UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM ~~10-Q/A~~

~~Amendment No. 1~~10-Q

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

For the quarterly period ended ~~June~~September 30, ~~2017~~2020

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

For the transition period from ~~___~~______ to ~~___~~______

Commission File No. 000-53361

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

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

~~5899 Preston Road #505, Frisco, TX 75034~~

303 Pearl Parkway Suite 200, San Antonio, TX 78215

(Address of principal executive offices) (Zip Code)

~~(479) 259-2977~~(800) 762-7293

(Registrant’s telephone number, including area code)

~~Not applicable~~ 5899 Preston Road #505, Frisco, TX 75034

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

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

Title of each class		Trading Symbol		Name of each exchange on which registered
None

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

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

~~Title of each class~~		~~Trading Symbol(s)~~		~~Name of each exchange on which registered~~

There were ~~45,551,847~~106,755,723 shares of the Registrant’s $0.001 par value common stock outstanding as of ~~August 4, 2017.~~November 2, 2020.

~~Explanatory Note~~

We are amending this Form 10-Q to correct previous reported amounts and disclosures related to the accounting for warrants in connection with capital raises in March 2017 and May 2017. The results of the corrections impacted the Company’s liabilities, stockholders’ equity and its results of operations and earnings per share calculations.

Ecoark Holdings, Inc.

INDEX

		Page No.

Part I. Financial Information		1

Item 1.	Condensed Consolidated Financial Statements	1

	Condensed Consolidated Balance Sheets	2

	Condensed Consolidated Statements of Operations	3

	Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity (Deficit)	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3642

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4749

Item 4.	Controls and Procedures	4849

Part II. Other Information		4950

Item 1.	Legal Proceedings	4950

Item 1A.	Risk Factors	4950

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4950

Item 3.	Default Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	5051

Signatures		5152

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~JUNE~~SEPTEMBER 30, ~~2017 AND 2016~~2020

Table of Contents

Unaudited Condensed Consolidated Balance Sheets	2
Unaudited Condensed Consolidated Statements of Operations	3
~~Statement~~Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	4
Unaudited Condensed Consolidated Statements of Cash Flows	5
Notes to Unaudited Condensed Consolidated Financial Statements	6 - 3541

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS ~~(RESTATED)~~

(in thousands, except per share data)

(Dollars in thousands,
except per share data)
June 30,
2017 (Restated) March 31,
2017 (Restated)
(Unaudited)
ASSETS
CURRENT ASSETS
Cash ($265 pledged as collateral for credit) $ 11,562 $ 8,648
Accounts receivable, net of allowance of $25 and $76 as of June 30, and March 31, 2017, respectively 1,462 1,627
Inventory, net of reserves 2,775 2,104
Prepaid expenses 1,227 2,006
Assets held for sale - production equipment 158 158
Other current assets 504 -
Current assets – discontinued operations - 1,404
Total current assets 17,688 15,947
NON-CURRENT ASSETS
Property and equipment, net 2,254 2,308
Intangible assets, net 2,918 1,567
Non-current assets – discontinued operations - 366
Other assets 53 53
Total non-current assets 5,225 4,294
TOTAL ASSETS $ 22,913 $ 20,241

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable $ 1,267 $ 1,720
Accrued liabilities 1,138 2,620
Derivative liabilities 7,082 3,351
Current liabilities – discontinued operations - 463
Total current liabilities 9,487 8,154
NON-CURRENT LIABILITIES
Long-term debt, net of current portion 500 500
Long-term debt, net of current portion - related party 100 100
COMMITMENTS AND CONTINGENCIES
Total liabilities 10,087 8,754

STOCKHOLDERS' EQUITY (Number of shares rounded to thousands)

Preferred stock, $0.001 par value; 5,000 shares authorized; none issued - -
Common stock, $0.001 par value; 100,000 shares authorized, 45,528 shares issued and 45,400 shares outstanding as of June 30, 2017, and 42,330 issued and outstanding as of March 31, 2017 45 42
Additional paid-in-capital 93,021 80,845
Accumulated deficit (79,663 ) (69,400 )
Treasury stock, at cost, 128 shares as of June 30, 2017 (577 ) -
Total stockholders' equity 12,826 11,487
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,913 $ 20,241

	September 30,			March 31,
	2020			2020
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash ($85 and $85 pledged as collateral for credit as of September 30, 2020 and March 31, 2020, respectively)	$	1,664		$	406
Accounts receivable, net of allowance of $709 and $500 as of September 30, 2020 and March 31, 2020, respectively		476			172
Note receivable, net of allowance of $0 and $25 as of September 30, 2020 and March 31, 2020, respectively		-			-
Inventories – Crude Oil		175			-
Prepaid expenses and other current assets		1,952			676
Total current assets		4,267			1,254

NON-CURRENT ASSETS
Property and equipment, net		4,093			3,965
Intangible assets, net		2,208			2,350
Goodwill		10,225			10,225
Right of use assets – financing leases		515			589
Right of use assets – operating leases		533			142
Oil and gas properties, full cost-method		11,412			6,135
Non-current assets of discontinued operations		249			249
Other assets		-			7
Total non-current assets		29,235			23,662

TOTAL ASSETS	$	33,502		$	24,916

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,385		$	751
Accrued liabilities		2,387			3,036
Due to prior owners		814			2,358
Warrant derivative liabilities		4,364			2,775
Current portion of long-term debt		719			6,401
Notes payable – related parties		772			2,172
Current portion of lease liability – financing leases		139			137
Current portion of lease liability – operating leases		190			85
Current liabilities of discontinued operations		228			228
Total current liabilities		10,998			17,943

NON-CURRENT LIABILITIES
Lease liability – financing leases, net of current portion		366			436
Lease liability – operating leases, net of current portion		368			74
Long-term debt, net of current portion		3,558			421
Asset retirement obligations		421			295
Total liabilities		15,711			19,169

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (Numbers of shares rounded to thousands)
Preferred stock, $0.001 par value; 5,000 shares authorized; none and 1(Series C) issued and outstanding as of September 30, 2020 and March 31, 2020, respectively		-			-
Common stock, $0.001 par value; 200,000 shares authorized, 106,016 shares issued and 105,431 shares outstanding as of September 30, 2020 and 85,876 shares issued and 85,291 shares outstanding as of March 31, 2020		106			86
Additional paid-in-capital		159,575			135,355
Accumulated deficit		(140,219	)		(128,023	)
Treasury stock, at cost		(1,671	)		(1,671	)
Total stockholders’ equity		17,791			5,747

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	33,502		$	24,916

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

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016 (RESTATED)~~

(in thousands, except per share data)

(Dollars in thousands,
except per share data)
2017 2016
(Restated) (Restated)
CONTINUING OPERATIONS:
REVENUES
Revenue from product sales $ 2,462 $ 2,362
Revenue from services 44 31
2,506 2,393
COST OF REVENUES
Cost of product sales, including $67 and $46 of depreciation expense on manufacturing equipment in 2017 and 2016, respectively 2,753 2,433
Cost of services 41 23
2,794 2,456
GROSS LOSS (288 ) (63 )
OPERATING EXPENSES:
Salaries and salary related costs, including share-based compensation of $8,551 and $312 in 2017 and 2016, respectively 9,678 1,262
Professional fees and consulting, including share-based compensation of $1,201 and $2,500 in 2017 and 2016, respectively 1,907 3,161
Selling, general and administrative 499 433
Depreciation and amortization 181 109
Research and development 1,620 943
Total operating expenses 13,885 5,908
Loss from continuing operations before other income (expenses) (14,173 ) (5,971 )

OTHER INCOME (EXPENSE):
Change in fair value of derivative liability 3,346 -
Interest expense, net of interest income (15 ) (87 )
Total other income (expense) 3,331 (87 )
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND DISCONTINUED OPERATIONS (10,842 ) (6,058 )
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations (57 ) 184
Gain on disposal of discontinued operations 636 -
Total discontinued operations 579 184
PROVISION FOR INCOME TAXES FROM CONTINUING AND DISCONTINUED OPERATIONS - -
NET LOSS (10,263 ) (5,874 )
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST - 64
NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST $ (10,263 ) $ (5,938 )

NET LOSS PER SHARE
Basic: Continuing operations $ (0.24 ) $ (0.19 )
Discontinued operations $ - $ -
Total $ (0.24 ) $ (0.19 )
Diluted: Continuing operations $ (0.24 ) $ (0.19 )
Discontinued operations $ - $ -
Total $ (0.24 ) $ (0.19 )

SHARES USED IN CALCULATION OF NET LOSS PER SHARE (in thousands)
Basic 43,247 30,909
Diluted 43,247 30,909

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2020			2019			2020			2019

CONTINUING OPERATIONS:
REVENUES	$	3,278		$	44		$	5,591		$	79
COST OF REVENUES		2,333			16			3,426			61
GROSS PROFIT		945			28			2,165			18
OPERATING EXPENSES:
Selling, general and administrative		4,375			1,683			7,260			3,232
Depreciation, amortization, depletion and accretion		323			71			624			148
Research and development		136			788			366			1,685
Total operating expenses		4,834			2,542			8,250			5,065
Loss from continuing operations before other income (expense)		(3,889	)		(2,514	)		(6,085	)		(5,047	)

OTHER INCOME (EXPENSE):
Change in fair value of derivative liabilities		1,011			(960	)		(16,382	)		(16	)
Gain (loss) on exchange of warrants for common stock		14,952			(839	)		16,583			(839	)
Loss on conversion of long-term debt and accrued expenses		(1,775	)		-			(3,969	)		-
Loss on disposal of fixed assets		-			-			(105	)		-
Loss on abandonment of oil and gas property		-			-			(83	)		-
Interest expense, net of interest income		(1,314	)		(76	)		(2,155	)		(135	)
Total other income (expenses)		12,874			(1,875	)		(6,111	)		(990	)
Income (LOSS) FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES		8,985			(4,389	)		(12,196	)		(6,037	)

DISCONTINUED OPERATIONS:
Loss from discontinued operations		-			-			-			-
Gain on disposal of discontinued operations		-			-			-			2
Total discontinued operations		-			-			-			2

PROVISION FOR INCOME TAXES		-			-			-			-
NET INCOME (LOSS)	$	8,985		$	(4,389	)	$	(12,196	)	$	(6,035	)

NET EARNINGS (LOSS) PER SHARE
Basic: Continuing operations	$	0.09		$	(0.07	)	$	(0.13	)	$	(0.10	)
Discontinued operations		-			-			-			-
Total	$	0.09		$	(0.07	)	$	(0.13	)	$	(0.10	)

Diluted: Continuing operations	$	0.08		$	(0.07	)	$	(0.13	)	$	(0.10	)
Discontinued operations		-			-			-			-
Total	$	0.08		$	(0.07	)	$	(0.13	)	$	(0.10	)

SHARES USED IN CALCULATION OF NET EARNINGS (LOSS) PER SHARE
Basic		100,879			61,967			96,357			58,227
Diluted		118,223			61,967			96,357			58,227

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

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
~~THREE~~

SIX MONTHS ENDED ~~JUNE~~SEPTEMBER 30, ~~2017 (RESTATED)~~2020 AND 2019

(in thousands)

(Dollar amounts and number of shares in thousands)
Preferred Common Stock Additional Paid-in Accumulated Treasury
Shares Amount Shares Amount Capital Deficit Stock Total

Balance at March 31, 2017 (Restated) - $ - 42,330 $ 42 $ 80,845 $ (69,400 ) $ - $ 11,487

Shares issued for cash in private placement, net of expenses (Restated) - - 2,500 3 2,026 - - 2,029

