 30, 2017, the Company issued 37 shares of common stock to independent directors that were fully vested with a grant value of $125 in each quarter, for a total of 65 shares with a grant value of $250. A total of $25 in shares was issued to each independent director for their participation on the Company’s Board in each quarter. The shares were issued based on the average closing share price of the Company’s stock for each quarter.

      

    The Company records share-based compensation in accordance with ASC 718 for employees and ASC 505 for non-employees, and has recorded share-based compensation of $241 for the six months ended September 30, 2017 relating to the options. Management valued the options utilizing the Black-Scholes model with the following criteria ranges: stock price - $3.02 to $3.76 exercise price - $3.02 to $3.76; expected term – 10 years; discount rate – 2.20% to 2.27%; and volatility – 89 to 94%. Changes in the options under the 2017 Omnibus Incentive Plan are described in the table below 

     

        Number of Options     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life (Years)  
    Granted     611                  
    Exercised     -                  
    Forfeited     -                  
    Balance at September 30, 2017     611     $ 3.38       9.7  
    Intrinsic value of options   $ -                  

     

    In June 2017, the Board authorized awards of 135 shares of restricted stock whose vesting is contingent upon annual reviews, which may include specific performance metrics. The values were based on grant date fair value as of June 28, 2017 ($3.36 per share), will be expensed through the completion of the vesting in 2020 and were accrued assuming that performance goals will be achieved. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $72.

     

    A summary of the activity for performance grants as of September 30, 2017 and since inception in June 2017 is presented below:

     

        Number of 
    Performance 
    Shares
        Weighted Average Remaining Contractual Life (Years)  
    Granted     135       2.7  
    Forfeited     -          
    Balance at September 30, 2017     135       2.7  
    Vested stock awards at September 30, 2017     -          

     

    In June 2017, the Board authorized awards of 1,105 shares of restricted stock whose vesting is contingent upon completion of periods of service to employees that vest through 2020. The values were based on grant date fair value of June 28, 2017 ($3.36 per share) and will be expensed through the completion of the vesting. The share-based compensation expense related to these grants for the six months ended September 30, 2017 was $1,328.

     

    A summary of the activity for service-based grants as of September 30, 2017 and since inception in June 2017 is presented below:

      

        Number of 
    Grants 
    Issued
        Weighted Average Remaining Contractual Life (Years)  
    Granted     1,105       2.7  
    Forfeited     -          
    Balance at September 30, 2017     1,105       2.7  

     

    Share-based compensation costs of approximately $2,692 for performance and service grants not yet recognized will be recognized as expense through 2020, subject to any changes for actual versus estimated forfeitures.

     

    A reconciliation of the shares available under the 2017 Omnibus Incentive Plan is presented in the table below through September 30, 2017:

     

        Number of Shares  
    Available under the Omnibus Incentive Plan     4,000  
    Shares granted     (1,916 )
    Shares forfeited     -  
    Balance at September 30, 2017     2,084  
    Vested stock awards at September 30, 2017     232  

     

    Shares issued under the 2017 Omnibus Incentive Plan through September 30, 2017:

     

        Number of Shares Issued  
           
    Issued     232  
    Balance at September 30, 2017     232  
     
    XML 35 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Commitments and Contingencies
    6 Months Ended
    Sep. 30, 2017
    Commitments and Contingencies [Abstract]  
    COMMITMENTS AND CONTINGENCIES

    NOTE 12: COMMITMENTS AND CONTINGENCIES

     

    Operating Leases

     

    The Company leases many of its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements. These leases expire at various dates through 2021. Rent expense was approximately $332 and $284 for the six months ended September 30, 2017 and 2016, respectively. The amount for 2017 and 2016 includes $153 and $119 in rent for Sable’s production facility which is included in cost of product sales. Future minimum lease payments required under the operating leases are as follows: 2018 - $315, 2019 - $578, 2020 - $496, 2021 - $386.

     

    Corporate Card Program

     

    The Company has established a corporate credit card program with a bank and has approximately $265 in an interest-bearing account at the bank to secure charges from the corporate card program.

     

    Royalties

     

    The Company has cross-licensing agreements with several technology companies that require payment of royalties upon the sale and or use of certain patented technologies. One of these agreements requires minimum annual payments of $50 until the last of the patents expire.

     

    Contract Related Fees

     

    Prior to the Merger, a subsidiary of the Company, as part of a contract to develop its products, has agreed to pay the contractor 1.5% of future New York state manufactured sales, and 5% of future non-New York state manufactured sales until the entire funds paid by a contractor have been repaid (or three times the funds if non-New York manufactured), or 15 years after start of sales. As of September 30, 2017, the subsidiary has $1,252 of contract-related expenses. These funds will be owed to the contractor, as described above, contingent upon the sale of the subsidiary’s product related to that contract.

     

    The Company has determined that a liability need not be accrued because management has determined that it is not probable sales will occur in this technology.

    XML 36 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Income Taxes
    6 Months Ended
    Sep. 30, 2017
    Income Taxes [Abstract]  
    INCOME TAXES

    NOTE 13: INCOME TAXES

     

    The Company accounts for income taxes under ASC Topic 740 Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement basis and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company has a net operating loss carryforward for tax purposes totaling approximately $82,880 at September 30, 2017, expiring through the year 2037. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after certain ownership shifts.

     

    The provision (benefit) for income taxes for the six months ended September 30, 2017 and 2016 differs from the amount expected as a result of applying statutory tax rates to the losses before income taxes principally due to establishing a valuation allowance to fully offset the income tax benefit other than minimum state income taxes payable of $7. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. As the achievement of required taxable income is uncertain, the Company has recorded a full valuation allowance against deferred tax assets.

     

    The Company’s deferred tax assets are summarized as follows:

        

      

    September 30,

    2017

      

    March 31,

    2017

     
    Net operating loss carryover $27,961  $20,671 
    Depreciable and amortizable assets  1,628   1,464 
    Share-based compensation  4,542   1,003 
    Accrued liabilities  167   122 
    Inventory reserve  116   119 
    Allowance for bad debts  162   154 
    Other  328   4 
    Less: valuation allowance  (34,904)  (23,537)
    Net deferred tax asset $-  $- 

     

    After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at September 30, 2017 and March 31, 2017, due to the uncertainty of realizing the deferred income tax assets. The valuation allowance increased by $11,367 in the six months ended September 30, 2017. The Company has not identified any uncertain tax positions and has not received any notices from tax authorities.

    XML 37 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Segment Information
    6 Months Ended
    Sep. 30, 2017
    Segment Information [Abstract]  
    SEGMENT INFORMATION

    NOTE 14: SEGMENT INFORMATION

     

    The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions. As of September 30, 2017, and for the six months ended September 30, 2017 and 2016, the Company operated in two segments. The segments are Pioneer (principally consisting of Pioneer Products’ operations consisting of sales of recycled plastic products and materials) and Zest Labs (principally consisting of costs associated with developing Zest Labs solutions). Amounts related to Eco3d’s mapping, modeling and consulting services business have been reclassified to discontinued operations and thus are excluded from the amounts in the tables below. The reclassification of Eco3d to discontinued operations caused the reportable segments to change from the previously reported Products and Services to the current reporting of Pioneer and Zest Labs. The principal change was the removal of Eco3d from the Services segment. Prior period segment information has been restated as a result. Home office costs are allocated to the two segments based on the relative support provided to those segments.

     

    Three months ended September 30, 2017 Pioneer  Zest Labs  Total 
    Segmented operating revenues $1,885  $20  $1,905 
    Cost of revenues  2,276   19   2,295 
    Gross profit (loss)  (391)  1   (390)
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  311   10,220   10,531 
    Depreciation, amortization and impairment  828   196   1,024 
    Interest expense, net of interest income  -   15   15 
    Loss from continuing operations before income taxes $(1,530) $(10,430) $(11,960)
    Segmented assets            
    Property and equipment, net $2,117  $180  $2,297 
    Intangible assets, net $11  $2,010  $2,021 
    Capital expenditures $181  $10  $191 

     

    Three months ended September 30, 2016 Pioneer  Zest Labs  Total 
    Segmented operating revenues $3,872  $17  $3,889 
    Cost of revenues  3,832   12   3,844 
    Gross profit  40   5   45 
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  502   5,868   6,370 
    Depreciation, amortization and impairment  90   60   150 
    Interest expense, net of interest income  20   60   80 
    Loss from continuing operations before income taxes $(572) $(5,983) $(6,555)
    Segmented assets            
    Property and equipment, net $2,953  $217  $3,170 
    Intangible assets, net $2,187  $810  $2,997 
    Capital expenditures $123  $-  $123 

      

    Six months ended September 30, 2017 Pioneer  Zest Labs  Total 
    Segmented operating revenues $4,389  $21  $4,410 
    Cost of revenues  5,056   33   5,089 
    Gross (loss)  (667)  (12)  (679)
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  1,568   22,666   24,234 
    Depreciation, amortization and impairment  881   324   1,205 
    Interest expense, net of interest income  -   30   30 
    Loss from continuing operations before income taxes $(3,116) $(23,032) $(26,148)
    Segmented assets            
    Property and equipment, net $2,117  $180  $2,297 
    Intangible assets, net $11  $2,010  $2,021 
    Capital expenditures $214  $22  $236 

     

    Six months ended September 30, 2016 Pioneer  Zest Labs  Total 
    Segmented operating revenues $6,260  $22  $6,282 
    Cost of revenues  6,269   11   6,280 
    Gross profit (loss)  (9)  11   2 
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  633   11,553   12,186 
    Depreciation, amortization and impairment  148   112   260 
    Interest expense, net of interest income  37   130   167 
    Loss from continuing operations before income taxes $(827) $(11,784) $(12,611)
    Segmented assets            
    Property and equipment, net $2,953  $217  $3,170 
    Intangible assets, net $2,187  $810  $2,997 
    Capital expenditures $232  $77  $309 
    XML 38 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Concentrations
    6 Months Ended
    Sep. 30, 2017
    Concentrations [Abstract]  
    CONCENTRATIONS

    NOTE 15: CONCENTRATIONS

     

    During the six months ended September 30, 2017 and 2016, the Company had three major customers, respectively, comprising 73% of revenue. A major customer is defined as a customer that represents 10% or greater of total sales. Additionally, the Company had three and four customers as of September 30, 2017 and 2016, respectively, with accounts receivable balances of 74% of the total accounts receivable at both dates.

