0001213900-18-010314.txt : 20180807 0001213900-18-010314.hdr.sgml : 20180807 20180807060512 ACCESSION NUMBER: 0001213900-18-010314 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 63 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180807 DATE AS OF CHANGE: 20180807 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: 18996184 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 f10q0618_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 June 30, 2018

 

☐   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 48,972,306 shares of the Registrant’s $0.001 par value common stock outstanding as of August 6, 2018.

 

 

 

 

 

 

Ecoark Holdings, Inc.

 

INDEX

 

    Page No.
     
Part I. Financial Information 1
     
Item 1. Condensed Consolidated Financial Statements 1
     
  Condensed Consolidated Balance Sheets 2
     
  Condensed Consolidated Statements of Operations 3
     
  Condensed Consolidated Statements of Cash Flows 4
     
  Notes to Condensed Consolidated Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
     
Item 4. Controls and Procedures 23
     
Part II. Other Information 24
     
Item 1. Legal Proceedings 24
     
Item 1A. Risk Factors 24
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
     
Item 3. Default Upon Senior Securities 24
     
Item 4. Mine Safety Disclosures 24
     
Item 5. Other Information 24
     
Item 6. Exhibits 25
     
Signatures 26

  

i

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2018

 

Table of Contents

 

Balance Sheets 2
Statements of Operations 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 13

 

 1 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   (Dollars in thousands, 
   except per share data) 
   June 30,   March 31, 
   2018   2018 
   (Unaudited)     
ASSETS        
CURRENT ASSETS          
Cash ($100 pledged as collateral for credit)  $1,748   $3,730 
Accounts receivable, net of allowance of $87 and $87 as of June 30, 2018 and March 31, 2018, respectively   2,014    2,617 
Prepaid expenses   208    242 
Current assets held for sale - (Note 2)   1,087    645 
Total current assets   5,057    7,234 
NON-CURRENT ASSETS          
Property and equipment, net   2,448    2,619 
Intangible assets, net   1,407    1,545 
Non-current assets held for sale - (Note 2)   1,018    1,023 
Other assets   26    26 
Total non-current assets   4,899    5,213 
TOTAL ASSETS  $9,956   $12,447 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable  $2,537   $2,350 
Accrued liabilities   914    1,080 
Current portion of long-term debt   500    500 
Current liabilities held for sale - (Note 2)   15    43 
Total current liabilities   3,966    3,973 
NON-CURRENT LIABILITIES   -    - 
COMMITMENTS AND CONTINGENCIES          
        Total liabilities   3,966    3,973 
           
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, 49,533 shares issued and 48,972 shares outstanding as of June 30, 2018 and 49,468 shares issued and 48,923 shares outstanding as of March 31, 2018   50    49 
Additional paid-in-capital   123,510    122,424 
Accumulated deficit   (115,929)   (112,381)
Treasury stock, at cost   (1,641)   (1,618)
Total stockholders’ equity   5,990    8,474 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $9,956   $12,447 

 

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

 

 2 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   Three Months Ended 
   June 30, 
   2018   2017 
  

(Dollars in thousands,

 
  

except per share data)

 
CONTINUING OPERATIONS:          
REVENUES  $753   $1 
COST OF REVENUES   430    13 
GROSS PROFIT (LOSS)   323    (12)
OPERATING EXPENSES:          
Selling, general and administrative   2,091    11,890 
Depreciation, amortization, and impairment   309    120 
Research and development   870    1,620 
Total operating expenses   3,270    13,630 
Loss from continuing operations before other expenses   (2,947)   (13,642)
           
OTHER EXPENSE:          
Interest expense, net of interest income   (11)   (15)
Total other expenses   (11)   (15)
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES   (2,958)   (13,657)
DISCONTINUED OPERATIONS:          
Loss from discontinued operations   (590)   (588)
Gain on disposal of discontinued operations   -    636 
Total discontinued operations   (590)   48 
PROVISION FOR INCOME TAXES   -    - 
NET LOSS  $(3,548)  $(13,609)
           
NET LOSS PER SHARE          
Basic and diluted: Continuing operations  $(0.06)  $(0.32)
Discontinued operations  $(0.01)  $-
Total  $(0.07)  $(0.32)
           
SHARES USED IN CALCULATION OF NET LOSS PER SHARE          
Basic and diluted   48,960    43,247 

  

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

 

 3 

 

 

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

 

   Three Months Ended 
  

June 30,

 
   2018   2017 
  

(Dollars in thousands)

 
Cash flows from operating activities:        
Net loss  $(3,548)  $(13,609)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation, amortization and impairment   362    254 
Shares of common stock issued for services rendered   136    

1,314

 
Share-based compensation – stock – employees   951    6,938 
Share-based compensation due to employment agreements   -    1,500 
Loss from discontinued operations   590    588 
Gain on sale of discontinued operations   -    (636)
Changes in assets and liabilities:          
Accounts receivable   573    95 
Inventory   (437)   (494)
Prepaid expenses   46    (290)
Other current assets   13    (498)
Other assets   -    4 
Accounts payable   158    (479)
Accrued liabilities   (167)   (1,824)
Net cash used in operating activities of continuing operations   (1,323)   (7,137)
Net cash used in discontinued operations   (590)   (439)
Net cash used in operating activities   (1,913)   (7,576)
           
Cash flows from investing activities:          
Proceeds from sale of Eco3d   -    2,006 
Purchases of property and equipment        (12)
        Net cash provided by investing activities of continuing operations   -    1,994 
        Net cash used in investing activities of discontinued operations   (46)   (33)
        Net cash provided by (used in) investing activities   (46)   1,961 
           
Cash flows from financing activities:          
Proceeds from issuance of common stock, net of fees   -    9,106 
Purchase of treasury shares from employees for tax withholdings   (23)   (577)
       Net cash provided by (used in) financing activities   (23)   8,529 
NET INCREASE (DECREASE) IN CASH   (1,982)   2,914 
Cash - beginning of period   3,730    8,646 
Cash - end of period  $1,748   $11,560 
           
SUPPLEMENTAL DISCLOSURES:          
Cash paid for interest  $11   $15 
Cash paid for income taxes  $-   $- 
           
SUMMARY OF NONCASH ACTIVITIES:          
Assets acquired via acquisition of 440labs, Inc.:          
Identifiable intangible assets  $-   $1,435 
Goodwill  $-   $65 

 

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

  

 4 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Ecoark Holdings, Inc. (“Ecoark Holdings” or the “Company”) 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, 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” or “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. 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, so its results are included with Pioneer’s since May 2016. As described in Note 2, in May 2018 the Ecoark Holdings Board approved a plan to sell Pioneer.

 

Sable Polymer Solutions, LLC (“Sable”) is located in Flowery Branch, Georgia and specializes in the sale, purchase, and processing 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. As described in Note 2, in May 2018 the Ecoark Holdings Board approved a plan to sell key assets of Sable.

 

Zest Labs, Inc. (“Zest Labs”) is located in San Jose, California and offers freshness management solutions for food retailers, restaurants, growers, processors and suppliers. Its Zest Fresh solution is a cloud-based post-harvest freshness management solution that improves delivered freshness and reduces losses due to temperature handling and processing by intelligently matching customer freshness requirements with actual product freshness. It focuses on four primary value propositions – operational efficiency, consistent food freshness, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence at a pallet level. The Company’s Zest Delivery solution offers dynamic 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 near Boston, Massachusetts and is a software development and information solutions provider for cloud, mobile, and IoT (Internet of Things) applications. 440labs had been a key development partner with Zest Labs for more than four years prior to the May 2017 acquisition, 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 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. As described in Note 2, in May 2018 the Ecoark Holdings Board approved a plan to sell Magnolia Solar.

 

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.

 

 5 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

Principles of Consolidation

 

The condensed consolidated financial statements of Ecoark Holdings and its subsidiaries and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2018. Therefore, the interim condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K.

  

Reclassifications

 

The Company has reclassified certain amounts in the June 30, 2017 condensed consolidated financial statements to be consistent with the June 30, 2018 presentation. Reclassifications relating to the discontinued operations are described in Note 2. The reclassifications had no impact on net loss or net cash flows for the three months ended June 30, 2018 and 2017.

 

Segment Information

 

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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. As a result of Sable, Pioneer and Magnolia Solar being classified as discontinued operations, the Company and its Chief Operating Decision Makers determined that the Company’s operations now consist of only one segment, Zest Labs.

 

Recent Accounting Pronouncements Pending Adoption

 

In February 2016, the FASB issued Accounting Standards Update (“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.

 

In June 2018, the FASB issued ASU 2018-07 Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent accounting for employee share-based compensation. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASU 2018-07 on its 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 $115,929 since inception. The accumulated deficit together with losses of $3,548 for the three months ended June 30, 2018, and net cash used in operating activities in the three months ended June 30, 2018 of $1,913, have resulted in the uncertainty of the Company’s ability to continue as a going concern.

 

These condensed 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 additional capital through the issuance of common stock, net of fees, in private placements, issuances under equity purchase agreements and sales of convertible notes of $12,693 in the year ended March 31, 2018. The Company’s ability to raise additional capital through future equity and debt securities issuances and completion of the divesting of non-core assets is unknown. 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. There can also be no assurance that the Company will have met the SEC’s Form S-3 eligibility requirements to use its shelf registration. 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 condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

 6 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

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 $2,006 in cash 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. 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. Eco3d had $188 in revenues and a $57 loss in the first two weeks of April 2017 that are included in the table below. There was no significant continuing involvement with Eco3d. In addition, as a result of receiving letters of intent for the sale of key assets of Sable, Pioneer and Magnolia Solar, and the approval by the Company’s Board in May 2018 to sell the assets, those assets are included in assets held for sale and their operations included in discontinued operations.