Share-based compensation - stock - Board of Directors - - 28 - 125 - - 125

Share-based compensation - stock - employees - - 581 1 7,047 - - 7,048

Share-based compensation - options - employees - - - - 3 - - 3

Share-based compensation - employment agreements - - 300 - 1,500 - - 1,500

Warrant conversion -cashless - - 49 - - - - -

Shares issued for 440labs acquisition - - 300 - 1,500 - - 1,500

Shares received and canceled - sale of Eco3d - - (560 ) (1 ) (25 ) - - (26 )

Purchase of treasury shares from employees - - - - - - (577 ) (577 )

Net loss for the period - - - - (10,263 ) - (10,263 )

Balance at June 30, 2017 (Restated) - $ - 45,528 $ 45 $ 93,021 $ (79,663 ) $ (577 ) $ 12,826

	Preferred					Common				Additional Paid-In-			Accumulated			Treasury
	Shares			Amount		Shares		Amount		Capital			Deficit			Stock			Total
Balances at March 31, 2019		-		$	-		52,571	$	53	$	113,310		$	(115,886	)	$	(1,671	)	$	(4,194	)

Shares issued in acquisition of Trend Holdings		-			-		5,500		5		3,231			-			-			3,236
Share-based compensation		-			-		-		-		582			-			-			582
Net loss for the period		-			-		-		-		-			(1,646	)		-			(1,646	)

Balance at June 30, 2019		-			-		58,071		58		117,123			(117,532	)		(1,671	)		(2,022	)

Shares issued in exchange for warrants		-			-		4,277		4		3,289			-			-			3,293
Shares issued for services rendered		-			-		300		1		210			-			-			211
Preferred stock issuance		2			-		-		-		404			-			-			404
Share-based compensation		-			-		-		-		630			-			-			630
Net loss for the period		-			-		-		-		-			(4,389	)		-			(4,389	)

Balances at September 30, 2019		2		$	-		62,648	$	63	$	121,656		$	(121,921	)	$	(1,671	)	$	(1,873	)

Balances at March 31, 2020		1		$	-		85,876	$	86	$	135,355		$	(128,023	)	$	(1,671	)	$	5,747

Shares issued in the conversion of long-term debt and accrued interest		-			-		2,622		3		3,939			-			-			3,942
Shares issued in the conversion of accounts payable and accrued expenses		-			-		466		-		677			-			-			677
Preferred shares converted into common shares		(1	)		-		1,540		2		(2	)		-			-			-
Shares issued in the exercise of warrants, net of expenses		-			-		7,657		8		6,668			-			-			6,676
Shares issued in the exercise of stock options		-			-		443		-		349			-			-			349
Stock based compensation,		-			-		-		-		1,114			-			-			1,114
Net loss for the period		-			-				-		-			(21,181	)		-			(21,181	)

Balance at June 30, 2020		-			-		98,604		99		148,100			(149,204	)		(1,671	)		(2,676	)

Shares issued in the conversion of long-term debt and accrued interest		-			-		958		1		2,634			-			-			2,635
Shares issued for services rendered		-			-		152		-		485			-			-			485
Shares issued in acquisition of oil and gas reserves and fixed assets		-			-		855		1		2,749			-			-			2,750
Shares issued in the exercise of warrants		-			-		5,441		5		5,571			-			-			5,576
Shares issued in the exercise of cash less stock options		-			-		6		-		-			-			-			-
Stock based compensation		-			-		-		-		36			-			-			36
Net income for the period		-			-				-		-			8,985			-			8,985

Balances at September 30, 2020		-		$	-		106,016	$	106	$	159,575		$	(140,219	)	$	(1,671	)	$	17,791

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

statements.

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

~~THREE MONTHS ENDED JUNE 30, 2017 (RESTATED) AND 2016~~ (in thousands)

(Dollars in thousands)
2017 2016
(Restated)
Cash flows from operating activities:

Net loss attributable to controlling interest $ (10,263 ) $ (5,938 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, including $67 in 2017 and $46 in 2016 included in cost of product sales 254 176
Shares of common stock issued for services rendered 1,201 2,500
Share-based compensation – stock - employees 7,048 -
Share-based compensation – options 3 312
Change in derivative liabilities (3,346 ) -
Change in non-controlling interest on cash - 64
Cash acquired in acquisition - 41
Share-based compensation due to employment agreements 1,500 -
(Income) loss from discontinued operations 57 (184 )
Gain on sale of discontinued operations (636 ) -
Changes in assets and liabilities:
Accounts receivable 95 (1,053 )
Inventory (494 ) 145
Prepaid expenses (290 ) (130 )
Other current assets (498 ) -
Other assets 4 (107 )
Accounts payable (479 ) 151
Accrued liabilities (1,824 ) 97
Net cash used in operating activities of continuing operations (7,668 ) (3,926 )
Net cash provided by discontinued operations 92 255
Net cash used in operating activities (7,576 ) (3,671 )

Cash flows from investing activities:
Proceeds from sale of Eco3d 2,006 -
Purchases of short-term investments - (3,500 )
Pre-acquisition advance to Sable Polymer Solutions - (600 )
Purchases of property and equipment – continuing operations (45 ) (186 )
Net cash provided by (used in) investing activities of continuing operations 1,961 (4,286 )
Purchases of property and equipment – discontinued operations - (155 )
Net cash provided by (used in) investing activities 1,961 (4,441 )

Cash flows from financing activities:
Proceeds from issuance of common stock, net of fees 9,106 7,792
Purchase of treasury shares from employees (577 ) -
Repayments of debt - related parties - (42 )
Repayments of debt - (14 )
Net cash provided by financing activities 8,529 7,736
NET INCREASE (DECREASE) IN CASH 2,914 (376 )
Cash - beginning of period 8,648 8,744
Cash - end of period $ 11,562 $ 8,368
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 15 $ 90
Cash paid for income taxes $ - $ -
SUMMARY OF NONCASH ACTIVITIES:
Shares issued in conversion of notes payable $ - $ 3,718
Inventory in transit recorded as accrued liabilities $ 177 $ -
Shares issued for accrued board of director fees $ - $ 100
Shares issued for prepaid services $ - $ 1,714
Assets and liabilities acquired via acquisition of companies:
Receivables, net $ - $ 1,250
Inventory $ - $ 759
Property and equipment $ - $ 2,822
Identifiable intangible assets $ 1,435 $ 1,028
Goodwill $ 65 $ 1,264
Other assets $ - $ 36
Payables and liabilities assumed $ - $ 883
Debt assumed $ - $ 2,531

	Six Months Ended
	September 30,
	2020			2019

	(Dollars in thousands)
Cash flows from operating activities:
Net loss	$	(12,196	)	$	(6,035	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization, depletion and accretion		624			148
Share-based compensation		1,150			1,422
Common stock issued for services		485			-
Change in fair value of derivative liabilities		16,382			16
Bad debt		209			-
(Gain) loss on exchange of warrants		(16,583	)		839
Commitment fees on credit facility advances		-			34
Loss on sale of fixed assets		105			-
Loss on abandonment of oil and gas property		83			-
Warrants granted for interest expense		1,790			-
Recovery of bad debt		(25	)		-
Loss on conversion of debt and liabilities to common stock		3,969			-
Amortization of debt discount		149			-
Gain on sale of discontinued operations		-			(2	)
Changes in operating assets and liabilities:
Accounts receivable		(513	)		467
Inventories		(175	)		-
Prepaid expenses and other current assets		(1,002	)		717
Amortization of right of use asset – financing leases		74			-
Amortization of right of use assets – operating leases		51			-
Other assets		(4	)		1
Interest on lease liability – financing leases		(68	)		-
Interest on lease liability – operating leases		(43	)		-
Accounts payable		635			(753	)
Accrued liabilities		(268	)		9
Net cash used in operating activities of continuing operations		(5,171	)		(3,137	)
Net cash used in discontinued operations		-			(-	)
Net cash used in operating activities		(5,171	)		(3,137	)

Cash flows from investing activities:
Cash received in acquisition of Trend Holdings		-			3
Advance of note receivable		(275	)		-
Purchases of oil and gas properties		(2,698	)		-
Proceeds from the sale of fixed assets		43			-
Proceeds received from sale of Magnolia		-			5
Purchases of fixed assets		(241	)		(-	)
Net cash (used in) provided by investing activities of continuing operations		(3,171	)		8
Net cash used in investing activities of discontinued operations		-			(-	)
Net cash (used in) provided by investing activities		(3,171	)		8

Cash flows from financing activities:
Proceeds from exercise of warrants, net of fees		12,253			-
Proceeds from exercise of stock options		349			-
Proceeds from notes payable – related parties		559			403
Proceeds from long-term debt		1,869			-
Repayment of long-term debt		(3,730	)		-
Repayment to prior owners		(316	)		-
Repayment of notes payable – related parties		(1,384	)		-
Proceeds from issuance of preferred stock, net of fees		-			1,980
Proceeds from credit facility		-			951
Net cash provided by financing activities		9,600			3,334
NET INCREASE IN CASH		1,258			205
Cash - beginning of period		406			244
Cash - end of period	$	1,664		$	449

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	361		$	-
Cash paid for income taxes	$	-		$	-

SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Exchange of common stock for warrants	$	-		$	3,293
Preferred stock converted into common stock	$	2		$	-
Conversion of long-term debt and notes payable and accrued interest into common stock	$	6,577		$	-
Conversion of accounts payable and accrued expenses into common stock	$	677		$	-
Shares issued for acquisition of oil and gas reserves and fixed assets, net of asset retirement obligations	$	2,750		$	-
Note receivable offset against oil and gas reserves in acquisition of Rabb	$	304		$	-
Lease liability recognized for ROU asset	$	442		$	-

Assets acquired via acquisition of Trend Holdings.:
Current assets	$	-		$	12
Goodwill	$	-		$	3,222

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

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
~~THREE MONTHS ENDED JUNE~~SEPTEMBER 30, ~~2017 AND 2016~~2020

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Ecoark Holdings Inc.(“ (“Ecoark Holdings” or the “Company”) is ~~an innovative and growth-oriented~~a diversified holding company, ~~founded~~incorporated in ~~2007 that develops and deploys intelligent technologies and products in order to meet~~ the ~~demand for sustainable, integrated solutions to contemporary business needs.~~state of Nevada on November 19, 2007. Through Ecoark Holdings iswholly owned subsidiaries, the Company has operations in three areas: (i) oil and gas, including exploration, production and drilling operations on over 20,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi and transportation services, (ii) post-harvest shelf-life and freshness food management technology, and (iii) financial services including investings in a ~~holding company that supports~~select number of early stage startups each year. Since the ~~businesses~~acquisition of Banner Midstream Corp. on March 27, 2020, which currently comprises the exploration, production and drilling operations, the Company has focused its ~~subsidiaries.~~efforts to a considerable extent on expanding its exploration and production footprint and capabilities by acquiring real property and working interests in oil and gas mineral leases. The Company’s subsidiaries consist of Ecoark, ~~Holdings~~Inc. (“Ecoark”), a Delaware corporation which is the parent ~~company~~ of ~~Ecoark,~~Zest Labs, Inc. (“Zest Labs”), 440IoT Inc., a Nevada corporation (“440IoT”), Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and ~~Magnolia Solar~~Trend Discovery Holdings Inc., a Delaware corporation (“Trend Holdings”).

