UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FormFORM 10-K

(Mark One)

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

For the fiscal year endedFiscal Year Ended March 31, 20202023

ORor

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

For the transition period from ____________________ to _______________________

Commission File Numberfile number 000-53361

 BITNILE METAVERSE, INC.

ECOARK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

(479) 259-2977

(Registrant’s telephone number, including area code)

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

SecuritiesSecurities registered pursuant to Section 12(g) of the Act:     Common Stock, par value $0.001 per shareNone

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ☐  No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes  ☐  No  ☒

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 monthsyear (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No  ☐

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

Indicate by check mark whether the Registrantregistrant 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.

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 Registrantregistrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act ( 15(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

TheAs of September 30, 2022, the aggregate market value of the voting and non-votingregistrant’s common equitystock held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last business dayregistrant was $30,023,598 based on the closing sale price as reported on the Nasdaq Stock Market of $39.00. Shares of the registrant’s most recently completed second fiscal quarter was approximately $29,451,500.

Ascommon stock held by executive officers, directors or 10% beneficial owners and by each other person who may be deemed to be an affiliate of June 25, 2020, therethe registrant have been excluded from this computation. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

There were 98,606,8842,522,816 shares of common stock par value $0.001 per share, outstanding.outstanding as of July 10, 2023.

Documents incorporated by reference: None

BITNILE METAVERSE, INC. AND SUBSIDIARIES

FORM 10-K

FOR THE FISCAL YEAR ENDED MARCH 31, 2023

INDEX

PART I

Forward-Looking StatementsNOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (the “Annual Report”) contains forward-looking statements underwithin the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act and other federal securities laws that are subjectof 1934, as amended. These statements relate to a number of risks and uncertainties, many of which are beyondfuture events or our control including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subjectfuture financial performance. We have attempted to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission (the “Commission” or “SEC”). 

In some cases, you can identify forward-looking statements by terminology such asincluding “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,’’ “will,’’ “should,’’ “could,’’ “expects,’’” “plans,’’ “intends,’’ “anticipates,’’ “believes,’’ “estimates,’’ “predicts,’’ “seeks,” “potential,’’” “predict,” “should” or “continue’’“will” or the negative of suchthese terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements.

These forward-looking statementsOur expectations are made only as of the date hereof. We are under no dutythis Annual Report is filed, and we do not intend to update or revise any of thesethe forward-looking statements after the date this Annual Report is filed to confirm these statements to actual results, unless required by law.

This Annual Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves a number of this report or to provide any assurance with respect to future performance or results. You are cautioned that any forward-looking statements are not guarantees of future performanceassumptions and involve riskslimitations, and uncertainties. Readersyou are cautioned not to placegive undue reliance on these forward-looking statementsweight to such estimates. We have not independently verified the statistical and should readother industry data generated by independent parties and contained in this report thoroughly withAnnual Report and, accordingly, we cannot guarantee their accuracy or completeness, though we do generally believe the understanding thatdata to be reliable. In addition, projections, assumptions and estimates of our future performance and the actualfuture performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this Annual Report. These and other factors could cause results mayto differ materially from those set forthexpressed in the forward-looking statements for many reasons, including, without limitation, unforeseen events beyond management’s controlestimates made by the independent parties and assumptions that prove to be inaccurate or unfounded. The following list of examples, while not exclusive or exhaustive, includes someby us.

RISK FACTOR SUMMARY

Below is a summary of the many possible unforeseen developmentsprincipal factors that may cause actual results to differ from anticipated or desired results:

As usedmake an investment in our common stock speculative. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report and our other filings with the terms “we,” “us,” “our,” “Ecoark Holdings” and the “Company” mean Ecoark Holdings, Inc., a Nevada corporation and its consolidated subsidiaries, unless otherwise indicated.SEC before making investment decisions regarding our common stock.

Unless the context otherwise indicates or requires, all product names and trade names used in this Annual Report are the Company's trademarks, although the “®” and “™” trademark designations may have been omitted. Except as otherwise indicated, dollar amounts and numbers of shares that follow in this report are presented in thousands, except per share amounts.

PART I

Item 1 BusinessITEM 1. BUSINESS

General Corporate HistoryUnless the context otherwise indicates or requires, all product names and trade names used in this Annual Report on Form 10-K (this “Annual Report”) are the Company’s trademarks, although the “®” and “™” trademark designations may have been omitted.

Ecoark Holdings,As used in this Annual Report, the terms “we,” “us,” “our,” “BitNile Metaverse” and the “Company” mean BitNile Metaverse, Inc., a Nevada corporation and its consolidated subsidiaries, unless otherwise indicated.

Overview

BitNile Metaverse, Inc. was(“BitNile Metaverse” or the “Company”) is a holding company, incorporated in the State of Nevada on November 19, 2007 under2007. Through March 31, 2023, the name Magnolia Star CorporationCompany’s former wholly owned subsidiaries with the exception of Agora Digital Holdings, Inc., a Nevada corporation (“Magnolia Star”Agora”). On and Zest Labs, Inc., a Nevada corporation (“Zest Labs”) have been treated for accounting purposes as divested. See below in Note 1 “Organization and Summary of Significant Accounting Policies” 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 consolidated balance sheet for March 24, 2016, Magnolia consummated31, 2022 and all operations of these companies have been reclassified to discontinued operations and loss on disposal on the consolidated statements of operations for the year ended March 31, 2023.

The Company’s principal subsidiaries consisted of (a) BitNile.com, Inc., a reverse merger withNevada corporation (“BNC”) which includes the platform BitNile.com (the “Platform”) and that was acquired by the Company on March 6, 2023, which transaction has been reflected as an asset purchase, and (b) Ecoark, Inc., a Delaware corporation (“Ecoark”), pursuant to that certain Agreement and Plan of Merger, dated January 29, 2016 (the “Merger Agreement”), by and among, Magnolia Solar, Magnolia Solar Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Magnolia Star (the “Merger Sub”), and Ecoark. Pursuant to the Merger Agreement, Merger Sub merged with and into Ecoark with Ecoark surviving the Merger and becoming a wholly-owned subsidiary of the Company (the “Merger”). At the effective time of the Merger, each share of issued and outstanding Ecoark common stock was automatically converted into 0.5 shares of Magnolia Star common stock. On March 18, 2016, Magnolia Star filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada thereby changing its name to Ecoark Holdings, Inc.

The Merger was intended to constitute a tax-free reorganization within the meaning of Section 368 of the United States Internal Revenue Code of 1986, as amended. In accordance with the accounting treatment for a “reverse merger,” the Company’s historical financial statements prior to the Merger was replaced with the historical financial statements of Ecoark prior to the Merger. The financial statements after completion of the reverse merger include the assets, liabilities, and results of operations of the combined company from and after the closing date of the reverse merger, with only certain aspects of pre-consummation stockholders’ equity remaining in the consolidated financial statements.

On March 31, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada therein increasing the number of its authorized shares of common stock from 100,000 to 200,000 shares, effective March 31, 2020. The increase was approved by the Company’s shareholders at its annual stockholders meeting held on February 27, 2020. The 5,000 authorized shares of “blank check” preferred stock were unchanged by the reverse stock split.

Overview

Ecoark Holdings is a diversified holding company incorporated in the state of Nevada on November 19, 2007. Ecoark Holdings has four wholly-owned subsidiaries: Ecoark, Inc. (“Ecoark”), a Delaware corporation which is the parent of Zest Labs and Agora.

On June 17, 2022 Agora sold its ownership in Trend Discovery Holdings, LLC to a non-related third party, and currently holds only the assets that remain in Bitstream Mining, LLC, its wholly owned subsidiary. In addition, Ecoark sold 100% of Banner Midstream Corp., in two separate transactions. Ecoark sold the oil and gas production and service assets to Fortium Holdings Corp. (renamed White River Energy Corp) (“WTRV”) on July 25, 2022, and sold its transportation services assets to Enviro Technologies US, Inc. (renamed Wolf Energy Services, Inc.) (“Wolf Energy”) on September 7, 2022. For full details of these transactions, we refer you to the Current Reports on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on June 21, 2022, July 29, 2022 and September 12, 2022. We have removed all pertinent information pertaining to the Trend Discovery Holdings, LLC, and Banner Midstream Corp operations from this Annual Report, and instead have focused our disclosure solely on our current operations.

Key Developments in the Fiscal Year Ended March 31, 2023

In conjunction with the acquisition of BNC on March 6, 2023, the Company changed its name from Ecoark Holdings, Inc. to BitNile Metaverse, Inc. on March 21, 2023 and its stock ticker symbol was subsequently changed from ZEST to BNMV. Furthermore, in March 2023, the Company experienced a significant change in its business model as it shifted its focus on the Platform, adapting it to becoming a revenue-generating model and away from the legacy subsidiaries Agora and Zest. The Company also achieved or experienced the following key developments during the fiscal year ended March 31, 2023 (“FY 2023”):

On June 8, 2022, the Company entered into a Securities Purchase Agreement with Ault Lending, LLC (“Ault Lending”), pursuant to which the Company sold Ault Lending 1,200 shares of Series A Convertible Redeemable Preferred Stock, 3,429 shares of Common Stock, and a warrant to purchase shares of Common Stock for a total purchase price of $12,000,000. The Series A and warrant later incurred multiple amendments in order for the Company to maintain compliance with Nasdaq listing standards.

In conjunction with the transaction with Ault Lending, Company determined it was in the best interests of its shareholders that it divest all of its principal operating assets through a series of spin-offs or stock dividends to the Company’s shareholders. It intended 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.) (“WTRV”), which acquired White River Holdings Corp on July 25, 2022, and Wolf Energy Services, Inc. (formerly Enviro Technologies US, Inc.) (“Wolf Energy”), which acquired Banner Midstream Corp. on September 7, 2022, or by direct dividends. The Company’s plan was also driven in part by the dividends it must pay to Ault Lending.

Because all spin-offs for issuers in our position require that a registration statement have been declared effective by the SEC, which we have not been able to achieve, the Company did not complete any spin-offs in fiscal year 2023. The Company has decided to leave Agora in the Company and to not proceed with the spin-off of this entity, as Agora’s hosting business model has potential synergies that could be achieved with the BNC acquisition. The Company intends to transfer all of the common stock of Zest Labs into Zest Labs Holdings LLC (“Zest Labs”Holdings”), 440IoT Inc., a Nevada corporation (“440IoT”),private limited liability company the Company formed and that will own all of the intellectual property of Zest Labs as well as the rights to any funds obtained from current and future intellectual property litigation by Zest Labs. The Company also amended the Zest Labs charter to require that it distribute at least 95% of the net proceeds of the pending Zest Labs litigation recoveries, if any, to the Company’s shareholders as of November 15, 2022. Additionally, net proceeds from the sale or licensing of Zest Labs intellectual property are intended to be distributed to shareholders of record as of November 15, 2022.

On June 16, 2022, Agora entered into a Membership Interest Purchase Agreement with Trend Ventures, LP, pursuant to which Agora sold all of its outstanding membership interests of Trend Discovery Holdings, LLC, a wholly owned subsidiary of Agora to the purchaser in exchange for a $4.25 million senior secured promissory note issued by the purchaser to Agora.

On July 25, 2022, the Company entered into a Share Exchange Agreement with WTRV and White River Holdings Corp, an indirect wholly owned subsidiary of the Company. The Company transferred to WTRV 100% of the issued and outstanding shares of White River Holdings capital stock in exchange for 1,200 shares of WTRV’s newly designated non-voting Series A Convertible Preferred Stock. Subject to certain terms and conditions set forth in the Certificate of Designation of the Series A, the Series A will become convertible into 42,253,521 shares of WTRV’s common stock upon such time as WTRV has registered the underlying shares through a Form S-1. Upon effectiveness of the Form S-1, the Company intends to distribute 100% of the shares of WTRV to the Company’s shareholders of record as of September 30, 2022.

On August 23, 2022, the Company entered into a Share Exchange Agreement with Wolf Energy and Banner Midstream Corp., a Delaware corporation (“Banner Midstream”), and Trend Discovery Holdings Inc., a Delaware corporation (“Trend Holdings”).

Through its subsidiaries, the Company is engaged in three separate and distinct business segments: (i) technology; (ii) commodities; and (iii) financial.

Zest Labs offers the Zest Fresh solution, a breakthrough approach to quality management of fresh food, is specifically designed to help substantially reduce the $161 billion amount of food loss the U.S. experiences each year.

Banner Midstream is engaged in oil and gas exploration, production and drilling operations on over 10,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi. Banner Midstream also provides transportation and logistics services and procures and finances equipment to oilfield transportation service contractors.

Trend Holding’s primary asset is Trend Discovery Capital Management. Trend Discovery Capital Management provides services and collects fees from entities. Trend Holdings invests in a select number of early stage startups each year as partwholly owned subsidiary of the fund’s Venture Capital strategy.

440IoT is a cloud and mobile software developer based near Boston, Massachusetts and is a software development and information solutions provider for cloud, mobile, and IoT (Internet of Things) applications.

Developments During Fiscal 2020

Acquisition of Trend Discovery

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 (“Trend Holdings”) for the Company to acquire 100% of Trend Holdings pursuant to a merger of Trend Holdings with and into the Company (the “Merger”). The Merger was completed on the May 31, 2019 and as agreed in the Merger Agreement, the Company is the surviving entity in the Merger and the separate corporate existence of Trend Holdings has ceased to exist.

Trend Holding’s primary asset is Trend Discovery Capital Management. Trend Discovery Capital Management provides services and collects fees from entities including Trend Discovery LP and Trend Discovery SPV I. Trend Discovery LP and Trend Discovery SPV I invest in securities.  Neither Trend Holdings nor Trend Discovery Capital Management invest in securities or have any role in the purchase of securities by Trend Discovery LP and Trend Discovery SPV I. In the near-term, Trend Discovery LP’s performance will be driven by its investment in Volans-i, a fully autonomous vertical takeoff and landing (“VTOL”) drone delivery platform.  Trend Discovery LP currently owns approximately 1% of Volans-i and has participation rights to future financings to maintain its ownership at 1% indefinitely. More information can be found at flyvoly.com. 

Company. The Company does not intend to acquire any other companiesacquired 51,987,832 shares of Wolf Energy common stock in exchange for all of the financial services industry.

Acquisitioncapital stock of Banner Midstream Corp.

On March 27, 2020,owned by Wolf Energy. Upon effectiveness of the Form S-1, the Company acquired Banner Midstream Corp.,intends to distribute 100% of the shares of Wolf Energy to the Company’s shareholders of record as of September 30, 2022.

On December 7, 2022, Agora entered into a Delaware corporationMaster Services Agreement (“Banner Midstream”MSA”), pursuant a Stock Purchase Agreement, dated March 27, 2020 (the “Banner Purchase Agreement”), between the Company and Banner Energy Services, with BitNile, Inc., a Nevada corporation and former parent companywholly owned subsidiary of Banner MidstreamAult Alliance, Inc. (“Banner Parent”AAI”). Pursuant, governing the relationship between the parties and the services provided by Agora to the Banner Purchase Agreement,Company, which include providing the Company acquired 100% of the outstanding capital stock of Banner Midstreamwith digital assert mining hosting services in consideration for 8,945 shares of common stock of the Company valued at $0.544 per share and assumed up to $11,774 in short-term and long-term debt of Banner Midstream and its subsidiaries.

Banner Midstream has four operating subsidiaries: Pinnacle Frac Transport LLC, a Texas limited liability company (“Pinnacle Frac”); Capstone Equipment Leasing LLC, a Texas limited liability company (“Capstone”); White River Holdings Corp., a Delaware corporation (“White River”); and Shamrock Upstream Energy LLC, a Texas limited liability company (“Shamrock”). Pinnacle Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield transportation service contractors. These two operating subsidiaries of Banner Midstream are revenue producing entities. White River and Shamrock are engaged in oil and gas exploration, production, and drilling operations on over 10,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi.

The Company issued 8,945 shares of common stock (which Banner Parent issued to certain of its noteholders) and assumed $11,774 in debt and lease liabilities of Banner Midstream, per the Banner Purchase Agreement. The Company’s Chief Executive Officer and another director recused themselves from all board discussions on the acquisition of Banner Midstream as they are stockholders and/or noteholders of Banner Midstream. The transaction was approved by all of the disinterested members of the Board of Directors of the Company. The Chairman and CEO of Banner Parent is a former officer of the Company and is currently the Principal Accounting Officer of the Company and Chief Executive Officer and President of Banner Midstream.

Commitment on Secured Funding

The Company has secured a commitmentexchange for a $35 million long-term loan from an institutional lendermonthly fee to make additional investmentsbe set out in the energy sector.applicable service orders. The supply-side shock from OPEC production increases coupled with the demand-side impactterms of the COVID-19 pandemic is continuingthat MSA have not been met due to drive oil prices to historic lows, resulting in unprecedented investment opportunities. This financing positionslack of capital by the Company to take advantagebring its 12MW of these unique investment opportunities in the energy market. The loan commitment specifies a 20-year term and will carry a 6.25% interest rate. The agreement is pending final review and is not guaranteed to close.hosting power online.

ConversionOn January 11, 2023, the Company made the decision to withdraw Agora’s S-1 registration statement for an initial public offering, due to market conditions as well as numerous regulatory delays with respect to factors beyond the Company’s control related to accounting for the nascent industry of Credit Facility to Common SharesBitcoin mining.

TheOn January 24, 2023, the Company converted all principalentered into an At-The-Market Issuance Sales Agreement (“ATM”) with Ascendiant Capital Markets, LLC (“Ascendiant”), pursuant to which the Company could issue and interest in Trend SPV’s credit facility intosell from time to time, through Ascendiant, shares of the Company’s common stock on March 31, 2020.with offering proceeds of up to $3,500,000. The conversionpurpose of the ATM was to ensure sufficient liquidity for the Company to continue as a going concern. Upon the sale of approximately $2,525$3,500,000 through the ATM, the Company terminated the ATM in June 2023.

On March 6, 2023, the Company entered into an Amendment to the Share Exchange Agreement dated as of principalFebruary 8, 2023 by and $290among AAI, the owner of accrued interest resultedapproximately 86% of BNC, as well as certain individuals employed by AAI, providing for the acquisition of all of the outstanding shares of capital stock of BNC, in exchange for (i) 8,637.5 shares of newly designated Series B Convertible Preferred Stock of the Company issued to AAI, and (ii) 1,362.5 shares of newly designated Series C Convertible Preferred Stock of the Company to be issued to the individuals employed by AAI. The Company accounted for this transaction as an asset purchase.

Description of Business

Bitnile.com, Inc.

Overview

BitNile.com, Inc. (“BNC”) is in the issuanceembryonic stage of 3,855 sharesdevelopment yet represents a significant development in the online metaverse landscape, offering immersive, interconnected digital experiences that are engaging, and dynamic. By integrating various elements such as virtual markets, real world goods marketplaces, gaming, social activities, sweepstakes, and more, BNC aims to revolutionize the way people interact online. BNC’s rapidly growing virtual world, BitNile.com (the “Platform”) is accessible via almost any device using a web browser, does not require permissions, downloads or apps, and the Platform can be enjoyed without the need for bulky and costly virtual reality headsets.

BNC’s business strategy revolves around creating a seamless, all-encompassing platform that caters to various user needs and interests. The Platform’s strategic pillars include: (i) leveraging cutting edge technology to offer a user-friendly, browser-based platform compatible with Virtual Reality (“VR”) headsets and other modern devices for an enhanced experience; (ii) providing a diverse range of common stock atproducts and experiences that caters to users with different interests and preferences; (iii) fostering global connections and a valuesense of $0.59 per share. This transaction resultedcommunity among users, encouraging socialization and collaboration; and (iv) focusing on continuous innovation to stay ahead of industry trends and customer expectations.

Customers

BNC targets a broad audience, including: (i) tech-savvy individuals seeking immersive digital experiences; (ii) gamers of all skill levels interested in a gaindiverse array of $541 upon conversion.gaming options; (iii) collectors and traders of digital assets, such as virtual real estate, digital art, and unique collectibles; (iv) shoppers seeking a convenient, intuitive platform for purchasing real world goods; (v) users seeking either social interaction and global connectivity in a virtual environment or an immersive shopping experience that allows real world shopping in a virtual environment; (vi) creators of virtual spaces within our virtual online environment; and (vii) business owners and marketers seeking to have an online presence with a 3D virtual online environment.

Recent Developments

Tech-savvy Individuals

Tech-savvy individuals are drawn to BNC due to its innovative, cutting-edge technology and immersive virtual experiences. These users are likely to engage with the Platform’s virtual markets, trading digital assets like virtual real estate, world and personal space design, digital art and unique collectibles. They may also be early adopters of VR headsets, using them to explore the metaverse and interact with other users in social hubs.

Gamers of All Skill Levels

BNC attracts gamers through its wide range of gaming options, providing a diverse and comprehensive selection. The platform offers sweepstakes gaming experiences, allowing gamers to enter contests and compete against fellow players for both virtual and real money prizes. By participating in sweepstakes games, gamers can assess and demonstrate their skills in comparison to others. Additionally, BNC facilitates social gaming experiences, enabling users to engage with one another while playing single player games equipped with chat features. The platform also plans to introduce casual and multiplayer games, fostering collaboration and communication among gamers who seek a shared gaming experience. Competitive gamers have the opportunity to exhibit their abilities by engaging in contests of skill, which provide a platform for earning recognition and winning prizes.

Collectors and Traders of Digital Assets

BNC’s virtual markets cater to users interested in collecting, trading, and investing in digital assets. These users will be able to interact with the Platform’s offerings by buying, selling, and trading digital assets, such as virtual real estate, digital character skins, digital art, and unique collectibles; exploring and engaging with the digital art galleries and museums featured in the metaverse, and attending virtual events and auctions for exclusive digital asset releases and limited-edition collectibles.

Shoppers Seeking Real world Goods

Users looking for a convenient, intuitive platform to purchase real world goods can explore BNC’s real world goods marketplaces, which will offer a diverse range of products. These users can browse and purchase items from categories such as fashion, electronics, travel, and home goods; interact with virtual showrooms and product demonstrations to gain a better understanding of the products they’re interested in, and participate in virtual events, sales, and promotions to discover new products and take advantage of special offers.