 

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

 

June 30, 2018:     
Inventory  $1,048 
Other current assets   39 
Current assets – held for sale  $1,087 
      
Property and equipment, net   993 
Other assets   25 
Non-current assets – held for sale  $1,018 
      
Accounts payable   2 
Accrued liabilities   13 
Current liabilities – held for sale  $15 
March 31, 2018:     
Inventory  $611 
Other current assets   34 
Current assets – held for sale  $645 
      
Property and equipment, net   995 
Other assets   28 
Non-current assets – held for sale  $1,023 
      
Accounts payable   30 
Accrued liabilities   13 
Current liabilities – held for sale  $43 

 

 7 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

Major line items constituting loss from discontinued operations in the condensed consolidated statements of operations consisted of the following:

 

Three months ended June 30, 2018:     
Revenue  $2,479 
Cost of revenue   2,845 
Gross loss   (366)
Operating expenses   224 
Loss from discontinued operations  $(590)
Non-cash expenses  $61 
      
Three months ended June 30, 2017:     
Revenue  $2.693 
Cost of revenue   2,884 
Gross loss   (191)
Operating expenses   397 
Loss from discontinued operations  $(588)
Non-cash expenses  $194 

 

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 all periods presented, and the income tax provision for all periods presented was considered immaterial. Thus, no separate tax provision or benefit relating to discontinued operations is included here or on the face of the condensed consolidated statements of operations.

  

Non-cash expenses above consist principally of depreciation, amortization and impairment costs. Capital expenditures of discontinued operations were principally at Sable and amounted to $46 and $33 for the three months ended June 30,2018 and 2017, respectively.

  

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

 

 8 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

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. Revenue for the three months ended June 30, 2018 were from a professional services project with a major retailer and several Software as a Service (“SaaS”) projects in 2018 and from the sale of hardware in 2017.

 

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

  

   Three Months Ended 
   June 30, 
  

2018 

  

2017

 
Revenue:  (Unaudited)   (Unaudited) 
Professional services  $750   $               - 
Software as a Service   3    - 
Hardware sales   -    1 
   $753   $1 

 

NOTE 4: PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

  

June 30,

2018

  

March 31,

2018

 
   (Unaudited)     
           
Zest Labs freshness hardware  $2,477   $2,477 
Computers and software costs   400    400 
Machinery and equipment   211    211 
Furniture and fixtures   89    89 
Leasehold improvements   4    4 
Total property and equipment   3,181    3,181 
Accumulated depreciation and impairment   (733)   (562)
Property and equipment, net  $2,448   $2,619 

 

During the year ended March 31, 2018 Zest Labs entered into SaaS contracts with customers and $2,477 of assets previously classified as inventory were reclassified to property and equipment as of March 31, 2018. These assets will be used in the satisfaction of performance obligations to customers and depreciated over estimated useful lives of three to seven years.

 

Depreciation expense for the three months ended June 30, 2018 and 2017 was $171 and $32, respectively. 

 

Property and equipment for Sable and Magnolia Solar has been reclassified as assets held for sale as more fully described in Note 2 and accordingly depreciation expense for Sable through May 2018 has been included in the loss from discontinued operations.

 

 9 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

NOTE 5: INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

   June 30,
2018
   March 31,
2018
 
   (Unaudited)     
     
Patents  $1,013   $1,013 
Outsourced vendor relationships   1,017    1,017 
Non-compete agreements   340    340 
Total intangible assets   2,370    2,370 
Accumulated amortization and impairment   (963)   (825)
Intangible assets, net  $1,407   $1,545 

 

The outsourced vendor relationships and non-compete agreements were recorded as part of the acquisition of 440labs described in Note 11 below.

  

Amortization expense for the three months ended June 30, 2018 and 2017 was $138 and $88, respectively. Amortization for the intangible assets related to the discontinued operations for the three months ended June 30, 2017 are included in the loss from discontinued operations for the three months ended June 30, 2017.

 

NOTE 6: ACCRUED LIABILITIES

 

Accrued liabilities consisted of the following:

 

   June 30,
2018
   March 31,
2018
 
   (Unaudited)     
Vacation and paid time off  $302   $278 
Professional fees and consulting costs   213    325 
Payroll and employee expenses   96    75 
Legal fees   23    100 
Hardware in transit   -    26 
Other   280    276 
  $914   $1,080 

 

NOTE 7: LONG-TERM DEBT

 

The Company had 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 principal along with accrued interest of $11 was paid on July 2, 2018. The convertible note was part of the financing the Company entered into in the three months ended March 31, 2017.

 

Interest expense on debt for the three months ended June 30, 2018 and 2017 was $11 and $15, respectively.

 

NOTE 8: 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. The Company has outstanding warrants of 10,577 as of June 30, 2018 that are exercisable into shares of common stock.

 

In the three months ended June 30, 2018, the Company issued 24 shares of common stock pursuant to stock awards granted from the 2013 Ecoark Holdings Incentive Stock Plan (“2013 Incentive Stock Plan”), net of 16 shares of common stock acquired from employees in lieu of amounts required to satisfy minimum withholding requirements upon vesting of the employees’ stock. The Company also issued 25 shares to an advisor to the Company pursuant to a stock award granted from the 2017 Ecoark Holdings Omnibus Incentive Plan (“2017 Omnibus Incentive Plan”).

 

 10 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

Share-based Compensation

 

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.

 

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.

 

During the year ended March 31, 2018, the Compensation Committee of the Board of Directors of the Company issued non-qualified stock option awards to individuals in replacement of existing restricted stock and restricted stock unit awards previously granted.

 

Share-based compensation expense is included in selling, general and administrative expense in the condensed consolidated statements of operations as follows:

 

   2013 Incentive Stock Plan   2017 Omnibus Incentive Plan   Non-Qualified Stock Options   Common Stock   Total 
Three months ended June 30, 2018                    
Directors  $-   $100   $        -   $-   $100 
Employees   202    98    651    -    951 
Services   -    36    -    -    36 
   $202   $234   $651   $-   $1,087 
                          
Three months ended June 30,2017                         
Directors  $-   $125   $-   $-   $125 
Employees   6,900    38    -    1,500    8,438 
Services   113    -    -    -    113 
Amortization of services cost   1,076    -    -    -    1,076 
   $8,089   $163    -   $1,500   $9,752 

 

NOTE 9: INCOME TAXES

 

The Company has a net operating loss carryforward for tax purposes totaling approximately $93,204 at June 30, 2018. 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 three months ended June 30, 2018 and 2017 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 potential income tax benefit. 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:

 

  

June 30,

2018

  

March 31,

2018

 
   (Unaudited)     
Net operating loss carryover  $21,768   $21,274 
Depreciable and amortizable assets   1,209    1,168 
Share-based compensation   3,067    2,858 
Accrued liabilities   58    58 
Allowance for bad debts   13    13 
Other   332    331 
Less: valuation allowance   (26,447)   (24,708)
Net deferred tax asset  $-   $- 

 

 11 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at June 30, 2018 and March 31, 2018, due to the uncertainty of realizing the deferred income tax assets. The valuation allowance increased by $1,739 in the three months ended June 30, 2018. The Company has not identified any uncertain tax positions and has not received any significant notices from tax authorities.

 

On December 22, 2017, Public Law 115-97, informally referred to as the Tax Cuts and Jobs Act (“TCJA”) was enacted into U.S. law. The TCJA provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporate taxation requirements. Effective January 1, 2018, the federal tax rate for corporations was reduced from 35% to 21% for U.S. taxable income. That required a one-time remeasurement of deferred taxes to reflect their value at a lower rate of 21%. Accordingly, the components of deferred tax assets in the table above have been remeasured at 21%. Additionally, the new tax law requires specified research and development or experimentation expenses paid or incurred after December 31, 2021 be capitalized and amortized ratably over a five-year period. That has the potential to impact the Company in the future. We continue to evaluate the impact of the TCJA.

 

NOTE 10: CONCENTRATIONS

 

During the three months ended June 30, 2018 and 2017 the Company had one major customer in each period comprising 99% and 100% of sales, respectively. A major customer is defined as a customer that represents 10% or greater of total sales. Additionally, the Company had two customers at June 30, 2018 and one customer as of March 31, 2018 with accounts receivable balances of 72% and 93% of the total accounts receivable. The Company does not believe that risk associated with these customers will have an adverse effect on the business.

 

In addition, during the three months ended June 30, 2018 and 2017, the Company had one major vendor in each period comprising 26% and 16% of purchases, respectively. A major vendor is defined as a vendor that represents 10% or greater of total purchases. Alternative sources exist such that the risk associated with the two vendors is not expected to have an adverse effect on the Company. Additionally, the Company had one vendor as of both June 30, 2018 and March 31, 2018 representing 50% and 27%, 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 11: ACQUISITION OF 440labs, Inc.

 

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 was tested for impairment and written off in the quarter ended March 31, 2018 along with the intangible asset related to one of the executive employees who resigned from the Company.

 

 12 

 

 

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2018

 

NOTE 12: COMMITMENTS AND CONTINGENCIES 

 

Legal Proceedings

 

On August 1, 2018, Ecoark Holdings and Zest Labs filed a complaint against Walmart Inc. in the United States District Court for the Eastern District of Arkansas, Western Division. The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. Ecoark Holdings and Zest Labs are seeking damages of more than $2,000,000 (two billion) and other related relief to the extent it is deemed proper by the court. The Company does not believe that expenses incurred in pursuing the complaint will have a material effect on the Company’s net income or financial condition for the fiscal year ended March 31, 2019 or any individual fiscal quarter.

 

On June 20, 2018, a complaint against the Company and certain affiliates was filed by Ridgeline, LLC in the U.S. District Court - Northern District of California. The complaint refers to an advisory agreement dated January 1, 2015 with Ecoark, Inc., a subsidiary of the Company, in which Ridgeline was to provide advice and consultation to Ecoark, Inc. in exchange for consulting fees, expenses and a warrant to purchase equity in Ecoark, Inc. The complaint seeks judgment for compensatory damages in excess of $75, specific performance regarding delivery of a warrant, attorney’s fees, interest and other relief. Company counsel has advised us that it is remote that the complaint, if decided adversely to or settled by the Company, will result in a liability material to the Company’s financial condition or results of operations.