     

    In addition, during the six months ended September 30, 2017 and 2016, the Company had one major vendor comprising 32% and 30% of purchases, respectively. A major vendor is defined as a vendor that represents 10% or greater of total purchases. Additionally, the Company had two vendors as of September 30, 2017 and March 31, 2017 with accounts payable balances of 46% and 42% respectively, of total accounts payable.

     

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

    XML 39 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Acquisitions
    6 Months Ended
    Sep. 30, 2017
    Acquisitions [Abstract]  
    ACQUISITIONS

    NOTE 16: ACQUISITIONS

     

    Sable

     

    On May 3, 2016, the Company entered into a Share Exchange Agreement (the “Agreement”) by and among the Company, Pioneer Products, Sable, and the holder of all of Sable’s membership interests, an entity controlled by a stockholder of the Company.

     

    The Company issued 2,000 shares of the Company’s common stock (the “Shares”) in exchange for all of Sable’s membership interests. Sable has since been a wholly-owned subsidiary of Pioneer Products.

     

    The seller was subject to a lock-up agreement (the “Lock-Up Agreement”) that released shares from the Lock-Up Agreement over a period of one year (the “Lock-Up Period”). Under the Lock-Up Agreement, the seller was permitted to sell 33.3% of the Shares received by the seller after the six-month anniversary of the closing of the transaction. Thereafter, an additional 33.3% of the Shares was released at the end of each subsequent three-month period until the end of the Lock-Up Period.

     

    No cash was paid relating to the acquisition of Sable. Sable operates a polymer manufacturing facility north of Atlanta, Georgia.

     

    The Company acquired the assets and liabilities noted below in exchange for the 2,000 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:

     

    Cash $41 
    Receivables, net  1,250 
    Inventory  759 
    Property and equipment  2,822 
    Identifiable intangible assets  1,028 
    Goodwill  1,264 
    Other assets  36 
    Accounts payable and other liabilities  (883)
    Notes payable and current debt  (2,100)
    Long-term debt  (431)
      $3,786 

     

    The intangible assets represent customer lists that were being amortized over three years. The goodwill recognized reflected expected synergies from combining operations of Sable and the Company as well as intangible assets that did not qualify for separate recognition including polymer formulas and formulations. The goodwill is not expected to be deductible for tax purposes. The goodwill was not amortized but was tested for impairment. As a result of the impairment testing, the remaining balance of goodwill was written off, and the unamortized intangible assets were fully impaired. Since the acquisition, Sable has recorded $7,527 in revenues (net of intercompany elimination) and a loss of $5,220 that are both included in the consolidated results.


    The following table shows pro-forma results for the six months ended September 30, 2016 as if the acquisition had occurred on April 1, 2016. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Sable and the Company.

       

    Revenues $6,782 
    Net loss attributable to controlling interest $(13,192)
    Net loss per share $(0.54)

     

    440labs

     

    On May 18, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”) with Zest Labs, 440labs, SphereIt, LLC, a Massachusetts limited liability company (“SphereIt”) and three of 440labs’ executive employees. Pursuant to the Exchange Agreement, on May 23, 2017 the Company acquired all of the shares of 440labs in exchange for 300 shares of the Company’s common stock issued to SphereIt. 440labs’ three executive employees signed employment agreements pursuant to which each of the three executive employees received 100 shares of the Company’s common stock and became employed by Zest Labs.

     

    No cash was paid relating to the acquisition of 440labs. 440labs is a software development and information solutions provider for cloud, mobile, and IoT applications. 440labs’ experienced leadership and engineering teams will augment Zest Labs’ development of modern, enterprise scale solutions that robustly connect to distributed IoT deployments. 440labs blends onshore and offshore resources to optimize development and provide extended runtime operations coverage, critical to broad-based deployments.

     

    The Company acquired the assets and liabilities noted below in exchange for the 300 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:

      

    Identifiable intangible assets $1,435 
    Goodwill  65 
      $1,500 

     

    The primary business of 440labs is providing development services to Zest Labs. In consolidation, the revenues of 440labs prior to the acquisition would have been eliminated against the expenses of Zest Labs that were paid to 440labs, resulting in an insignificant impact to the net losses of the Company. The goodwill is not expected to be deductible for tax purposes. The goodwill will not be amortized but will be tested at least annually for impairment.

    XML 40 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Subsequent Events
    6 Months Ended
    Sep. 30, 2017
    Subsequent Events [Abstract]  
    SUBSEQUENT EVENTS

    NOTE 17: SUBSEQUENT EVENTS

     

    On September 25, 2017, Charles Rateliff notified the Company that he would be voluntarily relinquishing his positions as Chief Financial Officer and Treasurer, and as a member of the Board, effective October 1, 2017. Following his departure, Mr. Rateliff will continue as an advisor to the Company. Upon relinquishment of the position as Chief Financial Officer and Treasurer, Mr. Rateliff forfeited 150 shares in the 2017 Omnibus Incentive Plan. In his capacity as an advisor to the Company, Mr. Rateliff will receive 75 shares of stock grants under the 2017 Omnibus Incentive Plan of which 25 shares vested upon commencement of the advisor agreement and were issued October 1, 2017, 25 shares vest on April 1, 2018 and 25 shares vest based on the earliest of the Company achieving a performance metric or October 1, 2018.

     

    Effective October 13, 2017, the Compensation Committee of the Board of Directors of the Company issued new option awards to individuals in replacement of existing restricted stock and restricted stock unit awards previously granted. In addition, the Committee approved new option awards that vest over a four-year period to induce certain employees to accept the replacement options, to compensate them for diminution in value of their existing awards and in consideration of a number of other factors, including each individual’s role and responsibility with the Company, their years of service to the Company, and market precedents and standards for modification of equity awards. With respect to the replacement options, grantees agreed to forfeit the existing awards covering 2,303 shares of the Company’s common stock and were granted the replacement options to purchase an equal number shares of Company common stock at an exercise price set at 100% of the fair market value of the Company’s stock price on the effective date of the grants (October 13, 2017). In consideration of the agreements, the majority of the replacement options vested immediately upon grant. The remaining replacement options will vest in 12 equal installments, with the first installment vesting on January 15, 2018, and additional installments vesting on the last day of each of the eleven successive three-month periods, subject to continued employment by the Company. The replacement options were issued under the 2017 Omnibus Incentive Plan or 2013 Incentive Stock Plan to correspond with the plan under which the existing awards were issued. With respect to the new options, the individuals were granted options to purchase 2,909 shares of Company common stock that vest at a rate of 25% per year on October 13th of each year from 2018 to 2021, subject to continued employment by the Company. As with the replacement options, the new options have an exercise price set at 100% of the fair market value of the Company’s stock price on the effective date of the grant. The new options were not granted under any of the Company’s existing equity compensation plans. The modifications referred to above are expected to result in incremental expense of $6,048 being recorded in the Company’s third fiscal quarter.

     

    Subsequent to September 30, 2017, the Company has issued 64 shares of common stock pursuant to stock awards granted from the 2013 Incentive Stock Plan and 75 shares of common stock pursuant to stock awards granted from the 2017 Omnibus Incentive Plan. The Company acquired 42 shares of common stock from employees in lieu of amounts required to satisfy minimum withholding requirements upon vesting of the employees’ stock.

     

    On October 26, 2017, the Company entered into a consulting agreement for $8 per month-to-month basis unless otherwise terminated and agreed to issue warrants for 75 shares of common stock at $2.10 per share, vesting at 20% per month and with a term of five years.

    XML 41 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Organization and Summary of Significant Accounting Policies (Policies)
    6 Months Ended
    Sep. 30, 2017
    Organization and Summary of Significant Accounting Policies [Abstract]  
    Principles of Consolidation

    Principles of Consolidation

     

    The consolidated financial statements include the accounts of Ecoark Holdings and its direct and indirect subsidiaries, collectively referred to as “the Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Ecoark Holdings is a holding company that holds 100% of Ecoark and Magnolia Solar. Ecoark holds 100% of Eco360, Pioneer Products (which owns 100% of Sable), Zest Labs (which owns 100% of 440labs) and, until April 2017, Eco3d. As described further in Note 2, in March 2017 the Ecoark Holdings Board approved a plan to sell Eco3d, and the sale was completed in April 2017. Ecoark previously owned 65% of Eco3d and the remaining 35% interest was owned by executives of Eco3d until September 2016 when the executives’ 35% interest was acquired in exchange for 525 shares of Ecoark Holdings stock. In conjunction with the sale of Eco3d in April 2017, the 525 shares were reacquired by the Company and canceled.  

     

    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.

    Noncontrolling Interests

    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 September 2016, the 35% noncontrolling interest of Eco3d was acquired in exchange for 525 shares of Ecoark Holdings stock, which eliminated the noncontrolling interest. On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d, and the 525 shares of Ecoark Holdings were returned as part of the sales proceeds and were subsequently canceled.

    Basis of Presentation

    Basis of Presentation

     

    The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”). It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

    Reclassification

    Reclassification

     

    The Company has reclassified certain amounts in the 2016 consolidated financial statements to be consistent with the 2017 presentation. These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as certain research and development expenses. Reclassifications relating to the discontinued operations of Eco3d are described further in Note 2. The reclassifications had no impact on operations or cash flows for the six months ended September 30, 2016.

    Use of Estimates

    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, obsolete or slow-moving inventory, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, liabilities to accrue, allocation of home office expenses for segment reporting and determination of the fair value of stock awards and forfeiture rates. Actual results could differ from those estimates.

    Cash

    Cash

     

    Cash consists of cash, demand deposits and money market funds with an original maturity of three months or less. The Company holds no cash equivalents. The Company maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.

    Inventory

    Inventory

     

    Inventory is stated at the lower of cost or market. Inventory cost is determined on average cost and at standard cost, which approximates average costs in accordance with ASC 330-10-30-12. Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their estimated useful or scrap values. The Company establishes reserves for this purpose. Effective April 1, 2017, the Company changed its inventory costing method at Sable from first-in first-out (“FIFO”) to average cost. FIFO costs approximated average cost. The change was made in conjunction with a system conversion that enabled the Company to move from a periodic to a perpetual inventory system. In accordance with ASC 250-10-45-11 through 45-13, management determined that the change was preferable because it provides better operational control and visibility into inventory levels and costs, and it facilitates cost analysis at a batch level that was not available previously. The effect of the change was not material to the Company’s fiscal first or second quarter consolidated financial statements.

    Property and Equipment and Long-Lived Assets

    Property and Equipment and Long-Lived Assets

     

    Property and equipment is stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to ten years for all classes of property and equipment, except leasehold improvements which are depreciated over the term of the lease when shorter than the estimated useful life of the improvements.