~~Ecoark, Inc.~~On March 27, 2020, the Company and Banner Energy Services Corp., a Nevada corporation (“~~Ecoark”~~Banner Parent”), entered into a Stock Purchase and Sale Agreement (the “Banner Purchase Agreement”) ~~was founded in 2011 and is located in Rogers, Arkansas,~~to acquire Banner Midstream Corp., a Delaware corporation (“Banner Midstream”). Pursuant to the ~~home office for Ecoark and Ecoark Holdings. Ecoark merged into~~acquisition, Banner Midstream became a wholly-owned subsidiary of ~~Magnolia Solar Corporation (“MSC”) on March 24, 2016, with Ecoark as~~ the ~~surviving entity. At the merger (“Merger”), MSC changed its name to Ecoark Holdings, Inc. Ecoark is the parent company of Eco360, Pioneer Products~~Company and ~~Zest Labs (formerly known as Intelleflex Corporation). Ecoark was also the parent company of Eco3d until it was sold in April 2017, as discussed below.~~

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

~~Eco360,~~Banner Midstream has four operating subsidiaries: Pinnacle Frac Transport LLC(“~~Eco360”~~Pinnacle Frac”) ~~is located in Rogers, Arkansas~~, Capstone Equipment Leasing LLC (“Capstone”), White River Holdings Corp. (“White River”), and ~~has~~Shamrock Upstream Energy LLC (“Shamrock”). Pinnacle Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield transportation service contractors. These two operating subsidiaries of Banner Midstream are revenue producing entities. White River and Shamrock are engaged in ~~research~~oil and ~~development activities. Eco360 was formed~~gas exploration, production, and drilling operations on over 10,000 cumulative acres of active mineral leases in ~~November 2014 by Ecoark. Eco360 does not currently have any active operations.~~Texas, Louisiana, and Mississippi.

~~Pioneer Products,~~On June 11, 2020, the Company acquired certain energy assets from SR Acquisition I, LLC ~~(“Pioneer Products”) is located~~ for $1 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of 262 total wells in ~~Rogers, Arkansas~~Mississippi and ~~is involved~~Louisiana, approximately 9,000 acres of active mineral leases, and drilling production materials and equipment. The 262 total wells include 57 active producing wells, 19 active disposal wells, 136 shut-in with future utility wells, and 50 shut-in pending plugging wells. Included in the ~~selling of recycled plastic products and other products. It sells to~~assignment are 4 wells in the world’s largest retailer. Pioneer Products strategically leverages its role as a supplier to this retailer with existing and new products. This subsidiary recovers plastic waste from retail supply chains that is converted to new consumer products from the reclaimed materials, completing a closed loop and reducing waste sent to landfills. Pioneer Products was purchased by Ecoark in 2012. Pioneer Products acquired Sable Polymer Solutions, LLC in a stock transaction on May 3, 2016.Tuscaloosa Marine Shale formation.

~~Sable Polymer Solutions,~~On June 18, 2020, the Company acquired certain energy assets from SN TMS, LLC ~~(“Sable”) is located in Flowery Branch, Georgia~~ for $1 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of wells, active mineral leases, and ~~specializes in the purchase, processing~~drilling production materials and sale of post-consumer and post-industrial plastic materials. It provides materials to a variety of suppliers and customers throughout the plastics processing industry, from small extruders, molders and scrap collectors to large corporations.equipment.

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

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

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

~~Fiscal Year-End Change~~2020

On ~~January 19, 2017,~~August 14, 2020, the ~~Ecoark Holdings Board approved~~Company entered into an Asset Purchase Agreement by and among the Company, White River E&P LLC, a ~~change from~~Texas Limited Liability Company and a ~~fiscal year ending~~wholly-owned subsidiary of the Company Rabb Resources, LTD. and Claude Rabb, the sole owner of Rabb Resources, LTD. Pursuant to the Asset Purchase Agreement, the Company completed the acquisition of certain assets of Rabb Resources, LTD. The acquired assets consisted of certain real property and working interests in oil and gas mineral leases. The Company in June 2020 previously provided for bridge financing to Rabb Resources, LTD under the $225 Senior Secured Convertible Promissory Note. As consideration for entering into the Asset Purchase Agreement, the Company agreed to pay Rabb Resources, LTD. A total of $3,500 consisting of (i) $1,500 in cash, net of $304 in outstanding amounts related to the note receivable and accrued interest receivable, and (ii) $2,000 payable in common stock of the Company, which based on ~~December 31~~the closing price of the common stock as of the date of the Asset Purchase Agreement equaled 514 shares. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the Rabb Resources, LTD historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

On September 4, 2020, White River SPV 3, LLC, a ~~fiscal year ending on March 31~~wholly-owned subsidiary of Banner Midstream entered into an Agreement and Assignment of Oil, Gas and Mineral Lease with a privately held limited liability company (the “Assignor”). Under the Lease Assignment, the Assignor assigned a 100% working interest (75% net revenue interest) in a certain oil and gas lease covering in excess of 1,600 acres (the “Lease”), and White River paid $1,500 in cash to the Assignor. The Company accounted for this acquisition as ~~permitted by~~an asset acquisition under ASC 805 and that the ~~bylaws~~Company has early adopted the amendments of ~~Ecoark Holdings.~~ Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

On September 30, 2020, the Company and White River Energy, LLC (“White River Energy”), a wholly-owned subsidiary of the Company entered into three Asset Purchase Agreements (the “Asset Purchase Agreements”) with privately-held limited liability companies to acquire working interests in the Harry O’Neal oil and gas mineral lease (the “O’Neal OGML”), the related well bore, crude oil inventory and equipment. Immediately prior to the acquisition, White River Energy owned an approximately 61% working interest in the O’Neal OGML oil well and a 100% working interest in any future wells.

The ~~change applied~~purchase price of these leases were $126, $312 and $312, respectively, totaling $750. The consideration paid to ~~all subsidiaries except Eco3d which~~the Sellers was ~~sold~~ in ~~April 2017.~~the form of 341 shares of common stock. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

Principles of Consolidation

The condensed consolidated financial statements ~~include the accounts~~ of Ecoark Holdings and its ~~direct~~subsidiaries and ~~indirect subsidiaries, collectively referred to as “the Company”. All significant intercompany accounts and transactions~~the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been ~~eliminated~~included. Such adjustments are of a normal, recurring nature.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020

The unaudited condensed consolidated financial statements, and the accompanying notes, are prepared in ~~consolidation. Ecoark Holdings is a holding company~~accordance with generally accepted accounting principles in the United States (“GAAP”) and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020. Therefore, the interim unaudited condensed consolidated financial statements should be read in conjunction with that holds 100% of Ecoark and Magnolia Solar. Ecoark holds 100% of Eco360, Pioneer Products (which owns 100% of Sable), Zest Labs (which owns 100% of 440labs) and, until April 2017, Eco3d. As described further in Note 2, in March 2017Annual Report on Form 10-K.

In May 2018, the Ecoark Holdings Board approved a plan to sell ~~Eco3d,~~key assets of Pioneer (including the assets of Sable) and Magnolia Solar. Both of these subsidiaries were sold in May 2019.

On May 31, 2019, the ~~sale~~Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Trend Discovery Holdings Inc., a Delaware corporation (“Trend Holdings”) for the Company to acquire 100% of Trend Holdings pursuant to a merger of Trend Holdings with and into the Company (the “Merger”). The Merger was completed, and Trend Holdings is now included in ~~April 2017. Ecoark previously owned 65%~~the consolidated financial statements.

On March 27, 2020, the Company and Banner Parent, entered into the Banner Purchase Agreement to acquire Banner Midstream. Pursuant to the acquisition, Banner Midstream became a wholly-owned subsidiary of ~~Eco3d~~the Company and Banner Parent received shares of the ~~remaining 35% interest was owned by executives of Eco3d until September 2016 when the executives’ 35% interest was acquired~~Company’s common stock in exchange for ~~525~~all of the issued and outstanding shares of ~~Ecoark Holdings stock. In conjunction with the sale of Eco3d in April 2017, the 525 shares were reacquired by the Company and canceled.~~ Banner Midstream.

The Company applies the guidance of Topic 810Consolidationof the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—are consolidated except when control does not rest with the parent. Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.

~~Noncontrolling Interests~~

~~In accordance with ASC 810-10-45~~~~Noncontrolling Interests in Consolidated Financial Statements,~~the Company classifies noncontrolling interests as a component of equity within the consolidated balance sheet. In September 2016, the 35% noncontrolling interest of Eco3d was acquired in exchange for 525 shares of Ecoark Holdings stock which eliminated the noncontrolling interest. On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d and the 525 shares of Ecoark Holdings were returned as part of the sales proceeds and were subsequently canceled.

~~Basis of Presentation~~

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

~~Reclassification~~Reclassifications

The Company has reclassified certain amounts in the ~~2016~~September 30, 2019 unaudited condensed consolidated financial statements to be consistent with the ~~2017~~September 30, 2020 presentation. ~~These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as certain research and development expenses.~~ Reclassifications relating to the discontinued operations ~~of Eco3d~~ are described ~~further~~ in Note 2. The reclassifications had no impact on ~~operations~~net loss or net cash flows for the three and six months ended ~~June~~September 30, ~~2016.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~2020 and 2019.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for uncollectible accounts receivable, ~~obsolete or slow-moving inventory,~~ fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, including goodwill, asset retirement obligations, estimates of discount rates in lease, liabilities to accrue, ~~allocation~~fair value of ~~home office expenses for segment reporting~~derivative liabilities associated with warrants, cost incurred in the satisfaction of performance obligations, permanent and temporary differences related to income taxes and determination of the fair value of stock ~~awards and forfeiture rates. Actual results could differ from those estimates.~~ awards.

~~Cash~~

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

~~Inventory~~

Inventory is stated at the lower of cost or market. Inventory cost is determined on a first-in first-out basis that approximates average cost and at standard cost, which approximates average costs in accordance with ASC 330-10-30-12. Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their estimated useful or scrap values. The Company establishes reserves for this purpose.

~~Property and Equipment and Long-Lived Assets~~

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

~~FASB Codification Topic 360~~~~Property, Plant and Equipment~~(“ASC 360”), requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. The Company determined that no impairment was necessary for the three months ended June 30, 2017.

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

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

The ~~Company assesses~~estimates of proved, probable and possible oil and gas reserves are used as significant inputs in determining the depletion of oil and gas properties and the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

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

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

~~3. Significant negative industry or economic trends.~~

~~When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment~~ unproved oil and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the riskgas properties. There are numerous uncertainties inherent in the ~~current business model. Significant management judgment is required in determining whether an indicator~~estimation of ~~impairment exists~~quantities of proven, probable and possible reserves and in ~~projecting cash flows. The Company tested~~ the ~~carrying value~~projection of ~~its intangible assets~~future rates of production and the timing of development expenditures. Similarly, evaluations for ~~recoverability. The Company determined that no~~ impairment ~~was necessary for~~of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves and commodity price outlooks. Actual results could differ from the ~~three months ended June 30, 2017.~~estimates and assumptions utilized.

~~Advertising Expense~~Oil and Gas Properties

The Company ~~expenses advertising~~uses the full cost method of accounting for its investment in oil and natural gas properties. Under the full cost method of accounting, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs are capitalized. General and administrative costs related to production and general overhead are expensed as incurred. ~~Advertising expenses~~

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit of production method using estimates of proved reserves. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in operations. Unproved properties and development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the loss from operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

There was $126 and $0 in depreciation, depletion and amortization expense for the Company’s oil and gas properties for the six months ended September 30, 2020 and 2019, respectively, and $73 and $0, for the three months ended ~~June~~September 30, ~~2017~~2020 and ~~2016, which were nominal, are included in selling, general and administrative costs.~~2019, respectively.