 

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 2020. Rent expense for continuing operations was $72 and $91 in the three months ended June 30, 2018 and 2017, respectively. Future minimum lease payments required under the operating leases for continuing operations are as follows: fiscal 2019 - $133 and fiscal 2020 - $113.

 

NOTE 13: SUBSEQUENT EVENTS

 

Subsequent to June 30, 2018, the Company has issued 8 shares of common stock pursuant to stock awards granted from the 2013 Incentive Stock Plan. The Company acquired 5 shares of common stock from employees in lieu of amounts required to satisfy minimum withholding requirements upon vesting of the employees’ stock. Subsequent to June 30, 2018, the Board awarded 150 incentive stock options to employees pursuant to the 2017 Omnibus Incentive Plan, which grants are at an exercise price of $1.35, a term of 10 years and a vesting period over four years.

 

The Company had a secured convertible promissory note bearing interest at 10% per annum, entered on January 10, 2017 for $500 with the principal due in one lump sum payment on or before July 10, 2018. On July 2, 2018 the $500 and $11 of accrued interest was repaid and the note retired.

 

 13 

 

 

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 Condensed 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 is a Nevada corporation incorporated on November 19, 2007 that has developed over the years through key acquisitions and organic growth. Ecoark Holdings is an innovative AgTech company focused on solutions that reduce food waste and improve delivered freshness and product margins for fresh and perishable foods for a wide range of organizations including growers, processors, distributors and retailers. Ecoark Holdings addresses this through its wholly-owned subsidiary, Ecoark, Inc. (“Ecoark”) and Ecoark’s subsidiary: Zest Labs, Inc. (“Zest Labs”). The Company has committed to a plan to focus its business on Zest Labs and divest non-core assets that include key assets of Pioneer Products, LLC (“Pioneer Products” or “Pioneer”), including its subsidiary Sable Polymer Solutions, LLC (“Sable”), and Magnolia Solar, Inc. (“Magnolia Solar”). Those assets are reported as held for sale and their operations are reported as discontinued operations in the condensed consolidated financial statements. The subsidiary Eco3d, LLC (“Eco3d”) was sold on April 14, 2017 and is also reported as discontinued operations in the condensed consolidated financial statements. 

 

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 www.zestlabs.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.

  

 14 

 

  

Description of Business

 

Zest Labs

 

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

 

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.

 

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 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 managed, can result in food loss or spoilage ahead of expectations, leading to waste and lost profits. Zest Fresh empowers fresh food producers and retailers to significantly reduce the post-harvest loss by providing real-time guidance to process adherence, intelligent distribution and best handling practices, with a goal of providing significant financial savings to fresh food producers and retailers. 

 

Zest Labs has developed the industry’s first freshness metric called the Zest Intelligent Pallet Routing Code (“ZIPR Code”). The ZIPR Code has three main components: 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).

 

 15 

 

 

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

 

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

 

Zest Labs currently holds rights to 67 U.S. patents (with additional patents pending), numerous related foreign patents, and U.S. copyrights relating to certain aspects of its Zest Labs’ software, hardware devices including Radio-Frequency Identification (“RFID”) technology, software, and services. In addition, Zest Labs has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services,” and the Zest, Zest Fresh and Zest Delivery logos, ZIPR and numerous other trademarks and service marks. Many of Zest Labs’ products have been designed to include licensed intellectual property obtained from third-parties. Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates.

 

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

 

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

 

 16 

 

 

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.

 

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 had been a key development partner with Zest Labs for more than four years prior to the May 2017 acquisition, contributing its expertise in scalable enterprise cloud solutions and mobile applications.

 

Discontinued Operations

 

Pioneer Products is located in Rogers, Arkansas and is involved in the selling of recycled plastic products. 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, so its results are included with Pioneer’s since May 2016. In May 2018 the Ecoark Holdings Board approved a plan to sell Pioneer.

 

Sable is located in Flowery Branch, Georgia and specializes in the sale, purchase and processing of post-consumer and post-industrial plastic materials. It provides products to a variety of suppliers and customers throughout the plastics processing industry, from small extruders, molders and scrap collectors to large corporations. In May 2018 the Ecoark Holdings Board approved a plan to sell key assets of Sable.

 

Magnolia Solar is located in Woburn, Massachusetts and is principally engaged in the development of nanotechnology-based, high-efficiency, thin-film technology that can be deposited on a variety of substrates, including glass and flexible structures. In May 2018 the Ecoark Holdings Board approved a plan to sell Magnolia Solar.

 

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.

 

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.

 

 17 

 

 

Sales and Marketing

 

We sell our products and services principally through direct sales efforts and the utilization of third-party agents. Zest Labs has marketing operations and programs for demand generation, public relations, and branding/messaging.

 

Research and Development

 

We have devoted a substantial amount of our resources to software and hardware development activities in recent years, principally for the Zest Labs initiatives. Ecoark Holdings believes that, analyzing the competitive factors affecting the market for the solutions and services its subsidiaries provide, its products and services compete favorably by offering integrated solutions to customers. The Company has incurred research and development expenses of $870 and $1,620 in the three months ended June 30, 2018 and 2017, respectively, to develop its solutions and differentiate those solutions from competitive offerings. We incurred no capitalized software development costs in the three months ended June 30, 2018 and 2017.

 

Intellectual Property

 

Ecoark Holdings and its subsidiaries have had 67 patents issued by the United States Patent and Trademark Office, and additional patent applications are currently pending.

 

Critical Accounting Policies, Estimates and Assumptions

 

In reading and understanding the Company’s discussion of results of operations, liquidity and capital resources, and the financial statements that follow, one should be aware of key policies, judgments and assumptions that are important to the portrayal of financial conditions and results. The Company’s continuing operations have not generated sufficient revenues and related cash flows to date to fund the Company’s operations. That raises a question as to whether we are a “going concern”. Because we have been successful at raising capital, we assume that we will continue operations and thus have not used liquidation accounting which would assume that liquidation was imminent.

 

Our revenues from periods prior to fiscal 2018 were generated principally from the sale of hardware. In the three months ended June 30, 2018, revenues were principally from a professional services project and more importantly from Software as a Service (“SaaS”) arrangements that we expect to be a principal source of revenue in the future. We adopted a new accounting policy for revenue recognition that had no impact on historical reported results, and it positions us for what we expect our business to be in the future. It requires judgment to apply, but in plain English it recognizes revenue when the Company fulfills the obligations it has committed to in agreements with customers. Judgment is also required to estimate the costs associated with those revenues.

 

A significant percentage of our operating expenses results from non-cash share-based compensation, which is typical of technology companies. We have granted shares, options and warrants to employees, consultants and investors as incentives to generate success for the Company instead of making cash payments. The accounting calculations for this type of compensation can be complex and are derived from models like the Black-Scholes option pricing model that requires judgment in making assumptions and developing estimates.

 

We have also invested heavily in research and development expenses. Those investments have required cash payments principally for the development of our software solutions and the testing of those solutions in our labs and on some customer projects. We have not capitalized any of that development effort, so there are no research and development costs to amortize in the future.

  

Given the strategic focus on Zest Labs moving forward, we are in the process of divesting the remaining assets and operations that principally consist of our plastic resin and trash can business. The decision to divest approved by our Board resulted in the reclassification of current and historical amounts related to those businesses. Judgment was required to estimate the fair value of the assets that we intend to sell. We have recorded impairments or non-cash write-downs of some of those assets, including intangible assets that include goodwill.

 

We have been conservative in our treatment of income taxes. Our historical losses have resulted in net operating losses for tax purposes. Applying accounting policies, we have recorded a “valuation allowance” against both current and future tax benefits of the losses. We will not recognize any benefits until such time as we are assured that we will generate taxable income.

 

 18 

 

 

RESULTS OF OPERATIONS

 

Overview

 

The discussion below addresses the Company’s operations and liquidity which were impacted by the acquisition of 440labs in May 2017 and the sale of Eco3d in April 2017 as described above Results from Eco3d, Sable, Pioneer Products and Magnolia Solar are included as discontinued operations in the statements of operations and therefore, the revenues and expenses for these entities are not included in the amounts and discussion of results of continuing operations below, except in the Net Loss summary.

 

Results of Continuing Operations for the Three Months Ended June 30, 2018 and 2017

 

Revenues, Cost of Revenues and Margins

 

Revenues for the three months ended June 30, 2018 were $753 as compared to $1 for the three months ended June 30, 2017. Professional services revenues of $750 for the three months ended June 30, 2018 were from a project with a large retailer related to freshness solutions. SaaS revenues of $3 in 2018 were from projects with produce distributors and growers, while the revenue in 2017 was from the sale of hardware.

 

Cost of revenues for the three months ended June 30, 2018 was $430 as compared to $13 for the three months ended June 30, 2017 resulting in gross profit of $323 in 2018 and gross loss of $12 in 2017. The significant increase in gross profit in 2018 was directly related to the margin in professional services than in revenues from the hardware sale in 2017. The gross loss in 2017 was due primarily to royalties for cross license agreements on patents imbedded with Zest freshness solutions intellectual property. 

 

Operating Expenses

 

Operating expenses for three months ended June 30, 2018 were $3,270 as compared to $13,630 for the three months ended June 30, 2017. The $10,360 decrease was due primarily to share-based non-cash compensation which decreased by $8,665 to $1,087 in the three months ended June 30, 2018 from $9,752 in the three months ended June 30, 2017. Operating expenses excluding share-based non-cash compensation for the three months ended June 30, 2018 decreased $1,695 from the three months ended June 30, 2017 due to decreases in professional fees and consulting and decreases in research and development expenditures.