     

    ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has early adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

     

    ASC 360-10 addresses criteria to be considered for long-lived assets expected to be disposed of by sale. Six criteria are listed in ASC 360-10-45-9 that must be met in order for assets to be classified as held for sale. Once the criteria are met, long-lived assets classified as held for sale are to be measured at the lower of carrying amount or fair value less costs to sell. In December 2016, management decided to outsource its densification activities at the Sable facility in Georgia. All six criteria were met and thus the densification and related equipment have been adjusted to fair value and reclassified to current assets in the balance sheets. During the six months ended September 30, 2017, the most significant of these assets were sold and the immaterial balances of the remaining assets were written off.

      

    Intangible assets with definite useful lives are stated at cost less accumulated amortization and impairment. Identifiable intangible assets capitalized represent the valuation of the Company-owned patents, customer lists, outsourced vendor relationships and non-compete agreements. These intangible assets are being amortized on a straight-line basis over their estimated average useful lives of thirteen and a half years for the patents, three years for the customer lists and outsourced vendor relationships and two years for the non-compete agreements. Expenditures on intangible assets through the Company’s filing of patent and trademark protection for Company-owned inventions are expensed as incurred. 

     

    The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

     

    1. Significant underperformance relative to expected historical or projected future operating results;

     

    2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

     

    3. Significant negative industry or economic trends.

     

    When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company tested the carrying value of its intangible assets for recoverability during the six months ended September 30, 2017, and impairments were recorded during this period.

    Advertising Expense

    Advertising Expense

     

    The Company expenses advertising costs as incurred. Advertising expenses for the six months ended September 30, 2017 and 2016, which were nominal, are included in selling, general and administrative costs.

    Software Costs

    Software Costs

     

    The Company accounts for software development costs in accordance with ASC 985-730 Software Research and Development, and ASC 985-20 Costs of Software to be Sold, Leased or Marketed. ASC 985-20 requires that costs related to the development of the Company’s products be capitalized as an asset when incurred subsequent to the point at which technological feasibility of the enhancement is established and prior to when a product is available for general release to customers. ASC 985-20 specifies that technological feasibility can be established by the completion of a detailed program design. Costs incurred prior to achieving technological feasibility are expensed. The Company does utilize detailed program designs; however, the Company’s products are expected to be released soon after technological feasibility has been established and as a result software development costs have been expensed as incurred.

    Research and Development Costs

    Research and Development Costs

     

    Research and development costs are expensed as incurred. These costs include internal salaries and related costs and professional fees for activities related to development. The majority of these costs relate to the Zest Data Services platform, Zest Fresh and Zest Delivery.

    Subsequent Events

    Subsequent Events

     

    Subsequent events were evaluated through the date the consolidated financial statements were filed.

    Shipping and Handling Costs

    Shipping and Handling Costs

     

    The Company reports shipping and handling revenues and their associated costs in product revenue and cost of revenue, respectively. Shipping revenues and costs for the six months ended September 30, 2017 and 2016 were nominal.

    Revenue Recognition

    Revenue Recognition

     

    The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company early adopted effective April 1, 2017. No cumulative adjustment to accumulated deficit was required as a result of this adoption, and the early adoption did not have a material impact on our consolidated financial statements as no material arrangements prior to the adoption were impacted under the new pronouncement.

     

    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 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 can be accounted for as separate units of accounting, and if so, the fair value for each of the elements.

     

    Product revenue consists primarily of the sale of recycled plastics products by Pioneer and Sable. Contracts for products are for products held in inventory and typically are on thirty- to sixty-day payment terms. Management’s evaluation of credit risk involves judgement and may include securing insurance coverage on the recoverability of the receivables. Revenues are recognized when obligations under the terms of a contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products are shipped to the customer. Expected costs of standard warranties and claims are recognized as expense.

     

    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 contracts that include multiple performance obligations, including hardware, perpetual software licenses, subscriptions, term licenses, maintenance 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. Contracts are typically on thirty- to sixty-day payment terms from when the Company satisfies the performance obligation in the contract.

     

    Services contracts include research contracts for the government. The contracts define delivery dates for which the performance obligation will be satisfied over time. Revenue is recognized over time based on the output method to measure the Company’s progress toward complete satisfaction of a performance obligation.

     

    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 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 incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

    Accounts Receivable and Concentration of Credit Risk

    Accounts Receivable and Concentration of Credit Risk

     

    The Company considers accounts receivable, net of allowance for returns and 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.

    Uncertain Tax Positions

    Uncertain Tax Positions

     

    The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates tax positions on an annual basis.

      

    The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they were filed.

    Vacation and Paid-Time-Off Compensation

    Vacation and Paid-Time-Off Compensation

     

    The Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable to services already rendered, will be paid even if an employee is terminated, payment is probable and the amount can be estimated.

    Share-Based Compensation

    Share-Based Compensation

     

    The Company follows ASC 718 Compensation – Stock Compensation and has early adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accountingas of July 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual forfeitures when estimating the forfeiture rate. The Company facilitates payment of the employee tax withholdings resulting from the issuances of these awards by remitting the employee taxes and recovering the resulting amounts due from the employee either via payments from employees or from the sale of shares issued sufficient to cover the amounts due the Company. 

     

    The Company measures compensation expense for its non-employee share-based compensation under ASC 505-50 Equity-Based Payments to Non-Employees. The fair values of options and shares issued are used to measure the transactions, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged either directly to expense, or to a prepaid expense if shares of common stock are issued in advance of services being rendered, and to additional paid-in capital.

     

    The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting effective April 1, 2017. Cash paid when shares were directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.

    Fair Value of Financial Instruments

    Fair Value of Financial Instruments

     

    ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments. The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments. The carrying amount of the Company’s debt instruments also approximates fair value.

    Leases

    Leases

     

    The Company follows ASC 840 Leases in accounting for leased properties. The Company leases several office facilities and production facilities for terms typically ranging from three to five years. Rent escalations over the term of a lease are considered at the inception of the lease such that the monthly average for all payments is recorded as straight-line rent expense with any differences recorded in accrued liabilities.

    Earnings (Loss) Per Share of Common Stock

    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 per share include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options, grants 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 basic weighted average number of common shares are used in the computations.

    Fair Value Measurement

    Fair Value Measurement

     

    ASC 820 Fair Value Measurement 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 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.

    Segment Information

    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. For fiscal year 2018 the Company and its Chief Operating Decision Maker determined that the Company’s operations were divided into two segments: Zest Labs and Pioneer Products. See Note 14 for segment information disclosures.

    Related-Party Transactions

    Related-Party Transactions

     

    Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions (see Note 10). All transactions are recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.

    Recently Adopted Accounting Pronouncements

    Recently Adopted Accounting Pronouncements

     

    In May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09 Revenue from Contracts with Customers, ASU 2015-14 Revenue from Contracts with Customers, Deferral of the Effective Date, and ASU 2016-12 Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, respectively, which implement ASC Topic 606. ASU 2017-13 issued in September 2017 clarifies SEC Staff guidance on the transition to ASC 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under U.S. GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company adopted the above ASUs (ASC Topic 606) effective April 1, 2017. The adoption of these ASUs did not have a material impact on our consolidated financial statements.

     

    In May 2017, the FASB issued ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The FASB issued this update to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this update are required for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017 and early adoption is permitted. The Company adopted ASU 2017-09 as of July 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements. 

     

    In January 2017, the FASB issued ASU 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The amendments in this update are required for public business entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The update is intended to simplify the annual or interim goodwill impairment test. A public business entity that is a U.S. SEC filer must adopt the amendments in this update for its annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted ASU 2017-04 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805), Clarifying the Definition of a Business. The amendments in this update are required for public business entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The update is intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. Public business entities must apply the amendments in this update to annual periods beginning after December 15, 2017. Early application is permitted under certain conditions. The Company adopted ASU 2017-01 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The amendments in this update provided guidance on eight specific cash flow issues. This update provided specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 31, 2017. Early adoption is permitted. The Company adopted ASU 2016-15 effective April 1, 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

     

    The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting effective April 1, 2017. Cash paid when shares were directly withheld for tax withholding purposes is classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.

    Recent Accounting Pronouncements Pending Adoption

    Recent Accounting Pronouncements Pending Adoption

     

    In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 changes the accounting for leased assets, principally by requiring balance sheet recognition of assets under lease arrangements. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The Company does not expect that adoption of ASU 2016-02 will have a material impact on our consolidated financial statements.

     

    There were other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries or transactions that are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

    Going Concern

    Going Concern

     

    The Company has experienced losses from operations resulting in an accumulated deficit of $95,805 since inception. The accumulated deficit together with losses of $25,576 for the six months ended September 30, 2017, and net cash used in operating activities in the six months ended September 30, 2017 of $10,451, have resulted in the uncertainty of the Company’s ability to continue as a going concern.

     

    These consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time.

     

    The Company raised $9,106 of additional capital, net of expenses, in the six months ended September 30, 2017, as compared with over $12,000 raised in the three-month transition period ended March 31, 2017. The Company’s ability to raise additional capital through future equity and debt securities issuances is unknown. The Company disclosed its intention to raise up to a cumulative amount of $80,000 pursuant to its shelf registration filed with the SEC (approximately $23,000 has been raised with $57,000 remaining through August 2019). Obtaining additional financing and the successful development of the Company’s strategic plan to achieve profitability are necessary for the Company to continue operations. There can be no assurance that such capital will be available or on terms acceptable to the Company. The Company intends to further develop its product offerings and customer bases. The Company’s plans to achieve profitability include evaluating the cost structure and processes of its operations, both at the margin and operating expense levels, as well as pursuing additional strategic acquisitions and dispositions. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern as determined by management. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

    XML 42 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Discontinued Operations (Tables)
    6 Months Ended
    Sep. 30, 2017
    Discontinued Operations [Abstract]  
    Schedule of carrying amounts of major classes of assets and liabilities held for sale

      

    September 30,

    2017

      

    March 31,

    2017

     
      (Unaudited)    
    Cash $     -  $34 
    Accounts receivable, net of allowance  -   1,293 
    Prepaid expenses  -   67 
    Other current assets  -   10 
    Current assets - held for sale $-  $1,404 
             
    Property and equipment, net $-  $362 
    Other assets  -   4 
    Non-current assets - held for sale $-  $366 
             
    Accounts payable $-  $67 
    Accrued liabilities  -   396 
    Current liabilities - held for sale $-  $463 

