UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
OR
For the transition period from _______ to _______
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
The (The Nasdaq Capital Market) |
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of November 18, 2022, there were
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
Table of Content
1
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2022 (UNAUDITED) AND MARCH 31, 2022
| SEPTEMBER 30, | MARCH 31, | |||||||
| 2022 | 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash ($ |
$ | $ | ||||||
| Investment - White River Energy Corp | - | |||||||
| Current portion of secured note receivable and accrued interest receivable | - | |||||||
| Intangible assets, cryptocurrencies | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets held for sale | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS: | ||||||||
| Property and equipment, net | ||||||||
| Power development costs | ||||||||
| Secured note receivable and accrued interest receivable, net of current portion | ||||||||
| Right of use assets - operating leases | ||||||||
| Other assets | ||||||||
| Non-current assets of discontinued operations/held for sale | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Warrant derivative liabilities | ||||||||
| Current portion of long-term debt | ||||||||
| Current portion of lease liability - operating leases | ||||||||
| Current liabilities of discontinued operations/held for sale | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Lease liability - operating leases, net of current portion | ||||||||
| Long-term debt, net of current portion | ||||||||
| Non-current liabilities of discontinued operations/held for sale | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| MEZZANINE EQUITY | ||||||||
| Series A Convertible Redeemable Preferred Stock, $ |
||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, $ |
||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Treasury stock, at cost | - | ( |
) | |||||
| Total stockholders’ equity before non-controlling interest | ||||||||
| Non-controlling interest | ( |
) | ( |
) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX AND THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
| SIX MONTHS ENDED | THREE MONTHS ENDED | |||||||||||||||
| SEPTEMBER 30, | SEPTEMBER 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| CONTINUING OPERATIONS: | ||||||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| GROSS LOSS | ( | ) | ( | ) | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Salaries and salaries related costs | ||||||||||||||||
| Professional and consulting fees | ||||||||||||||||
| Selling, general and administrative costs | ||||||||||||||||
| Depreciation, amortization, and impairment | ||||||||||||||||
| Cryptocurrency impairment losses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| LOSS FROM CONTINUING OPERATIONS BEFORE OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||||||||||
| Loss on disposal of fixed assets | ( | ) | ( | ) | ||||||||||||
| Interest expense, net of interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ||||||||||||||
| LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND DISCONTINUED OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| DISCONTINUED OPERATIONS: | ||||||||||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on disposal of discontinued operations | ( | ) | ( | ) | ||||||||||||
| Total discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| PROVISION FOR INCOME TAXES | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ||||||||||||||||
| NET LOSS TO CONTROLLING INTEREST | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Less: Preferred Stock Dividends | ||||||||||||||||
| NET LOSS TO CONTROLLING INTEREST OF COMMON SHAREHOLDERS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| NET LOSS PER SHARE - BASIC | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
| Additional | ||||||||||||||||||||||||||||||||||||
| Preferred | Common Stock | Paid-In | Accumulated | Treasury | Non-controlling | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Interest | Total | ||||||||||||||||||||||||||||
| Balance - March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Shares issued in the exercise of stock options, including cashless exercises | - | |||||||||||||||||||||||||||||||||||
| Shares issued for services rendered, net of amounts prepaid | - | |||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Net income for the period | - | - | ||||||||||||||||||||||||||||||||||
| Balance - June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Shares issued for services rendered, net of amounts prepaid | ||||||||||||||||||||||||||||||||||||
| Shares issued in registered direct offering, net of amount allocated to derivative liability | ||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Fractional adjustment | - | |||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance - September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Balance - March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Shares issued for commitment for preferred stock offering, net of expenses | ||||||||||||||||||||||||||||||||||||
| Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid | - | - | ||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Preferred stock dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance - June 30, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued in conversion of preferred stock to common stock | ||||||||||||||||||||||||||||||||||||
| Shares issued in settlement | - | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid | - | - | ||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Disposal of subsidiaries in reverse merger transaction | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Preferred stock dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance - September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
| SEPTEMBER 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Change in non-controlling interest | ( | ) | ||||||
| Depreciation, amortization, and impairment | ||||||||
| Cryptocurrency impairment losses | ||||||||
| Share-based compensation | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ( | ) | ||||
| Loss on disposal of fixed assets | ||||||||
| Loss on disposal of White River and Banner Midstream | ||||||||
| Gain on disposal of Trend Discovery Holdings | ( | ) | ||||||
| Common shares issued for services | ||||||||
| Common shares issued for services - Agora | ||||||||
| Amortization of discount | ||||||||
| Warrants granted for interest expense | ||||||||
| Warrants granted for commissions | ||||||||
| Development expenses reduced from refund of power development costs | ||||||||
| Commitment fees on long-term debt | ||||||||
| Changes in assets and liabilities | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Intangible assets - cryptocurrencies | ||||||||
| Amortization of right of use asset - operating leases | ||||||||
| Accrued interest receivable | ( | ) | ||||||
| Operating lease expense | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ||||||
| Total adjustments | ( | ) | ||||||
| Net cash used in operating activities of continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by (used in) discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from the sale of power development costs | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities of continuing operations | ( | ) | ||||||
| Net cash used in investing activities of discontinued operations | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from the issuance of common stock in a registered direct offering, net of fees | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Proceeds from notes payable - related parties | ||||||||
| Repayments of notes payable - related parties | ( | ) | ( | ) | ||||
| Proceeds from long-term debt | ||||||||
| Repayment of long-term debt | ( | ) | ( | ) | ||||
| Proceeds from the sale of preferred stock | ||||||||
| Net cash provided by financing activities of continuing operations | ||||||||
| Net cash used in financing activities of discontinued operations | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH - BEGINNING OF PERIOD | ||||||||
| CASH - END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES | ||||||||
| Cash paid for interest expense | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| SUMMARY OF NON-CASH ACTIVITIES: | ||||||||
| Reclassification of assets of discontinued operations to current operations in fixed assets | $ | $ | ||||||
| Lease liability recognized for ROU asset | $ | $ | ||||||
| Issuance costs on mezzanine equity | $ | $ | ||||||
| Non-controlling interest recorded in consolidation of Enviro Technologies US, Inc. | $ | $ | ||||||
| Preferred shares converted into common stock | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
ECOARK
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ecoark Holdings Inc. (“Ecoark Holdings” or the “Company”) is a holding company, incorporated in the State of Nevada on November 19, 2007. Through September 30, 2022, Ecoark Holdings’ former wholly owned subsidiaries with the exception of Agora Digital Holdings, Inc., a Nevada corporation (“Agora”) and Zest Labs, Inc. (“Zest Labs”) have been divested. See below in this Note 1 and Note 2 “Discontinued Operations.” As a result of the divestitures, all assets and liabilities of the former subsidiaries have been reclassified to discontinued operations on the condensed consolidated balance sheet for March 31, 2022 and all operations of these companies have been reclassified to discontinued operations and gain on disposal on the condensed consolidated statements of operations for the six and three months ended September 30, 2022.
The Company’s principal subsidiaries consisted of Ecoark, Inc. (“Ecoark”), a Delaware corporation which was the parent of Zest Labs, Inc. (“Zest Labs”), Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and Agora which was assigned the membership interest in Trend Discovery Holdings LLC, a Delaware limited liability corporation (all references to “Trend Holdings” or “Trend” are now synonymous with Agora) from the Company on September 17, 2021 upon its formation, which includes Bitstream Mining, LLC, the Company’s Bitcoin mining subsidiary. Zest Labs, Inc. was formed in Nevada on August 2, 2022 and Zest Labs, Inc. Delaware merged into Zest Labs, Inc. Nevada on August 4, 2022.
As disclosed in these Notes, the Company has decided it is in the best
interests of its shareholders that it divest all of its operating assets through a series of spin-offs or stock dividends to the Company’s
shareholders. It intends to do so either by engaging in business combinations with existing public companies which have trading symbols
and markets like White River Energy Corp (formerly Fortium Holdings Corp.) (“WREC”) which acquired White River Holdings Corp
on July 25, 2022, and Enviro Technologies US, Inc. (“Enviro”) which acquired Banner Midstream Corp. on September 7, 2022,
or by direct dividends. The Company’s plan is also driven by the dividends it must pay to an investor which provided $
On March 27, 2020, the Company and Banner Energy Services Corp., a Nevada corporation (“Banner Parent”), entered into a Stock Purchase and Sale Agreement (the “Banner Purchase Agreement”) to acquire Banner Midstream Corp., a Delaware corporation (“Banner Midstream”). Pursuant to the acquisition, Banner Midstream became a wholly-owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream.
Banner Midstream had four operating subsidiaries:
Pinnacle Frac Transport LLC (“Pinnacle Frac”), Capstone Equipment Leasing LLC (“Capstone”), White River Holdings
Corp (“White River”), and Shamrock Upstream Energy LLC (“Shamrock”). Pinnacle Frac provides transportation of
frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield
transportation service contractors. White River is and Shamrock was engaged in oil and gas exploration, production, and drilling operations
on over
6
ECOARK
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
For a full description of the operations of White River as well as Pinnacle Frac and Capstone, refer to the Annual Report filed on Form 10-K for the year ended March 31, 2022 filed on July 7, 2022.
On July 25, 2022, the Company entered into and
closed a Share Exchange Agreement, by and among the Company, White River and WREC. As a result, White River became a wholly-owned subsidiary
of WREC and issued the Company non-voting Series A Convertible Preferred Stock (the “Series A”) which is convertible into
approximately
On August
23, 2022 the Company entered into a Share Exchange Agreement (the “Agreement”) with Enviro and Banner Midstream.
On April 9, 2021, a Little Rock, Arkansas jury awarded Ecoark and Zest
a total of $
7
ECOARK
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Trend Holdings formed four subsidiaries, including Bitstream Mining, LLC, a Texas limited liability company (“Bitstream”), on May 16, 2021. In addition, Trend Holdings owned Barrier Crest, LLC (“Barrier Crest”) which was acquired along with Trend Capital Management, Inc. (“TCM”) which was acquired by Ecoark Holdings on May 31, 2019. On June 17, 2022, Agora sold Trend Holdings to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV and sold Trend Discovery Exploration LLC (“Trend Exploration”) to the Company. See Note 2, “Discontinued Operations”. The Company reclassified the operations of Barrier Crest and TCM, as discontinued operations as the disposal represents a strategic shift that will have a major effect on the Company’s operations and financial results as of March 31, 2022.
The Company made this determination for these segments to be held for sale as the criteria established under ASC 205-20-45-1E have been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a) upon the closing of the sale on June 17, 2022 at which time the gain was recognized.
The Company assigned its membership interest in Trend Holdings and its related wholly owned subsidiaries to Agora on September 22, 2021, for the sale of the initial 100 shares for $10. On October 1, 2021, the Company purchased 41,671,121 shares of Agora common stock for $4,167,112 which Agora used to purchase equipment to commence the Bitstream operations.
Agora was organized by Ecoark Holdings to enter the Bitcoin mining business. Because of regulatory uncertainty over Bitcoin being deemed to be securities, Agora’s initial focus is on mining Bitcoin which we believe is not a security. Because of regulatory concerns and the changing regulatory environment, Agora intends to seek opportunities to engage with cryptocurrencies that do not involve the offer or sale of any securities. Because of the plunge in the price of Bitcoin and the type of miners Agora acquired during its attempt to close an initial public offering, Agora determined it was not presently feasible to conduct Bitcoin mining operations and temporarily ceased such activities on March 3, 2022. In September 2022, Agora determined to become a power-centric hosting company and thus will focus its attention on generating revenues in this capacity.
On November 19, 2021 Agora filed a registration
statement on Form S-1 (File No. 333-261246) in connection with its initial public offering of
On August 4, 2021, the Company’s common stock commenced trading on the Nasdaq Capital Market.
8
ECOARK
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
On
October 6, 2021, the Company held a Special Meeting of Stockholders, at which the stockholders approved (a) an amendment to the Articles
of Incorporation to increase the number of shares of authorized common stock of the Company from
On September 9, 2022, the Company held an annual meeting of its stockholders,
and the stockholders approved the issuance of the shares of common stock issuable upon conversion of the Series A Redeemable Convertible
Preferred Stock sold on June 8, 2022. Additionally, the stockholders approved increasing authorized common stock to
Overview of Agora Digital Holdings, Inc.
Bitstream
Bitstream was organized to be our principal Bitcoin mining subsidiary. Bitstream entered into a series of agreements and arrangements including arranging for a reliable and economical electric power source needed to efficiently mine Bitcoin, order miners, housing infrastructure and other infrastructure to mine Bitcoin and locate a third-party hosting service to operate the miners and the service’s more advanced miners. As discussed in this Note 1, Agora has refocused its efforts and will become a power-centric hosting company rather than a Bitcoin mining company and will not hold any Bitcoin in its digital wallets. To that end, Agora is presently in discussions with a third party regarding a potential joint venture in which the third party would provide mining equipment which Agora would host at its West Texas location and supply the electricity for the cryptocurrency mining. However, as of the date of this Report, no term sheet or definitive agreement has been executed by the prospective parties.
All significant accounting policies related to Pinnacle Frac, Capstone, White River, Shamrock, Barrier Crest and Trend Discovery Capital Management have been removed as these entities are reflected in discontinued operations. For full details on the policies refer to the Annual Report on Form 10-K for the year ended March 31, 2022 filed on July 7, 2022.
Principles of Consolidation
On May 31, 2019, the Company entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with Trend Discovery Holdings Inc., a Delaware corporation for the Company to
acquire
On March 27, 2020, the Company and Banner Parent, entered into the Banner Purchase Agreement to acquire Banner Midstream. Pursuant to the acquisition, Banner Midstream became a wholly owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream. The Company sold all divisions of Banner Midstream in July 2022 and September 2022 as discussed herein.
The Company applies the guidance of Topic 810 Consolidation of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—are consolidated except when control does not rest with the parent.
9
ECOARK
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Pursuant
to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and,
therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than
The Company has utilized the guidance under ASC 810-10-55-4B, Case
A for a Change that has resulted in the recognition of non-controlling interest.
During
the six months ended September 30, 2022, Agora issued
The Company sold both White River and Banner Midstream
(Pinnacle/Capstone) in July and September 2022, respectively. These entities are no longer subsidiaries of the Company. The Company has
investments in WREC and Enviro that represent the shares it received for the sale of these entities. The investment in WREC is in non-voting
preferred shares, and Management has concluded that the Company is not the primary beneficiary in this transaction, and thus no consolidation
is required for White River as a variable interest entity. The Company currently owns
Reclassifications
The Company has reclassified certain amounts in the September 30, 2021 condensed consolidated financial statements to be consistent with the September 30, 2022 presentation, including the reclassification of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone assets and liabilities from continuing operations to held for sale and reclassifications of operations of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone to discontinued operations. The March 31, 2022 consolidated balance sheet has been reclassified to include the assets and liabilities sold for White River, Pinnacle Frac, and Capstone as well. Additionally, we have removed all rounding of amounts and shares from the September 30, 2021 presentation to conform to the September 30, 2022 presentation. These changes had no impact on the Company’s financial position or result of operations for the periods presented.
Noncontrolling Interests
In accordance with ASC 810-10-45 Noncontrolling
Interests in Consolidated Financial Statements, the Company classifies noncontrolling interests as a component of equity within the
consolidated balance sheet. In October 2021 and July 2022, with the issuance of restricted common stock to directors, management and advisors,
the Company no longer owns
10
ECOARK
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, including goodwill, asset retirement obligations, estimates of discount rates in lease, liabilities to accrue, fair value of derivative liabilities associated with warrants, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes and determination of the fair value of stock awards.
Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer |
| ● | Step 2: Identify the performance obligations in the contract |
| ● | Step 3: Determine the transaction price |
| ● | Step 4: Allocate the transaction price to the performance obligations in the contract |
| ● | Step 5: Recognize revenue when the Company satisfies a performance obligation |
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
| ● | Variable consideration |
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HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
| ● | Constraining estimates of variable consideration |
| ● | The existence of a significant financing component in the contract |
| ● | Noncash consideration |
| ● | Consideration payable to a customer |
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised service separately to a customer. The relative selling price for each performance obligation is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the promised service. In instances where the Company does not sell a service separately, establishing standalone selling price requires significant judgment.
The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time.
Although, Agora since March 3, 2022, has not recognized revenue from its mining operations, prior to this time, it recognized revenue upon satisfaction of its performance obligation over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.
The Company accounts for incremental costs of obtaining a contract with a customer and contract fulfillment costs in accordance with ASC 340-40, Other Assets and Deferred Costs. These costs should be capitalized and amortized as the performance obligation is satisfied if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The Company recognizes the cost of sales of a contract as expense when incurred or when a performance obligation is satisfied. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies.
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HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Bitcoin Mining
The discussion here should be understood as being applicable while Agora was conducting mining operations which it ceased beginning March 3, 2022. On September 16, 2022, the Company determined to conduct operations as a power-centric hosting company, rather than a Bitcoin mining company. For the past revenue recognition, refer to the Company’s Annual Report on Form 10-K filed on July 7, 2022.
Hosting Revenues
Agora effective in September 2022 began efforts to generate revenue via hosting agreements. As of September 30, 2022 and the date of this Report, Agora has not executed any such agreements. If Agora generates hosting revenues, it will follow ASC 606 as outlined above and recognize revenue upon the completion of the performance obligations as stipulated under such hosting agreements. For the six months ended September 30, 2022 and 2021, no revenue has been recognized under hosting agreements.
All Bitcoin that is mined under these arrangements will be transmitted directly into the third-party digital wallets and the Company will not hold any Bitcoin in its accounts.
Accounts Receivable and Concentration of Credit Risk
The Company considers accounts receivable, net of allowance for doubtful accounts, to be fully collectible. The allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses, credit insurance and economic conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized, however credit insurance is obtained for some customers. Past-due status is based on contractual terms.
Fair Value Measurements
ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles (“GAAP”), and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
| Level 1 inputs: Quoted prices for identical instruments in active markets. |
| Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
| Level 3 inputs: Instruments with primarily unobservable value drivers. |
The carrying values of the Company’s financial instruments such as cash, investments, prepaid expenses, accounts payable, and accrued expenses approximate their respective fair values because of the short-term nature of those financial instruments.
Bitcoin assets will be presented in current assets. Fair value will be determined by taking the price of the coins from the trading platforms which Agora will most frequently use.
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HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Bitcoin
Prior to March 3, 2022 when the Company was mining Bitcoin, it included the Bitcoin in current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. Bitcoin was recorded at cost less impairment. For the past Bitcoin accounting policies, refer to the Company’s Annual Report on Form 10-K filed on July 7, 2022. As of September 30, 2022, the Company neither owns nor mines any Bitcoin, although it may in the future operate as a hosting company providing a mining location and electricity for third parties’ mining equipment and activities.
Impairment of Long-lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Segment Information
The Company follows the provisions of ASC 280-10 Segment Reporting. The Company classified its reporting segments in these three divisions through March 31, 2022, when the Company determined that pursuant to ASC 205-20-45-1E that the operations related to the Financial Services segment would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. As a result of this reclassification, the Company’s segment reporting has removed the Financing segment for the six months ended September 30, 2021. Effective April 1, 2022, the Company has classified its segments in the Commodity Segment, Technology Segment and Bitcoin Mining Segment. It now charges a monthly overhead charge to the Technology Segment and to the Transportation component and Oil and Gas Production component (each part of the Commodities Segment). On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment, and on September 7, 2022, the Company sold the remaining part (Pinnacle Frac and Capstone) of the Commodities Segment. Under ASC 855-10-55, the Company has reflected the sale of these entities and the operations as discontinued operations as of and for the six months ended September 30, 2022. As a result of the sales of White River and Banner Midstream, and the immaterial nature of the operations of Zest Labs, the Company no longer segregates its operations as most of the continuing operations are related to Agora.
Earnings (Loss) Per Share of Common Stock
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Derivative Financial Instruments
The Company does not currently use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-measured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities.
Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.
The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Liquidity
For the six months ended September 30, 2022 and 2021,
the Company had a net loss to controlling interest of common shareholders of $(
The Company’s
financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable
to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The
Company sold its interests in Banner Midstream in two separate transactions on July 25, 2022 and September 7, 2022. In addition, it sold
the non-core business of Trend Discovery on June 17, 2022. The Company expects to distribute the common stock it received (or issuable
upon conversion of preferred stock) in the sales to its stockholders upon the effective registration statements for the two entities the
companies were sold to. See Note 13, “Mezzanine Equity” for information on the Company’s recent $
Impact of COVID-19
COVID-19 may continue to affect the economy and the industries in which we operate, depending on the vaccine and booster rollouts and the emergence of virus mutations.