 

 19 

 

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the three months ended June 30, 2018 were $2,091 compared with $11,890 for the three months ended June 30, 2017. The $9,799 decrease was principally due to a $8,665 decrease in share-based non-cash compensation, a decrease in the use of consultants and efforts to control general and administrative costs including travel and travel-related expenses.

 

Salaries and related costs for the three months ended June 30, 2018 were $1,613, down $8,005 from $9,618 for the three months ended June 30, 2017. The decrease resulted primarily from a $7,487 decrease in share-based non-cash compensation. A portion of that cost was derived from estimates of stock option expense calculated using a Black-Scholes model which can vary based on assumptions utilized and share-based compensation expense from awards of stock grants. Additional information on that equity expense can be found in Note 8 to the condensed consolidated financial statements, which complies with critical accounting policies driven by Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 718-10. In fiscal 2018, reductions in staff were implemented to reduce the cash expenditures of the Company which also reduced salaries and related costs from 2017.

 

Professional fees and consulting expenses for the three months ended June 30, 2018 of $260, were down $1,226 from $1,486 incurred for the three months ended June 30, 2017 as the engagement of consultants was significantly decreased during the current period.

 

Depreciation, Amortization and Impairment

 

Depreciation, amortization and impairment expenses for the three months ended June 30, 2018 were $309 compared to $120 for the three months ended June 30, 2017. The $189 increase primarily resulted from the amortization of the identifiable intangible assets related to the 440labs acquisition in 2017 and depreciation on the $2,477 of assets previously classified as inventory that were reclassified to property and equipment as of March 31, 2018 as Zest Labs entered into SaaS contracts.

 

Research and Development

 

Research and development expense decreased $750 to $870 in the three months ended June 30, 2018 compared with $1,620 during the same period in 2017. The reduction in costs related primarily to the maturing of development of the Zest Labs freshness solutions.

 

Interest Expense

 

Interest expense, net of interest income, for the three months ended June 30, 2018 was $11 as compared to $15 for the three months ended June 30, 2017. The decrease resulted from a decrease to $500 from $600 of convertible notes with an annual interest rate of 10%. The remaining $500 debt outstanding was paid in full subsequent to June 30, 2018.

 

Net Loss

 

Net loss for the three months ended June 30, 2018 was $3,548 as compared to $13,609 for the three months ended June 30, 2017. The $10,061 decrease in net loss was primarily due to the $8,665 decrease in non-cash share-based compensation, a decrease in professional fees and a decrease in research and development expenditures plus the absence of the gain on sale of Eco3d of $636 in April 2017.

 

 20 

 

 

Results of 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. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company had included amounts relating to Eco3d as part of discontinued operations in the three months ended June 30, 2017. In addition, as a result of receiving letters of intent for the sale of key assets of Sable, Pioneer and Magnolia Solar, and the approval by the Company’s Board to sell the assets, those assets are included in assets held for sale and their operations included in discontinued operations in both periods presented. 

 

Loss from discontinued operations for the three months ended June 30, 2018 was $590. Revenues from discontinued operations were $2,479, comprised of $2,419 for Pioneer and Sable and $60 for Magnolia Solar. Pioneer had a decrease in sales of consumer trash cans made from recycled materials due to a unit price decrease and fewer promotions by a customer. Losses from discontinued operations were $558 for Pioneer and Sable and $32 for Magnolia Solar.  Pioneer and Sable losses were driven by lower volumes and a unit price decrease as previously described.

 

For the three months ended June 30, 2017 loss from discontinued operations was $588. Revenues from discontinued operations were $188 for Eco3d and $2,505 for Pioneer and Sable for a total of $2,693. Losses from discontinued operations were $57 for Eco3d and $553 for Pioneer and Sable. 

 

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 June 30, 2018 and March 31, 2018, we had cash of $1,748 and $3,730, respectively, and working capital of $1,091 at June 30, 2018 compared with working capital of $3,261 at March 31, 2018. The decrease in working capital is the result of the net cash used in operating activities. The Company is dependent upon raising additional capital from future financing transactions.

 

 21 

 

 

Net cash used in operating activities was $1,913 for the three months ended June 30, 2018, as compared to net cash used in operating activities of $7,576 for the three months ended June 30, 2017. 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 used in investing activities was $46 for the three months ended June 30, 2018, as compared to net cash provided by investing activities of $1,961 for the three months ended June 30, 2017 which included $2,006 proceeds from the sale of Eco3d.

 

Net cash used in financing activities in 2018 was $23. In 2017 net cash provided by financing activities was $8,529, primarily from the issuance of common stock, net of fees.

 

At June 30, 2018, $500 of Ecoark Holdings’ convertible notes payable were due in July 2018 and were paid on July 2, 2018. Future minimum lease payments required under operating leases of continuing operations by fiscal year are as follows: $2019 - $133 and 2020 - $113.

 

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.

 

Off-Balance Sheet Arrangements

 

As June 30, 2018 and March 31, 2018, we had no off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

 22 

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Exchange Act, as of June 30, 2018, 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 not effective given the identification of two material weaknesses in controls. 

 

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.

 

We have advised our audit committee of two material weaknesses in internal control. The first weakness relates to inadequate segregation of duties consistent with control objectives. In an effort to reduce expenses, the Company reduced its accounting and administrative staff at the parent company level to the extent that achieving desired control objectives were deemed at risk.

 

The second weakness relates to violations of the Company’s delegation of authority and related policies that were established and approved by the board of directors. The Company is working with the board and board committees to communicate and reemphasize Company policies including the delegation of authority to reduce the risk of errors or omissions that could result in inaccurate or incomplete disclosures.

 

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.

 

 23 

 

 

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 other than a suit filed by the Company in Arkansas on August 1, 2018, a suit filed against us in California on June 20, 2018, and a suit we filed in Maryland to collect a receivable from a customer. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company.

 

On August 1, 2018, Ecoark Holdings and Zest Labs filed a complaint against Walmart Inc. in the United States District Court for the Eastern District of Arkansas, Western Division. The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. Ecoark Holdings and Zest Labs are seeking damages of more than $2,000,000 (two billion) and other related relief to the extent it is deemed proper by the court. The Company does not believe that expenses incurred in pursuing the complaint will have a material effect on the Company’s net income or financial condition for the fiscal year ended March 31, 2019 or any individual fiscal quarter.

 

On June 20, 2018, a complaint against the Company and certain affiliates was filed by Ridgeline, LLC in the U.S. District Court - Northern District of California. The complaint refers to an advisory agreement dated January 1, 2015 with Ecoark, Inc., a subsidiary of the Company, in which Ridgeline was to provide advice and consultation to Ecoark, Inc. in exchange for consulting fees, expenses and a warrant to purchase equity in Ecoark, Inc. The complaint seeks judgment for compensatory damages in excess of $75, specific performance regarding delivery of a warrant, attorney’s fees, interest and other relief. Company counsel has advised us that it is remote that the complaint, if decided adversely to or settled by the Company, will result in a liability material to the Company’s financial condition or results of operations.

 

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 March 31, 2018 filed with the SEC on June 28, 2018.

 

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

 

We did not sell any securities during the quarter ended June 30, 2018, 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 June 30, 2018. 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 Be Purchased 
                 
April 1, 2018 to April 30, 2018   5   $0.91                              
May 1, 2018 to May 31, 2018   5   $1.97           
June 1, 2018 to June 30, 2018   5   $1.55           

 

(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.

 

 24 

 

 

ITEM 6. EXHIBITS 

 

Exhibit No.    Description of Exhibit
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.

 

 25 

 

 

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: August 6, 2018 By: /s/ RANDY MAY
    Randy May
    Chief Executive Officer
    (Principal Executive Officer)
     
Date: August 6, 2018 By: /s/ JAY OLIPHANT
    Jay Oliphant
    Principal Financial and Accounting Officer 

 

 

26

 

EX-31.1 2 f10q0618ex31-1_ecoarkholding.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 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 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: August 6, 2018 /s/ Randy May
  Randy May
  Chief Executive Officer and
Principal Executive Officer

 

EX-31.2 3 f10q0618ex31-2_ecoarkholding.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 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 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: August 6, 2018 /s/ Jay Oliphant
  Jay Oliphant
  Principal Financial and Accounting Officer

 

EX-32.1 4 f10q0618ex32-1_ecoarkholding.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 quarterly period ended June 30, 2018, 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: August 6, 2018 /s/ Randy May
  Randy May
  Chief Executive Officer and
Principal Executive Officer

EX-32.2 5 f10q0618ex32-2_ecoarkholding.htm CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

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 quarterly period ended June 30, 2018, 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: August 6, 2018 /s/ Jay Oliphant
  Jay Oliphant
  Principal Financial and Accounting Officer

 

 

