U.S.Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

UNDER

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

 

For the quarterly period ended June 30, 2022

2023

or

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________________________ to ________________________________________

 

Commission File Number: 0-30454file number: 000-30454

 

Enviro Technologies U.S.,Wolf Energy Services Inc.

(Exact name of registrant as specified in its charter)

 

florida

Florida

82-0266517

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

incorporation or organization)

408 State Highway 135 N,Kilgore, Texas

 Identification No.)

75662

(Address of principal executive offices)

(Zip Code)

 

821 NW 57th Place, Fort Lauderdale, Florida33309
(Address of principal executive offices) (Zip Code)

(954)958-9968
(Registrant’s telephone number, including area code)

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

Registrant’s telephone number, including area code:

903-392-0948

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which

registered

None

 not applicable

None

 not applicable

None

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.4.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   ☐ No


 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

If an emerging growth company, indicate by checkmarkcheck mark if the registrant has elected not elected 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: Act.

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: August 15, 2022,17, 2023, we had 5,570,12578,268,332  shares of our Common Stock outstanding.


INDEX

 

  

Page

Number

PART I.1.FINANCIAL INFORMATION

41

Item 1.

Unaudited Financial Statements

41

Condensed Consolidated Balance Sheets

41

Condensed Consolidated Statements of Operations

52

Condensed Consolidated Statements of Changes in Shareholders’Shareholders' Equity (deficiency)(deficit)

63

Condensed Consolidated Statements of Cash Flows

74

Notes to Condensed Consolidated Financial Statements

85

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.

1617

Item 3.

Quantitative and Qualitative Disclosures About Market RiskRisk.

2022

Item 4.

Controls and ProceduresProcedures.

2022
   
PART II.

OTHER INFORMATION

2223

Item 1.

Legal Proceedings2223

Item 1A.

Risk Factors

2223

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds2223

Item 3.

Defaults Upon Senior Securities

2223

Item 4.

Mine Safety Disclosure

2223

Item 5.

Other Information2223

Item 6.

Exhibits 22
Signatures  
Signatures23

 

i

 

 

2

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

Cautionary Note Regarding Forward Looking Statements

This report includesReport contains, in addition to historical information, certain forward-looking statements, that relateincludes information relating to future events, or our future financial performance, strategies, business opportunities, expectations including our goals and involveprojections, the expected results from and trends and developments in our transportation and logistics activities, future plans for and anticipated transactions and relationships with respect to transportation and logistics operations, our working capital needs, potential financings through the sale of our common stock or other securities, the subsequent use and sufficiency of the proceeds from any capital raising methods we may undertake to fund our operations, our further development and implementation of our business plan and our ability to locate sources of capital necessary to meet our business needs and objectives. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown risks,that could cause actual results and developments to differ materially from those expressed or implied in such statements.

In some cases, you can identify forward-looking statements by terminology, such as “may,” “should,” “would,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “continue,” “plan,” “potential” and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this Report or incorporated herein by reference.

You should read this Report and the documents we have filed as exhibits to this Report, completely and with the understanding that our actual future results may be materially different from what we expect. You should not assume that the information contained in this Report or in any document incorporated herein by reference is accurate as of any date other than the date on the front cover of those documents.

Risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be different from those expressed or implied in our written or oral forward-looking statements may be found in this Report under “Item 1A. - Risk Factors.”

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based thesequalify all of the information presented in this Report particularly our forward-looking statements, largely onby these cautionary statements.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that you should consider before investing in our current expectations and future events and financial trends thatcommon stock. Set forth below is a summary of the principal risks we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with:face:

 

· Financial risks, including:
 ·

our

Our ability to continue as a going concern;

·the adverse impact of Covid-19 on our company;

·our ability to generate revenuesconcern and report profitable operations;

potential need for additional capital;

·our ability to pay our operating expenses; and

·our ability to raise working capital.

· Business risks, including:
 ·

reliance

We have incurred significant losses since inception, we may continue to incur losses and negative cash flows in the future;

i

We derive a significant portion of our revenue from a small number of customers, under contracts that may be terminated on short notice without cause, and the loss of one of these customers, or a reduction in their demand for our services, could adversely affect our business, financial condition, results of operations and prospects;

Our future cash flows and results of operations, are highly dependent on our ability to efficiently develop our current customers as well as find or acquire additional customers;

Our future operating results are dependent on oil and gas prices that are highly volatile, and even when the high natural gas prices return, other aspects of our business such as transportation may be adversely affected, reducing or eliminating the potential benefits;

Our future operating results are dependent on insurance costs that have seen a significant increase recently across all industries;

Future approval by the Securities and Exchange Commission (the “SEC”) of its climate change rules and continued focus on environmental, social and governance (“ESG”) regulation and sustainability initiatives, which would have the effect of reducing demand for fossil fuels and negatively impact our operating results, stock price and ability to access capital markets;

Potential future changes in the regulation of hydraulic fracturing could materially adversely affect our transportation business;

A potential inability to retain and attract qualified drivers, including owner-operators, subjects us to risks;

We are subject to the potential risk that the drivers who we rely upon in our transportation business will be classified as employees rather than independent contractors;

The majority of our accounts receivable and revenues are derived from a very limited number of customers, and the Grant Back License;

any loss of these customers or reduction in work orders from them would materially adversely affect us; and

·our ability to compete; and

·our dependence on our sole executive officer.

· Risks related to our common stock, including:
 ·

continuing material weaknesses

Dilution to our shareholders in the event of conversion of any of our disclosure controls and internal control over financial reporting;

outstanding convertible notes.

·the illiquid nature of the market for our common stock; and

·the impact of penny stock rules on our shareholders.

 

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, Part I, Item 1A. - Risk Factors in our Annual Report on Form 10-K forincluding the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2022 (the “2021 10-K”) and our other filings with the SEC.“Risk Factors” contained herein. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

 

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this report the terms “EVTN,“WOEN,” the “Company,” “we,” “our,” “us,” and similar terms refers to Wolf Energy Services Inc., formerly known as Enviro Technologies U.S., Inc., a Florida corporation, and our subsidiary, Florida Precision Aerospace, Inc., a Florida corporation which we refer to as “FPA.”subsidiaries. In addition, “second“first quarter of 2022”fiscal year 2024” refers to the three months ended June 30, 2022, “second2023 and “first quarter of 2021”fiscal year 2023” refers to the three months ended June 30, 2021, “2021” refers to the year ended December 31, 2021.2022. We maintain a corporate website at www.evtn.com.www.wolf-energy.com. Unless specifically set forth to the contrary, the information which appears on our website at www.evtn.comwww.wolf-energy.com is not part of this report.

 

3
PART I.FINANCIAL INFORMATION

Throughout this quarterly report 10-Q (this “Report”), the terms “Wolf Energy,” the “Company,” “we,” “us,” “our,” “registrant,” and “Company” refer to Wolf Energy Services Inc., a Florida corporation. On January 17, 2023, we effected a forward split of our outstanding and authorized shares of common stock pursuant to which each one share of common stock was divided into and became four shares of common stock. All share numbers set forth in this Report give effect to the forward split.

Item 1.Financial Statements.

 

ENVIRO TECHNOLOGIESWolf Energy is a holding company which operates primarily in the transportation and logistics services business serving hydraulic fracking companies and assisting in their operations through Banner. On February 1, 2023, we amended our articles of incorporation to change our corporate name from “Enviro Technologies U.S., INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETSInc.” to “Wolf Energy Services Inc.” to better reflect our business and operations.

 

     
  June 30,
2022
(unaudited)
 December 31,
2021
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $4,236  $11,740 
Accounts receivable, net  5,008   8,374 
Inventory, net  116,200   114,247 
Prepaid expenses  670   4,689 
Total current assets  126,114   139,050 
         
FIXED ASSETS, NET  6,913   7,325 
         
OTHER ASSETS        
Operating lease asset  128,755   153,811 
Security deposit  10,143   10,143 
Total other assets  138,898   163,954 
Total assets $271,925  $310,329 
         
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY        
         
CURRENT LIABILITIES:        
Accounts payable and accrued expenses $396,338  $357,379 
Accrued Expenses – related party  903,565   777,565 
Loans payable, current portion  114,855   113,461 
Loan Payable – Related Party  104,500      
Operating lease liability, current portion  52,715   50,970 
Total current liabilities  1,571,973   1,299,375 
         
LONG-TERM LIABILITIES:        
      Operating lease liabilities, less current portion  76,040   102,841 
Loans payable, less current portion  147,116   148,510 
Total long-term liabilities  223,156   251,351 
Total liabilities  1,795,129   1,550,726 
         
COMMITMENTS AND CONTINGENCIES (See Note G)          
         
SHAREHOLDERS’ (DEFICIENCY):        
Common stock, $.001 par value, 250,000,000 shares authorized;
5,570,125 and 5,570,125 shares issued and outstanding as of
June 30, 2022 and December 31, 2021
  5,571   5,571 
Additional paid-in capital  15,390,553   15,390,553 
Accumulated deficit  (16,919,328)  (16,636,521)
Total shareholders’ (deficiency)  (1,523,204)  (1,240,397)
         
Total liabilities and shareholders’ (deficiency) $271,925  $310,329 

 

The accompanying notes are an integral part


 

4

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
PART 1.  FINANCIAL INFORMATION

 

Item 1. Financial Statements

                 
  Three Months Ended June 30, Six Months Ended June 30,
  2022 2021 2022 2021
Revenues, net $39,047  $29,108  $59,330  $66,864 
                 
Cost of goods sold  19,020   13,368   39,691   28,212 
                 
Gross profit  20,027   15,740   19,639   38,652 
                 
Costs and expenses:                
Selling, general and administrative  36,115   56,210   74,915   133,557 
Payroll expenses  94,313   123,886   163,915   214,594 
Professional Fees  46,241   37,570   59,223   76,397 
                 
Total costs and expenses  176,669   217,666   298,053   424,548 
                 
Loss from operations  (156,642)  (201,926)  (278,414)  (385,896)
                 
Other income (expenses):                
Other Income            2,948      
Loss on sale of assets       (15,011)       (15,011)
Interest expense  (3,998)  (7,771)  (7,341)  (14,675)
                 
Total other income (expense)  (3,998)  (22,782)  (4,393)  (29,686)
                 
Net loss before provisions for income taxes  (160,640)  (224,708)  (282,807)  (415,582)
Provisions for income taxes                    
NET LOSS $(160,640) $(224,708) $(282,807) $(415,582)
                 
Net loss per common share - basic and diluted $(0.03) $(0.05) $(0.05) $(0.08)
Weighted average number of common shares outstanding - basic and diluted  5,570,125   4,950,125   5,570,125   4,950,125 

WOLF ENERGY SERVICES INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2023 (UNAUDITED) AND MARCH 31, 2023

  

June 30,

  

March 31,

 
  

2023

  

2023

 
  

(unaudited)

     

ASSETS

        

CURRENT ASSETS:

        

Cash

 $166,644  $574,233 

Accounts receivable

  115,795   146,836 

Prepaid expenses and other current assets

  1,071,113   516,370 

Current assets of discontinued operations

  30,672   60,362 
         

Total current assets

  1,384,224   1,297,801 
         

NON-CURRENT ASSETS:

        

Property and equipment, net

  138,318   686,327 

Right of use asset - operating lease

  278,919   297,744 
         

Total non-current assets

  417,237   984,071 
         

TOTAL ASSETS

 $1,801,461  $2,281,872 
         
         

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

        
         

LIABILITIES

        

CURRENT LIABILITIES

        

Accounts payable

 $419,583  $229,267 

Accrued liabilities

  1,686,147   1,055,862 

Notes payable

  845,565   845,565 

Short-term debt, net of discount

  349,895   511,777 

Current portion of lease liability - operating lease

  67,543   71,758 

Current liabilities of discontinued operations

  222,626   238,028 
         

Total current liabilities

  3,591,359   2,952,257 
         

NON-CURRENT LIABILITIES

        

Lease liability - operating lease, net of current portion

  214,076   227,786 

Non-current liabilities of discontinued operations

  150,000   150,000 
         

Total non-current liabilities

  364,076   377,786 
         

Total Liabilities

  3,955,435   3,330,043 
         

COMMITMENTS AND CONTINGENCIES

          
         

STOCKHOLDERS' EQUITY (DEFICIT)

        

Preferred stock, $0.001 par value, 5,000,000 shares authorized and none issued and outstanding

  -   - 

Common stock, $0.001 par value, 1,000,000,000 shares authorized and 78,268,332 and 78,268,332 shares issued and outstanding

  78,268   78,268 

Additional paid in capital (*)

  14,944,041   14,906,541 

Accumulated deficit

  (17,176,283)  (16,032,980)
         

Total stockholders' equity (deficit)

  (2,153,974)  (1,048,171)
         

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 $1,801,461  $2,281,872 

 

(*) On September 7, 2022, Banner Midstream Corp merged with Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) in a reverse merger.  Banner Midstream's parent, BitNile Metaverse, Inc., was issued 51,987,832 shares of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) common stock in exchange for all the capital stock of Banner owned by BitNile Metaverse, which represents 100% of the issued and outstanding shares of Banner that were outstanding at the time of the reverse merger.  The Company has reflected this transaction retroactively in these interim financial statements.