Social Seekers and Global Connectors

BNC is anticipates it will attract users who prioritize social interaction and global connectivity within a virtual environment. Our future plans involve offering multiple avenues through which users can engage with the platform's offerings. This includes participating in diverse social hubs, facilitating the opportunity to meet and interact with individuals from around the world. Users will have the ability to collaborate on projects, exchange ideas, and forge new friendships within the metaverse. Additionally, they will have the freedom to build and personalize private spaces, allowing them to host virtual gatherings, parties, or events for their friends and online communities. Furthermore, users can look forward to attending virtual events, concerts, and conferences, providing them with opportunities to connect with like-minded individuals who share their interests and passions.

By understanding its target customers and the ways in which they interact with BNC’s various products and experiences, the Platform can effectively tailor its offerings to meet the needs and preferences of its diverse user base.

Products

BNC intends to offer an extensive range of products and experiences designed to cater to a diverse audience with varied interests and preferences. By providing a comprehensive suite of offerings, the Platform aims to attract and engage users, creating a vibrant and dynamic metaverse environment. The following is an expanded list of BNC’s current and planned products and experiences, most of which remain in development:

By planning to offer a diverse and comprehensive range of products and experiences, BNC aims to create a vibrant and engaging metaverse platform that appeals to users with a wide array of interests and preferences.

Industry

The metaverse industry is experiencing rapid growth and expansion, driven by advances in technology, increased interest in virtual experiences, and the rise of digital economies. Key trends include: the integration of virtual and physical worlds; the integration of artificial intelligence (“AI”) and machine learning in virtual environments; VR and Augmented Reality (“AR”) technologies that are becoming more accessible and affordable, enabling a wider audience to engage with the metaverse; the rise of virtual concerts, events, and conferences within the metaverse, providing new opportunities for entertainment and networking; the emergence of virtual economies and markets; and the growing importance of socialization and community-building in digital spaces.

User Adoption and Growth

The growing popularity of virtual experiences and digital platforms has led to a surge in user adoption and engagement in the metaverse industry. A number of factors contribute to this growth, including: increased accessibility of VR and AR technologies, making immersive experiences more affordable and widely available; the ongoing digitization of various aspects of everyday life, from work and education to entertainment and socialization, which drives users to seek out new digital experiences; the COVID-19 pandemic, which accelerated the adoption of digital platforms and virtual experiences as people adapted to remote work, learning, and social distancing measures; greater connectivity and high-speed internet accessibility, rapid technological advancements and improved infrastructure, which have led to more people being able to access the metaverse and other virtual environments, thereby bolstering engagement and participation; the development of innovative gaming and entertainment experiences for whom the metaverse provides a platform for unique, immersive experiences that surpass traditional digital games or entertainment, contributing to its escalating popularity; and growth in ecommerce and digital business opportunities. Management believes that the metaverse offers a new domain for businesses to engage with consumers, driving its adoption in various sectors, including retail, real estate, and marketing.

Integration of Virtual and Physical Worlds

One of the key trends in the metaverse industry is the growing integration of virtual and physical worlds, enabling users to seamlessly transition between digital and real-world experiences. This trend is evident in: (i) the emergence of virtual marketplaces where users can trade digital assets and purchase real world goods; (ii) the incorporation of AR and VR technologies in retail, entertainment, and other industries, providing immersive, interactive experiences that blur the lines between the digital and physical realms; (iii) the development of virtual environments that replicate real world locations, allowing users to explore and interact with digital versions of familiar places; and (iv) the integration of virtual and physical realms in the metaverse presents new opportunities for businesses to reach and engage with their target audiences in both spaces.

Virtual Economies and Markets

The metaverse industry is witnessing the rise of virtual economies and markets, where users can trade digital assets, such as virtual real estate, digital art, and unique collectibles. Key factors driving this trend include: development of cryptocurrencies and blockchain technology, enabling transparent transactions in digital markets; growing interest in non-fungible tokens (“NFTs”) and digital collectibles, which has led to the creation of new marketplaces and trading platforms for these assets; the realization of the potential for virtual goods to hold and accrue value over time; expanding opportunities for creative expression and entrepreneurship within the metaverse, incentivizing users to participate in virtual economies and trade digital assets; increasing global connectivity and internet penetration, enabling a larger user base to engage in virtual economies and markets, and collaborations between established brands and the metaverse industry, introducing real-world businesses and their customer bases to virtual economies and markets.

Socialization and Community Building in Digital Spaces

The importance of socialization and community building in digital spaces is another significant trend in the metaverse industry. As users spend more time in virtual environments, platforms are placing a greater emphasis on fostering connections and interactions among users. This trend can be observed in: the creation of social hubs, virtual events, and gatherings designed to bring users together and encourage networking, collaboration, and communication; the integration of social media and messaging features within metaverse platforms, allowing users to stay connected with friends and communities while exploring virtual worlds; the development of user-generated content and customization tools, empowering users to create unique experiences and contribute to the growth and expansion of the metaverse; implementation of voice and video chat and real-time communication features, enhancing the sense of presence and fostering more immersive social experiences in virtual environments; collaboration between brands, influencers, and metaverse platforms to host virtual events, concerts, and exhibitions, creating shared experiences and strengthening community bonds and virtual education and learning communities, providing opportunities for knowledge sharing, skill development, and collaborative learning in the metaverse.

The metaverse industry is experiencing rapid growth and transformation, driven by, among other factors, technological advancements, increased user adoption, and the emergence of virtual economies and markets. As the industry continues to evolve, it will be essential that BNC stay informed of key trends and driving forces shaping the future of the metaverse landscape and adapt to those trends as they arise.

Business Operations

BNC’s focuses on delivering a comprehensive, immersive, and interconnected metaverse experience. To achieve this, management has identified several core strategic initiatives that will guide the Platform’s growth and development.

Technological Innovation and User Experience

BNC places a strong emphasis on leveraging technology to create a user-friendly experience. By offering a browser-based platform that is compatible with VR headsets and other modern devices, BNC aims to ensure accessibility and convenience for users across various platforms. BNC intends to continuously invest in research and development to aim to stay at the forefront of technological advancements in the metaverse space, and work to ensure that users enjoy an unparalleled experience.

Diversification and Personalization

BNC’s strategy focuses on providing a diverse range of products and experiences that caters to users with different interests and preferences. By planning to offer a wide variety of activities, from virtual markets and real world goods marketplaces to gaming and tournaments, social interaction, world building, and live and virtual events, the Platform aims to attract a broad user base and promote user engagement. Additionally, BNC intends to emphasize personalization, allowing users to customize their experiences and tailor the Platform to suit their particular needs and tastes.

Community Building and Global Connections

BNC recognizes the importance of fostering a strong sense of community and global connectivity among the Platform’s users. BNC intends to implement various features and initiatives designed to encourage socialization, collaboration, and networking among users from around the world. This will include the creation of social hubs, support for user-generated content, teams and communities, and the promotion of events and activities that bring users together.

Monetization and Revenue Generation

BNC’s business strategy includes developing diverse revenue streams to help ensure the Platform’s long-term sustainability and growth. Potential monetization strategies include charging fees for premium features, from sales and transactions on virtual markets and real world goods marketplaces, social sweepstakes gaming, real and virtual concerts and events, third party vendors and creators, and offering advertising opportunities for brands within the metaverse. Additionally, the Platform will explore partnerships and collaborations with other businesses and organizations to create new revenue-generating opportunities.

Compliance and Regulatory Management

To navigate the complex and evolving regulatory landscape, BNC will prioritize compliance with relevant laws and regulations in all jurisdictions where it operates. This includes data privacy and protection regulations, gaming, gambling, and sweepstakes regulations, and intellectual property rights. By maintaining a strong focus on regulatory compliance, BNC aims to minimize potential legal risks and build trust with users and partners.

Continuous Improvement and Adaptability

Finally, BNC’s business strategy emphasizes the importance of continuously evaluating and refining its offerings in response to changing market trends and user preferences. The Platform plans to actively seek user feedback and monitor industry developments to inform its ongoing product development and feature enhancements. This adaptability will, in management’s opinion, allow BNC to maintain its competitive edge and continue delivering a compelling metaverse experience for users.

Competition

BNC faces competition from existing metaverse platforms and new entrants, where its key competitors include: established metaverse platforms, such as Decentraland, The Sandbox, and Second Life, as well as companies that focus on the development of metaverse tools and platforms such as META (formerly known as Facebook); gaming-focused platforms, like Fortnite and Roblox; mixed reality platforms, like Microsoft Mesh, and social media platforms that integrate metaverse elements, such as META’s Horizon platform. Should our Platform gain widespread adoption, future competition may arise from additional competitors, including tech giants such as Apple, Google, or Amazon, which have the resources and infrastructure to develop their own metaverse platforms and ecosystems.

Market Segments and Niches

The metaverse industry can be broadly divided into several market segments and niches, each catering to different user needs and preferences: (i) gaming-focused metaverse platforms, such as Fortnite and Roblox, primarily cater to gamers and offer a wide range of gaming experiences and social interaction opportunities within virtual environments; (ii) in terms of VR and AR platforms, companies like META and Microsoft focus on developing hardware and software solutions to enable immersive VR and AR experiences, driving the adoption of these technologies in the metaverse; (iii) social and community-driven metaverse platforms like Second Life and BNC emphasize socialization, community building, and user-generated content, fostering connections and collaboration among users; and (iv) NFT and digital asset marketplaces, where these platforms, such as OpenSea and Decentraland, facilitate the trading of digital assets like virtual real estate, digital art, and unique collectibles, and thereby contribute to the growth of virtual economies. Meanwhile, hardware and platform developers, including Nvidia and Unity, serve as technology providers for numerous companies aiming to penetrate the metaverse market. Additionally, they are actively engaged in the development of their own metaverse platforms.

Differentiating Factors

With the increasing competition in the metaverse industry, it is crucial for BNC to differentiate itself by offering compelling features, experiences, or technologies. Some potential differentiating factors include:

The metaverse industry is characterized by a competitive landscape with numerous users, market segments, and niches. To succeed in this rapidly evolving market, BNC must continuously innovate and differentiate itself, by offering unique features, experiences, and technologies that cater to the diverse needs and preferences of users.

Regulatory Environment

BNC operates within a complex and evolving regulatory landscape, with key considerations including: data privacy and protection regulations, such as the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”); compliance with gaming, gambling, and sweepstakes regulations in various jurisdictions; and intellectual property rights and digital asset ownership.

BNC intends to offer a transformative digital experience by combining elements of virtual markets, real world goods marketplaces, gaming, social activities, world and personal spaces building, and sweepstakes gaming. We believe this unique integration will establish the Platform as a pioneer in the metaverse industry, catering to diverse user interests and needs. We believe that as the industry evolves and expands, BNC’s commitment to providing immersive and interconnected digital experiences will place it at the forefront of the metaverse revolution. By continuously innovating and adapting to the ever-changing digital landscape, BNC aims to offer limitless possibilities and opportunities for users, setting the stage for a truly inclusive and dynamic metaverse.

As the metaverse industry continues to grow and evolve, regulatory challenges and considerations are becoming increasingly important and additional or changing regulations may increase BNC’s costs. The unique nature of the metaverse, which often combines elements of virtual reality, gaming, social networking, and digital economies, presents a complex landscape for regulators to navigate.

Present Regulatory Challenges

The metaverse industry is currently grappling with several regulatory challenges, including:

Future Regulatory Challenges

As the metaverse industry continues to develop and expand, several future regulatory challenges are likely to emerge, including:

DescriptionGlossary of BusinessTerms

Zest LabsVirtual Reality: Virtual Reality (VR) refers to a computer-generated simulation or environment that can be experienced and interacted with using specialized hardware, such as headsets or gloves. It immerses users in a digital world that can replicate real-world or fantastical settings, providing a sense of presence and allowing for realistic, interactive experiences.

Metaverse Industry: The metaverse industry refers to the collective ecosystem of companies, technologies, and platforms involved in creating and developing the metaverse. The metaverse is a virtual universe or interconnected network of digital spaces where users can interact with each other and digital objects in real time. It aims to provide a shared, immersive, and persistent digital environment that transcends traditional online experiences.

Digital Economies: Digital economies refer to the virtual economies that exist within online platforms, games, or virtual worlds. They involve the exchange of digital goods, services, or currencies, which can have real-world value. In these economies, users can engage in various economic activities, such as buying and selling virtual items, earning virtual currencies, or participating in virtual marketplaces.

Augmented Reality: Augmented Reality (“AR”) is a technology that overlays digital information or virtual elements onto the real-world environment. AR enhances the user's perception of the physical world by integrating computer-generated graphics, sounds, or other sensory inputs into their view, typically through the use of smartphones, tablets, or AR glasses. It blends virtual content with the real world, providing an interactive and enriched experience.

Mixed Reality: Mixed Reality (“MR”) refers to the merging of real-world and virtual elements to create new environments and visualizations where physical and digital objects coexist and interact in real time. MR combines elements of both virtual reality and augmented reality, allowing users to experience and manipulate virtual objects within their physical surroundings. It enables a seamless integration of the real and virtual worlds, enhancing the user's perception and interactions.

Digital Character Skins: Digital character skins are virtual cosmetic items or appearances that can be applied to a character or avatar in a video game, virtual world, or online platform. These skins are purely aesthetic and do not affect gameplay mechanics. They allow users to customize the visual appearance of their digital persona, often offering unique designs, costumes, or visual effects that can be acquired or purchased within the virtual environment.

Non-Fungible Tokens: Non-Fungible Tokens (“NFTs”) are digital assets that represent ownership or proof of authenticity of a unique item or piece of content. Unlike cryptocurrencies such as Bitcoin, which are fungible and interchangeable, NFTs are distinct and indivisible. They are typically based on blockchain technology, providing a transparent way to verify ownership and track the provenance of digital assets, such as artwork, collectibles, virtual real estate, or in-game items. NFTs have gained popularity for their potential to revolutionize digital ownership and enable creators to monetize their digital creations.

AI (Artificial Intelligence): Artificial Intelligence refers to the development of computer systems that can perform tasks that typically require human intelligence. AI involves the creation of algorithms and models that enable machines to perceive, reason, learn, and make decisions or predictions based on data. It encompasses various subfields such as machine learning, natural language processing, computer vision, and robotics. AI aims to replicate or augment human intelligence to solve complex problems, automate processes, and improve efficiency across different domains.

Machine Learning: Machine Learning is a subset of AI that focuses on developing algorithms and models that enable computers to learn from data and make predictions or decisions without being explicitly programmed. ML algorithms learn patterns, relationships, and insights from training data, allowing them to generalize and make predictions or take actions on new, unseen data. It involves techniques such as supervised learning, unsupervised learning, and reinforcement learning. Machine learning has applications in various fields, including image recognition, natural language processing, recommendation systems, and predictive analytics.

Digital Identity: Digital identity refers to the online representation of an individual or entity within digital systems or platforms. It encompasses the collection of personal information, attributes, and credentials that uniquely identify an individual in the digital realm. Digital identity can include various elements, such as usernames, passwords, biometric data, email addresses, and social media profiles. It plays a crucial role in online authentication, access control, and personalized experiences across a range of digital services, including social media, e-commerce, banking, and government platforms. Digital identity management involves the secure and responsible handling of personal information to ensure privacy and protect against identity theft or misuse.

Corporate Information

BNC was incorporated in Nevada on January 9, 2023. BNC’s principal executive offices are located at 303 Pearl Parkway Suite 200, San Antonio, TX 78215, and our telephone number is (800) 762-7293. As of March 31, 2023, BNC had 17 employees, including ten full-time employees.

BNC’s website address is www.bitnile.com. BNC’s website and the information contained on, or that can be accessed through, that website will not be deemed to be incorporated by reference in and are not considered part of this Annual Report.

Agora

Following the Company’s sale of Trend Holdings, Agora’s only operating subsidiary, Bitstream, engages in the hosting of digital asset miners for the mining of Bitcoin.

Bitstream

Bitstream was originally organized to be our Bitcoin mining subsidiary. Due to regulatory challenges and delays with its planned initial public offering, Bitstream transitioned its business model from digital asset mining to hosting. Bitstream also divested all Bitcoin holdings. Bitstream entered into the aforementioned MSA with BitNile Inc. but due to limited capital has not been able to fulfill the terms of that MSA. The Company is devoting the majority of its capital going forward to its core business of the Platform and is not confident that Bitstream will become a viable hosting company in the future.

Zest Labs offers

Through its wholly owned subsidiary Zest, the Company has developed intellectual property that can offer freshness management solutions for fresh food growers, suppliers, processors, distributors, grocers and restaurants. ItsThe Company idled Zest’s operations in conjunction with litigation that was filed against Walmart and Deloitte for trade secret violations; the action against Deloitte was subsequently dismissed. In lieu of conducting operations in Zest, Fresh solutionthe Company is a cloud-based post-harvest shelf-lifeactively pursuing various licensing or sale opportunities of its intellectual property. As previously noted, the Company intends to transfer all of the common stock of Zest into Zest Holdings, which will own all of the intellectual property of Zest as well as the rights to any current and freshness management solution that improves delivered freshness of produce and protein and reduces post-harvest losses at the retailer due to temperature handling and processingfuture intellectual property litigation by 50% or more by intelligently matching customer freshness requirements with actual product freshness. It focuses on four primary value propositions – operational efficiency, consistent food freshness, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence at a pallet level. Zest Labs also offers its Zest Delivery solution that provides real-time monitoring and control for prepared food delivery containers, helping delivery and dispatch personnel ensure the quality and safety of delivered food.Zest.

On June 6, 2019, Zest Labs announced a strategic collaboration between AgroFresh and Zest Labs to strengthen their end-to-end solutions. AgroFresh will incorporate Zest Labs’ Zest Fresh™ solution into its FreshCloud™ Transit Insights platform. The agreement will utilize both companies’ resources and strengths to provide customers with a comprehensive solution that improves operations, increases visibility into produce shelf-life and reduces food waste.

Zest Labs was incorporated in the State of Delaware on September 23, 2004 under the name Intelleflex Corporation. Effective on October 28, 2016, Intelleflex Corporation changed its name to Zest Labs, Inc. to align its corporate name

Competition

The Company faces intense competition with its mission and the brand name ofrespect to its products and services.services in all markets in which it operates.

For a discussion on BNC competition see Business Overview for BNC above.

Sales and Marketing

Through the Platform, the Company intends to generate revenues through the sale of tokens or coins that provide the end user with interactive entertainment (game play) and durable goods principally for the PC and mobile platforms.

In fiscal year 2023, Bitstream changed its business model from digital asset mining to digital asset hosting. Bitstream has generated no revenue during 2023.

Government Regulations

Set forth below is an overview of the government regulations we presently face or could face as a result of our current and planned operations. As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our hosting and other activities. For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see “Risk Factors.”

For a discussion of BNC government regulation see Business Overview for BNC above.

Agora

Although there was a period of regulatory uncertainty ending in 2018, we believe that the SEC will not claim that Bitcoin is a security and therefore that Bitcoin will not be subject to the SEC’s regulation. The SEC has been active in pursuing its regulation of other cryptocurrencies by filing lawsuits and, more recently, administratively against a cryptocurrency that tried to register under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Further, the SEC’s chairman has given a number of speeches seeking firm regulatory authority over cryptocurrencies. Whether Congress will enact new legislation in this area is uncertain, although in June 2022, bipartisan legislation was introduced in the Senate. However, enhanced regulation may adversely affect our future Bitcoin hosting and other cryptocurrency activities. Moreover, there is a risk that the SEC may seek a way to regulate Bitcoin as a security.

Blockchain and Bitcoin are increasingly becoming subject to governmental regulation, both in the U.S. and internationally. State and local regulations also may apply to our activities and other activities in which we may participate in the future. Other governmental or semi-governmental regulatory bodies have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency business. For instance, the Cyber-Digital Task Force of the U.S. Department of Justice (the “DOJ”) published a report entitled “Cryptocurrency: An Enforcement Framework” in October 2020. This report provides a comprehensive overview of the possible threats and enforcement challenges the DOJ views as associated with the use and prevalence of cryptocurrency, as well as the regulatory and investigatory means the DOJ has at its disposal to deal with these possible threats and challenges.

Presently, we do not believe any U.S. or state regulatory body has taken any action or position adverse to Bitcoin with respect to its production, sale, and use as a medium of exchange; however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.

For example, in 2021 China banned Bitcoin mining. Additionally, lawmakers in New York recently approved legislation which would impose a two-year moratorium on certain cryptocurrency mining, including Bitcoin.

Although Bitstream is no longer actively engaged in digital asset mining, regulations affecting Bitcoin and other digital assets have a direct impact on its hosting business model. See “Risk Factors” at page 29 of this Report.

Environmental Compliance

The Zest Fresh value propositionCompany’s core operations through the Platform are virtual in nature and have minimal environmental impact, if any.

Our operations through Agora’s subsidiary Bitstream, are or may become subject to numerous laws and regulations relating to environmental protection and climate change. These laws and regulations change frequently, and the effect of these changes is often to reduce fresh food loss by improving quality consistency. Inimpose additional costs or other restrictions on our operations. We cannot predict the U.S. produce market, it is reportedoccurrence, timing, nature or effect of these changes. We also operate under a number of environmental permits and authorizations. The issuing agencies may take the position that roughly 30%some or all of post-harvest fresh food is lostthese permits and authorizations are subject to modification, suspension, or wastedrevocation under certain circumstances.

While we are currently not experiencing any material expenses related to the environmental compliance, we may become subject to environmental or other related laws and therefore not consumed. Both fresh food producers and retailers bear significant expense when harvested food is either rejectedregulations in the future, which may result from a number of causes, the likelihood of which would increase should we determine to initiate Bitcoin mining operations and/or due to early spoilage or reducednew regulations being considered. Please review the Risk Factors in value due to early ripening. Zest Labs believes that a significant portionItem 1A of this waste can be attributedReport and the paragraph that follows with regard to inconsistent quality or freshness basedpotential environmental and other compliance expenses.