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the six months ended September 30, 2022 or year ended March 31, 2022 in contrast to the material impact it had in the prior fiscal year.
COVID-19 has also contributed to the supply chain disruptions which have not yet had a material effect for the Company. The Company will continue to monitor the supply chain shortages affecting its business.
The extent to which COVID-19 may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent and related costs. We had received funding under the PPP, and a majority of that has been forgiven.
NOTE 2: DISCONTINUED OPERATIONS
On June 17,
2022, the Company sold Trend Discovery to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV for
a three-year $
On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment. The Company has reflected the reclassification of assets and liabilities of these entities discontinued operations as of and for the period April 1, 2022 through July 31, 2022. The Company used July 31, 2022 as a cut-off as a majority of its revenue and expenses are billed on a monthly basis and it is more convenient to do so.
On September 7, 2022, the Company sold its transportation
business (Pinnacle Frac and Capstone) which is part of the Commodities segment. The Company has reflected the reclassification of assets
and liabilities of these entities discontinued operations as of and for the period April 1, 2022 through August 31, 2022. The Company
used August 31, 2022 as a cut-off as a majority of its revenue and expenses are billed on a monthly basis and it is more convenient to
do so. The shares the Company were issued by Enviro represent approximately
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Current assets as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
| September 30, 2022 | March 31, 2022 | |||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Enviro Technologies US Inc | ||||||||
| $ | $ | |||||||
Non-current assets as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
| September 30, 2022 | March 31, 2022 | |||||||
| Goodwill | $ | $ | ||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | | |||||||
| Oil and gas properties, full cost-method | ||||||||
| Capitalized drilling costs, net of depletion | ||||||||
| Right of use asset – operating and financing leases | ||||||||
| Enviro Technologies US Inc. | ||||||||
| $ | $ | |||||||
Current liabilities as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
| September 30, 2022 | March 31, 2022 | |||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Current portion of long-term debt | ||||||||
| Current portion of lease liability – operating and financing leases | | |||||||
| Enviro Technologies US Inc. | ||||||||
| $ | $ | |||||||
Non-current liabilities as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
| September 30, 2022 | March 31, 2022 | |||||||
| Lease liabilities – operating and financing leases, net of current portion | $ | - | $ | |||||
| Long-term debt | - | |||||||
| Asset retirement obligations | - | |||||||
| Enviro Technologies US Inc. | ||||||||
| $ | $ | |||||||
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
The Company reclassified the following operations to discontinued operations for the six months ended September 30, 2022 and 2021, respectively.
| 2022 | 2021 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses | ||||||||
| Enviro Technologies US, Inc. – net loss | ( | ) | ||||||
| Other (income) loss | ( | ) | ||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
The Company reclassified the following operations to discontinued operations for the three months ended September 30, 2022 and 2021, respectively.
| 2022 | 2021 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses | ||||||||
| Enviro Technologies US, Inc. – net loss | ( | ) | ||||||
| Other (income) loss | ( | ) | ||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
The following represents the calculation of the gain on disposal of Trend Discovery at June 17, 2022:
| 2022 | 2021 | |||||||
| Secured Note Receivable | $ | $ | ||||||
| Cash | ( | ) | ||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Goodwill | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Gain on disposal of discontinued operations | $ | $ | ||||||
The following represents the calculation of the loss on disposal of Banner Midstream Corp in two separate transactions – July 25, 2022 and September 7, 2022:
| 2022 | 2021 | |||||||
| Investment – White River Energy Corp./Enviro Technologies US, Inc. | $ | $ | ||||||
| Cash | ( | ) | ||||||
| Forgiveness of amounts due from subsidiaries | ( | ) | ||||||
| Reversal of investment booked on March 27, 2020 when acquired | ( | ) | ||||||
| Loss on disposal of discontinued operations | $ | ( | ) | $ | ||||
As of April 1, 2021, all of the equipment assets and accounts payable of Pinnacle Vac Services LLC (“Pinnacle Vac”) were transitioned into Capstone to continue servicing the debt.
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 3: REVENUE
The Company recognizes revenue when it transfers promised services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those services. In the six months ended September 30, 2022 and 2021, the Company did not recognize revenue from continuing operations.
Bitcoin Mining
Prior to March 3, 2022, the Company recognized revenue for Bitcoin mining as follows:
Providing computing power to solve complex cryptographic algorithms in support of Bitcoin blockchains, in a process known as “solving a block”, is an output of the Company’s ordinary activities. The provision of computing power is the only performance obligation in the Company’s contracts with mining pool operators, its customers. When the Company engaged in mining, satisfied its performance obligation over time as it provides computing power.
The contract term is short, limited to the period of time the Company’s miners were contributing to the mining pool computational operations in support of the blockchain, measured in “hash rate” or “hashes per second”. The contract term was the payout period under the Company’s mining pool contracts, which is a twenty-four-hour period. After each contract period, the Company had the right to renew the contract for subsequent, successive payout periods.
Bitcoin received in exchange for providing computing power represents noncash consideration. The fair value of the noncash consideration determined at contract inception was recognized in revenue as the Company performed over the contract term using an output method based on hash rate contributed. Changes in the fair value of the noncash consideration post-contract consideration due to reasons other than form of consideration (that is, other than the price of bitcoin or ether) were estimated under the expected value method but constrained from inclusion in the transaction price (and hence revenue) until end of the contract term when the uncertainty has been resolved and amount was known.
The Company received payment for its provision of hash rate under the Pay-Per-Shares-Plus (“PPS+”) payment method. The payment method contains two components, (1) the block rewards issued by the blockchain network and paid by the mining pool operator, and (2) transaction fees generated from (paid by) blockchain users and distributed (paid out) to individual miners by the mining pool operator. The pool, as a collective entity, develops its own technology that, on one end, gathers individual miner’s hash rate, and on the other end contributes hash rate to the network to compete for block rewards from the network.
For PPS+, as long as individual miners contribute hash rate to the pool, the Company (as an individual miner) is entitled to receive its corresponding amount of block rewards based on the mining pool’s calculation methodology, which is standard across pool operators.
Block rewards are the new coins awarded to Bitcoin miners by the network (bitcoin for the bitcoin network) and is a theoretical number calculated by the mining pool operator based on inputs including difficulty level, network hash rate, and block rewards (for example, 6.25 for Bitcoin). Transaction fees refers to the total fees paid by users of the network to execute transactions.
Digital asset transaction fees are payable to the mining pool operator to cover the costs of maintaining the pool and are deducted from the block reward payout. This fee was deducted from the block reward the Company received and recorded as a reduction of revenue because it does not represent payment for a distinct good or service.
Effective September 16, 2022, Agora commenced efforts to become a power-centric hosting company and will recognize revenue, if any, in accordance with the provisions of ASC 606.
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 4: SENIOR SECURED PROMISSORY NOTE RECEIVABLE
Agora was issued a Senior Secured Promissory Note
by Trend Ventures, LP (“Trend Ventures Note”) on June 16, 2022. The Trend Ventures Note was the consideration paid to Agora
for the acquisition of Trend Discovery Holdings. The Trend Ventures Note is in the principal amount of $
As of September 30, 2022, the Company has recognized $
NOTE 5: INVESTMENT – SERIES A CONVERTIBLE PREFERRED STOCK – WHITE RIVER ENERGY CORP
On July 25, 2022, the Company entered into a Share
Exchange Agreement pursuant to which that day it sold to WREC its oil and gas production business (White River) which is part of the Commodities
segment. The Company received
As of September 30, 2022, the Company has determined that Ecoark is not the primary beneficiary, and this transaction has not resulted in Ecoark controlling WREC as the preferred shares are unable to be converted until the effectiveness of the registration statement being filed for WREC, does not have the power to direct activities of WREC, control the Board of Directors of WREC and WREC is not reliant upon funding by Ecoark moving forward.
NOTE 6: INVESTMENT – COMMON STOCK – ENVIRO TECHNOLOGIES US, INC.
On August 23,
2022 the Company entered into a Share Exchange Agreement (the “Agreement”) with Enviro and Banner Midstream. Pursuant to the
Agreement, upon the terms and subject to the conditions set forth therein, the Company acquired
The Company has determined that this transaction has
resulted in Ecoark having a controlling interest in Enviro as the common shares issued represent
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 7: BITCOIN
Agora commenced its Bitcoin mining operations
in November 2021. Through September 30, 2022,
The following table presents additional information about Agora’s Bitcoin holdings during the six months ended September 30, 2022:
| Beginning balance – April 1, 2022 | $ | | ||
| Gain on sale of Bitcoin | ||||
| Bitcoin converted into fiat currency | ( | ) | ||
| Bitcoin impairment losses | ( | ) | ||
| Ending balance – September 30, 2022 | $ |
NOTE 8: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of September 30, 2022 and March 31, 2022:
| September 30, 2022 | March 31, 2022 | |||||||
| (unaudited) | ||||||||
| Zest Labs freshness hardware, equipment and computer costs | $ | | $ | | ||||
| Land | ||||||||
| Furniture | ||||||||
| Mining technology equipment– Bitcoin | ||||||||
| Machinery and equipment – Bitcoin | ||||||||
| Total property and equipment | ||||||||
| Accumulated depreciation and impairment | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
As of September 30, 2022, the Company performed
an evaluation of the recoverability of these long-lived assets. As a result of the evaluation, there was impairment of fixed assets necessary
in the amount of $
In September 2022, Agora renegotiated a settlement
with one of its vendors, and provided them transformers (in mining technology equipment) valued at $
Depreciation expense for the six months ended
September 30, 2022 and 2021 was $
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 9: POWER DEVELOPMENT COST
Agora has paid $
The $
Bitstream also reimbursed the utility deposits
paid by the non-related third party in connection with these agreements in the amount of $
On August 10, 2022, the Company had $
The Company has classified these payments as “Power Development Costs” as a noncurrent asset on the Consolidated Balance Sheets.
NOTE 10: WARRANT DERIVATIVE LIABILITIES
The Company issued common stock and warrants in several private placements and two public offerings (“Derivative Warrant Instruments”) and some of these warrants have been classified as liabilities. The Derivative Warrant Instruments have been accounted for utilizing ASC 815 “Derivatives and Hedging.” The Company has incurred a liability for the estimated fair value of Derivative Warrant Instruments. The estimated fair value of the Derivative Warrant Instruments has been calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense).
The Company identified embedded features in some of the warrant agreements which were classified as a liability. These embedded features included (a) the implicit right for the holders to request that the Company settle the warrants in registered shares. Since maintaining an effective registration of shares is potentially outside the control of the Company, these warrants were classified as liabilities as opposed to equity; (b) included the right for the holders to request that the Company cash settle the warrant instruments from the holder by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the Derivative Warrant Instruments on the date of the consummation of a fundamental transaction; and (c) certain price protections in the agreements. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as derivatives as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
See Note 13, “Mezzanine Equity” for the derivative liability recognized with respect to the warrant granted to Digital Power Lending, LLC.
On November 14, 2020, the Company granted
On December 30, 2020, the Company granted
The fair value of the
On June 30, 2021, the Company granted
On August 6, 2021, the Company closed a $
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2022 and 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.
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ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following assumptions were used on September 30, 2022, March 31, 2022 and at inception:
| Six
Months Ended September 30, 2022 | Year
Ended March 31, 2022 | Inception | ||||||||||
| Expected term | ||||||||||||
| Expected volatility | ||||||||||||
| Expected dividend yield | ||||||||||||
| Risk-free interest rate | ||||||||||||
| Market price | $ | $ |
The Company’s remaining derivative liabilities as of September 30, 2022 and March 31, 2022 associated with warrant offerings are as follows. All fully extinguished warrants liabilities are not included in the chart below.
| September 30, 2022 (unaudited) | March 31, 2022 | Inception | ||||||||||
| Fair value of 200,000 (originally 250,000) September 24, 2020 warrants | $ | - | $ | $ | ||||||||
| Fair value of 60,000 November 14, 2020 warrants | - | |||||||||||
| Fair value of 888,889 December 31, 2020 warrants | ||||||||||||
| Fair value of 62,222 December 31, 2020 warrants | ||||||||||||
| Fair value of 200,000 June 30, 2021 warrants | ||||||||||||
| Fair value of 3,478,261 August 6, 2021 warrants | ||||||||||||
| Fair value of 243,478 August 6, 2021 warrants | ||||||||||||
| $ | $ | |||||||||||
During the six months ended September 30, 2022
and 2021 the Company recognized changes in the fair value of the derivative liabilities of $
Activity related to the warrant derivative liabilities for the six months ended September 30, 2022 is as follows:
| Beginning balance as of March 31, 2022 | $ | |||
| Issuances of warrants – derivative liabilities | ||||
| Warrants exchanged for common stock | ||||
| Change in fair value of warrant derivative liabilities | ( | ) | ||
| Ending balance as of September 30, 2022 | $ |
Activity related to the warrant derivative liabilities for the six months ended September 30, 2021 is as follows:
| Beginning balance as of March 31, 2021 | $ | |||
| Issuances of warrants – derivative liabilities | ||||
| Warrants exchanged for common stock | ||||
| Change in fair value of warrant derivative liabilities | ( | ) | ||
| Ending balance as of September 30, 2021 | $ |
25
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 11: LONG-TERM DEBT
Long-term debt included in continuing operations consisted of the following as of September 30, 2022 and March 31, 2022. All debt instruments repaid during the year ended March 31, 2022 are not included in the below chart and the chart only reflects those instruments that had a balance owed as of these dates.
| September 30, 2022 | March 31, 2022 | |||||||
| (unaudited) | ||||||||
| Credit facility -Trend Discovery SPV 1, LLC (a) | $ | $ | ||||||
| Auto loan – Ford (b) | ||||||||
| Total long-term debt | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long-term debt, net of current portion | $ | $ | ||||||
| (a) |
| (b) |
26
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
The following is a list of maturities as of September 30:
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| $ |
During the six months ended September 30, 2022,
the Company received proceeds of $
During the six months ended September 30, 2021,
the Company repaid $
Interest expense on long-term debt during the
six months ended September 30, 2022 and 2021 are $
NOTE 12: NOTES PAYABLE - RELATED PARTIES
A Board member advanced $
An officer of the Company advanced $
27
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 13: MEZZANINE EQUITY
On June 8, 2022, the Company entered into a Securities
Purchase Agreement (the “Agreement”) with Digital Power Lending, LLC, a California limited liability company (the “Purchaser”),
pursuant to which the Company sold the Purchaser
Ecoark Series A
Conversion Rights
Each share of Ecoark Series A has a stated value
of $
Voting Rights
The Ecoark Series A is entitled to vote with the
common stock as a single class on an as-converted basis, subject to applicable law and the Nasdaq Rules. In addition, as long as the holder
continues to hold at least
The holders of record of the shares of common stock and of any other class or series of voting stock (including the Ecoark Series A), exclusively and voting together as a single class, are entitled to elect the balance of the total number of directors of the Company. The Purchaser has agreed not to vote at the shareholders meeting on the proposal to approve the issuance of the additional common stock issuable due to the reduced conversion price.
Dividend Rights
The holder of shares of the Ecoark Series A is
entitled to receive cumulative cash dividends at an annual rate of
28
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
If the Company fails to make one or more dividend
payments, whether or not consecutive, a default dividend rate of
Liquidation Rights
The shares of Ecoark Series A have a liquidation
preference over the common stock and any subsequent series of junior preferred stock of $
Redemption
At any time beginning on or after June 8, 2024,
the holder of Ecoark Series A may cause the Company to redeem some or all of the shares of Ecoark Series A it holds at a redemption price
of $
Negative Covenants and Approval Rights
The Ecoark Series A Certificate of Designation (the “Certificate”) subjects the Company to negative covenants restricting its ability to take certain actions without prior approval from the holder(s) of a majority of the outstanding shares of Ecoark Series A for as long as the holder(s) continue to hold at least 25% (or such higher percentage as set forth in the Certificate (as defined below)) of the Ecoark Series A shares issued on the closing date under the Agreement. These restrictive covenants include the following actions by the Company, subject to certain exceptions and limitations:
| (ii) | investment in, purchase or acquisition of any assets or capital stock of any entity for an amount that exceeds $100,000 in any one transaction or $250,000, in the aggregate; |
| (iii) | issuance of any shares of common stock or other securities convertible into or exercisable or exchangeable for shares of common stock; |
| (iv) | incurrence of indebtedness, liens, or guaranty obligations, in an aggregate amount in excess of $50,000 in any individual transaction or $100,000 in the aggregate with customary exceptions. |
| (v) | sale, lease, transfer or disposal of any of its properties having a value calculated in accordance with GAAP of more than $50,000; |
| (vi) | increase in any manner the compensation or fringe benefits of any of its directors, officers, employees; and |
| (vii) | merger or consolidation with, or purchase a substantial portion of the assets of, or by any other manner the acquisition or combination with any business or entity. |
The above and other negative covenants in the Series A Certificate do not apply to a reverse merger with an entity with securities quoted on a market operated by OTC Markets or listed on a national securities exchange.
29
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Warrant
Prior to its cancellation, the Warrant, as amended, provided the Purchaser or its assignees (the “Holder”) with the right to purchase a number of shares of common stock as would enable the holder together with its affiliates to beneficially own 49% of the Company’s common stock, calculated on a fully diluted basis, at an exercise price of $0.001 per share, including the Commitment Shares and Conversion Shares unless sold. Subject to shareholder approval, the Warrant was to vest and become exercisable into shares of the Company’s stock if as of June 8, 2024: (i) the Company had failed to complete the distributions to the Company’s security holders or to any other subsidiary of the Company’s equity ownership of its three principal subsidiaries: Agora, Banner Midstream and Zest Labs (or their principal subsidiaries) (the “Distributions”), and/or (ii) the Holder together with its affiliates does not beneficially own at least 50% of the Company’s outstanding common stock. Provided, the Company must retain 20% of its common stock of Agora. The Warrant was to be exercised on a cashless basis and expire on June 8, 2027.
On November 14, 2022,
Registration Rights
Pursuant to the Agreement, the Company has agreed
to register the sale by the Purchaser of up to
The value of the Commitment Shares of $
The description above is not a substitute for reviewing the full text of the referenced documents, which were attached as exhibits to the Company’s Current Report on Form 8-K as filed with the SEC on June 9, 2022, and the Company’s Current Report on Form 8-K as filed with the SEC on July 15, 2022 when we filed the amended and restated warrant.
30
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 14: STOCKHOLDERS’ EQUITY (DEFICIT)
On July 26, 2022, the Company filed a Definitive Proxy Statement with respect to its 2022 Annual Meeting of the Shareholders, being held virtually at 1:00 p.m., Eastern Time, on September 9, 2022, at which the shareholders of the Company approved the following proposals:
| (1) | Approve for purposes of complying with Listing Rule 5635 of the Nasdaq Stock Market, the issuance by the Company of shares of the Company’s Common Stock pursuant to the terms of the private placement financing transaction pursuant to the Securities Purchase Agreement dated June 8, 2022 between the Company and Digital Power Lending, LLC, a California limited liability company, without giving effect to any beneficial ownership limitations contained therein; | |
| (2) | Approve an amendment to the Company’s Articles of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue from |
| (3) | Elect four members to the Company’s Board of Directors for a one-year term expiring at the next annual meeting of stockholders; |
| (4) | Ratify the selection of RBSM LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023; and |
| (5) | Approve the adjournment of the Annual Meeting to a later date or time, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Annual Meeting, there are not sufficient votes to approve any of the other proposals before the Annual Meeting. |
Ecoark Holdings Preferred Stock
On March 18, 2016, the Company created
As of March 31, 2022, there were no shares of any
series of preferred stock issued and outstanding. On June 8, 2022, as noted in Note 13, “Mezzanine Equity”, the Company issued
Ecoark Holdings Common Stock
On
September 9, 2022, the shareholders approved the increase in authorized common stock to
31
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
In the three months ended June 30, 2021, the Company
issued
In the three months ended September 30, 2021,
the Company issued
In the three months ended June 30, 2022, the Company
issued
In the three months ended September 30, 2022,
the Company issued
As of September 30, 2022,
Agora Common Stock
Agora is authorized to issue 250,000,000 shares of common stock, par value $0.001. On September 22, 2021, the Company purchased 100 shares of Agora for $10.
On October 1, 2021, the Company purchased
In addition, between October 1 and December 7,
2021, Agora issued
On August 7, 2022, Agora issued
Of the
32
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
The Company recognized $
The Company accounts for stock-based payments
in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”). During the year ended
March 31, 2022, in addition to the value measured by the
Share-based Compensation Expense
Share-based compensation for employees is included in salaries and salary related costs and directors and services are included in professional fees and consulting in the consolidated statement of operations for the six months ended September 30, 2022 and 2021.