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The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. Ecoark Holdings and Zest Labs are seeking damages of more than $2,000,000 (two billion) and other related relief to the extent it is deemed proper by the court. 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The complaint refers to an advisory agreement dated January 1, 2015 with Ecoark, Inc., a subsidiary of the Company, in which Ridgeline was to provide advice and consultation to Ecoark, Inc. in exchange for consulting fees, expenses and a warrant to purchase equity in Ecoark, Inc. The complaint seeks judgment for compensatory damages in excess of $75, specific performance regarding delivery of a warrant, attorney&#8217;s fees, interest and other relief. 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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. 21274000 21768000 1168000 1209000 2858000 3067000 58000 58000 13000 13000 331000 332000 24708000 26447000 93204000 1739000 0.35 0.21 That required a one-time remeasurement of deferred taxes to reflect their value at a lower rate of 21%. Accordingly, the components of deferred tax assets in the table above have been remeasured at 21%. Additionally, the new tax law requires specified research and development or experimentation expenses paid or incurred after December 31, 2021 be capitalized and amortized ratably over a five-year period. 1.00 0.16 0.93 0.27 0.99 0.26 0.72 0.50 A major customer is defined as a customer that represents 10% or greater of total sales. 1 1 1 2 A major vendor is defined as a vendor that represents 10% or greater of total purchases. 1 1 1 1 1435000 65000 1500000 300000 5000 75000 These leases expire at various dates through 2020. 91000 72000 133000 113000 500000 11000 Ecoark Holdings and Zest Labs are seeking damages of more than $2,000,000 (two billion) and other related relief to the extent it is deemed proper by the court. The Company does not believe that expenses incurred in pursuing the complaint will have a material effect on the Company's net income or financial condition for the fiscal year ended March 31, 2019 or any individual fiscal quarter. Term of 10 years. 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Document and Entity Information - shares
3 Months Ended
Jun. 30, 2018
Aug. 06, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name Ecoark Holdings, Inc.  
Entity Central Index Key 0001437491  
Trading Symbol ZEST  
Amendment Flag false  
Current Fiscal Year End Date --03-31  
Document Type 10-Q  
Document Period End Date Jun. 30, 2018  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2019  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   48,972,306
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Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2018
Mar. 31, 2018
CURRENT ASSETS    
Cash ($100 pledged as collateral for credit) $ 1,748 $ 3,730
Accounts receivable, net of allowance of $87 and $87 as of June 30, 2018 and March 31, 2018, respectively 2,014 2,617
Prepaid expenses 208 242
Current assets held for sale - (Note 2) 1,087 645
Total current assets 5,057 7,234
NON-CURRENT ASSETS    
Property and equipment, net 2,448 2,619
Intangible assets, net 1,407 1,545
Non-current assets held for sale - (Note 2) 1,018 1,023
Other assets 26 26
Total non-current assets 4,899 5,213
TOTAL ASSETS 9,956 12,447
CURRENT LIABILITIES    
Accounts payable 2,537 2,350
Accrued liabilities 914 1,080
Current portion of long-term debt 500 500
Current liabilities held for sale - (Note 2) 15 43
Total current liabilities 3,966 3,973
NON-CURRENT LIABILITIES
COMMITMENTS AND CONTINGENCIES
Total liabilities 3,966 3,973
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, 49,533 shares issued and 48,972 shares outstanding as of June 30, 2018 and 49,468 shares issued and 48,923 shares outstanding as of March 31, 2018 50 49
Additional paid-in-capital 123,510 122,424
Accumulated deficit (115,929) (112,381)
Treasury stock, at cost (1,641) (1,618)
Total stockholders' equity 5,990 8,474
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,956 $ 12,447
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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
shares in Thousands, $ in Thousands
Jun. 30, 2018
Mar. 31, 2018
Statement of Financial Position [Abstract]    
Pledged as collateral for credit $ 100 $ 100
Accounts receivable, net of allowance $ 87 $ 87
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 49,533 49,468
Common stock, shares outstanding 48,972 48,923
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Jun. 30, 2018
Jun. 30, 2017
CONTINUING OPERATIONS:    
REVENUES $ 753 $ 1
COST OF REVENUES 430 13
GROSS PROFIT (LOSS) 323 (12)
OPERATING EXPENSES:    
Selling, general and administrative 2,091 11,890
Depreciation, amortization, and impairment 309 120
Research and development 870 1,620
Total operating expenses 3,270 13,630
Loss from continuing operations before other expenses (2,947) (13,642)
OTHER EXPENSE:    
Interest expense, net of interest income (11) (15)
Total other expenses (11) (15)
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES (2,958) (13,657)
DISCONTINUED OPERATIONS:    
Loss from discontinued operations (590) (588)
Gain on disposal of discontinued operations 636
Total discontinued operations (590) 48
PROVISION FOR INCOME TAXES
NET LOSS $ (3,548) $ (13,609)
NET LOSS PER SHARE    
Basic and diluted: Continuing operations $ (0.06) $ (0.32)
Discontinued operations (0.01)
Total $ (0.07) $ (0.32)
SHARES USED IN CALCULATION OF NET LOSS PER SHARE    
Basic and diluted 48,960 43,247
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash flows from operating activities:    
Net loss $ (3,548) $ (13,609)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation, amortization and impairment 362 254
Shares of common stock issued for services rendered 136 1,314
Share-based compensation - stock - employees 951 6,938
Share-based compensation due to employment agreements 1,500
Loss from discontinued operations 590 588
Gain on sale of discontinued operations (636)
Changes in assets and liabilities:    
Accounts receivable 573 95
Inventory (437) (494)
Prepaid expenses 46 (290)
Other current assets 13 (498)
Other assets 4
Accounts payable 158 (479)
Accrued liabilities (167) (1,824)
Net cash used in operating activities of continuing operations (1,323) (7,137)
Net cash used in discontinued operations (590) (439)
Net cash used in operating activities (1,913) (7,576)
Cash flows from investing activities:    
Proceeds from sale of Eco3d 2,006
Purchases of property and equipment (12)
Net cash provided by investing activities of continuing operations 1,994
Net cash used in investing activities of discontinued operations (46) (33)
Net cash provided by (used in) investing activities (46) 1,961
Cash flows from financing activities:    
Proceeds from issuance of common stock, net of fees 9,106
Purchase of treasury shares from employees for tax withholdings (23) (577)
Net cash provided by (used in) financing activities (23) 8,529
NET INCREASE (DECREASE) IN CASH (1,982) 2,914
Cash - beginning of period 3,730 8,646
Cash - end of period 1,748 11,560
SUPPLEMENTAL DISCLOSURES:    
Cash paid for interest 11 15
Cash paid for income taxes
Assets acquired via acquisition of 440labs, Inc.:    
Identifiable intangible assets 1,435
Goodwill $ 65
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Organization and Summary of Significant Accounting Policies
3 Months Ended
Jun. 30, 2018
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” or the “Company”) 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, 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” or “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. 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, so its results are included with Pioneer’s since May 2016. As described in Note 2, in May 2018 the Ecoark Holdings Board approved a plan to sell Pioneer.

 

Sable Polymer Solutions, LLC (“Sable”) is located in Flowery Branch, Georgia and specializes in the sale, purchase, and processing 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. As described in Note 2, in May 2018 the Ecoark Holdings Board approved a plan to sell key assets of Sable.

 

Zest Labs, Inc. (“Zest Labs”) is located in San Jose, California and offers freshness management solutions for food retailers, restaurants, growers, processors and suppliers. Its Zest Fresh solution is a cloud-based post-harvest freshness management solution that improves delivered freshness and reduces losses due to temperature handling and processing by intelligently matching customer freshness requirements with actual product freshness. It focuses on four primary value propositions – operational efficiency, consistent food freshness, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence at a pallet level. The Company’s Zest Delivery solution offers dynamic 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 near Boston, Massachusetts and is a software development and information solutions provider for cloud, mobile, and IoT (Internet of Things) applications. 440labs had been a key development partner with Zest Labs for more than four years prior to the May 2017 acquisition, 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 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. As described in Note 2, in May 2018 the Ecoark Holdings Board approved a plan to sell Magnolia Solar.

 

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 condensed consolidated financial statements of Ecoark Holdings and its subsidiaries and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2018. Therefore, the interim condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K.

  

Reclassifications

 

The Company has reclassified certain amounts in the June 30, 2017 condensed consolidated financial statements to be consistent with the June 30, 2018 presentation. Reclassifications relating to the discontinued operations are described in Note 2. The reclassifications had no impact on net loss or net cash flows for the three months ended June 30, 2018 and 2017.

 

Segment Information

 

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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. As a result of Sable, Pioneer and Magnolia Solar being classified as discontinued operations, the Company and its Chief Operating Decision Makers determined that the Company’s operations now consist of only one segment, Zest Labs.

 

Recent Accounting Pronouncements Pending Adoption

 

In February 2016, the FASB issued Accounting Standards Update (“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.

 

In June 2018, the FASB issued ASU 2018-07 Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent accounting for employee share-based compensation. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASU 2018-07 on its 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 $115,929 since inception. The accumulated deficit together with losses of $3,548 for the three months ended June 30, 2018, and net cash used in operating activities in the three months ended June 30, 2018 of $1,913, have resulted in the uncertainty of the Company’s ability to continue as a going concern.

 

These condensed 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 additional capital through the issuance of common stock, net of fees, in private placements, issuances under equity purchase agreements and sales of convertible notes of $12,693 in the year ended March 31, 2018. The Company’s ability to raise additional capital through future equity and debt securities issuances and completion of the divesting of non-core assets is unknown. 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. There can also be no assurance that the Company will have met the SEC’s Form S-3 eligibility requirements to use its shelf registration. 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 condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

XML 18 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations
3 Months Ended
Jun. 30, 2018
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 $2,006 in cash 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. 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. Eco3d had $188 in revenues and a $57 loss in the first two weeks of April 2017 that are included in the table below. There was no significant continuing involvement with Eco3d. In addition, as a result of receiving letters of intent for the sale of key assets of Sable, Pioneer and Magnolia Solar, and the approval by the Company’s Board in May 2018 to sell the assets, those assets are included in assets held for sale and their operations included in discontinued operations.

 

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

 

June 30, 2018:    
Inventory $1,048 
Other current assets  39 
Current assets – held for sale $1,087 
     
Property and equipment, net  993 
Other assets  25 
Non-current assets – held for sale $1,018 
     
Accounts payable  2 
Accrued liabilities  13 
Current liabilities – held for sale $15 
March 31, 2018:    
Inventory $611 
Other current assets  34 
Current assets – held for sale $645 
     
Property and equipment, net  995 
Other assets  28 
Non-current assets – held for sale $1,023 
     
Accounts payable  30 
Accrued liabilities  13 
Current liabilities – held for sale $43 

  

Major line items constituting loss from discontinued operations in the condensed consolidated statements of operations consisted of the following:

 

Three months ended June 30, 2018:    
Revenue $2,479 
Cost of revenue  2,845 
Gross loss  (366)
Operating expenses  224 
Loss from discontinued operations $(590)
Non-cash expenses $61 
     
Three months ended June 30, 2017:    
Revenue $2.693 
Cost of revenue  2,884 
Gross loss  (191)
Operating expenses  397 
Loss from discontinued operations $(588)
Non-cash expenses $194 

 

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 all periods presented, and the income tax provision for all periods presented was considered immaterial. Thus, no separate tax provision or benefit relating to discontinued operations is included here or on the face of the condensed consolidated statements of operations.