On March 21, 2022, the SEC released proposed rule changes on variable post-harvest processingclimate-related disclosure. The proposed rule changes would require registrants, including the Company, to include certain climate-related disclosures in registration statements and handling. Fresh food producers and retailers manage food distribution and inventory basedperiodic reports, including information about climate-related risks that are reasonably likely to have a material impact on the harvest date,registrant’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements. The required information about climate-related risks would include disclosure of a registrant’s greenhouse gas emissions, information about climate-related targets and goals, and transition plan, if any, and extensive attestation requirements. The proposed new rules would also require companies to disclose multiple levels of climate impact, including primary direct impacts from the registrant’s own operations, as well as secondary and tertiary effects of the operations and uses by contractors that the registrant utilizes and end-users of the registrant’s products and/or services. If adopted as proposed, the rule changes will result in material additional compliance and reporting costs, including monitoring, collecting, analyzing and reporting the new metrics and implementing systems and hiring additional internal and external personnel with the assumptionrequisite skills and expertise to serve those functions. We expect that all food harvested on the same day will have the same freshness. However, studies have shown that harvest conditions and post-harvest handling can have a significant effect on the actual remaining freshness and, if not properly accounted for, can result in food loss or spoilage ahead of expectations. Zest Fresh empowers fresh food producers and retailers to significantly reduce the post-harvest loss by providing real-time guidance to process adherence, intelligent distribution and best handling practices, with a goal of providing significant financial savings to fresh food producers and retailers. 

Zest Labs has developed the industry’s first freshness metric called the Zest Intelligent Pallet Routing Code (“ZIPR Code”). The ZIPR Code has three main components: (i) Harvest Quality which sets total freshness capacity (for example, 12 days for strawberries), (ii) Handling Impact which reflects aging acceleration due to improper handling, and (iii) Future Handling which accurately reflects how the productrules will be handled (for example, store shelf temperature mayadopted in large part at least, and our compliance costs will be 40 degrees Fahrenheit insteadmaterial. However, following a June 2022 U.S. Supreme Court administrative decision, we expect a court challenge to any final rule promulgated by the SEC. We cannot predict the outcome of any such challenge.

Intellectual Property

The Company owns all of the ideal 34 degrees Fahrenheit). 

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

Zest Labs’ Zest Delivery solution helps to manage prepared food delivery from the restaurant throughintellectual property to the customer. Zest Delivery manages the delivery container environment, both monitoring and controlling the product condition. The value of Zest Delivery is to manage prepared meals in an ideal state for consumption, while accommodating extended pre-staging or delivery times. Extended pre-staging times are associated with “instant delivery” services of prepared meals, where the meals are often pre-staged in a delivery area ahead of demand. While pre-staging enables fast demand response time, it can result in prepared meals being staged for extended periods, which can potentially impact quality, value and safety. Zest Delivery monitors and controls the delivery container environment to preserve the prepared meal in ideal, ready to consume condition. Zest Delivery also provides the dispatcher with real-time remote visibilityPlatform. BNC’s software provider, MeetKai, owns various patents related to the condition of available meals and confirming quality priormetaverse which may or may not be transferred to dispatch. Zest Delivery provides automated, real-time visibility forBNC at a very distributed fleet of drivers, reflecting prepared meal food safety, quality and availability. Zest Delivery is offered to meal delivery companies based on the quantity of delivery containers and frequency of use.future date.

The Company through Zest Labs, currently holds rights to 6975 U.S. patents (with additional patents pending), numerous related foreign patents, and U.S. copyrights relating to certain aspects of its Zest Labs software, hardware devices including Radio-Frequency Identification (“RFID”)RFID technology, software, and services. In addition, Zest Labs has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services,” and the Zest, Zest Fresh and Zest Delivery logos, and numerous other trademarks and service marks. Many of Zest Labs’Zest’s products have been designed to include licensed intellectual property obtained from third-parties.third parties. Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs operates and seeks to operate, subject to the outcome of pending litigation and financing and, are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates.

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

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

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

Trend Capital Management

Before we acquired Trend Holdings in May 2019 by merging Trend Holdings with and into the Company, Trend Holdings was a financial services holding company with two primary subsidiaries: Trend Discovery Capital Management, LLC, a Delaware limited liability company (“Trend Capital Management”), and Barrier Crest, LLC, a Delaware limited liability company (“Barrier Crest”). 

Trend Capital Management was founded in 2011 and was Trend Holding’s primary asset.  Trend Capital Management provides services and collects fees from entities including Trend LP and Trend SPV, both of which invest in securities.  Trend Capital Management neither invests in securities nor have any role in Tend LP and Trend SPV’s purchase of securities.  The investment capital in Trend LP and Trend SPV is from individual limited partners, and not from the Company. 

In the near-term, Trend LP’s performance will be driven by its investment in Volans-i, a fully autonomous vertical takeoff and landing drone delivery platform (“Volans”).  Trend LP currently owns approximately 1% of Volans and has participation rights to future financings to maintain such ownership at 1% indefinitely. More information can be found at website. www.flyvoly.com, the contents of which are not incorporated into this report. 

Barrier Crest provides fund administration and fund formation services to institutional investors.  Barrier Crest provides fund administration services to Trend LP and Trend SPV.

Banner Midstream Corp.

Banner Midstream has four operating subsidiaries: Pinnacle Frac, Capstone, White River, and Shamrock. Pinnacle Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield transportation service contractors. These two operating subsidiaries of Banner Midstream are revenue producing entities. White River and Shamrock are engaged in oil and gas exploration, production, and drilling operations on over 10,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi.

Discontinued Operations of Ecoark Holdings Inc (prior to acquisition of Banner Midstream):

Pioneer Products

Pioneer Products, LLC, an Arkansas limited liability company (“Pioneer Products”) was located in Rogers, Arkansas and was involved in the selling of recycled plastic products and other products. Pioneer Products recovered plastic waste from retail supply chains and converted the reclaimed material into new consumer products which completed a closed loop and reduced waste sent to landfills. Pioneer Products was purchased by Ecoark, Inc. in 2012. Pioneer Products acquired Sable Polymer Solutions, LLC (“Sable”) in a stock transaction on May 3, 2016. In May 2018 the Ecoark Holdings Board of Directors (“Board”) approved a plan to sell Pioneer and Sable. Pioneer concluded operations in February 2019, and the sale of Sable’s assets was completed in March 2019. Relevant assets and liabilities are classified as held for sale and operations are classified as discontinued in the consolidated financial statements.

Magnolia Solar, Inc.

Magnolia Solar, Inc. is located in Albany, New York and was principally engaged in the development and commercialization of nanotechnology-based, high-efficiency, thin-film technology that can be deposited on a variety of substrates, including glass and flexible structures. Magnolia Solar was a subsidiary of Magnolia Solar Corporation that merged with Ecoark Inc. (“Ecoark”) on March 24, 2016 to create Ecoark Holdings and continued as a subsidiary of Ecoark Holdings. In May 2018 the Ecoark Holdings Board approved a plan to sell Magnolia Solar, and the sale was completed in May 2019. Relevant assets and liabilities are classified as held for sale and operations are classified as discontinued in the consolidated financial statements.

Discontinued Operations of Banner Midstream

Pinnacle Vac, LLC

Banner Midstream made the decision to discontinue the operations of its wholly owned subsidiary, Pinnacle Vac Service LLC (“Pinnacle Vac”) effective October 31, 2018 due to the inability of Pinnacle Vac’s management to develop a sustainable, profitable business model. All of the non-managerial staff of Pinnacle Vac were terminated on October 23, 2018 and all of its oilfield services operations were terminated on October 23, 2018.

The managerial staff of Pinnacle Vac was terminated on November 15, 2018 and Pinnacle Vac’s rental facility at Sligo Rd was vacated on November 15, 2018.

Pursuant to Financial Accounting Standards Board Accounting Standard Codification (“ASC”) ASC 205-20, Presentation of Financial Statements – Discontinued Operations, ASC-20-45-1B, paragraph 360-10-45-15, Pinnacle Vac will be disposed of other than by sale via an abandonment and termination of operations with no intent to classify the entity or assets as Available for Sale. Pursuant to ASC 205-20-45-3A, the results of operations of Pinnacle Vac from inception to discontinuation of operations will be reclassified to a separate component of income, below Net Income/(Loss), as a Loss on Discontinued Operations.

All of the equipment assets of Pinnacle Vac and the related loan liabilities will be subsequently transitioned into Capstone to continue servicing the debt. The remaining current assets of Pinnacle Vac will be used to settle any outstanding current liabilities of Pinnacle Vac. A loss contingency will be recorded if any of the outstanding liabilities or obligations of Pinnacle Vac resulting from this abandonment are reasonably estimable and likely to be incurred.

Competition

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

Trend Holdings and its subsidiaries have significant competition from larger companies with greater assets and resources.

Banner Midstream expects to encounter intense competition from entities having a business objective similar to theirs. Some of these competitors possess greater technical, human and other resources than they do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there are numerous potential target businesses that we could acquire, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.

Sales and Marketing

Zest Labs sells its products and services principally through direct sales efforts and the utilization of third-party agents. Zest Labs has marketing operations and programs for demand generation, public relations, and branding/messaging that are scaled based on market engagement and available resources.

Trend Holdings and its subsidiaries provide fund administration and fund formation services to institutional investors and market their services through private marketing.

Banner Midstream sells and provides services to its customers via a blanket master services agreement (MSA). Banner Midstream sells hydrocarbon to midstream providers such as Plains Marketing L.P.

Government Regulations

Zest Labs

Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates.  The Federal Communications Commission (the “FCC”), is responsible for the assignment of spectrum for non-government use in the United States in accordance with regulations established by an international organization known as the International Telecommunications Union (the “ITU”). Any ITU or FCC reallocation of radio frequency spectrum, including frequency band segmentation or sharing of spectrum, could cause interference with the reception of GPS signals and may materially and adversely affect the utility and reliability of Zest Labs’ products, which would, in turn, cause a material adverse effect on our operating results.

Banner Midstream

Oil and gas production are regulated under a wide range of federal and state statutes, rules, orders and regulations. State and federal statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. The states in which we operate, Texas, Louisiana, Oklahoma and New Mexico (the “Territory”), have regulations governing conservation matters, including provisions for the unitization or pooling of oil and gas properties, the establishment of maximum rates of production from oil and gas wells, the regulation of spacing, and requirements for plugging and abandonment of wells. Also, states in the Territory impose a severance tax on production and sales of oil, and gas within its jurisdiction. Failurecontinue to comply with these rules and regulations can result in substantial penalties. Our competitors in the oil and gas industry are subject to the same regulatory requirements and restrictions that affect our operations.

Environmental Compliance Expenses

We are currently not experiencing any material expenses related to the environmental compliance. Please review Risk Factors in Item 1A of this report with regard to potential environmental compliance expenses.

Research and Development

We have devoted a substantial amount of our resources to software and hardware development activities in recent years, principally for the Zest Labs initiatives. Ecoark Holdings believes that, analyzing the competitive factors affecting the market for the solutions and services its subsidiaries provide, its products and services compete favorably by offering integrated solutions to customers. The Company has incurred research and development expenses of $2,472 and $3,320 in the years ended March 31, 2020 and 2019, respectively, to develop its solutions and differentiate those solutions from competitive offerings. We incurred no capitalized software development costs in the years ended March 31, 2020 and 2019.

Intellectual Property

The Company, through Zest Labs, currently holds rights to 69 U.S. patents (with additional patents pending), numerous related foreign patents, and U.S. copyrights relating to certain aspects of its Zest software, hardware devices including Radio-Frequency Identification (“RFID”) technology, software, and services. In addition, Zest Labs has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services,” and the Zest, Zest Fresh and Zest Delivery logos, and numerous other trademarks and service marks. Many of Zest Labs’ products have been designed to include licensed intellectual property obtained from third-parties. Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates. 

Equipment

Banner Midstream is pursuing additional purchases of machinery and equipment to become a fully vertically integrated exploration and production company.

No Foreign Operations

No foreign operations are expected in connection with the Company’s business.

Seasonality

Our business experiences a certain level of seasonality due to Banner Midstream’s oil and gas exploration and transportation business. Demand for oil, natural gas and energy is typically higher in the third and fourth quarters resulting in higher prices. Due to these seasonal fluctuations, results of operations for individual quarterly periods may not be indicative of the results that may be realized on an annual basis. Seasonal weather conditions and lease stipulations can limit drilling and producing activities and other oil and natural gas operations in a portion of our operating areas of trucking business. These seasonal anomalies can pose challenges for the drilling objectives and can increase competition for equipment, supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay operations, thus, lowering the demand for trucking services.

Dependence on One or Few Major Customers

From time to time we may have customers generating 10 percent or more of the Company’s consolidated revenues, and loss of such customers could have a material adverse effect on the Company.

Employees

AtIn the fiscal year ended March 31, 2020,2023, we did not recognize any revenue from continuing operations, so a customer concentration risk would not be applicable.

Human Capital

As of the date of this Annual Report, we have 6 full-time employees dedicated to all operations other than BNC. BNC had 36 full time17 employees, including ten full-time employees.

Our ability to successfully execute our strategic initiatives is highly dependent on recruiting and 98 owner-operator truckretaining skilled personnel. Our compensation philosophy is based on incentivizing and rewarding performance, with alignment of individual, corporate, and shareholder interests. Compensation includes salaries, benefits, and equity participation. Our owner operator drivers leased onare not salaried employees.

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

Our Code of Business Conduct and Ethics is designed to ensure that all employees maintain the highest standards of business conduct in every aspect of their dealings with each other, customers, suppliers, vendors, service providers, shareholders, and governmental authorities.

We believe our relations with our employees and drivers are representedsatisfactory.

Proposed Spin-Offs

As previously discussed, the spin-off of the legacy non-core subsidiaries is subject to various factors. Although White River and Banner Midstream were divested and transferred to WTRV in July 2022 and Wolf Energy in September 2022, respectively, in reverse merger transactions, the planned and announced stock dividends to the Company shareholders of record as of September 30, 2022 is subject to the SEC’s approval of Form S-1 registration statements for WTRV and Wolf Energy, which are still undergoing review by the SEC. The Company still has full intentions to distribute 100% of the common stock it received from Wolf Energy and common stock it will receive from WTRV upon the conversion of preferred stock, upon the effectiveness of the aforementioned Form S-1’s.

The spin-off of Zest Labs into Zest Holdings is expected to occur prior to quarter-end September 30, 2023.

As previously noted, the Company made the decision in January 2023 to terminate Agora’s planned initial public offering. Instead, Agora will remain in the Company as a labor unionmajority owned subsidiary due to potential synergies which could be achieved with BNC.

Corporate Information

Our principal executive offices are located at 303 Pearl Parkway, Suite 200, San Antonio, TX 78215, and our telephone number is (800) 762-7293. Our website address is http://bitnile.net/. Our website and the information contained on, or a collective bargaining agreement.  We considerthat can be accessed through, our employee relationswebsite will not be deemed to be positive.incorporated by reference in and are not considered part of this Annual Report.

ITEM 1A. RISK FACTORS

Item 1A. Risk Factors

There are numerous risks affecting our business, many of which are beyond our control. An investment in our common stock involves a high degreesignificant risks. You should carefully consider the following risks and all other information set forth in this Annual Report before deciding to invest in our common stock. If any of the events or developments described below occurs, our business, financial condition and results of operations may suffer. In that case, the value of our common stock may decline and you could lose all or part of your investment.

You should consider each of the following risk factors and any other information set forth in this Annual Report and the other reports filed by the Company with the SEC, including the Company’s financial statements and related notes, in evaluating the Company’s business and prospects. The risks and uncertainties described below are not the only ones that impact on the Company’s operations and business. Additional risks and uncertainties not presently known to the Company, or that the Company currently considers immaterial, may not be appropriate for investors who cannot afford to lose their entire investment.also impair its business or operations. If any of the following risks actually occur, ouroccurs, the Company’s business and financial condition, results or operating resultsprospects could be materially harmed. This could causePlease also read carefully the tradingsection entitled “Note About Forward-Looking Statements” at the beginning of this Annual Report.

Risks Relating to Our Company and Our Financial Condition

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

As of July 10, 2023, we had cash (not including restricted cash) of approximately $3,492. We have not been profitable on an annual basis since inception and had previously incurred significant operating losses and negative cash flow from operations. We recorded a net loss of approximately $87,361,603 and $10,554,452 for the fiscal years ended March 31, 2023 and 2022. In fiscal year 2023, our net loss was increased by non-cash net gain of approximately $32.9 million from a change in the fair value of our preferred stock and warrant derivative liabilities due to the weakness of our stock price and $14.4 million related to a day one derivative income on the Series B and Series C preferred stock issuances. Furthermore, in fiscal year 2023, our net loss was reduced by non-cash net losses of approximately $54.5 million and $20.7 million related to the loss on acquisition of BitNile and the change in fair value of the White River investment respectively. Fiscal year 2022 also had non-cash charges gains of approximately $15.4 million from a change in the fair value of our warrant derivative liabilities. We will likely continue to incur losses and experience negative cash flows from operations for the foreseeable future. If we cannot achieve positive cash flow from operations or net income, it may make it more difficult to raise capital based on our common stock to decline, and you may lose all or part of your investment. In addition to the risks outlined below, risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations.on acceptable terms.

Potential risks and uncertainties that could affect our operating results and financial condition include, without limitation, the following:

RISK FACTORS RELATING TO OUR COMPANY

We have experienced losses since our founding. A failure to obtain profitability and achieve consistent positive cash flows would haveOur independent registered public accounting firm has issued a significant adverse effectgoing concern opinion on our business.

We have incurred operating losses since our inception, including a reported net loss of $12,137consolidated financial statements for the year ended March 31, 20202023 as compared to $13,650a result of our continued net losses, working capital deficiency, and accumulated deficit.  

The accompanying financial statements for the year ended March 31, 2019. Net cash used in operating activities was $5,490 for2023 have been prepared assuming the year ended March 31, 2020,Company will continue as compared to net cash used in operating activitiesa going concern, but the ability of $9,040 for the year ended March 31, 2019. As of March 31, 2020, we had cash (including restricted cash) of $406, a working capital deficit of $16,689, and an accumulated deficit of $128,023. Some of our debt and equity instruments may contain derivative liabilities which may result in variability in our working capital deficit as these liabilities are re-measured each reporting period. Prior to the acquisition of Banner Midstream, we have funded our operations principally through the sale of our capital stock and debt instruments.

In their audit report for the fiscal year ended March 31, 2019, our independent auditors reported that there is substantial doubt about the Company’s abilityCompany to continue as a going concern depends on the Company obtaining adequate capital to carry outfund 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 and debt securities. 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, and reduce the scope of the Company’s development of its continuing operations. Continuing as a going concern is dependent upon its ability to successfully secure other sources of financing and the ability to conduct 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.

Because we will require additional capital and may need or desire to engage in strategic transactions in the future to support the growth of our metaverse platform, and our inability to generate and obtain such capital or to enter into strategic transactions may be constrained due to, among other items, contractual limitations under the Series B and C preferred stock, our business, plan. Although, we alleviatedoperating results, financial condition and prospects could be material and adversely affected.

The Company announced the substantial doubt fortermination of its ATM on June 16, 2023, as substantially all of the fiscal year ended March 31, 2020$3,500,000 proceeds had been raised by the Company through Ascendiant. As of the date of this Annual Report, the Company is exploring additional opportunities to generate capital to continue operating as a resultgoing concern but does not have any formal contractual agreements in place.

The certificates of designation of the Series A, B and C preferred stock contain certain provisions that limit our ability to act without the consent of their holder, AAI. This means that AAI could prevent us from entering into a strategic transaction even if we felt it was the best interest of the Company raising over $6 millionand its shareholders.

Further, if we raise additional funds through future issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity or debt securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

We have substantial amounts of indebtedness. This indebtedness and the covenants contained in the exerciseLoan Agreements substantially limit our financial and operating flexibility. Further, conversions of warrants and the enteringNotes will dilute the ownership interest of our existing shareholders.

On April 27, 2023, we entered into a $35 million secured fundingSecurities Purchase Agreement (the “SPA”) with certain accredited investors (the “Investors”) providing for the issuance of (i) Senior Secured Convertible Notes (individually, a “Note” and collectively, the “Notes”) with an aggregate principal face amount of $6,875,000, which Notes are convertible into shares of our common stock (the “Conversion Shares”); and (ii) five-year warrants to purchase an aggregate of 2,100,905 shares of common stock. The maturity date of the Notes is April 27, 2024.

Pursuant to the SPA, we and certain of our subsidiaries and Arena Investors, LP, as the collateral agent on behalf of the Investors (the “Agent”) entered into a security agreement (the “Security Agreement”), pursuant to which we (i) pledged the equity interests in our subsidiaries and (ii) granted to the Investors a security interest in, among other items, all of our deposit accounts, securities accounts, chattel paper, documents, equipment, general intangibles, instruments and inventory, and all proceeds therefrom (the “Assets”). In addition, pursuant to the Security Agreement, the subsidiaries granted to the Investors a security interest in its Assets and, pursuant to a subsidiary guarantees, jointly and severally agreed to guarantee and act as surety for our new business ventureobligation to repay the Notes and other obligations under the SPA, the Notes and Security Agreement (collectively, the “Loan Agreements”).

The Notes have a principal face amount of $6,875,000 and bear no interest (unless an event of default occurs) as they were issued with Banner Midstream,an original issuance discount of $1,375,000. The maturity date of the global pandemic caused by COVID-19 has brought uncertaintyNotes is April 27, 2024. The Notes are convertible, subject to certain beneficial ownership limitations, into Conversion Shares at a price per share equal to the global workforcelower of (i) $3.273 or (ii) the greater of (A) $0.504 and (B) 85% of the lowest volume weighted average price of our common stock during the ten (10) trading days prior to the date of conversion (the “Conversion Price”). The Conversion Price is subject to adjustment in the event of an issuance of common stock at a price per share lower than the Conversion Price then in effect, as well as the capital markets.upon customary stock splits, stock dividends, combinations or similar events.