    Schedule of income (loss) of discontinued operations in the consolidated statements of operations
      2017  2016 
    Revenue from services $188  $2,531 
    Cost of services  103   942 
    Gross profit  85   1,589 
    Operating expenses  142   1,341 
    Allocated interest expense  -   24 
    Income (loss) of discontinued operations $(57) $224 
    XML 43 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Revenue (Tables)
    6 Months Ended
    Sep. 30, 2017
    Revenue [Abstract]  
    Schedule of revenue by major source
      Three months ended September 30, 2017  Three months ended September 30, 2016  Six months ended September 30, 2017  Six months ended September 30, 2016 
    Revenue:            
    Pioneer and Sable $1,885  $3,872  $4,389  $6,260 
    Zest Labs  20   17   21   22 
      $1,905  $3,889  $4,410  $6,282 
    XML 44 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Inventory (Tables)
    6 Months Ended
    Sep. 30, 2017
    Inventory [Abstract]  
    Schedule of inventory

      September 30, 
    2017
      March 31, 
    2017
     
      (Unaudited)    
           
    Inventory $3,265  $2,456 
    Inventory reserves  (340)  (352)
    Total $2,925  $2,104
    XML 45 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Property and Equipment (Tables)
    6 Months Ended
    Sep. 30, 2017
    Property and Equipment [Abstract]  
    Schedule of property and equipment

      

    September 30,

    2017

      

    March 31,

    2017

     
      (Unaudited)    
    Machinery and equipment $2,931  $2,724 
    Computers and software costs  406   406 
    Furniture and fixtures  107   107 
    Leasehold improvements  4   4 
    Total property and equipment  3,448   3,241 
    Accumulated depreciation and impairment  (1,151)  (933)
    Property and equipment, net $2,297  $2,308
    XML 46 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Intangible Assets (Tables)
    6 Months Ended
    Sep. 30, 2017
    Intangible Assets [Abstract]  
    Summary of intangible assets
      September 30, 
    2017
      March 31, 
    2017
     
      (Unaudited)    
    Customer lists $5,008  $5,008 
    Patents  1,090   1,090 
    Outsourced vendor relationships  1,016   - 
    Non-compete agreements  419   - 
    Goodwill, net of impairment  65   582 
    Total intangible assets  7,598   6,680 
    Accumulated amortization and impairment  (5,577)  (5,113)
    Intangible assets, net $2,021  $1,567 
    XML 47 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Accrued Liabilities (Tables)
    6 Months Ended
    Sep. 30, 2017
    Accrued Liabilities [Abstract]  
    Summary of accrued liabilities
      September 30, 
    2017
      

    March 31, 2017

     
      (Unaudited)    
    Professional fees and consulting costs $186  $1,777 
    Inventory in transit  127   89 
    Vacation and paid time off  390   359 
    Payroll and employee expenses  123   163 
    Legal fees  43   112 
    Straight-line rent  91   95 
    Other  171   25 
    Total $1,131  $2,620
    XML 48 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Long-Term Debt (Tables)
    6 Months Ended
    Sep. 30, 2017
    Note Payable/ Long-Term Debt [Abstract]  
    Schedule of long-term debt
      September 30, 
    2017
      March 31,
    2017
     
      (Unaudited)    
    Secured convertible promissory note $500  $500 
    Less: current portion  (500)  - 
    Long-term debt, net of current portion $-  $500 
    XML 49 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Tables)
    6 Months Ended
    Sep. 30, 2017
    2013 Option Plan [Member]  
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
    Schedule of changes in stock options

      Number of Options  Weighted
    Average
    Exercise
    Price
      Weighted Average Remaining Contractual Life (Years) 
    Balance at December 31, 2015  659  $2.50   2.1 
    Granted  125  $2.50   0.4 
    Exercised  -         
    Forfeited  (125) $2.50     
    Balance at December 31, 2016  659  $2.50   1.2 
    Granted  250  $2.50   1.0 
    Exercised  (25) $2.50     
    Forfeited  -         
    Balance at March 31, 2017  884  $2.50   1.0 
    Granted  -         
    Exercised  -         
    Forfeited  -         
    Balance at September 30, 2017  884  $2.50   0.8 
    Intrinsic value of options $309         
    2013 Incentive Stock Plan [Member]  
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
    Schedule of changes in stock options

     

      Number of Shares Issued  Weighted Average Remaining Contractual Life (Years) 
    Balance at December 31, 2015  3   0 
    Issued post-merger  159   1.9 
    Balance at December 31, 2016  162   0 
    Issued  813   1.9 
    Balance at March 31, 2017  975   1.8 
    Issued  1,247   1.5 
    Balance at September 30, 2017  2,222   1.3 
    Schedule of reconciliation of shares
      Number of Shares 

    Available under the 2013 Incentive Stock Plan

      5,500 
    Granted pre-Merger  (13)
    Shares cancelled pre-Merger  10 
    Available at the Merger date  5,497 
    Shares granted post-Merger  (476)
    Options granted post-Merger  - 
    Balance at December 31, 2016  5,021 
    Shares granted  (5,010)
    Balance at March 31, 2017  11 
    Shares granted  - 
    Shares forfeited  141 
    Balance at September 30, 2017  152 
    Vested stock awards at September 30, 2017  2,225 
    2017 Omnibus Incentive Plan [Member]  
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
    Schedule of changes in stock options
      Number of Options  Weighted Average Exercise Price  Weighted Average Remaining Contractual Life (Years) 
    Granted  611         
    Exercised  -         
    Forfeited  -         
    Balance at September 30, 2017  611  $3.38   9.7 
    Intrinsic value of options $-         
    Schedule of activity for performance grants
      Number of 
    Performance 
    Shares
      Weighted Average Remaining Contractual Life (Years) 
    Granted  135   2.7 
    Forfeited  -     
    Balance at September 30, 2017  135   2.7 
    Vested stock awards at September 30, 2017  -     
    Schedule of activity for service based grants
      Number of 
    Grants 
    Issued
      Weighted Average Remaining Contractual Life (Years) 
    Granted  1,105   2.7 
    Forfeited  -     
    Balance at September 30, 2017  1,105   2.7 
    Schedule of reconciliation of shares
      Number of Shares 
    Available under the Omnibus Incentive Plan  4,000 
    Shares granted  (1,916)
    Shares forfeited  - 
    Balance at September 30, 2017  2,084 
    Vested stock awards at September 30, 2017  232 
    Schedule of shares issued
      Number of Shares Issued 
        
    Issued  232 
    Balance at September 30, 2017  232
    Warrants [Member]  
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
    Schedule of changes in warrants
      Number of Warrants  Weighted
    Average
    Exercise
    Price
      Weighted Average Remaining Contractual Life (Years) 
    Balance at December 31, 2015  15  $35.00   1.0 
    Granted  4,437  $4.94   2.0 
    Exercised pre-Merger  (13)        
    Exercised pre-Merger  (98) $(5.00)    
    Exercised cashless, post-Merger  (2)        
    Forfeited  -         
    Cancelled  -         
    Balance at December 31, 2016  4,339  $4.94   2.0 
    Granted  1,450  $5.53   4.3 
    Exercised Cash  -         
    Exercised Cashless  -         
    Forfeited  -         
    Cancelled  -         
    Balance at March 31, 2017  5,789  $5.09   2.6 
    Granted  2,050  $5.50   5.2 
    Exercised Cash  -         
    Exercised Cashless  (49)        
    Forfeited  (51)        
    Cancelled  -         
    Balance at September 30, 2017  7,739  $5.26   3.3 
    Intrinsic value of warrants $-         
    XML 50 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Income Taxes (Tables)
    6 Months Ended
    Sep. 30, 2017
    Income Taxes [Abstract]  
    Schedule of deferred tax assets

       

      

    September 30,

    2017

      

    March 31,

    2017

     
    Net operating loss carryover $27,961  $20,671 
    Depreciable and amortizable assets  1,628   1,464 
    Share-based compensation  4,542   1,003 
    Accrued liabilities  167   122 
    Inventory reserve  116   119 
    Allowance for bad debts  162   154 
    Other  328   4 
    Less: valuation allowance  (34,904)  (23,537)
    Net deferred tax asset $-  $- 
    XML 51 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Segment Information (Tables)
    6 Months Ended
    Sep. 30, 2017
    Segment Information [Abstract]  
    Schedule of disclosures about segments of an enterprise and related information
    Three months ended September 30, 2017 Pioneer  Zest Labs  Total 
    Segmented operating revenues $1,885  $20  $1,905 
    Cost of revenues  2,276   19   2,295 
    Gross profit (loss)  (391)  1   (390)
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  311   10,220   10,531 
    Depreciation, amortization and impairment  828   196   1,024 
    Interest expense, net of interest income  -   15   15 
    Loss from continuing operations before income taxes $(1,530) $(10,430) $(11,960)
    Segmented assets            
    Property and equipment, net $2,117  $180  $2,297 
    Intangible assets, net $11  $2,010  $2,021 
    Capital expenditures $181  $10  $191 

     

    Three months ended September 30, 2016 Pioneer  Zest Labs  Total 
    Segmented operating revenues $3,872  $17  $3,889 
    Cost of revenues  3,832   12   3,844 
    Gross profit  40   5   45 
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  502   5,868   6,370 
    Depreciation, amortization and impairment  90   60   150 
    Interest expense, net of interest income  20   60   80 
    Loss from continuing operations before income taxes $(572) $(5,983) $(6,555)
    Segmented assets            
    Property and equipment, net $2,953  $217  $3,170 
    Intangible assets, net $2,187  $810  $2,997 
    Capital expenditures $123  $-  $123 
     
    Six months ended September 30, 2017 Pioneer  Zest Labs  Total 
    Segmented operating revenues $4,389  $21  $4,410 
    Cost of revenues  5,056   33   5,089 
    Gross (loss)  (667)  (12)  (679)
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  1,568   22,666   24,234 
    Depreciation, amortization and impairment  881   324   1,205 
    Interest expense, net of interest income  -   30   30 
    Loss from continuing operations before income taxes $(3,116) $(23,032) $(26,148)
    Segmented assets            
    Property and equipment, net $2,117  $180  $2,297 
    Intangible assets, net $11  $2,010  $2,021 
    Capital expenditures $214  $22  $236 

     