~~Software~~Limitation on Capitalized Costs

Under the full-cost method of accounting, we are required, at the end of each reporting period, to perform a test to determine the limit on the book value of our oil and gas properties (the “Ceiling” test). If the capitalized costs of our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed the Ceiling, the excess or impairment is charged to expense. The ~~Company accounts~~expense may not be reversed in future periods, even though higher oil and gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of: (a) the present value, discounted at 10% and assuming continuation of existing economic conditions, of (1) estimated future gross revenues from proved reserves, which is computed using oil and gas prices determined as the unweighted arithmetic average of the first-day-of-the-month price for ~~software development costs in accordance with ASC 985-730~~~~Software Research and Development~~~~, and ASC 985-20~~~~Costs of Software~~each month within the 12-month hedging arrangements pursuant to SAB 103, less (2) estimated future expenditures (based on current costs) to be ~~Sold, Leased~~incurred in developing and producing the proved reserves; plus, (b) the cost of properties being amortized; plus, (c) the lower of cost or ~~Marketed. ASC 985-20 requires that~~estimated fair value of unproven properties included in the costs being amortized; net of (d) the related tax effects related to the ~~development~~difference between the book and tax basis of our oil and natural gas properties. A ceiling test was performed as of September 30, 2020 and there was no indication of impairment on the ~~Company’s products be capitalized as an asset when incurred subsequent to the point at which technological feasibility of the enhancement is established~~oil and prior to when a product is available for general release to customers. ASC 985-20 specifies that technological feasibility can be established by the completion of a detailed program design. Costs incurred prior to achieving technological feasibility are expensed. The Company does utilize detailed program designs; however, the Company’s products are expected to be released soon after technological feasibility has been established and as a result software development costs have been expensed as incurred.gas properties.

~~Research and Development Costs~~

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

~~Subsequent Events~~

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

~~Shipping~~Oil and ~~Handling Costs~~Gas Reserves

Reserve engineering is a subjective process that is dependent upon the quality of available data and interpretation thereof, including evaluations and extrapolations of well flow rates and reservoir pressure. Estimates by different engineers often vary sometimes significantly. In addition, physical factors such as results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Because proved reserves are required to be estimated using recent prices of the evaluation, estimated reserve quantities can be significantly impacted by changes in product prices.

Inventories

Crude oil, products and merchandise inventories are carried at the lower of cost (LIFO) or net realizable value. Inventory costs include expenditures and other charges directly and indirectly incurred in bringing the inventory to its existing condition and location.

Accounting for Asset Retirement Obligation

Asset retirement obligations (“ARO”) primarily represent the estimated present value of the amount the Company will incur to plug, abandon and remediate its producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. The Company ~~reports shipping and handling revenues and their associated costs in product revenue and cost~~determined its ARO by calculating the present value of ~~revenue, respectively. Shipping revenues and costs for~~ the ~~three months ended June 30, 2017 and 2016 were nominal.~~estimated cash flows related to the obligation. The retirement obligation is recorded as a liability at its estimated present value as of the obligation’s inception, with an offsetting increase to proved properties.

Revenue Recognition

~~Product revenue primarily consists of the sale of recycled plastics products. Revenue is recognized when the following criteria have been met:~~

~~Evidence of an arrangement exists.~~~~The Company considers a customer purchase order, service agreement, contract, or equivalent document to be evidence of an arrangement.~~

~~Delivery has occurred.~~The Company’s standard transfer terms are free on board (“FOB”) shipping point. Thus, delivery is considered to have occurred when title and risk of loss have passed to the customer at the time of shipment.

~~The fee is fixed or determinable.~~~~The Company considers the fee to be fixed or determinable if the fee is not subject to refund or adjustment and payment terms are standard, which is generally 30-60 days.~~

~~Collection is deemed reasonably assured~~. Collection is deemed reasonably assured if it is expected that the customer will be able to pay amounts under the arrangement as payments become due. If it is determined that collection is not reasonably assured, then revenue is reserved and recognized upon cash collection.

The Company ~~will recognize revenues~~accounts for ~~its software~~revenue in accordance with ASC ~~985-605~~Topic 606, ~~Software~~ Revenue ~~Recognition~~from Contracts with Customers.

The Company accounts for a contract when it has ~~not generated revenue~~been approved and committed to, each party’s rights regarding the goods or services to be transferred have been identified, the payment terms have been identified, the contract has commercial substance, and collectability is probable. Revenue is generally recognized net of allowances for returns and any taxes collected from ~~software licensing~~customers and subsequently remitted to governmental authorities.

Revenue recognition for multiple-element arrangements requires judgment to determine if multiple elements exist, whether elements can be accounted for as separate units of ~~June 30, 2017.~~accounting, and if so, the fair value for each of the elements.

Revenue from software license agreements of Zest Labs is recognized over time or at a point in time depending on the evaluation of when ~~persuasive evidence of an agreement exists, delivery~~the customer obtains control of the ~~software has occurred, the fee is fixed~~promised goods or determinable, and collectability is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among the elements based on the relative fair value of each of the elements.

License revenue allocated to software products generally is recognized upon delivery of the products or deferred and recognized in future periods to the extent that an arrangement includes one or more elements to be delivered at a future date and for which fair values have not been established. Revenue allocated to maintenance agreements is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. If evidence of fair value does not exist for all elements of a license agreement and post customer support (“PCS”) is the only undelivered element, then all revenue for the license arrangement is recognized ratably over the term of the ~~agreement as license revenue. If evidence of fair value of all undelivered PCS elements exists but evidence does not exist for one or more delivered elements, then~~agreement. For agreements where the software requires continuous updates to provide the intended functionality, revenue is recognized over the term of the agreement. For software as a service (“SaaS”) contracts that include multiple performance obligations, including hardware, perpetual software licenses, subscriptions, term licenses, maintenance and other services, the Company allocates revenue to each performance obligation based on estimates of the price that would be charged to the customer for each promised product or service if it were sold on a standalone basis. For contracts for new products and services where standalone pricing has not been established, the Company allocates revenue to each performance obligation based on estimates using the ~~residual method. Under~~adjusted market assessment approach, the expected cost plus a margin approach or the residual ~~method,~~approach as appropriate under the ~~fair value of~~circumstances. Contracts are typically on thirty-day payment terms from when the ~~undelivered elements is deferred~~Company satisfies the performance obligation in the contract. The Company did not have material revenue from software license agreements in the six months ended September 30, 2020 and ~~the remaining portion of the arrangement fee is recognized as revenue.~~2019, respectively.

Cost of license revenue primarily includes product, delivery, and royalty costs. Cost of maintenance and service revenue consists primarily of labor costs for engineers performing implementation services, technical support, and training personnel as well as facilities and equipment costs.

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.

The Company ~~may enter into arrangements that can include various combinations~~recognizes revenue under ASC 606 when: (i) the Company receives notification of ~~software, services, and hardware. Where elements are delivered over different periods~~the successful sale of ~~time, and when allowed under U.S. GAAP, revenue is allocated~~a load of crude oil to a buyer; (ii) the ~~respective elements~~buyer will provide a price based on ~~their relative selling prices at~~ the ~~inception~~average monthly price of crude oil in the arrangement, and revenue is recognized as each element is delivered. The Company uses a hierarchy to determine the fair value to be used for allocating revenue to elements: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence,most recent month; and (iii) ~~best estimate of selling price (“ESP”). For software elements,~~cash is received the ~~Company follows~~following month from the industry specific software guidance which only allows for the use of VSOE in establishing fair value. Generally, VSOE is the price charged when the deliverable is sold separately or the price established by management for a product that is not yet sold if it is probable that the price will not change before introduction into the marketplace.

ESPs are established as best estimates of what the selling prices would be if the deliverables were sold regularly on a stand-alone basis. The process for determining ESPs requires judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each deliverable.crude oil buyer.

~~Revenue Recognition – Discontinued Operations~~

For discontinued operations of Eco3d, when the arrangement with a customer includes services or significant production, modification, or customization of software, we recognized the related revenue using the percentage-of-completion method in accordance with the accounting guidance and certain production-type contracts contained in ASC 605-35~~Construction-Type and Production-Type Contracts. Note that revenues and~~The Company accounts for contract costs of revenues relating to Eco3d have been reclassified to income (loss) from discontinued operations in the statements of operations. We used the percentage-of-completion method provided all of the following conditions exist:

●

the contract includes provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged and the manner and terms of settlement;

●

~~the customer can be expected to satisfy its obligations under the contract;~~

●

~~the Company can be expected to perform its contractual obligations; and~~

●

~~reliable estimates of progress toward completion can be made.~~

~~We measured completion based on progress achieved on deliverables detailed in the agreements with the customers. Costs of providing services, including services accounted for~~ in accordance with ASC ~~605-35, were expensed~~Topic 340-40, Contracts with Customers. The Company recognizes the cost of sales of a contract as expense when incurred or at the time a performance obligation is satisfied. The Company recognizes an asset from the costs to fulfil 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 ~~matched with~~ the ~~related revenues.~~costs are expected to be recovered. The incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

Cost 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.

Accounts Receivable and Concentration of Credit Risk

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

~~Uncertain Tax Positions~~

~~The Company follows ASC 740-10~~~~Accounting for Uncertainty in Income Taxes~~~~. This requires recognition and measurement~~For Pinnacle Frac, accounts receivable is comprised of ~~uncertain income tax positions using~~unsecured amounts due from customers that have been conveyed to a ~~“more-likely-than-not” approach. Management evaluates their tax positions on~~factoring agent without recourse. Pinnacle Frac receives an ~~annual basis.~~

~~The Company files income tax returns in~~advance from the ~~U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns~~factoring agent of 98% of the ~~Company are subject~~amount invoiced to ~~examination by~~ the ~~IRS and state taxing authorities, generally for three years after they were filed.~~

~~Vacation and Paid-Time-Off Compensation~~

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

~~Share-Based Compensation~~

~~The Company follows ASC 718-10~~~~Share-Based Payments~~~~. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values.~~customer within one business day. The Company recognizes ~~these compensation costs,~~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 ~~of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award.~~proceeds received. The Company ~~considers voluntary termination behavior~~has recognized an allowance for doubtful accounts of $709 and $500 as ~~well as trends~~ of ~~actual forfeitures when estimating the forfeiture rate. The Company facilitates payment of the employee tax withholdings resulting from the issuances of these awards by remitting the employee taxes~~September 30, 2020 and ~~recovering the resulting amounts due from the employee from the sale of shares issued sufficient to cover the amount due the Company.~~

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

~~Fair Value of Financial Instruments~~

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

~~Leases~~

~~The Company follows ASC 840~~~~Leases~~in accounting for leased properties. The Company leases several office facilities and production facilities for terms typically ranging from three to five years and does not act as a lessor. Rent escalations over the term of a lease are considered at the inception of the lease such that the monthly average for all payments is recorded as straight-line rent expense with any differences recorded in accrued liabilities.

~~Earnings (Loss) Per Share of Common Stock~~

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only basic weighted average number of common shares are used in the computations.March 31, 2020, respectively.

Fair Value Measurements

ASC 820Fair Value Measurementsdefines 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.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020

Segment Information

The Company follows the provisions of ASC 280-10~~Disclosures about Segments of an Enterprise and Related Information.~~Segment Reporting. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. ~~For fiscal year 2018 the~~The Company and its ~~Chief Operating Decision Maker~~chief operating decision makers determined that the Company’s operations ~~were divided into two segments:~~effective with the May 31, 2019, acquisition of Trend Holdings and the March 27, 2020 acquisition of Banner Midstream now consist of three segments, Trend Holdings (Finance), Banner Midstream (Commodities) and Zest Labs ~~and Pioneer Products. See Note 13 for segment information disclosures.~~

~~Related-Party Transactions~~

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material related-party transactions (see Note 9)(Technology). All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is remeasured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities. ~~Applying this accounting policy resulted in restatements of prior periods as more fully described in Note 18.~~

Recently Issued Accounting Standards

In ~~May 2017,~~August 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standard~~Standards Update (“ASU”) ~~2017-09~~~~Compensation – Stock Compensation (Topic 718) Scope of Modification~~No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting. for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ~~FASB issued this update to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to~~ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a ~~change to the terms or~~single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions ~~of a share-based payment award. The amendments in this update~~that are required for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is assessing the impact, if any, of implementing this guidance on its financial position and results of operations.