Share-based compensation for the six months ended
September 30, 2022 and 2021 for stock options and RSUs granted under the 2013 Incentive Stock Plan and 2017 Omnibus Incentive Stock Plan
and non-qualified stock options were $
There is $
In order to have sufficient authorized capital
to raise the $
33
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 15: COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are presently involved in the following legal proceedings. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company.
| ● | On August 1, 2018, Ecoark Holdings, Inc. and Zest Labs, Inc. filed
a complaint against Walmart Inc. in the United States District Court for the Eastern District of Arkansas, Western Division. The complaint
includes claims for violation of the Arkansas Trade Secrets Act, violation of the Federal Defend Trade Secrets Act, breach of contract,
unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. On April 9, 2021,
a Little Rock, Arkansas jury awarded Ecoark and Zest a total of $ |
| ● | On September 21, 2021, Ecoark Holdings, Inc. and Zest Labs, Inc. filed a complaint against Deloitte Consulting, LLP (“Deloitte”) in the Eight Judicial District Court in Clark County, Nevada. The complaint is for violation of the Nevada Uniform Trade Secret Act and will also be seeking a preliminary and permanent injunction, attorney’s fees, and punitive damages. The damages at issue are in the hundreds of millions of dollars. Zest Labs, Inc. began working with Deloitte in 2016, in a confidential matter in a pilot program that Zest Labs, Inc. had been engaged for by Walmart. Zest Labs, Inc. engaged in significant discussions, presentations, demonstrations, and information downloads with Deloitte who specifically acknowledged that this information was confidential. Deloitte’s motion to dismiss was denied, it filed an answer denying substantive allegations and the parties are engaging in discovery. The Company cannot reasonably determine the outcome and potential reward at this time. |
| ● | On April 22, 2022, BitStream Mining and Ecoark Holdings were sued in
Travis County, Texas District Court (Docket #79176-0002) by Print Crypto Inc. in the amount of $ |
| ● | On July 15, 2022, BitStream Mining and two of their Management were
parties to a petition filed in Ward County District Court by 1155 Distributor Partners-Austin, LLC d/b/a Lonestar Electric Supply in the
amount of $ |
In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon the Company’s financial condition, results of operations or cash flows.
34
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
NOTE 16: CONCENTRATIONS
The Company occasionally maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.
NOTE 17: FAIR VALUE MEASUREMENTS
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash, prepaid expenses, other receivables, accounts payable and accrued liabilities, notes payable, and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the six months ended September 30, 2022 and 2021. The recorded values of all other financial instruments approximate its current fair values because of its nature and respective relatively short maturity dates or durations.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The Company records the fair value of the of the warrant derivative liabilities disclosed in accordance with ASC 815, Derivatives and Hedging. The fair values of the derivatives were calculated using the Black-Scholes Model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in other income (expense) in the consolidated statement of operations. The following table presents assets and liabilities that are measured and recognized at fair value on a recurring basis as of:
| Level 1 | Level 2 | Level 3 | Total Gains and (Losses) | |||||||||||||
| September 30, 2022 | ||||||||||||||||
| Warrant derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Bitcoin | ( | ) | ||||||||||||||
| Investment – White River Energy Corp | ||||||||||||||||
| March 31, 2022 | ||||||||||||||||
| Warrant derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Bitcoin | ( | ) | ||||||||||||||
35
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
The table below shows a reconciliation of the beginning and ending liabilities measured at fair value using significant unobservable inputs (Level 3):
| September 30, 2022 | ||||
| (unaudited) | ||||
| Beginning balances | $ | ( | ) | |
| Net change in unrealized (depreciation) appreciation included in earnings | ||||
| Purchases | ||||
| Sales | ||||
| Transfers in and out | ||||
| Ending balances | $ | |||
NOTE 18: LEASES
The Company has adopted ASU No. 2016-02, Leases
(Topic 842), as of April 1, 2019 and will account for its leases in terms of the right of use assets and offsetting lease liability
obligations under this pronouncement. The Company had had only short-term leases up through the acquisition of Banner Midstream. The Company
acquired a right of use asset and lease liability on March 27, 2020. The Company recorded these amounts at present value, in accordance
with the standard, using a discount rate of
The Company has chosen to implement this standard using the modified retrospective model approach with a cumulative-effect adjustment, which does not require the Company to adjust the comparative periods presented when transitioning to the new guidance. The Company has also elected to utilize the transition related practical expedients permitted by the new standard. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a modified retrospective approach. Adoption of the new standard did not result in an adjustment to retained earnings for the Company.
As of September 30, 2022, the value of the unamortized
lease right of use asset is $
| Maturity of lease liability for the operating leases for the period ended September 30, | ||||
| 2023 | $ | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| Imputed interest | $ | ( | ) | |
| Total lease liability | $ | |||
| Disclosed as: | ||||
| Current portion | $ | |||
| Non-current portion | $ | |||
| Amortization of the right of use asset for the period ended September 30, | ||||
| 2023 | $ | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| Total | $ | |||
36
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
| Operating lease expense – six months ended September 30, 2022 and 2021 | $ | $ | ||||||
| Operating lease expense – three months ended September 30, 2022 and 2021 | $ | $ |
NOTE 19: RELATED PARTY TRANSACTIONS
Trend Capital Management was founded in 2011 and through June 30, 2021, was Trend Holding’s primary asset. Trend Capital Management is not the investment manager of these entities, nor the beneficial owner of Ecoark securities held by Trend Discovery LP (“Trend LP”) nor Trend Discovery SPV I, LLC (“Trend SPV”) since it assigned the power to vote and dispose of securities to a third party not affiliated with Ecoark. The investment capital in Trend LP and Trend SPV is from individual limited partners and members, and not from the Company. Trend Capital Management does not have the obligation to absorb losses or the right to receive benefits that could be significant as a result of the entities’ performance. Trend Capital Management does not have any ownership of or a controlling financial interest in Trend LP nor Trend SPV and therefore management has concluded consolidation of these entities with Trend Capital Management is not required. Trend Capital Management provides services and collects fees from entities which include Trend LP and Trend SPV.
Trend Discovery which held Barrier Crest and Trend Capital Management was sold on June 17, 2022.
Jay Puchir, the Company’s Chief Financial
Officer, Secretary and Treasurer, served as a consultant to the Company from May 2019 to March 2020 and was paid solely in stock options
totaling
Gary Metzger, a director, advanced $
In the Banner Midstream acquisition, Randy S.
May, Chief Executive Officer and Chairman, was the holder of approximately $
On August 31, 2021, William B. Hoagland, the then Chief Financial Officer of the Company, transferred 550,000 shares of Ecoark Holdings common stock to Trend LP, of which Mr. Hoagland owns an approximately 25% of Trend LP. Additionally, Trend SPV holds 344,000 shares of Ecoark Holdings common stock and 460,000 warrants to purchase Ecoark Holdings common stock.
Ecoark Holdings has made periodic loans to Agora
to permit it to begin its Bitcoin mining business. On November 13, 2021, Agora issued Ecoark Holdings a $
37
ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2022
On February 2, 2022, Peter Mehring, a director and executive officer, gave notice of his intent to resign as an executive officer and director effective on February 11, 2022. Mr. Mehring resigned as a result of his entering into an Employment Agreement with a leading Internet service company. He also entered into a Consulting Agreement with the Company.
Under the Consulting Agreement, Mr. Mehring will
advise the Company (including Zest Labs) on its current intellectual property litigation and matters relating to Zest Lab’s intellectual
property as well as provide transition services. The Consulting Agreement is for a one-year term. The Company agreed to pay Mr. Mehring
$
NOTE 20: SUBSEQUENT EVENTS
Subsequent to September 30, 2022, the Company had the following transactions:
On October 28, 2022, the Company and Ecoark, Inc. assigned all of its residual intellectual property rights and rights in the Zest Labs lawsuits to Zest Labs in connection with the anticipated spin-off of Zest Labs common stock to the Company’s stockholders. The Board of Directors subsequently determined not to proceed with the Zest Labs spin-off, however the assignment was not affected by that determination.
On November 14, 2022,
38
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and notes thereto presented in this Report as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2022.
Overview
Ecoark Holdings Inc. (“Ecoark Holdings,” “Ecoark” or the “Company”) is a holding company, incorporated in the State of Nevada on November 19, 2007. Through September 30, 2022, Ecoark Holdings’ former subsidiaries with the exception of Agora Digital Holdings, Inc., a Nevada corporation (“Agora”) and Zest Labs, Inc. (“Zest Labs”) have been divested. See Notes 1 and 2 to the financial statements included in this Report. As a result of the divestitures, all assets and liabilities of the former subsidiaries have been reclassified to discontinued operations on the condensed consolidated balance sheet for March 31, 2022 and all operations of these companies have been reclassified to discontinued operations and gain on disposal on the condensed consolidated statements of operations for the six and three months ended September 30, 2022.
Prior to the recent divestitures, the Company’s principal subsidiaries consisted of Ecoark, Inc., a Delaware corporation which was the parent of Zest Labs, Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and Agora which was assigned the membership interest in Trend Discovery Holdings LLC, a Delaware limited liability corporation (all references to “Trend Holdings” or “Trend” are now synonymous with Agora) from the Company on September 17, 2021 upon its formation, which includes Bitstream Mining, LLC, the Company’s Bitcoin mining subsidiary.
Recent Developments
During the period covered by this Report, the Company engaged in the following transactions:
| ● | On July 25, 2022 the Company sold White River Holdings Corp (“White River”) and with it its oil and gas production business to White River Energy Corp, formerly Fortium Holdings Corp. (“WREC”) in exchange for 1,200 shares of WREC’s non-voting Series A Convertible Preferred Stock (the “WREC Series A”). Subject to certain terms and conditions set forth in the Certificate of Designation of the WREC Series A, the WREC Series A will become convertible into 42,253,521 shares of WREC’s common stock upon such time as (A) WREC has filed a Form S-1, with the Securities and Exchange Commission (the “SEC”) and such Form S-1 has been declared effective, and (B) Ecoark elects to distribute shares of its common stock to its shareholders. | |
| ● | On August 23, 2022 the Company sold Banner Midstream, which consisted of its transportation business to Enviro Technologies US, Inc. (“Enviro”) in exchange for 12,996,958 shares of the Enviro common stock. | |
| ● | In September 2022, the Company announced a record date of September 30, 2022 for the spin-offs of common stock of Enviro and WREC to holders of the Company’s common stock and preferred stock (on an as-converted basis). |
The Company’s goal is to spin-off all of the Enviro common stock and WREC common stock to the Company’s shareholders in early calendar year 2023, although because of regulatory delays or other reasons we may not meet that deadline. At the same time, we expect to acquire another business so we do not become a shell corporation. This will result in a change of control and may or may not be subject to shareholder approval. As of the date of this Report, we have not had any material discussions about any such acquisition, and our search for an operating business to acquire in ongoing.
Future Spin-Offs
As described in this Report, Ecoark’s goal is to spin-off certain of the capital stock it holds in operating businesses and acquire an operating business. This will entail the common stock of WREC underlying the WREC Series A and the Enviro common stock that the Company acquired in July and September 2022, respectively. While the Company previously planned on spinning off Zest Labs common stock in a similar fashion, the Company decided not to proceed with that spin-off. Due to market conditions, the Company decided it was inadvisable to seek to raise capital for Zest Labs which it needed to operate as a stand-alone public company. To protect the Company’s shareholders, it granted its shareholders of record as of September 30, 2022 the right to receive 95% of the net proceeds of the Zest Labs litigation with Walmart and Deloitte, which is describe under Note 15 to the financial statements contained in this Report. That right is part of the Zest Labs articles of incorporation.
39
At some point, Ecoark expects that BitNile or an affiliate will present a reverse merger candidate to it which will prevent Ecoark from becoming a shell or losing its Nasdaq listing. However, the parties have only engaged in very preliminary discussions. What the acquisition target will be and what the consideration will be has not been discussed. The Ecoark Board of Directors intends to obtain a valuation from a nationally recognized valuation firm and advice from investment bankers consistent with the exercise of their fiduciary duty.
To date, discussions between BitNile have centered upon Ecoark being able to spin-off to its shareholders each of our subsidiaries, either directly or through the business combinations. Our current plans are to expedite the spin-offs and complete them in early calendar year 2023, although we may not reach our goal by then. If it is necessary to maintain our Nasdaq listing, we may delay one spin-off until we can acquire one or more new businesses. BitNile files reports with the SEC which investors are encouraged to review at www.SEC.gov/EDGAR, which reports are not incorporated herein by reference.
Following the above transactions, the Company’s only remaining subsidiaries are Agora, which ceased mining Bitcoin but is now exploring operating as a hosting company for Bitcoin mining ventures, and Zest Labs which holds technology and related intellectual property rights for fresh food solutions, and is not operating due to ongoing litigation involving its technology an intellectual property.
Segment Reporting for the Three Months Ended September 30, 2022:
As a result of the sales of White River and Banner Midstream, and the immaterial nature of the operations of Zest Labs, the Company no longer segregates its operations as most of the continuing operations are related to Agora.
Key Trends
Impact of Inflation
In 2022, there has been a sharp rise in inflation in the U.S. and globally. Given our limited operations, the most significant future impact will be on employee salaries and benefits and electricity costs.
Impact of COVID-19
COVID-19 may continue to affect the economy and our business, depending on the vaccine rollouts and the emergence of virus mutations as well as the impact of supply chain disruptions.
COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the fiscal quarter ended September 30, 2022 included in this Report.
COVID-19 has been a contributing factor in supply and labor shortages which have been pervasive in many industries. The extent to which a future COVID-19 outbreak and other adverse developments may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted.
Results of Operations For Continuing Operations For the Three Months Ended September 30, 2022 and 2021 Revenues
The discussion of our results of operations should be evaluated considering that our primary subsidiaries were sold in the three months ended September 30, 2022 and their results of operations are now treated as discontinued operations.
The Company had no revenue in either of the three months ended September 30, 2022 (“Q2 2023”) or 2021 (“Q2 2022”) as it was not operating as a Bitcoin mining company as it focuses on becoming a hosting company as reflected below. The Company is negotiating potential hosting agreements, however, none of been executed as of the date of this Report.
The Company’s Bitcoin operations began in the fiscal year ended March 31, 2022 and ceased on March 3, 2022 due to the low price of Bitcoin and the inability of Agora to timely complete its initial public offering which created a working capital issue. The Company intends to refocus Agora, which given the Zest Labs litigation is expected to be its primary operating entity in the short-term, to operating as a hosting company providing infrastructure and energy to cryptocurrency mining enterprises. Unless and until we are successful in generating revenue for Agora or acquire another operating business, we expect our lack of revenue to persist.
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Cost of Revenues and Gross Profit
Cost of revenues for Q2 2023 was $88,212 as compared to $0 for Q2 2022. We expect cost of revenues to increase as and when we commence Agora’s planned hosting operations.
Operating Expenses
Total operating expenses were $7,607,202 for Q2 2023 compared to $4,166,386 for Q2 2022. The increase between periods were primarily related to an increase in salaries and salaries related costs to $3,707,971 in Q2 2023 from $1,370,841 in Q2 2022 arising from the stock-based compensation in Q2 2023 compared to Q2 2022, and to a lesser extent an approximately $1.6 million increase in impairment related to the miners that Agora had purchased as it has moved to a hosting model from a mining model for Bitcoin.
Other Income (Expense)
Total other income was $2,433,332 in Q2 2023, compared to total other (expense) of $(633,951) in Q2 2022. Change in fair value of derivative liabilities for Q2 2023 was a non-cash gain of $3,286,004 related to the changes in our stock price, partially offset by a loss on disposal of fixed assets of $(570,772) related to Agora’s settlement wherein mining equipment valued at $1,425,772 were exchanged with a vendor for a credit of $855,000; and interest expense, net of interest income of $(281,900). Change in fair value of derivative liabilities for Q2 2022 was a non-cash (loss) of $(630,142) related to the changes in our stock price.
Net Income (Loss) from Continuing Operations
Net loss from continuing operations for Q2 2023 was ($5,262,082) as compared to net (loss) from continuing operations of ($4,800,337) for Q2 2022. The increase was primarily due to the additional operating expenses as noted above offset by the change in the fair value of the derivative liability.
Results of Operations For Continuing Operations For the Six Months Ended September 30, 2022 and 2021 Revenues
The Company had no revenue in either of the six months ended September 30, 2022 (“H1 2023”) or 2021 (“H1 2022”) as it was not operating as it ceased its Bitcoin mining operations prior to H1 2023, and was not operating as a Bitcoin mining company as of the H1 2022.
Cost of Revenues and Gross Profit
Cost of revenues for H1 2023 was $182,074 as compared to $0 for H1 2022. We expect cost of revenues to increase as and when we commence Agora’s planned hosting operations.
Operating Expenses
Total operating expenses were $14,903,921 for H1 2023 compared to $6,082,158 for H1 2022. The increase between periods were primarily related to an increase in salaries and salaries related costs to $9,718,030 in H1 2023 from $2,344,854 in H1 2022 arising from the stock-based compensation of $9,217,208 in H1 2023 versus $767,000 in H1 2022, and to a lesser extent an approximately $1.6 million increase related to the impairment of the miners that Agora had purchased as it has moved to a hosting model from a mining model for Bitcoin.
Other Income (Expense)
Total other income was $2,002,972 in H1 2023, compared to total other income of $3,758,522 in H1 2022. Change in fair value of derivative liabilities for H1 2023 was a non-cash gain of $2,892,472, partially offset by a loss on disposal of fixed assets of $(570,772) related to Agora’s settlement wherein mining equipment valued at $1,425,772 were exchanged with a vendor for a credit of $855,000; and interest expense, net of interest income of $(318,728). Change in fair value of derivative liabilities for H1 2022 was a non-cash gain of $4,315,677, partially offset by interest expense, net of interest income of $(557,155).
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Net Income (Loss) from Continuing Operations
Net loss from continuing operations for H1 2023 was ($13,083,023) as compared to net loss from continuing operations of ($2,323,636) for H1 2022. The increase was primarily attributable to increases in salaries and salaries related costs and our H1 2023 impairment charge, partially offset by the change in the fair value of the derivative liabilities.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are revenue generated from operations, levels of accounts receivable and accounts payable and capital expenditures.
Net cash used in operating activities for continuing operations was $(11,009,363) for H1 2023, as compared to $(7,560,708) for H1 2022. Cash used in operating activities for H1 2023 was primarily caused by increases in common shares issued for services, partially offset by losses on disposal of former subsidiaries without similar amounts in H1 2022 as well as changes in accounts payable and accrued expenses from H1 2022 to H1 2023.
Net cash provided by investing activities was $139,732 for H1 2023 compared to net cash used in investing activities of $(4,547,868) for H1 2022. Net cash provided by investing activities in H1 2023 were comprised of proceeds received from the refund of the power development costs partially offset by purchases of fixed assets and discontinued operations, and the amounts used in H1 2022 related to the purchase of fixed assets as we commenced operations in Agora.
Net cash provided by financing activities for H1 2023 was $11,770,856 which comprised primarily of proceeds from our June 2022 sale of the Ecoark Series A, Commitment Shares described elsewhere in this Report. This compared with H1 2022 net cash provided by financing activities of $17,728,209 comprised primarily of the sale of our common stock in a registered direct offering.
As of November 11, 2022, the Company has $296,959 in cash and cash equivalents. The Company believes that the current cash on hand is not sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements and may need to raise capital to support their operations.
To date we have financed our operations through sales of common stock, convertible preferred stock and other derivative securities and the issuance of debt. We may also issue common stock, preferred stock or other securities in connection with any business acquisition we undertake in the future following our planned spin-offs. Presently we may not raise capital without the consent of the Purchaser.
The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company sold its interests in Banner Midstream in two separate transactions on July 25, 2022 and September 7, 2022. In addition, it sold the non-core business of Trend Discovery on June 17, 2022. The Company expects to distribute the common stock it received (or issuable upon conversion of preferred stock) in the sales to its stockholders upon the effective registration statements for the two entities the companies were sold to. See Note 13, “Mezzanine Equity” for information on the Company’s recent $12 million convertible preferred stock financing. That financing has restrictive covenants that require approval of the investor for the Company to engage in any equity or debt financing. The Company believes that the current cash on hand is not sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements and may need to raise capital to support their operations. As of September 30, 2022, the Company has not established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern and will require additional financing to fund its future planned operations. The accompanying financial statements for the period ended September 30, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Agora Line of Credit
As of November 11, 2022, the Company has advanced a total of $5,448,982 to Agora under a $7.5 million term line of credit note issued to the Company by Agora which bears interest at a rate of 10% per annum. Agora will be required to repay any sums we lend it on March 31, 2023 with accrued interest.