    Six months ended September 30, 2016 Pioneer  Zest Labs  Total 
    Segmented operating revenues $6,260  $22  $6,282 
    Cost of revenues  6,269   11   6,280 
    Gross profit (loss)  (9)  11   2 
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net  633   11,553   12,186 
    Depreciation, amortization and impairment  148   112   260 
    Interest expense, net of interest income  37   130   167 
    Loss from continuing operations before income taxes $(827) $(11,784) $(12,611)
    Segmented assets            
    Property and equipment, net $2,953  $217  $3,170 
    Intangible assets, net $2,187  $810  $2,997 
    Capital expenditures $232  $77  $309 
    XML 52 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Acquisitions (Tables)
    6 Months Ended
    Sep. 30, 2017
    Acquisitions [Abstract]  
    Schedule of fair values at the effective date of acquisition purchase price
    Cash $41 
    Receivables, net  1,250 
    Inventory  759 
    Property and equipment  2,822 
    Identifiable intangible assets  1,028 
    Goodwill  1,264 
    Other assets  36 
    Accounts payable and other liabilities  (883)
    Notes payable and current debt  (2,100)
    Long-term debt  (431)
      $3,786 
    Schedule of unaudited pro forma results of operations
    Revenues $6,782 
    Net loss attributable to controlling interest $(13,192)
    Net loss per share $(0.54)
    Schedule of fair value effective date of acquisition the purchase price
    Identifiable intangible assets $1,435 
    Goodwill  65 
      $1,500 
    XML 53 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Organization and Summary of Significant Accounting Policies (Details) - USD ($)
    $ in Thousands
    3 Months Ended 6 Months Ended
    Sep. 30, 2017
    Mar. 31, 2017
    Sep. 30, 2016
    Sep. 30, 2017
    Sep. 30, 2016
    Organization and Summary of Significant Accounting Policies (Textual)          
    Accumulated deficit $ (95,805) $ (70,229)   $ (95,805)  
    Losses $ (11,967)   $ (6,565) (25,576) $ (12,503)
    Additional capital, net of expenses   $ 12,000   9,106  
    Shelf registration amount registered       $ 80,000  
    Property, plant and equipment, estimated useful lives, description      
    Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to ten years for all classes of property and equipment, except leasehold improvements which are depreciated over the term of the lease when shorter than the estimated useful life of the improvements.
     
    Intangible assets amortization method, description       Intangible assets are being amortized on a straight-line basis over their estimated average useful lives of thirteen and a half years for the patents and three years for the customer lists and outsourced vendor relationships and two years for the non-compete agreements.  
    Cash used in operating activities       $ (10,451) $ (7,623)
    Adjustments to additional capital, description      
    The Company raised $9,106 of additional capital, net of expenses, in the six months ended September 30, 2017, as compared with over $12,000 raised in the three-month transition period ended March 31, 2017. The Company’s ability to raise additional capital through future equity and debt securities issuances is unknown. The Company disclosed its intention to raise up to a cumulative amount of $80,000 pursuant to its shelf registration filed with the SEC (approximately $23,000 has been raised with $57,000 remaining through August 2019).
     