 

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

5

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY


EQUITY (DEFICIENCY)CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS

(Unaudited)

 

 

1

For the three months ended June 30, 2022 and 2021

 

              
  Common Stock Additional    
  Shares Par Value Paid-In
Capital
 Accumulated Deficit Total
Balance – March 31, 2021 (unaudited)  4,950,125  $4,951   $15,236,173  $(16,113,303) $(872,179)
                     
Net (loss)  —               (224,708)  (224,708)
                     
Balance-June 30, 2021 (unaudited)  4,950,125  $4,951  $15,236,173  $(16,338,011) $(1,096,887)
                     
Balance – March 31, 2022 (unaudited)  5,570,125  $5,571  $15,390,553  $(16,758,688) $(1,362,564)
                     
Net (loss)  —               (160,640)  (160,640)
                     
Balance – June 30, 2022 (unaudited)  5,570,125  $5,571  $15,390,553  $(16,919,328) $(1,523,204)
                     

WOLF ENERGY SERVICES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 20023 AND 2022

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 
         

REVENUES

 $2,343,558  $5,418,655 
         

COSTS AND EXPENSES

        

Costs of revenues (excludes items below)

  1,538,813   4,512,249 

Salaries and salaries related costs

  315,347   263,321 

Selling, general and administrative costs

  1,166,140   1,209,725 

Depreciation, amortization, and impairment

  29,056   112,829 
         

Total costs and expenses

  3,049,356   6,098,124 
         

LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSE)

  (705,798)  (679,469)
         

OTHER (EXPENSE)

        

Loss on disposal of fixed assets

  (298,953)  (950,024)

Interest expense, net of interest income

  (107,028)  (7,278)

Total other expense

  (405,981)  (957,302)
         

LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES

  (1,111,779)  (1,636,771)
         

DISCONTINUED OPERATIONS:

        

Income (loss) from discontinued operations

  (28,287)  - 

Gain on disposal of discontinued operations

  -   - 

Total discontinued operations

  (28,287)  - 
         

LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES

  (1,140,066)  (1,636,771)
         

PROVISION FOR INCOME TAXES

  (3,237)  - 
         

NET LOSS

 $(1,143,303) $(1,636,771)
         

NET LOSS PER SHARE - BASIC

        

Continuing operations

 $(0.01) $(0.03)

Discontinued operations

  -   - 

NET LOSS PER SHARE

 $(0.01) $(0.03)
         
         

WEIGHTED AVERAGE SHARES OUTSTANDING

  78,268,332   51,987,832 

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

2

WOLF ENERGY SERVICES INC.

STATEMENT OF CHANGESIN STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 20023 AND 2022

                  

Additional

         
  

Preferred Stock

  

Common Stock (*)

  

Paid-In

  

Accumulated

     
  

Shares

  

Amount

  

Shares

  

Amount

  

Capital (*)

  

Deficit

  

Total

 
                             

Balance - March 31, 2022

  -  $-   51,987,832  $51,988  $10,349,029  $(2,758,773) $7,642,244 
                             

Advances from BitNile Metaverse, Inc. to Banner Midstream Corp

  -   -   -   -   392,484   -   392,484 

Net loss for the period

  -   -   -   -   -   (1,636,771)  (1,636,771)
                             

Balance - June 30, 2022

  -   -   51,987,832   51,988   10,741,513   (4,395,544)  6,397,957 
                             
                             

Balance - March 31, 2023

  -  $-   78,268,332  $78,268  $14,906,541  $(16,032,980) $(1,048,171)
                             

Share-based compensation

  -   -   -   -   37,500   -   37,500 

Net loss for the period

  -   -   -   -   -   (1,143,303)  (1,143,303)
                             

Balance - June 30, 2023

  -   -   78,268,332   78,268   14,944,041   (17,176,283)  (2,153,974)

 

 

For* On September 7, 2022, Banner Midstream Corp merged with Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) in a reverse merger. Banner Midstream's parent, BitNile Metaverse, Inc., was issued 51,987,832 shares of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) common stock in exchange for all the six months ended June 30, 2022capital stock of Banner owned by BitNile Metaverse, Inc., which represents 100% of the issued and 2021

               
  Common Stock Additional    
  Shares Par Value Paid-In
Capital
 Accumulated Deficit Total
Balance - December 31, 2020  4,950,125  $4,951  $15,236,173  $(15,922,429) $(681,305)
                     
Net (loss)  —               (415,582)  (415,582)
                     
Balance-June 30, 2021 (unaudited)  4,950,125  $4,951  $15,236,173  $(16,338,011) $(1,096,887)
                     
Balance - December 31, 2021  5,570,125  $5,571  $15,390,553  $(16,636,521) $(1,240,397)
                     
Net (loss)  —               (282,807)  (282,807)
                     
Balance – June 30, 2022 (unaudited)  5,570,125  $5,571  $15,390,553  $(16,919,328) $(1,523,204)
                     

outstanding shares of Banner that were outstanding at the time of the reverse merger.  The Company has reflected this transaction retroactively in these interim financial statements along with amounts due to Ecoark Holdings that were exchanged for the capital stock.

 

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

6

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

        
  Six Months Ended June 30,
  2022 2021
Cash Flows from Operating Activities:        
Net loss $(282,807) $(415,582)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation  412   15,298 
Amortization of operating lease asset  25,056   22,596 
Loss on sale of equipment  
   15,011 
Changes in assets and liabilities:        
Accounts receivable  3,366   (10,511)
Inventory  (1,953)  (2,899)
Prepaid expenses  4,019   8,483 
Accounts payable and accrued expenses  38,959   50,358 
Operating lease liability  (25,056)  (22,596)
Accrued expenses – related parties  126,000   100,250 
Net cash used in operating activities  (112,004)  (239,592)
         
Cash Flows from Investing Activities:        
Sale of equipment     275,000 
Net cash provided by Investing activities     275,000 
         
Cash Flows from Financing Activities:        
Repayment of equipment note payable     (175,398)
Proceeds from loan payable - related party  104,500    
Loan payable issuance     75,085 
Net cash provided by (used in) financing activities  104,500  (100,313)
         
Net decrease in cash and cash equivalents  (7,504)  (64,905)
         
Cash and cash equivalents, beginning of period  11,740   336,564 
         
Cash and cash equivalents, end of period $4,236  $271,659 
         
Supplemental Disclosures        
Cash paid during the period for interest $1,494  $10,403
Cash paid during the period for taxes $  $ 
         

 

 

3

 

Table of Contents

WOLF ENERGY SERVICES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 20023 AND 2022

  

June 30,

 
  

2023

  

2022

 
         

CASH FLOW FROM OPERATING ACTIVITIES

        

Net loss

 $(1,143,303) $(1,636,771)

Adjustments to reconcile net loss to net cash used in operating activities

        

Depreciation, amortization and impairment

  29,056   112,829 

Loss on disposal of fixed assets

  298,953   950,024 

Stock based compensation - RSU

  37,500   - 

Discount on short-term debt

  3,960   - 

Changes in assets and liabilities

        

Accounts receivable

  31,041   58,405 

Prepaid expenses and other current assets

  (554,743)  (1,491,522)

Amortization of right of use asset - operating leases

  23,665   15,234 

Amortization of right of use asset - financing leases

  -   36,591 

Due to BitNile Metaverse, Inc.

  -   392,484 

Interest on lease liability - financing leases

  -   (6,113)

Operating lease expense

  (22,765)  (16,948)

Accrued payable and accrued liabilities

  820,601   1,403,852 

Total adjustments

  667,268   1,454,836 

Net cash (used in) operating activities of continuing operations

  (476,035)  (181,935)

Net cash (used in) operating activities of discontinued operations

  14,288   - 

Net cash (used in) operating activities

  (461,747)  (181,935)
         

CASH FLOWS FROM INVESTING ACTIVITES

        

Proceeds from the sale of fixed assets

  220,000   580,000 

Net cash provided by investing activities of continuing operations

  220,000   580,000 
         

CASH FLOWS FROM FINANCING ACTIVITES

        

Reduction of finance lease liability

  -   (29,775)

Repayments of long-term debt

  -   (436,407)

Repayments of short-term debt, net of discount

  (165,842)  - 

Net cash (used in) financing activities of continuing operations

  (165,842)  (466,182)
         

NET DECREASE IN CASH

  (407,589)  (68,117)
         

CASH - BEGINNING OF PERIOD

  574,233   99,452 
         

CASH - END OF PERIOD

 $166,644  $31,335 
         

SUPPLEMENTAL DISCLOSURES

        

Cash paid for interest expense

 $12,189  $- 

Cash paid for income taxes

 $-  $- 
         
         
         

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

 

7
4

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

WOLFENERGY SERVICES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

JUNE 30, 2023 AND 2022

(UNAUDITED) NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

NOTE A - ORGANIZATION AND OPERATIONS

Wolf Energy Services Inc., formerly known as Enviro Technologies U.S., Inc., a Florida corporation (the “Company”), isprior to September 7, 2022 was a manufacturer and provider of environmental and industrial separationoperation technology. The Company had developed, manufactured, and now manufactures and sellssold the V-Inline Separator, a technology that efficiently separates liquid/liquid, liquid/solid or liquid/liquid/solid fluid streams with distinct specific gravities. Current and potential commercial applications and markets includeincluded mining, utilities, manufacturing, waste-to-energy among other industries. We also, through a Grant Back License with Schlumberger Technology Corporation signed in June 2017, can utilize specific patents that were sold to Schlumberger under Technology Purchase Agreement for industries outside of oil and gas.

 

The Company had one subsidiary, Florida Precision Aerospace, Inc., a Florida corporation (“FPA”) prior to the closing of the Exchange Agreement (defined below).

Effective September 7, 2002, BitNile Metaverse, Inc. (formerly Ecoark Holdings, Inc.), isa Nevada corporation (“BitNile”) and Banner Midstream Corp. (“Banner” or “Banner Midstream”) completed a Share Exchange Agreement (the “Exchange Agreement”) with Wolf Energy Services Inc. Under the Agreement, BitNile acquired 51,987,832 shares of Wolf Energy Services Inc., common stock in exchange for all the capital stock of Banner owned by BitNile, which represents 100% of the issued and outstanding shares of Banner (the “Merger”). Upon closing of the Exchange Agreement, Banner became a wholly-owned subsidiary of Wolf Energy Services Inc. via a reverse merger. As a result, the historical financial information of the company is that of Banner. The transaction was accounted for as a reverse merger whereby Banner Midstream is considered the accounting acquirer. Since the reverse merger occurred with a non-shell public company, the transaction included the purchase of the non-controlling interest of Wolf Energy Services Inc.

Banner was organized under the name Pinnacle Frac Holdings Corp, under the laws of the State of Delaware on April 2,2018. Pinnacle Frac Holdings Corp was renamed Banner Midstream Corp on December 6, 2018.

Banner Midstream established Pinnacle Frac Sales & Service LLC dba Capstone Equipment Leasing (“Capstone”) as a limited liability company pursuant to the laws of the State of Texas on May 23, 2018, with the Company having ownership of one hundred percent of the issued and outstanding membership interests of Capstone. Capstone is currently structured as a wholly owned subsidiary of the Company. Pinnacle Frac Sales & Service LLC was renamed Capstone Equipment Leasing, LLC by the Office of the Secretary of State of Texas on October 4, 2018. Capstone commenced operations in October 2018 and is usedengaged in the business of procuring and financing equipment to manufacture precision parts along with the manufacture, assemblevarious oilfield transportation services contractors (“owner-operators”).

Banner Midstream has two active operating subsidiaries: Pinnacle Frac Transport LLC (“Pinnacle Frac”), and test the V-Inline Separator. On August 20, 2020, Capstone.

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.

In September 2022, the Company’s shareholdersboard of directors and management determined that the FPA business will be sold. As this determination represents a strategic shift that will have a major effect on the Company’s operations and financial results, in accordance with ASC 205-20-45-1E, the Company has reclassified FPA’s assets and liabilities as held for sale and presented the results of operations of FPA as discontinued operations, and when FPA is sold, will recognize a gain or loss on disposal.

On September 22, 2022, the board of directors approved a change to the Company’s fiscal year from December 31 to March 31, as a result of domicilethe Merger to conform to Banner's year end.

Forward Split and Corporate Name Change

On January 13, 2023, the Company completed a 4-for-1 forward stock split of its issued and outstanding shares of its common stock to shareholders of record as of the close of business on December 30, 2022. The Company filed articles of amendment to its articles of incorporation with the Secretary of State of the State of Florida effective January 17, 2023. Pursuant to a unanimous written consent of the Company’s board of directors, the only change reflected in the articles of amendment is an increase in the authorized number of shares of common stock of the Company from Idaho250,00,000 shares to Florida. 1,000,000,000 shares in connection with the Company’s 4-for-1 forward stock split. Throughout these financial statements, common stock share and per share information, including stock award units, options and the Company's convertible note conversion ratio in common stock shares have been revised for all periods presented to give effect to the forward stock split.