2018 Line of Credit
On December 28, 2018, the Company entered into a $10,000,000 credit facility that includes a loan and security agreement (the “Agreement”) where the lender agreed to make one or more loans to the Company, and the Company may make a request for a loan or loans from the lender, subject to the terms and conditions. The Company is required to pay interest biannually on the outstanding principal amount of each loan calculated at an annual rate of 12%. The loans are evidenced by demand notes executed by the Company. The Company is able to request draws from the lender up to $1,000,000 with a cap of $10,000,000. In the year ended March 31, 2022, the Company borrowed $595,855, which includes $25,855 in commitment fees, with the balance of $570,000 being deposited directly into the Company. In the six months ended September 30, 2022, the Company borrowed $505,181, which includes $17,681 in commitment fees, with the balance of $487,500 being deposited directly into the Company, and repaid $710,000 in the six months ended September 30, 2022. Interest incurred for the six months ended September 30, 2022 was $41,427, and accrued as of September 30, 2022 was $43,650. There were no advances in the six months ended September 30, 2021. With the sale of Trend Holdings, we no longer can access this line of credit.
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Cautionary Note Regarding Forward Looking Statements
This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the potential terms, timing and success of the planned spin-offs by us to our security holders of certain entities’ common stock and plans to file registration statements in connection therewith, our plans to acquire an operating business following or in connection with the completion of the planned spin-offs to avoid becoming a shell company and maintain our Nasdaq listing, the expected changes to Agora’s business, anticipated or potential transactions with BitNile and/or its affiliates, our expectations with respect to future developments in our ongoing litigation, and our liquidity. All statements other than statements of historical fact are “forward-looking statements” including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include the ability to complete and timelines of our planned spin-offs any regulatory, registration or other delays or obstacles that may arise with respect thereto, our ability to negotiate a transaction with BitNile and obtain shareholder approval as required, risks and uncertainties relating to undisclosed liabilities or the integration of such entities with the acquiring entity if any such transaction closes, , due to a recessionary environment, inflation, or other factors beyond our control, our ability to refocus Agora into a hosting company, which may prove difficult based on our negotiations and agreements with vendors and challenges in securing our maintaining relationships with customers operating cryptocurrency mining businesses, the future price of Bitcoin and other cryptocurrencies if we host any mining for them, regulatory uncertainties and risks relating to other cryptocurrencies, failure to meet Nasdaq continued listing requirements, the impact of future strains of COVID-19, the Russian invasion of the Ukraine, inflation and Federal Reserve interest rate increases in response thereto on the economy including the potential for a recession which may result, supply chain shortages, any issues which could result in unfavorable outcomes of one or both of our ongoing Zest Labs lawsuits, and the availability of capital on acceptable terms when needed or at all. Further information on the risks and uncertainties affecting our business is contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 under Part I. Item 1A. – Risk Factors. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.
Critical Accounting Policies, Estimates and Assumptions
The critical accounting policies listed below are those the Company deems most important to its operations.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, including goodwill, asset retirement obligations, estimates of discount rates in lease, liabilities to accrue, fair value of derivative liabilities associated with warrants, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes and determination of the fair value of stock awards.
Actual results could differ from those estimates.
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Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer |
| ● | Step 2: Identify the performance obligations in the contract |
| ● | Step 3: Determine the transaction price |
| ● | Step 4: Allocate the transaction price to the performance obligations in the contract |
| ● | Step 5: Recognize revenue when the Company satisfies a performance obligation |
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
| ● | Variable consideration |
| ● | Constraining estimates of variable consideration |
| ● | The existence of a significant financing component in the contract |
| ● | Noncash consideration |
| ● | Consideration payable to a customer |
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
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The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised service separately to a customer. The relative selling price for each performance obligation is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the promised service. In instances where the Company does not sell a service separately, establishing standalone selling price requires significant judgment. The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time. Although, Agora since March 3, 2022, has not recognized revenue from its mining operations, prior to this time, it recognized revenue upon satisfaction of its performance obligation over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.
The Company accounts for incremental costs of obtaining a contract with a customer and contract fulfillment costs in accordance with ASC 340-40, Other Assets and Deferred Costs. These costs should be capitalized and amortized as the performance obligation is satisfied if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The Company recognizes the cost of sales of a contract as expense when incurred or when a performance obligation is satisfied. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies.
Hosting Revenues
Agora effective in September 2022 began efforts to generate revenue via hosting agreements. As of September 30, 2022 and the date of this Report, Agora has not executed any such agreements. If Agora generates hosting revenues, it will follow ASC 606 as outlined above and recognize revenue upon the completion of the performance obligations as stipulated under such hosting agreements.
Fair Value Measurements
ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level 1 inputs: Quoted prices for identical instruments in active markets.
Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 inputs: Instruments with primarily unobservable value drivers.
The carrying values of the Company’s financial instruments such as cash, accounts payable, and accrued expenses approximate their respective fair values because of the short-term nature of those financial instruments.
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Derivative Financial Instruments
The Company does not currently use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks, but may explore hedging oil prices in the current fiscal year. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is remeasured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities.
Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.
The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, our principal executive and financial officers have concluded that as of the end of the period covered by this report the Company’s disclosure controls and procedures were effective.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no material changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than discussed below, during the period covered by this report, there were no material developments in the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended March 31, 2022.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. Investors should review the risk factors described in our Annual Report on Form 10-K for the year ended March 31, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
On November 14, 2022, the Company and the warrant holder canceled the warrant, as subsequently amended and restated, which was originally issued to the holder on June 8, 2022 in connection with a private sale by the Company to the holder of the warrant and preferred stock and common stock for a total purchase price of $12 million. The warrant cancellation was made in exchange for $100 as the Company has substantially met the conditions under Section 1(a) of the warrant. The warrant was filed as an exhibit to the Company’s Current Report on Form 8-K as filed with the SEC on June 9, 2022, and the Company’s Current Report on Form 8-K as filed with the SEC on July 15, 2022 when we filed the amended and restated warrant.
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ITEM 6. EXHIBITS
| * | Certain schedules and other attachments have been omitted. The Company undertakes to furnish the omitted schedules and attachments to the Securities and Exchange Commission upon request. |
| ** | This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. |
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at Ecoark Holdings, Inc., 303 Pearl Parkway Suite #200, San Antonio, Texas 78215.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Ecoark Holdings, Inc. | ||
| Date: November 21, 2022 | By: | /s/ Randy May |
| Randy May | ||
| Chief Executive Officer | ||
| Date: November 21, 2022 | By: | /s/ Jay Puchir |
| Jay Puchir | ||
| Chief Financial Officer | ||
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Randy May, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Ecoark Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 21, 2022
| /s/ Randy May | |
| Randy May | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Jay Puchir, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Ecoark Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 21, 2022
| /s/ Jay Puchir | |
| Jay Puchir | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION 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 quarter ended September 30, 2022, 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. §1350, as adopted pursuant to §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. |
| /s/ Randy May | |
| Randy May | |
| Chief Executive Officer | |
| Dated: November 21, 2022 |
Exhibit 32.2
CERTIFICATION 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 quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay Puchir, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §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. |
| /s/ Jay Puchir | |
| Jay Puchir | |
| Chief Financial Officer | |
| Dated: November 21, 2022 |
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Pledged as collateral for credit (in Dollars) | $ 16,000 | $ 16,000 |
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 28,176,055 | 26,364,099 |
| Common stock, shares outstanding | 28,176,055 | 26,246,984 |
| Series A Preferred Stock | ||
| Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 932 | 0 |
| Preferred stock, shares outstanding | 932 | 0 |
Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED (in Shares) | 27,063,460 | 25,092,050 | 26,728,759 | 23,905,432 |
Organization and Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||
| 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 a holding company, incorporated in the State of Nevada on November 19, 2007. Through September 30, 2022, Ecoark Holdings’ former wholly owned subsidiaries with the exception of Agora Digital Holdings, Inc., a Nevada corporation (“Agora”) and Zest Labs, Inc. (“Zest Labs”) have been divested. See below in this Note 1 and Note 2 “Discontinued Operations.” As a result of the divestitures, all assets and liabilities of the former subsidiaries have been reclassified to discontinued operations on the condensed consolidated balance sheet for March 31, 2022 and all operations of these companies have been reclassified to discontinued operations and gain on disposal on the condensed consolidated statements of operations for the six and three months ended September 30, 2022.
The Company’s principal subsidiaries consisted of Ecoark, Inc. (“Ecoark”), a Delaware corporation which was the parent of Zest Labs, Inc. (“Zest Labs”), Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and Agora which was assigned the membership interest in Trend Discovery Holdings LLC, a Delaware limited liability corporation (all references to “Trend Holdings” or “Trend” are now synonymous with Agora) from the Company on September 17, 2021 upon its formation, which includes Bitstream Mining, LLC, the Company’s Bitcoin mining subsidiary. Zest Labs, Inc. was formed in Nevada on August 2, 2022 and Zest Labs, Inc. Delaware merged into Zest Labs, Inc. Nevada on August 4, 2022.
As disclosed in these Notes, the Company has decided it is in the best interests of its shareholders that it divest all of its operating assets through a series of spin-offs or stock dividends to the Company’s shareholders. It intends to do so either by engaging in business combinations with existing public companies which have trading symbols and markets like White River Energy Corp (formerly Fortium Holdings Corp.) (“WREC”) which acquired White River Holdings Corp on July 25, 2022, and Enviro Technologies US, Inc. (“Enviro”) which acquired Banner Midstream Corp. on September 7, 2022, or by direct dividends. The Company’s plan is also driven by the dividends it must pay to an investor which provided $12 million on June 8, 2022 in exchange for preferred stock and a warrant. Because all spin-offs require the transactions or the subsidiaries to be registered with the Securities and Exchange Commission, the Company will not complete any or all spin-offs in calendar 2022. Because of the recent divestitures of its operating subsidiaries, the Company is searching for one or more operating businesses to acquire.
On March 27, 2020, the Company and Banner Energy Services Corp., a Nevada corporation (“Banner Parent”), entered into a Stock Purchase and Sale Agreement (the “Banner Purchase Agreement”) to acquire Banner Midstream Corp., a Delaware corporation (“Banner Midstream”). Pursuant to the acquisition, Banner Midstream became a wholly-owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream.
Banner Midstream had four operating subsidiaries: Pinnacle Frac Transport LLC (“Pinnacle Frac”), Capstone Equipment Leasing LLC (“Capstone”), White River Holdings Corp (“White River”), and Shamrock Upstream Energy LLC (“Shamrock”). Pinnacle Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield transportation service contractors. White River is and Shamrock was engaged in oil and gas exploration, production, and drilling operations on over 30,000 cumulative acres of active mineral leases in Louisiana, and Mississippi. All of these operating subsidiaries have since been divested in two separate transactions that occurred in July and September 2022.
For a full description of the operations of White River as well as Pinnacle Frac and Capstone, refer to the Annual Report filed on Form 10-K for the year ended March 31, 2022 filed on July 7, 2022.
On July 25, 2022, the Company entered into and closed a Share Exchange Agreement, by and among the Company, White River and WREC. As a result, White River became a wholly-owned subsidiary of WREC and issued the Company non-voting Series A Convertible Preferred Stock (the “Series A”) which is convertible into approximately 82% of WREC’s common stock after the Company elects to spin-off WREC common stock to the Company’s stockholders and a registration statement covering the spin-off has been declared effective. The Company’s Executive Chairman is also the Executive Chairman of WREC, and the Company’s Chief Financial Officer is the Chief Executive Officer of WREC. The former Chief Executive Officer and director of WREC is the son-in-law of the Company’s Executive Chairman, and he resigned from all positions with WREC in connection with the closing. The new Board of Directors (the “Board”) of WREC includes the Company’s Executive Chairman and the Executive Chairman’s daughter as well as three other designees. The Company has determined that it is not the primary beneficiary in this transaction and has concluded that no consolidation is required for White River as a variable interest entity.
On August 23, 2022 the Company entered into a Share Exchange Agreement (the “Agreement”) with Enviro and Banner Midstream. Pursuant to the Agreement, upon the terms and subject to the conditions set forth therein, the Company acquired 12,996,958 shares of the Enviro common stock in exchange for all of the capital stock of Banner Midstream owned by the Company, which represents 100% of the issued and outstanding shares (the “Exchange”). Following the closing of the Agreement which occurred on September 7, 2022, Banner Midstream continues as a wholly-owned subsidiary of Enviro. On September 7, 2022, the Exchange was completed, and Banner Midstream was merged into Enviro via a reverse merger. The shares the Company that were issued by Enviro represent approximately 70% of the total voting shares of Enviro. As a result, the Company will consolidate Enviro in the condensed consolidated financial statements, however because it is the intent of the Company to distribute these shares in Enviro to the stockholders of the Company upon the effectiveness of a registration statement filed by Enviro, the Company has classified the assets and liabilities of Enviro and the results of operations of Enviro in discontinued operations. See Note 2.
On April 9, 2021, a Little Rock, Arkansas jury awarded Ecoark and Zest a total of $115 million in damages (later reduced to $110 million) which includes $65 million in compensatory damages and $50 million in punitive damages and found Walmart Inc. (“Walmart”) liable on three counts. The federal jury found that Walmart misappropriated Zest’s trade secrets, failed to comply with a written contract, and acted willfully and maliciously in misappropriating Zest’s trade secrets. See Note 15 – Commitments and Contingencies – Legal Proceedings.
Trend Holdings formed four subsidiaries, including Bitstream Mining, LLC, a Texas limited liability company (“Bitstream”), on May 16, 2021. In addition, Trend Holdings owned Barrier Crest, LLC (“Barrier Crest”) which was acquired along with Trend Capital Management, Inc. (“TCM”) which was acquired by Ecoark Holdings on May 31, 2019. On June 17, 2022, Agora sold Trend Holdings to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV and sold Trend Discovery Exploration LLC (“Trend Exploration”) to the Company. See Note 2, “Discontinued Operations”. The Company reclassified the operations of Barrier Crest and TCM, as discontinued operations as the disposal represents a strategic shift that will have a major effect on the Company’s operations and financial results as of March 31, 2022.
The Company made this determination for these segments to be held for sale as the criteria established under ASC 205-20-45-1E have been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a) upon the closing of the sale on June 17, 2022 at which time the gain was recognized.
The Company assigned its membership interest in Trend Holdings and its related wholly owned subsidiaries to Agora on September 22, 2021, for the sale of the initial 100 shares for $10. On October 1, 2021, the Company purchased 41,671,121 shares of Agora common stock for $4,167,112 which Agora used to purchase equipment to commence the Bitstream operations.
Agora was organized by Ecoark Holdings to enter the Bitcoin mining business. Because of regulatory uncertainty over Bitcoin being deemed to be securities, Agora’s initial focus is on mining Bitcoin which we believe is not a security. Because of regulatory concerns and the changing regulatory environment, Agora intends to seek opportunities to engage with cryptocurrencies that do not involve the offer or sale of any securities. Because of the plunge in the price of Bitcoin and the type of miners Agora acquired during its attempt to close an initial public offering, Agora determined it was not presently feasible to conduct Bitcoin mining operations and temporarily ceased such activities on March 3, 2022. In September 2022, Agora determined to become a power-centric hosting company and thus will focus its attention on generating revenues in this capacity.
On November 19, 2021 Agora filed a registration statement on Form S-1 (File No. 333-261246) in connection with its initial public offering of 10,000,000 units comprised of shares of common stock and warrants to purchase an equal number of shares of common stock. The Agora registration statement has undergone a series of amendments since its initial filing in November 2021 and has not yet been declared effective by the Securities and Exchange Commission (“SEC”). In addition, in connection with Agora’s public offering, Agora applied for its common stock and warrants to be listed on The Nasdaq Capital Market. However, Agora encountered extensive review of its accounting disclosure policies by the Staff of the SEC as the Staff seeks to impose uniformity upon the industry. These delays and the fall of the price of Bitcoin has made the feasibility of the initial public offering inadvisable. As a result of the change in market conditions, Agora expects to withdraw the Form S-1.
On August 4, 2021, the Company’s common stock commenced trading on the Nasdaq Capital Market.
On October 6, 2021, the Company held a Special Meeting of Stockholders, at which the stockholders approved (a) an amendment to the Articles of Incorporation to increase the number of shares of authorized common stock of the Company from 30,000,000 shares to 40,000,000 shares; (b) an amendment to the Ecoark Holdings 2017 Omnibus Incentive Plan to increase the number of shares of common stock authorized for issuance under this plan from 800,000 shares to 1,300,000 shares; and (c) the issuance of 272,252 restricted stock units and an additional 63,998 restricted stock units to the then President of Zest Labs and director of the Company under this Plan, in exchange for the cancellation of 672,499 previously issued stock options.
On September 9, 2022, the Company held an annual meeting of its stockholders, and the stockholders approved the issuance of the shares of common stock issuable upon conversion of the Series A Redeemable Convertible Preferred Stock sold on June 8, 2022. Additionally, the stockholders approved increasing authorized common stock to 100,000,000 shares. Articles of Amendment were filed that day.
Overview of Agora Digital Holdings, Inc.
Bitstream
Bitstream was organized to be our principal Bitcoin mining subsidiary. Bitstream entered into a series of agreements and arrangements including arranging for a reliable and economical electric power source needed to efficiently mine Bitcoin, order miners, housing infrastructure and other infrastructure to mine Bitcoin and locate a third-party hosting service to operate the miners and the service’s more advanced miners. As discussed in this Note 1, Agora has refocused its efforts and will become a power-centric hosting company rather than a Bitcoin mining company and will not hold any Bitcoin in its digital wallets. To that end, Agora is presently in discussions with a third party regarding a potential joint venture in which the third party would provide mining equipment which Agora would host at its West Texas location and supply the electricity for the cryptocurrency mining. However, as of the date of this Report, no term sheet or definitive agreement has been executed by the prospective parties.
All significant accounting policies related to Pinnacle Frac, Capstone, White River, Shamrock, Barrier Crest and Trend Discovery Capital Management have been removed as these entities are reflected in discontinued operations. For full details on the policies refer to the Annual Report on Form 10-K for the year ended March 31, 2022 filed on July 7, 2022.
Principles of Consolidation
On May 31, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Trend Discovery Holdings Inc., a Delaware corporation for the Company to acquire 100% of Trend Discovery Holdings, LLC pursuant to a merger of Trend with and into the Company (the “Merger”). Trend Discovery Holdings, Inc. ceased doing business upon completion of the merger and Trend Discovery Holdings LLC is the subsidiary of the Company. Upon the formation of Agora on September 17, 2021, Ecoark assigned the membership interest it owned in Trend Holdings to Agora on September 22, 2021 when the Company purchased 100 shares of Agora common stock for $10.
On March 27, 2020, the Company and Banner Parent, entered into the Banner Purchase Agreement to acquire Banner Midstream. Pursuant to the acquisition, Banner Midstream became a wholly owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream. The Company sold all divisions of Banner Midstream in July 2022 and September 2022 as discussed herein.
The Company applies the guidance of Topic 810 Consolidation of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—are consolidated except when control does not rest with the parent.
Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.
The Company has utilized the guidance under ASC 810-10-55-4B, Case A for a Change that has resulted in the recognition of non-controlling interest. On October 1, 2021, Agora issued restricted common stock to non-employee directors, management, employees and advisors. As a result of the restricted common share issuances, the Company owns now owns less than 100% of Agora (approximately 89%). The Company expects it will continue to control Agora until it completes the distribution of Agora common stock to its security holders described above; after that event occurs, it may still have sufficient equity ownership to control Agora unless one or more third parties acquire a larger equity position.
During the six months ended September 30, 2022, Agora issued 400,000 shares of common stock to consultants and management. As a result of these issuances, the Company’s ownership percentage in Agora dropped from approximately 90% to approximately 89%.
The Company sold both White River and Banner Midstream (Pinnacle/Capstone) in July and September 2022, respectively. These entities are no longer subsidiaries of the Company. The Company has investments in WREC and Enviro that represent the shares it received for the sale of these entities. The investment in WREC is in non-voting preferred shares, and Management has concluded that the Company is not the primary beneficiary in this transaction, and thus no consolidation is required for White River as a variable interest entity. The Company currently owns 70% of the total issued common shares of Enviro and has consolidated Enviro, however, the Company will be distributing these shares to its stockholders of record as of September 30, 2022, and thus have reflected Enviro in the discontinued operations of the Company for the six months ended September 30, 2022.