    Percentage of non-controlling interest     35.00%   35.00%
    Eco360 [Member]          
    Organization and Summary of Significant Accounting Policies (Textual)          
    Ownership percentage of the company 100.00%     100.00%  
    Sable acquisition [Member]          
    Organization and Summary of Significant Accounting Policies (Textual)          
    Ownership percentage of the company 100.00%     100.00%  
    Eco3d, LLC [Member]          
    Organization and Summary of Significant Accounting Policies (Textual)          
    Holding interest of the company       65.00%  
    Percentage of non-controlling interest     35.00%   35.00%
    Ecoark Holdings, Inc. [Member]          
    Organization and Summary of Significant Accounting Policies (Textual)          
    Shares issued in exchange for noncontrolling interest, shares       525 525
    Ecoark and Magnolia solar [Member]          
    Organization and Summary of Significant Accounting Policies (Textual)          
    Ownership percentage of the company 100.00%     100.00%  
    Zest Labs, Inc. [Member]          
    Organization and Summary of Significant Accounting Policies (Textual)          
    Ownership percentage of the company 100.00%     100.00%  
    XML 54 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Discontinued Operations (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Discontinued Operations [Abstract]    
    Cash $ 34
    Accounts receivable, net of allowance 1,293
    Prepaid expenses 67
    Other current assets 10
    Current assets - held for sale 1,404
    Property and equipment, net 362
    Other assets 4
    Non-current assets - held for sale 366
    Accounts payable 67
    Accrued liabilities 396
    Current liabilities - held for sale $ 463
    XML 55 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Discontinued Operations (Details 1) - USD ($)
    $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Discontinued Operations [Abstract]    
    Revenue from services $ 188 $ 2,531
    Cost of services 103 942
    Gross profit 85 1,589
    Operating expenses 142 1,341
    Allocated interest expense 24
    Income (loss) of discontinued operations $ (57) $ 224
    XML 56 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Discontinued Operations (Details Textual) - USD ($)
    shares in Thousands, $ in Thousands
    1 Months Ended 6 Months Ended
    Nov. 30, 2017
    Sep. 30, 2016
    Sep. 30, 2017
    Discontinued Operations (Textual)      
    Cash received     $ 2,029
    Shares received from Eco3d     560
    Gain on sale of discontinued operations     $ 636
    Eco3d, LLC [Member]      
    Discontinued Operations (Textual)      
    Shares issued in exchange for noncontrolling interest   525  
    Subsequent Event [Member]      
    Discontinued Operations (Textual)      
    Additional Payments $ 30    
    XML 57 R42.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Revenue (Details) - USD ($)
    $ in Thousands
    3 Months Ended 6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Sep. 30, 2017
    Sep. 30, 2016
    Revenue Recognition, Multiple-deliverable Arrangements [Line Items]        
    Revenue $ 1,905 $ 3,889 $ 4,410 $ 6,282
    Pioneer and Sable [Member]        
    Revenue Recognition, Multiple-deliverable Arrangements [Line Items]        
    Revenue 1,885 3,872 4,389 6,260
    Zest Labs [Member]        
    Revenue Recognition, Multiple-deliverable Arrangements [Line Items]        
    Revenue $ 20 $ 17 $ 21 $ 22
    XML 58 R43.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Revenue (Details Textual) - USD ($)
    $ in Thousands
    3 Months Ended 6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2017
    Revenue (Textual)    
    Revenues $ 20  
    Pioneer and Sable [Member]    
    Revenue (Textual)    
    Revenue performance obligation, description   We do not disclose the value of unsatisfied 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.
    XML 59 R44.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Inventory (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Inventory [Abstract]    
    Inventory $ 3,265 $ 2,456
    Inventory reserves (340) (352)
    Total $ 2,925 $ 2,104
    XML 60 R45.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Property and Equipment (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Property, Plant and Equipment [Line Items]    
    Total property and equipment $ 3,448 $ 3,241
    Accumulated depreciation and impairment (1,151) (933)
    Property and equipment, net 2,297 2,308
    Machinery and equipment [Member]    
    Property, Plant and Equipment [Line Items]    
    Total property and equipment 2,931 2,724
    Computers and software costs [Member]    
    Property, Plant and Equipment [Line Items]    
    Total property and equipment 406 406
    Furniture and fixtures [Member]    
    Property, Plant and Equipment [Line Items]    
    Total property and equipment 107 107
    Leasehold improvements [Member]    
    Property, Plant and Equipment [Line Items]    
    Total property and equipment $ 4 $ 4
    XML 61 R46.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Property and Equipment (Details Textual) - USD ($)
    $ in Thousands
    3 Months Ended 6 Months Ended
    Mar. 31, 2017
    Sep. 30, 2017
    Sep. 30, 2016
    Property and Equipment (Textual)      
    Depreciation expense   $ 220 $ 222
    Impairment charge $ 245    
    Estimated fair value assets 5    
    Cost of product sales depreciation expense   156 119
    Depreciated assets were written off (fully) 30    
    Loss on disposition   (61) $ (25)
    Equipment [Member]      
    Property and Equipment (Textual)      
    Retired equipment value   34  
    Accumulated depreciation, cash   2  
    Accumulated depreciation, trade   1  
    Loss on disposition   $ 31  
    Sable acquisition [Member]      
    Property and Equipment (Textual)      
    Impairment charge 200    
    Estimated fair value assets 58    
    Accurate (impairment charge) $ 45    
    XML 62 R47.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Intangible Assets (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Summary of intangible assets    
    Total intangible assets $ 7,598 $ 6,680
    Accumulated amortization and impairment (5,577) (5,113)
    Intangible assets, net 2,021 1,567
    Customer lists [Member]    
    Summary of intangible assets    
    Total intangible assets 5,008 5,008
    Patents [Member]    
    Summary of intangible assets    
    Total intangible assets 1,090 1,090
    Outsourced vendor relationships [Member]    
    Summary of intangible assets    
    Total intangible assets 1,016
    Non-compete agreements [Member]    
    Summary of intangible assets    
    Total intangible assets 419
    Goodwill, net of impairment [Member]    
    Summary of intangible assets    
    Total intangible assets $ 65 $ 582
    XML 63 R48.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Intangible Assets (Details Textual) - USD ($)
    $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Intangible Assets (Textual)    
    Amortization expense $ 371 $ 201
    Amortization amounts for 2018 332  
    Amortization amounts for 2019 630  
    Amortization amounts for 2020 440  
    Amortization amounts for 2021 117  
    Amortization amounts for 2022 75  
    Goodwill 1,264  
    Impairment of goodwill 582  
    Customer lists [Member]    
    Intangible Assets (Textual)    
    Impairment of goodwill 98  
    440 labs [Member]    
    Intangible Assets (Textual)    
    Goodwill $ 65  
    XML 64 R49.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Accrued Liabilities (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Accrued Liabilities [Abstract]    
    Professional fees and consulting costs $ 186 $ 1,777
    Inventory in transit 127 89
    Vacation and paid time off 390 359
    Payroll and employee expenses 123 163
    Legal fees 43 112
    Straight-line rent 91 95
    Other 171 25
    Total $ 1,131 $ 2,620
    XML 65 R50.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Note Payable (Details) - USD ($)
    $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Jul. 15, 2015
    Note Payable (Textual)      
    Note payable maximum amount     $ 1,500
    Notes payable payment terms The balance of the note was $1,500 for the period from acquisition on May 3, 2016 to March 16, 2017.    
    Interest expense   $ 28  
    Certificate of deposit $ 1,500    
    Note Payable [Member]      
    Note Payable (Textual)      
    Interest rate 5.50%    
    Maturity date Nov. 18, 2017    
    XML 66 R51.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Long-Term Debt (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Note Payable/ Long-Term Debt [Abstract]    
    Secured convertible promissory note $ 500 $ 500
    Less: current portion $ (500)
    Long-term debt, net of current portion   $ 500
    XML 67 R52.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Long-Term Debt (Details Textual) - USD ($)
    $ / shares in Units, shares in Thousands, $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Feb. 28, 2017
    Long-Term Debt (Textual)      
    Debt instrument, convertible, conversion price $ 4.50    
    Interest expense on long-term debt $ 25 $ 158  
    Secured Convertible Promissory Note (Member)      
    Long-Term Debt (Textual)      
    Principal amount     $ 100
    Warrants to purchase shares of common stock     10
    Convertible Note [Member]      
    Long-Term Debt (Textual)      
    Principal amount $ 500    
    Note payable, interest rate 10.00%    
    Debt instrument, Maturity date Jul. 10, 2018    
    Debt conversion, description The convertible note was part of the financing the Company entered into in the three months ended March 31, 2017, that raised $4,300 (of a maximum of $5,000) in convertible notes ($700 of which were from related parties, see Note 10) bearing interest at 10% per annum.    
    Sable [Member] | Maximum [Member]      
    Long-Term Debt (Textual)      
    Debt instrument, convertible, conversion price $ 7.10    
    Sable [Member] | Minimum [Member]      
    Long-Term Debt (Textual)      
    Debt instrument, convertible, conversion price $ 4.15    
    XML 68 R53.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Related-Party Transactions (Details) - USD ($)
    $ / shares in Units, $ in Thousands
    1 Months Ended 3 Months Ended 6 Months Ended
    Feb. 28, 2017
    Mar. 31, 2017
    Sep. 30, 2017
    Related-Party Transactions (Textual)      
    Converted notes   $ 600  
    Conversion price     $ 4.50
    Convertible Notes Payable [Member]      
    Related-Party Transactions (Textual)      
    Interest expense     $ 5
    Officer [Member]      
    Related-Party Transactions (Textual)      
    Purchases from related party $ 100    
    Mr. Richard [Member]      
    Related-Party Transactions (Textual)      
    Purchases from related party $ 100    
    Conversion price $ 4.15    
    Mr. Richard [Member] | Director [Member]      
    Related-Party Transactions (Textual)      
    Purchases from related party $ 500    
    XML 69 R54.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details) - USD ($)
    shares in Thousands
    3 Months Ended 6 Months Ended 12 Months Ended
    Mar. 31, 2017
    Sep. 30, 2017
    Dec. 31, 2016
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Weighted Average Remaining Contractual Life (Years), Granted   2 years 8 months 12 days  
    Weighted Average Remaining Contractual Life (Years), Ending Balance   2 years 8 months 12 days  
    Warrants [Member]      
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Number of Warrants, Beginning Balance 4,339 5,789 15
    Number of Warrants, Granted 1,450 2,050 4,437
    Number of Warrants, Exercised pre-Merger     (13)
    Number of Warrants, Exercised pre-Merger     (98)
    Number of Warrants, Exercised cashless, post-Merger     (2)
    Number of Warrants, Exercised Cash  
    Number of Warrants, Exercised Cashless (49)  
    Number of Warrants, Forfeited (51)
    Number of Warrants, Canceled
    Number of Warrants, Ending Balance 5,789 7,739 4,339
    Number of Warrants, Intrinsic value of warrants    
    Weighted Average Exercise Price, Beginning Balance $ 4.94 $ 5.09 $ 35.00
    Weighted Average Exercise Price, Granted 5.53 5.50 4.94
    Weighted Average Exercise Price, Exercised pre-Merger     (5.00)
    Weighted Average Exercise Price, Ending Balance $ 5.09 $ 5.26 $ 4.94
    Weighted Average Remaining Contractual Life (Years), Beginning Balance 2 years 2 years 7 months 6 days 1 year
    Weighted Average Remaining Contractual Life (Years), Granted 4 years 3 months 18 days 5 years 2 months 12 days 2 years
    Weighted Average Remaining Contractual Life (Years), Ending Balance 2 years 7 months 6 days 3 years 3 months 19 days 2 years
    XML 70 R55.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details 1) - USD ($)
    $ / shares in Units, shares in Thousands, $ in Thousands
    3 Months Ended 6 Months Ended 12 Months Ended
    Mar. 31, 2017
    Sep. 30, 2017
    Dec. 31, 2016
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Number of Options, Granted   1,105  
    2013 Option Plan [Member]      
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Number of Options, Beginning Balance 659 884 659
    Number of Options, Granted 250 125
    Number of Options, Exercised (25)
    Number of Options, Forfeited (125)
    Number of Options, Ending Balance 884 884 659
    Weighted Average Exercise Price, Beginning Balance $ 2.50 $ 2.50 $ 2.50
    Weighted Average Exercise Price, Granted 2.50 2.50
    Weighted Average Exercise Price, Exercised 2.50  
    Weighted Average Exercise Price, Forfeited 2.50
    Weighted Average Exercise Price, Ending Balance $ 2.50 $ 2.50 $ 2.50
    Weighted Average Remaining Contractual Life (Years), Beginning Balance 1 year 2 months 12 days 1 year 2 years 1 month 6 days
    Weighted Average Remaining Contractual Life (Years), Granted 1 year   4 months 24 days
    Weighted Average Remaining Contractual Life (Years), Ending Balance 1 year 9 months 18 days 1 year 2 months 12 days
    Number of Options, Intrinsic value of options   $ 309  
    2017 Omnibus Incentive Plan [Member]      
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Number of Options, Beginning Balance    
    Number of Options, Granted   611  
    Number of Options, Exercised    
    Number of Options, Forfeited    
    Number of Options, Ending Balance 611  
    Weighted Average Exercise Price, Beginning Balance    
    Weighted Average Exercise Price, Granted    
    Weighted Average Exercise Price, Exercised    
    Weighted Average Exercise Price, Forfeited    
    Weighted Average Exercise Price, Ending Balance $ 3.38  
    Weighted Average Remaining Contractual Life (Years), Ending Balance   9 years 8 months 12 days  
    Number of Options, Intrinsic value of options    
    XML 71 R56.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details 2) - shares
    shares in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Dec. 31, 2016
    2013 Incentive Stock Plan [Member]      
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Available under the 2013 Incentive Stock Plan     5,500
    Granted pre-Merger     (13)
    Shares cancelled pre-Merger     10
    Available at the Merger date     5,497
    Shares granted post-Merger     (476)
    Options granted post-Merger    
    Balance 11 5,021 5,021
    Shares granted (5,010)  
    Shares forfeited 141    
    Balance 152 11  
    Vested stock awards at September 30, 2017 2,225    
    2017 Omnibus Incentive Plan [Member]      
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Available under the 2013 Incentive Stock Plan 4,000    
    Shares granted (1,916)    
    Shares forfeited    
    Balance 2,084    
    Vested stock awards at September 30, 2017 232    
    XML 72 R57.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details 3) - 2013 Incentive Stock Plan [Member] - shares
    shares in Thousands
    3 Months Ended 6 Months Ended 12 Months Ended
    Mar. 31, 2017
    Sep. 30, 2017
    Dec. 31, 2016
    Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
    Number of Shares Issued, Beginning Balance 162 975 3
    Number of Shares Issued, post-Merger     159
    Number of Shares, Issued 813 1,244  
    Number of Shares Issued, Ending Balance 975 2,219 162
    XML 73 R58.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details 4)
    shares in Thousands
    6 Months Ended
    Sep. 30, 2017
    shares
    2017 Omnibus Incentive Plan  
    Number of Performance Shares, Beginning Balance
    Number of Performance Shares, Granted 135
    Number of Performance Shares, Forfeited
    Number of Performance Shares, Ending Balance 135
    Number of Performance Shares, Vested stock awards at September 30, 2017
    Weighted Average Remaining Contractual Life (Years), Granted 2 years 8 months 12 days
    Weighted Average Remaining Contractual Life (Years), Ending Balance 2 years 8 months 12 days
    XML 74 R59.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details 5)
    shares in Thousands
    6 Months Ended
    Sep. 30, 2017
    shares
    2017 Omnibus Incentive Plan  
    Number of Grants Issued, Beginning Balance
    Number of Grants Issued, Granted 1,105
    Number of Grants Issued, Forfeited
    Number of Grants Issued, Balance at September 30, 2017 1,105
    Weighted Average Remaining Contractual Life (Years), Granted 2 years 8 months 12 days
    Weighted Average Remaining Contractual Life (Years), Balance at September 30, 2017 2 years 8 months 12 days
    XML 75 R60.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details 6)
    Sep. 30, 2017
    shares
    2017 Omnibus Incentive Plan  
    Issued 232
    Balance at September 30, 2017 232
    XML 76 R61.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Stockholders' Equity (Details Textual) - USD ($)
    $ / shares in Units, $ in Thousands
    1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
    Apr. 14, 2017
    Mar. 14, 2017
    Sep. 25, 2017
    Jun. 30, 2017
    May 31, 2017
    May 31, 2017
    May 23, 2017
    May 22, 2017
    May 22, 2017
    Mar. 31, 2017
    Mar. 30, 2017
    Feb. 28, 2017
    Oct. 31, 2016
    Sep. 30, 2016
    Mar. 18, 2016
    Dec. 31, 2015
    May 31, 2014
    Sep. 30, 2017
    Mar. 31, 2017
    Sep. 30, 2016
    Sep. 30, 2017
    Sep. 30, 2016
    Dec. 31, 2016
    Jun. 28, 2017
    Stockholders' Equity (Textual)                                                
    Preferred stock, shares issued                                        
    Preferred stock, par value (in dollars per share)                   $ 0.001               $ 0.001 $ 0.001   $ 0.001      
    Common stock, par value                   $ 0.001               $ 0.001 $ 0.001   $ 0.001      
    Common stock, shares authorized                   100,000,000               100,000,000 100,000,000   100,000,000      
    Common stock, shares issued                   42,330,000               46,369,000 42,330,000   46,369,000      
    Common stock, shares outstanding                   42,330,000               46,174,000 42,330,000   46,174,000      
    Share-based compensation stock services rendered and to be rendered (prepaid), value                                              
    Shares issued for company acquisition, value                                         1,500      
    Anticipated payments $ 2,029                                              
    Stock issued for compensation, value                                         $ 12,973      
    Options grant to purchase shares of common stock granted                                         1,105,000      
    Share-based compensation                                       $ 1,328      
    Proceeds from units offered in private placement                                     $ 12,000   9,106      
    Prepaid expenses as the contractual service term                                            
    Share-based compensation costs for grants not yet recognize                                         4,200      
    Proceeds from sale of Eco3d                                         $ 2,029      
    Shares received from Eco3d                                         560,000      
    Eco3d [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued, price per share $ 4.00                                              
    Black Scholes Model [Member]                                                
    Stockholders' Equity (Textual)                                                
    Stock price                                   $ 2.50     $ 2.50      
    Expected term                                         10 years      
    Volatility                                         55.00%      
    Discount rate                                         0.25%      
    Sale of stock price per share                                   2.50     $ 2.50      
    Minimum [Member] | Black Scholes Model [Member]                                                
    Stockholders' Equity (Textual)                                                
    Exercise price                                   3.02     3.02      
    Stock price                                   3.02     $ 3.02      
    Volatility                                         89.00%      
    Discount rate                                         2.20%      
    Maximum [Member] | Black Scholes Model [Member]                                                
    Stockholders' Equity (Textual)                                                
    Exercise price                                   3.76     $ 3.76      
    Stock price                                   $ 3.76     $ 3.76      
    Volatility                                         94.00%      
    Discount rate                                         2.27%      
    2013 Incentive Stock Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares available to issue                                         5,497,000      
    Shares issued during the period, shares                                         141,000      
    Options grant to purchase shares of common stock granted                                         5,500,000      
    Share-based compensation                                         $ 12,968      
    Share based payment award, number of shares authorized                                   5,486,000     5,486,000      
    Additional grant shares                                         3,129,000      
    Shares granted                                   2,219,000     2,219,000      
    Number of shares forfeited                                         65,000      
    Share-based compensation costs                                         $ 6,800      
    Shares available to award                                         152,000      
    2017 Omnibus Incentive Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Common stock, shares issued                                   166     166      
    Exercise price                                               $ 3.36
    Shares issued during the period, shares     75,000                                          
    Shares issued for compensation, shares       28,000                                        
    Share-based compensation                                         $ 241      
    Sale of stock price per share                                               3.36
    Shares granted                                   1,685     1,685      
    Share-based compensation costs for grants not yet recognize                                         $ 2,692      
    Number of shares forfeited     42,000                                          
    Share-based compensation costs                                         559      
    Restricted stock award       135,000                                        
    2017 Omnibus Incentive Plan [Member] | Independent Directors [Member]                                                
    Stockholders' Equity (Textual)                                                
    Grant date fair values                                         $ 125      
    Grant date fair value in shares                                         37,000      
    2017 Omnibus Incentive Plan [Member] | Independent Members [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares granted                                   65,000     65,000      
    Grant date fair values                                         $ 250      
    2017 Omnibus Incentive Plan [Member] | Black Scholes Model One [Member]                                                
    Stockholders' Equity (Textual)                                                
    Stock price                                   $ 3.000     $ 3.000      
    Expected term                                         10 years      
    Sale of stock price per share                                   $ 3.38     $ 3.38      
    Stock Awards [Member] | 2017 Omnibus Incentive Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares granted                                   4,000,000     4,000,000      
    2013 Option Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Exercise price                   $ 2.50           $ 2.50 $ 1.25   $ 2.50          
    Options grant to purchase shares of common stock granted                                 693,000              
    Option, description                                 Options were exercised for 25 shares in March 2017, at $2.50 per share providing $62 in cash to the Company.              
    Vesting term                                 3 years              
    Expected term                                 10 years              
    Option issued for conversion of common stock                               659,000                
    Option vesting, description                           In September 2016, the remaining vesting was accelerated to have those Options 100% vested. In 2016, the Company issued Options to purchase 125 shares of stock at a strike price of $2.50 per share to a consultant. These options vested immediately and expire on March 31, 2018. In the Company's fourth quarter of 2016, an option holder forfeited 125 options and thus, at December 31, 2016, Options on 659 shares of the Company were outstanding with an adjusted exercise price of $2.50.                    
    Option outstanding                   25,000           1,318,000     25,000       659,000  
    Grant date fair values       $ 98                                        
    Grant date fair value in shares       20,000                                        
    Additional options issued                               625,000                
    Restricted stock award                                         1,105      
    Incentive Stock Options [Member] | 2017 Omnibus Incentive Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares granted                                   611,000     611,000      
    Service Based Restricted Stock Shares [Member] | 2017 Omnibus Incentive Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares granted                                   1,105,000     1,105,000      
    Performance Based Restricted Stock Shares [Member] | 2017 Omnibus Incentive Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares granted                                   135,000     135,000      
    Consultants [Member] | 2013 Option Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Exercise price                   $ 2.50                 $ 2.50          
    Option, description                  
    Options were exercised for 25 shares in March 2017 at $2.50 per share providing $62 in cash to the Company.
                               