The COVID-19 worldwide pandemic has disruptedLoan Agreements contain standard and customary events of default including, but not limited to, failure to make payments when due under the global economyNotes, failure to comply with certain covenants contained in the Loan Agreements, or our bankruptcy or insolvency. Such agreements contain restrictions that substantially limit our financial flexibility, over and supply chains.above the negative covenants contained the transaction document relates to the Series A Preferred Stock, which themselves are substantial. These agreements place limits on our ability to (i) incur additional indebtedness or the Agent otherwise agrees, and (ii) grant security to third persons, among many other items. These restrictions limit our ability to finance our future operations and capital needs. In addition, our substantial indebtedness could require us to dedicate a substantial portion of our cash flow, if any, from the anticipated operations to making payments on our indebtedness and other liabilities, which would limit the availability of funds for working capital and other general corporate purposes; limit our flexibility in reacting to changes in the industries in which we operate or in our competitive environment; place us at a competitive disadvantage compared to those of our competitors who have less debt than we do, and limit our ability to borrow additional funds and increase the costs of any such additional borrowings. If we are unable to pay our debts, including the Notes as they become due and payable, we would become insolvent.

The short-term and long-term effectsconversion of some or all of the COVID-19 pandemic, including actions taken by businesses and governments, have adversely affectedNotes will dilute the global economy, disrupted global supply chains and created significant volatilityownership interests of our existing shareholders. Any sales in the financial markets. The extent to whichpublic market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the COVID-19 pandemic adversely affectsexistence of the Company’s business, financial condition, resultsNotes may encourage short selling by market participants because the conversion of operation and liquidity will depend on future developments, which are uncertain and cannot be predicted. Disruptions and/or uncertainties related to the COVID-19 pandemic for a sustained periodNotes would likely depress the price of time could result in delays or modifications to the Company’s strategic plans and initiatives and hinder the Company’s ability to achieve its strategic goals.our common stock.

We cannot predict our future results because we have a limitedvirtually no operating history.

We acquired our metaverse business on March 6, 2023, which is the Company’s core business for future revenue growth. Given our highly limited operating history, it may be difficult to evaluate our future performance or prospects. You should consider the uncertainties that we may encounter as a company that should still be considered an early stageearly-stage company. These uncertainties include:

If we are not able to address successfully some or all of these uncertainties, we may not be able to expand our business, compete effectively or achieve profitability.

We may require additional financingBecause we must periodically evaluate our intangible assets and investment holdings for impairment, we could be required to support our operations. Any new equity financingrecognize non-cash impairment charges in future periods which could have a substantial dilutive effectmaterial adverse impact on our existing stockholders.operating results.

The Company incurred non-cash charges of $54.5 million and $20.7 million related to the loss on the acquisition of BNC as well as the change in fair value of its investment holding, pending dividend distribution, of White River. The Company will assess these investments for impairment going forward, and if the carrying value of the holding on the Company’s balance sheet exceeds its estimated fair value, we will record an impairment charge.

As of March 31, 2020,2023, we had cash (including restricted cash)not generated revenue in the Company’s core business of $406, a working capital deficitthe Platform, and the inability to generate significant revenue in this nascent business could adversely affect our business, financial condition, results of $16,689,operations and an accumulated deficit of $128,023. While we expect cash can be provided by a $35,000 secured debt financing, the final agreement is still pending and not guaranteed to close. prospects.

The Company had not generated any revenue from the Platform as of March 31, 2023, and the revenue generated during the first quarter of fiscal year 2024 has alsobeen minimal.

If the Company is unable to generate significant revenue in the near future related to gaming, sweepstakes, sponsorship or advertising within its metaverse platform then its business model in the metaverse will be difficult to fund through continuing operations and additional capital will need to be raised substantialby the company to grow its business and continue operating cash throughits business as a going concern. Our contract with MeetKai has many performance obligations that, if breached, could impair our business, financial condition, results of operations and prospects.

If we do not continue to satisfy the exerciseNasdaq Stock Market’s continued listing requirements, our common stock could be delisted from the Nasdaq.

The listing of our warrants issuedcommon stock on the Nasdaq is contingent on our compliance with the Nasdaq’s conditions for continued listing. We are not presently in capital raises overcompliance with all such conditions, and it is possible that we will fail to meet one or more of these conditions in the past two years. We continuefuture.

In connection with our acquisition of BNC on March 3, 2023 the Company received a letter from Nasdaq indicating that certain of the terms of the Series B Preferred Stock and the Series C Preferred Stock, which subject to seek additional financingvarious limitations are convertible into a combined total of 13,333,334 shares of the Company’s common stock, would constitute a change of control requiring shareholder approval under Nasdaq Listing Rule 5110. Specifically, Listing Rule 5110(a) states that “[a] Company must apply for initial listing in orderconnection with a transaction whereby the Company combines with a non-Nasdaq entity, resulting in a change of control of the Company...” Nasdaq also asked certain questions and requested certain documents and information related to support current operationsvarious aspects of the BitNile.com transaction and other matters, including the transaction’s valuation and the process by which it arose, was negotiation and closed.

Further, on June 21, 2023, the Company received a letter (the “Letter”) from Nasdaq notifying the Company that Nasdaq has determined that the Company has violated Nasdaq’s voting rights rule set forth in Listing Rule 5640 (the “Voting Rights Rule”). The alleged violation of the Voting Rights Rule relates to the issuance of (i) 8,637.5 shares of the newly designated Series B Preferred Stock and (ii) 1,362.5 shares of newly designated Series C Preferred Stock (collectively, the “Preferred Stock”) in connection with the acquisition of BNC as well as the securities of Earnity, Inc. beneficially owned by BitNile (collectively, the “Assets”) pursuant to the Share Exchange Agreement (the “Agreement”) by and among the Company, AAI and certain employees of AAI, which was previously disclosed on Current Reports on Form 8-K filed by the Company on February 14, 2023 and March 10, 2023. The Preferred Stock has a collective stated value of $100,000,000 (the “Stated Value”), and votes on an as-converted basis, representing approximately 92.4% of the Company’s outstanding voting power on a fully diluted basis at the time of issuance, assuming shareholder approval for the voting of these shares.

According to the Letter, because the Preferred Stock was not issued for cash, Nasdaq compared the value of the Assets to the Stated Value and determined that the value of the Assets was less than the Stated Value and that the voting rights attributable to the Preferred Stock has the effect of disparately reducing the voting rights of the Company’s existing shareholders. The Staff looked at the total assets and shareholders’ equity of BNC as of March 5, 2023, as well as the market capitalization of AAI prior to entering into the Agreement and immediately after closing of the transaction in determining, in Nasdaq’s opinion, the value of the Assets. The Letter did not make any reference to the projections prepared by AAI as to the future potential vertical integration of the business of BNC nor to the fairness opinion that we obtained from an independent party prior to closing of the transaction, which supported the Stated Value of the Preferred Stock for the total value of the Assets, both of which the Company provided to the Staff prior to receipt of the Letter.

According to the Letter, Nasdaq determined that the voting rights of the Preferred Stock, voting on an as-converted basis, are below the minimum price per share of the Common Stock at the time of the issuance of the Preferred Stock. Additionally, Nasdaq determined that the Series B Preferred Stock provides the holder the right to appoint a majority of the Company’s board of directors when such representation is not justified by the relative contribution of the Series B Preferred Stock pursuant to the Agreement.

Under the Voting Rights Rule, a company cannot create a new class of security that votes at a higher rate than an existing assetsclass of securities or take any other action that has the effect of restricting or reducing the voting rights of an existing class of securities. As such, according to the Letter, the issuance of the Preferred Stock violated the Voting Rights Rule because the holders of the Preferred Stock are entitled to vote on an as-converted basis, thus having greater voting rights than holders of common stock, and the Series B Preferred Stock is entitled to a disproportionate representation on the Company’s board of directors.

According to the Letter, the Company has 45 calendar days from the date of the Letter, or until August 7, 2023, to submit a plan to regain compliance (the “Compliance Plan”) with the Voting Rights Rule, and if such plan is accepted by Nasdaq, the Company can receive an extension of up to 180 calendar days from the date of the Letter to evidence compliance. However, if the Company’s plan is not accepted by Nasdaq, the Common Stock will be subject to delisting. The Company would have the right to appeal that decision to a hearings panel. The Letter also provides that the Company’s name will be included on a list of all non-compliant companies which Nasdaq makes available to investors on its website at listingcenter.nasdaq.com, beginning five business days from the date of the Letter. As part of this process, an indicator reflecting the Company’s non-compliance is broadcast over Nasdaq’s market data dissemination network and is also made available to third party market data providers.

The Company intends to submit the Compliance Plan to Nasdaq as promptly as practicable and update the public of any developments in this regard, as required by applicable securities laws and regulations as well as Nasdaq’s rules. The Company cannot provide any assurances with respect to Nasdaq’s response to the forthcoming Compliance Plan.

If we were to fail to meet a Nasdaq listing requirement, we will be subject to delisting by the Nasdaq. In the event our common stock is no longer listed for trading on the Nasdaq, our trading volume and share price may decrease and we may experience further difficulties in raising capital which could materially affect our operations and financial results. Further, delisting from the Nasdaq could also have other negative effects, including potential loss of similar companies. Weconfidence by partners, lenders, suppliers and employees and could also trigger various defaults under our lending agreements and other outstanding agreements. Finally, delisting could make it harder for us to raise capital and sell securities. You may experience future dilution as a result of future equity offerings. In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be able to obtain additional financing on satisfactory terms, or at all,the same as the price per share in this offering.

The Series B and any new equity financing could have a substantial dilutive effect on our existing stockholders and or contain complex terms subject to derivative accounting. Our operating results from our commodities segment and financial segment should be in position to provideSeries C preferred stock, if approved by shareholders for positive cash flow to assist in the support of our technology segment and holding company related costs.

Banner Midstream has devoted substantially all of their financial resources to purchase new equipment and to acquire existing businesses in the states of Texas, Louisiana, Oklahoma and New Mexico (the “Territory”). Banner Midstream had financed their operations primarily through the issuance of debt securities. The amount of their future net losses will depend, in part, on successful implementation of their business strategy, continuous increase in demand of tracking and freight services to maintain the oil-related enterprises, the rate of our future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations with key customers. Trucking business development is a highly speculative undertaking and involves a substantial degree of risk. Banner Midstream is in the early stages of acquiring existing businesses and establishing operations of our wholly owned subsidiaries on the Territory. It may be several years, if ever, before the Company becomes profitable.

Our future revenue will depend upon the size of the markets which we target and our ability to achieve continuous and sufficient market acceptance.

Even if we enter all necessary agreements with key customers in the oil industry and purchase enough equipment to satisfy the demand for freight services in the market, our future revenue will depend upon the size of the markets which we target and our ability to achieve continuous and sufficient market acceptance, and such factors as pricing, reimbursement from third-party payors and adequate market share for our services at the target markets.

We anticipate that the Banner Midstream expenses will increase substantially if and as they:

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to control the operational costs.

We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of our securities and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The incurrence of indebtednessconversion, could result in increased fixed payment obligations,significant dilution to shareholders.

A third party fairness opinion was utilized by the Company for the March 6, 2023 acquisition of BNC. In exchange for BNC, the Company issued AAI Series B and certain of its employees Series C convertible preferred stock which would be convertible into 11,516,667 and 1,816,667 shares of the Company’s common stock on a reverse split adjusted basis. The conversion of this preferred stock by AAI and its employees, however, is subject to both Nasdaq and shareholder approval rules requiring a majority vote of shareholders to approve a change of control for AAI to acquire more than 19.9% of the voting rights within the Company. Furthermore, the conversion of the Series B and Series C preferred stock is subject to the Company’s authorized and available shares which are currently at 3,333,333 and 1,949,501, respectively as of the date of this Annual Report. If the Company is able to successfully obtain shareholder approval to allow the conversion of the Series B and Series C preferred stock as well as increase its authorized shares, then this event would, assuming that AAI or its employees were to sell the shares of our common stock upon conversion of the preferred stock, result in significant dilution to the Company’s existing common shareholders.

We have an evolving business model, which increases the complexity of our business.

Our business model has evolved in the past and continues to do so. In prior years we have added additional types of services and product offerings and in some cases, we have modified or discontinued those offerings. We intend to continue to try to offer additional types of products or services, and we maydo not know whether any of them will be requiredsuccessful. From time to agreetime we have also modified aspects of our business model relating to certain restrictive covenants, such as limitationsour product mix. We do not know whether these or any other modifications will be successful. The additions and modifications to our business have increased the complexity of our business and placed significant strain on our abilitymanagement, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. Future additions to incur additional debt, limitations on our ability to acquire or sell other entities and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to somemodifications of our current master service agreementsbusiness are likely to have similar effects. Further, any new business or otherwise agree to terms unfavorable to us,website we launch that is not favorably received by the market could damage our reputation or our brand. The occurrence of any of which maythe foregoing could have a material adverse effect on our business, operatingbusiness.

Risks Relating to Our Planned Spin-offs

There is an inherent risk that a regulatory agency may attempt to change the Company’s record date for its planned stock dividends.

The Company announced that its common and preferred shareholders of record as of September 30, 2022 would be entitled to receive a pro rata share of the common stock holdings of WTRV and Wolf Energy in the respective spin-off reverse merger transactions of White River Holdings and Banner Midstream. Additionally, the Company announced that its common and preferred shareholders of record as of November 15, 2022 would be entitled to receive their pro rata share of at least 95% of any net proceeds received from the ongoing Zest Labs litigation and their pro rata share of Zest Labs which the Company plans to transfer into Zest Holdings. While the Company intends to distribute these shares of common stock and any proceeds from Zest Holdings to shareholders of record as of the previously announced record dates, there is a substantial risk that a regulator, including but not limited to the Depository Trust Company (“DTC”), may require the Company to change its record date to a future unknown date selected by the regulator. If a regulator were to direct a change in this record date it could cause a material liability for the Company due to potential lawsuits from both (i) common shareholders who sold their shares of common stock after the record date under the assumption that they would have been eligible to receive stock dividends as well as (ii) common and preferred shareholders who held their shares after the record dates but had their pro rata share of ownership in the company decreased due to subsequent dilution incurred on Company share issuances and capital raises after the record dates. In the event that a regulator attempted to change the Company’s record dates for these stock dividends, the Company would defend itself vigorously and potentially pursue legal measures against the regulator in an attempt to mitigate any potential shareholder lawsuits. However, the outcome of any such action cannot be predicted with any degree of certitude by the Company and there can be no assurance that the Company would be able to successfully defend itself.

We have incurred significant delays in the effectiveness of registration statements to enable the Company to issue stock dividends of WTRV and Wolf Energy.

The Form S-1 for the registration of the common stock underlying the White River Holdings stock dividend was filed on December 7, 2022, with the sixth amendment thereto having been filed on July 5, 2023. The Form S-1 for the registration of the common stock underlying the Banner Midstream stock dividend was filed on March 10, 2023. As of the date of the filing of this Annual Report, neither registration statement has been declared effective by the SEC. The Company may incur further delays on these registration statements and cannot accurately predict when either will be declared effective, if ever.

We may encounter issues with the ability to transfer either the intellectual property or litigation of Zest into Zest Holdings.

The Company intends to transfer all of the common stock of Zest Labs into Zest Holdings. Any net cash proceeds from the Zest Labs litigation or any sale or licensing of Zest Labs intellectual property would then be distributed to the Company’s shareholders of record on a pro rata basis as of November 15, 2022, DTC permitting. There is an inherent risk that the Company may determine that a potential risk relating to the future viability of either the Zest Labs litigation or the Zest Labs intellectual property exists and that could be triggered upon this transfer. If this event occurs, the Company would most likely leave Zest Labs as a wholly owned subsidiary but still intend to distribute any net cash proceeds realized by Zest Labs to shareholders of record on a pro rata basis as of November 15, 2022.

Risks Related to BNC

If BNC fails to retain existing users and add a very significant number of new users, or if BNC’s users decrease their level of engagement with BNC’s products, BNC’s revenue, financial results, and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, webusiness may seek additional capital if market conditions are favorablebe significantly harmed.

If BNC fails to retain existing users and add a very significant number of new users, or if weBNC’s users decrease their level of engagement with BNC’s products, BNC’s revenue, financial results, and business may be significantly harmed. The following events, among others, should they occur, would have specific strategic considerations.a materially adverse effect on our business, results of operations, financial condition and future prospects:

The size of BNC’s user base and BNC’s users’ level of engagement across BNC’s products are critical to BNC’s success. BNC’s financial performance will be significantly determined by BNC’s success in adding, retaining, and engaging active users of BNC’s products that deliver ad impressions. User growth and engagement are also impacted by a number of other factors, including competitive products and services, such as TikTok, that could reduce some users’ engagement with BNC’s products and services, as well as global and regional business, macroeconomic, and geopolitical conditions. Any future declines in the size of BNC’s active user base, which to date is minimal, may adversely impact BNC’s ability to deliver ad impressions and, in turn, BNC’s financial performance.

If people do not perceive BNC’s products to be useful, reliable, and trustworthy, BNC may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement. A number of other social networking companies that achieved early popularity have since seen their active user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that BNC will not experience a similar inability to generate a significant used baser or, if achieved, subsequent erosion of BNC’s active user base or engagement levels. User engagement can be difficult to measure, particularly as BNC introduces new and different products and services. Any number of factors can negatively affect user retention, growth, and engagement, including if:

 From time to time, certain of these factors have negatively affected user retention, growth, and engagement to varying degrees. If BNC are unable to maintain or increase BNC’s user base and user engagement, particularly for BNC’s significant revenue-generating products like Facebook and Instagram, BNC’s revenue and financial results may be adversely affected. Any significant decrease in user retention, growth, or engagement could render BNC’s products less attractive to users, marketers, and developers, which is likely to have a material and adverse impact on BNC’s ability to deliver ad impressions and, accordingly, BNC’s revenue, business, financial condition, and results of operations. As the size of BNC’s active user base fluctuates in one or more markets from time to time, BNC will become increasingly dependent on BNC’s ability to maintain or increase levels of user engagement and monetization in order to grow revenue.

BNC’s user growth, engagement, and monetization on mobile devices depend upon effective operation with mobile operating systems, networks, technologies, products, and standards that BNC does not control.

The substantial majority of BNC’s revenue is expected to be generated from advertising on mobile devices. There is no guarantee that popular mobile devices will feature BNC’s products, or that mobile device users will ever use BNC’s products rather than competing products. BNC is dependent on the interoperability of BNC’s products with popular mobile operating systems, networks, technologies, products, and standards that BNC does not control, such as the Android and iOS operating systems and mobile browsers. Changes, bugs, or technical issues in such systems, or changes in BNC’s relationships with mobile operating system partners, handset manufacturers, browser developers, or mobile carriers, or in the content or application of their terms of service or policies that degrade BNC’s products’ functionality, reduce or eliminate BNC’s ability to update or distribute BNC’s products, give preferential treatment to competitive products, limit BNC’s ability to deliver, target, or measure the effectiveness of ads, or charge fees related to the distribution of BNC’s products or BNC’s delivery of ads have in the past adversely affected, and could in the future adversely affect, the usage of BNC’s products and monetization on mobile devices.

BNC’s products and changes to such products could fail to attract or retain users or generate revenue and profits, or otherwise adversely affect BNC’s business.

BNC’s ability to retain, increase, and engage its user base and to increase BNC’s revenue depends heavily on BNC’s ability to continue to evolve BNC’s existing products and to create successful new products, both independently and in conjunction with developers or other third parties. BNC is currently in the early stages of development, has made a limited number of products available to users and has not developed all of the products it intends to release to users. Although BNC is actively developing products it intends to release to users, in the future, technological, competitive or financial pressures, among other changes, could cause BNC to abandon its product development plans which would adversely harm its user experience and financial results. In addition, BNC may introduce significant changes to BNC’s products or acquire or introduce new and unproven products, including using technologies with which BNC has little or no prior development or operating experience. For example, BNC does not have significant experience with consumer hardware products or virtual or augmented reality technology, which may adversely affect BNC’s ability to successfully develop and market these products and technologies. BNC will incur substantial costs, and BNC may not be successful in generating profits, in connection with these efforts. These efforts, including the introduction of new products or changes to existing products, may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect BNC’s business, reputation, or financial results. If BNC’s new products or changes to existing products fail to engage users, marketers, or developers, or if BNC’s business plans are unsuccessful, BNC may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify BNC’s investments, and BNC’s business may be adversely affected.

BNC may be adversely impacted by negative economic conditions.

BNC’s performance and financial condition are subject to economic conditions and the impact such conditions have on levels of discretionary spending. Factors that may impact discretionary spending include inflation, employment rates, the liquidity of the capital markets, economic uncertainty and political conditions. Spending on BNC’s Platform has declined in the past, and could decline in the future, during recessionary periods and other periods of uncertainty or in which capital is constrained. If spending on BNC’s marketplace or Platform declines, or grows at a slower rate, including as a result of reduced discretionary consumer spending, BNC’s business, financial condition, and results of operations would be adversely affected.

BNC may not be successful in its metaverse strategy and investments, which could adversely affect BNC’s business, reputation, or financial results.

BNC believes that the metaverse, an embodied internet where people have immersive experiences beyond two-dimensional screens, is the next evolution in social technology. BNC intends to focus on helping to bring the metaverse to life. BNC expects this will be a complex, evolving, and long-term initiative that will involve the development of new and emerging technologies, require significant investment in infrastructure as well as privacy, safety, and security efforts, and collaboration with other companies, developers, partners, and other participants. However, the metaverse may not develop in accordance with BNC’s expectations, and market acceptance of features, products, or services BNC may build for the metaverse is uncertain. While BNC intends to regularly evaluate BNC’s product roadmaps and make significant changes as BNC’s understanding of the technological challenges and market landscape and BNC’s product ideas and designs evolve, there is no guarantee that BNC will be able to successfully compete in the future. In addition, BNC has virtually no experience with consumer hardware products and virtual and augmented reality technology, which may enable other companies to compete more effectively than it can. BNC may be unsuccessful in BNC’s future research and product development efforts, including if BNC is unable to develop relationships with key participants in the metaverse or develop products that operate effectively with metaverse technologies, products, systems, networks, or standards. BNC hopes to make investments in virtual and augmented reality and other technologies to support these efforts, and BNC’s ability to support these efforts is dependent on generating sufficient profits from BNC’s business. In addition, as BNC’s metaverse efforts evolve, BNC may be subject to a variety of existing or new laws and regulations in the United States and international jurisdictions, including in the areas of privacy, safety, competition, content regulation, consumer protection, and e-commerce, which may delay or impede the development of BNC’s products and services, increase BNC’s operating costs, require significant management time and attention, or otherwise harm BNC’s business. As a result of these or other factors, BNC’s metaverse strategy and investments may not be successful in the foreseeable future, or at all, which could adversely affect BNC’s business, reputation, or financial results.