Reclassifications
The Company has reclassified certain amounts in the September 30, 2021 condensed consolidated financial statements to be consistent with the September 30, 2022 presentation, including the reclassification of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone assets and liabilities from continuing operations to held for sale and reclassifications of operations of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone to discontinued operations. The March 31, 2022 consolidated balance sheet has been reclassified to include the assets and liabilities sold for White River, Pinnacle Frac, and Capstone as well. Additionally, we have removed all rounding of amounts and shares from the September 30, 2021 presentation to conform to the September 30, 2022 presentation. These changes had no impact on the Company’s financial position or result of operations for the periods presented.
Noncontrolling Interests
In accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated Financial Statements, the Company classifies noncontrolling interests as a component of equity within the consolidated balance sheet. In October 2021 and July 2022, with the issuance of restricted common stock to directors, management and advisors, the Company no longer owns 100% of Agora. As of September 30, 2022 and March 31, 2022, approximately 11% and 9.1% is reflected as non-controlling interest of that entity. In addition, we have reflected 30% of Enviro as noncontrolling interests as the Company represents 70% of the voting interests in Enviro.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, including goodwill, asset retirement obligations, estimates of discount rates in lease, liabilities to accrue, fair value of derivative liabilities associated with warrants, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes and determination of the fair value of stock awards.
Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
The following five steps are applied to achieve that core principle:
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised service separately to a customer. The relative selling price for each performance obligation is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the promised service. In instances where the Company does not sell a service separately, establishing standalone selling price requires significant judgment.
The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time.
Although, Agora since March 3, 2022, has not recognized revenue from its mining operations, prior to this time, it recognized revenue upon satisfaction of its performance obligation over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.
The Company accounts for incremental costs of obtaining a contract with a customer and contract fulfillment costs in accordance with ASC 340-40, Other Assets and Deferred Costs. These costs should be capitalized and amortized as the performance obligation is satisfied if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The Company recognizes the cost of sales of a contract as expense when incurred or when a performance obligation is satisfied. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies.
Bitcoin Mining
The discussion here should be understood as being applicable while Agora was conducting mining operations which it ceased beginning March 3, 2022. On September 16, 2022, the Company determined to conduct operations as a power-centric hosting company, rather than a Bitcoin mining company. For the past revenue recognition, refer to the Company’s Annual Report on Form 10-K filed on July 7, 2022.
Hosting Revenues
Agora effective in September 2022 began efforts to generate revenue via hosting agreements. As of September 30, 2022 and the date of this Report, Agora has not executed any such agreements. If Agora generates hosting revenues, it will follow ASC 606 as outlined above and recognize revenue upon the completion of the performance obligations as stipulated under such hosting agreements. For the six months ended September 30, 2022 and 2021, no revenue has been recognized under hosting agreements.
All Bitcoin that is mined under these arrangements will be transmitted directly into the third-party digital wallets and the Company will not hold any Bitcoin in its accounts.
Accounts Receivable and Concentration of Credit Risk
The Company considers accounts receivable, net of allowance for doubtful accounts, to be fully collectible. The allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses, credit insurance and economic conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized, however credit insurance is obtained for some customers. Past-due status is based on contractual terms.
Fair Value Measurements
ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles (“GAAP”), and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
The carrying values of the Company’s financial instruments such as cash, investments, prepaid expenses, accounts payable, and accrued expenses approximate their respective fair values because of the short-term nature of those financial instruments.
Bitcoin assets will be presented in current assets. Fair value will be determined by taking the price of the coins from the trading platforms which Agora will most frequently use.
Bitcoin
Prior to March 3, 2022 when the Company was mining Bitcoin, it included the Bitcoin in current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. Bitcoin was recorded at cost less impairment. For the past Bitcoin accounting policies, refer to the Company’s Annual Report on Form 10-K filed on July 7, 2022. As of September 30, 2022, the Company neither owns nor mines any Bitcoin, although it may in the future operate as a hosting company providing a mining location and electricity for third parties’ mining equipment and activities.
Impairment of Long-lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Segment Information
The Company follows the provisions of ASC 280-10 Segment Reporting. The Company classified its reporting segments in these three divisions through March 31, 2022, when the Company determined that pursuant to ASC 205-20-45-1E that the operations related to the Financial Services segment would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. As a result of this reclassification, the Company’s segment reporting has removed the Financing segment for the six months ended September 30, 2021. Effective April 1, 2022, the Company has classified its segments in the Commodity Segment, Technology Segment and Bitcoin Mining Segment. It now charges a monthly overhead charge to the Technology Segment and to the Transportation component and Oil and Gas Production component (each part of the Commodities Segment). On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment, and on September 7, 2022, the Company sold the remaining part (Pinnacle Frac and Capstone) of the Commodities Segment. Under ASC 855-10-55, the Company has reflected the sale of these entities and the operations as discontinued operations as of and for the six months ended September 30, 2022. As a result of the sales of White River and Banner Midstream, and the immaterial nature of the operations of Zest Labs, the Company no longer segregates its operations as most of the continuing operations are related to Agora.
Earnings (Loss) Per Share of Common Stock
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.
Derivative Financial Instruments
The Company does not currently use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-measured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities.
Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.
The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Liquidity
For the six months ended September 30, 2022 and 2021, the Company had a net loss to controlling interest of common shareholders of $(33,523,288) and $(3,295,155), respectively, has working capital (deficit) of $25,749,537 and $(8,394,850) as of September 30, 2022 and March 31, 2022, respectively, and has an accumulated deficit as of September 30, 2022 of $(163,520,500). As of September 30, 2022, the Company has $986,298 in cash and cash equivalents. The working capital at September 30, 2022 is the direct result of the investment in White River Energy Corp valued at $30,000,000. These represent the value of the 1,200 shares of Series A Preferred Stock that are expected to be distributed to the Company’s stockholders, as discussed in Note 5.
The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company sold its interests in Banner Midstream in two separate transactions on July 25, 2022 and September 7, 2022. In addition, it sold the non-core business of Trend Discovery on June 17, 2022. The Company expects to distribute the common stock it received (or issuable upon conversion of preferred stock) in the sales to its stockholders upon the effective registration statements for the two entities the companies were sold to. See Note 13, “Mezzanine Equity” for information on the Company’s recent $12 million convertible preferred stock financing. That financing has restrictive covenants that require approval of the investor for the Company to engage in any equity or debt financing. The Company believes that the current cash on hand is not sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements and may need to raise capital to support their operations. As of September 30, 2022, the Company has not established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern and will require additional financing to fund its future planned operations. The accompanying financial statements for the period ended September 30, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Impact of COVID-19
COVID-19 may continue to affect the economy and the industries in which we operate, depending on the vaccine and booster rollouts and the emergence of virus mutations.
COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the six months ended September 30, 2022 or year ended March 31, 2022 in contrast to the material impact it had in the prior fiscal year.
COVID-19 has also contributed to the supply chain disruptions which have not yet had a material effect for the Company. The Company will continue to monitor the supply chain shortages affecting its business.
The extent to which COVID-19 may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent and related costs. We had received funding under the PPP, and a majority of that has been forgiven. |
Discontinued Operations |
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| Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DISCONTINUED OPERATIONS | NOTE 2: DISCONTINUED OPERATIONS
On June 17, 2022, the Company sold Trend Discovery to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV for a three-year $4,250,000 secured note (see Note 4). Each of the Trend Discovery subsidiaries including Barrier Crest guaranteed the note and provided Agora with a first lien on its assets. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a). The Company had reclassified the operations of Barrier Crest and Trend Discovery Capital Management (the other entities were inactive) as discontinued operations as the disposal represents a strategic shift that will have a major effect on the Company’s operations and financial results. The Company made this determination for these segments to be held for sale as the criteria established under ASC 205-20-45-1E had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022 as well as for the period April 1, 2022 through June 17, 2022. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a) on June 17, 2022 at which time the gain was recognized. As a result of this reclassification, the Company identified the following assets and liabilities that were reclassified from continuing operations to discontinued operations as they are discontinued.
On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment. The Company has reflected the reclassification of assets and liabilities of these entities discontinued operations as of and for the period April 1, 2022 through July 31, 2022. The Company used July 31, 2022 as a cut-off as a majority of its revenue and expenses are billed on a monthly basis and it is more convenient to do so.
On September 7, 2022, the Company sold its transportation business (Pinnacle Frac and Capstone) which is part of the Commodities segment. The Company has reflected the reclassification of assets and liabilities of these entities discontinued operations as of and for the period April 1, 2022 through August 31, 2022. The Company used August 31, 2022 as a cut-off as a majority of its revenue and expenses are billed on a monthly basis and it is more convenient to do so. The shares the Company were issued by Enviro represent approximately 70% of the total voting shares of Enviro. As a result, the Company will consolidate Enviro in the condensed consolidated financial statements. It is the intent of the Company to distribute these shares in Enviro to the stockholders of the Company upon the effectiveness of a registration statement filed by Enviro. Therefore, the Company has classified the assets and liabilities of Enviro and the results of operations of Enviro in discontinued operations.
Current assets as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
Non-current assets as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
Current liabilities as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
Non-current liabilities as of September 30, 2022 and March 31, 2022 – Discontinued Operations:
The Company reclassified the following operations to discontinued operations for the six months ended September 30, 2022 and 2021, respectively.
The Company reclassified the following operations to discontinued operations for the three months ended September 30, 2022 and 2021, respectively.
The following represents the calculation of the gain on disposal of Trend Discovery at June 17, 2022:
The following represents the calculation of the loss on disposal of Banner Midstream Corp in two separate transactions – July 25, 2022 and September 7, 2022:
As of April 1, 2021, all of the equipment assets and accounts payable of Pinnacle Vac Services LLC (“Pinnacle Vac”) were transitioned into Capstone to continue servicing the debt. |
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Revenue |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Revenue [Abstract] | |
| REVENUE | NOTE 3: REVENUE
The Company recognizes revenue when it transfers promised services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those services. In the six months ended September 30, 2022 and 2021, the Company did not recognize revenue from continuing operations.
Bitcoin Mining
Prior to March 3, 2022, the Company recognized revenue for Bitcoin mining as follows:
Providing computing power to solve complex cryptographic algorithms in support of Bitcoin blockchains, in a process known as “solving a block”, is an output of the Company’s ordinary activities. The provision of computing power is the only performance obligation in the Company’s contracts with mining pool operators, its customers. When the Company engaged in mining, satisfied its performance obligation over time as it provides computing power.
The contract term is short, limited to the period of time the Company’s miners were contributing to the mining pool computational operations in support of the blockchain, measured in “hash rate” or “hashes per second”. The contract term was the payout period under the Company’s mining pool contracts, which is a twenty-four-hour period. After each contract period, the Company had the right to renew the contract for subsequent, successive payout periods.
Bitcoin received in exchange for providing computing power represents noncash consideration. The fair value of the noncash consideration determined at contract inception was recognized in revenue as the Company performed over the contract term using an output method based on hash rate contributed. Changes in the fair value of the noncash consideration post-contract consideration due to reasons other than form of consideration (that is, other than the price of bitcoin or ether) were estimated under the expected value method but constrained from inclusion in the transaction price (and hence revenue) until end of the contract term when the uncertainty has been resolved and amount was known.
The Company received payment for its provision of hash rate under the Pay-Per-Shares-Plus (“PPS+”) payment method. The payment method contains two components, (1) the block rewards issued by the blockchain network and paid by the mining pool operator, and (2) transaction fees generated from (paid by) blockchain users and distributed (paid out) to individual miners by the mining pool operator. The pool, as a collective entity, develops its own technology that, on one end, gathers individual miner’s hash rate, and on the other end contributes hash rate to the network to compete for block rewards from the network.
For PPS+, as long as individual miners contribute hash rate to the pool, the Company (as an individual miner) is entitled to receive its corresponding amount of block rewards based on the mining pool’s calculation methodology, which is standard across pool operators.
Block rewards are the new coins awarded to Bitcoin miners by the network (bitcoin for the bitcoin network) and is a theoretical number calculated by the mining pool operator based on inputs including difficulty level, network hash rate, and block rewards (for example, 6.25 for Bitcoin). Transaction fees refers to the total fees paid by users of the network to execute transactions.
Digital asset transaction fees are payable to the mining pool operator to cover the costs of maintaining the pool and are deducted from the block reward payout. This fee was deducted from the block reward the Company received and recorded as a reduction of revenue because it does not represent payment for a distinct good or service.
Effective September 16, 2022, Agora commenced efforts to become a power-centric hosting company and will recognize revenue, if any, in accordance with the provisions of ASC 606. |
Senior Secured Promissory Note Receivable |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Receivables [Abstract] | |
| SENIOR SECURED PROMISSORY NOTE RECEIVABLE | NOTE 4: SENIOR SECURED PROMISSORY NOTE RECEIVABLE
Agora was issued a Senior Secured Promissory Note by Trend Ventures, LP (“Trend Ventures Note”) on June 16, 2022. The Trend Ventures Note was the consideration paid to Agora for the acquisition of Trend Discovery Holdings. The Trend Ventures Note is in the principal amount of $4,250,000, bears interest at the rate of 5% per annum, and matures June 16, 2025. Under Trend Ventures Note, Trend Ventures, LP has agreed to make interest-only payments, in arrears on a monthly basis commencing on June 30, 2022 and continuing thereafter until June 16, 2023. Beginning on June 30, 2023, Trend Ventures, LP agreed to make 24 consecutive equal monthly payments of principal each in an amount which would fully amortize the principal, plus accrued interest. All principal and any unpaid accrued interest will be due and payable on or before the maturity date. The Trend Ventures Note will be granted a first lien senior secured interest as set forth in the Security Agreement executed on the same date as the Trend Ventures Note, by and among Trend Ventures, LP, its future subsidiaries (each a Guarantor) and Agora dated as of June 16, 2022.
As of September 30, 2022, the Company has recognized $61,979 in interest income and accrued interest receivable. The Company has waived Trend Ventures, LP’s failure to pay the interest. The Company has included $593,229 in current assets, and the remaining $3,718,750 in non-current assets. |
Investment – Series A Convertible Preferred Stock – White River Energy Corp |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Disclosure Text Block Supplement [Abstract] | |
| INVESTMENT – SERIES A CONVERTIBLE PREFERRED STOCK – WHITE RIVER ENERGY CORP | NOTE 5: INVESTMENT – SERIES A CONVERTIBLE PREFERRED STOCK – WHITE RIVER ENERGY CORP
On July 25, 2022, the Company entered into a Share Exchange Agreement pursuant to which that day it sold to WREC its oil and gas production business (White River) which is part of the Commodities segment. The Company received 1,200 shares of WREC’s Series A Convertible Preferred Stock, which becomes convertible into 42,253,521 shares of WREC common stock upon such time as (A) WREC has filed a Form S-1with the SEC and such Form S-1 has been declared effective, or is no longer subject to comments from the Staff of the SEC, and (B) Ecoark elects to distribute shares of its common stock to its shareholders. Based on the lower of cost or market, the value of the investment was determined to be $30,000,000. As of September 30, 2022, WREC has not filed a registration statement. The Company has determined that as of September 30, 2022, there is no impairment of this investment. The Company has treated the investment as a Level 3 asset and that the fair value of the investment exceeds the cost basis which thereby implies no impairment as of September 30, 2022.
As of September 30, 2022, the Company has determined that Ecoark is not the primary beneficiary, and this transaction has not resulted in Ecoark controlling WREC as the preferred shares are unable to be converted until the effectiveness of the registration statement being filed for WREC, does not have the power to direct activities of WREC, control the Board of Directors of WREC and WREC is not reliant upon funding by Ecoark moving forward. |
Investment – common stock – enviro technologies us, inc. |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Investment of Common Stock [Abstract] | |
| INVESTMENT – COMMON STOCK – ENVIRO TECHNOLOGIES US, INC. | NOTE 6: INVESTMENT – COMMON STOCK – ENVIRO TECHNOLOGIES US, INC.
On August 23, 2022 the Company entered into a Share Exchange Agreement (the “Agreement”) with Enviro and Banner Midstream. Pursuant to the Agreement, upon the terms and subject to the conditions set forth therein, the Company acquired 12,996,958 shares of the Enviro common stock in exchange for all of the capital stock of Banner Midstream owned by the Company, which represents 100% of the issued and outstanding shares (the “Exchange”). Following the closing of the Agreement which occurred on September 7, 2022, Banner Midstream continues as a wholly-owned subsidiary of Enviro. Based on the lower of cost or market, the value of the investment was determined to be $5,328,753. On September 7, 2022, the Exchange was completed, and Banner Midstream was merged into Enviro via a reverse merger. The Company has determined that as of September 30, 2022, there is no impairment of this investment.
The Company has determined that this transaction has resulted in Ecoark having a controlling interest in Enviro as the common shares issued represent 70% of the voting common shares of Enviro. Since Ecoark will be distributing to the Ecoark stockholders a stock dividend to all common and preferred stockholders with a stock dividend date of September 30, 2022, the Company has reflected Enviro, in discontinued operations as the Company intends to hold no shares and thus no voting interest upon the effectiveness of a registration statement for Enviro, and the investment has been eliminated in the consolidation. |
Bitcoin |
6 Months Ended | |||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||
| Bitcoin [Abstract] | ||||||||||||||||||||||||||
| BITCOIN | NOTE 7: BITCOIN
Agora commenced its Bitcoin mining operations in November 2021. Through September 30, 2022, Agora mined 0.57 Bitcoins (none in the six months ended September 30, 2022). Agora ceased Bitcoin mining on March 3, 2022. The value of the Bitcoin mined was $26,495 of which $16,351 has been impaired through September 12, 2022. On September 12, 2022, the Company liquidated its Bitcoin holdings into fiat currency (USD), of $12,485. This transaction resulted in a gain on sale of Bitcoin of $2,340. During the six months ended September 30, 2022, the Company recognized Bitcoin impairment losses of $9,122.
The following table presents additional information about Agora’s Bitcoin holdings during the six months ended September 30, 2022:
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Property and Equipment |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 8: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of September 30, 2022 and March 31, 2022:
As of September 30, 2022, the Company performed an evaluation of the recoverability of these long-lived assets. As a result of the evaluation, there was impairment of fixed assets necessary in the amount of $1,655,969 in September 2022 as the Agora’s focus changed to a power-centric power company from a Bitcoin Mining company. As a result, the Company determined the value of the miners purchased have nominal value.
In September 2022, Agora renegotiated a settlement with one of its vendors, and provided them transformers (in mining technology equipment) valued at $1,425,772 in exchange for a credit against amounts owed to them of $855,000. This resulted in a loss on settlement of $570,772.
Depreciation expense for the six months ended September 30, 2022 and 2021 was $48,560 and $110,792, respectively. |
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Power Development Cost |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Power Development Fee [Abstract] | |
| POWER DEVELOPMENT COST | NOTE 9: POWER DEVELOPMENT COST
Agora has paid $1,000,000 each under two separate agreements for two different land sites to a non-related third party for a total of $2,000,000 in connection with the commencement of Bitstream’s Bitcoin mining operations. The payments represent the fee for securing 48 MW and 30 MW, respectively of utility capacity as defined and agreed by ERCOT West Load Zone in the Oncor Electric Delivery Company LLC (“Utility”) at the “one-span” tariff rate classification of “6.1.1.1.5 Primary greater than 10kw”. If the Utility is unable to deliver these terms as defined in the facilities extension agreement, the non-related third party is obligated to secure a new location for Bitstream with at least the stated capacity and same rate tariff. The non-related third party secured the 48 MW and 30 MW of available capacity by signing a distribution facilities extension agreement with the Utility and posting the required collateral.
The $2,000,000 was used to purchase this right to the distribution facilities extension agreement which gives Bitstream immediate access to the 78 MW electric capacity from the Utility.
Bitstream also reimbursed the utility deposits paid by the non-related third party in connection with these agreements in the amount of $96,000 and $326,500, respectively. The power development fees are deemed non-refundable unless the non-related third party cannot find a suitable location within 6 months. Bitstream and the non-related third party are still negotiating a definitive power agreement.
On August 10, 2022, the Company had $844,708 returned from one of the distribution facilities extension agreements, which is net of $155,292 of fees related to development costs paid to our power broker. As a result, $1,000,000 remains as an asset as of September 30, 2022.
The Company has classified these payments as “Power Development Costs” as a noncurrent asset on the Consolidated Balance Sheets. |
Warrant Derivative Liabilities |
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| Warrant Derivative Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WARRANT DERIVATIVE LIABILITIES | NOTE 10: WARRANT DERIVATIVE LIABILITIES
The Company issued common stock and warrants in several private placements and two public offerings (“Derivative Warrant Instruments”) and some of these warrants have been classified as liabilities. The Derivative Warrant Instruments have been accounted for utilizing ASC 815 “Derivatives and Hedging.” The Company has incurred a liability for the estimated fair value of Derivative Warrant Instruments. The estimated fair value of the Derivative Warrant Instruments has been calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense).