    Option issued for conversion of common stock                   250,000                            
    Option expiration date                   Mar. 28, 2018                            
    Number of options outstanding                                         884,000      
    Employee [Member] | 2013 Incentive Stock Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Grant date fair values                                         $ 6,089      
    Grant date fair value in shares                                         1,219,000      
    Employee [Member] | 2017 Omnibus Incentive Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued during the period, value                                         $ 125      
    Options grant to purchase shares of common stock granted                                         166,000      
    Share-based compensation                                         $ 72      
    Shares issued, price per share                                               $ 3.36
    Shares granted                                   1,105,000     1,105,000      
    Number of shares vested                                         166,000      
    Employees and Directors [Member] | 2017 Omnibus Incentive Plan [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares granted                                   1,916,000     1,916,000      
    Private Placement [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued, price per share               $ 4.00 $ 4.00                              
    Securities Purchase Agreement - Institutional Funds [Member]                                                
    Stockholders' Equity (Textual)                                                
    Common stock, shares issued                                   46,565,000     46,565,000      
    Common stock, shares outstanding                                   46,370,000     46,370,000      
    Shares issued during the period, shares           2,500,000                                    
    Shares issued during the period, value                 $ 10,000                              
    Proceeds from units offered in private placement                 $ 9,106                              
    Warrant to purchase common stock                 1,875,000                              
    Shares issued, price per share               175 $ 175                              
    Sale of stock price per share               5.50 $ 5.50                              
    Percentage of warrants purchase                 50.00%                              
    Warrants term                 5 years                              
    Treasury stock, shares                                         195,000      
    Securities Purchase Agreement - Institutional Funds [Member] | Investment Bankers [Member]                                                
    Stockholders' Equity (Textual)                                                
    Warrant to purchase common stock   140,000                                            
    Shares issued, price per share               $ 5.50 $ 5.50                              
    Warrants term                 5 years                              
    Securities Purchase Agreement - Institutional Funds [Member] | Randy and Gary Metzger [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued during the period, shares                       1,100,000                        
    Preferred Stock [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued for services rendered, shares                                         0      
    Share-based compensation stock services rendered and to be rendered (prepaid), value                                         $ 0      
    Shares issued for company acquisition, shares                                         0      
    Shares issued for company acquisition, value                                         $ 0      
    Shares issued for compensation, shares                                         0      
    Stock issued for compensation, value                                         $ 0      
    Shares issued upon exercise of warrants                                         0      
    Common Stock [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued for services rendered, shares                                              
    Share-based compensation stock services rendered and to be rendered (prepaid), value                                              
    Shares issued for company acquisition, shares             300,000                           300,000      
    Shares issued for company acquisition, value                                         $ 0      
    Shares issued for compensation, shares                                         1,385,000      
    Stock issued for compensation, value                                         $ 2      
    Shares issued upon exercise of warrants                                         0      
    Warrant [Member]                                                
    Stockholders' Equity (Textual)                                                
    Volatility                     82.00%                          
    Discount rate                     1.27%                          
    Warrants issued                                   3,785,000     3,785,000      
    Warrant outstanding                     310,000                          
    Warrants strike price                     $ 7.50   $ 2.50                   $ 5.00  
    Warrants expire date                     Dec. 31, 2018   Oct. 31, 2018                   Dec. 31, 2018  
    Shares issued upon exercise of warrants           49,000             100,000                      
    Warrant agreement, description                                         MSC had issued warrants for 15 shares (post-merger, formerly 3,785) that were converted into shares of common stock in accordance with the Merger Agreement with Ecoark. Consistent with the terms of the Merger, warrants for 13 shares were converted to shares at the time of the Merger. The remaining warrants for 2 shares were exercised in a cashless exchange for shares during the second quarter of 2016.      
    Option outstanding       100,000                                     100,000  
    Number of shares forfeited           51,000                                    
    Warrant [Member] | Institutional Investors [Member]                                                
    Stockholders' Equity (Textual)                                                
    Warrants issued   1,000,000           1,875,000 1,875,000                              
    Warrants strike price   $ 5.00           $ 5.50                                
    Warrants expire date   Mar. 31, 2022           Nov. 30, 2022                                
    Warrant to purchase common stock               175,000                                
    Warrant [Member] | Private Placement [Member]                                                
    Stockholders' Equity (Textual)                                                
    Warrant outstanding                                             4,239,000  
    Warrant agreement, description                                           The Company issued 4,337 warrants as part of the private placement that was completed on April 28, 2016, of which 98 of these warrants were exercised for common shares totaling $487.    
    Warrant [Member] | Private Placement [Member] | Institutional Investors [Member]                                                
    Stockholders' Equity (Textual)                                                
    Warrant to purchase common stock   2,000,000           2,500,000                                
    Non-controlling Interest [Member]                                                
    Stockholders' Equity (Textual)                                                
    Share-based compensation stock services rendered and to be rendered (prepaid), value                                              
    Treasury Stock [Member]                                                
    Stockholders' Equity (Textual)                                                
    Share-based compensation stock services rendered and to be rendered (prepaid), value                                              
    Shares issued for company acquisition, value                                         0      
    Stock issued for compensation, value                                         0      
    Ecoark Holdings Preferred Stock [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares of blank check preferred stock                             5,000,000                  
    Preferred stock, shares issued                                              
    Preferred stock, par value (in dollars per share)                             $ 0.001                  
    Additional Paid-in Capital [Member]                                                
    Stockholders' Equity (Textual)                                                
    Share-based compensation stock services rendered and to be rendered (prepaid), value                                              
    Shares issued for company acquisition, value                                         1,500      
    Stock issued for compensation, value                                         $ 12,971      
    Additional Paid-in Capital [Member] | Interest Expense [Member]                                                
    Stockholders' Equity (Textual)                                                
    Value of warrants                   $ 370                            
    Ecoark Holdings Common Stock [Member]                                                
    Stockholders' Equity (Textual)                                                
    Common stock, par value                             $ 0.001                  
    Common stock, shares authorized                             100,000,000                  
    Shares issued during the period, shares         49                                      
    Shares issued for compensation, shares       28,000                                 37,000      
    Stock issued for compensation, value       $ 125                                 $ 125      
    Warrants issued         100 100                                    
    Common stock issued on acquisition           $ 1,500                                    
    Common stock issued on acquisition, shares           300,000                                    
    Number of shares forfeited         51                                      
    Ecoark Holdings Common Stock [Member] | Eco3d [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued during the period, value   $ 100                                            
    Ecoark Holdings Common Stock [Member] | Consultants [Member]                                                
    Stockholders' Equity (Textual)                                                
    Shares issued for services rendered, shares                                         20,000      
    Options grant to purchase shares of common stock granted                                         1,199,000      
    Share-based compensation                                   $ 1,500            
    Shares issued options to purchase shares of stock                                         195,000      
    Additional grant shares                                         152,000      
    Employee restricted stock                                         $ 780      
    XML 77 R62.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Commitments and Contingencies (Details) - USD ($)
    $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Commitments and Contingencies (Textual)    
    Lease expiration period, description
    These leases expire at various dates through 2021.
     