~~In January 2017, the FASB issued ASU 2017-04~~~~Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.~~~~The amendments in this update are required for public business entities that have goodwill reported in their financial statements and have not elected the private company alternative~~equity contracts to qualify for the ~~subsequent measurement of goodwill.~~derivative scope exception, which will permit more equity contracts to qualify for it. The ~~update is intended to simplify~~ASU simplifies the ~~annual or interim goodwill impairment test. A public business entity that is a U.S. SEC filer must adopt the amendments~~diluted net income per share calculation in ~~this update for its annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted.~~certain areas. The ~~Company is assessing the impact, if any, of implementing this guidance on its financial position and results of operations.~~

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

~~In August 2016, the FASB issued ASU 2016-15~~~~Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments~~. The amendments in this update provided guidance on eight specific cash flow issues. This update is to provide specific guidance on each of the eight issues, thereby reducing the diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for ~~fiscal years~~annual and interim periods beginning after December 31, ~~2017. Early~~2021, and early adoption is ~~permitted.~~permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is ~~assessing~~currently evaluating the impact ~~if any, of implementing~~that this new guidance will have on its consolidated financial ~~position,~~statements.

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

Liquidity

For the six months ended September 30, 2020 and ~~liquidity.~~2019, the Company had a net loss of $12,196 and $6,035, respectively, has a working capital deficit of $6,731 as of September 30, 2020, and has an accumulated deficit as of September 30, 2020 of $140,219. As of September 30, 2020, the Company has $1,664 in cash and cash equivalents.

~~In February 2016, the FASB issued ASU 2016-02~~~~Leases (Topic 842).~~ASU 2016-02 changes the accounting for leased assets, principally by requiring balance sheet recognition of assets under lease arrangements. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-02 on its consolidated financial statements.

~~In May 2014, August 2015 and May 2016, the FASB issued ASU 2014-09~~~~Revenue from Contracts with Customers~~~~, ASU 2015-14~~~~Revenue from Contracts with Customers, Deferral of the Effective Date~~~~, and ASU 2016-12~~~~Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients~~, respectively, which implement ASC Topic 606. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance under U.S. GAAP, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in these ASUs are effective for annual periods beginning after December 15, 2017, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2016. These ASUs may be applied retrospectively with a cumulative adjustment to retained earnings in the year of adoption. The Company is assessing the impact, if any, of implementing this guidance on its financial position, results of operations and liquidity.

There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. The Company has adopted ASU 2016-09~~Improvements to Employee Share-Based Payment Accounting.Cash paid when shares were directly withheld for tax-withholding purposes were classified as a financing activity in the statement of cash flows. There were no other impacts from this adoption.~~

~~Going Concern~~2020

The Company ~~has experienced losses from operations resulting in an accumulated deficit~~alleviated the substantial doubt regarding this uncertainty as of ~~$79,663 since inception. The accumulated deficit together with losses of $10,263 for the three months ended June~~March 31, 2020 which continues to be alleviated at September 30, ~~2017, and cash used in operating activities in the three months ended June 30, 2017 of $7,576 have resulted in the uncertainty~~2020 as a result of the Company’s ~~ability to continue as a going concern.~~acquisition of Banner Midstream on March 27, 2020 which bring revenue generating subsidiaries with reserves of oil properties over $6,000 and existing customer relationships over $2,000, coupled with the raising of $12,253 in the exercise of warrants in the six months ended September 30, 2020.

~~These consolidated financial statements of~~If the Company ~~have been prepared assuming~~raises additional funds by issuing equity securities, its stockholders would experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company ~~will continue as a going concern,~~raises may contain terms that are not favorable to it or its stockholders and require significant debt service payments, which ~~contemplates, among~~diverts resources from other ~~things,~~activities. If the ~~realization of assets~~Company is unable to obtain additional financing, it may be required to significantly scale back its business and ~~the satisfaction of liabilities in the normal course of business over a reasonable period of time.~~

The Company raised $9,106 of additional capital, net of expenses, in the three months ended June 30, 2017, as compared with over $12,000 raised in the three-month transition period ended March 31, 2017. Portions of the capital raise resulted in recognition of derivative liabilities.operations. The Company’s ability to raise additional capital ~~through future equity~~will also be impacted by the recent outbreak of COVID-19.

Based on this acquisition, company-wide consolidation, and ~~debt securities issuances~~management’s plans, the Company believes that the current cash on hand and anticipated cash from operations is ~~unknown.~~ sufficient to conduct planned operations for one year from the issuance of the unaudited condensed consolidated financial statements.

Impact of COVID-19

The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. The COVID-19 public health epidemic prevented the Company ~~intends~~from conducting business activities at full capacity for an indefinite period of time, including due to ~~raise up~~risk of spread of the disease within these groups or due to shutdowns requested or mandated by governmental authorities.

COVID-19 did not have a ~~cumulative amount~~material effect on the Condensed Consolidated Statements of ~~$80,000 pursuant~~Operations or the Condensed Consolidated Balance Sheets included in this Form 10-Q. However, it did have a material impact on our management’s ability to ~~its shelf registration filed~~operate effectively and meet some of our filing deadlines. The impact included the difficulties of working remotely from home including slow Internet connection, the inability of our accounting and financial officers to collaborate as effectively as they would otherwise have in an office environment and issues arising from mandatory state quarantines.

While it is not possible at this time to estimate with sufficient certainty the ~~SEC. Obtaining additional financing~~impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the ~~successful development~~measures taken by federal, state, local and foreign governments could disrupt the operation of the Company’s ~~strategic plan~~business. The COVID-19 outbreak and mitigation measures have also had and may continue to ~~achieve profitability are necessary for~~have an adverse impact on global and domestic economic conditions, which could have an adverse effect on the ~~Company~~Company’s business and financial condition, including on its potential to ~~continue operations. There can be no assurance that such capital will be available or~~conduct financings on terms acceptable to the ~~Company. The~~ Company, ~~intends~~if at all. In addition, the Company has taken temporary precautionary measures intended to ~~further develop~~help minimize the risk of the virus to its ~~product offerings~~employees, including temporarily requiring employees to work remotely, and ~~customer bases. The Company’s plans to achieve profitability include evaluating the cost structure and processes of its operations, both~~discouraging employee attendance at ~~the margin and operating expense levels, as well as pursuing additional strategic acquisitions and dispositions. The ability to successfully resolve these factors raises substantial doubt about~~in-person work-related meetings, which could negatively affect the Company’s ~~ability~~business. These measures are continuing. The extent to ~~continue as a going concern. The consolidated financial statements~~which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the ~~Company do not include any adjustments that may result from~~virus and the ~~outcome of the uncertainties.~~actions to contain its impact.

As more fully described in Note 18, in connection with the preparation of the Company’s condensed consolidated financial statements as of and for the three months ended June 30, 2017, the Company identified inadvertent errors in the accounting for certain embedded derivative liabilities associated with warrants issued as a part of capital raises. In connection with those capital raises, proceeds (net of fees) were accounted for as equity. Upon further evaluation, the Company determined that a portion of the capital raised should have been accounted for as liabilities with fair value changes recorded in the Company’s condensed consolidated statements of operations.

The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small business are eligible for a loan to fund payroll expenses, rent and related costs.

In April 2020, the Company and one of its subsidiaries entered into PPP loans with financial institutions, See Notes 11 (u) and (v). Should the Company meet the criteria established under the loan, these amounts will be forgiven.

NOTE 2: DISCONTINUED OPERATIONS

~~On April 14, 2017,~~Pursuant to ASC 205-20, Presentation of Financial Statements – Discontinued Operations, ASC-20-45-1B, paragraph 360-10-45-15, Pinnacle Vac will be disposed of other than by sale via an abandonment and termination of operations with no intent to classify the ~~Company sold~~entity or assets as Available for Sale. Pursuant to ASC 205-20-45-3A, the ~~assets, liabilities and membership interests in Eco3d~~results of operations of Pinnacle Vac from inception to discontinuation of operations will be reclassified to a ~~group led by executives~~separate component of ~~Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction~~income, below Net Income/(Loss), as a Loss on Discontinued Operations.

All of the ~~Company.~~equipment assets of Pinnacle Vac and the related loan liabilities will be subsequently transitioned into Capstone to continue servicing the debt. The ~~Company received $2,006 in cash, anticipated payments~~remaining current assets of ~~$94~~Pinnacle Vac will be used to settle any outstanding current liabilities of Pinnacle Vac. A loss contingency will be recorded if any of the outstanding liabilities or obligations of Pinnacle Vac resulting from this abandonment are reasonably estimable and likely to be ~~received by August 2017,~~incurred.

Banner Midstream made the decision to discontinue the operations of its wholly owned subsidiary, Pinnacle Vac Service LLC (“Pinnacle Vac”), effective October 31, 2018 due to the inability of Pinnacle Vac’s management to develop a sustainable, profitable business model. The managerial staff of Pinnacle Vac was terminated on November 15, 2018 and ~~560 shares of the Company’s common stock (including 525 shares that had been exchanged for the noncontrolling interest in September 2016) that~~Pinnacle Vac’s rental facility at Sligo Rd. was held by executives of Eco3d, which were canceled upon receipt. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company had reflected amounts relating to Eco3d as a disposal group classified as held for sale at March 31, 2017 and has included amounts relating to Eco3d as part of discontinued operations for the three months ended June 30, 2017 and 2016. Eco3d had been included in the Services segment, and segment disclosures in Note 13 no longer include amounts relating to Eco3d following the reclassification to discontinued operations. There will be no significant continuing involvement with Eco3d. The Company will allow Eco3d to utilize certain accounting system software for up to one year.vacated on November 15, 2018.

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

June 30,
2017

March 31,
2017

(Unaudited)
Cash $          - $ 34
Accounts receivable, net of allowance - 1,293
Prepaid expenses - 67
Other current assets - 10
Current assets - discontinued operations $ - $ 1,404

Property and equipment, net $ - $ 362
Other assets - 4
Non-current assets - discontinued operations $ - $ 366

Accounts payable $ - $ 67
Accrued liabilities - 396
Current liabilities - discontinued operations $ - $ 463
~~Major line items constituting income (loss) of discontinued operations in the consolidated statements of operations~~September 30, 2020 for ~~the three months ended June 30~~Pinnacle Vac consisted of the following:

2017 2016
Revenue from services $ 188 $ 1,183
Cost of services 103 390
Gross profit 85 793
Operating expenses 142 597
Allocated interest expense - 12
Income (loss) of discontinued operations $ (57 ) $ 184
Current asset
Cash $ -
Total current assets $ -

Property and equipment, net $ 249
Non-current assets $ 249

Accounts payable $ 228
Current liabilities $ 228
There was no income (loss) from discontinued operations for the three and six months ended September 30, 2020 and 2019, respectively.

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

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

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
~~THREE MONTHS ENDED JUNE~~SEPTEMBER 30, ~~2017 AND 2016~~2020

NOTE 3: ~~INVENTORY~~REVENUE

~~Inventory, net~~The following table disaggregates the Company’s revenue by major source for the six and three months ended September 30:
Three Months Ended
September 30, Six Months Ended
September 30,
2020 2019 2020 2019
Revenue:
Software as a Service (“SaaS”) $ - $ 16 $ - $ 28
Professional Services - 28 - 51
Financial Services 104 - 194 -
Oil and Gas Production 525 - 676 -
Transportation Services 2,575 - 4,549 -
Fuel Rebate 31 - 77 -
Equipment Rental 43 - 95 -
$ 3,278 $ 44 $ 5,591 $ 79
There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of ~~reserves, consisted~~unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Subsequent to the acquisitions of Trend Discovery and Banner Midstream, the Company in 2020 recorded revenues for financial services and oil and gas services and production. For both of these entities, revenues are billed upon the completion of the ~~following:~~performance obligations.