The Company identified embedded features in some of the warrant agreements which were classified as a liability. These embedded features included (a) the implicit right for the holders to request that the Company settle the warrants in registered shares. Since maintaining an effective registration of shares is potentially outside the control of the Company, these warrants were classified as liabilities as opposed to equity; (b) included the right for the holders to request that the Company cash settle the warrant instruments from the holder by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the Derivative Warrant Instruments on the date of the consummation of a fundamental transaction; and (c) certain price protections in the agreements. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as derivatives as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.
See Note 13, “Mezzanine Equity” for the derivative liability recognized with respect to the warrant granted to Digital Power Lending, LLC.
On November 14, 2020, the Company granted 60,000 two-year warrants exercisable at $7.75 per share in exchange for the early conversion of a portion of the September 24, 2020 warrants. The fair value of the November 14, 2020 warrants was estimated to be $251,497 at inception, and $0 as of September 30, 2022.
On December 30, 2020, the Company granted 888,889 two-year warrants, with a strike price of $10.00, in the registered direct offering. The fair value of those warrants was estimated to be $4,655,299 at inception. During the three months ended March 31, 2021, 176,000 warrants were exercised for $1,760,000, and no shares were exercised during the year ended March 31, 2022 and six months ended September 30, 2022. The fair value of the remaining warrants at September 30, 2022 is $23.
On December 30, 2020, the Company granted 62,222 two-year warrants to the placement agent as additional compensation in connection with the registered direct offering closed December 31, 2020, exercisable at a strike price of $11.25 per share. The fair value of those warrants was estimated to be $308,205 at inception and $1 as of September 30, 2022.
The fair value of the 200,000 warrants that remain outstanding from the 250,000 warrants granted on September 24, 2020 have expired on September 24, 2022.
On June 30, 2021, the Company granted 200,000 two-year warrants with a strike price of $10.00 per share, pursuant to a purchase agreement entered into the same day with the warrant holder. The fair value of those warrants was estimated to be $545,125 at inception, on June 30, 2021 and $3,201 as of September 30, 2022.
On August 6, 2021, the Company closed a $20,000,000 registered direct offering. The Company sold 3,478,261 shares of common stock and 3,478,261 warrants at $5.75 per share. The warrants are exercisable through April 8, 2025. The Company also issued the placement agent 243,478 warrants exercisable at $7.1875 per share. Further information on the offering and compensation to the placement agent is contained in the prospectus supplement dated August 4, 2021. The fair value of the investor warrants was estimated to be $11,201,869 at inception and $1,342,054 as of September 30, 2022. The fair value of the placement agent warrants was estimated to be $744,530 at inception and $80,879 as of September 30, 2022.
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2022 and 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following assumptions were used on September 30, 2022, March 31, 2022 and at inception:
The Company’s remaining derivative liabilities as of September 30, 2022 and March 31, 2022 associated with warrant offerings are as follows. All fully extinguished warrants liabilities are not included in the chart below.
During the six months ended September 30, 2022 and 2021 the Company recognized changes in the fair value of the derivative liabilities of $2,892,472 and $4,315,677, respectively. In addition, the Company recognized $0 and $545,125 in expenses related to the warrants granted for the six months ended September 30, 2022 and 2021.
Activity related to the warrant derivative liabilities for the six months ended September 30, 2022 is as follows:
Activity related to the warrant derivative liabilities for the six months ended September 30, 2021 is as follows:
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Long-Term Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LONG-TERM DEBT | NOTE 11: LONG-TERM DEBT
Long-term debt included in continuing operations consisted of the following as of September 30, 2022 and March 31, 2022. All debt instruments repaid during the year ended March 31, 2022 are not included in the below chart and the chart only reflects those instruments that had a balance owed as of these dates.
The following is a list of maturities as of September 30:
During the six months ended September 30, 2022, the Company received proceeds of $487,500, repaid $716,645, and incurred $17,681 in commitment fees added to the credit facility with Trend Discovery SPV 1, LLC for its long-term debt from continuing operations. All discontinued operation totals are not reflected in these figures.
During the six months ended September 30, 2021, the Company repaid $23,966.
Interest expense on long-term debt during the six months ended September 30, 2022 and 2021 are $44,133 and $276, respectively. |
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Notes Payable - Related Parties |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Notes Payable - Related Parties [Abstract] | |
| NOTES PAYABLE - RELATED PARTIES | NOTE 12: NOTES PAYABLE - RELATED PARTIES
A Board member advanced $577,500 to the Company through August 8, 2021, under the terms of notes payable that bears interest at rates ranging between 10% and 15% interest per annum. On August 9, 2021, the Company repaid the entire $577,500 to the Board member with accrued interest of $42,535. Interest expense on the notes for the three months ended June 30, 2021 was $17,514.
An officer of the Company advanced $116,000 and was repaid this amount during the year ended March 31, 2022, and $25,000 was advanced and repaid during the year ended March 31, 2022 from an officer of Agora. In the six months ended September 30, 2022, the Company’s Chief Executive Officer and Chief Financial Officer advanced a total of $591,000 which was fully repaid in the same period; and an officer of Agora advanced $25,000 which was fully repaid in the same period. These were short-term advances and no interest was charged as the amounts were outstanding for just a few weeks. |
Mezzanine Equity |
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Sep. 30, 2022 | ||||||||||||||||||||||
| Mezzanine Equity [Abstract] | ||||||||||||||||||||||
| MEZZANINE EQUITY | NOTE 13: MEZZANINE EQUITY
On June 8, 2022, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Digital Power Lending, LLC, a California limited liability company (the “Purchaser”), pursuant to which the Company sold the Purchaser 1,200 shares of Series A Convertible Redeemable Preferred Stock (the “Ecoark Series A”), 102,881 shares of common stock (the “Commitment Shares”) and a warrant to purchase shares of common stock (the “Warrant,” and together with the Ecoark Series A and the Commitment Shares, the “Securities”) for a total purchase price of $12,000,000. The Purchaser is a subsidiary of BitNile Holdings, Inc. [NYSE American: NILE]. The Company determined that the classification of the Ecoark Series A is Mezzanine Equity as the option to convert the shares belongs to the Purchaser. A description of the material transaction components are as follows:
Ecoark Series A
Conversion Rights
Each share of Ecoark Series A has a stated value of $10,000 and is convertible into shares of common stock at a conversion price of $2.10 per share, subject to customary adjustment provisions. The holder’s conversion of the Ecoark Series A is subject to a beneficial ownership limitation of 19.9% of the issued and outstanding common stock as of any conversion date of the Ecoark Series A, unless and until the Company obtains shareholder and The Nasdaq Stock Market (“Nasdaq”) approval for the conversion of more than that amount, in order to comply with Nasdaq Rules. Shareholder approval was obtained on September 9, 2022. In addition, the conversion rights in general did not become effective until July 23, 2022, which is one day after the record date for the shareholders meeting seeking such shareholder approval at the September 9, 2022 meeting. The shares of Ecoark Series A as amended are also subject to a 4.99% beneficial ownership limitation, which may be increased to up to 9.9% by the holder by giving 61 days’ notice to the Company.
Voting Rights
The Ecoark Series A is entitled to vote with the common stock as a single class on an as-converted basis, subject to applicable law and the Nasdaq Rules. In addition, as long as the holder continues to hold at least 25% of the shares of Ecoark Series A issued to it on the issuance date, the holder is entitled to elect a number of directors to the Company’s Board equal to a percentage determined by (i) the number of Ecoark Series A beneficially owned by the holder, calculated on an “as converted” basis, (ii) divided by the sum of the number of shares of common stock outstanding plus the number of Ecoark Series A outstanding on an “as converted” basis; and such director(s) so elected may only be removed without cause by the affirmative vote of the holder. Initially, the Purchaser may designate one director.
The holders of record of the shares of common stock and of any other class or series of voting stock (including the Ecoark Series A), exclusively and voting together as a single class, are entitled to elect the balance of the total number of directors of the Company. The Purchaser has agreed not to vote at the shareholders meeting on the proposal to approve the issuance of the additional common stock issuable due to the reduced conversion price.
Dividend Rights
The holder of shares of the Ecoark Series A is entitled to receive cumulative cash dividends at an annual rate of 12.6% of the stated value, which is equivalent to $1,260 per year per share, payable monthly beginning on the issuance date and continuing until the earlier of (a) June 8, 2024, and (b) the date on which the holder no longer holds any shares of Ecoark Series A.
If the Company fails to make one or more dividend payments, whether or not consecutive, a default dividend rate of 18% per annum will apply until all accumulated dividend payments have been made.
Liquidation Rights
The shares of Ecoark Series A have a liquidation preference over the common stock and any subsequent series of junior preferred stock of $1,200 per share of Ecoark Series A, plus accrued but unpaid dividends.
Redemption
At any time beginning on or after June 8, 2024, the holder of Ecoark Series A may cause the Company to redeem some or all of the shares of Ecoark Series A it holds at a redemption price of $1,200 per share, plus any accumulated and unpaid dividends thereon.
Negative Covenants and Approval Rights
The Ecoark Series A Certificate of Designation (the “Certificate”) subjects the Company to negative covenants restricting its ability to take certain actions without prior approval from the holder(s) of a majority of the outstanding shares of Ecoark Series A for as long as the holder(s) continue to hold at least 25% (or such higher percentage as set forth in the Certificate (as defined below)) of the Ecoark Series A shares issued on the closing date under the Agreement. These restrictive covenants include the following actions by the Company, subject to certain exceptions and limitations:
The above and other negative covenants in the Series A Certificate do not apply to a reverse merger with an entity with securities quoted on a market operated by OTC Markets or listed on a national securities exchange.
Warrant
Prior to its cancellation, the Warrant, as amended, provided the Purchaser or its assignees (the “Holder”) with the right to purchase a number of shares of common stock as would enable the holder together with its affiliates to beneficially own 49% of the Company’s common stock, calculated on a fully diluted basis, at an exercise price of $0.001 per share, including the Commitment Shares and Conversion Shares unless sold. Subject to shareholder approval, the Warrant was to vest and become exercisable into shares of the Company’s stock if as of June 8, 2024: (i) the Company had failed to complete the distributions to the Company’s security holders or to any other subsidiary of the Company’s equity ownership of its three principal subsidiaries: Agora, Banner Midstream and Zest Labs (or their principal subsidiaries) (the “Distributions”), and/or (ii) the Holder together with its affiliates does not beneficially own at least 50% of the Company’s outstanding common stock. Provided, the Company must retain 20% of its common stock of Agora. The Warrant was to be exercised on a cashless basis and expire on June 8, 2027.
On November 14, 2022, the Company and the warrant holder canceled the warrant which was originally issued to the holder on June 8, 2022, as subsequently amended and restated, in exchange for $100 as the Company has substantially met the conditions under Section 1(a) of the warrant, therefore, the Company did not compute any derivative liability on the warrants as of September 30, 2022.
Registration Rights
Pursuant to the Agreement, the Company has agreed to register the sale by the Purchaser of up to 5,246,456 shares of common stock, representing the Commitment Shares issued at the closing plus 5,143,575 of the shares of common stock issuable upon conversion of the Ecoark Series A. This amount equals 19.9% of the Company’s outstanding common stock immediately prior to the closing. The Company registered the sale by filing a prospectus supplement pursuant to the Company’s registration statement on Form S-3 (File No. 333-249532), originally filed with the SEC on October 16, 2020, as amended, which became effective on December 29, 2020, and the base prospectus included therein.
The value of the Commitment Shares of $193,416 were considered issuance costs and have been reflected in the total for Mezzanine Equity of $11,806,584. During the six months ended September 30, 2022, a total of 268 shares of the Series A Preferred Stock have been converted into 1,276,190 shares of common stock. As of September 30, 2022, a total of 932 shares of Series A Preferred Stock are issued and outstanding. In addition, the Company amortized $41,086 in discount on the preferred stock.
The description above is not a substitute for reviewing the full text of the referenced documents, which were attached as exhibits to the Company’s Current Report on Form 8-K as filed with the SEC on June 9, 2022, and the Company’s Current Report on Form 8-K as filed with the SEC on July 15, 2022 when we filed the amended and restated warrant. |
Stockholders’ Equity (Deficit) |
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Sep. 30, 2022 | |||||||||||||||||||
| Stockholders’ Equity (Deficit) [Abstract] | |||||||||||||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | NOTE 14: STOCKHOLDERS’ EQUITY (DEFICIT)
On July 26, 2022, the Company filed a Definitive Proxy Statement with respect to its 2022 Annual Meeting of the Shareholders, being held virtually at 1:00 p.m., Eastern Time, on September 9, 2022, at which the shareholders of the Company approved the following proposals:
Ecoark Holdings Preferred Stock
On March 18, 2016, the Company created 5,000,000 shares of “blank check” preferred stock, par value $0.001.
As of March 31, 2022, there were no shares of any series of preferred stock issued and outstanding. On June 8, 2022, as noted in Note 13, “Mezzanine Equity”, the Company issued 1,200 Series A Preferred shares, and as of September 30, 2022, there are 932 shares of preferred stock issued and outstanding, and 268 shares were converted into common stock in the period ended September 30, 2022. In addition, the Company amortized $41,086 in discount on the preferred stock. The balance in the mezzanine equity related to the preferred stock as of September 30, 2022 is $9,210,843.
Ecoark Holdings Common Stock
The Company is authorized to issue 40,000,000 shares of common stock, par value $0.001. Effective with the opening of trading on December 17, 2020, the Company implemented a one-for-five reverse split of its issued and outstanding common stock and a simultaneous proportionate reduction of its authorized common stock. All share and per share figures are reflected on a post-split basis herein. Effective December 29, 2020, the Company amended its articles of incorporation to reduce its authorized common stock from 40,000,000 shares to 30,000,000 shares. On August 6, 2021, the Company’s board of directors approved the increase of the authorized common shares to 40,000,000. The increase became effective on October 8, 2021, following the approval in a Special Meeting of Ecoark Holdings’ Stockholders.
On September 9, 2022, the shareholders approved the increase in authorized common stock to 100,000,000 shares.
In the three months ended June 30, 2021, the Company issued 114,796 shares of common stock which had been accrued for at March 31, 2021 in consulting fees under a contract entered into February 2, 2021. In addition, the Company issued 20,265 shares of common stock for the exercise of stock options.
In the three months ended September 30, 2021, the Company issued 45,000 shares of common stock for services, and 3,478,261 shares issued in a registered direct offering.
In the three months ended June 30, 2022, the Company issued 102,881 shares of common stock which were the commitment shares in the BitNile transaction as discussed in Note 13.
In the three months ended September 30, 2022, the Company issued 1,276,190 shares of common stock in conversion of 268 shares of Series A Preferred stock. In addition, the Company issued 550,000 shares (including the 117,115 shares held as treasury stock, for a net 432,885 common shares) as settlement with a Trend Ventures investor. The Company has expensed the value of $1,045,000 ($1.90 per share) as a settlement expense.
As of September 30, 2022, 28,176,055 shares of common stock were issued and outstanding.
Agora Common Stock
Agora is authorized to issue 250,000,000 shares of common stock, par value $0.001. On September 22, 2021, the Company purchased 100 shares of Agora for $10.
On October 1, 2021, the Company purchased 41,671,121 shares of Agora common stock for $4,167,112 which Agora used to purchase equipment to commence the Bitstream operations.
In addition, between October 1 and December 7, 2021, Agora issued 4,600,000 restricted common shares to its management, non-employee directors, employees and advisors. After issuance of these shares, Ecoark controls approximately 90% of Agora. The future stock-based compensation related to these shares that will be measured consists of $12,166,680 over a three-year period in service-based grants ($9,611,145 in year one, $1,861,096 in year two, and $694,436 in year 3) and $10,833,320 in performance-based grants ($5,416,660 for the deployment of 20 MW in the State of Texas, and $5,416,660 for the deployment of 40 MW in the State of Texas) for a total of $23,000,000. These restricted common shares were measured pursuant to ASC 718-10-50 at an estimated value per share of $5.00 and consist of both service-based and performance-based criteria.
On August 7, 2022, Agora issued 400,000 shares of common stock to its management, non-employee directors, employees and advisors. After issuance of these shares, Ecoark controls approximately 89% of Agora. The future stock-based compensation related to these shares that will be measured consists of $2,000,000 ranging from immediate vesting through the three-year anniversary in service-based grants. These restricted common shares were measured pursuant to ASC 718-10-50 at an estimated value per share of $5.00 and consist of service-based criteria only.
Of the 5,000,000 restricted shares of common stock — 2,833,336 shares of restricted stock are considered service grants and 2,166,664 are considered performance grants.
The performance grants vest as follows: 1,083,332 restricted common shares upon Agora deploying a 20 MW power contract in Texas; and 1,083,332 restricted common shares upon the Company deploying a 40 MW power contract in Texas. As of September 30, 2022, none of the performance criteria are probable as no contracts have been signed as the proper funding has not been secured, therefore no compensation expense is recognized in accordance with ASC 718-10-25-20 related to the performance grants. On April 12, 2022, Agora upon board of director approval accelerated the vesting of 250,000 restricted shares for deploying a 20 MW power contract in Texas; and 250,000 restricted shares for deploying a 40 MW power contract in Texas with Agora’s former Chief Financial Officer. All remaining performance grants remain unvested.
The Company recognized $8,172,209 in stock-based compensation for the six months ended September 30, 2022, which represented $5,047,209 in service grants related, and $3,125,000 in the accelerated vesting of the former CFO’s grants ($625,000 in service-based grants and $2,500,000 in performance grants). The unrecognized stock-based compensation expense as of September 30, 2022 is $8,333,320 in performance based grants and $3,810,716 in service based grants for a total of $12,144,036.
The Company accounts for stock-based payments in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”). During the year ended March 31, 2022, in addition to the value measured by the 4,600,000 restricted stock grants, stock-based compensation consists primarily of RSUs granted to a Company employee while employed by Ecoark Holdings. The Company measures compensation expense for RSUs based on the fair value of the award on the date of grant. The grant date fair value is based on the closing market price of Ecoark Holdings’ common stock on the date of grant.
Share-based Compensation Expense
Share-based compensation for employees is included in salaries and salary related costs and directors and services are included in professional fees and consulting in the consolidated statement of operations for the six months ended September 30, 2022 and 2021.
Share-based compensation for the six months ended September 30, 2022 and 2021 for stock options and RSUs granted under the 2013 Incentive Stock Plan and 2017 Omnibus Incentive Stock Plan and non-qualified stock options were $342,601 and $1,218,182, respectively.
There is $167,120 in share-based compensation is accrued as of September 30, 2022 for Ecoark Holdings and $237,499 accrued in Agora for a total of $404,619.
In order to have sufficient authorized capital to raise the $20,000,000, on August 4, 2021, a then officer and director of the Company agreed to cancel stock options in exchange for a lesser number of restricted stock units, subject to future vesting. In accordance with the restricted stock agreement, the director was granted 272,252 RSUs that vest over 12 quarterly increments, in exchange for cancelling 672,499 stock options. In addition, on October 6, 2021, this officer and director received 63,998 additional RSUs. The expense related to the modification of these grants is included in the share-based compensation expense in the year ended March 31, 2022. |
Commitments and Contingencies |
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Sep. 30, 2022 | |||||||||||||
| Commitments and Contingencies [Abstract] | |||||||||||||
| COMMITMENTS AND CONTINGENCIES | NOTE 15: COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are presently involved in the following legal proceedings. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company.
In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon the Company’s financial condition, results of operations or cash flows. |
Concentrations |
6 Months Ended |
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Sep. 30, 2022 | |
| Concentrations [Abstract] | |
| CONCENTRATIONS | NOTE 16: CONCENTRATIONS
The Company occasionally maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material. |
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| Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS | NOTE 17: FAIR VALUE MEASUREMENTS
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash, prepaid expenses, other receivables, accounts payable and accrued liabilities, notes payable, and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the six months ended September 30, 2022 and 2021. The recorded values of all other financial instruments approximate its current fair values because of its nature and respective relatively short maturity dates or durations.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The Company records the fair value of the of the warrant derivative liabilities disclosed in accordance with ASC 815, Derivatives and Hedging. The fair values of the derivatives were calculated using the Black-Scholes Model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in other income (expense) in the consolidated statement of operations. The following table presents assets and liabilities that are measured and recognized at fair value on a recurring basis as of:
The table below shows a reconciliation of the beginning and ending liabilities measured at fair value using significant unobservable inputs (Level 3):
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Leases |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | NOTE 18: LEASES
The Company has adopted ASU No. 2016-02, Leases (Topic 842), as of April 1, 2019 and will account for its leases in terms of the right of use assets and offsetting lease liability obligations under this pronouncement. The Company had had only short-term leases up through the acquisition of Banner Midstream. The Company acquired a right of use asset and lease liability on March 27, 2020. The Company recorded these amounts at present value, in accordance with the standard, using a discount rate of 5%. The right of use asset is composed of the sum of all lease payments, at present value, and is amortized straight line over the life of the expected lease term. For the expected term of the lease the Company used the initial terms ranging between 24 and 60 months. Upon the election by the Company to extend the lease for additional years, that election will be treated as a lease modification and the lease will be reviewed for re-measurement.