    Rent expense $ 332 $ 284
    Cost of product sales 153 $ 119
    Operating lease future minimum lease payments, 2018 315  
    Operating lease future minimum lease payments, 2019 578  
    Operating lease future minimum lease payments, 2020 496  
    Operating lease future minimum lease payments, 2021 $ 386  
    Contract related fee, description
    As part of a contract to develop its products, has agreed to pay the contractor 1.5% of future New York state manufactured sales, and 5% of future non-New York state manufactured sales until the entire funds paid by a contractor have been repaid (or three times the funds if non-New York manufactured), or 15 years after start of sales.
     
    Contract related expense $ 1,252  
    Interest bearing amount 265  
    Payments for royalties $ 50  
    XML 78 R63.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Income Taxes (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    Mar. 31, 2017
    Income Taxes [Abstract]    
    Net operating loss carryover $ 27,961 $ 20,671
    Depreciable and amortizable assets 1,628 1,464
    Share-based compensation 4,542 1,003
    Accrued liabilities 167 122
    Inventory reserve 116 119
    Allowance for bad debts 162 154
    Other 328 4
    Less: valuation allowance (34,904) (23,537)
    Net deferred tax asset
    XML 79 R64.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Income Taxes (Details Textual)
    $ in Thousands
    6 Months Ended
    Sep. 30, 2017
    USD ($)
    Income Taxes (Textual)  
    Net operating loss carry forward $ 82,880
    Expiration date Dec. 31, 2037
    Valuation allowance increased $ 11,367
    Other than minimum state income taxes payable $ 7
    XML 80 R65.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Segment Information (Details) - USD ($)
    $ in Thousands
    3 Months Ended 6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Sep. 30, 2017
    Sep. 30, 2016
    Segment Reporting Information [Line Items]        
    Segmented operating revenues $ 1,905 $ 3,889 $ 4,410 $ 6,282
    Cost of revenues 2,295 3,844 5,089 6,280
    Gross profit (loss) (390) 45 (679) 2
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net 10,531 6,370 24,242 12,186
    Depreciation, amortization and impairment 1,024 150 1,205 260
    Interest expense, net of interest income 15 80 30 167
    Loss from continuing operations before income taxes (11,960) (6,555) (26,148) (12,611)
    Segmented assets        
    Property and equipment, net 2,297 3,170 2,297 3,170
    Intangible assets, net 2,021 2,997 2,021 2,997
    Capital expenditures 236 309 236 309
    Pioneer [Member]        
    Segment Reporting Information [Line Items]        
    Segmented operating revenues 1,885 3,872 4,389 6,260
    Cost of revenues 2,276 3,832 5,056 6,269
    Gross profit (loss) (391) 40 (667) (9)
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net 311 502 1,568 633
    Depreciation, amortization and impairment 828 90 881 148
    Interest expense, net of interest income 0 20 0 37
    Loss from continuing operations before income taxes (1,530) (572) (3,116) (827)
    Segmented assets        
    Property and equipment, net 2,117 2,953 2,117 2,953
    Intangible assets, net 11 2,187 11 2,187
    Capital expenditures 214 232 214 232
    Zest Labs [Member]        
    Segment Reporting Information [Line Items]        
    Segmented operating revenues 20 17 21 22
    Cost of revenues 19 12 33 11
    Gross profit (loss) 1 5 (12) 11
    Total operating expenses net of depreciation, amortization and impairment, and interest expense, net 10,220 5,868 22,666 11,553
    Depreciation, amortization and impairment 196 60 324 112
    Interest expense, net of interest income 15 60 30 130
    Loss from continuing operations before income taxes (10,430) (5,983) (23,032) (11,784)
    Segmented assets        
    Property and equipment, net 180 217 180 217
    Intangible assets, net 2,010 810 2,010 810
    Capital expenditures $ 22 $ 77 $ 22 $ 77
    XML 81 R66.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Segment Information (Details Textual) - Vendor
    6 Months Ended
    Sep. 30, 2017
    Sep. 30, 2016
    Segment Information (Textual)    
    Number of operating segments 2 2
    XML 82 R67.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Concentrations (Details)
    6 Months Ended 12 Months Ended
    Sep. 30, 2017
    Vendor
    Customers
    Sep. 30, 2016
    Vendor
    Customers
    Mar. 31, 2017
    Vendor
    Sales [Member]      
    Concentrations (Textual)      
    Percentage of concentration risk 73.00% 73.00%  
    Major customer definition as per company standards A major customer is defined as a customer that represents 10% or greater of total sales. A major customer is defined as a customer that represents 10% or greater of total sales.  
    Number of customers | Customers 3 3  
    Accounts Receivable [Member]      
    Concentrations (Textual)      
    Percentage of concentration risk 74.00% 74.00%  
    Number of customers | Customers 3 4  
    Purchases [Member]      
    Concentrations (Textual)      
    Percentage of concentration risk 32.00% 30.00%  
    Number of Vendors | Vendor 1 1  
    Accounts Payable [Member]      
    Concentrations (Textual)      
    Percentage of concentration risk 46.00% 42.00% 42.00%
    Number of Vendors | Vendor 2 2 2
    XML 83 R68.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Acquisitions (Details) - USD ($)
    $ in Thousands
    Sep. 30, 2017
    May 03, 2016
    Schedule of fair values at the effective date of acquisition purchase price    
    Goodwill $ 1,264  
    Sable [Member]    
    Schedule of fair values at the effective date of acquisition purchase price    
    Cash   $ 41
    Receivables, net   1,250
    Inventory   759
    Property and equipment   2,822
    Identifiable intangible assets   1,028
    Goodwill   1,264
    Other assets   36
    Accounts payable and other liabilities   (883)
    Notes payable and current debt   (2,100)
    Long-term debt   (431)
    Total   $ 3,786
    XML 84 R69.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Acquisitions (Details 1)
    $ / shares in Units, $ in Thousands
    6 Months Ended
    Sep. 30, 2016
    USD ($)
    $ / shares
    Schedule of unaudited pro forma results of operations  
    Revenues $ 6,782
    Net loss attributable to controlling interest $ (13,192)
    Net loss per share | $ / shares $ (0.54)
    XML 85 R70.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Acquisitions (Details 2)
    $ in Thousands
    Sep. 30, 2017
    USD ($)
    Business Acquisition [Line Items]  
    Goodwill $ 1,264
    440 labs [Member]  
    Business Acquisition [Line Items]  
    Identifiable intangible assets 1,435
    Goodwill 65
    Total $ 1,500
    XML 86 R71.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Acquisitions (Details Textual) - USD ($)
    shares in Thousands, $ in Thousands
    1 Months Ended 3 Months Ended 6 Months Ended
    May 03, 2016
    May 23, 2017
    Dec. 31, 2016
    Sep. 30, 2017
    Acquisitions (Textual)        
    Percentage of shares permitted to sell by sellers under lock up agreement 33.30%      
    Additional percentage of shares released at the end of lock-up period 33.30%      
    Business acquisition, exchange of shares 2,000      
    Business acquisitions consolidated revenue     $ 7,527  
    Business acquisitions consolidated loss     $ 5,220  
    SphereIt [Member]        
    Acquisitions (Textual)        
    Business acquisition, exchange of shares   300    
    Shares issued for services to be rendered (employment agreements)   300    
    Common Stock [Member]        
    Acquisitions (Textual)        
    Shares issued for services to be rendered (employment agreements)      
    Shares issued for company acquisition, shares   300   300
    XML 87 R72.htm IDEA: XBRL DOCUMENT v3.8.0.1
    Subsequent Events (Details) - USD ($)
    shares in Thousands, $ in Thousands
    1 Months Ended 6 Months Ended
    Oct. 13, 2017
    Oct. 26, 2017
    Sep. 25, 2017
    Sep. 30, 2017
    Subsequent Event [Member]        
    Subsequent Events (Textual)        
    Common stock issued to stock awards granted 2,909      
    Common stock issued to stock awards granted additional shares 2,303      
    Percentage of fair market value stock price 100.00%      
    Effective date of the grants Oct. 13, 2017      
    Percentage of common stock vest 25.00%      
    Option vesting, description The replacement options were issued under the 2017 Omnibus Incentive Plan or 2013 Incentive Stock Plan to correspond with the plan under which the existing awards were issued. With respect to the new options, the individuals were granted options to purchase 2,909 shares of Company common stock that vest at a rate of 25% per year on October 13th of each year from 2018 to 2021, subject to continued employment by the Company.      
    Consulting agreement, description   Consulting agreement for $8 per month-to-month basis unless otherwise terminated and agreed to issue warrants for 75 shares of common stock at $2.10 per share, vesting at 20% per month and with a term of five years.    
    Incremental expense $ 6,048      
    Mr. Rateliff [Member]        
    Subsequent Events (Textual)        
    Stock granted vest, description     In his capacity as an advisor to the Company, Mr. Rateliff will receive 75 shares of stock grants under the 2017 Omnibus Incentive Plan of which 25 shares vested upon commencement of the advisor agreement and were issued October 1, 2017, 25 shares vest on April 1, 2018 and 25 shares vest based on the earliest of the Company achieving a performance metric or October 1, 2018.  
    2013 Incentive Stock Plan [Member]        
    Subsequent Events (Textual)        
    Common stock issued to stock awards granted       141
    Number of shares forfeited       65
    2013 Incentive Stock Plan [Member] | Mr. Rateliff [Member]        
    Subsequent Events (Textual)        
    Number of shares forfeited     150  
    2017 Omnibus Incentive Plan [Member]        
    Subsequent Events (Textual)        
    Common stock issued to stock awards granted     75  
    Number of shares forfeited     42  
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