5

On December 28, 2020,30, 2022 the Company’s board of directors and majority shareholder approved a name change of the Company receivedto “Wolf Energy Services Inc.”, as the file stamped Certificatenew name will better reflect the Company’s business and operations. On January 30, 2023, the Company filed articles of Domestication and Articlesamendment to its articles of Incorporation fromincorporation with the Secretary of State of Florida which wasand after processing by FINRA, the Company formally changed its name to Wolf Energy Services Inc. effective on December 18, 2020, thereby completing the change in domicile from Idaho to Florida. In connection with the change in domicile from Idaho to Florida, the Company’s name changed to “Enviro Technologies U.S.,February 1, 2023. Additionally, effective February 1, 2023, Wolf Energy Services Inc. began trading under its new ticker symbol, WOEN.

 

NOTE B – GOING CONCERN

Since entering into the Technology Purchase Agreement, Supply Agreement and Grant Back License in June 2017, we have generated limited revenues, significantly less than we anticipated, under the termsBasis of any of these agreements. The Supply Agreement expired in June 2020. The Grant Back License did not expire. There are no assurances that the Grant Back License will ever generate any material ongoing revenues. We intend to continue to seek opportunities for the V-Inline Separator. Although we experienced strong revenue growth prior to COVID-19 through the sales of V-Inline and Voraxial Separators, the pandemic created significant cash flow issues that we are trying to work through, including lack of capital for sales and marketing. This has limited our exposure to potential customers. Our ability to increase our revenues in future periods will depend on a number of factors, many of which are beyond our control, including our ability to generate sales of the V-Inline Separator, our ability to leverage the Grant Back License to generate additional revenues, the continuing impact of the Covid-19 pandemic on the economy in general and the Company in particular, competitive efforts and other general economic trends. There are no assurances we will return to the pre-Covid revenue and profitability levels of 2019 or report profitable operations in the future. Further, the lingering economic impact of the Covid-19 pandemic may have a continued negative effect on the potential for sales of V-inline Separators.Presentation

 

At June 30, 2022, we had a working capital deficit of $1,445,859, an accumulated deficit of $16,919,328. We do not have any external sources of liquidity. Our revenues have declined significantly from quarter ended and year ended December 31, 2019, our last full reporting period prior to the start of Covid-19 pandemic and has yet to recover. Covid-19 pandemic has created a very challenging economic condition for our company. In an effort to conserve our cash resources to sustain our operations until such time as the economy begins returning to pre-Covid-19 pandemic activity levels, we have reduced employee hours, continue to accrue management’s salary, and sold under-utilized equipment. We also have begun marketing our machining capabilities to local manufactures. There are no assurances, however, that these efforts will be sufficient to permit us to pay our operating expenses. In the event we cannot increase our revenues, we may be required to scale back or cease operations, sell or liquidate our assets and possibly seek bankruptcy protection.

As a result of the above, there is substantial doubt about the ability of the Company to continue as a going concern and the accompanying condensedThe Company’s consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

8

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2022

(UNAUDITED) 

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The condensed consolidated financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordanceconformity with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of America have been condensed or omitted pursuantthe Financial Accounting Standards Board (FASB).

As the reverse merger transaction resulted in the owner of Banner gaining control over the combined entity after the transaction, and the shareholders of Wolf Energy Services Inc. continuing only as passive investors, the transaction was not considered a business combination under the ASC. Instead, this transaction was considered to such rulesbe a capital transaction of the legal acquiree (Banner) and regulations. was equivalent to the issuance of shares by Banner for the net monetary assets of Wolf Energy Services Inc. accompanied by a recapitalization, except for the purchase of the 22,280,500 shares of issued and outstanding common shares of Wolf Energy Services Inc. which were considered as purchase consideration resulting in $3,613,144 of goodwill that was impaired immediately. As a result, the historical balances represent Banner. See Note 2, “Reverse Merger” for full details on the accounting for the reverse merger.

Principles of Consolidation

The condensedCompany prepares its consolidated financial statements should be read in conjunction withon the company’s annual consolidated financial statements, notes and accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 15, 2022. In the opinionaccrual basis of management, all adjustments, which are necessary to provide a fair presentation of financial position as of June 30, 2022, and the related operating results and cash flows for the interim period presented, have been made.accounting. The results of operations, for the period presented are not necessarily indicative of the results to be expected for the year.

Principles of Consolidation

The unaudited condensedaccompanying consolidated financial statements include the accounts of the parent company, Enviro Technologies U.S., Inc.,Company and its wholly-owned subsidiary, Florida Precision Aerospace, Inc. wholly owned subsidiaries, all of which have a year end of March 31. All significant intercompany accounts, balances and transactions have been eliminated.eliminated in the consolidation.

 

Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaU.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuresdisclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenuerevenues and expenses during the reporting period. SignificantThese estimates include, valuationbut are not limited to, management’s estimate of deferred taxprovisions required for uncollectible accounts receivable, impaired value of equipment and intangible assets, allowance for doubtful accountsliabilities to accrue, cost incurred in the satisfaction of performance obligations, permanent and allowance for inventory obsolescence. Actual results may differ.temporary differences related to income taxes, to present these consolidated financial statements on a standalone basis and determination of the fair value of stock awards.

 

Actual results could differ from those estimates.

Revenue Recognition

We account for our revenues in accordance with the Accounting Standard Codification Topic The Company recognizes revenue under ASC 606,Revenue from Contracts with Customers” and allCustomers. The core principle of the related amendments. This standards core principalrevenue standard is that a company should recognize revenue when it transfersto depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to receive.

The Company derives its revenue from the sale of the V-Inline Separators and some high precision manufacturing projects.

Revenues that are generated from high precision manufacturing projects are recognized when we satisfy a performance obligation by transferring control of the promised goods or services to our customers at a point in time, in an amount specified in the contract with our customer and that reflects the consideration we expect to be entitled to in exchange for those goods or services. The Company also assesses our customer’s abilityfollowing five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

6

Step 3: Determine the transaction price

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

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

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

 

RevenuesIf a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that are generated from sales of V-Inline separators, auxiliary equipment and parts are typically recognized upon shipment. Our standard agreements generally do not include customer acceptance or post shipment installation provisions. However, if such provisions have been included or there is an uncertainty about customer order, revenue is deferred until we have evidence of customer order and all terms of the agreement have been complied with. As of June 30, 2022, and December 31, 2021, respectively, there was $0 of deposits from customers.distinct.

 

9

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2022

(UNAUDITED) 

ACCOUNTS RECEIVABLE

Accounts receivable are presented net of an allowance for doubtful accounts. The company maintains allowances for doubtful accounts for estimated losses. The company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is a doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, and its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collections. At June 30, 2022 and December 31, 2021, the Company has $7,044 and $7,044 in the allowance for doubtful accounts, respectively.

Fair Value of Instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, inventory, accounts payable and accrued expenses at June 30, 2022 and December 31, 2021, approximate their fair value because of their relatively short-term nature.

ASC 820 “Disclosures about Fair Value of Financial Instruments,” requires disclosures of information regarding the fair value of certain financial instruments for which it is practicable to estimate the value. For purpose of this disclosure, the fair value of a financial instrumenttransaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all the following:

Variable consideration

Constraining estimates of variable consideration

The existence of a significant financing component in the contract

Noncash consideration

Consideration payable to a customer

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

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

Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be exchangedincluded in revenue); whether certain revenue should be presented gross or net of certain related costs; when a current transaction between willing parties, other thanpromised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time.

The Company recognizes revenue upon satisfaction of its performance obligation at a point in a forced sale of liquidation.time or over time in accordance with ASC 606-10-25.

 

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

7

The Company recognizes revenue for their proportionate share of revenue when: (i) the Company receives notification of the successful delivery of a load of frac sand or other material to a buyer; (ii) the buyer will provide a fixed price based on distance between origination and destination point; and (iii) cash is received within one business day from the factoring agent.

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

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

Accounts Receivable and Concentration of Credit Risk

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

For the Company, accounts receivable is comprised of unsecured amounts due from customers that have been conveyed to a factoring agent for both with and without recourse. Prior to June 2023, The Company receives an advance from the factoring agent of 98% of the amount invoiced to the customer within one business day. The Company recognizes revenue for 100% of the gross amount invoiced, records an expense for the 2% finance charge by the factoring agent, and realizes cash for the 98% net proceeds received.   During June 2023, The Company entered into an agreement whereby the company does not factor or receive an advance on amounts invoiced to customers.   The Company now receives 92.5% of the amount invoiced within one business day.   The Company recognizes revenue for 100% of the gross amount invoiced, records an expense for the 7.5% fee charged by the agent, and realizes cash for the 92.5% net proceeds received.

Reclassifications

The Company has reclassified certain amounts in the June 30, 2022 condensed consolidated financial statements to be consistent with the June 30, 2023 presentation. These changes had no impact on the Company’s financial position or result of operations for the periods presented.

Fair Value Measurements

ASC 820Fair Value Measurements defines fair value, based on the extent to which inputs used inestablishes a framework for measuring fair value is observable in the market. We categorize each of ouraccordance with GAAP, and expands disclosure about fair value measurements in one ofmeasurements. ASC 820 classifies these three levels based oninputs into the lowest level input that is significant to the fair value measurement in its entirety. These levels are:following hierarchy:

 

Level 1—inputs are based upon unadjusted quoted1 inputs: Quoted prices for identical instruments traded in active markets. We have no Level 1 instruments as of June 30, 2022 and December 31, 2021.

 

Level 2— inputs are based upon quoted2 inputs: Quoted prices for similar instruments in active markets,markets; quoted prices for identical or similar instruments in markets that are not active, active; and model-based valuation techniques (e.g. the Black-Scholes model) for which all significantmodel-derived valuations whose inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a presentwhose significant value using market-based observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies and commodities. We have no Level 2 instruments as of June 30, 2022 and December 31, 2021.drivers are observable.

 

Level 3— inputs are generally3 inputs: Instruments with primarily unobservable value drivers.

The carrying values of the Company’s financial instruments such as cash, accounts payable, and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Theaccrued expenses approximate their respective fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. We have no Level 3 instruments asbecause of June 30, 2022 and December 31, 2021.the short-term nature of those financial instruments.

 

Cash and Cash Equivalents

8

The Company considers all highly liquid investments with a maturityEarnings (Loss) Per Share of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash balances with various financial institutions. Balances at these institutions may at times exceed the Federal Deposit Insurance Corporate (“FDIC”) limits. As of June 30, 2022 and December 31, 2021, the Company has 0 cash concentration in excess of FDIC limits.Common Stock

 

Inventory

Inventory primarily consists of components, including raw material and finished parts for the V-Inline Separator and face shields and is priced at lower of cost orBasic net realizable value. Net realizable value is defined as sales price less cost of completion and disposable and transportation. Inventory may include units being rented on a short term basis or components held by third parties in connection with pilot programs as part of the continuing evaluation by such third parties as to the effectiveness and usefulness of the service to be incorporated into their respective operations. The third parties do not have a contractual obligation to purchase the equipment. The Company maintains the title and risk of loss. Therefore, these units are included in the inventory of the Company. As of June 30, 2022 and December 31, 2021:

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2022

(UNAUDITED) 

Schedule of inventory

  June 30, 2022
(unaudited)
 

December 31,

2021

Raw materials $19,784  $24,142 
Work in process  21,581   16,856 
Finished goods  74,835   73,269 
  Total $116,200  $114,257 

Inventory amounts are presented net of allowance for inventory reserves of $75,785 and $75,785 as of June 30, 2022 and December 31, 2021, respectively.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation. The cost of maintenance and repairs is expensed to operations as incurred. Depreciation is computed by the straight-line method over the estimated economic useful life of the assets (5-10 years). Gains and losses recognized from the sales or disposal of assets is the difference between the sales price and the recorded cost less accumulated depreciation less costs of disposal.

Net Loss Per Share

In accordance with the accounting guidance now codified as FASB ASC Topic 260, “Earningsincome (loss) per Share” basic earnings (loss) percommon share is computed by dividing net income (loss) byusing the weighted average number of common shares of common stock outstanding during each period.outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock,(“EPS”) include additional dilution from common stock equivalents, such as convertible notes. The Company as of and potentially dilutive securities outstanding duringfor the period.three months ended June 30, 2023 and 2022 had no common stock equivalents.