The Company has chosen to implement this standard using the modified retrospective model approach with a cumulative-effect adjustment, which does not require the Company to adjust the comparative periods presented when transitioning to the new guidance. The Company has also elected to utilize the transition related practical expedients permitted by the new standard. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a modified retrospective approach. Adoption of the new standard did not result in an adjustment to retained earnings for the Company.
As of September 30, 2022, the value of the unamortized lease right of use asset is $400,951 (through maturity at October 31, 2026). As of September 30, 2022, the Company’s lease liability was $405,987.
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
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Related Party Transactions |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 19: RELATED PARTY TRANSACTIONS
Trend Capital Management was founded in 2011 and through June 30, 2021, was Trend Holding’s primary asset. Trend Capital Management is not the investment manager of these entities, nor the beneficial owner of Ecoark securities held by Trend Discovery LP (“Trend LP”) nor Trend Discovery SPV I, LLC (“Trend SPV”) since it assigned the power to vote and dispose of securities to a third party not affiliated with Ecoark. The investment capital in Trend LP and Trend SPV is from individual limited partners and members, and not from the Company. Trend Capital Management does not have the obligation to absorb losses or the right to receive benefits that could be significant as a result of the entities’ performance. Trend Capital Management does not have any ownership of or a controlling financial interest in Trend LP nor Trend SPV and therefore management has concluded consolidation of these entities with Trend Capital Management is not required. Trend Capital Management provides services and collects fees from entities which include Trend LP and Trend SPV.
Trend Discovery which held Barrier Crest and Trend Capital Management was sold on June 17, 2022.
Jay Puchir, the Company’s Chief Financial Officer, Secretary and Treasurer, served as a consultant to the Company from May 2019 to March 2020 and was paid solely in stock options totaling 40,000 stock options at an exercise price of $3.15 per share. In addition, any outstanding notes with Mr. Puchir have been repaid along with all accrued interest.
Gary Metzger, a director, advanced $577,500 to the Company through March 31, 2020, under the terms of notes payable that bears interest at rates ranging between 10% and 15% interest per annum. These notes along with all accrued interest were repaid in August 2021.
In the Banner Midstream acquisition, Randy S. May, Chief Executive Officer and Chairman, was the holder of approximately $1,242,000 in notes payable by Banner Midstream and its subsidiaries, which were assumed by the Company in the transaction. Additionally, Mr. May held a note payable by Banner Energy in the amount of $2,000,000 in principal and accrued interest, which was converted into 2,740,000 shares of common stock (on a pre-reverse stock split basis) as a result of the transaction. Neither of these amounts remain outstanding.
On August 31, 2021, William B. Hoagland, the then Chief Financial Officer of the Company, transferred 550,000 shares of Ecoark Holdings common stock to Trend LP, of which Mr. Hoagland owns an approximately 25% of Trend LP. Additionally, Trend SPV holds 344,000 shares of Ecoark Holdings common stock and 460,000 warrants to purchase Ecoark Holdings common stock.
Ecoark Holdings has made periodic loans to Agora to permit it to begin its Bitcoin mining business. On November 13, 2021, Agora issued Ecoark Holdings a $7.5 million term note which accrues 10% per annum interest and is due September 30, 2022. As of September 30, 2022, Agora owed principal of $5,337,884 and interest of $410,821 to Ecoark Holdings. These amounts have been eliminated in consolidation.
On February 2, 2022, Peter Mehring, a director and executive officer, gave notice of his intent to resign as an executive officer and director effective on February 11, 2022. Mr. Mehring resigned as a result of his entering into an Employment Agreement with a leading Internet service company. He also entered into a Consulting Agreement with the Company.
Under the Consulting Agreement, Mr. Mehring will advise the Company (including Zest Labs) on its current intellectual property litigation and matters relating to Zest Lab’s intellectual property as well as provide transition services. The Consulting Agreement is for a one-year term. The Company agreed to pay Mr. Mehring $16,667 per month. His unvested stock awards will continue to vest during the term and the expiration date on any stock awards will be extended for one year following the termination. |
Subsequent Events |
6 Months Ended |
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Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 20: SUBSEQUENT EVENTS
Subsequent to September 30, 2022, the Company had the following transactions:
On October 28, 2022, the Company and Ecoark, Inc. assigned all of its residual intellectual property rights and rights in the Zest Labs lawsuits to Zest Labs in connection with the anticipated spin-off of Zest Labs common stock to the Company’s stockholders. The Board of Directors subsequently determined not to proceed with the Zest Labs spin-off, however the assignment was not affected by that determination.
On November 14, 2022, the Company and the warrant holder canceled the warrant originally issued to the holder on June 8, 2022, as subsequently amended and restated, in exchange for $100 as the Company has substantially met the conditions under Section 1(a) of the warrant. |
Accounting Policies, by Policy (Policies) |
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| Principles of Consolidation | Principles of Consolidation
On May 31, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Trend Discovery Holdings Inc., a Delaware corporation for the Company to acquire 100% of Trend Discovery Holdings, LLC pursuant to a merger of Trend with and into the Company (the “Merger”). Trend Discovery Holdings, Inc. ceased doing business upon completion of the merger and Trend Discovery Holdings LLC is the subsidiary of the Company. Upon the formation of Agora on September 17, 2021, Ecoark assigned the membership interest it owned in Trend Holdings to Agora on September 22, 2021 when the Company purchased 100 shares of Agora common stock for $10.
On March 27, 2020, the Company and Banner Parent, entered into the Banner Purchase Agreement to acquire Banner Midstream. Pursuant to the acquisition, Banner Midstream became a wholly owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream. The Company sold all divisions of Banner Midstream in July 2022 and September 2022 as discussed herein.
The Company applies the guidance of Topic 810 Consolidation of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—are consolidated except when control does not rest with the parent.
Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.
The Company has utilized the guidance under ASC 810-10-55-4B, Case A for a Change that has resulted in the recognition of non-controlling interest. On October 1, 2021, Agora issued restricted common stock to non-employee directors, management, employees and advisors. As a result of the restricted common share issuances, the Company owns now owns less than 100% of Agora (approximately 89%). The Company expects it will continue to control Agora until it completes the distribution of Agora common stock to its security holders described above; after that event occurs, it may still have sufficient equity ownership to control Agora unless one or more third parties acquire a larger equity position.
During the six months ended September 30, 2022, Agora issued 400,000 shares of common stock to consultants and management. As a result of these issuances, the Company’s ownership percentage in Agora dropped from approximately 90% to approximately 89%.
The Company sold both White River and Banner Midstream (Pinnacle/Capstone) in July and September 2022, respectively. These entities are no longer subsidiaries of the Company. The Company has investments in WREC and Enviro that represent the shares it received for the sale of these entities. The investment in WREC is in non-voting preferred shares, and Management has concluded that the Company is not the primary beneficiary in this transaction, and thus no consolidation is required for White River as a variable interest entity. The Company currently owns 70% of the total issued common shares of Enviro and has consolidated Enviro, however, the Company will be distributing these shares to its stockholders of record as of September 30, 2022, and thus have reflected Enviro in the discontinued operations of the Company for the six months ended September 30, 2022.
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| Reclassifications | Reclassifications
The Company has reclassified certain amounts in the September 30, 2021 condensed consolidated financial statements to be consistent with the September 30, 2022 presentation, including the reclassification of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone assets and liabilities from continuing operations to held for sale and reclassifications of operations of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone to discontinued operations. The March 31, 2022 consolidated balance sheet has been reclassified to include the assets and liabilities sold for White River, Pinnacle Frac, and Capstone as well. Additionally, we have removed all rounding of amounts and shares from the September 30, 2021 presentation to conform to the September 30, 2022 presentation. These changes had no impact on the Company’s financial position or result of operations for the periods presented.
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| Noncontrolling Interests | Noncontrolling Interests
In accordance with ASC 810-10-45 Noncontrolling Interests in Consolidated Financial Statements, the Company classifies noncontrolling interests as a component of equity within the consolidated balance sheet. In October 2021 and July 2022, with the issuance of restricted common stock to directors, management and advisors, the Company no longer owns 100% of Agora. As of September 30, 2022 and March 31, 2022, approximately 11% and 9.1% is reflected as non-controlling interest of that entity. In addition, we have reflected 30% of Enviro as noncontrolling interests as the Company represents 70% of the voting interests in Enviro.
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| Use of Estimates | Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, including goodwill, asset retirement obligations, estimates of discount rates in lease, liabilities to accrue, fair value of derivative liabilities associated with warrants, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes and determination of the fair value of stock awards.
Actual results could differ from those estimates.
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| Revenue Recognition | Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
The following five steps are applied to achieve that core principle:
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised service separately to a customer. The relative selling price for each performance obligation is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the promised service. In instances where the Company does not sell a service separately, establishing standalone selling price requires significant judgment.
The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time.
Although, Agora since March 3, 2022, has not recognized revenue from its mining operations, prior to this time, it recognized revenue upon satisfaction of its performance obligation over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.
The Company accounts for incremental costs of obtaining a contract with a customer and contract fulfillment costs in accordance with ASC 340-40, Other Assets and Deferred Costs. These costs should be capitalized and amortized as the performance obligation is satisfied if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future and the costs are expected to be recovered. The Company recognizes the cost of sales of a contract as expense when incurred or when a performance obligation is satisfied. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies.
Bitcoin Mining
The discussion here should be understood as being applicable while Agora was conducting mining operations which it ceased beginning March 3, 2022. On September 16, 2022, the Company determined to conduct operations as a power-centric hosting company, rather than a Bitcoin mining company. For the past revenue recognition, refer to the Company’s Annual Report on Form 10-K filed on July 7, 2022.
Hosting Revenues
Agora effective in September 2022 began efforts to generate revenue via hosting agreements. As of September 30, 2022 and the date of this Report, Agora has not executed any such agreements. If Agora generates hosting revenues, it will follow ASC 606 as outlined above and recognize revenue upon the completion of the performance obligations as stipulated under such hosting agreements. For the six months ended September 30, 2022 and 2021, no revenue has been recognized under hosting agreements.
All Bitcoin that is mined under these arrangements will be transmitted directly into the third-party digital wallets and the Company will not hold any Bitcoin in its accounts.
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| Accounts Receivable and Concentration of Credit Risk | Accounts Receivable and Concentration of Credit Risk
The Company considers accounts receivable, net of allowance for doubtful accounts, to be fully collectible. The allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses, credit insurance and economic conditions. Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts are uncollectible. Credit extended to customers is generally uncollateralized, however credit insurance is obtained for some customers. Past-due status is based on contractual terms.
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| Fair Value Measurements | Fair Value Measurements
ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles (“GAAP”), and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
The carrying values of the Company’s financial instruments such as cash, investments, prepaid expenses, accounts payable, and accrued expenses approximate their respective fair values because of the short-term nature of those financial instruments.
Bitcoin assets will be presented in current assets. Fair value will be determined by taking the price of the coins from the trading platforms which Agora will most frequently use.
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| Bitcoin | Bitcoin
Prior to March 3, 2022 when the Company was mining Bitcoin, it included the Bitcoin in current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. Bitcoin was recorded at cost less impairment. For the past Bitcoin accounting policies, refer to the Company’s Annual Report on Form 10-K filed on July 7, 2022. As of September 30, 2022, the Company neither owns nor mines any Bitcoin, although it may in the future operate as a hosting company providing a mining location and electricity for third parties’ mining equipment and activities.
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| Impairment of Long-lived Assets | Impairment of Long-lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
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| Segment Information | Segment Information
The Company follows the provisions of ASC 280-10 Segment Reporting. The Company classified its reporting segments in these three divisions through March 31, 2022, when the Company determined that pursuant to ASC 205-20-45-1E that the operations related to the Financial Services segment would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. As a result of this reclassification, the Company’s segment reporting has removed the Financing segment for the six months ended September 30, 2021. Effective April 1, 2022, the Company has classified its segments in the Commodity Segment, Technology Segment and Bitcoin Mining Segment. It now charges a monthly overhead charge to the Technology Segment and to the Transportation component and Oil and Gas Production component (each part of the Commodities Segment). On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment, and on September 7, 2022, the Company sold the remaining part (Pinnacle Frac and Capstone) of the Commodities Segment. Under ASC 855-10-55, the Company has reflected the sale of these entities and the operations as discontinued operations as of and for the six months ended September 30, 2022. As a result of the sales of White River and Banner Midstream, and the immaterial nature of the operations of Zest Labs, the Company no longer segregates its operations as most of the continuing operations are related to Agora.
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| Earnings (Loss) Per Share of Common Stock | Earnings (Loss) Per Share of Common Stock
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.
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| Derivative Financial Instruments | Derivative Financial Instruments
The Company does not currently use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-measured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities.
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| Recently Issued Accounting Standards | Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.
The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
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| Liquidity | Liquidity
For the six months ended September 30, 2022 and 2021, the Company had a net loss to controlling interest of common shareholders of $(33,523,288) and $(3,295,155), respectively, has working capital (deficit) of $25,749,537 and $(8,394,850) as of September 30, 2022 and March 31, 2022, respectively, and has an accumulated deficit as of September 30, 2022 of $(163,520,500). As of September 30, 2022, the Company has $986,298 in cash and cash equivalents. The working capital at September 30, 2022 is the direct result of the investment in White River Energy Corp valued at $30,000,000. These represent the value of the 1,200 shares of Series A Preferred Stock that are expected to be distributed to the Company’s stockholders, as discussed in Note 5.
The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company sold its interests in Banner Midstream in two separate transactions on July 25, 2022 and September 7, 2022. In addition, it sold the non-core business of Trend Discovery on June 17, 2022. The Company expects to distribute the common stock it received (or issuable upon conversion of preferred stock) in the sales to its stockholders upon the effective registration statements for the two entities the companies were sold to. See Note 13, “Mezzanine Equity” for information on the Company’s recent $12 million convertible preferred stock financing. That financing has restrictive covenants that require approval of the investor for the Company to engage in any equity or debt financing. The Company believes that the current cash on hand is not sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements and may need to raise capital to support their operations. As of September 30, 2022, the Company has not established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern and will require additional financing to fund its future planned operations. The accompanying financial statements for the period ended September 30, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Impact of COVID-19
COVID-19 may continue to affect the economy and the industries in which we operate, depending on the vaccine and booster rollouts and the emergence of virus mutations.
COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the six months ended September 30, 2022 or year ended March 31, 2022 in contrast to the material impact it had in the prior fiscal year.
COVID-19 has also contributed to the supply chain disruptions which have not yet had a material effect for the Company. The Company will continue to monitor the supply chain shortages affecting its business.
The extent to which COVID-19 may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent and related costs. We had received funding under the PPP, and a majority of that has been forgiven. |
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| Impact of COVID-19 | Impact of COVID-19
COVID-19 may continue to affect the economy and the industries in which we operate, depending on the vaccine and booster rollouts and the emergence of virus mutations.
COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the six months ended September 30, 2022 or year ended March 31, 2022 in contrast to the material impact it had in the prior fiscal year.
COVID-19 has also contributed to the supply chain disruptions which have not yet had a material effect for the Company. The Company will continue to monitor the supply chain shortages affecting its business.