BNC may not be able to successfully grow usage of and engagement with applications that integrate with BNC’s products.

BNC hopes to make investments to enable developers to build, grow, and monetize applications that integrate with BNC’s products. Such existing and prospective developers may not be successful in building, growing, or monetizing applications that create and maintain user engagement. Additionally, developers may choose to build on other platforms, including platforms controlled by third parties, rather than building products that integrate with BNC’s products. BNC is continuously seeking to balance the distribution objectives of BNC’s developers with BNC’s desire to provide an optimal user experience, and BNC may not be successful in achieving a balance that attracts or retains such developers. In addition, as part of BNC’s efforts related to privacy, safety, and security, BNC intends to conduct investigations and audits of platform applications from time to time. In some instances, these actions will adversely affect BNC’s relationships with developers. If BNC is not successful in BNC’s efforts to grow the number of developers that choose to build products that integrate with BNC’s products or if BNC is unable to continue to build and maintain good relations with such developers, BNC’s user growth and user engagement as well as its financial results may be adversely affected.

Some developers, creators, and users on our Platform may make unauthorized, fraudulent, or illegal use of Bitnile Tokens, Coins and other digital goods or experiences on our Platform, including through unauthorized third-party websites or “cheating” programs.

Bitnile Tokens, Coins, and digital goods on our Platform have no monetary value outside of our Platform, and cannot be traded between accounts currently within bitnile.com, but users may in the future make unauthorized, fraudulent, or illegal sales and/or purchases of BitNile Tokens, Coins, and other digital goods on or off of our Platform, including through unauthorized third-party websites in exchange for real-world currency. For example, when trading between characters is implemented, some users may make fraudulent use of credit cards owned by others on our Platform to purchase Bitnile Tokens or coins and offer the purchased tokens and coins for sale at a discount on a third-party website.

While we plan to regularly monitor and screen usage of our Platform with the aim of identifying and preventing these activities, and regularly monitor third-party websites for fraudulent Bitnile products or digital goods offers as well as regularly send cease-and-desist letters to operators of these third-party websites, we are unable to control or stop all unauthorized, fraudulent, or illegal transactions in Bitnile Tokens, Coins, or other digital goods that occurs on or off of our Platform. Although we are not directly responsible for such unauthorized, fraudulent, and/or illegal activities conducted by these third parties, our user experience may be adversely affected, and users and/or developers may choose to leave our Platform if these activities are pervasive. These activities may also result in negative publicity, disputes, or even legal claims, and measures we take in response may be expensive, time consuming, and disruptive to our operations.

In addition, unauthorized, fraudulent, and/or illegal purchases and/or sales of Bitnile Tokens, Coins, or other digital goods on or off of our Platform, including through third-party websites, bots, fake accounts, or “cheating” or malicious programs that enable users to exploit vulnerabilities in the experiences on our Platform or our partners’ websites and platforms, could reduce our revenue and bookings by, among other things, decreasing revenue from authorized and legitimate transactions, increasing chargebacks from unauthorized credit card transactions, causing us to lose revenue and bookings from dissatisfied users who stop engaging with the experiences on our Platform, or increasing costs we incur to develop technological measures to curtail unauthorized transactions and other malicious programs.

Under the terms of service for our Platform, which developers, creators and users are obligated to comply with, we reserve the right to temporarily or permanently ban individuals for breaching our Terms of Use by violating applicable law or bitnile.com policies which include engaging in illegal activity on the Platform. We will also employe technological measures to help detect unauthorized transactions and continue to develop additional methods and processes through which we can identify unauthorized transactions and block such transactions. However, there can be no assurance that our efforts to prevent or minimize these unauthorized, fraudulent, or illegal transactions will be successful.

Due to unfamiliarity and some negative publicity associated with digital assets, BNC’s user base may lose confidence in products and services that utilize technology related to digital assets.

One of BNC’s products and experiences is a virtual market which facilitates the sales of digital assets from BNC as well as third party vendors like virtual real estate, digital art, user customizations and unique collectibles. Products and services that are based on digital assets are relatively new. The digital asset industry has companies that are unlicensed, unregulated, operate without supervision by any governmental authorities. As a result, users and the general public may lose confidence in digital assets, including BNC products and services. Companies like BNC that deal in digital assets are appealing targets for hackers and malware and may also be more likely to be targets of regulatory enforcement actions. Negative perception, a lack of stability and standardized regulation in the digital asset industry and the failure of digital asset focused companies due to fraud, business failure, hackers or malware, or government mandated regulation, may reduce confidence in BNC’s business. Any of these events could have a material and adverse impact on BNC’s business.

Risks Related to BNC’s Business Operations and Financial Results

Our business is highly competitive. Competition presents an ongoing threat to the success of BNC’s business.

BNC expects to compete with companies providing connection, sharing, discovery, and communication products and services to users online, as well as companies that sell advertising to businesses looking to reach consumers and/or develop tools and systems for managing and optimizing advertising campaigns. BNC faces significant competition in every aspect of BNC’s business, including, but not limited to, companies that facilitate the ability of users to create, share, communicate, and discover content and information online or enable marketers to reach their existing or prospective audiences. BNC expects to compete to attract, engage, and retain people who use BNC’s products, to attract and retain businesses that use BNC’s free or paid business and advertising services, and to attract and retain developers who build compelling applications that integrate with BNC’s products. BNC also expects to compete with companies that develop and deliver virtual and augmented reality products and services. As BNC introduces or acquires new products, or as other companies introduce new products and services, including as part of efforts to develop the metaverse or innovate through the application of new technologies such as artificial intelligence, BNC may become subject to additional competition.

Virtually all BNC’s current and potential competitors have greater resources, experience, or stronger competitive positions in the product segments, geographic regions, or user demographics in which BNC intends to operate than BNC does. For example, some of BNC’s competitors may be domiciled in different countries and subject to political, legal, and regulatory regimes that enable them to compete more effectively than BNC could. These factors may allow BNC’s competitors to respond more effectively than BNC to new or emerging technologies and changes in market conditions. In the event that users engage with other products and services, BNC may never see any growth in use and engagement in key user demographics or more broadly, in which case BNC’s business would be harmed.

BNC’s competitors may develop products, features, or services that are similar to its own or that achieve greater acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. Some competitors may gain a competitive advantage against BNC, including: by making acquisitions; by limiting BNC’s ability to deliver, target, or measure the effectiveness of ads; by imposing fees or other charges related to BNC’s delivery of ads; by making access to BNC’s products more difficult or impossible; by making it more difficult to communicate with BNC’s users; or by integrating competing platforms, applications, or features into products they control such as mobile device operating systems, search engines, browsers, or e-commerce platforms. BNC’s competitors may, and in some cases will, acquire and engage users or generate advertising or other revenue at the expense of BNC’s own efforts, which would negatively affect BNC’s business and financial results. In addition, from time to time, BNC may take actions in response to competitive threats, but BNC cannot assure you that these actions will be successful or that they will not negatively affect BNC’s business and financial results.

Real or perceived inaccuracies in BNC’s community and other metrics may harm BNC’s reputation and negatively affect BNC’s business.

The numbers for BNC’s key metrics are calculated using internal company data based on the activity of user accounts, at times augmented by other sources. While these numbers are based on what BNC believes to be reasonable estimates of BNC’s user base for the applicable period of measurement, there are inherent challenges in measuring usage of BNC’s products across online and mobile populations around the world. The methodologies used to measure these metrics require significant judgment and are also susceptible to algorithm or other technical errors. In addition, BNC is seeking to establish mechanisms to improve its estimates of its user base, and such estimates may change due to improvements or changes in BNC’s methodology. BNC intends to regularly review BNC’s processes for calculating these metrics, and from time to time BNC expects to discover inaccuracies in these metrics or make adjustments to improve their accuracy.

The lack of comprehensive encryption for communications on the Platform may increase the impact of a data security incident.

Communications on the Platform are not comprehensively encrypted at this time. As such, any data security incident that involves unauthorized access, acquisition, disclosure, or use may be highly impactful to BNC’s business. BNC may experience considerable incident response forensics, data recovery, legal fees, and costs of notification related to any such potential incident, and BNC may face an increased risk of reputational harm, regulatory enforcement, and consumer litigation, which could further harm BNC’s business, financial condition, results of operations, and future business opportunities.

BNC relies on the experience and expertise of its senior management team and skilled employees with creative and technical backgrounds.

BNC’s success depends in part upon the continued service of its senior management team and key technical employees. Each of these employees could terminate his or her relationship with BNC at any time. Such employees, particularly game designers, engineers and project managers with desirable skill sets are in high demand, and BNC devotes significant resources to identifying, hiring, training, successfully integrating and retaining these employees. Hiring and retaining skilled employees to support BNC’s products and services is highly competitive. A lack of skilled technical workers or the loss of any member of BNC’s senior management team could delay or negatively impact BNC’s business plans, ability to compete, results of operations, cash flows and financial condition.

Risks Related to Government Regulation and Enforcement

Actions by governments that restrict access to BNC’s products in their countries, censor or moderate content on BNC’s products in their countries, or otherwise impair BNC’s ability to sell advertising in their countries, could substantially harm BNC’s business and financial results.

BNC expects that governments will from time to time seek to censor or moderate content available on BNC’s products, should such products ever be developed, distributed and used by customers, in their country, restrict access to BNC’s products from their country partially or entirely, or impose other restrictions that may affect the accessibility of BNC’s products in their country for an extended period of time or indefinitely. In addition, government authorities may seek to restrict user access to BNC’s products if they consider us to be in violation of their laws or a threat to public safety or for other reasons. It is also possible that government authorities could take action that impairs BNC’s ability to sell advertising, including in countries where access to BNC’s consumer-facing products may be blocked or restricted. In the event that content shown on BNC’s products is subject to censorship, access to BNC’s products is restricted, in whole or in part, in one or more countries, BNC would be required to or could elect to make changes to BNC’s future operations, or other restrictions are imposed on BNC’s products, or BNC’s competitors are able to successfully penetrate new geographic markets or capture a greater share of existing geographic markets that BNC cannot access or where BNC face other restrictions, BNC’s ability to increase BNC’s user base, user engagement, or the level of advertising by marketers may be adversely affected, and BNC may not be able to grow BNC’s revenue as anticipated, and BNC’s financial results could be adversely affected.

BNC’s business is subject to complex existing U.S. and foreign laws and regulations regarding privacy, data use and data protection, content, competition, safety and consumer protection, e-commerce, and other matters, many of which may be amended supplements by laws and regulations in the future. Many of these laws and regulations are subject to change and uncertain interpretation and applicability to BNC, and could result in claims, changes to BNC’s products and business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm BNC’s business.

BNC is subject to a variety of laws and regulations, changes in existing laws and regulations or the interpretations of them in the United States and abroad that will involve matters central to BNC’s business, including, but not limited to, privacy, data use, data protection and personal information, biometrics, encryption, rights of publicity, content, integrity, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, artificial intelligence and machine learning, electronic contracts and other communications, competition, protection of minors, consumer protection, civil rights, accessibility, telecommunications, product liability, e-commerce, digital assets, gaming, gambling, sweepstakes, promotions, taxation, economic or other trade controls including sanctions, anti-corruption and political law compliance, securities law compliance, and online payment services. The introduction of new products, expansion of BNC’s activities in certain jurisdictions, or other actions that BNC may take may subject it to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, consumer protection, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.

BNC may incur substantial expenses to comply with laws and regulations or defend against a claim that BNC has not complied with them. Further, any failure on BNC’s part to comply with any relevant laws or regulations may subject BNC to significant civil or criminal liabilities, penalties, taxes, fees, costs and negative publicity. The application of existing domestic and international laws and regulations to BNC relating to issues such as user privacy and data protection, security, defamation, pricing, advertising, taxation, digital assets, gambling, sweepstakes, promotions, consumer protection, accessibility, content regulation, quality of services, law enforcement demands, telecommunications, mobile, and intellectual property ownership and infringement in many instances is unclear or unsettled. Further, the application to us of existing laws regulating or requiring licenses for certain businesses of BNC advertisers can be unclear. For example, BNC operates a social casino with a sweepstakes component, through which it offers real money prizes. It is unclear whether certain regulations relating to gaming, gambling, and sweepstakes apply to our operations. U.S. export control laws and regulations also impose requirements and restrictions on exports to certain nations and persons and on BNC’s business. Internationally, BNC may also be subject to laws regulating BNC’s activities in foreign countries and to foreign laws and regulations that are inconsistent from country to country.

These U.S. federal, state, and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which BNC operates, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with BNC’s current policies and practices. For example, regulatory or legislative actions or litigation affecting the manner in which BNC displays content to BNC’s users, moderate content, or obtain fundingconsent to various practices could adversely affect user growth and engagement. Such actions could affect the manner in which BNC provides its services or adversely affect BNC’s financial results.

As its business develops, BNC expects to become subject to significant legislative and regulatory developments, and proposed or new legislation and regulations could significantly affect BNC’s business in the future. For example, BNC intends to implement certain product changes and controls as a result of requirements under the European General Data Protection Regulation (“GDPR”), and may implement additional changes in the future. The interpretation of the GDPR is still evolving and draft decisions in investigations are subject to review by several European privacy regulators as part of the GDPR’s consistency mechanism, which may lead to significant changes in the final outcome of such investigations. As a result, the interpretation and enforcement of the GDPR, as well as the imposition and amount of penalties for non-compliance, are subject to significant uncertainty. The California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act (“CPRA”), also establishes certain transparency rules and creates new data privacy rights for users, including limitations on BNC’s use of certain sensitive personal information and more ability for users to control the purposes for which their data is shared with third parties. Other states have proposed or enacted similar comprehensive privacy laws that afford users with similar data privacy rights and controls. These laws and regulations are evolving and subject to interpretation, and resulting limitations on BNC’s advertising services, or reductions of advertising by marketers, could adversely affect BNC’s advertising business.

These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions, have in the past led to, and may in the future lead to, unfavorable outcomes including increased compliance costs, loss of revenue, delays or impediments in the development of new products, negative publicity and reputational harm, increased operating costs, diversion of management time and attention, and remedies that harm BNC’s business, including fines or demands or orders that BNC modify or cease existing business practices.

Changes in laws affecting gaming, and sweepstakes, or the public perception of gaming, and sweepstakes may adversely impact our or BNC’s business.

BNC offers a number of products and services, which may include a selection of gaming options, including sweepstakes, and social gaming experiences. Social gaming experiences have recently been the subject of civil lawsuits, and some jurisdictions have taken an adverse position to interactive social gaming, including “social casinos” and sweepstakes-based gaming. This could lead to states adopting legislation or imposing a regulatory framework to govern interactive social gaming or social casino or sweepstakes-based gaming specifically. These could also result in a prohibition on interactive social gaming or social casino or sweepstakes-based gaming altogether, restrict BNC’s ability to advertise its games, or substantially increase BNC or our costs to comply with these regulations, all of which could have an adverse effect on our or BNC’s results of operations, cash flows and financial condition. It is not possible to predict the likelihood, timing, scope, or terms of any such legislation or regulation or the extent to which they may affect our or BNC’s business.

Regulators in the future may pass additional rules and regulations that could adversely affect our or BNC’s business. In May 2019, the World Health Organization adopted a new edition of its International Classification of Diseases, which lists gaming addiction as a disorder. The American Psychiatric Association (“APA”) and U.S. regulators have yet to decide whether gaming addiction should be considered a behavioral disorder, but the APA has noted that research and the debate on its classification are ongoing. Certain countries, including China and South Korea, have enacted regulations, such as imposing both gaming curfews and spending limits for minors, and established treatment programs aimed at addressing gaming addiction. It is not possible to predict the likelihood, timing, scope, or terms of any similar regulations in any of the markets in which BNC operates, or the extent to which implementation of such regulations may adversely affect our or BNC’s reputation and business.

Consumer protection and health concerns regarding games and gambling such as BNC’s have been raised in the past and may again be raised in the future. Such concerns could lead to increased scrutiny over the manner in which BNC’s games are designed, developed, distributed, and presented. We and BNC cannot predict the likelihood, timing or scope of any concern reaching a level that will impact its business, or whether it would suffer any adverse impacts to our or BNC’s results of operations, cash flows and financial condition.

Our reputation may be harmed due to unfamiliarity or negative press associated with activities BNC is undertaking, including the online metaverse landscape, virtual markets, real world goods marketplaces, gaming, social activities, sweepstakes, and digital assets.

BNC is focused on the development of the online metaverse landscape and is focused on immersive digital experiences, including virtual markets, real world goods marketplaces, gaming, social activities, sweepstakes, and more. The activities BNC is undertaking are based on technology that is relatively new. Many companies operating in similar industries are unlicensed, unregulated and/or operate without supervision by any governmental authorities. As a result, users and the general public may lose confidence in BNC’s products and services. Companies like BNC that deal in digital assets are appealing targets for hackers and malware and may also be more likely to be targets of regulatory enforcement actions. Negative perception, a lack of stability and standardized regulation in the industries in which BNC operates and the failure of similar companies due to fraud, business failure, hackers or malware, or government mandated regulation, may reduce confidence in our or BNC’s business. Any of these events could have a material and adverse impact on our or BNC’s reputation and business.

If BNC fails to protect users or is perceived to be failing to protect users, its business will suffer and results of operations could be materially and adversely affected.

Unfavorable publicity regarding, for example, BNC’s privacy, data security, or data protection practices, terms of service, product changes, product quality, litigation or regulatory activity, the actions of BNC users or developers, the use of the Platform for illicit or objectionable ends (including the use of the Platform to possibly entice children to interact off-Platform), actual or perceived incidents or misuses of user data or other privacy or security incidents, the substance or enforcement of community standards, the quality, integrity, characterization and age-appropriateness of content shared on the Platform, or the actions of other companies that provide similar services to ours, has in the past, and could in the future, adversely affect BNC’s reputation. Although illicit activities are in violation of BNC’s terms and policies and BNC attempts to block objectionable material, BNC is unable to prevent all such violations from occurring and measures intended to make the Platform more attractive to older age-verified users may create the perception that the Platform is not safe for users. In addition, BNC maya faced allegations that its Platform has been used by criminal offenders to identify and communicate with children and to possibly entice them to interact off-Platform, outside of the restrictions of the chat, content blockers and other on-platform safety measures. While BNC devotes considerable resources to prevent this from occurring, any negative publicity could create the perception that BNC does not provide a safe online environment and may have an adverse effect on the size, engagement, and loyalty of its developer and user community, which would adversely affect business and financial results.

We may be subject to regulatory and other government investigations, enforcement actions, settlements, and other inquiries in the future, which could cause us to incur substantial costs or require us or BNC to change its business practices in a manner materially adverse to its business.

Should BNC’s business ever expand to a significant degree, we and BNC’s management expects to receive formal and informal inquiries from government authorities and regulators regarding BNC’s compliance with laws and regulations, many of which are evolving and subject to interpretation. In such a scenario, we and BNC expect to be the subject of investigations, inquiries, data requests, requests for information, actions, and audits in the United States, particularly in the areas of privacy and data protection, including with respect to minors, law enforcement, consumer protection, civil rights, content moderation, blockchain technologies, sweepstakes, promotions, gaming, gambling, and competition. In addition, we or BNC may in the future be subject to regulatory orders or consent decrees. 

We or BNC may also become subject to various litigation and formal and informal inquiries and investigations by competition authorities in the United States, which may relate to many aspects of BNC’s future business, including with respect to users and advertisers, as well as BNC’s industry. Such inquiries, investigations, and lawsuits concern, among other things, BNC’s business practices in the areas of social networking or social media services, digital advertising, gambling, and sweepstakes activities and/or mobile or online applications.

Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities could cause us or BNC to incur substantial costs, expose us to civil and criminal liability (including liability for personnel) or penalties (including substantial monetary remedies), interrupt or require us or BNC to change its business practices in a manner materially adverse to our or BNC’s business (including changes products or user data practices), result in negative publicity and reputational harm, divert resources and the time and attention of management from our or BNC’s business, or subject us or BNC to other structural or behavioral remedies that adversely affect our or BNC’s business.

BNC expects, should its business ever develop, to be subject to regulatory and other government investigations, enforcement actions, settlements and other inquiries in the future, which could cause us BNC incur substantial costs or require BNC to change its business practices in a manner materially adverse to its business.

Should BNC’s business ever expand and to a significant degree, its management expects it to receive formal and informal inquiries from government authorities and regulators regarding BNC’s compliance with laws and regulations, many of which are evolving and subject to interpretation. In such a scenario, BNC expects to be the subject of investigations, inquiries, data requests, requests for information, actions, and audits in the United States, Europe, and around the world, particularly in the areas of privacy and data protection, including with respect to minors, law enforcement, consumer protection, civil rights, content moderation, and competition. In addition, BNC may in the future be subject to regulatory orders or consent decrees.

BNC may also become subject to various litigation and formal and informal inquiries and investigations by competition authorities in the United States, Europe, and other jurisdictions, which may relate to many aspects of BNC’s future business, including with respect to users and advertisers, as well as BNC’s industry. Such inquiries, investigations, and lawsuits concern, among other things, BNC’s business practices in the areas of social networking or social media services, digital advertising, and/or mobile or online applications.

Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities could cause BNC to incur substantial costs, expose us to civil and criminal liability (including liability for BNC’s personnel) or penalties (including substantial monetary remedies), interrupt or require BNC to change its business practices in a manner materially adverse to BNC’s business (including changes to BNC’s products or user data practices), result in negative publicity and reputational harm, divert resources and the time and attention of management from BNC’s business, or subject it to other structural or behavioral remedies that adversely affect BNC’s business.

Payment transactions may subject us to additional regulatory requirements and other risks that could be costly and difficult to comply with or that could harm BNC’s business.

Several of BNC’s future products may offer payments functionality, including enabling BNC’s users to purchase tangible, virtual, and digital goods from merchants and developers that offer applications using BNC’s payment infrastructure, send money to other users, and make donations to certain charitable organizations, among other activities. BNC is or may become subject to a variety of laws and regulations in the United States, Europe and elsewhere, including those governing anti-money laundering and counter-terrorist financing, money transmission, stored value, gift cards and other prepaid access instruments, electronic funds transfer, virtual currency, consumer protection, charitable fundraising, trade sanctions, and import and export restrictions. Depending on how BNC’s payment products evolve, BNC may also be subject to other laws and regulations including those governing gambling, sweepstakes, banking, and lending. In some jurisdictions, the application or interpretation of these laws and regulations is not clear. BNC’s efforts to comply with these laws and regulations could be costly and result in diversion of management time and effort and may still not guarantee compliance. In the event that BNC is found to be in violation of any such legal or regulatory requirements, BNC may be subject to monetary fines or other penalties such as a cease and desist order, or BNC may be required to make product changes, any of which could have an adverse effect on BNC’s business and financial results. 

Risks Related to Data, Security, and Intellectual Property

Security breaches, improper access to or disclosure of BNC’s data or user data, other hacking and phishing attacks on BNC’s systems, or other cyber incidents could harm BNC’s reputation and adversely affect BNC’s business.

BNC’s industry is prone to cyber-attacks by third parties seeking unauthorized access to BNC’s data or users’ data or to disrupt BNC’s ability to provide service. BNC’s products and services involve the collection, storage, processing, and transmission of a large amount of data. Any failure to prevent or mitigate security breaches and improper access to or disclosure of BNC’s data or user data, including personal information, content, or payment information from users, or information from marketers, could result in the loss, modification, disclosure, destruction, or other misuse of such data, which could harm BNC’s business and reputation and diminish BNC’s competitive position. In addition, computer malware, viruses, social engineering (such as spear phishing attacks), scraping, and general hacking continue to be prevalent in BNC’s industry and are expected to occur on BNC’s systems in the future. BNC expects to regularly encounter attempts to create false or undesirable user accounts, purchase ads, or take other actions on BNC’s platform for purposes such as spamming, spreading misinformation, or other objectionable ends. Such attacks may cause interruptions to the services BNC intends to provide, degrade the user experience, cause users or marketers to lose confidence and trust in BNC’s products, impair BNC’s internal systems, or result in financial harm to BNC. BNC’s efforts to protect its data or the information BNC receives, and to disable undesirable activities on BNC’s platform, may also be unsuccessful due to software bugs or other technical malfunctions; employee, contractor, or vendor error or malfeasance, including defects or vulnerabilities in BNC’s vendors’ information technology systems or offerings; government surveillance; breaches of physical security of BNC’s facilities or technical infrastructure; or other threats that evolve. In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to BNC’s data or BNC’s users’ data. Cyber-attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. Although BNC intends to try to develop systems and processes that are designed to protect BNC’s data and user data, to prevent data loss, to disable undesirable accounts and activities on BNC’s platform, and to prevent or detect security breaches, BNC cannot assure you that such measures, if implemented, will provide adequate security, that BNC will be able to react in a timely manner, or that BNC’s remediation efforts will be successful. The changes in BNC’s work environment as a result of certain personnel working remotely could also impact the security of BNC’s systems, as well as BNC’s ability to protect against attacks and detect and respond to them quickly.

In addition, some of BNC’s developers or other partners, such as those that help us measure the effectiveness of ads, may receive or store information provided by us or by BNC’s users through mobile or web applications integrated with BNC’s products. If these third parties or developers fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, BNC’s data or BNC’s users’ data may be improperly accessed, used, or disclosed.

BNC expects to experience cyber-attacks and other security incidents of varying degrees from time to time, and BNC expects to incur significant costs in protecting against or remediating such incidents. In addition, BNC is subject to a variety of laws and regulations in the United States and abroad relating to cybersecurity and data protection. As a result, affected users or government authorities could initiate legal or regulatory actions against BNC in connection with any actual or perceived security breaches or improper access to or disclosure of data, which has occurred in the past and which could cause BNC to incur significant expense and liability or result in orders or consent decrees forcing BNC to modify its business practices. Such incidents or BNC’s efforts to remediate such incidents may also result in a decline in BNC’s active user base or engagement levels. Any of these events could have a material and adverse effect on BNC’s business, reputation, or financial results.

We anticipate that BNC’s efforts related to privacy, safety, security, and content review will identify additional instances of misuse of user data or other undesirable activity by third parties on BNC’s platform.

BNC intends to make investments in privacy, safety, security, and content review efforts to combat misuse of BNC’s services and user data by third parties, including investigations and audits of platform applications, as well as other enforcement efforts. As a result of these efforts, BNC anticipates that BNC will discover and announce additional incidents of misuse of user data or other undesirable activity by third parties. BNC may not discover all such incidents or activity, whether as a result of BNC’s data or technical limitations, including BNC’s lack of visibility over BNC’s encrypted services, the allocation of resources to other projects, or other factors, and BNC may be notified of such incidents or activity by the FTC, the media or other third parties. Such incidents and activities may in the future include the use of user data or BNC’s systems in a manner inconsistent with BNC’s terms, contracts or policies, the existence of false or undesirable user accounts, improper advertising practices, activities that threaten people’s safety on or offline, or instances of spamming, scraping, data harvesting, unsecured datasets, or spreading misinformation. BNC may also be unsuccessful in its efforts to enforce BNC’s policies or otherwise remediate any such incidents. Consequences of any of the foregoing developments include negative effects on user trust and engagement, harm to BNC’s reputation, changes to BNC’s business practices in a manner adverse to BNC’s business, and adverse effects on BNC’s business and financial results. Any such developments may also subject BNC to additional litigation and regulatory inquiries, which could subject BNC to monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight. 

BNC’s products and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures to address or mitigate technical limitations in BNC’s systems, could adversely affect BNC’s business. The Platform and the technology of the third-party service providers upon which BNC relies are also subject to the risks of severe weather, earthquakes, fires, floods, hurricanes and other natural catastrophic events and to interruption by man-made problems such as terrorism or cyberattacks.

It is critical the success of the Platform that users be able to access BNC’s website, mobile apps and Platform at all times. BNC’s systems, or those of third parties upon which BNC relies, may experience service interruptions, degradation, outages, and other performance problems that interrupt the availability or affect the speed or functionality of BNC’s website, mobile apps and Platform due to a variety of factors, including severe weather, earthquakes, fires, floods, hurricanes, other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, hardware and software defects or malfunctions, cyberattacks and other similar incidents. BNC’s products and internal systems rely on software and hardware, including software and hardware developed or maintained internally and/or by third parties, that is highly technical and complex. In addition, BNC’s products and internal systems depend on the ability of such software and hardware to store, retrieve, process, and manage considerable amounts of data. The software and hardware on which BNC relies is expected to contain, errors, bugs, or vulnerabilities, and BNC’s systems are subject to certain technical limitations that may compromise BNC’s ability to meet BNC’s objectives. Some errors, bugs, or vulnerabilities inherently may be difficult to detect and may only be discovered after the code has been released for external or internal use. Errors, bugs, vulnerabilities, design defects, or technical limitations within the software and hardware on which BNC relies, or human error in using such systems, may in the future lead to outcomes including a negative experience for users and marketers who use BNC’s products, compromised ability of BNC’s products to perform in a manner consistent with BNC’s terms, contracts, or policies, delayed product introductions or enhancements, targeting, measurement, or billing errors, compromised ability to protect the data of BNC’s users and/or BNC’s intellectual property or other data, or reductions in BNC’s ability to provide some or all of BNC’s services. In addition, any errors, bugs, vulnerabilities, or defects in BNC’s systems or the software and hardware on which BNC relies, failures to properly address or mitigate the technical limitations in BNC’s systems, or associated degradations or interruptions of service or failures to fulfill BNC’s commitments to BNC’s users, are expected to lead to outcomes including damage to BNC’s reputation, loss of users, loss of marketers, prevention of its ability to generate revenue, regulatory inquiries, litigation, or liability for fines, damages, or other remedies, any of which could adversely affect BNC’s business and financial results.

If BNC is unable to protect BNC’s intellectual property, the value of its brands and other intangible assets may be diminished, and its business may be adversely affected.

BNC relies, and expects to continue to rely on a timely basis,combination of confidentiality, assignment, and license agreements with BNC’s employees, consultants, and third parties with whom BNC has relationships, as well as intellectual property laws, to protect BNC’s proprietary rights. In the United States and internationally, BNC expects to file various applications for protection of certain aspects of BNC’s intellectual property. Third parties may knowingly or unknowingly infringe BNC’s proprietary rights, third parties may challenge proprietary rights held by BNC in the future, and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which BNC operates or intends to operate. In any or all of these cases, BNC may be required to expend significant time and expense in order to prevent infringement or to enforce BNC’s rights. Although BNC expects to take measures to protect BNC’s proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to BNC’s and compete with BNC’s business. If the protection of BNC’s proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of BNC’s brands and other intangible assets may be diminished and competitors may be able to more effectively mimic BNC’s products, services and methods of operations. Any of these events could have an adverse effect on BNC’s business and financial results.

BNC expects to be party to patent lawsuits and other intellectual property rights claims that are expensive and time consuming and, if resolved adversely, could have a significant impact on BNC’s business, financial condition, or results of operations.

Companies, in particular established ones, in the internet, technology, and media industries typically own large numbers of patents, copyrights, trademarks, and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. In the event that BNC ever develops a significant intellectual property portfolio, it would face similar challenges that established companies do. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value from technology companies. Furthermore, from time to time BNC may introduce or acquire new products, which could increase BNC’s exposure to patent and other intellectual property claims from competitors and non-practicing entities.

From time to time, BNC may receive notices from patent holders and other parties alleging that certain of BNC’s products and services, or user content, infringe their intellectual property rights. BNC expects, should its business ever develop, to be involved in a number of intellectual property lawsuits. Defending patent and other intellectual property litigation is costly and can impose a significant burden on management and employees, and there can be no assurances that favorable final outcomes will be obtained in all or even most cases. In addition, plaintiffs may seek, and BNC may become subject to, preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of BNC’s anticipated operations. BNC may seek, if possible, to settle such lawsuits and disputes on terms that are unfavorable to it. Similarly, if any litigation to which BNC is a party is resolved adversely, BNC may be subject to an unfavorable judgment that may not be reversed upon appeal, if appealed. The terms of such a settlement or judgment may require us to cease some or all of BNC’s operations or require us pay substantial amounts to the other party, which BNC may not be able to afford. In addition, BNC may have to seek a license to continue practices found to be in violation of a third party’s rights, which may not be available on reasonable terms, or at all, and may significantly increase BNC’s operating costs and expenses. As a result, BNC may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The development of alternative non-infringing technology or practices could require significant effort and expense, could result in less effective technology or practices or otherwise negatively affect the user experience, or may not be feasible. BNC’s business, financial condition, and results of operations could be adversely affected as a result of an unfavorable resolution of the disputes and litigation referred to above.

We rely on the ability to use the intellectual property rights of third parties, and we may lose the benefit of any intellectual property owned by or licensed to BNC.

Substantially all of our games rely on products, technologies and other intellectual property that are licensed from third parties. The future success of our business will depend, in part, on our ability to obtain, retain or expand licenses for technologies and services in a competitive market. We cannot assure that these third-party licenses, or support for such licensed technologies and services, will continue to be available to us on commercially reasonable terms, if at all. In the event that we lose the benefit of, or cannot renew and/or expand existing licenses, we may be required to significantly curtail, delaydiscontinue or discontinue one or morelimit our use of the linestechnologies and services that include or incorporate the licensed intellectual property. In addition, we may not have the leverage to negotiate amendments to the Statement of operationsWork, if required, on terms as favorable to us as those we would negotiate with an unaffiliated third party.

BNC may suffer from the use of our wholly owned subsidiaries or be unablea third-party platform for its primary development of the Platform.

BNC’s strategic decision to expand our operations or otherwise capitalizeutilize a third-party platform for the primary development of the bitnile.com metaverse presents a variety of risks. The following events, should they occur, would have a materially adverse effect on our business, opportunities,results of operations, financial condition, and future prospects:

We rely on Amazon Web Services for a portion of our cloud infrastructure in certain areas, and as desired,a result any disruption of AWS would negatively affect our operations and significantly harm our business.

We rely on Amazon Web Services (“AWS”) a third-party provider for a portion of our backend services, including for some of our high-speed databases, scalable object storage, and message queuing services. For location-based support areas, we outsource certain aspects of the infrastructure relating to our Platform. As a result, our operations depend, in part, on AWS’ ability to protect their services against damage or interruption due to a variety of factors, including infrastructure changes, human or software errors, natural disasters, power or telecommunications failures, criminal acts, capacity constraints and similar events. Our developers, creators, and users need to be able to access our Platform at any time, without interruption or degradation of performance. Our Platform depends, in part, on the virtual cloud infrastructure hosted in AWS. Although we have disaster recovery plans that utilize multiple AWS availability zones to support our requirements, any incident affecting their infrastructure that may be caused by fire, flood, severe storm, earthquake or other natural disasters, power loss, telecommunications failures, cyber-attacks, terrorist or other attacks, and other similar events beyond our control, could adversely affect our cloud-native Platform. Any disruption of or interference with our use of AWS could impair our ability to deliver our Platform reliably to our developers, creators, and users.

Additionally, threats or attacks from computer malware, ransomware, viruses, social engineering (including phishing attacks), denial of service or other attacks, employee theft or misuse and general hacking have occurred and are becoming more prevalent in our industry, particularly against cloud-native services and vendors of security solutions. If AWS were to experience any of these security incidents, it could result in unauthorized access to, damage to, disablement or encryption of, use or misuse of, disclosure of, modification of, destruction of, or loss of our data or our developers’, creators’, and users’ data or disrupt our ability to provide our Platform or service.

A prolonged AWS service disruption affecting our Platform for any of the foregoing reasons would adversely impact our ability to serve our users, developers, and creators and could damage our reputation with current and potential users, developers, and creators, expose us to liability, result in substantial costs for remediation, cause us to lose users, developers, and creators, or otherwise harm our business, financial condition, or results of operations. and users. We may also incur significant costs for using alternative hosting cloud infrastructure services or taking other actions in preparation for, or in reaction to, events that damage or interfere with the AWS services we use.

In the event that our AWS service agreements are terminated, or there is a lapse of service, elimination of AWS services or features that we utilize, we could experience interruptions in access to our Platform as well as significant delays and additional expense in arranging for or creating new facilities or re-architecting our Platform for deployment on a different cloud infrastructure service provider, which could materiallywould adversely affect our business, financial condition, and results of operations.

Risks Relating to Agora

In March 2023, the Company experienced a significant change in its business model as it has shifted its focus towards building out the Platform towards a revenue-generating model and away from the non-core legacy subsidiaries Agora and Zest Labs. As a result of the shift in business strategy, the related risk factors for Agora have been updated accordingly.

As the Company devotes substantially all of its growth capital towards building out the Platform, there may be minimal remaining growth capital, if any, to devote to Agora’s hosting business.

As a result of the Company’s change in business strategy as well as capital constraints, the Company has limited resources to devote to building out Agora’s hosting business. To date, Agora has been unable to fulfill the terms of the MSA it signed with BitNile, Inc. in December 2022, and the Company does not currently have clarity on if it will be able to successfully enter the hosting business.

Agora lacks an operating history in the digital asset hosting space, and its new business is subject to a number of significant risks and uncertainties which affect its future viability.

As of March 31, 2023, Agora has invested in a Bitcoin mining business which was then discontinued as Bitstream transitioned to a digital asset hosting model. That business, Bitstream, entered agreements and arrangements for equipment and power contracts. In order to proceed at its first digital asset hosting facility in Texas, it must enter into a long-term contract to purchase electric power from the power grid in Texas and use the power to mine Bitcoin on behalf of third parties as well as take advantage of future power shortages such as the one that affected Texas in the winter of 2021 and may be beginning to occur in Texas in June 2023. Among the risks and uncertainties are:

For all of these reasons, Agora’s digital asset hosting business may not be successful.

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

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

Additionally, Agora has already paid $1,096,000 to a power broker for assistance in obtaining 12 megawatts (“MW”) of electricity at this site, with the potential to increase the available capacity at the substation to 48 MW. Agora had entered into a second letter of intent for a second location in October 2021 where it has already paid $1,326,500 and committed to pay $1,628,000 upon the execution of a definitive agreement; however, these high costs and uncertainties may harm its ability to become profitable, particularly if the price of Bitcoin declines further or if Agora is unable to enter into definitive agreements for the power on favorable terms or at all. While Agora has arranged for the delivery of the transformers necessary to use up to 42 MW (with agreement to go to 78 MW in the next six to twelve months) of electricity, Agora has conditional and unconditional rights to two sites in West Texas for up to 372 MW, subject to approval by the local government, which is the only required approval needed. If Agora or the third parties with whom it contracts should fail to obtain, deliver and install the necessary items for the required energy as and when needed and on commercially viable terms, its results of operations and financial condition will be materially adversely affected. There may not be an alternative source of electricity, or the resources needed to access it, and the establishment and growth of Agora’s Bitcoin mining operations may be stifled or hindered as a result. The Company received $865,000 related to the deposits paid and expensed the remaining amounts related to these agreements in the fiscal year ended March 31, 2023.

The Company’s lack of capital has hindered Bitstream’s operations and resulted in various litigation related to Bitstream for lack of payment or lack of contract performance. 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 $256,733.28 for failure to pay for equipment purchased to operate BitStream Mining’s Bitcoin mining operation. 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 $414,026.83 for failure to pay for equipment purchased to operate the Company’s Bitcoin mining operation. On October 17, 2022, BitStream Mining was a party to a petition filed in Ward County District Court by VA Electrical Contractors, LLC in the amount of $1,666,187.18 for failure to pay for equipment purchased to operate the Company’s Bitcoin mining operation. See Legal Proceedings on page 38, for additional information.

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

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

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

We willare subject to a highly evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our business, prospects or operations.

Our business is subject to extensive laws, rules, regulations, policies and legal and regulatory guidance, including those governing securities, commodities, crypto asset custody, exchange and transfer, data governance, data protection, cybersecurity and tax. Many of these legal and regulatory regimes were adopted prior to the advent of the Internet, mobile technologies, crypto assets and related technologies. As a result, they do not contemplate or address unique issues associated with the crypto economy, are subject to significant uncertainty, and vary widely across U.S. federal, state and local and international jurisdictions. These legal and regulatory regimes, including the laws, rules and regulations thereunder, evolve frequently and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the crypto economy requires us to exercise our judgement as to whether certain laws, rules and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied with such laws, rules and regulations, we could be subject to significant fines and other regulatory consequences, which could adversely affect our business, prospects or operations. As Bitcoin has grown in popularity and in market size, the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the CFTC, SEC, the Financial Crimes Enforcement Network (“FinCEN”) and the Federal Bureau of Investigation) have begun to examine the operations of the Bitcoin network, Bitcoin users and the Bitcoin exchange market. Regulatory developments and/or our business activities may require us to comply with certain regulatory regimes. For example, to the extent that our activities cause us to be deemed a money service business under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act, we may be required to comply with FinCEN regulations, including those that would mandate us to implement certain anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

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

Bitcoin mining uses very large amounts of electricity to operate the high speed computers used in mining. Because West Texas presently has low electricity rates, Agora arranged for power supplies there to support its planned operations. On November 23, 2022, the Governor of New York signed into law a bill passed by the State of New York legislature, which imposed a two-year moratorium on certain cryptocurrency mining, including Bitcoin mining. While this action does not directly impact Agora’s current operations, which would be conducted in Texas, it may be the beginning of a new wave of climate change regulations aimed at preventing or reducing the growth of Bitcoin mining in the U.S., including potentially jurisdictions in which Agora now operates or may in the future operate. While New York is currently a state under Democratic control and very supportive of climate change regulations in contrast to Texas, there is a risk that Democrats may gain control of Texas and enact legislation that would make Agora’s operations in Texas economically inviable. Further if other states begin to adopt legislation that makes cryptocurrency mining prohibitively expensive or bans it, it could create a surge of demand in Texas and increase the cost of power there. The above-described developments could also demonstrate the beginning of a regional or global regulatory trend in response to environmental and energy preservation or other concerns surrounding cryptocurrencies, and similar action in a jurisdiction in which Agora operates or in general could have devastating effects to our operations. If further regulation follows, it is possible that the digital asset hosting industry may not be able to developadjust to a sudden and dramatic overhaul to our ability to deploy energy towards the operation of mining equipment.

The crypto economy is novel and has little to no access to policymakers or lobbying organizations, which may harm our ability to effectively react to proposed legislation and regulation of crypto assets or crypto asset platforms adverse to our business.