 

As

Recently Issued Accounting Standards

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

Liquidity

For the three months ended June 30, 20222023 and 2021, there were 10,000 and 10,000 shares issuable upon2022, the exercise of options, respectively. The Company had a net loss from continuing operations (not including the provisions for threeincome taxes) of ($1,111,779) and six months ended ($1,636,771) respectively, has a working capital deficit of $2,207,135 and $1,654,456 as of June 30, 20222023 and 2021; therefore, common stock equivalent shares are excluded fromMarch 31, 2023 respectively, and has an accumulated deficit as of June 30, 2023  of ($17,176,283). As of June 30, 2023, the computation of net loss per share if their effect is anti-dilutive. Company has $166,644 in cash and cash equivalents.

 

INCOME TAXESBanner has historically relied on BitNile to provide the necessary capital to sustain its operations. The Company has included cost allocations as noted herein to reflect the operations as if they were a standalone entity.

The financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

 

The Company accounts for income taxes under ASC 740-10-25. Under ASC 740-10-25, deferred tax assets and liabilitiesplans include the raising of capital through a private placement of its securities, although there are recognizedno assurances the Company will be successful at raising any capital.

Impact of COVID-19

COVID-19 did not have a material effect on the Statements of Operations or the Balance Sheets for the future tax consequences attributablethree months ended June 30, 2023 and 2022 or as of June 30, 2023 and March 31, 2023, respectively. While COVID-19 has contributed to differences betweenglobal supply chain disruptions, such disruptions have not had a material effect for the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expectedCompany. The Company will continue to apply to taxable income inmonitor the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25,supply chain shortages affecting the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.world.

NOTE 2: REVERSE MERGER

 

BUSINESS SEGMENTS

The Company operates in one segment and therefore segment information is not presented.

LEASES

The Company accounts for leases in accordance with Accounting Standard Codification Topic 842.

Advertising Costs

Advertising costs are expensed as incurred and are included in general and administrative expenses. There was $0 and $320 in advertising costs during the three months ended June 30, 2022 and June 30, 2021, respectively. There was $0 and $484 in advertising costs during the six months ended June 30, 2022 and June 30, 2021, respectively.

11

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2022

(UNAUDITED) 

Stock-Based Compensation

The Company accounts for stock-based instruments issued for services inIn accordance with ASC 718 “Compensation – Stock Compensation.” ASC 718 requires companies to recognize805-40-45-1, the consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (Wolf Energy Services Inc.) but described in the statement of operationsnotes to the grant-date fair value of stock options and other equity based compensation issued. The valuefinancial statements as a continuation of the portionfinancial statements of a stock award thatthe legal subsidiary (Banner), with one adjustment, which is ultimately expected to vestretroactively adjust the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree. That adjustment is recognized as an expense overrequired to reflect the requisite service periods usingcapital of the straight-line attribution method.legal parent. Comparative information presented in the consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent.

 

Recent Accounting Pronouncements

All newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.Under ASC 805-40-45-2, the consolidated financial statements represent the continuation of the legal subsidiary except for the capital structure, as follows:

 

NOTE D - RELATED PARTY TRANSACTIONS

For the three months ended June 30, 2022 and 2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500 and $52,500 respectively, of which a total of $0 of salary and accrued salary have been paid. The total unpaid balance as of June 30, 2022 and June 30, 2021 are $828,065 and $743,065, respectively, which are included in accrued expenses – related party. During the six months ended June 30, 2022 and 2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $105,000 and $105,000 respectively, of which a total of $0 and $26,250 of salary and accrued salary have been paid.

Effective July 1, 2017, our non-employee directors receive a monthly fee of $1,000 for serving on the board of directors. During the three and six months ended June 30, 2022 and 2021, Raynard Veldman, received compensation for being a member of the Company’s board of directors of $3,000 and $6,000, respectively. Mr. John DiBella does not receive compensation for being a member of the Company’s board of Directors.

Effective July 1, 2017, Raynard Veldman, a member of the Company’s board of directors, receives a fee of $2,500 per month for consulting services. During the three and six months ended June 30, 2022 and 2021, Mr. Veldman received consulting fees of $7,500 and $15,000, respectively. The unpaid balance has been included in accrued expenses- related party. As of June 30, 2022 and December 31, 2021 the total accrued board compensation and consulting fees are $75,500 and 54,500, respectively.

On January 5, 2022, John A. DiBella, the Company’s chief executive officer, advanced the Company $30,000 pursuant to the terms of a 4% unsecured promissory note. The note is payable on December 31, 2022 and accrues interest at a rate of 4% per annum. In addition, from February 15, 2022 through March 31, 2022, Mr. DiBella advanced the Company an additional $23,000 under the same terms as the note. From April 1, 2022 through June 30, 2022 Mr. DiBella advanced the Company an additional $31,500 under the same terms as the note (see Note G).

NOTE E – FIXED ASSETS

Fixed assets as of June 30, 2022 and December 31, 2021 consist of:

Schedule of fixed assets

  June 30, 2022
(unaudited)
 December 31, 2021
Machinery and equipment $490,927  $490,927 
Furniture and fixtures  14,498   14,498 
Total  505,425   505,425 
Less: accumulated depreciation  (498,512)  (498,100)
Fixed Assets, net $6,913  $7,325 

Depreciation expense was $206 and $3,827 for the three months ended June 30, 2022 and 2021, respectively.

Depreciation expense was $412 and $15,298 for the six months ended June 30, 2022 and 2021, respectively.

 12

(a)

The assets and liabilities of the legal subsidiary recognized and measured at their precombination carrying amounts;

 

(b)

The assets and liabilities of the legal parent recognized and measured in accordance with the guidance in this topic applicable to business combinations (ASC 805);

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2022

(UNAUDITED) 

 

(c)

The retained earnings and other equity balances of the legal subsidiary before the business combination;

(d)

The amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary outstanding immediately before the business combination to the fair value of the legal parent determined in accordance with the guidance in ASC 805 applicable to business combinations. However, the equity structure reflects the equity structure of the legal parent, including the equity interests the legal parent issued to affect the combination. Accordingly, the equity structure of the legal subsidiary is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition.

In April, 2021 the Company sold its CNC machining equipment for a sales price

9

Wolf Energy Services Inc., issued BitNile Metaverse, Inc. 51,987,832 shares of $15,011 from the sale of equipment.

note F – shareholders’ equity

Options

Information with respect to options outstanding and exercisablecommon stock valued at June 30, 2022 is as follows:

Schedule of options outstanding

 

Number

Outstanding

Exercise

Price

Number

Exercisable

Balance, December 31, 202110,000$0.1010,000
Issued
Expired
Forfeited
Balance, June 30, 202210,000$0.1010,000

Schedule of stock options outstanding and exercisable

Exercise

Price

Number
Outstanding at
June 30, 2022
Weighted Average
Remaining
Contractual Life
Weighted
Average
Exercise Price
Number
Exercisable at
June 30, 2022
Weighted
Average
Exercise Price
0.1010,0001.38$0.1010,000$0.10
Total10,00010,000

The aggregate intrinsic value represents the excess amount over the exercise price optionees would have received if all the options have been exercised on the last business day of the period indicated based on the Company’s closing stock price of for such day. The aggregate intrinsic value as of June 30, 2022 is $0 as the stock price is higher than the exercise price.

The Company accounts for stock-based instruments issued for services in accordance with ASC 718 “Compensation – Stock Compensation.” ASC 718 requires companies to recognize$5,328,753 in the statement of operations the grant-date fair value of stock options and other equity based compensation issued. The value of the portion of a share award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities with a term similar to the expected term. The expected dividend yield is based upon the Company’s history of having never issued a dividend and management’s current expectation of future action surrounding dividends. Expected volatility was based on historical data for the trading of our stock on the open market. The expected lives for such grants were based on the simplified method.

NOTE G – COMMITMENTS AND CONTINGENCIES

SBA AND PPP LOANSreverse merger transaction.

 

On May 4, 2020, FPA receivedSeptember 7, 2022, the Company completed the reverse merger transaction of Banner Midstream. As a loan (the “PPP Loan”) from Bankresult of America, N.A. in the aggregate amountthis transaction, which is accounted for as a reverse merger, Banner is a wholly owned subsidiary of $111,971, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan,

13

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2022

(UNAUDITED) 

which was in the form of a Note dated May 4, 2020 issued by FPA, matures on May 4, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 6, 2020. The Note may be prepaid by FPA at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities and interest on other debt obligations incurred before February 15, 2020. FPA believes it used the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP Loan, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. We applied for forgiveness of the PPP Loan inWolf Energy Services Inc. In accordance with the terms of the CARES Act. We are waiting forMerger, at the effective time of the Merger, each outstanding share of the common stock of Banner was acquired by the Company in consideration of 51,987,832 shares of Common Stock of the Company. This exchange of shares and the resulting controlling ownership of Banner constitutes a reverse acquisition resulting in a recapitalization of Banner and purchase accounting being applied to Wolf Energy Services Inc. under ASC 805 due to Banner being the accounting acquirer and Wolf Energy Services, Inc. being deemed an approvalacquired business as they were not a shell corporation. This requires financial reporting from the bank but there are no assurances thatMerger close date forward to reflect only the full amount will be forgiven.

historic consolidated results of Banner and to include the consolidated results for Wolf Energy Services from September 7, 2022, forward. There has been no change in basis from the standpoint of Banner.

 

The primary reason Banner consummated the Merger with Wolf Energy Services Inc. was the opportunity for the Banner subsidiary previously wholly owned by BitNile to immediately become a standalone public company without the process of doing its own initial public offering, affording it the opportunity to raise capital more quickly. Following the closing of the Merger, management of the Company determined to discontinue the historical and existing business of Wolf Energy Services.  

The estimated allocation of the purchase price of the assets acquired and liabilities assumed for the acquisition by Banner of Wolf Energy Services Inc. via the reverse acquisition are set forth below in accordance with the guidance under ASC 805:

Purchase Price Allocation of Wolf Energy Services, Inc.

Current assets

 $124,760 

Fixed assets

  6,912 

Right of use assets

  128,755 

Other non-current assets

  10,000 

Notes payable

  (436,471)

Lease liabilities

  (128,755)

Accounts payable and accrued expenses

  (1,034,594)

Goodwill

  3,613,144 
     

Purchase price

 $2,283,751 

This allocation is based on management’s estimated fair value of the Wolf Energy Services assets and liabilities as of September 7,2022, utilizing the guidance in ASC 820-10-35 which included the measurement based on a known level one input regarding the applicable share price as well as the level of activity in the Company. Wolf Energy Services Inc.’s net liabilities were derived from a total value of $2,283,751, based on 22,280,500 shares of common stock on September 7, 2022, and the price of $0.10 per share which was a price on September 6, 2022. The Company impaired the goodwill effective with the Exchange on September 7, 2022, as they had decided at that time to sell the FPA business.

NOTE 3: REVENUE

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

The following table disaggregates the Company’s revenue by major source for the three months ended June 30, 2023  and 2022:

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 

Revenue:

        

Transportation Services

 $2,318,477  $5,348,225 

Fuel Rebate

  25,081   62,930 

Equipment Rental and other

     7,500 
  $2,343,558  $5,418,655 

10

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

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

NOTE 4: PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of June 30, 2023 and March 31, 2023:

  

June 30,

  

March 31,

 
  

2023

  

2023

 
  

(unaudited)

     

Machinery and equipment

 $1,434,889  $2,034,300 

Accumulated depreciation and impairment

  (1,296,571)  (1,347,973)

Property and equipment, net

 $138,318  $686,327 

As of  June 30, 2023, the Company performed an evaluation of the recoverability of these long-lived assets. The analysis resulted in no impairment as of related to these assets.

On April 1, 2021, the Company placed back in service equipment of $201,388 with accumulated depreciation of $7,484, which were part of discontinued operations related to Pinnacle Vac, a historical subsidiary of Banner Midstream. These assets are equipment related to Capstone who is servicing the debt related to the assets.

In February 2022, the Company traded in a vehicle valued at $51,806 for a new vehicle valued at $91,132.

In May 2022, the Company sold $1,530,024 of fixed assets for $580,000.

In October 2022, the Company sold equipment and incurred a loss of $21,227.

In January 2023, the Company sold equipment and incurred a loss of $333,976.

In February 2023, the Company sold $28,723 of fixed assets for $7,500 and incurred a loss of $21,223

In May 2023, the Company sold $118,266 of fixed assets for $75,000 and incurred a loss of $43,266

In June 23, 2020, FPA executed 2023, the standard loan documents requiredCompany sold $400,688 of fixed assets for securing$145,000 and incurred a loan (the “EIDL Loan”) fromloss of $255,688

Depreciation expense for the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in lightthree months ended June 30, 2023 and 2022:

  

Three Months Ended June 30,

 
  

2023

  

2022

 
         
         

Depreciation expense

 $29,056  $48,586 

11

NOTE 5: ACCRUED LIABILITIES

Accrued liabilities consisted of the impactfollowing as of June 30, 2023 and March 31, 2023:

  

June 30,

  

March 31,

 
  

2023

  

2023

 
   (unaudited)     

Insurance

 $1,088,376  $382,197 

Compensation

  547,374   615,200 

Interest

  42,277   29,979 

Professional fees and consulting costs

  4,883   15,540 

Taxes

  3,237   12,947 

Total

 $1,686,147  $1,055,862 

12

NOTE 6: NOTES PAYABLE

The following is a summary of our notes payable as of June 30, 2023 and March 31, 2023, respectively.