June 30,
2017

March 31,
2017

(Unaudited)
Inventory $ 3,107 $ 2,456
Inventory reserves (332 ) (352 )
Total $ 2,775 $ 2,104
Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

NOTE 4: INVENTORIES
The Company’s inventories of $175 consisted of crude oil of approximately 7,955 barrels of unsold crude oil using LIFO cost method.
NOTE 5: NOTE RECEIVABLE
The Company entered into a $225 senior secured convertible promissory note on June 18, 2020 with Rabb Resources, LTD. The Company had an existing note in the amount of $25 that had not been secured, and rolled an additional $200 into Rabb Resources, LTD, whereby the entire amount became secured. The note was non-interest bearing if paid or converted within forty-five days of the issuance date of June 18, 2020 (August 2, 2020, which is the maturity date). If not paid or converted, the note bore interest at 11% per annum, paid in cash on a quarterly basis.
This note was convertible into shares of Rabb Resources, LTD. based on a valuation of Rabb Resources, LTD. into shares of that company at a value of the $225. The Company advanced an additional $50 on July 8, 2020 and $25 on August 7, 2020 to bring the total note receivable to $300. This amount plus the accrued interest receivable of $4 was due as of August 14, 2020.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
On August 14, 2020, the Company entered into an Asset Purchase Agreement with Rabb Resources, LTD. which included the acquisition of real property. The purchase price for this acquisition was $3,500, of which $1,196 was paid in cash (after applying the outstanding principal of the note receivable and accrued interest receivable against the $1,500 agreed upon cash consideration) and the balance was paid in common stock of the Company. The Company accounted for this acquisition as an asset purchase (see Note 16). There are no amounts outstanding as of September 30, 2020.
NOTE 6: PROPERTY AND EQUIPMENT

Property and equipment consisted of the ~~following:~~following as of September 30, 2020 and March 31, 2020:

June 30,
2017

March 31,
2017
September 30,
2020 March 31,
2020
(Unaudited)
Machinery and equipment $ 2,769 $ 2,724
Zest Labs freshness hardware $ 2,493 $ 2,493
Computers and software costs 406 406 222 222
Furniture and fixtures 107 107
Leasehold improvements 4 4
Land 140 -
Buildings 236 -
Leasehold improvements – Pinnacle Frac 18 18
Machinery and equipment - Technology 200 200
Machinery and equipment – Commodity 3,458 3,405
Total property and equipment 3,286 3,241 6,767 6,338
Accumulated depreciation and impairment (1,032 ) (933 ) (2,674 ) (2,373 )
Property and equipment, net $ 2,254 $ 2,308 $ 4,093 $ 3,965
As of September 30, 2020 and March 31, 2020, 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.
The Company acquired $3,423 in property and equipment on March 27, 2020 in the acquisition of Banner Midstream. In addition, $376 of land and buildings were acquired in the Rabb Resources acquisition.

Depreciation expense for the ~~three~~six months ended ~~June~~September 30, ~~2017~~2020 and ~~2016~~2019 was ~~$99~~$341 and ~~$70, respectively. The expense includes $67~~$148, respectively, and ~~$46~~$171 and $71 for the three months ended ~~June~~September 30, ~~2017~~2020 and ~~2016, respectively,~~2019, respectively. During the six months ended September 30, 2020, the Company disposed of ~~depreciation on manufacturing~~$188 worth of equipment that ~~is classified as cost of product sales.~~
An impairment charge of $245 was recorded in March 2017 ($45 related to assets reclassified to held for sale and $200 for other equipment at Sable). The Company decided to outsource its densification process and therefore has plans to sell the densifiers and related equipment acquired in the Sable acquisition. That equipment was written down to estimated fairhad a net value of ~~$158 and is included~~$148 for cash proceeds of $43, resulting in ~~current assets as~~a loss on disposal of June 30, and March 31, 2017. As described in Note 8 below, the ownership interest in Sable (that includes equipment and other assets) serves as collateral for the remaining outstanding convertible notes.$105.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
~~THREE MONTHS ENDED JUNE~~
SEPTEMBER 30, ~~2017 AND 2016~~2020

NOTE 5:7: INTANGIBLE ASSETS AND GOODWILL

Intangible assets consisted of the ~~following:~~following as of September 30, 2020 and March 31, 2020:

June 30, March 31, September 30,
2020 March 31,
2020
2017 2017
(Unaudited)
Customer lists $ 5,008 $ 5,008
Patents 1,090 1,090 $ 1,013 $ 1,013
Customer relationships 2,100 2,100
Non-compete agreements – Banner Midstream 250 250
Outsourced vendor relationships 1,016 - 1,017 1,017
Non-compete agreements 419 -
Goodwill, net of impairment 647 582
Non-compete agreements – Zest Labs 340 340
Total intangible assets 8,180 6,680 4,720 4,720
Accumulated amortization and impairment (5,262 ) (5,113 ) (2,512 ) (2,370 )
Intangible assets, net $ 2,918 $ 1,567 $ 2,208 $ 2,350

~~The~~All intangible assets prior to the acquisition of Banner Midstream were fully impaired as of March 31, 2019. Those intangible assets related to the outsourced vendor relationships and non-compete agreements ~~and $65 of goodwill~~ were recorded as part of the acquisition of ~~440labs described in Note 15 below.~~440labs.

~~Total amortization~~In the acquisition of Banner Midstream, the Company acquired the customer relationships and non-compete agreements valued at $2,350. The estimated useful lives of the customer relationships is ten years based on the estimated cash flows from those customer contracts, and the estimated useful lives of the non-compete agreement is five years amortized over a straight-line method.
Amortization expense for the six months ended September 30, 2020 and 2019 was $142 and $0, respectively, and $71 and $0 for the three months ended ~~June~~September 30, ~~2017~~2020 and ~~2016 was $149~~2019, respectively.
The following is the future amortization of the intangibles as of September 30:
2021 $ 317
2022 303
2023 261
2024 264
2025 241
Thereafter 822
$ 2,208
In addition to the statutory based intangible assets noted above, the Company incurred $10,225 in the purchase of Trend and ~~$85, respectively. Amortization amounts~~Banner Midstream as follows:
Acquisition – Trend Discovery $ 3,223
Acquisition – Banner Midstream 7,002
Goodwill – September 30, 2020 and March 31, 2020 $ 10,225
The Company assessed the criteria for ~~the next five years are: $208, $630, $440, $117~~impairment, and ~~$75.~~there were no indicators of impairment present as of September 30, 2020, and therefore no impairment is necessary.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020

NOTE 6:8: ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

June 30, March 31,
2017 2017
(Unaudited)
Professional fees and consulting costs $ 223 $ 1,777
Vacation and paid time off 376 359
Inventory in transit 177 89
Legal fees 106 112
Payroll and employee expenses 46 163
Other 210 120
Total $ 1,138 $ 2,620

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
September 30,
2020 March 31,
2020
Professional fees and consulting costs $ 39 $ 106
Vacation and paid time off 92 126
Legal fees 84 503
Compensation 323 865
Interest 369 673
Insurance 1,110 548
Other 370 215
Total $ 2,387 $ 3,036

~~NOTE 7: NOTE PAYABLE~~
On March 27, 2020, the Company assumed $2,362 of liabilities in the acquisition of Banner Midstream, and in addition, assumed $2,362 of liabilities in amounts that are due to prior owners of Banner Midstream and their subsidiaries. These amounts are non-interest bearing and due on demand. As of September 30, 2020 and March 31, 2020, $814 and $2,358 of the amounts due to prior owners is currently due. The Company ~~had a note payable pursuant~~converted $1,228 of amounts due to a line of credit maintained with a bank. The note was secured by the accounts receivable, inventory and equipment of Sable and had a 5.5% interest rate with interest payable monthly and a balloon payment due on November 18, 2017. The note, formerly guaranteed by the former owner of Sable, now a stockholder of the Company, originated July 15, 2015 with a maximum amount of $1,500. The balance of the note was $1,500 for the period from acquisition on May 3, 2016 to March 16, 2017. The Company had pledged a $1,500 certificate of deposit as collateral, and the guaranty of the former owner of Sable was eliminated. The note had standard covenants, and the Company was not in default of any covenant. The note along with all accrued interest was repaid on March 17, 2017. Interest expense on the note for the three months ended June 30, 2016 was $14.
~~NOTE 8: LONG-TERM DEBT~~
~~Long-term debt consisted of the following:~~
June 30, March 31,
2017 2017
(Unaudited)
Secured convertible promissory note $ 500 $ 500
Less: current portion - -
Long-term debt, net of current portion $ 500 $ 500
The Company has a secured convertible promissory note (“convertible note”) bearing interest at 10% per annum, entered into on January 10, 2017 for $500 with the principal due in one lump sum payment on or before July 10, 2018. The convertible note was part of the financing the Company entered into in the three months ended March 31, 2017, that raised $4,300 (of a maximum of $5,000) in convertible notes ($700 of which were from related parties, see Note 9) bearing interest at 10% per annum. On March 30, 2017, $3,700 of these notes were converted (and $600 of the $700 in connection with the related parties)prior owners into shares of common stock ~~along with~~which resulted in a loss on conversion of $1,248 in the ~~related accrued interest on those notes. The interest is due and payable quarterly, in arrears, on~~six months ended September 30, ~~and December 31, 2017, and March 31, and June 30, 2018.~~
The Company has granted note holders a security interest for the holder’s ratable share of the series notes in the Company’s ownership interest in Sable as collateral. The note holders have the right at the holders’ option to convert all or any portion of the principal amount at a conversion rate per share which ranges from $4.15 to $7.10 per share. In February 2017, the Company amended the convertible note whereby certain holders (not including related parties) received a warrant to purchase 10 shares of common stock for every $100 principal amount if the holder converted the note on or before March 31, 2017.
~~Interest expense on the long-term debt for the three months ended June 30, 2017 and 2016 was $13 and $77, respectively. The $77 of interest expense in 2016 was incurred on debt that has been repaid.~~
~~See Note 9 for long-term debt transactions with related parties.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~2020.