As crypto assets have grown in both popularity and market size, various U.S. federal, state and local and foreign governmental organizations, consumer agencies and public advocacy groups have been examining the operations of crypto networks, users and platforms, with a focus on how crypto assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist enterprises, and the safety and soundness of platforms and other service providers that hold crypto assets for users. Many of these entities have called for heightened regulatory oversight, and have issued consumer advisories describing the risks posed by crypto assets to users and investors. For instance, in July 2019, then-U.S. Treasury Secretary Steven Mnuchin stated that he had “very serious concerns” about crypto assets. In recent months, members of Congress have made inquiries into the regulation of crypto assets, and Gary Gensler, Chair of the Commission, has made public statements regarding increased regulatory oversight of crypto assets. Outside the United States, several jurisdictions have banned so-called initial coin offerings, such as China and South Korea, while Canada, Singapore, Hong Kong, have opined that token offerings may constitute securities offerings subject to local securities regulations. In July 2019, the United Kingdom’s Financial Conduct Authority proposed rules to address harm to retail customers arising from the sale of derivatives and exchange-traded notes that reference certain types of crypto assets, contending that they are “ill-suited” to retail investors due to extreme volatility, valuation challenges and association with financial crimes. In May 2021, the Chinese government called for a crackdown on Bitcoin mining and trading, and in September 2021, Chinese regulators instituted a blanket ban on all crypto mining and transactions, including overseas crypto exchange services taking place in China, effectively making all crypto-related activities illegal in China. In January 2022, the Central Bank of Russia called for a ban on cryptocurrency activities ranging from mining to trading, and on March 8, 2022, President Biden announced an executive order on cryptocurrencies which seeks to establish a unified federal regulatory regime for currencies.

The crypto economy is novel and has little to no access to policymakers and lobbying organizations in many jurisdictions. Competitors from other, more established industries, including traditional financial services, may have greater access to lobbyists or governmental officials, and regulators that are concerned about the potential for crypto assets for illicit usage may affect statutory and regulatory changes with minimal or discounted inputs from the crypto economy. As a result, new laws and regulations may be proposed and adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that harm the crypto economy or crypto asset platforms, which could adversely impact our business.

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

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

Agora has had difficulty and expects to continue to have difficulty collecting on its $4,250,000 note receivable received in exchange for its divestiture of Trend Holdings.

Agora was issued a Senior Secured Promissory Note by Trend Ventures, LP 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. As of the date of this Annual Report, Agora has not received any principal or interest payments on this note. Agora amended the note on May 15, 2023 to allow Trend Ventures additional time to obtain the necessary resources for repayment. See Note 25 in our consolidated financial statements for details on the amendment. The Company has fully reserved this note receivable and accrued interest receivable as of March 31, 2023.

Risks Relating to Zest Labs

As the Company devotes substantially all of its growth capital towards building out the Platform, there may be minimal remaining growth capital, if any, to devote towards maintaining, licensing, or selling Zest Lab’s intellectual property or towards current or future intellectual property litigation.

As a result of the Company’s change in business strategy as well as capital constraints, the Company has had limited resources to devote to maintaining, licensing or selling Zest Lab’s intellectual property. Furthermore, the Company has limited resources to devote to current and future litigation other than that litigation which has been secured properly by a litigation funding firm.

Our ability to return shareholder value with respect to Zest Labs depends to a large extent on the outcome of the litigation related to protection of our intellectual property rights.

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

We expect that Walmart will appeal the District Court’s decision. Intellectual property and similar litigation is subject to uncertainty. There is no assurance that we will be successful in our efforts related to this lawsuit or if we failare, what amounts we will be able to attract and retain key personnel.recover.

General Risks

Our future success depends on our ability to retain and attract high-quality personnel, and the efforts, abilities and continued service of our senior management.

Our future success depends on our ability to attract, hire, train and retain a number of highly skilled employees and on the service and performance of our senior management team and other key personnel.personnel for each of our subsidiaries particularly with the planned spin-offs. The loss of the services of our executive officers or other key employees and inadequate succession planning could cause substantial disruption to our business operations, deplete our institutional knowledge base and erode our competitive advantage, which would adversely affect our business. Competition for qualified personnel possessing the skills necessary to implement our strategy is intense, and we may fail to attract or retain the employees necessary to execute our business model successfully. We do not have obtained “key person” life insurance policies covering certain employees.any of our executive officers.

Our success will depend to a significant degree upon the continued contributionsefforts of our key management, engineering and other personnel, many of whom would be difficult to replace. In particular, we believe that our future success is highly dependent on Randy May, ourthe roles of the Company’s Chief Executive Officer (“CEO”) and Peter Mehring, President of Zest Labs. If Messrs.Chief Financial Officer (“CFO”) as well as the shared staff in AAI that are currently managing BNC. In conjunction with the BNC transaction, the Company’s CEO, Randy May, or Mehring, or any otherand CFO, Jay Puchir, plan to depart the Company in good standing at a future date when the Company’s preferred shareholder, AAI, elects to appoint new officers in the Company, presuming that Nasdaq permits AAI to make such appointments. Additionally, the key members of our management team, leave our employment, ourpersonnel in the Company’s core business could suffer,in AAI are currently working in dual roles within AAI and the share price of our common stock could decline.

Our acquisition strategy involves a number of risks.

We intend to pursue continued growth through opportunities to acquire companies or assets that will enable us to expand our product and service offerings and to increase our geographic footprint. We routinely review potential acquisitions. However, we may be unable to implement this growth strategy if we cannot reach agreement on potential strategic acquisitions on acceptable terms or for other reasons. Moreover, our acquisition strategy involves certain risks, including: 

Future acquisitions may require us to obtain additional equity or debt financing, which may not be availableable to devote full time efforts towards BNC.

Deterioration of global economic conditions could adversely affect our business.

The global economy and capital and credit markets have experienced exceptional turmoil and upheaval over the past several years. Ongoing concerns about the systemic impact of potential long-term and widespread recession and potentially prolonged economic recovery, volatile energy costs, fluctuating commodity prices and interest rates, volatile exchange rates, geopolitical issues, including the recent outbreak of armed conflict in Ukraine, natural disasters and pandemic illness, instability in credit markets, cost and terms of credit, consumer and business confidence and demand, a changing financial, regulatory and political environment, and substantially increased unemployment rates have all contributed to increased market volatility and diminished expectations for many established and emerging economies, including those in which we operate. Furthermore, austerity measures that certain countries may agree to as part of any debt crisis or disruptions to major financial trading markets may adversely affect world economic conditions and have an adverse impact on current attractive market terms.our business. These general economic conditions could have a material adverse effect on our cash flow from operations, results of operations and overall financial condition.

Risks Factors Relating

The availability, cost and terms of credit also have been and may continue to Zest Labs

If we are unablebe adversely affected by illiquid markets and wider credit spreads. Concern about the stability of the markets generally, and the strength of counterparties specifically, has led many lenders and institutional investors to developreduce credit to businesses and generate additional demand forconsumers. These factors have led to a decrease in spending by businesses and consumers over the past several years, and a corresponding slowdown in global infrastructure spending. 

Continued uncertainty in the U.S. and international markets and economies and prolonged stagnation in business and consumer spending may adversely affect our services or products, we will likely suffer serious harm to our business.

We have invested significant resources in developingliquidity and marketing our servicesfinancial condition, and products. Somethe liquidity and financial condition of our servicescustomers, including our ability to access capital markets and products are often considered complexobtain capital lease financing to meet liquidity needs.

No assurance of successful expansion of operations.

Our significant increase in the scope and involve a new approach to the conduct of business by our customers. As a result, intensive marketing and sales efforts may be necessary to educate prospective customers regarding the uses and benefitsscale of our servicesoperations, including the hiring of additional personnel, has resulted in significantly higher operating expenses. We anticipate that our operating expenses will continue to increase. Expansion of our operations may also make significant demands on our management, finances and productsother resources. Our ability to manage the anticipated future growth, should it occur, will depend upon a significant expansion of our accounting and other internal management systems and the implementation and subsequent improvement of a variety of systems, procedures and controls. We cannot assure that significant problems in orderthese areas will not occur. Failure to generate additional demand. The market forexpand these areas and implement and improve such systems, procedures and controls in an efficient manner at a pace consistent with our services and products may weaken, competitors may develop superior offerings, or we may fail to develop acceptable solutions to address new market conditions. Any one of these eventsbusiness could have a material adverse effect on our business, financial condition and results of operations, cash flow and financial condition.

Undetected errors or failures in our software, products or services could result in loss or delay in the market acceptance for our products or lost sales.

Because our software services and products, and the environments in which they operate, are complex, our software and products may contain errors that can be detected at any point in its lifecycle. While we continually test our services and products for errors, errors may be found at any time in the future. Detection of any significant errors may result in, among other things, loss of, or delay in, market acceptance and sales of our services and products, diversion of development resources, injury to our reputation, increased service and warranty costs, license terminations or renegotiations or costly litigation. Additionally, because our services and products support or rely on other systems and applications, any software or hardware errors or defects in these systems or applications may result in errors in the performance of our service or products, and it may be difficult or impossible to determine where the error resides.

We may not be competitive, and increased competition could seriously harm our business.

Relative to us, some of our current competitors or potential competitors of our products and services may have one or more of the following advantages:

Although no single competitive factor is dominant, current and potential competitors may establish cooperative relationships among themselves or with third parties to enhance their offerings that are competitive with our products and services, which may result in increased competition.operations. We cannot assure that attempts to expand our marketing, sales, manufacturing and customer support efforts will succeed or generate additional sales or profits in any future period. As a result of the expansion of our operations and the anticipated increase in our operating expenses, along with the difficulty in forecasting revenue levels, we expect to continue to experience significant fluctuations in its results of operations.

If we cannot manage our growth effectively, our results of operations would be materially and adversely affected.

We experienced a significant change in our business model as we have shifted its focus towards building out the Platform towards a revenue-generating model and away from the legacy subsidiaries Agora and Zest Labs. Our business model relies on our ability to generate revenue through gaming and sweepstakes events in the metaverse, which is a nascent industry. Businesses that grow rapidly often have difficulty managing their growth while maintaining their compliance and quality standards. If we grow as rapidly as we anticipate, we will need to expand our management by recruiting and employing additional executive and key personnel capable of providing the necessary support. There can be no assurance that our management, along with our staff, will be able to compete successfully against current or future competitors. Increased competition in mobile data capture products, software, and related products and solutions, or supplies may result in price reductions, low gross profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and customer support. Some competitors may make strategic acquisitions or establish cooperative relationshipseffectively manage our growth. Our failure to meet the challenges associated with suppliers or companies that produce complementary products, which may create additional pressures on our competitive position in the marketplace.

Sales to many of our target customers involve long sales and implementation cycles, which may cause revenues and operating results to vary significantly.

A prospective customer’s decision to purchase our services or products may often involve lengthy evaluation and product qualification processes. Throughout the sales cycle, we anticipate often spending considerable time educating and providing information to prospective customers regarding the use and benefits of our services and products. Budget constraints and the need for multiple approvals within these organizations may also delay the purchase decision. Failure to obtain the timely required approval for a particular project or purchase decision may delay the purchase of our services or products. As a result, we expect that the sales cycle for some of our services and products will typically range to more than 360 days, depending on the availability of funding to the prospective customer. These long cycles may cause delays in any potential sale, and we may spend a large amount of time and resources on prospective customers who decide not to purchase our services or products, whichrapid growth could materially and adversely affect our business.business and operating results.

Additionally, someIf we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act which require, among other things, that public companies maintain effective disclosure controls and procedures and internal control over financial reporting.

Although our management concluded that our disclosure controls and procedures were effective as of March 31, 2023, any failure to maintain effective controls or any difficulties encountered in their implementation or improvement in the future could cause us to fail to meet our reporting obligations and may result in a restatement of our services and products are designedfinancial statements for corporate customers, which requires usprior periods. If we fail to maintain a sales force that understands the needsan effective system of these customers, engagesdisclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired, which could result in extensive negotiationsloss of investor confidence and provides support to complete sales. If we do not successfully market our services and products to these targeted customers, our operating results will be below our expectations and the expectations of investors and market analysts, which would likely cause the price of our common stock to decline.

Patents, trademarks, copyrights and licenses are important to the Company’s business, and the inability to defend, obtain or renew such intellectual property could adversely affect the Company’s operating results.

Through Zest Labs, the Company currently holds rights to patents and copyrights relating to certain aspects of its RFID technology, software, and services. In addition, the Company has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services”, the Zest logo, and numerous other trademarks and service marks. Although the Company believes the ownership of such patents, copyrights, trademarks and service marks is an important factor in its business and that its success does depend in part on the ownership thereof, the Company relies primarily on the innovative skills, technical competence, and marketing abilities of its personnel. Loss of a significant number of licenses may have an adverse effect on our stock price.

If our accounting controls and procedures are circumvented or otherwise fail to achieve their intended purposes, our business could be seriously harmed.

We evaluate our disclosure controls and procedures as of the Company’s operations.

Manyend of Zest Labs’ products are designedeach fiscal quarter, and annually review and evaluate our internal control over financial reporting in order to include intellectual property obtained from third parties. While it may be necessary incomply with the future to seek or renew licensesCommission’s rules relating to various aspectsinternal control over financial reporting adopted pursuant to the Sarbanes-Oxley Act of 2002. Because of its products and business methods,inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the Company believes, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms; however, there is no guaranteerisk that such licenses could be obtained at all.

The Company relies on licenses to third-party patents and intellectual property, and the Company’s future results could be materially adversely affected if it is allegedcontrols may become inadequate because of changes in conditions, or found to have infringed intellectual property rights.

Many of Zest Labs’ products are designed to use third-party intellectual property, and it may be necessary in the future to seek or renew licenses relating to various aspects of its products and business methods. Although the Company believes that, based on past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms, there is no assurance that the necessary licenses would be available on acceptable termsdegree of compliance with the policies or at all.

procedures may deteriorate. If we dofail to maintain effective internal control over financial reporting or our management does not protect our proprietary information and prevent third parties from making unauthorized use of our products and technology, our financial results could be harmed.

Much of our software and underlying technology is proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and through copyright, patent, trademark, and trade secret laws. However, all of these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Any patent licensed by us or issued to us could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore, patent applications that we file may not result in issuance of a patent or, if a patent is issued,timely assess the patent may not be issued in a form that is advantageous to us. Despite our efforts to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property in a cost-effective manner.

Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products and services.

From time to time, we might receive claims that we have infringed the intellectual property rights of others, including claims regarding patents, copyrights, and trademarks. Because of constant technological change in the markets in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us the confidential or proprietary information of these former employers. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we are not successful in defending such claims, we could be required to stop selling, delay shipments of, or redesign our products, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our customers. We cannot assure you that any royalty or licensing arrangements that we may seek in such circumstances will be available to us on commercially reasonable terms or at all. We may incur significant expenditures to investigate, defend and settle claims related to the use of technology and intellectual property rights as part of our strategy to manage this risk.

Periods of sustained economic adversity and uncertainty could negatively affect our business, results of operations and financial condition.

Demand for our services and products depend in large part upon the level of capital and maintenance expenditures by many of our customers. Lower budgets could have a material adverse effect on the demand for our services and products, and our business, results of operations, cash flow and overall financial condition would suffer.

Disruptions in the financial markets may have an adverse impact on regional and world economies and credit markets, which could negatively impact the availability and cost of capital for us and our customers. These conditions may reduce the willingness or ability of our customers and prospective customers to commit funds to purchase our services or products, or their ability to pay for our services after purchase. These conditions could result in bankruptcy or insolvency for some customers, which would impact our revenue and cash collections. These conditions could also result in pricing pressure and less favorable financial terms in our contracts and our ability to access capital to fund our operations.

Final assembly of certain products is performed by third-party manufacturers. We may be dependent on these third-party manufacturers as a sole-source of supply for the manufactureadequacy of such products.

A failure by such manufacturers to provide manufacturing services to us, or any disruption in such manufacturing services, may adversely affect our business results. We may incur increased business disruption risk due to the dependence on these third-party manufacturers, as we are not able to exercise directinternal control, over the assembly or related operations of certain of our products. If these third-party manufacturers experience business difficulties or fail to meet our manufacturing needs, then we may be unablesubject to satisfy customer product demands, lose sales,regulatory sanctions, and be unable to maintain customer relationships. Longer production lead timesour reputation may result in shortages of certain products and inadequate inventories during periods of unanticipated higher demand. Without such third parties continuing to manufacture our products, we may have no other means of final assembly of certain of our products until we are able to secure the manufacturing capability at another facility or develop an alternative manufacturing facility. This transition could be costly and time consuming.decline. 

Failure of information technology systems and breaches inor data security couldbreaches, including as the result of cyber security attacks, affecting us, our business associates, or our industry, may adversely affect the Company’sour financial condition and operating results.

InformationWe depend on information technology system failuressystems and breaches of data security could disrupt the Company’s operations by causing delays or cancellation of customer orders, impeding the manufacture or shipment of products, or resultingservices in conducting our business. We and others in the unintentional disclosure of customer or Company information. Management has taken steps to addressindustries in which we operate use these concerns by implementing sophisticated network securitytechnologies for internal purposes, including data storage and internal control measures. There can be no assurance, however, that a system failure or data security breach will not have a material adverse effect on the Company’s financial condition and operating results.

Failureprocessing, transmissions, as well as in our operational systems or cyber security attacks on anyinteractions with our business associates. Examples of our facilities, or those of third parties, may adversely affect our financial results.

Our business is dependent upon our operational systems to process a large amount of datathese digital technologies include analytics, automation, and complex transactions.cloud services. If any of our financial, operational, or other data processing systems are compromised, fail or have other significant shortcomings, our financial results could be adversely affected. Our financial results could also be adversely affected if an employee causes our operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our operational systems. Due to increased technology advances, we have become more reliant on technology to help increase efficiency in our business. We use computer programs to help run our financial and operations sectors, and this may subject our business to increased risks. Any future cyber security attacks that affect our facilities, our customers and any financial data could have a material adverse effect on our business. In addition, cyber-attacks on our customer and employee data may result in a financial loss, including potential fines for failure to safeguard data, and may negatively impact our reputation. Third-party systems on which we rely could also suffer operational system failure. Any of these occurrencesit could disrupt our business, require us to incur substantial additional expenses, result in potential liability or reputational damage or otherwise have an adverse effect on our financial results.

The Company is subject to risks associated with laws, regulations and industry-imposed standards related to wireless communications devices.

Laws and regulations related to wireless communications devices in the many jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Such changes, which could include but are not limited to restrictions on production, manufacture, distribution, and use of the device, may have a material adverse effect on the Company’s financial condition and operating results.

Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates, which may have a material adverse effect on the Company’s financial condition and operating results.

Because of technological changes in the business software, web and device applications, sensors and sensor-based devices, and RFID and wireless communication industries, current extensive patent coverage, and the rapid issuance of new patents, it is possible that certain components of Zest Labs’ products and business methods may unknowingly infringe the patents or other intellectual property rights of third parties. From time to time, Zest Labs may be notified that it may be infringing such rights. Responding to such claims, regardless of their merit, can consume significant time and expense. In certain cases, the Company may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. If there is a temporary or permanent injunction prohibiting the Company from marketing or selling certain products or a successful claim of infringement against the Company requires it to pay royalties to a third party, the Company’s financial condition and operating results could be materially adversely affected.

The inability to obtain certain components could adversely impact the Company’s ability to deliver on its contractual commitments which could negatively impact operations and cash flows.

Although most components essential to the Company’s business are generally available from multiple sources, certain key components including, but not limited to, microprocessors, enclosures, certain RFID custom integrated circuits, and application-specific integrated circuits are currently obtained by the Company from single or limited sources. Some key components, while currently available to the Company from multiple sources, are at times subject to industry-wide availability constraints and pricing pressures. If the supply of a key or single-sourced component to the Company were to be delayed or curtailed or in the event a key manufacturing vendor delayed shipment of completed products to the Company, the Company’s ability to ship related products in desired quantities, and in a timely manner, could be adversely affected. The Company’s business and financial performance could also be adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source. Continued availability of these components may be affected if suppliers were to decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements. The Company attempts to mitigate these potential risks by working closely with these and other key suppliers on product introduction plans, strategic inventories, coordinated product introductions, and internal and external manufacturing schedules and levels. Consistent with industry practice, the Company acquires components through a combination of formal purchase orders, supplier contracts, and open orders based on projected demand information. However, adverse changes in the supply chain of the Company’s vendors may adversely impact the supply of key components.

Risk Factors Relating to Banner Midstream

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

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

The transportation industry is affected by economic and business risks that are largely beyond our control.

The transportation industry is highly cyclical, and our business is dependent on a number of factors that may have a negative impact on our operating results, many of which are beyond our control. Our revenue is from customers in the oil exploration and production industry. As such, our volumes are largely dependent on the economy and our results may be more susceptible to trends in unemployment and how it affects oil prices than carriers that do not have this focus. We believe that some of the most significant factors beyond our control that may negatively impact our operating results are economic changes that affect supply and demand in transportation markets.

The risks associated with these factors are heightened when the United States economy is weakened. Some of the principal risks during such times are as follows:

Economic conditions that decrease shipping demand or increase the supply of capacity in the trucking transportation industry on the Territory can exert downward pressure on rates and equipment utilization, thereby decreasing asset productivity. Declining freight levels and rates, a prolonged recession or general economic instability could result in declines in our results of operations, which declines may be material.

We also are subject to cost increases outside our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Such cost increases include, but are not limited to, fuel and energy prices, driver wages, taxes and interest rates, tolls, license and registration fees, insurance premiums, regulations, revenue equipment and related maintenance costs and healthcare and other benefits for our associates. We cannot predict whether, or in what form, any such cost increase or event could occur. Any such cost increase or event could adversely affect our profitability.

In addition, events outside our control, such as strikes or other work stoppages at our facilities or at customer, port, border or other shipping locations, weather, actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state or heightened security requirements could lead to reduced economic demand, reduced availability of credit or temporary closing of shipping locations or United States borders. Such events or enhanced security measures in connection with such events could impair our operations and result in higher operating costs.

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

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

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

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

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

A significant portion of our operating revenue is generated from a number of major customers, the loss of one or more of which could have a material adverse effect on our business. Economic and capital markets conditions may adversely affect our customers and their ability to remain solvent. Our customers’ financial difficulties can negatively impact our businesscondition and operating resultsresults.