  

June 30,

  

March 31,

 
  

2023

  

2023

 
         
         

Unsecured Convertible Promissory Note (a)

 $755,565  $755,565 

Unsecured Convertible Promissory Note (b)

  90,000   90,000 

Unsecured Promissory Note (c)

  170,461   250,000 

Unsecured Promissory Note (d)

  44,406   96,777 

Unsecured Promissory Note, net of discount (e)

  135,028   165,000 

Total notes payable

  1,195,460   1,357,342 

Less: current portion

  (1,195,460)  (1,357,342)

Notes payable, net of current portion

 $-  $- 

(a)

Unsecured Convertible Promissory Note entered into on August 23, 2022 accruing interest at the rate of 6% per annum payable monthly, maturing August 23, 2023. The note is convertible into shares of the Company’s common stock at a price of $0.015 per share, which was the closing price of the common stock on the date the note was executed. The note is with the former CEO of the Company. On December 29, 2022, the Company issued 4,000,000 shares of common stock in conversion of $60,000.

(b)

Unsecured Convertible Promissory Note entered into on August 23, 2022 accruing interest at the rate of 6% per annum payable monthly, maturing August 23, 2023. The note is convertible into shares of the Company’s common stock at a price of $0.015 per share, which was the closing price of the common stock on the date the note was entered into. The note is with a former director of the Company.

(c)

The Company entered into a Purchase and Sale of Future Receipts Agreement with EAdvance Services for a purchase price of $250,000, with a repayment of $340,000 over 32 weeks at $10,625 per week on March 28, 2023. The Company paid $7,500 in initial fees which were deducted from the agreed upon price and $242,500 was paid in cash to the Company.

(d)

The Company entered into a Standard Merchant Cash Advance Agreement with KYF Global Partners for a purchase price of $100,000, with a repayment of $140,000 over 22 weeks at $6,363.64 per week on March 28,2023. The Company paid $5,000 in initial fees which were deducted from the agreed upon price and $95,000 was paid in cash to the Company.

(e)

The Company entered into a one year promissory note with Red Road Holdings Corporation on March 27, 2023 in the amount of $165,000 (net of discount) plus a one-time interest charge of 12% or $22,176 charged at the inception of the note. There is an original issue discount of $19,800 on this note that is amortized over the life of the note based on the effective interest method. $3,960 of the original issue discount was amortized during the three months ended June 30, 2023.  Should the Company default on the note, it becomes convertible with a conversion price that will be the greater of (i) $0.000075, or (ii) 75% times the average Trading Price for the common stock during the five trading days immediately prior to the conversion date.

Interest expense on the notes payable during the three months ended June 30, 2023 and 2022 are $104,172 and $0, respectively.

NOTE 7: STOCKHOLDERS EQUITY (DEFICIT)

The Company has 5,000,000 shares of preferred stock and 1,000,000,000 shares of common stock authorized at $0.001 par value per share, and there were 78,268,332 and 78,268,332 common shares issued and outstanding at June 30, 2023 and March 31, 2023, respectively, and no shares of preferred stock issued and outstanding, respectively.  

In September 2022, the Company issued 51,987,832 shares of common stock in a Share Exchange Agreement with BitNile and Banner Midstream Corp. The shares were valued at $0.10 per share ($5,328,753) as that was the value per share of the Covid-19 pandemic on common stock at closing.

On December 19, 2022, the Company’s business. Pursuant to that certain Loan Authorization and Agreement, the principal amountCompany's Board of the EIDL Loan is up to $Directors approved a 150,000four, with proceeds to be used-for-one forward stock split for working capital purposes. shareholders of record as of December 30, 2022.

On July 16, 2020, December 29, 2022, the Company has requested $150,000issued 4,000,000 shares of common stock in disbursements under the EIDL Loan. The funds were received on July 20, 2020. Interest accrues at the rateconversion of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginning June 23, 2021 (12 months from the date of the SBA note)convertible promissory notes in the amount of $731. The extension$60,000.

There were no equity transactions for the monthly installment principal payment begin in Julythree months ended June 30, 2022. The balance of principal and interest is payable 30 years from the date of the SBA Note. In connection therewith, FPA executed (i) a note for the benefit of the SBA, which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of FPA, which also contains customary events of default.

 

Schedule of loans payables

  

June 30, 2022

(unaudited)

 December 31, 2021
Loans payable $261,971  $261,971 
Less: current portion  (114,855)  (113,461)
Long-term loans payable $147,116  $148,510 

LOANS PAYABLE – RELATED PARTYStock Options

 

As of June 30, 2023 and 2022, there remains 40,000 fully vested stock options that expire November 2023 at a $0.025 strike price. There is no stock-based compensation for the three months ended June 30, 2023 and 2022. The intrinsic value of these options at June 30, 2023 is $2,300.

On January 5,Restricted Stock Units

Pursuant to the Employment Agreement with the Company's Former CEO, Jimmy Galla dated November 15, 2022, John A. DiBella,the Company granted 10,000,000 restricted stock units that vest quarterly for 20 consecutive quarters (500,000 per quarter). The Company has expensed $37,500 in these restricted stock units for the three months ended June 30, 2023. There was no expense for the three months ended June 30, 2022

13

NOTE 8: CONCENTRATIONS

Customer Concentration. Three and one customers accounted for more than 10% of the accounts receivable balance at each of June 30, 2023 and March 31, 2023, respectively for a total of 86%  and 85% of accounts receivable, respectively. In addition, two and three customers represent approximately 94%  and 72%  of total revenues for the Company for the three months ended June 30, 2023 and 2022, respectively.

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

NOTE 9: LEASES

The Company has adopted ASU No.2016-02,Leases (Topic 842and accounts for their leases in terms of the right of use assets and offsetting lease liability obligations under this pronouncement. The Company recorded these leases at present value, in accordance with the standard, using a discount rate between 2.5% and 11.36%. The right of use asset is composed of the sum of all lease payments, at present value, and is amortized straight line over the life of the expected lease term. For the expected term of the lease the Company used the initial terms ranging between 42 and 60 months.

Upon the election by the Company to extend the lease for additional years, that election will be treated as a lease modification and the lease will be reviewed for re-measurement. 

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

As of June 30, 2023, the value of the unamortized lease right of use asset for the operating leases is $278,919  (through maturity in September 2027). As of June 30, 2023, the Company’s chief executive officer, advancedlease liability was $281,619  from operating leases.

Maturity of lease liability for the operating leases for the period ended June 30,

    

2023

 $80,307 

2024

  70,500 

2025

  72,000 

2026

  72,000 

2027

  35,102 

Imputed interest

  (48,290)

Total lease liability

 $281,619 

Disclosed as:

    

Current portion

 $67,543 

Non-current portion

 $214,076 

Amortization of the right of use asset for the period ended June 30,

    

2023

 $71,143 

2024

  60,257 

2025

  63,450 

2026

  66,818 

2027

  17,251 
     

Total

 $278,919 

Total Lease Cost

Individual components of the total lease cost incurred by the Company $30,000 pursuant to the terms of a 4% unsecured promissory note. The note is payable on December 31,as follows:

         
         
  

June 30,

  

June 30,

 
  

2023

  

2022

 
  (unaudited)  (unaudited) 

Operating lease expense

 $22,765  $16,552 
         

Finance lease expense

        

Depreciation of capitalized finance lease assets

  -   56,576 

Interest expense on finance lease liabilities

  -   1,934 

Total lease cost

 $22,765  $75,062 

NOTE 10: DISCONTINUED OPERATIONS

In September, 2022, and accrues interest at a rate of 4% per annum. From February 15, 2022 through March 31, 2022, Mr. DiBella has advanced the Company an additional $23,000 under the same terms as the note. In addition, from April 1, 2022 through June 30, 2022 Mr. DiBella has advanced the Company an additional $31,500, under the same terms as the note. See Footnote J Subsequent Events.

On April 11, 2022, Ray Veldman, member of the Company’s Board of Directors advancedand management after the Share Exchange Agreement, determined that the FPA business will be sold. As this determination represents a strategic shift that will have a major effect on the Company’s operations and financial results, in accordance with ASC 205-20-45-1E, the Company $has reclassified FPA’s assets and liabilities as held for sale and presented the results of operations of FPA as discontinued operations, and when FPA is sold, will recognize a gain or loss on disposal.

Current assets as of June 30, 2023 and March 31, 2023 – Discontinued Operations:

  

June 30,

  

March 31,

 
  

2023

  

2023

 
   (unaudited)     

Cash

 $672  $9,362 

Accounts receivable

  30,000   51,000 
  $30,672  $60,362 

Current liabilities as of  June 30, 2023 and March 31, 2023 – Discontinued Operations:

  

June 30,

  

March 31,

 
  

2023

  

2022

 
   (unaudited)     

Accounts payable and accrued expenses

 $184,649  $200,051 

Current portion of long-term debt

  37,977   37,977 
  $222,626  $238,028 

Non-current liabilities as of June 30, 2023 and March 31, 2023 –Discontinued Operations:

  

June 30,

  

March 31,

 
  

2023

  

2022

 
   (unaudited)     

Long-term debt

 $150,000  $150,000 
         
  $150,000  $150,000 

14

The Company reclassified the following operations to discontinued operations for the three months ended June 30, 2023 and 2022, respectively.

  

June 30,

  

June 30,

 
  

2023

  

2022

 

 

  (unaudited)     

Revenue

 $-  $- 

Operating expenses

  24,334   - 

Other (income) loss

  3,953   - 

Net loss from discontinued operations

 $(28,287) $ 

NOTE 11: COMMITMENT

On November 15, 2022, the Company entered into a 20,000five pursuant to-year Employment Agreement with its former CEO, Jimmy Galla. Under the terms of a 4% unsecured promissory note. The note is payable on December 31, 2022 and accrues interestthe Employment Agreement, the Company agreed to compensate its CEO at a rate of 4%$250,000 annually (“Base Pay”). In addition to the Base Pay, Mr. Galla shall be eligible to earn an annual bonus of up to 100% of the Base Pay based on terms and conditions, including the financial performance of the Company, as well as individual performance goals, as set forth in a bonus plan that is to be determined by the Company’s Board of Directors. The Company also granted Mr. Galla 10,000,000 restricted stock units that vest quarterly for 20 consecutive quarters (500,000 per annum. 

quarter). Through June 30, 2023, Mr. Galla has vested 1,500,000 restricted stock units.  Those shares have not been issued to Mr. Galla.

 

Litigation

NOTE 12: SUBSEQUENT EVENTS

From time-to-time,On July 31, 2023, Jimmy Galla, Chief Executive Officer, Chief Financial Officer, and a director of Wolf Energy Services Inc. (the “Company”), resigned from his positions as an officer and director of the Company may be involvedto pursue other interests. Mr. Galla's departure from the Company was amicable and he was in litigationgood standing at the time of his resignation. As a result of his resignation from his positions with the Company, Mr. Galla is no longer an employee or be subjectdirector of the Company or any subsidiary. Following Mr. Galla’s resignation the board of directors appointed Jimmy “JD” Reedy to claims arising outserve as interim Chief Executive Officer of the Company. Mr. Reedy has served on the board of directors of the Company since September 2022 and as the chief operating officer of Banner Midstream Corp., a wholly owned subsidiary of the Company, since April 2019. Description of the five-year business experience, compensatory arrangements and related party transactions of Mr. Reedy has previously been disclosed by the Company in its operations or content appearing on its websitesfilings with the Securities and Exchange Commission, most recently in the normal courseCompany’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed on June 26, 2023.

On August 8, 2023, Robert Carr (“Carr”), a former employee of business. AlthoughPinnacle Frac Transport LLC, filed a complaint in the resultsUnited States District Court for the Eastern Division of litigationTexas Sherman Division alleging violations of the Fair Labor Standards Act (FLSA) and claims cannot be predicted with certainty,seeks to recover overtime pay, liquidated damages, post judgement interest and attorneys’ fees and cost. Specifically, Carr alleges that he and other similarly situated employees were not paid time and one-half their respective regular rates of pay for all hours worked over 40 in each seven day work week. The complaint seeks to certify a collective action under the FLSA comprised of employees employed by Pinnacle Frac during a period of three years prior to the filing of the complaint. At this time the Company currently believes thatcannot estimate either the final outcomesize of any potential class or the value or validity of the claims asserted if this action were to proceed. For these ordinary course matters will reasons, the Company is unable to estimate any potential loss or range of loss in such a scenario; however, if the Company is not successful in its defense efforts, the resolution of Carr could have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

NOTE H - LEASE

In October 2021, the Company entered into a first amendment to lease agreement for a three-year 3 lease renewal for an office and manufacturing facility located at 821 NW 57th Place, Fort Lauderdale, FL 33309. The lease is $4,839 per month, which includes common area maintenance, taxes and insurance and expires in September 2024. The lease has a one-time renewal option for three 3 years and an increased base rent of 3%. The Company has the option to terminate the lease with three months’ notice. The Company accounts for lease in accordance with ASC Topic 842. On June 30, 2022, we notified our landlord that we exercising the termination clause in our lease to vacate the premise by October 1, 2022. The Company is in negotiations to continue the manufacturing and maintenance of the inventory.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2022

(UNAUDITED) 

For the three months ended June 30, 2022 and 2021, the total lease cost was $20,890 and $20,126, respectively, which includes variable lease cost of $5,765 and $5,798, respectively. Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate. For the six months ended June 30, 2022 and 2021, the total lease cost was $41,780 and $40,440, respectively, which includes variable lease cost of $11,469 and $9,064, respectively. For the six months ended June 30, 2022 and 2021, cash paid for operating lease liabilities was $29,897 and $22,596, respectively.