The extent to which COVID-19 may impact the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent and related costs. We had received funding under the PPP, and a majority of that has been forgiven. |
Discontinued Operations (Tables) |
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| Schedule of current assets |
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| Schedule of non-current assets |
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| Schedule of current liabilities |
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| Schedule of non-current liabilities |
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| Schedule of operations to discontinued operations |
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| Schedule of calculation of the gain on disposal of trend discovery |
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| Schedule of the calculation of the loss on disposal |
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Bitcoin (Tables) |
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| Bitcoin [Abstract] | ||||||||||||||||||||||||||
| Schedule of additional information about agora’s bitcoin holdings |
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Property and Equipment (Tables) |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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Warrant Derivative Liabilities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrant Derivative Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair value of each warrant is estimated using the black-scholes valuation model |
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| Schedule of derivative liabilities |
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| Schedule of warrant derivative liabilities |
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Long-Term Debt (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of long-term debt |
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| Schedule of maturities |
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Fair Value Measurements (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of assets and liabilities that are measured and recognized at fair value on a recurring basis |
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| Schedule of beginning and ending liabilities measured at fair value |
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Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of maturity of operating lease liability |
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| Schedule of amortization of the right of use asset |
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| Schedule of total lease cost |
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Organization and Summary of Significant Accounting Policies (Details) |
1 Months Ended | 6 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Aug. 23, 2022
USD ($)
|
Oct. 06, 2021
USD ($)
shares
|
Apr. 09, 2021
USD ($)
|
Jul. 31, 2022 |
Jul. 25, 2022 |
Oct. 31, 2021 |
Sep. 30, 2022
USD ($)
a
shares
|
Sep. 30, 2021
USD ($)
|
Sep. 09, 2022
shares
|
Jun. 08, 2022
USD ($)
|
Mar. 31, 2022
USD ($)
|
Nov. 19, 2021
shares
|
Sep. 22, 2021
$ / shares
shares
|
May 31, 2019 |
|
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Investor | $ 12,000,000 | |||||||||||||
| Percentage of non-voting | 82.00% | |||||||||||||
| Share exchange agreement, description | Pursuant to the Agreement, upon the terms and subject to the conditions set forth therein, the Company acquired 12,996,958 shares of the Enviro common stock in exchange for all of the capital stock of Banner Midstream owned by the Company, which represents 100% of the issued and outstanding shares (the “Exchange”). Following the closing of the Agreement which occurred on September 7, 2022, Banner Midstream continues as a wholly-owned subsidiary of Enviro. On September 7, 2022, the Exchange was completed, and Banner Midstream was merged into Enviro via a reverse merger. The shares the Company that were issued by Enviro represent approximately 70% of the total voting shares of Enviro. As a result, the Company will consolidate Enviro in the condensed consolidated financial statements, however because it is the intent of the Company to distribute these shares in Enviro to the stockholders of the Company upon the effectiveness of a registration statement filed by Enviro, the Company has classified the assets and liabilities of Enviro and the results of operations of Enviro in discontinued operations. | |||||||||||||
| Total damages | $ 115,000,000 | |||||||||||||
| Reduced amount of damages | 110,000,000 | |||||||||||||
| Compensatory damages | 65,000,000 | |||||||||||||
| Punitive damages | $ 50,000,000 | |||||||||||||
| Ownership shares, description | The Company assigned its membership interest in Trend Holdings and its related wholly owned subsidiaries to Agora on September 22, 2021, for the sale of the initial 100 shares for $10. On October 1, 2021, the Company purchased 41,671,121 shares of Agora common stock for $4,167,112 which Agora used to purchase equipment to commence the Bitstream operations. | |||||||||||||
| Shares issued (in Shares) | shares | 550,000 | |||||||||||||
| Restricted stock units | $ 272,252 | |||||||||||||
| Cancellation of shares (in Shares) | shares | 672,499 | |||||||||||||
| Authorized common shares (in Shares) | shares | 100,000,000 | |||||||||||||
| Common stock per share (in Dollars per share) | $ / shares | $ 10 | |||||||||||||
| Outstanding voting share percentage | 50.00% | |||||||||||||
| Description of ownership percentage | On October 1, 2021, Agora issued restricted common stock to non-employee directors, management, employees and advisors. | As a result of these issuances, the Company’s ownership percentage in Agora dropped from approximately 90% to approximately 89%. | ||||||||||||
| Shares of common stock (in Shares) | shares | 400,000 | |||||||||||||
| Ownership percentage | 70.00% | |||||||||||||
| Owns percentage of agora | 100.00% | 100.00% | ||||||||||||
| Non-controlling interest | 11.00% | 9.10% | ||||||||||||
| Percentage noncontrolling interests | 30.00% | |||||||||||||
| Percentage of voting interests | 70.00% | |||||||||||||
| Net income loss | $ 33,523,288 | $ 3,295,155 | ||||||||||||
| Working capital deficit | (25,749,537) | $ (8,394,850) | ||||||||||||
| Accumulated deficit | 163,520,500 | |||||||||||||
| Cash and cash equivalents | 986,298 | |||||||||||||
| Investment valued | $ 5,328,753 | 30,000,000 | ||||||||||||
| Convertible preferred stock | $ 12,000,000 | |||||||||||||
| Warrant [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Shares issued (in Shares) | shares | 10,000,000 | |||||||||||||
| Minimum [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Authorized common stock shares (in Shares) | shares | 30,000,000 | |||||||||||||
| Minimum [Member] | 2017 Omnibus Incentive Plan [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Authorized common stock shares (in Shares) | shares | 800,000 | |||||||||||||
| Maximum [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Authorized common stock shares (in Shares) | shares | 40,000,000 | |||||||||||||
| Maximum [Member] | 2017 Omnibus Incentive Plan [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Authorized common stock shares (in Shares) | shares | 1,300,000 | |||||||||||||
| Merger Agreement [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Shares issued (in Shares) | shares | 100 | |||||||||||||
| Ownership percentage | 100.00% | |||||||||||||
| Series A Preferred Stock [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Shares distributed (in Shares) | shares | 1,200 | |||||||||||||
| President and Director [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Restricted stock units | $ 63,998 | |||||||||||||
| White River and Shamrock [Member] | ||||||||||||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | ||||||||||||||
| Number of acres (in Acres) | a | 30,000 | |||||||||||||
Discontinued Operations (Details) - USD ($) |
1 Months Ended | |
|---|---|---|
Jun. 17, 2022 |
Sep. 07, 2022 |
|
| Discontinued Operations (Details) [Line Items] | ||
| Investment sold amount | $ 4,250,000 | |
| Enviro [Member] | ||
| Discontinued Operations (Details) [Line Items] | ||
| Percentage of voting | 70.00% |
Discontinued Operations (Details) - Schedule of current assets - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Schedule Of Current Assets Abstract | ||
| Cash | $ 391,125 | |
| Accounts receivable | 1,075,960 | |
| Inventory | 107,026 | |
| Prepaid expenses | 838,731 | |
| Enviro Technologies US Inc | 2,228,179 | |
| Total current assets | $ 2,228,179 | $ 2,412,842 |
Discontinued Operations (Details) - Schedule of non-current assets - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Schedule Of Non Current Assets Abstract | ||
| Goodwill | $ 10,224,046 | |
| Property and equipment, net | 3,117,962 | |
| Intangible assets, net | 1,716,331 | |
| Oil and gas properties, full cost-method | 6,626,793 | |
| Capitalized drilling costs, net of depletion | 604,574 | |
| Right of use asset – operating and financing leases | 608,714 | |
| Enviro Technologies US Inc. | 2,784,288 | |
| Total non-current assets | $ 2,784,288 | $ 22,898,420 |
Discontinued Operations (Details) - Schedule of current liabilities - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Schedule Of Current Liabilities Abstract | ||
| Accounts payable and accrued expenses | $ 2,419,909 | |
| Current portion of long-term debt | 572,644 | |
| Current portion of lease liability – operating and financing leases | 345,441 | |
| Enviro Technologies US Inc. | 3,468,315 | |
| Total current liabilities | $ 3,468,315 | $ 3,337,994 |
Discontinued Operations (Details) - Schedule of non-current liabilities - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Schedule Of Non Current Liabilities Abstract | ||
| Lease liabilities – operating and financing leases, net of current portion | $ 282,638 | |
| Long-term debt | 67,512 | |
| Asset retirement obligations | 1,303,751 | |
| Enviro Technologies US Inc. | $ 158,693 | |
| Total non-current liabilities | $ 158,693 | $ 1,653,901 |
Discontinued Operations (Details) - Schedule of operations to discontinued operations - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Schedule Of Operations To Discontinued Operations Abstract | ||||
| Revenue | $ 3,795,607 | $ 6,878,992 | $ 10,955,153 | $ 12,989,573 |
| Operating expenses | 6,557,506 | 8,500,041 | 17,110,005 | 14,622,198 |
| Enviro Technologies US, Inc. – net loss | (3,836,919) | (3,836,919) | ||
| Other (income) loss | 338,755 | (566,707) | 560,831 | (661,106) |
| Net loss from discontinued operations | $ (6,937,573) | $ (1,054,342) | $ (10,552,602) | $ (971,519) |
Discontinued Operations (Details) - Schedule of calculation of the gain on disposal of trend discovery - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Mar. 31, 2021 |
|
| Schedule Of Calculation Of The Gain On Disposal Of Trend Discovery Abstract | ||
| Secured Note Receivable | $ 4,250,000 | |
| Cash | (27,657) | |
| Accounts receivable | (222,400) | |
| Prepaid expenses | (99,566) | |
| Goodwill | (3,222,799) | |
| Other assets | (284) | |
| Accounts payable and accrued expenses | 34,211 | |
| Gain on disposal of discontinued operations | $ 711,505 |
Discontinued Operations (Details) - Schedule of the calculation of the loss on disposal - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Mar. 31, 2021 |
|
| Schedule Of The Calculation Of The Loss On Disposal Abstract | ||
| Investment – White River Energy Corp./Enviro Technologies US, Inc. | $ 35,328,753 | |
| Cash | (3,000,000) | |
| Forgiveness of amounts due from subsidiaries | (39,997,461) | |
| Reversal of investment booked on March 27, 2020 when acquired | (4,866,192) | |
| Loss on disposal of discontinued operations | $ (12,534,900) |
Senior Secured Promissory Note Receivable (Details) |
6 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Receivables [Abstract] | |
| Principal amount | $ 4,250,000 |
| Bears interest rate | 5.00% |
| Maturity date | Jun. 16, 2025 |
| Interest income and accrued interest receivable | $ 61,979 |
| Current assets | 593,229 |
| Non-current assets | $ 3,718,750 |
Investment – Series A Convertible Preferred Stock – White River Energy Corp (Details) |
6 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
shares
| |
| Disclosure Text Block Supplement [Abstract] | |
| Shares received | 1,200 |
| Convertible shares of common stock | 42,253,521 |
| Investments (in Dollars) | $ | $ 30,000,000 |
Investment – common stock – enviro technologies us, inc. (Details) - USD ($) |
1 Months Ended | 6 Months Ended |
|---|---|---|
Aug. 23, 2022 |
Sep. 30, 2022 |
|
| Investment of Common Stock [Abstract] | ||
| Acquire of shares (in Shares) | 12,996,958 | |
| Issued and outstanding, percentage | 100.00% | |
| Investment value (in Dollars) | $ 5,328,753 | $ 30,000,000 |
| Voting common shares, percentage | 70.00% |
Bitcoin (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 12, 2022 |
Sep. 30, 2022 |
|
| Bitcoin [Abstract] | ||
| Bitcoins description | Agora mined 0.57 Bitcoins | |
| Bitcoins value | $ 12,485 | $ 26,495 |
| Impaired amount | 16,351 | |
| Gain on sale of bitcoin | 2,340 | |
| Bitcoin impairment losses | $ 9,122 |
Bitcoin (Details) - Schedule of additional information about agora’s bitcoin holdings |
6 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Schedule Of Additional Information About Agora SBitcoin Holdings Abstract | |
| Beginning balance – April 1, 2022 | $ 19,267 |
| Gain on sale of Bitcoin | 2,340 |
| Bitcoin converted into fiat currency | (12,485) |
| Bitcoin impairment losses | (9,122) |
| Ending balance – September 30, 2022 |
Property and Equipment (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Property and Equipment [Abstract] | ||
| Impairment of fixed assets | $ 1,655,969 | |
| Mining technology equipment | 1,425,772 | |
| Exchange for a credit | 855,000 | |
| Loss on settlement | 570,772 | |
| Depreciation expense | $ 48,560 | $ 110,792 |
Property and Equipment (Details) - Schedule of property and equipment - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | $ 8,811,406 | $ 10,197,095 |
| Accumulated depreciation and impairment | (4,675,264) | (2,970,725) |
| Property and equipment, net | 4,136,143 | 7,226,370 |
| Zest Labs freshness hardware, equipment and computer costs [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | 2,915,333 | 2,915,333 |
| Land [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | 125,000 | 125,000 |
| Furniture [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | 40,074 | |
| Mining technology equipment– Bitcoin [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | 5,639,867 | 7,065,630 |
| Machinery and equipment – Bitcoin [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total property and equipment | $ 91,132 | $ 91,132 |
Power Development Cost (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Aug. 10, 2022 |
Sep. 30, 2022 |
|
| Power Development Cost (Details) [Line Items] | ||
| Paid in agreements | $ 1,000,000 | |
| Total of third party amount | 2,000,000 | |
| Purchase of extension agreement | 2,000,000 | |
| Extension agreements | $ 844,708 | 1,000,000 |
| Development costs | $ 155,292 | |
| Minimum [Member] | ||
| Power Development Cost (Details) [Line Items] | ||
| Related party amount | 96,000 | |
| Maximum [Member] | ||
| Power Development Cost (Details) [Line Items] | ||
| Related party amount | $ 326,500 |
Warrant Derivative Liabilities (Details) - Schedule of warrant derivative liabilities - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Schedule Of Warrant Derivative Liabilities Abstract | ||
| Beginning balance | $ 4,318,630 | $ 7,213,407 |
| Issuances of warrants – derivative liabilities | 12,491,524 | |
| Warrants exchanged for common stock | ||
| Change in fair value of warrant derivative liabilities | (2,892,472) | (4,315,677) |
| Ending balance | $ 1,426,158 | $ 15,389,254 |
Long-Term Debt (Details) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Feb. 16, 2022 |
|
| Long-Term Debt (Details) [Line Items] | |||
| Maturity date | Dec. 28, 2018 | Feb. 13, 2028 | |
| Credit facility amount | $ 10,000,000 | ||
| Annual rate percentage | 12.00% | ||
| Debt description | The Company is able to request draws from the lender up to $1,000,000 with a cap of $10,000,000. In the year ended March 31, 2022, the Company borrowed $595,855, which includes $25,855 in commitment fees, with the balance of $570,000 being deposited directly into the Company. In the six months ended September 30, 2022, the Company borrowed $505,181, which includes $17,681 in commitment fees, with the balance of $487,500 being deposited directly into the Company, and repaid $710,000 in the six months ended September 30, 2022. Interest incurred for the six months ended September 30, 2022 was $41,427, and accrued as of September 30, 2022 was $43,650. There were no advances in the six months ended September 30, 2021. | ||
| Long term secured note payable | $ 80,324 | ||
| Debt percentage | 5.79% | ||
| Repaid amount | $ 23,966 | ||
| Commitment fees | 17,681 | ||
| Interest expense | 44,133 | $ 276 | |
| Long Term Loans [Member] | |||
| Long-Term Debt (Details) [Line Items] | |||
| Proceeds received | 487,500 | ||
| Repaid amount | 716,645 | ||
| Commitment fees | $ 17,681 | ||
Long-Term Debt (Details) - Schedule of long-term debt - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
||||
|---|---|---|---|---|---|---|
| Debt Instrument [Line Items] | ||||||
| Total long-term debt | $ 464,716 | $ 676,179 | ||||
| Less: current portion | (402,963) | (608,377) | ||||
| Long-term debt, net of current portion | 61,753 | 67,802 | ||||
| Credit facility -Trend Discovery SPV 1, LLC [Member] | ||||||
| Debt Instrument [Line Items] | ||||||
| Total long-term debt | [1] | 391,036 | 595,855 | |||
| Auto loan – Ford [Member] | ||||||
| Debt Instrument [Line Items] | ||||||
| Total long-term debt | [2] | $ 73,680 | $ 80,324 | |||
| ||||||
Long-Term Debt (Details) - Schedule of maturities |
Sep. 30, 2022
USD ($)
|
|---|---|
| Schedule Of Maturities [Abstract] | |
| 2023 | $ 402,963 |
| 2024 | 12,636 |
| 2025 | 13,387 |
| 2026 | 14,183 |
| 2027 | 15,026 |
| Thereafter | 6,521 |
| Total | $ 464,716 |
Notes Payable - Related Parties (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Sep. 30, 2022 |
Mar. 31, 2022 |
Aug. 09, 2021 |
Aug. 08, 2021 |
|
| Notes Payable - Related Parties (Details) [Line Items] | |||||
| Advances | $ 577,500 | ||||
| Re-payment | $ 577,500 | ||||
| Accrued interest | $ 42,535 | ||||
| Interest expense | $ 17,514 | ||||
| Amount issued | $ 116,000 | ||||
| Advanced and repaid | $ 25,000 | ||||
| Minimum [Member] | |||||
| Notes Payable - Related Parties (Details) [Line Items] | |||||
| Bears interest rate | 10.00% | ||||
| Maximum [Member] | |||||
| Notes Payable - Related Parties (Details) [Line Items] | |||||
| Bears interest rate | 15.00% | ||||
| Chief Executive Officer [Member] | |||||
| Notes Payable - Related Parties (Details) [Line Items] | |||||
| Total advance payment | $ 591,000 | ||||
| Chief Financial Officer [Member] | |||||
| Notes Payable - Related Parties (Details) [Line Items] | |||||
| Total advance payment | $ 25,000 |
Mezzanine Equity (Details) - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Nov. 14, 2022 |
Jun. 08, 2022 |
Jun. 08, 2022 |
Sep. 30, 2022 |
|
| Mezzanine Equity (Details) [Line Items] | ||||
| Common stock shares issued (in Shares) | 102,881 | |||
| Total purchase price | $ 12,000,000 | |||
| Convertible shares amount | $ 10,000 | |||
| Conversion price (in Dollars per share) | $ 2.1 | |||
| Beneficial ownership limitation | 19.90% | |||
| Beneficial ownership limitation description | The shares of Ecoark Series A as amended are also subject to a 4.99% beneficial ownership limitation, which may be increased to up to 9.9% by the holder by giving 61 days’ notice to the Company. | |||
| Holders percentage. | 25.00% | |||
| Annual rate | 12.60% | |||
| Equivalent amount | $ 1,260 | $ 1,260 | ||
| Dividend rate | 18.00% | |||
| Junior preferred stock | $ 1,200 | |||
| Redemption price | $ 1,200 | |||
| Equity description | (i)payment or declaration of any dividend (other than pursuant to the Ecoark Series A Certificate); (ii)investment in, purchase or acquisition of any assets or capital stock of any entity for an amount that exceeds $100,000 in any one transaction or $250,000, in the aggregate; (iii)issuance of any shares of common stock or other securities convertible into or exercisable or exchangeable for shares of common stock; (iv)incurrence of indebtedness, liens, or guaranty obligations, in an aggregate amount in excess of $50,000 in any individual transaction or $100,000 in the aggregate with customary exceptions. (v)sale, lease, transfer or disposal of any of its properties having a value calculated in accordance with GAAP of more than $50,000; (vi)increase in any manner the compensation or fringe benefits of any of its directors, officers, employees; and (vii)merger or consolidation with, or purchase a substantial portion of the assets of, or by any other manner the acquisition or combination with any business or entity. | |||
| Warrant description | Prior to its cancellation, the Warrant, as amended, provided the Purchaser or its assignees (the “Holder”) with the right to purchase a number of shares of common stock as would enable the holder together with its affiliates to beneficially own 49% of the Company’s common stock, calculated on a fully diluted basis, at an exercise price of $0.001 per share, including the Commitment Shares and Conversion Shares unless sold. Subject to shareholder approval, the Warrant was to vest and become exercisable into shares of the Company’s stock if as of June 8, 2024: (i) the Company had failed to complete the distributions to the Company’s security holders or to any other subsidiary of the Company’s equity ownership of its three principal subsidiaries: Agora, Banner Midstream and Zest Labs (or their principal subsidiaries) (the “Distributions”), and/or (ii) the Holder together with its affiliates does not beneficially own at least 50% of the Company’s outstanding common stock. Provided, the Company must retain 20% of its common stock of Agora. The Warrant was to be exercised on a cashless basis and expire on June 8, 2027. | |||
| Commitment shares issued (in Shares) | 5,246,456 | |||
| Common stock issuable (in Shares) | 5,143,575 | |||
| Outstanding common stock percentage | 19.90% | |||
| Commitment Shares | $ 193,416 | |||
| Mezzanine Equity | $ 11,806,584 | |||
| Preferred shares issued (in Shares) | 268 | |||
| Common stock shares (in Shares) | 1,276,190 | |||
| Discount on the preferred stock | $ 41,086 | |||
| Series A Convertible Redeemable Preferred Stock [Member] | ||||
| Mezzanine Equity (Details) [Line Items] | ||||
| Purchaser shares (in Shares) | 1,200 | |||
| Series A Preferred Stock [Member] | ||||
| Mezzanine Equity (Details) [Line Items] | ||||
| Preferred shares issued (in Shares) | 932 | |||
| Subsequent Event [Member] | Restated [Member] | ||||
| Mezzanine Equity (Details) [Line Items] | ||||
| Warrant description | the Company and the warrant holder canceled the warrant originally issued to the holder on June 8, 2022, as subsequently amended and restated, in exchange for $100 as the Company has substantially met the conditions under Section 1(a) of the warrant. | |||
| Warrant description | the Company and the warrant holder canceled the warrant which was originally issued to the holder on June 8, 2022, as subsequently amended and restated, in exchange for $100 as the Company has substantially met the conditions under Section 1(a) of the warrant | |||
Commitments and Contingencies (Details) - USD ($) |
1 Months Ended | ||
|---|---|---|---|
Jul. 15, 2022 |
Apr. 09, 2021 |
Apr. 22, 2022 |
|
| Commitments and Contingencies (Details) [Line Items] | |||
| Damages value | $ 115,000,000 | ||
| Compensatory damages | 65,000,000 | ||
| Punitive damages | 50,000,000 | ||
| Purchased equipment | $ 414,026.83 | $ 256,733.28 | |
| Maximum [Member] | |||
| Commitments and Contingencies (Details) [Line Items] | |||
| Subsequently reduced | 110,000,000 | ||
| Minimum [Member] | |||
| Commitments and Contingencies (Details) [Line Items] | |||
| Subsequently reduced | $ 60,000,000 |
Fair Value Measurements (Details) - Schedule of beginning and ending liabilities measured at fair value |
6 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Schedule Of Beginning And Ending Liabilities Measured At Fair Value Abstract | |
| Beginning balances | $ (4,318,630) |
| Net change in unrealized (depreciation) appreciation included in earnings | 2,892,472 |
| Purchases | 30,000,000 |
| Sales | |
| Transfers in and out | |
| Ending balances | $ 28,573,842 |
Leases (Details) |
6 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Leases (Details) [Line Items] | |
| Leases, description | The right of use asset is composed of the sum of all lease payments, at present value, and is amortized straight line over the life of the expected lease term. For the expected term of the lease the Company used the initial terms ranging between 24 and 60 months. |
| Unamortized lease right of use asset | $ 400,951 |
| Lease liability | $ 405,987 |
| Minimum [Member] | |
| Leases (Details) [Line Items] | |
| Discount rate percentage | 5.00% |
Leases (Details) - Schedule of maturity of operating lease liability - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Schedule Of Maturity Of Operating Lease Liability [Abstract] | ||
| 2023 | $ 139,304 | |
| 2024 | 102,043 | |
| 2025 | 96,864 | |
| 2026 | 99,770 | |
| 2027 | 8,334 | |
| Imputed interest | (40,328) | |
| Total lease liability | 405,987 | |
| Current portion | 121,764 | $ 117,451 |
| Non-current portion | $ 284,223 | $ 345,976 |
Leases (Details) - Schedule of amortization of the right of use asset |
Sep. 30, 2022
USD ($)
|
|---|---|
| Schedule Of Amortization Of The Right Of Use Asset [Abstract] | |
| 2023 | $ 124,815 |
| 2024 | 90,350 |
| 2025 | 86,664 |
| 2026 | 91,294 |
| 2027 | 7,828 |
| Total | $ 400,951 |
Leases (Details) - Schedule of total lease cost - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Leases Disclosure Abstract | ||||
| Operating Lease, Expense | $ 35,588 | $ 19,942 | $ 71,177 | $ 19,942 |
Subsequent Events (Details) |
Nov. 14, 2022 |
|---|---|
| Subsequent Event [Member] | Restated [Member] | |
| Subsequent Events (Details) [Line Items] | |
| Warrant description | the Company and the warrant holder canceled the warrant originally issued to the holder on June 8, 2022, as subsequently amended and restated, in exchange for $100 as the Company has substantially met the conditions under Section 1(a) of the warrant. |