For example, the operator of the Colonial Pipeline was forced to pay $4.4 million in ransom to hackers as the result of a cyberattack disabling the pipeline for several days in May 2021. The attack also resulted in gasoline price increases and financial condition. Generally,shortages across the East Coast of the United States. As we do not have contractual relationships withdepend on the availability and price of gasoline in our customerstransportation business, any significant increase in the price and/or shortage of gasoline such as that guarantee any minimum volumes, and our customer relationships may not continue as presently in effect. We generally do not have long-term contractual relationships with our customers, including our dedicated customers, and certain of these contracts contain clauses that permit cancellation on a short-term basis without cause, and accordingly any of our customers may not continue to utilize our services, renew our existing contracts or continue atexperienced from the same volume levels. Despite the existence of contract arrangements with our customers, certain of our customers may nonetheless engage in competitive bidding processes that could negatively impact our contractual relationship. In addition, certain of our major customers may increasingly use their own trucking and delivery fleets, whichMay 2021 cyberattack would reduce our freight volumes. A reduction in or termination of our services by one or more of our major customers could have a material adverse effect on our business and operating results. Additionally, our Agora operations depend on the functioning of Bitcoin mining computers and digital wallets maintained by third parties, which are also subject to enhanced risks of a cyberattack as a result.

Fluctuations in the price or availability of fuel, the volumeOur limited ability to protect our proprietary information and terms of diesel fuel purchase commitments and surcharge collectiontechnology may increase our costs of operation, which could materially and adversely affect our margins.

Fuel represents a significant expense for us. Diesel fuel prices fluctuate greatly dueability to factors beyondcompete, and our control, such as political events, terrorist activities, armed conflicts, depreciationproducts could infringe upon the intellectual property rights of others, resulting in claims against us, the dollar against other currencies and weather, such as hurricanes, and other natural or man-made disasters, eachresults of which may lead to an increase in the cost of fuel. Fuel prices also are affected by the rising demand in developing countries, and could be adversely impacted by diminished drilling activity and by the use of crude oil and oil reserves for other purposes. Such events may lead not only to increases in fuel prices, but also to fuel shortages and disruptions in the fuel supply chain. Because our operations are dependent upon diesel fuel, and a portioncostly.

Many of our business is based on fuel purchased onproducts consist entirely or partly of proprietary technology owned by us. Although we seek to protect our technology through a combination of copyrights, trade secret laws and contractual obligations, these protections may not be sufficient to prevent the spot market at prevailing market rates, significant diesel fuel cost increases, shortages or supply disruptions could materially and adversely affect our operating results and financial condition.

Increases in fuel costs, to the extent not offset by rate per mile increases or fuel surcharges, have an adverse effect on our operations and profitability. While a portionwrongful appropriation of our fuel costsintellectual property, nor will they prevent our competitors from independently developing technologies that are covered by pass-through provisions in customer contracts and compensatory fuel surcharge programs, we also incur fuel costs that cannot be recovered even with respectsubstantially equivalent or superior to customers with which we maintain fuel surcharge programs, such as those associated with unbilled miles, or the time when our engines are idling. Because our fuel surcharge recovery lags behind changes in fuel prices, our fuel surcharge recovery may not capture the increased costs we pay for fuel, especially when prices are rising, leading to fluctuations in our levels of reimbursement. Further, during periods of low freight volumes, shippers can use their negotiating leverage to impose less compensatory fuel surcharge policies.proprietary technology. In addition, the termslaws of each customer’s fuel surcharge agreement vary, and customers may seeksome foreign countries do not protect our proprietary rights to modify the terms of their fuel surcharge agreements to minimize recoverability for fuel price increases. Such fuel surcharges may not be maintained indefinitely or may not be sufficiently effective. Assame extent as the laws of the date of this Annual Report, we had no derivative financial instrumentsU.S. In order to reducedefend our exposure to fuel price fluctuations, nor are we aware of existence thereof.

Difficulties attracting and retaining qualified drivers, including through owner-operators, could materially adversely affectproprietary rights in the technology utilized in our profitability and ability to maintain or grow our fleet.

Like many carriers,products from time to timethird party infringement, we may experience difficulty in attractingbe required to institute legal proceedings, which would be costly and retaining sufficient numbers of qualified drivers, including through owner-operators, and driver shortages may recur inwould divert our resources from the future. Our challenge with attracting and retaining qualified drivers stems from intense market competition and our driver quality standards, which subjects us to increased payments for driver compensation and owner-operator contracted rates. Our specialty equipment services targeting servicing oil exploration and oil development industries require special training to handle unique operating requirements. We may be legally obligated or otherwise subjected by the industry standards to use physical function tests and hair follicle and urine testing to screen and test all driver applicants, which we believe is a rigorous standard and could decrease the pool of qualified applicants available to us. Failure to recruit high-quality, safe drivers that meet our testing standards could diminish the safety of our fleet and could have a materially adverse effect on our customer relationships and our business.

Our Company drivers are generally compensated on a per-mile basis, and the rate per-mile generally increases with the drivers’ length of service. Owner-operators contracting with us are generally compensated on a percentage of revenue basis. The compensation we offer our drivers and owner-operators is also subject to market conditions and labor supply. We may in future periods increase company driver and owner-operator compensation, which will be more likely to the extent that economic conditions improve and industry regulation exacerbates driver shortages forcing driver compensation higher. The recent electronic logging device regulations, requiring compliance by nearly all carriers has further tightened the market for eligible drivers. In addition, with any driver voluntary turnover rate, we may suffer a loss of company drivers. Such turnover rate could require us to continually recruit a substantial number of drivers in order to operate our revenue-producing fleet equipment, including trucks, chassis and specialty equipment. If we are unable to continue to attractsuccessfully assert and retain a sufficient number of high-quality company drivers, and contract with suitable owner-operators, we could be required to adjustdefend our compensation packages, or operate with fewer trucks and face difficulty meeting shipper demands, all of which could adversely affect our profitability and ability to maintain our size or grow.

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

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

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

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

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

If we are unable to recruit, develop and retain our key associates, our business, financial condition and operatingfuture results could be adversely affected.

We are highly dependent upon the servicesAlthough we attempt to avoid infringing known proprietary rights of certain key employees, includingthird parties in our team of managers. We currently do not have employment agreements with any of our managers, and the loss of any of their services could negatively impact our operations and future profitability. Inadequate succession planning or unexpected departure of key managers could cause substantial disruption to our business operations, deplete our institutional knowledge base and erode our competitive advantage. Additionally,product development efforts, we may havebecome subject to continue to recruit, develop and retain skilled and experienced service center managers if we are to realize our goal of expanding our operations and continuing our growth. Failure to recruit, develop and retain a core group of service center managers could have a materially adverse effect on our business.

Efforts by labor unions could divert management’s attention and could have a materially adverse effect on our operating results.

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

Insuranceproceedings and claims expenses could significantly reduce our earnings.

Our future insurance and claims expense might exceed historical levels, which could reduce our earnings. We self-insure or maintain a high deductible for a portion of our claims exposure resultingalleged infringement from workers’ compensation, auto liability, general liability, cargo and property damage claims, as well as associate health insurance. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. This, along with legal expenses, incurred but not reported claims and other uncertainties can cause unfavorable differences between actual claim costs and our reserve estimates. We plan to reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.

We maintain insurance with licensed insurance carriers above the amounts which we retain. Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would bear the excess, in addition to our other self-insured/retained amounts. Insurance carriers have raised premiums for many businesses, including transportation companies. As a result, our insurance and claims expense could increase, or we could raise our self-insured retention or deductible when our policies are renewed or replaced. Our operating results and financial condition could be materially and adversely affected if (i) cost per claim, premiums, or the number of claims significantly exceeds our estimates, (ii) we experience a claim in excess of our coverage limits, (iii) our insurance carriers fail to pay on our insurance claims or (iv) we experience a claim for which coverage is not provided.

Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.

We are subject to various environmental laws and regulations dealing with the hauling and handling of hazardous materials, waste and other oil, fuel storage tanks, air emissions from our vehicles and facilities, engine idling and discharge and retention of storm water. Our truck terminals often are located in industrial areas where groundwater or other forms of environmental contamination could occur. Our operations involve the risks of fuel spillage or seepage, environmental damage and hazardous waste disposal, among others. Certain of our facilities have waste oil or fuel storage tanks and fueling islands. If we are involved in a spill or other accident involving hazardous substances, if there are releases of hazardous substances we transport, if soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in violation of applicable environmental laws or regulations, we could owe cleanup costs and incur related liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and operating results.

We have significant ongoing capital requirements that could affect our profitability if we are unable to generate sufficient cash from operations or obtain financing on favorable terms.

The trucking industry generally, and our trucking business in particular, are capital intensive and asset heavy, and our policy of maintaining a young, technology-equipped fleet requires us to expend significant amounts in capital expenditures annually. We expect to pay for projected capital expenditures with cash flows from operations, proceeds from equity sales or financing available under our existing debt instruments. If we were unable to generate sufficient cash from operations, we would need to seek alternative sources of capital, including financing, to meet our capital requirements. In the event that we are unable to generate sufficient cash from operations or obtain financing on favorable terms in the future, we may have to limit our fleet size, enter into less favorable financing arrangements or operate our revenue equipment for longer periods, any of which could have a materially adverse effect on our profitability.

The seasonal pattern generally experienced in the trucking industry may affect our periodic results during traditionally slower shipping periods and winter months.

In the trucking industry, revenue generally follows a seasonal pattern which may affect our operating results. Operating levels of the oil industry have historically been lower in the winter months because of adverse winter weather conditions. Revenue can also be affected by other adverse weather conditions, holidays and the number of business days during a given period because revenue is directly related to the available working days. From time to time we may also suffer short-term impacts from severe weather and similar events, such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes, and explosions that could harm our results of operations or make our results of operations more volatile.

We may be subject to various claims and lawsuits in the ordinary course of business,business. Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, divert management’s attention and increases in the amountresources, require us to reengineer or severitycease sales of theseour products or require us to enter into royalty or license agreements which are not advantageous to us. In addition, parties making claims and lawsuits could adversely affect us.

We are exposed to various claims and litigation related to commercial disputes, personal injury, property damage, environmental liability and other matters. Proceedings include claims by third parties, and certain proceedings have been certified or purport to be class actions. Developments in regulatory, legislative or judicial standards, material changes to litigation trends, or a catastrophic accident or series of accidents, involving any or all of property damage, personal injury, and environmental liability could have a material adverse effect on our operating results, financial condition and liquidity.

If we commence operations and produce oil from a drilling, thenunless we replace our reserves with new reserves and develop those reserves, our reserves and production will decline, which would adversely affect our future cash flows and results of operations. 

Once we start oil production, then producing oil reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Unless we conduct successful ongoing exploration and development activities or continually acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced. Our future reserves and production, and therefore our future cash flow and results of operations, are highly dependent on our success in efficiently developing our current reserves and economically finding or acquiring additional recoverable reserves. We may not be able to develop, findobtain an injunction, which could prevent us from selling our products in the U.S. or acquire sufficient additional reserves to replace our current and future production. If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations would be materially and adversely affected.abroad.

Drilling for and producing crude oil are high risk activities withmany uncertainties that could adversely affect our business, financial condition orresults of operations.

Our proposed drilling and operating activities will be subject to many risks, including the risk that we will not discover commercially productive reservoirs. Drilling for crude oil can be unprofitable, not only from dry holes, but from productive wells that do not produce sufficient revenues to return a profit. In addition, our drilling and producing operations may be curtailed, delayed or cancelled as a result of other factors, including:

Any of these risks can cause substantial losses, including personal injury or loss of life; severe damage to or destruction of property, natural resources and equipment, pollution, environmental contamination, clean-up responsibilities, loss of wells, repairs to resume operations; and regulatory fines or penalties.

Insurance against all operational risks may not be available to us or not affordable for us. Additionally, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. The occurrence of an event that is not covered in full or in part by insurance could have a material adverse impact on our business activities, financial condition and results of operations. We only have standard business liability and casualty insurance as of the date of this Annual Report. We will not pay for or require, and cannot afford, insurance covering drilling, production and storage of oil and establishing oil rigs until we receive sufficient funding from this Annual Report.

The extension of our active oil and gas mineral leases may be subject to performing continuous drilling operations.

Our oil and gas mineral leases may contain acreage that is either held by production or not. In order to extend the leased acreage not held by production, the Company must maintain minimum continuous drilling operations in order to extend these leases to future periods. The Company’s inability to perform operations during any given period could result in the Company’s losing the rights to future operations on that lease.

The potential lack of availability of, or cost of, drilling rigs, equipment,supplies, personnel and crude oil field services could adversely affect our abilityto execute on a timely basis our exploration and development plans within our budget.

When the prices of crude oil increase, or the demand for equipment and services is greater than the supply in certain areas, we could encounter an increase in the cost of securing drilling rigs, equipment and supplies. In addition, larger producers may be more likely to secure access to such equipment by offering more lucrative terms. If we are unable to acquire access to such resources, or can obtain access only at higher prices, our ability to convert our reserves into cash flow could be delayed and the cost of producing those reserves could increase significantly, which would adversely affect our results of operations and financial condition.

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

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

Oil prices are volatile.  Once we commence oil production, any sustained decline in oil prices could adversely affect our business, financial condition and results of operations and our ability to meet our capital expenditure obligations and financial commitments. 

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The prices we receive for our oil production will heavily influence our revenue, profitability, access to capital, future rate of growth and carrying value of our properties. Oil is a commodity and its price may fluctuate widely in response to relatively minor changes in the supply of and demand for oil and market uncertainty. Lower commodity prices may reduce our cash flows and borrowing ability. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to develop future reserves could be adversely affected. Also, using lower prices in estimating proved reserves may result in a reduction in proved reserve volumes due to economic limits.

If we are required to curtail our drilling program, we may be unable to continue to hold leases that are scheduled to expire, which may further reduce our reserves. As a result, a substantial or extended decline in commodity prices may materially and adversely affect our future business, financial condition, results of operations, liquidity and ability to finance planned capital expenditures.

Historically, oil prices have been volatile. The prices we receive for our production, and the levels of our production, depend on numerous factors beyond our control, which include the following: 

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

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices could reduce demand for oil. The impact of the changing demand for oil may have a material adverse effect on our business, financial condition, results of operations and cash flows.

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

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

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

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

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

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

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

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

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

RISK FACTORS RELATING TO OUR COMMON STOCK AND WARRANTS

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

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

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

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

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

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

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

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

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

Of 2,522,816 shares of common stock outstanding as of July10, 2023, approximately 2,212,944 shares are held by investors who are not our affiliates or holders of restricted stock. Of these 2,522,816 shares, 2,329,420 shares are unrestricted freely tradeable stock and 193,396 shares are being held as restricted shares. The remaining shares may be sold subject to the volume limits of Rule 144 which limits sales by any affiliate to the greater of 1% of outstanding shares in any three-month period or the average weekly trading volume over a four-week period. Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through a publican offering of our securities.

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

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

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

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

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

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

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

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

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

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

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and Company resources, which could harm our business and financial condition.

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

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

We intendstock, and as a result of our sale of Series A Preferred Stock in June of 2022 to continue to seek financing through the issuanceAult Lending, a wholly owned subsidiary of equity or convertible securities to fund our operations. In the future, we may also issueAAI, Ault Lending could convert additional equity securities resulting in the dilutionshares of the ownership interests of our present shareholders. We may also issue additionalSeries A and cause dilution to the Company’s other investors. To the extent that such outstanding securities are converted into shares of our common stock, or other securities that are convertible into or exercisable forissued in future financings, our common stockinvestors may experience dilution with respect to their investment in connection with hiring or retaining employees, future acquisitions or for other business purposes. The future issuance of any such additional shares of common stock will result in dilution to our shareholders and may create downward pressure on the trading price of our common stock.us.

The market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.

Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that we will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.

Our stock could be subject to volatility.

The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including:

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

Changes in the fair valueBecause of the warrant liabilitiesderivative liability caused by our outstanding warrants, the increase or decrease in our common stock price each quarter (measured from the first day to the last day) is either a non-cash expense or income. If the price rises, we are required to report the expense, which increases our actual operating loss. Contrarily a price decrease in a given quarter will cause us to report income. The risk is principally that investors will react to our reported bottom line, which will increase volatility or other factors impacting the fair value determined by the Black Scholes model will impact other income or expense.

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

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

OurUnder our Articles of Incorporation, authorize ussubject to issuethe approval of the Series A holder, Ault Lending, our Board of Directors, may approve an issuance of up to 5,0005,000,000 shares of “blank check:check” preferred stock.stock without seeking shareholder approval, though in certain cases Nasdaq approval could be required. Any additional shares of preferred stock that we issue in the future may rank ahead of our common stock in terms of dividend priority or liquidation premiumsrights and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which couldwould dilute the value of common stock to current stockholdersshareholders and could adversely affect the market price if any, of our common stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company.Company. Although we have no present intention to issue any additional shares of authorized preferred stock, there can be no assurance that we will not do so in the future.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

We are a public company and subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act of 2002. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. For example, Section 404 of the Sarbanes-Oxley Act requires that our management report on the effectiveness of our internal controls structure and procedures for financial reporting. Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete. If we fail to maintain compliance under Section 404, or if our internal control over financial reporting continues to not be effective as defined under Section 404, we could be subject to sanctions or investigations by the NYSE American, the Commission, or other regulatory authorities. Furthermore, investor perceptions of our company may suffer, and this could cause a decline in the market price of our common stock. Any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting or financial results and could result in an adverse opinion on internal controls from our independent auditors. We may need to hire a number of additional employees with public accounting and disclosure experience in order to meet our ongoing obligations as a public company, particularly if we become fully subject to Section 404 and its auditor attestation requirements, which will increase costs. Our management team and other personnel will need to devote a substantial amount of time to new compliance initiatives and to meeting the obligations that are associated with being a public company, which may divert attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. Our research coverage by industry and financial analysts is currently limited. Even if our analyst coverage increases, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

The elimination of monetary liability against our directors, officers and employees under law and the existence of indemnification rights for or obligations to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees. 

Our articles of incorporation contains a provision permitting us to eliminate the personal liability of our directors to us and our stockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification obligations under any future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit us and our stockholders.

We do not anticipate paying dividends on our common stock and, accordingly, stockholders must rely on stock appreciation for any return on their investment.

We have never declared or paid cash dividends on our common stock and do not expect to do so in the foreseeable future. The declaration of dividends is subject to the discretion of our Board and will depend on various factors, including our operating results, financial condition, future prospects and any other factors deemed relevant by our Board. You should not rely on an investment in our company if you require dividend income from your investment in our company. The success of your investment will likely depend entirely upon any future appreciation of the market price of our common stock, which is uncertain and unpredictable. There is no guarantee that our common stock will appreciate in value. 

Because the COVID-19 pandemic has had a material adverse effect on the economy, the uncertainty relating to its continuation may have a future adverse effect on our business, results of operations, and future prospects.

The global COVID-19 pandemic and the unprecedented actions taken by U.S. federal, state and local governments and governments around the world in order to stop the spread of the virus had a profound impact on the U.S. and global economy, disrupting global supply chains and creating significant volatility in the financial markets.

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

Disruptions and/or uncertainties related to a new strain of COVID-19 for a sustained period of time could have a material adverse impact on our business, results of operations and financial condition. Supply chain delays and shortages of Bitcoin miners and other equipment such as transformers may adversely affect BitNile especially its plans to further develop and monetize its metaverse business. Increased transportation, electrical supply, labor or other costs which may result from COVID-19 could have a material adverse effect on our financial condition, and results of operations.

Furthermore, the effect of another serious COVID-19 outbreak on financial markets and on our Company may limit our ability to raise additional capital in the future on the terms acceptable to us at the time we need it, or at all.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Item 1B. Unresolved Staff CommentsBecause we are a smaller reporting company, this section is not applicable.

None.

ITEM 2. PROPERTIES

Item 2. PropertiesHeadquarters

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

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

O’Neal Family OGML and Weyerhaeuser OGML including shallow drilling rights were acquired by White River on July 1, 2019 from Livland, LLC and Hi-Tech Onshore Exploration, LLC respectively in exchange for a $125 drilling credit to be applied by Livland, LLC on subsequent drilling operations.

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

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

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

Oil and Natural Gas Reserves

As of March 31, 2020, all of our proved oil and natural gas reserves were located in the United States, in the States of Texas, Mississippi and Louisiana. The Company did not have any proved oil and natural gas reserves prior to the acquisition of Banner Midstream on March 27, 2020, therefore there is no comparative information for March 31, 2019.

The following tables set forth summary information with respect to our proved reserves as of March 31, 2020. For additional information see Supplemental Information “Oil and Gas Producing Activities (Unaudited)” to our consolidated financial statements in “Item 8 – Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Proved reserves as of March 31, 2020:

The following table presents certain information with respect to oil and natural gas production attributable to our interests in all of our properties in the United States, the reserve derived from the sale of such production, average sales price received and average production costs during the 4 day period after the Banner Midstream acquisition between March 28, 2020 and the fiscal year-end on March 31, 2020.

Drilling and other exploratory activities:

During the year ended March 31, 2020, the Company acquired Banner Midstream and all activities and properties owned by them at the time of acquisition. Other than some minor drilling in that four-day period of time that the Company owned Banner Midstream, no material activities occurred.

Present activities:

The Company is assessing allcurrently leases space through October 2026 in Charleston, South Carolina for Agora’s offices.

Bitcoin Mining Facilities

Agora owns a separate parcel of its properties post-acquisition20 acres in West Texas which it purchased for $250,000 on January 3, 2022, of Banner Midstreamwhich $125,000 was paid for by PPM to assist in the funding as well as its recent acquisition disclosed regardingAgora goes through the energy assets acquired from SR Acquisition I, LLC as partregistration statement process. Agora has no obligation to repay PPM and they have no ownership of the ongoing bankruptcy reorganizationland. Agora has an option to sell back this land to the sellers at $400 per acre upon cessation of Sanchez Energy Corporation. Once this assessment is completed the Company anticipatesland being used as a data center. Agora intends to use the commencement of a drilling program in the Company’s fiscal second quarter of 2021.land for its Bitcoin mining operations.

Delivery commitments:

The Company is not currently committed to provide a fixed and determinable quantity of oil and gas in the near future under existing contracts or agreements.

Productive WellsWe currently anticipate that the current leased space will be sufficient to support our current and foreseeable future needs.

The following table sets forth the number of wells in our inventory, in which we maintained ownership interests as of March 31, 2020.