NOTE I – MAJOR CUSTOMERS

During the six months ended June 30, 2022, we recorded 92% of our revenue from 3 customers, with each representing 52%, 36% and 5% of total revenues.

During the three months ended June 30, 2022, we recorded 100% of our revenue from 2 customers, with each representing 78% and 22% of total revenues.

During the six months ended June 30, 2021, we recorded 87% of our revenue from two customers, with each representing 71% and 16% of total revenues.

During the three months ended June 30, 2021, we recorded 90% of our revenue from two customers, with each representing 65% and 25% of total revenues.

As of June 30, 2022, two of the Company’s customers represents 54% and 35%financial statements as a whole.

15

 

 

Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations

15
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion of our financial condition and results of operations for the three and six months endingended June 30, 20222023 and 2021 and2022 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. OurThe discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as ourthe Company's plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Cautionary Statement Regarding Forward Looking Information in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Overview

 

Effective September 7, 2002, BitNile Metaverse, Inc., a Nevada corporation (“BitNile”) and Banner Midstream Corp. (“Banner” or “Banner Midstream”) completed a Share Exchange Agreement (the “Agreement”) with Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc). Under the Agreement, BitNile acquired 51,987,832 shares of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) common stock in exchange for all the capital stock of Banner owned by BitNile, which represents 100% of the issued and outstanding shares of Banner (the “Merger”). Upon closing of the Agreement, Banner became a wholly owned subsidiary of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) via a reverse merger. As a result, the historical financial information of the Company is that of Banner. The Covid-19 pandemictransaction was accounted for as a reverse merger, whereby Banner Midstream is considered the accounting acquirer. Since the reverse merger occurred with a non-shell public company, the transaction included the purchase of the non-controlling interest of Wolf Energy Services Inc. (formerly Enviro Technologies US, Inc).

Immediately following the Closing, BitNile owned approximately 70% of the issued and current economic conditions have hurt our operations significantly. Prioroutstanding shares of Wolf Energy Services Inc. (formerly Enviro Technologies U.S. Inc.) common stock. BitNile is quoted on the Nasdaq Capital Market under the symbol “BNMV”. At the Closing Jimmy R. Galla was appointed Chief Executive Officer and Chief Financial Officer of the Company. Following the Closing, Raynard Veldman and John A. DiBella resigned as directors of the Company and John A. DiBella resigned as Chief Executive Officer and Chief Financial Officer of the Company. Mr. DiBella continues to serve as the sole officer of Florida Precision Aerospace, Inc., a wholly owned subsidiary of the Company (“FPA”).

The Merger was accounted for as a reverse acquisition. No cash was paid relating to the Covid-19 pandemic, we experienced significant revenue growthacquisition. As the reverse merger transaction of Banner Midstream resulted in 2019the owners of Banner Midstream gaining control over the combined entity after the transaction, and the shareholders of the Company continuing only as passive investors, the transaction was not considered a business combination under ASC 805. Instead, this transaction was considered to be a capital transaction of the legal acquiree (Banner Midstream) and was equivalent to the issuance of shares by Banner Midstream for the net monetary assets of the Company accompanied by a recapitalization, except for the purchase of the 22,280,500 shares of issued and outstanding common shares of Wolf Energy Services Inc. (formerly Enviro Technologies U.S., Inc.) which were considered as purchase consideration resulting in $3,613,144 of goodwill that was impaired immediately. As a result, the financial information in this report is that of Banner Midstream.

Pursuant to the Closing, the Company changed its fiscal year to March 31 from December 31 as March 31 was the year end for Banner Midstream. In September 2022, following the Closing, management of the Company determined to reclassify to discontinued operations the activity related to FPA.

Banner Midstream has two operating subsidiaries: Pinnacle Frac Transport LLC (“Pinnacle Frac”) and Capstone Equipment Leasing LLC (“Capstone”). 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.

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

Pinnacle Frac uses a third party’s licensed software known as “Sandbox” to monitor and execute its transportation and logistics operations. Use of this service offers the following benefits for customers and other industry participants: reduced road traffic; reduced personnel on frac site; and eliminate silica dust particles.

By operating a call center and using specialized licensed software to meet customers’ demand for timely delivery and movement of fracking materials, Pinnacle Frac facilitates customers’ fracking operations through the salelife cycle of Voraxial Separatorthe drilling process.

Hydraulic fracturing, or fracking, is a process that creates fractures extending from the well bore into the rock formation to enable natural gas or oil contained in the rock to move more easily from the rock pores to a production conduit, or an opening at the surface designed to allow for extraction of the energy resource. The hydraulic fracturing technique is used to enable the extraction of natural gas or oil from shale and V-Inline Separators. However, 2020, 2021other forms of “tight” rock, or in other words, impermeable rock formations that lock in oil and early 2022 provedgas and make fossil fuel production difficult. The process entails blasting water, chemicals, and sand into these formations at pressures high enough to be an extremely challengingcrack the rock in which the targeted resources are embedded, allowing the once-trapped gas and disappointing period dueoil to flow to the Covid-19 pandemicsurface.

Because the process is highly reliant on an ample supply of sand and slow economic recovery. The dropother materials, Pinnacle Frac capitalizes on this demand by helping its customers timely supply the materials to the drilling site in capital expenditures fromsufficient quantities to complete the overall market, both from the oil industry and industries outsideprocess. Banner Midstream’s customers consist of oil and gas coupleddrilling to which Banner Midstream may be the prime contractor, and third-party contractors assisting with another party’s drilling operation for which Banner Midstream serves as the subcontractor.

Due to concerns surrounding health, safety and environmental, or HSE, impacts of hydraulic fracturing, Pinnacle Frac takes an active role in assessing occupational risk and finding methods to better manage these issues. To further these efforts, Banner Midstream has implemented an HSE program which consists of the following key features aimed at avoiding, preventing, detecting and mitigating certain hazards that are inherent in operating as a participant in the hydraulic fracturing field: Jobs Safety Analysis (JSA) Program; Near-Miss Reporting System; and Accident Reporting System.

All programs are designed with the lackpurpose of mitigating the risk of future safety incidents, while also ensuring that when rare instances occur when a salessafety incident does occur, that Banner Midstream has a plan to address in a consistent, formal manner to ensure the utmost safety for its employees and marketing budget, hindered sales opportunitiescontractors. To enhance safety, each of Pinnacle Frac employee and contractor are put through a safety program to meet the needs of its customers while maintaining adequate safety protocols. Through this system, workers gain knowledge of how to maintain optimum work conditions and be prepared for the V-Inline Separator. Duringvariety of potential challenges that may arise. Pinnacle Frac monitors performance under its HSE program throughout the year to evaluate its goals are being met or address any concerns in this period, we drastically decreased our sales and marketing efforts which has resulted in fewer customer inquiries in the current period. We are still experiencing the ramifications of a nominal sales and marketing budget. As such, customer inquiries have not rebounded. As we have reduced our marketing budget for the V-Inline Separator, we have shifted our near-term focus on machining work to help stabilize our cash flow.regard should they arise.

 

We believe there is a market for the V-Inline Separator in the mining, utilities, sewage and industrial wastewater industries, among others. We intend to continue to seek opportunities for the V-Inline Separator through our rights under our Grant Back License. We have branded our licensed products as the V-Inline Separator. In 2021, our customer commissioned a wastewater system at a nuclear facility that consisted

16

 

Going Concern 

 

For the sixthree months ended June 30, 2023 and 2022, we reportedthe Company had a net loss(loss) income from continuing operations (not including the provision for income taxes) of $282,807($1,111,779) and net cash used in operations of $112,004. At June 30, 2022, we had cash on hand of $4,236,($1,636,771), respectively, has a working capital deficit of  $1,445,859$2,207,135  and $1,654,456 as of June 30, 2023 and March 31, 2023, and has an accumulated deficit as of $16,919,328.June 30, 2023 of ($17,176,283). The report of our independent registered public accounting firm on our consolidated financial statements for the year ended DecemberMarch 31, 20212023 filed as an exhibit to the Company’s Form 10-K filed on June 26, 2023 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our working capital deficit, accumulated deficit and negative cash flows from operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances wethe Company will be successful in our efforts to raise capital, develop a source of revenues, report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company. We estimate we require approximately $800,000 to maintain our operations over the next 12 months.

 

Results of Operations for the Three Months and Six Months ended June 30, 2022 and 2020:

Revenue

While our revenues were nominal for the three and six months ended June 30, 2022, our revenues increased by approximately 34%2023 and decreased by 11%, respectively2022

Revenue

The following table shows the Company’s revenues for the three and six months ended June 30, 2022 from the comparable period in 2021. There are no assurances we will be able to increase our revenues to the profitability levels we experienced in fiscal year 2019 before the Covid-19 pandemic or report profitable operations in the future. Further, the lingering economic impact of the Covid-19 pandemic may have a continued negative effect on the potential for sales of V-inline Separators. Our revenues are dependent upon our ability to develop a consistent sales channel2023 and 2022:

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 

Revenue from continuing operations:

        

Transportation Services

 $2,318,477  $5,348,225 

Fuel Rebate

  25,081   62,930 

Equipment Rental and Other

     7,500 

Total

 $2,343,558  $5,418,655 

Revenues for the V-Inline Separators and potentially additional sales of the Voraxial Separator from Schlumberger. As discussed earlier in this report, we believe that our revenues for the sixthree months ended June 30, 2022 and fiscal year 2021 have been adversely impacted by the Covid-19 pandemic and current economic conditions. Even once the effects of the pandemic on our business subsides, it may take longer than expected for business in our target markets2023  (Q1 FY 2024) were $2,343,558  as compared to resume normal operations. Accordingly, at this time we are unable to predict the ultimate impact to our revenues for the remaining 2022.

The majority of our sales in the six months ended June 30, 2022 were a result of manufacturing specific machine parts for our customers, sales to Schlumberger related to the Voraxial Separator, and sales of auxiliary equipment and parts of the V-Inline Separator. The majority of revenues in the first half of 2021 were a result of manufacturing specific machine parts for our customers, sales to Schlumberger related to the Voraxial Separator, and sales of auxiliary equipment and parts of the V-Inline Separator.

Cost of Goods

Our cost of goods increased by approximately 42% and 41%, respectively, for the three and six months ended June 30, 2022 from the comparable period 2021. The increase in our COGS is mainly due to the increase in machining projects and the different manufacturing projects we completed during the three and six months ended June 30, 2022. Our cost of goods continues to be reviewed by management in effort to obtain the best available pricing while maintaining high quality standards.

Costs and Expenses

Total costs and expenses decreased by approximately 19% and 30%, respectively, for the second quarter and first six months of 2022 from the comparable period 2021 as we continue to reduce expenditures as a result of Covid-19 pandemic and current economic conditions. Included in this decrease was a decrease of approximately 36% and 44%, respectively, in general and administrative expenses in the three and six months ended June 30, 2022 from the comparable period in 2021. The decrease is attributable to a decrease in repair and maintenance and insurance expense. In addition, payroll expense decreased approximately 24% in the three and six months ended June 30, 2022 from the comparable period in 2021 as we reduced the number of employees and overtime hours due to slower economic activity. Professional fees increased by approximately 23%$5,418,655 for the three months ended June 30, 2022 (Q1 FY 2023).  The decrease of 57%  was due to a significant decrease in loads of frac sand (average of approximately 1,200 loads per month in Q1 FY 2024 compared to approximately 2,200 loads per month in prior year) as well as lower rates per frac sand load (average of approximately $700 per load compared in Q1 FY 2024 compared to approximately $800 in Q1 FY 2023).  Fuel rebate saw a similar decrease due to lower frac sand loads in Q1 FY 2024 compared to prior year.