  

Non-cash expenses above consist principally of depreciation, amortization and impairment costs. Capital expenditures of discontinued operations were principally at Sable and amounted to $46 and $33 for the three months ended June 30,2018 and 2017, respectively.

  

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

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Revenue
3 Months Ended
Jun. 30, 2018
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. Revenue for the three months ended June 30, 2018 were from a professional services project with a major retailer and several Software as a Service (“SaaS”) projects in 2018 and from the sale of hardware in 2017.

 

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

  

  Three Months Ended 
  June 30, 
  

2018 

  

2017

 
Revenue: (Unaudited)  (Unaudited) 
Professional services $750  $               - 
Software as a Service  3   - 
Hardware sales  -   1 
  $753  $1
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment
3 Months Ended
Jun. 30, 2018
Property and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 4: PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

  

June 30,

2018

  

March 31,

2018

 
  (Unaudited)    
         
Zest Labs freshness hardware $2,477  $2,477 
Computers and software costs  400   400 
Machinery and equipment  211   211 
Furniture and fixtures  89   89 
Leasehold improvements  4   4 
Total property and equipment  3,181   3,181 
Accumulated depreciation and impairment  (733)  (562)
Property and equipment, net $2,448  $2,619 

 

During the year ended March 31, 2018 Zest Labs entered into SaaS contracts with customers and $2,477 of assets previously classified as inventory were reclassified to property and equipment as of March 31, 2018. These assets will be used in the satisfaction of performance obligations to customers and depreciated over estimated useful lives of three to seven years.

 

Depreciation expense for the three months ended June 30, 2018 and 2017 was $171 and $32, respectively. 

 

Property and equipment for Sable and Magnolia Solar has been reclassified as assets held for sale as more fully described in Note 2 and accordingly depreciation expense for Sable through May 2018 has been included in the loss from discontinued operations.

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Intangible Assets
3 Months Ended
Jun. 30, 2018
Intangible Assets [Abstract]  
INTANGIBLE ASSETS

NOTE 5: INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

  June 30,
2018
  March 31, 
2018
 
  (Unaudited)    
    
Patents $1,013  $1,013 
Outsourced vendor relationships  1,017   1,017 
Non-compete agreements  340   340 
Total intangible assets  2,370   2,370 
Accumulated amortization and impairment  (963)  (825)
Intangible assets, net $1,407  $1,545 

 

The outsourced vendor relationships and non-compete agreements were recorded as part of the acquisition of 440labs described in Note 11 below.

  

Amortization expense for the three months ended June 30, 2018 and 2017 was $138 and $88, respectively. Amortization for the intangible assets related to the discontinued operations for the three months ended June 30, 2017 are included in the loss from discontinued operations for the three months ended June 30, 2017.

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Accrued Liabilities
3 Months Ended
Jun. 30, 2018
Accrued Liabilities [Abstract]  
ACCRUED LIABILITIES

NOTE 6: ACCRUED LIABILITIES

 

Accrued liabilities consisted of the following:

 

  June 30, 
2018
  March 31,
2018
 
  (Unaudited)    
Vacation and paid time off $302  $278 
Professional fees and consulting costs  213   325 
Payroll and employee expenses  96   75 
Legal fees  23   100 
Hardware in transit  -   26 
Other  280   276 
 $914  $1,080 
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Long-Term Debt
3 Months Ended
Jun. 30, 2018
Long-Term Debt [Abstract]  
LONG-TERM DEBT

NOTE 7: LONG-TERM DEBT

 

The Company had 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 principal along with accrued interest of $11 was paid on July 2, 2018. The convertible note was part of the financing the Company entered into in the three months ended March 31, 2017.

 

Interest expense on debt for the three months ended June 30, 2018 and 2017 was $11 and $15, respectively.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stockholders' Equity
3 Months Ended
Jun. 30, 2018
Stockholders' Equity [Abstract]  
STOCKHOLDERS' EQUITY

NOTE 8: 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. The Company has outstanding warrants of 10,577 as of June 30, 2018 that are exercisable into shares of common stock.

 

In the three months ended June 30, 2018, the Company issued 24 shares of common stock pursuant to stock awards granted from the 2013 Ecoark Holdings Incentive Stock Plan (“2013 Incentive Stock Plan”), net of 16 shares of common stock acquired from employees in lieu of amounts required to satisfy minimum withholding requirements upon vesting of the employees’ stock. The Company also issued 25 shares to an advisor to the Company pursuant to a stock award granted from the 2017 Ecoark Holdings Omnibus Incentive Plan (“2017 Omnibus Incentive Plan”).

 

Share-based Compensation

 

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.

 

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.

 

During the year ended March 31, 2018, the Compensation Committee of the Board of Directors of the Company issued non-qualified stock option awards to individuals in replacement of existing restricted stock and restricted stock unit awards previously granted.

 

Share-based compensation expense is included in selling, general and administrative expense in the condensed consolidated statements of operations as follows:

 

  2013 Incentive Stock Plan  2017 Omnibus Incentive Plan  Non-Qualified Stock Options  Common Stock  Total 
Three months ended June 30, 2018               
Directors $-  $100  $        -  $-  $100 
Employees  202   98   651   -   951 
Services  -   36   -   -   36 
  $202  $234  $651  $-  $1,087 
                     
Three months ended June 30,2017                    
Directors $-  $125  $-  $-  $125 
Employees  6,900   38   -   1,500   8,438 
Services  113   -   -   -   113 
Amortization of services cost  1,076   -   -   -   1,076 
  $8,089  $163   -  $1,500  $9,752
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes
3 Months Ended
Jun. 30, 2018
Income Taxes [Abstract]  
INCOME TAXES

NOTE 9: INCOME TAXES

 

The Company has a net operating loss carryforward for tax purposes totaling approximately $93,204 at June 30, 2018. 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 three months ended June 30, 2018 and 2017 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 potential income tax benefit. 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:

 

  

June 30,

2018

  

March 31,

2018

 
  (Unaudited)    
Net operating loss carryover $21,768  $21,274 
Depreciable and amortizable assets  1,209   1,168 
Share-based compensation  3,067   2,858 
Accrued liabilities  58   58 
Allowance for bad debts  13   13 
Other  332   331 
Less: valuation allowance  (26,447)  (24,708)
Net deferred tax asset $-  $- 

 

After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at June 30, 2018 and March 31, 2018, due to the uncertainty of realizing the deferred income tax assets. The valuation allowance increased by $1,739 in the three months ended June 30, 2018. The Company has not identified any uncertain tax positions and has not received any significant notices from tax authorities.

 

On December 22, 2017, Public Law 115-97, informally referred to as the Tax Cuts and Jobs Act (“TCJA”) was enacted into U.S. law. The TCJA provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporate taxation requirements. Effective January 1, 2018, the federal tax rate for corporations was reduced from 35% to 21% for U.S. taxable income. That required a one-time remeasurement of deferred taxes to reflect their value at a lower rate of 21%. Accordingly, the components of deferred tax assets in the table above have been remeasured at 21%. Additionally, the new tax law requires specified research and development or experimentation expenses paid or incurred after December 31, 2021 be capitalized and amortized ratably over a five-year period. That has the potential to impact the Company in the future. We continue to evaluate the impact of the TCJA.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Concentrations
3 Months Ended
Jun. 30, 2018
Concentrations [Abstract]  
CONCENTRATIONS

NOTE 10: CONCENTRATIONS

 

During the three months ended June 30, 2018 and 2017 the Company had one major customer in each period comprising 99% and 100% of sales, respectively. A major customer is defined as a customer that represents 10% or greater of total sales. Additionally, the Company had two customers at June 30, 2018 and one customer as of March 31, 2018 with accounts receivable balances of 72% and 93% of the total accounts receivable. The Company does not believe that risk associated with these customers will have an adverse effect on the business.

 

In addition, during the three months ended June 30, 2018 and 2017, the Company had one major vendor in each period comprising 26% and 16% of purchases, respectively. A major vendor is defined as a vendor that represents 10% or greater of total purchases. Alternative sources exist such that the risk associated with the two vendors is not expected to have an adverse effect on the Company. Additionally, the Company had one vendor as of both June 30, 2018 and March 31, 2018 representing 50% and 27%, 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 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisition of 440labs, Inc.
3 Months Ended
Jun. 30, 2018
Acquisition of 440labs, Inc.[Abstract]  
ACQUISITION OF 440labs, Inc.

NOTE 11: ACQUISITION OF 440labs, Inc.

 

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 was tested for impairment and written off in the quarter ended March 31, 2018 along with the intangible asset related to one of the executive employees who resigned from the Company.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
3 Months Ended
Jun. 30, 2018
Commitments and Contingencies [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 12: COMMITMENTS AND CONTINGENCIES 

 

Legal Proceedings

 

On August 1, 2018, Ecoark Holdings and Zest Labs filed a complaint against Walmart Inc. in the United States District Court for the Eastern District of Arkansas, Western Division. The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. Ecoark Holdings and Zest Labs are seeking damages of more than $2,000,000 (two billion) and other related relief to the extent it is deemed proper by the court. The Company does not believe that expenses incurred in pursuing the complaint will have a material effect on the Company’s net income or financial condition for the fiscal year ended March 31, 2019 or any individual fiscal quarter.

 

On June 20, 2018, a complaint against the Company and certain affiliates was filed by Ridgeline, LLC in the U.S. District Court - Northern District of California. The complaint refers to an advisory agreement dated January 1, 2015 with Ecoark, Inc., a subsidiary of the Company, in which Ridgeline was to provide advice and consultation to Ecoark, Inc. in exchange for consulting fees, expenses and a warrant to purchase equity in Ecoark, Inc. The complaint seeks judgment for compensatory damages in excess of $75, specific performance regarding delivery of a warrant, attorney’s fees, interest and other relief. Company counsel has advised us that it is remote that the complaint, if decided adversely to or settled by the Company, will result in a liability material to the Company’s financial condition or results of operations.