NOTE 9: ~~RELATED-PARTY TRANSACTIONS~~
Long-term debt – related parties consisted of a $100 note payable purchased by the Company’s Chief Administrative Officer, Troy Richards, in February 2017, who declined the warrants. The convertible note has terms consistent with those described in Note 8 above, including being due in one lump sum payment on or before July 10, 2018 and remains outstanding as of June 30, 2017.
In February 2017, in addition to Mr. Richards’ note, an independent director on the Company’s Board, who is a significant shareholder, purchased $500 of the series notes, and an officer of the Company purchased $100 of the series notes. The officers and directors declined the warrants. The $600 of notes were converted in March 2017.
~~Interest expense on the convertible notes held by related parties for the three months ended June 30, 2017 was $2.~~
On February 28, 2017, the Company entered into a Securities Purchase Agreement related to the issuance and sale of up to 1,100 shares of common stock held by Randy May, Chairman of the Board and former CEO, and Gary Metzger, an independent director on the Company’s Board and a significant shareholder. The purchase agreement is pursuant to the Company’s Form S-3 registration statement filed on August 17, 2016. The selling securityholders may sell or distribute the securities included in this prospectus supplement through underwriters, through agents, to dealers, in private transactions, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices. The Company will not receive any of the proceeds from sales of the common stock made by the selling securityholders.
~~NOTE 10: STOCKHOLDERS’ EQUITY~~
~~Ecoark Holdings Preferred Stock~~
~~On March 18, 2016, the Company created 5,000 shares of “blank check” preferred stock, par value $0.001. No preferred shares have been issued.~~
~~Ecoark Holdings Common Stock~~
~~The Company has 100,000 shares of common stock, par value $0.001 which were authorized on March 18, 2016.~~
~~In May 2017, the Company issued 2,500 shares of the Company’s common stock pursuant to a private placement offering for $9,106, net of expenses (see~~~~Securities Purchase Agreement – Institutional Funds~~ ~~below). Of the total net proceeds of $9,106, $7,772 were determined to be warrant liabilities, and $695 of the fees that were considered related to liabilities were charged to other expense.~~
~~The Company issued 28 shares to members of the Board as compensation for their services in the quarter ended June 30, 2017, valued at $125.~~
During the quarter ended June 30, 2017, the Company issued 20 shares to a consultant and 561 shares to employees in stock grants vested under the 2013 Ecoark Holdings Incentive Stock Plan (“2013 Incentive Stock Plan”). The employees’ shares were valued at $7,048. The Company acquired 128 shares of common stock from employees in lieu of amounts required to satisfy minimum withholding requirements of $577 upon vesting of the employees’ stock.
~~The Company issued 300 shares upon the execution of employment agreements with employees of 440labs valued at $1,500 recorded as share-based compensation for the three months ended June 30, 2017.~~
~~The Company issued 300 shares for the acquisition of 440labs valued at $1,500.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d to a group led by executives of Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction of the Company. The Company received $2,006 in cash, anticipated payments of $94 to be received by August 2017 and 560 shares of the Company’s common stock that was held by executives of Eco3d, which shares were canceled.
~~Securities Purchase Agreement – Institutional Funds~~
On May 22, 2017, the Company completed a reserved private placement agreement related to the issuance and sale of 2,500 shares of common stock for $10,000 ($9,106 net of expenses) to institutional purchasers at $4.00 per share. The purchase agreement is pursuant to the Company’s Form S-3 registration statement filed on August 17, 2016. The purchasers also received warrants to purchase 1,875 shares of common stock equal to 50% of the purchaser’s shares for $5.50 for up to 5 years from the date the transaction completed. The investment bankers for the transaction received warrants to purchase 175 shares of common stock for $5.50 for up to 5 years, the same terms as the investors.
~~As of June 30, 2017, 45,528 total shares were issued and 45,400 shares were outstanding, net of 128 treasury shares.~~
~~Warrants~~
MSC had issued warrants for 15 shares (post-merger, formerly 3,785) that were converted into shares of common stock in accordance with the Merger agreement with Ecoark. Consistent with the terms of the Merger, warrants for 13 shares were converted to shares at the time of the Merger. The remaining warrants for 2 shares were exercised in a cashless exchange for shares during the second quarter of 2016.
During 2016, the Company issued 4,337 warrants as part of the private placement that was completed on April 28, 2016, of which 98 of these warrants were exercised for common shares totaling $487, leaving warrants for 4,239 shares outstanding that have a strike price of $5.00 per share and expire on December 31, 2018.
Warrants were issued in October 2016 to a consultant. The warrants were exercisable into 100 shares of common stock with a strike price of $2.50 per share that vested October 31, 2016 with an expiration date of October 31, 2018. In May 2017, 49 shares of the warrants were exercised in a cashless exchange and the remaining 51 shares were forfeited.
As discussed in Note 8, the Company on March 30, 2017 issued warrants to the convertible note holders that converted their notes into shares of common stock in accordance with the amended secured convertible promissory note. The warrants are exercisable into 310 shares of common stock with a strike price of $7.50 per share, and expire on December 31, 2018. The warrants were valued using the Black-Scholes model, which incorporated a volatility of 82% and a discount yield of 1.27%. The value of the warrants of $370 was included in interest expense for the three months ended March 31, 2017 and additional paid in capital.
On March 14, 2017, the Company issued 1,000 warrants to institutional investors that purchased 2,000 shares of common stock in a private placement. The warrants have a strike price of $5.00 and mature in March 2022. In addition, the brokers of the transaction received 140 warrants with the same terms as the investors.
As discussed above, on May 22, 2017, the Company issued 1,875 warrants to the institutional investors that purchased the 2,500 shares of common stock in the reserved private placement. The warrants have a strike price of $5.50 and mature in November 2022. In addition, the brokers of the transaction received 175 warrants with the same terms as the investors.
~~Both the March 14, 2017 and May 22, 2017 warrant issuances resulted in the Company’s recognition of derivative liabilities. See Note 16.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
~~Changes in the warrants are described in the table below:~~
Number of Warrants Weighted Average Exercise Price
Weighted
Average Remaining Contractual Life (Years)

Balance at December 31, 2015 15 $ 35.00 1.0
Granted 4,437 $ 4.94 2.0
Exercised pre-Merger (13 )
Exercised pre-Merger (98 ) $ (5.00 )
Exercised cashless, post-Merger (2 )
Forfeited -
Canceled -
Balance at December 31, 2016 4,339 $ 4.94 2.0
Granted 1,450 $ 5.53 4.3
Exercised Cash -
Exercised Cashless -
Forfeited -
Canceled -
Balance at March 31, 2017 5,789 $ 5.09 2.6
Granted 2,050 $ 5.50 5.2
Exercised Cash -
Exercised Cashless (49 )
Forfeited (51 )
Canceled -
Balance at June 30, 2017 7,739 $ 5.26 3.3
Intrinsic value of warrants $ -
~~2013 Option Plan~~
On February 16, 2013, the Board of Directors of Ecoark approved the 2013 Ecoark Stock Option Plan (“2013 Option Plan”). The purposes of the 2013 Option Plan were to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants, and to promote the success of the business. The 2013 Option Plan was expected to contribute to the attainment of these objectives by offering employees, directors and consultants the opportunity to acquire stock ownership interests in Ecoark, and to thereby provide them with incentives to put forth maximum efforts for the success of Ecoark.
Awards under the 2013 Option Plan were only granted in the form of nonstatutory stock options (“Options”) to purchase Ecoark’s Series C Stock prior to the Merger with MSC. Under the terms of the 2013 Option Plan and the Merger, the Options converted into the right to purchase shares of the Company.
In May 2014, Ecoark had granted Options to purchase 693 shares to various employees and consultants of Ecoark. The Options had an exercise price of $1.25 per share and a term of 10 years. The Options were to vest over a three-year period as follows: 25% immediately; 25% on the first anniversary date; 25% on the second anniversary date; and 25% on the third anniversary date. During 2015 Ecoark issued additional Options on 625 shares of common stock. At the end of 2015, Options under the 2013 Option Plan were outstanding to purchase 1,318 shares of common stock. The total original number of Options to purchase 1,318 shares of Ecoark common stock was divided by two in conjunction with the exchange ratio required by the Merger agreement and converted to Options to purchase 659 shares of Ecoark Holdings with an adjusted exercise price of $2.50. In September 2016, the remaining vesting was accelerated to have those Options 100% vested. In 2016, the Company issued Options to purchase 125 shares of stock at a strike price of $2.50 per share to a consultant. These options vested immediately and expire on March 31, 2018. In the Company’s fourth quarter of 2016, an option holder forfeited 125 options and thus, at December 31, 2016, Options on 659 shares of the Company were outstanding with an adjusted exercise price of $2.50. The Board adjusted the expiration date of these options to March 28, 2018.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
Management valued the Options utilizing the Black-Scholes model, with the following criteria: stock price - $2.50; exercise price - $2.50; expected term – 10 years; discount rate – 0.25%; and volatility – 55.32%.
Options for 250 shares were issued to a consultant in 2017 with an exercise price of $2.50 and an expiration date of March 28, 2018, and Options were exercised for 25 shares in March 2017, at $2.50 per share providing $62 in cash to the Company. As of June 30, 2017, the number of Options outstanding was 884.
~~Changes in the Options under the 2013 Option Plan are described in the table below:~~
Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2015 659 $ 2.50 2.1
Granted 125 $ 2.50 0.4
Exercised -
Forfeited (125 ) $ 2.50
Balance at December 31, 2016 659 $ 2.50 1.2
Granted 250 $ 2.50 1.0
Exercised (25 ) $ 2.50
Forfeited -
Balance at March 31, 2017 884 $ 2.50 1.0
Granted -
Exercised -
Forfeited -
Balance at June 30, 2017 884 $ 2.50 0.8
Intrinsic value of options $ 981
~~2013 Incentive Stock Plan~~
The 2013 Incentive Stock Plan was registered on February 7, 2013. Under the 2013 Incentive Stock Plan, the Company may grant incentive stock in the form of Stock Options, Stock Awards and Stock Purchase Offers of up to 5,500 shares of common stock to Company employees, officers, directors, consultants and advisors. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant. At the time of the Merger, 5,497 shares were available to issue under the 2013 Incentive Stock Plan. The Board has authorized blocks of incentive stock totaling 5,486 shares to be issued to various employees, consultants, advisors and directors of the Company through June 30, 2017 and 65 shares have been forfeited, leaving 76 shares available to grant.
The Company engaged the services of consultants to assist it with efforts to raise capital, identify potential acquisitions, recruit talent, and perform acquisition due diligence. In June 2017, the Company issued 20 shares to a consultant for grants that were fully vested with a grant value of $98.
~~The Company issued 581 shares to employees for grants that were fully vested, with grant values of $3,065.~~
At June 30, 2017, the Company has issued 1,581 shares for fully vested grants and granted awards for 3,843 shares that will be expensed through the completion of vesting at December 31, 2018. The share-based compensation expense related to these grants for the three months ended June 30, 2017 was $7,013. Share-based compensation costs of approximately $11,700 for grants not yet recognized will be recognized as expense through December 31, 2018, subject to any changes for actual versus estimated forfeitures.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
~~A reconciliation of the shares available under the 2013 Incentive Stock Plan is presented in the table below through June 30, 2017:~~
~~Number of Shares~~
~~Available under the 2013 Incentive Stock Plan~~ ~~5,500~~
~~Granted pre-Merger~~ ~~(13~~ )
~~Shares canceled pre-Merger~~ 10
~~Available at the Merger date~~ ~~5,497~~
~~Shares granted post-Merger~~ ~~(476~~ )
~~Shares forfeited~~ -
~~Balance at December 31, 2016~~ ~~5,021~~
~~Shares granted~~ ~~(5,010~~ )
~~Shares forfeited~~ -
~~Balance at March 31, 2017~~ 11
~~Shares granted~~ -
~~Shares forfeited~~ 65
~~Balance at June 30, 2017~~ 76
~~Vested stock awards at June 30, 2017~~ ~~1,581~~
~~Shares issued under the 2013 Incentive Stock Plan through June 30, 2017:~~
Number of Shares Issued Weighted Average Remaining Contractual Life (Years)