Costs and decreased by 22%Expenses

The following table shows operating expenses for the sixthree months ended June 30, 2023 and 2022:

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 

Costs and Expenses

        

Costs of revenues (excludes items below)

 $1,538,813  $4,512,249 

Salaries and salary related costs

  315,347   263,321 

Selling, general and administrative

  1,166,140   1,209,725 

Depreciation, amortization, and impairment

  29,056   112,829 

Total

 $3,049,356  $6,098,124 

There was a decrease in total costs and expenses of approximately 50% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease was driven by lower costs of revenues (exclusive of other items shown) of  ($3,048,768) due to costs related to independent third-party owner-operator trucks as frac sand load counts decreased.

17

Selling, General and Administrative

The following table shows SG&A expenses for the three months ended June 30, 2023 and 2022:

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 

Selling, General and Administrative Expenses:

        

Insurance

 $621,313  $447,729 

Equipment rental

  149,011   149,425 

Factoring expense

  69,627   96,401 

Repairs and maintenance

  39,203   357,032 

Rents

  26,036   25,681 

Taxes and licenses

  6,413   65,871 

Legal and professional

  147,495   23,263 

Other

  107,042   44,323 

Total

 $1,166,140  $1,209,725 

Total SG&A costs for the three months ended June 30, 2023 decreased  $43,585 as compared to the three months ended June 30, 2022 from the comparable period in 2021primarily due to lower repairs and maintenance costs as we continueutilized more owner operators than company owned trucks offset by higher insurance costs of $621,313 in Q1 FY 2024 compared to reduce expenses due to the Covid-19 pandemic.$447,729 in Q1 FY 2023.

 

LiquidityDepreciation and Capital Resources:Amortization

 

Cash atThe following table shows depreciation and amortization expenses for the three months ended June 30, 20222023 and 2022:

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 

Depreciation of frac sand transportation equipment

 $29,056  $48,586 

Amortization of intangible assets

  -   64,243 

Total

 $29,056  $112,829 

Total depreciation and amortization expense for the three months ended June 30, 2023 was $4,236$29,056 compared to $112,829 for the same period last year.

The presentation of depreciation has been included in our operating expenses based on SAB topic 11:B.  Depreciation is not considered a key performance indicator by management and is immaterial as a percentage of revenues.

Other Expense

The following table shows other income (expense) for the three months ended June 30, 2023 and 2022

:

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 

Loss on disposal of fixed assets

 $(298,953) $(950,024)

Interest expense, net of interest income

  (107,028)  (7,278)

Total

 $(405,981) $(957,302)

Total other expense was ($405,981)  for the three months ended June 30, 2023, compared to ($957,302) in the three months ended June 30, 2022. 

For the three months ended June 30, 2023 there was a (loss) on disposal of fixed assets of  ($298,953)  compared to a loss of  ($950,024)  in the three months ended June 30, 2022.  The loss in Q1 FY 2024 was a result of a disposal of assets worth $599,411 that had a net value of $518,954 for cash proceeds of $220,000.  The loss in Q1 FY 2023 was a result of a disposal of assets worth $2,557,172 that had a net value of $1,530,024 for cash proceeds of $580,000.

Interest expense, net of interest income, for the three months ended June 30, 2023 was ($107,028) as compared to $11,740 at December 31, 2021. Our working capital deficit at($7,278)  for the three months ended June 30, 20222022. The increase  in interest expense was $1,445,859 as compared to a working capital deficit at December 31, 2021primarily the result of $1,160,325. Atthe expense incurred on the short term debt that was acquired in March 2023 with none in the three months ended June 30, 2022, we had an accumulated deficit of $16,919,328. Our current assets decreased by 9% at June 30, 2022 as compared to December 31, 2021, which reflects decreases in our cash and cash equivalents, prepaid expenses and accounts receivable, partially offset by increase in our inventory, net. Decrease in accounts receivable is due to customers paying timely during the period. Our current liabilities increased by 21% at June 30, 2022 as compared to December 31, 2021, which reflects an increase in accounts payable, loans payable, current portion and accrued expenses and accrued expenses – related party and loan payable- related party. Increase in accrued expenses – related party is due to the accrual of management’s salary. Accounts payable and accrued expenses increased due to professional fees. Increases in loans payable – related party is due to the loan the Company received from its CEO, Mr. DiBella and its board member, Mr. Veldman, during the period. Increases in loans payable, current portion is due to the 2020 PPP Loan. FPA believes it used the 2020 PPP Loan amount for qualifying expenses. Under the terms of the PPP Loan, certain amounts of the 2020 PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. We filed the application for forgiveness of the 2020 PPP Loan in accordance with the terms of the CARES Act. We are waiting for an approval from the bank but there are no assurances that the full amount will be forgiven.

From January 2022 through August 12, 2022, our CEO, John Di Bella, and Ray Veldman, a member of our Board of Directors, have advanced the Company an aggregate of $139,500 pursuant to 4% promissory notes due on December 31, 2022.

 

We do not have any external sources

18

Summary of cash flows

 

The following table summarizes our cash flows:
 
  Six Months Ended
June 30,
  2022 2021
  (Unaudited)
Cash flow data:        
Cash used in operating activities $(112,004) $(239,592)
Cash provided by investing activities $—    $275,000 
Cash provided by (used in) financing activities $104,500 $(100,313)

The following table summarizes our cash flows:

  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 
         

Cash flow data:

        

Cash used in operating activities

 $(461,747) $(181,935)

Cash provided by investing activities

 $220,000  $580,000 

Cash used in financing activities

 $(165,842) $(466,182)

 

Net cash used in operating activities of ($461,747)  in the sixthree months ended June 30, 2023  was primarily attributable to our ($1,143,303)  net loss for the period, an increase in prepaid expenses of ($554,743) offset by higher accrued payables and accrued liabilities of $820,601 and a loss on disposal of fixed assets of $298,953.

Net cash used in  operating activities of ($181,935)  in the three months ended June 30, 2022  was primarily attributable to our net loss of ($1,636,771) for the period, increasesan increase in accrued expenses – related partyprepaid expense and accountsother current assets of ($1,491,522), offset by an increase in accrued payable and accrued expenses offset in part by increases in inventory.

Net cash used in operating activities in the six months ended June 30, 2021 was primarily attributable to our netliabilities of $1,403,852 and loss for the period, increases in accrued expenses – related party and accounts payable and accrued expenses offset in part by increases in accounts receivable and inventory.

Net cash used in investing activities during the six months ended June 30, 2021 was primarily attributable to the saleon disposal of equipment.fixed assets of $950,024

 

Net cash provided by financinginvesting activities during the sixthree months ended June 30, 2023 was attributable to proceeds from sale of fixed assets of $220,000  Net cash provided by investing activities during the three months ended June 30, 2022 was attributable to the loans the Company received from its CEO, Mr. DiBella and its board member, Mr. Veldman. $580,000

Net cash used in financing activities during the sixthree months ended June 30, 20212023 was due to repayments of short--term debt, net of discount. Net cash used in financing activities during the three months ended June 30, 2022 was primarily attributabledue to the repaymentrepayments of thelong-term debt on equipment note payable offset by the proceeds from the 2021 PPP loan.and payments made to reduce lease liabilities.

 

In April 2021,Our ability to generate future revenues, generate sufficient cash flow to pay our operating expenses and report profitable operations in future periods will depend on several factors, many of which are beyond our control. Our independent auditors have included in their audit report an explanatory paragraph that states that our working capital deficits and accumulated deficit raises substantial doubt about our ability to continue as a going concern. If the Company entered intofails to achieve profitability on a purchase agreementquarterly or annual basis, or to sell its CNC machining equipment for $275,000. The machining equipment was received in July 2017 and was used for the manufacture of customer specific projects along with the largest Voraxial and V-Inline Separators. The Company sold the equipment as the utilization of the CNC machining equipment for customer specific projects and the separation equipment decreased dueraise additional funds when needed, or does not have sufficient cash flows from sales, we may be required to the Covid-19 pandemic.

Looking Forward

scale back operations. As a result of the uncertainties facing our companyabove, there is substantial doubt about the ability of the Company to continue as discussed elsewhere ina going concern and the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this report,uncertainty.

Liquidity and Capital Resources:

Going Concern 

For the three months ended June 30, 2023 and 2022, the Company had a net loss from operations (not including the impactprovision for income taxes) of ($1,111,779) and ($1,636,771), respectively, has a working capital deficit of $2,207,135  and $1,654,456, respectively, and has an accumulated deficit as of June 30, 2023 of ($17,176,283). These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the Covid-19 pandemic, weoutcome of this uncertainty. There are unableno assurances the Company will be successful in our efforts to predict the overall impact in 2022 and beyond on our company at this time. Our lossraise capital, develop a source of revenues, will materially impactreport profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

19

Cash at June 30, 2023 was $166,644 as compared to $574,233  at March 31, 2023. Our working capital deficit at June 30, 2023 was $2,207,135 as compared to a working capital deficit at March 31, 2023 of $1,654,456. At June 30, 2023, the Company had an accumulated deficit of $17,176,283. Our current assets increased  by 7%  at June 30, 2023 as compared to March 31, 2023, which reflects increases in prepaid expenses offset by a decrease in cash. Our current liabilities increased by -22% at June 30, 2023 as compared to March 31, 2023, primarily due to higher accounts payable and accrued liabilities offset by lower balances on short-term debt, net of discount.

The Company does not have any external sources of liquidity and does not have any capital commitments.

At the present time, we do not expecthave arrangements to raise additional capital, and we may need to identify potential investors and negotiate appropriate arrangements with them. We may not be able to accessarrange enough investment within the capital markets for additional working capital intime the near future. Our senior management will continue to monitor our situation on a daily basis; however, we expectinvestment is required or that these factors and others we have yet to experience will materially adversely impact our company, its business and operations for the foreseeable future. Our management has also begun exploring possible opportunities for the Company involving mergers, acquisitions or other business combination transactions in an effort to diversify our business. We are not currently a party to any agreement or understandings with any third parties, and there are no assurances even if our management locates an opportunity which it believesis arranged, that it will be inon favorable terms. If we cannot obtain the best interestsneeded capital, we may not be able to become profitable and may have to curtail or cease our operations. Additional equity financing, if available, may be dilutive to the holders of our shareholders what we will ever consummate such a transaction. Accordingly, investors should not place undue reliance on these efforts.capital stock. Debt financing may involve significant cash payment obligations, covenants and financial ratios that may restrict our ability to operate and grow our business.

Our ability to generate future revenues, generate sufficient cash flow to pay our operating expenses and report profitable operations in future periods will depend on a number of factors, many of which are beyond our control. Our independent auditors have included in their audit report an explanatory paragraph that states that our working capital deficits and accumulated deficit raises substantial doubt about our ability to continue as a going concern. If we failthe Company fails to achieve profitability on a quarterly or annual basis, or to raise additional funds when needed, or dodoes not have sufficient cash flows from sales, we may be required to scale back or cease operations, sell or liquidate our assets and possibly seek bankruptcy protection.operations. As a result of the above, there is substantial doubt about the ability of the Company to continue as a going concern and the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to continue to increase revenues, control expenses, raise capital, and continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. We are continuing to engage in discussions with potential sources for additional capital, however, our ability to raise capital is somewhat limited based upon our revenue levels, net losses and limited market for our common stock. Absent an increase in revenues, we estimate we require approximately $1,000,000 of additional capital to maintain our operations for the next 12 months from the date of filing this Report.  If we fail to raise additional funds when needed, or if we do not have sufficient cash flows from operations, we may be required to scale back or cease certain of our operations.

 

Effective March 29, 2023, the Company entered into a Securities Purchase Agreement dated March 27, 2023 (the “Purchase Agreement”) with an accredited investor (the “Investor”), pursuant to which the Company sold the Investor a promissory note in the principal amount of $165,000, net of discount (the “Note”). The Note carries a one-time interest charge of twelve percent (12%) which was applied on the issuance date to the principal (22% upon the occurrence of an event of default) and has a maturity date of March 27, 2024. The Note included an original issue discount of $19,800 and transaction expenses of $4,250. The Company received gross proceeds of $165,000 in consideration of issuance of the Note.

The Note requires that the Company make monthly payments for accrued interest and outstanding principal, which shall be paid in ten (10) payments each in the amount of $20,697.60 for total repayment to the Holder of $206,976.00. The first payment was due May 15, 2023, with nine (9) subsequent payments each month thereafter. The Company has the right to accelerate payments or prepay in full at any time with no prepayment penalty.

Effective March 29 2023, Pinnacle Frac entered into separate agreements with institutional financing parties (each, a “Purchaser”) to provide an aggregate net financing amount of approximately $350,000 prior to expenses and fees of approximately $12,500.