 

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 2020. Rent expense for continuing operations was $72 and $91 in the three months ended June 30, 2018 and 2017, respectively. Future minimum lease payments required under the operating leases for continuing operations are as follows: fiscal 2019 - $133 and fiscal 2020 - $113.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
3 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 13: SUBSEQUENT EVENTS

 

Subsequent to June 30, 2018, the Company has issued 8 shares of common stock pursuant to stock awards granted from the 2013 Incentive Stock Plan. The Company acquired 5 shares of common stock from employees in lieu of amounts required to satisfy minimum withholding requirements upon vesting of the employees’ stock. Subsequent to June 30, 2018, the Board awarded 150 incentive stock options to employees pursuant to the 2017 Omnibus Incentive Plan, which grants are at an exercise price of $1.35, a term of 10 years and a vesting period over four years.

 

The Company had a secured convertible promissory note bearing interest at 10% per annum, entered on January 10, 2017 for $500 with the principal due in one lump sum payment on or before July 10, 2018. On July 2, 2018 the $500 and $11 of accrued interest was repaid and the note retired.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Jun. 30, 2018
Organization and Summary of Significant Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

The condensed consolidated financial statements of Ecoark Holdings and its subsidiaries and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2018. Therefore, the interim condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K.

Reclassifications

Reclassifications

 

The Company has reclassified certain amounts in the June 30, 2017 condensed consolidated financial statements to be consistent with the June 30, 2018 presentation. Reclassifications relating to the discontinued operations are described in Note 2. The reclassifications had no impact on net loss or net cash flows for the three months ended June 30, 2018 and 2017.

Segment Information

Segment Information

 

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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. As a result of Sable, Pioneer and Magnolia Solar being classified as discontinued operations, the Company and its Chief Operating Decision Makers determined that the Company’s operations now consist of only one segment, Zest Labs.

Recent Accounting Pronouncements Pending Adoption

Recent Accounting Pronouncements Pending Adoption

 

In February 2016, the FASB issued Accounting Standards Update (“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.

 

In June 2018, the FASB issued ASU 2018-07 Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent accounting for employee share-based compensation. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASU 2018-07 on its 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 $115,929 since inception. The accumulated deficit together with losses of $3,548 for the three months ended June 30, 2018, and net cash used in operating activities in the three months ended June 30, 2018 of $1,913, have resulted in the uncertainty of the Company’s ability to continue as a going concern.

 

These condensed 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 additional capital through the issuance of common stock, net of fees, in private placements, issuances under equity purchase agreements and sales of convertible notes of $12,693 in the year ended March 31, 2018. The Company’s ability to raise additional capital through future equity and debt securities issuances and completion of the divesting of non-core assets is unknown. 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. There can also be no assurance that the Company will have met the SEC’s Form S-3 eligibility requirements to use its shelf registration. 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 condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations (Tables)
3 Months Ended
Jun. 30, 2018
Discontinued Operations [Abstract]  
Schedule of discontinued operations of consolidated balance sheets
June 30, 2018:    
Inventory $1,048 
Other current assets  39 
Current assets – held for sale $1,087 
     
Property and equipment, net  993 
Other assets  25 
Non-current assets – held for sale $1,018 
     
Accounts payable  2 
Accrued liabilities  13 
Current liabilities – held for sale $15 
March 31, 2018:    
Inventory $611 
Other current assets  34 
Current assets – held for sale $645 
     
Property and equipment, net  995 
Other assets  28 
Non-current assets – held for sale $1,023 
     
Accounts payable  30 
Accrued liabilities  13 
Current liabilities – held for sale $43

Schedule of loss from discontinued operations in the condensed consolidated statements
Three months ended June 30, 2018:    
Revenue $2,479 
Cost of revenue  2,845 
Gross loss  (366)
Operating expenses  224 
Loss from discontinued operations $(590)
Non-cash expenses $61 
     
Three months ended June 30, 2017:    
Revenue $2.693 
Cost of revenue  2,884 
Gross loss  (191)
Operating expenses  397 
Loss from discontinued operations $(588)
Non-cash expenses $194
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Revenue (Tables)
3 Months Ended
Jun. 30, 2018
Revenue [Abstract]  
Schedule of revenue by major source
  Three Months Ended 
  June 30, 
  

2018 

  

2017

 
Revenue: (Unaudited)  (Unaudited) 
Professional services $750  $               - 
Software as a Service  3   - 
Hardware sales  -   1 
  $753  $1
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Tables)
3 Months Ended
Jun. 30, 2018
Property and Equipment [Abstract]  
Schedule of property and equipment

 

June 30,

2018

  

March 31,

2018

 
  (Unaudited)    
         
Zest Labs freshness hardware $2,477  $2,477 
Computers and software costs  400   400 
Machinery and equipment  211   211 
Furniture and fixtures  89   89 
Leasehold improvements  4   4 
Total property and equipment  3,181   3,181 
Accumulated depreciation and impairment  (733)  (562)
Property and equipment, net $2,448  $2,619 

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Tables)
3 Months Ended
Jun. 30, 2018
Intangible Assets [Abstract]  
Schedule of intangible assets
  June 30,
2018
  March 31, 
2018
 
  (Unaudited)    
    
Patents $1,013  $1,013 
Outsourced vendor relationships  1,017   1,017 
Non-compete agreements  340   340 
Total intangible assets  2,370   2,370 
Accumulated amortization and impairment  (963)  (825)
Intangible assets, net $1,407  $1,545 
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Liabilities (Tables)
3 Months Ended
Jun. 30, 2018
Accrued Liabilities [Abstract]  
Summary of accrued liabilities
  June 30, 
2018
  March 31,
2018
 
  (Unaudited)    
Vacation and paid time off $302  $278 
Professional fees and consulting costs  213   325 
Payroll and employee expenses  96   75 
Legal fees  23   100 
Hardware in transit  -   26 
Other  280   276 
 $914  $1,080 
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stockholders' Equity (Tables)
3 Months Ended
Jun. 30, 2018
Stockholders' Equity [Abstract]  
Schedule of share-based compensation expense
  2013 Incentive Stock Plan  2017 Omnibus Incentive Plan  Non-Qualified Stock Options  Common Stock  Total 
Three months ended June 30, 2018               
Directors $-  $100  $        -  $-  $100 
Employees  202   98   651   -   951 
Services  -   36   -   -   36 
  $202  $234  $651  $-  $1,087 
                     
Three months ended June 30,2017                    
Directors $-  $125  $-  $-  $125 
Employees  6,900   38   -   1,500   8,438 
Services  113   -   -   -   113 
Amortization of services cost  1,076   -   -   -   1,076 
  $8,089  $163   -  $1,500  $9,752
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes (Tables)
3 Months Ended
Jun. 30, 2018
Income Taxes [Abstract]  
Schedule of deferred tax assets
  

June 30,

2018

  

March 31,

2018

 
  (Unaudited)    
Net operating loss carryover $21,768  $21,274 
Depreciable and amortizable assets  1,209   1,168 
Share-based compensation  3,067   2,858 
Accrued liabilities  58   58 
Allowance for bad debts  13   13 
Other  332   331 
Less: valuation allowance  (26,447)  (24,708)
Net deferred tax asset $-  $-
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisition of 440labs, Inc. (Tables)
3 Months Ended
Jun. 30, 2018
Acquisition of 440labs, Inc.[Abstract]  
Schedule of fair value effective date of acquisition the purchase price
Identifiable intangible assets $1,435 
Goodwill  65 
  $1,500 
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization and Summary of Significant Accounting Policies (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Mar. 31, 2018
Organization and Summary of Significant Accounting Policies (Textual)      
Net loss $ (3,548) $ (13,609)  
Accumulated deficit (115,929)   $ (112,381)
Cash used in operating activities (1,913) $ (7,576)  
Additional capital, net of expenses $ 12,693    
Eco3d, LLC [Member]      
Organization and Summary of Significant Accounting Policies (Textual)      
Ownership percentage of the company 65.00%    
Percentage of non-controlling interest, description 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.    
Percentage of non-controlling interest 35.00%    
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Mar. 31, 2018
Schedule of Equity Method Investments [Line Items]    
Inventory $ 1,048 $ 611
Other current assets 39 34
Current assets - held for sale 1,087 645
Property and equipment, net 993 995
Other assets 25 28
Non-current assets - held for sale 1,018 1,023
Accounts payable 2 30
Accrued liabilities 13 13
Current liabilities - held for sale $ 15 $ 43
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations (Details 1) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Discontinued Operations [Abstract]    
Revenue $ 2,479 $ 2,693
Cost of revenue 2,845 2,884
Gross loss (366) (191)
Operating expenses 224 397
Loss from discontinued operations (590) (588)
Non-cash expenses $ 61 $ 194
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations (Details Textual) - USD ($)
shares in Thousands, $ in Thousands
1 Months Ended 3 Months Ended
Apr. 14, 2017
Sep. 30, 2016
Jun. 30, 2018
Jun. 30, 2017
Discontinued Operations (Textual)        
Cash received     $ 2,006
Gain on sale of discontinued operations     636
Capital expenditures of discontinued operations     46 33
Revenues     2,479 2,693
Loss     $ (590) (588)
Eco3d [Member]        
Discontinued Operations (Textual)        
Cash received $ 2,006      
Shares received from Eco3d 560      
Shares issued in exchange for noncontrolling interest   525    
Gain on sale of discontinued operations       $ 636
Revenues $ 188      
Loss $ 57      
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]    
Total Revenues $ 753 $ 1
Professional services [Member]    
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]    
Total Revenues 750
Software as a Service [Member]    
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]    
Total Revenues 3
Hardware sales [Member]    
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]    
Total Revenues $ 1
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Mar. 31, 2018
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 3,181 $ 3,181
Accumulated depreciation and impairment (733) (562)
Property and equipment, net 2,448 2,619
Zest Labs freshness hardware [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 2,477 2,477
Computers and software costs [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 400 400
Machinery and equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 211 211
Furniture and fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 89 89
Leasehold improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 4 $ 4
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details Textual) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2018
Mar. 31, 2018
Jun. 30, 2017
Property and Equipment (Textual)      
Depreciation expense $ 171   $ 32
Maximum [Member]      
Property and Equipment (Textual)      
Estimated useful lives   7 years  
Minimum [Member]      
Property and Equipment (Textual)      
Estimated useful lives   3 years  
Zest Labs [Member]      
Property and Equipment (Textual)      
Inventory reclassified to property and equipment   $ 2,477  
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Mar. 31, 2018
Summary of intangible assets    
Total intangible assets $ 2,370 $ 2,370
Accumulated amortization and impairment (963) (825)
Intangible assets, net 1,407 1,545
Patents [Member]    
Summary of intangible assets    
Total intangible assets 1,013 1,013
Outsourced vendor relationships [Member]    
Summary of intangible assets    
Total intangible assets 1,017 1,017
Non-compete agreements [Member]    
Summary of intangible assets    
Total intangible assets $ 340 $ 340
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets (Details Textual) - USD ($)
3 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Intangible Assets (Textual)    
Amortization expense $ 138 $ 88
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Mar. 31, 2018
Accrued Liabilities [Abstract]    
Vacation and paid time off $ 302 $ 278
Professional fees and consulting costs 213 325
Payroll and employee expenses 96 75
Legal fees 23 100
Hardware in transit 26
Other 280 276
Total $ 914 $ 1,080
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Long-Term Debt (Details) - USD ($)
$ in Thousands
3 Months Ended
Jan. 10, 2017
Jun. 30, 2018
Jun. 30, 2017
Long-Term Debt (Textual)      
Interest expense on long-term debt   $ 11 $ 15
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 accrued interest, description   The principal along with accrued interest of $11 was paid on July 2, 2018.  
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stockholders' Equity (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense $ 1,087 $ 9,752
Directors [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 100 125
Employees [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 951 8,438
Services [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 36 113
Amortization of services cost [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 1,076
Common Stock [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 1,500
Common Stock [Member] | Directors [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
Common Stock [Member] | Employees [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 1,500
Common Stock [Member] | Services [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
Common Stock [Member] | Amortization of services cost [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
2013 Incentive Stock Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 202 8,089
2013 Incentive Stock Plan [Member] | Directors [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
2013 Incentive Stock Plan [Member] | Employees [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 202 6,900
2013 Incentive Stock Plan [Member] | Services [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 113
2013 Incentive Stock Plan [Member] | Amortization of services cost [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 1,076
2017 Omnibus Incentive Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 234 163
2017 Omnibus Incentive Plan [Member] | Directors [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 100 125
2017 Omnibus Incentive Plan [Member] | Employees [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 98 38
2017 Omnibus Incentive Plan [Member] | Services [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 36
2017 Omnibus Incentive Plan [Member] | Amortization of services cost [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
Non-Qualified Stock Options [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 651
Non-Qualified Stock Options [Member] | Directors [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
Non-Qualified Stock Options [Member] | Employees [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense 651
Non-Qualified Stock Options [Member] | Services [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
Non-Qualified Stock Options [Member] | Amortization of services cost [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stockholders' Equity (Details Textual) - $ / shares
shares in Thousands
1 Months Ended 3 Months Ended
May 18, 2017
Mar. 18, 2016
Jun. 30, 2018
Mar. 31, 2018
Stockholders' Equity (Textual)        
Preferred stock, par value     $ 0.001 $ 0.001
Preferred stock, shares issued    
Common stock, shares authorized     100,000 100,000
Common stock, par value     $ 0.001 $ 0.001
Common stock issued to stock awards granted 300      
Employees [Member]        
Stockholders' Equity (Textual)        
Net of shares of common stock from employees     16  
Ecoark Holdings Preferred Stock [Member]        
Stockholders' Equity (Textual)        
Shares of blank check preferred stock   5,000    
Preferred stock, par value   $ 0.001    
Preferred stock, shares issued      
Ecoark Holdings Common Stock [Member]        
Stockholders' Equity (Textual)        
Common stock, shares authorized   100,000    
Common stock, par value   $ 0.001    
Warrants outstanding exercisable into common stock     10,577  
2013 Incentive Stock Plan [Member]        
Stockholders' Equity (Textual)        
Common stock issued to stock awards granted     24  
2013 Incentive Stock Plan [Member] | Share-based Compensation [Member]        
Stockholders' Equity (Textual)        
Share-based compensation arrangement by share-based payment award, description     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.  
2017 Omnibus Incentive Plan [Member]        
Stockholders' Equity (Textual)        
Common stock issued to stock awards granted     25  
2017 Omnibus Incentive Plan [Member] | Share-based Compensation [Member]        
Stockholders' Equity (Textual)        
Share-based compensation arrangement by share-based payment award, description     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.  
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Mar. 31, 2018
Income Taxes [Abstract]    
Net operating loss carryover $ 21,768 $ 21,274
Depreciable and amortizable assets 1,209 1,168
Share-based compensation 3,067 2,858
Accrued liabilities 58 58
Allowance for bad debts 13 13
Other 332 331
Less: valuation allowance (26,447) (24,708)
Net deferred tax asset
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes (Details Textual) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended
Dec. 22, 2017
Jun. 30, 2018
Income Taxes (Textual)    
Net operating loss carryforwards   $ 93,204
Valuation allowance increased   $ 1,739
Research and development or experimentation expenses, description That required a one-time remeasurement of deferred taxes to reflect their value at a lower rate of 21%. Accordingly, the components of deferred tax assets in the table above have been remeasured at 21%. Additionally, the new tax law requires specified research and development or experimentation expenses paid or incurred after December 31, 2021 be capitalized and amortized ratably over a five-year period.  
Maximum [Member]    
Income Taxes (Textual)    
Percentage of federal tax rate 35.00%  
Minimum [Member]    
Income Taxes (Textual)    
Percentage of federal tax rate 21.00%  
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Concentrations (Details)
3 Months Ended
Jun. 30, 2018
Customers
Vendors
Mar. 31, 2018
Customers
Vendors
Jun. 30, 2017
Customers
Vendors
Sales [Member]      
Concentrations (Textual)      
Percentage of concentration risk 99.00%   100.00%
Major customer definition as per company standards A major customer is defined as a customer that represents 10% or greater of total sales.    
Number of customers | Customers 1   1
Accounts receivable [Member]      
Concentrations (Textual)      
Percentage of concentration risk 72.00% 93.00%  
Number of customers | Customers 2 1  
Purchases [Member]      
Concentrations (Textual)      
Percentage of concentration risk 26.00%   16.00%
Major vendor definition as per company standards A major vendor is defined as a vendor that represents 10% or greater of total purchases.    
Number of vendors | Vendors 1   1
Accounts payable [Member]      
Concentrations (Textual)      
Percentage of concentration risk 50.00% 27.00%  
Number of vendors | Vendors 1 1  
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisition of 440labs, Inc. (Details) - 440labs, Inc. [Member]
$ in Thousands
May 18, 2017
USD ($)
Business Acquisition [Line Items]  
Identifiable intangible assets $ 1,435
Goodwill 65
Total $ 1,500
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisition of 440labs, Inc. (Details Textual) - shares
shares in Thousands
1 Months Ended
May 23, 2017
May 18, 2017
Acquisition of 440labs, Inc. (Textual)    
Number of shares exchange acquired in assets and liabilities   300
SphereIt [Member]    
Acquisition of 440labs, Inc. (Textual)    
Business acquisition, exchange of shares 300  
Shares issued for company acquisition, description 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.  
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Details) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended
Aug. 01, 2018
Jun. 20, 2018
Jun. 30, 2018
Mar. 31, 2018
Commitments and Contingencies (Textual)        
Damages in excess amount   $ 75    
Lease expiration period, description     These leases expire at various dates through 2020.  
Rent expense for continuing operations     $ 72 $ 91
Operating lease future minimum lease payments, 2019     133  
Operating lease future minimum lease payments, 2020     $ 113  
Subsequent Event [Member]        
Commitments and Contingencies (Textual)        
Loss contingency damages, description Ecoark Holdings and Zest Labs are seeking damages of more than $2,000,000 (two billion) and other related relief to the extent it is deemed proper by the court. The Company does not believe that expenses incurred in pursuing the complaint will have a material effect on the Company's net income or financial condition for the fiscal year ended March 31, 2019 or any individual fiscal quarter.      
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
1 Months Ended
Jul. 02, 2018
Jan. 10, 2017
Jul. 31, 2018
Jun. 30, 2018
Secured convertible promissory note [Member]        
Subsequent Events (Textual)        
Note payable, interest rate   10.00%    
Principal amount   $ 500    
Debt instrument, maturity date   Jul. 10, 2018    
Subsequent Event [Member] | Secured convertible promissory note [Member]        
Subsequent Events (Textual)        
Repaid amount $ 500      
Repayment of accrued interest $ 11      
Employees [Member] | Subsequent Event [Member]        
Subsequent Events (Textual)        
Acquired shares of common stock     5  
2013 Incentive Stock Plan [Member] | Subsequent Event [Member]        
Subsequent Events (Textual)        
Common stock issued to stock awards granted     8  
2013 Incentive Stock Plan [Member] | Employees [Member]        
Subsequent Events (Textual)        
Common stock issued to stock awards granted       150
Incentive stock options, term       Term of 10 years.
Incentive stock options, vesting period       4 years
Incentive stock options, exercise price       $ 1.35
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