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Pinnacle Frac entered into a Purchase and Sale of Future Receipts dated as of March 28, 2023 (the “PSFR”); and Pinnacle Frac entered into a Standard Merchant Cash Advance Agreement dated as of March 28, 2023 (the “MCA”). Under each agreement, Pinnacle Frac sold to a Purchaser a specified percentage of its future sales and receipts (as defined by the applicable agreement). An aggregate purchased amount of such future receipts and sales of $480,000 was sold for an aggregate amount of $350,000, less origination and other fees, which resulted in a net aggregate amount of $337,500. Each agreement provides the Purchaser specified customary collection procedures for the collection and remittance of the weekly payable amount including direct payments from a specified authorized bank account of $10,625 under the PSFR and approximately $6,363 under the MCA. Each agreement expressly provides that the sale of the future receipts shall be construed and treated for all purposes as a true and complete sale of receivables at a discount, and not a loan. Each agreement provides that the title to the sold future receivables is transferred to the Purchaser under such agreement free and clear of all liens and includes customary remedies that may be exercised by such Purchaser upon a breach or default, including payment of attorney fees and costs of collection and, under the MCA, an amount equal to 25% of the then outstanding purchased amount of future receipts. Each agreement also provides customary provisions regarding, among other matters, representations, warranties and covenants, indemnification, arbitration, governing law and venue. Each agreement also provides for the grant by Pinnacle Frac of a security interest in the future receivables and other related collateral under the Uniform Commercial Code in accounts and proceeds.

Critical Accounting Policies, Estimates and Assumptions

Principles of Consolidation

The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, all of which have a year end of March 31. All intercompany accounts, balances and transactions have been eliminated in the consolidation.

Use of Estimates

 

OurThe preparation of consolidated financial statements have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities revenues and expenses. Note Cdisclosure of contingent assets and liabilities at the Notes to Consolidated Financial Statements appearing previously in this report describes the significant accounting policies used in the preparationdate of the consolidated financial statements. Certainstatements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, impaired value of equipment and intangible assets, including goodwill, liabilities to accrue, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes, cost allocations from BitNile Metaverse, Inc. to present these significant accounting policies are consideredconsolidated financial statements on a standalone basis and determination of the fair value of stock awards.

Actual results could differ from those estimates.

Revenue Recognition

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

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

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

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

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

 

A critical accounting policyIf a good or service is defined as onenot distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is both materialdistinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the presentationtransaction price, an entity must consider the effects of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are highly uncertain at the timeall of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.following:

 

Variable consideration

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information

Constraining estimates of variable consideration

The existence of a significant financing component in the contract

Noncash consideration

Consideration payable to a customer

Variable consideration is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Basedtransaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

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

Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and uncertainties affecting the applicationapplicable method of those policies, management believes that our consolidated financial statements are fairly statedmeasuring progress for services transferred to the customer over time.

The Company recognizes revenue upon satisfaction of its performance obligation at either a point in time or over time in accordance with U.S. GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:

Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts. The company maintains allowances for doubtful accounts for estimated losses. The company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is a doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, and its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collections.

Inventory

Inventory primarily consists of components, including raw material and finished parts for the V-Inline Separator and face shields and is priced at lower of cost or net realizable value. Net realizable value is defined as sales price less cost of completion, disposable and transportation. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.

Income TaxesASC 606-10-25.

 

The Company accounts for income taxes underincremental costs of obtaining a contract with a customer and contract fulfillment costs in accordance with ASC 740-10-25. Under ASC 740-10-25, deferred tax assets340-40, Other Assets and liabilitiesDeferred Costs. These costs should be capitalized and amortized as the performance obligation is satisfied, if certain criteria are met. The Company elected the practical expedient, to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized foris one year or less, and expenses certain costs to obtain contracts when applicable. The Company recognizes an asset from the costs to fulfill a contract only if the costs relate directly to a contract, the costs generate or enhance resources that will be used in satisfying a performance obligation in the future tax consequences attributable to differences betweenand the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differencescosts are expected to be recovered or settled. Under ASC 740-10-25,recovered. The Company recognizes the effect on deferred tax assets and liabilitiescost of sales of a change in tax ratescontract as expense when incurred or when a performance obligation is recognized in incomesatisfied. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained, are not considered recoverable, or the practical expedient applies.

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

 

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

 

All newly issued accounting pronouncements, but not yet effective,Revenue under master service agreements is recorded upon the performance obligation being satisfied. Typically, the satisfaction of the performance obligation occurs upon the frac sand load being delivered to the customer site and this load being successfully invoiced and accepted by the Company’s factoring agent. 

Accounts Receivable and Concentration of Credit Risk

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

For Pinnacle Frac, accounts receivable is comprised of unsecured amounts due from customers that have been deemed either immaterial or not applicable.conveyed to a factoring agent for both with and without recourse. Pinnacle Frac receives an advance from the factoring agent of 98% of the amount invoiced to the customer within one business day. The Company recognizes revenue for 100% of the gross amount invoiced, records an expense for the 2% finance charge by the factoring agent, and realizes cash for the 98% net proceeds received.

 

Fair Value Measurements

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

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

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

Level 3 inputs: Instruments with primarily unobservable value drivers.

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

Earnings (Loss) Per Share of Common Stock

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants. The Company as of and for the period ended June 30, 2023 and 2022 had no common stock equivalents.

Recently Issued Accounting Standards

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

Off Balance Sheet Arrangements

 

As of the date of this report, we dothe Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guaranteeguaranteed contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Key Trends

Impact of Inflation

In 2022 and continuing into 2023, data indicates a sharp rise in inflation in the U.S. and globally. In the U.S., inflation has been triggered by the war in the Ukraine, constrained supplies and increasing demand of certain goods and services as recovery from the COVID-19 pandemic continues. The Company’s revenues, capital and operating costs are influenced to a larger extent by specific price changes in the oil and natural gas industry and allied industries rather than by changes in general inflation. Crude oil prices generally reflect the balance between supply and demand, with crude oil prices being particularly sensitive to OPEC production levels, the Biden Administration’s efforts to reduce drilling and transition away from fossil fuels and/or attitudes of traders concerning supply and demand in the future. Prices for oil and gas related services such as those we supply though Pinnacle Frac and truck drivers we procure to assist in those efforts are also affected by the worldwide prices for crude oil. As a result of increasing prices for oil and natural gas, in 2021 and 2022, higher costs for goods and services in the oil and gas industry are being observed.

In response to recent inflationary pressures in the U.S., the Federal Reserve commenced interest rate hikes in calendar year 2022 that continue into 2023 in an effort to combat inflation. Because of these and other developments, a recession is expected in the coming months by many economic analysts, which may, among other things, reduce demand for our products and services as well as increase operating costs to the extent the Company is unable to procure required resources to continue our operations. As a result of the overall volatility of oil prices, it is not possible to predict the Company’s future cost of services it uses or provides.

Item 3Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable to smaller reporting company.

 

Item 4Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintainEVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

 

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer who also serves as our Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2022. Based upon continuing material weakness in the Company’s internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2021,2023. On June 30, 2023, our management concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.

We will continue to monitor our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added additional personnel, including additional accounting and administrative staff, allowing improved internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Control over Financial Reporting

 

ThereExcept for the internal controls adopted by the Company pursuant to the Merger, there were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II. OTHER INFORMATION

 

Item 1.Legal Proceedings

Item 1. Legal Proceedings

On August 8, 2023, Robert Carr (“Carr”), a former employee of Pinnacle Frac Transport LLC, filed a complaint in the United States District Court for the Eastern Division of Texas Sherman Division alleging violations of the Fair Labor Standards Act (FLSA) and seeks to recover overtime pay, liquidated damages, post judgement interest and attorneys’ fees and cost. Specifically, Carr alleges that he and other similarly situated employees were not paid time and one-half their respective regular rates of pay for all hours worked over 40 in each seven day work week. The complaint seeks to certify a collective action under the FLSA comprised of employees employed by Pinnacle Frac during a period of three years prior to the filing of the complaint. At this time the Company cannot estimate either the size of any potential class or the value or validity of the claims asserted if this action were to proceed. For these reasons, the Company is unable to estimate any potential loss or range of loss in such a scenario; however, if the Company is not successful in its defense efforts, the resolution of Carr could have a material adverse effect on the Company’s financial statements as a whole.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. In addition to the other information set forth in this report you should carefully consider the risk factors in our previously filed reports and our subsequent filings with the SEC, which could materially affect our business, financial condition or future results. These cautionary statements are to be used as a reference in connection with any forward-looking statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC.

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

All recent sales of  unregistered securities have been previously reported.

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 1A.Risk Factors

We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2021 Form 10-K.4. Mine Safety Disclosure

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

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosure

 

Not applicable to our company.

 

Item 5. Other Information

None.

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Item 6. Exhibits

    

Incorporated by Reference

 

Filed or

No.

 

Exhibit Description

 

Form

 

Date Filed

 

Exhibit

Number

 

Furnished

Herewith

           

2.1

 

Share Exchange Agreement dated August 23, 2022 by and among Enviro Technologies U.S., Inc., Banner Midstream Corp. and Ecoark Holdings, Inc.*

 

8-K

 

8/29/2022

 

2.1

  

3.1

 

Certificate of Domestication and Articles of Incorporation filed in the State of Florida

 

8-K

 

12/28/20

 

3(v)

  

3.1(a)

 

Articles of Amendment to Articles of Incorporation effective January 17, 2023 – forward stock split

 

8-K

 

1/17/23

 

3.1

  

3.1(b)

 

Articles of Amendment to Articles of Incorporation – name change

 

8-K

 

2/1/23

 

3.1

  

3.2

 

Bylaws

 

10-K

 

3/31/21

 

3(ii)

  

3.2(a)

 

Amendment to Bylaws dated April 14, 2023

 

8-K

 

4/18/23

 

3.2

  

10.1

 

Promissory Note issued by Wolf Energy Services Inc. in favor of Red Road Holdings Corporation dated March 27, 2023

 

8-K

 

4/3/23

 

10.1

  

10.2

 

Securities Purchase Agreement between Wolf Energy Services Inc. and Red Road Holdings Corporation dated March 27, 2023

 

8-K

 

4/3/23

 

10.2

  

10.3

 

Purchase and Sale of Future Receipts Agreement dated as of March 28, 2023 between Pinnacle Frac LLC and E-Advance Services, LLC including the Personal Guaranty of Performance dated as of even date by Jimmy Galla in favor of E-Advance Services, LLC

 

8-K

 

4/3/23

 

10.3

  

10.4

 

Standard Merchant Cash Advance Agreement dated as of March 28, 2023 between Pinnacle Frac LLC and KYF Global Partners including the Personal Guaranty dated as of even date by Jimmy Galla in favor of KYF Global Partners

 

8-K

 

4/3/23

 

10.4

  

31.1

 

Certificate of Principal Executive Officer (302)

       

Filed

32.1

 

Certificate of Principal Executive Officer (906)^

       

Furnished

101.INS

 

Inline XBRL Instance Document.

       

Filed

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

       

Filed

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

       

Filed

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

       

Filed

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

       

Filed

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

       

Filed

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

       

Filed

*

Certain schedules and other attachments have been omitted. The Company undertakes to furnish the omitted schedules and attachments to the Securities and Exchange Commission upon request.

^

This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 5.

Other Information601 of Regulation S-K.

 

None.  Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at Wolf Energy Services Inc., 408 State Highway 135 N, Kilgore, Texas, 75662.

 

Item 6.Exhibits

 

    Incorporated by Reference Filed or
No. Exhibit Description Form Date Filed 

Exhibit

Number

 

Furnished

Herewith

           
2 Agreement and Plan of Reorganization 10 11/03/99 2  
3(i) Articles of Incorporation 10 11/03/99 3(i)  
3(ii) Bylaws 10-K 3/31/21 3(ii)  
3(iii) Articles of Amendment to the Articles of Incorporation 8-K 11/13/17 3.2  
3(iv) Articles of Amendment to the Articles of Incorporation 8-K 9/9/20 3(iv)  
3(v) Statement of Domestication filed in the State of Idaho 8-K 12/28/20 3(iv)  
3(vi) Certificate of Domestication and Articles of Incorporation filed in the State of Florida 8-K 12/28/20 3(v)  
10.9 Form of Promissory Note dated January 5, 2022 8-K 1/7/22 10.3  
31.1 Rule 13a-14(a)/15d-4(a) Certification of Chief Executive Officer       Filed
31.2 Rule 13a-14(a)/15d-4(a) Certification of Chief Financial Officer       Filed
32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer       Filed
101.INS XBRL Instance Document       Filed
101.SCH XBRL Taxonomy Extension Schema Document       Filed
101.CAL XBRL Taxonomy Calculation Linkbase Document       Filed
101.DEF XBRL Taxonomy Extension Definition Linkbase Document       Filed
101.LAB XBRL Taxonomy Extension Label Linkbase Document       Filed
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document       Filed
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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, as athereunto duly authorized.authorized on August 18, 2023.

 

Enviro Technologies U.S., Inc. 

By:

/s/ Jimmy J.D. Reedy

Name:

Jimmy Reedy

Title:

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.

/s/ Jimmy J.D. Reedy

August 18, 2023

Jimmy J.D. Reedy, Director

  
   
By:/s/ John A. Di Bella
John A. Di Bella
Chief Executive Officer and Chief Financial Officer

DATED: August 15, 2022

 

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