Balance at December 31, 2015 3
Issued post-Merger 159 1.9
Balance at December 31, 2016 162
Issued 813 1.9
Balance at March 31, 2017 975 1.8
Issued 606 1.5
Balance at June 30, 2017 1,581 1.5
~~2017 Omnibus Incentive Plan~~
The 2017 Ecoark Holdings Omnibus Incentive Plan (“2017 Omnibus Incentive Plan”) was registered on June 14, 2017. Under the 2017 Omnibus Incentive Plan, the Company may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other awards. Awards of up to 4,000 shares of common stock to Company employees, officers, directors, consultants and advisors are available under the 2017 Omnibus Incentive Plan. The type of grant, vesting provisions, exercise price and expiration dates are to be established by the Board at the date of grant. The Board has authorized awards totaling 1,668 shares to employees and directors of the Company through June 30, 2017, comprised of 400 incentive stock options, 1,105 of service-based restricted stock shares, 135 of performance-based restricted stock shares and 28 shares to the independent members of the Board.
On June 30, 2017, the Company issued 28 shares of common stock to independent directors that were fully vested with a grant value of $125. A total of $25 in shares was issued to each independent director for their participation on the Company’s Board for the most recent quarter ended June 30, 2017. Each independent director was issued 6 shares at $4.47 per share which was the average closing share price of the Company’s stock for the quarter ended June 30, 2017.
23
~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
In June 2017, the Board awarded 400 incentive stock options to employees, which grants are at an exercise price of $3.36, a term of 10 years and a vesting period over four years. None of the options have vested. Management valued the options utilizing the Black-Scholes model, with the following criteria: stock price - $3.36; exercise price - $3.36; expected term – 10 years; discount rate – 0.22%; and volatility – 88.76%.
The Company records share-based compensation in accordance with ASC 718 for employees and ASC 505 for non-employees, and has recorded share-based compensation of $3 for the three months ended June 30, 2017 relating to the options. Changes in the options under the 2017 Omnibus Incentive Plan are described in the table below:
Number of
Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual Life (Years)

2017 Omnibus Incentive Plan
Granted 400 $ 3.36 10.0
Exercised -
Forfeited -
Balance at June 30, 2017 400 $ 3.36 10.0
Intrinsic value of options $ 100
In June 2017, the Board authorized awards of 135 shares of restricted stock whose vesting is contingent upon annual reviews, which may include specific performance metrics. The values were based on grant date fair value as of June 28, 2017 ($3.36 per share), will be expensed through the completion of the vesting in 2020 and were accrued assuming that performance goals will be achieved. The share-based compensation expense related to these grants for the three months ended June 30, 2017 was $2.
~~A summary of the activity for performance grants as of June 30, 2017, and changes during the quarter then ended is presented below:~~
Weighted
Average
Number of Remaining
Performance Contractual
Shares Life (Years)
2017 Omnibus Incentive Plan
Granted 135 3.0
Forfeited -
Balance at June 30, 2017 135 3.0
Vested stock awards at June 30, 2017 -

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
In June 2017, the Board authorized awards of 1,105 shares of restricted stock whose vesting is contingent upon completion of periods of service to employees that vest through 2020. The values were based on grant date fair value of June 28, 2017 ($3.36 per share) and will be expensed through the completion of the vesting. The share-based compensation expense related to these grants for the three months ended June 30, 2017 was $32.
~~A summary of the activity for service-based grants as of June 30, 2017, and changes during the quarter then ended is presented below:~~
Number of
Weighted
Average Remaining

Service Contractual
Shares Life (Years)
2017 Omnibus Incentive Plan
Granted 1,105 3.0
Forfeited -
Balance at June 30, 2017 1,105 3.0
Share-based compensation costs of approximately $4,300 for performance and service grants not yet recognized will be recognized as expense through 2020, subject to any changes for actual versus estimated forfeitures.
~~A reconciliation of the shares available under the 2017 Omnibus Incentive Plan is presented in the table below through June 30, 2017:~~
~~Number of Shares~~
~~Available under the 2017 Omnibus Incentive Plan~~ ~~4,000~~
~~Shares granted~~ ~~(1,668~~ )
~~Shares forfeited~~ -
~~Balance at June 30, 2017~~ ~~2,332~~
~~Vested stock awards at March 31, 2017~~ 28

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
~~NOTE 11: COMMITMENTS AND CONTINGENCIES~~
~~Operating Leases~~
The Company leases many of its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements. These leases expire at various dates through 2021. Rent expense was approximately $165 and $118 for the three months ended June 30, 2017 and 2016, respectively. The amounts for 2017 and 2016 include $72 and $47, respectively, in rent for Sable's production facility which is included in cost of product sales. Future minimum lease payments required under the operating leases are as follows (by fiscal year): 2018 - $444, 2019 - $496, 2020 - $413, 2021 - $250.
~~Corporate Card Program~~
~~The Company has established a corporate credit card program with a bank and has approximately $265 in an interest-bearing account at the bank to secure charges from the corporate card program.~~
~~Royalties~~
The Company has cross-licensing agreements with several technology companies that require payment of royalties upon the sale and or use of certain patented technologies. One of these agreements requires minimum annual payments of $50 until the last of the patents expire.
~~Contract Related Fees~~
Prior to the Merger, a subsidiary of the Company, as part of a contract to develop its products, has agreed to pay the contractor 1.5% of future New York state manufactured sales, and 5% of future non-New York state manufactured sales until the entire funds paid by a contractor have been repaid (or three times the funds if non-New York manufactured), or 15 years after start of sales. As of June 30, 2017, the subsidiary has $1,252 of contract-related expenses. These funds will be owed to the contractor, as described above, contingent upon the sale of the subsidiary’s product related to that contract.
~~The Company has determined that a liability need not be accrued because management has determined that it is not probable sales will occur in this technology.~~

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
~~NOTE 12: INCOME TAXES~~
~~The Company accounts for income taxes under ASC Topic 740~~~~Income Taxes~~ which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement basis and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company has a net operating loss carryforward for tax purposes totaling approximately $70,800 at June 30, 2017, expiring through the year 2037. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after certain ownership shifts.
The provision (benefit) for income taxes for the three months ended June 30, 2017 and 2016 differs from the amount expected as a result of applying statutory tax rates to the losses before income taxes principally due to establishing a valuation allowance to fully offset the income tax benefit and fully reserve deferred tax assets. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. As the achievement of required taxable income is uncertain, the Company has recorded a full valuation allowance.
~~The Company’s deferred tax assets are summarized as follows:~~

June 30,
2017
March 31, 2017
Net operating loss carryover $ 25,243 $ 20,961
Depreciable and amortizable assets 871 1,464
Share-based compensation 2,452 1,003
Accrued liabilities 128 122
Inventory reserve 112 119
Change in fair value of derivative liabilities (1,171 ) (290 )
Allowance for bad debts 137 154
Other 5 4
Less: valuation allowance (27,777 ) (23,537 )
Net deferred tax asset $ - $ -
After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at June 30, 2017 and March 31, 2017, due to the uncertainty of realizing the deferred income tax assets. The valuation allowance increased by $4,240 in the three months ended June 30, 2017. The Company has not identified any uncertain tax positions and has not received any notices from tax authorities.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
~~NOTE 13: SEGMENT INFORMATION~~
~~The Company follows the provisions of ASC 280-10~~~~Disclosures about Segments of an Enterprise and Related Information~~. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions. As of June 30, 2017, and for the three months ended June 30, 2017 and 2016, the Company operated in two segments. The segments are Pioneer Products (principally consisting of Pioneer Products’ operations consisting of sales of recycled plastic products and materials) and Zest Labs (principally consisting of costs associated with developing Zest Labs solutions). Amounts related to Eco3d’s mapping, modeling and consulting services business have been reclassified to discontinued operations and thus are excluded from the amounts in the tables below. The reclassification of Eco3d to discontinued operations caused the reportable segments to change from the previously reported Products and Services to the current reporting of Pioneer Products and Zest Labs. The principal change was the removal of Eco3d from the Services segment. Prior period segment information has been restated as a result. Home office costs are allocated to the two segments based on the relative support provided to those segments.
June 30, 2017 Pioneer Products Zest Labs Total
Segmented operating revenues $ 2,505 $ 1 $ 2,506
Cost of revenues 2,781 13 2,794
Gross loss (276 ) (12 ) (288 )
Total operating expenses net of depreciation, amortization, and interest expense, net 1,264 12,440 13,704
Depreciation and amortization 53 128 181
Change in fair value of derivative liabilities - (3,346 ) (3,346 )
Interest expense, net of interest income - 15 15
Loss from continuing operations $ (1,593 ) $ (9,249 ) $ (10,842 )
Segmented assets
Property and equipment, net $ 2,056 $ 198 $ 2,254
Intangible assets, net $ 747 $ 2,171 $ 2,918
Capital expenditures $ 33 $ 12 $ 45
June 30, 2016
Pioneer
Products
Zest Labs Total
Segmented operating revenues $ 2,387 $ 6 $ 2,393
Cost of revenues 2,441 15 2,456
Gross loss (54 ) (9 ) (63 )
Total operating expenses net of depreciation, amortization, and interest expense, net 413 5,386 5,799
Depreciation and amortization 57 52 109
Interest expense, net of interest income 17 70 87
Loss from continuing operations $ (541 ) $ (5,517 ) $ (6,058 )
Segmented assets
Property and equipment, net $ 2,908 $ 270 $ 3,178
Intangible assets, net $ 2,280 $ 833 $ 3,113
Capital expenditures $ 109 $ 77 $ 186

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
~~NOTE 14: CONCENTRATIONS~~
During the three months ended June 30, 2017 the Company had four major customers comprising 87% of sales and in 2016 the Company had two major customers comprising 66% of sales, all in the Pioneer Products segment. A major customer is defined as a customer that represents 10% or greater of total sales. Additionally, the Company had three customers in the Pioneer Products segment as of June 30, 2017 with accounts receivable balances of 80% and four customers with balances of 75% of the total accounts receivable as of March 31, 2017. The Company does not believe that risk associated with these customers will have an adverse effect on the business.
In addition, during 2017 the Company had one major vendor comprising 34% and in 2016 had two major vendors comprising 40% of purchases. A major vendor is defined as a vendor that represents 10% or greater of total purchases. Alternative sources exist such that the risk associated with the vendors is not expected to have an adverse effect on the Company. Additionally, the Company had two vendors as of June 30, 2017, with accounts payable balances of 42% and two vendors with 62% of total accounts payable at March 31, 2017.
~~The Company maintained cash balances in excess of the FDIC insured limit in both years. The Company does not consider this risk to be material.~~
~~NOTE 15: ACQUISITIONS~~
~~Sable~~
On May 3, 2016, the Company entered into a Share Exchange Agreement (the “Agreement”) by and among the Company, Pioneer Products, Sable, and the holder of all of Sable’s membership interests, an entity controlled by a stockholder of the Company.
The Company issued 2,000 shares of the Company’s common stock (the “Shares”) in exchange for all of Sable’s membership interests. Sable has since been a wholly-owned subsidiary of Pioneer Products.
The seller was subject to a lock-up agreement (the “Lock-Up Agreement”) that released shares from the Lock-Up Agreement over a period of one year (the “Lock-Up Period”). Under the Lock-Up Agreement, the seller was permitted to sell 33.3% of the Shares received by the seller after the six-month anniversary of the closing of the transaction. Thereafter, an additional 33.3% of the Shares was released at the end of each subsequent three-month period until the end of the Lock-Up Period.
~~No cash was paid relating to the acquisition of Sable. Sable operates a polymer manufacturing facility north of Atlanta, Georgia.~~
The Company acquired the assets and liabilities noted below in exchange for the 2,000 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:
Cash $ 41
Receivables, net 1,250
Inventory 759
Property and equipment 2,822
Identifiable intangible assets 1,028
Goodwill 1,264
Other assets 36
Accounts payable and other liabilities (883 )
Notes payable and current debt (2,100 )
Long-term debt (431 )
$ 3,786

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
The intangible assets represent customer lists that are being amortized over three years. The goodwill recognized reflects expected synergies from combining operations of Sable and the Company as well as intangible assets that do not qualify for separate recognition including polymer formulas and formulations. The goodwill is not expected to be deductible for tax purposes. The goodwill will not be amortized but will be tested annually for impairment. Since the acquisition, Sable has recorded $6,804 in revenues (net of intercompany elimination) and a loss of $3,726 that are both included in the consolidated results.
The following table shows pro-forma results for the three months ended June 30, 2016 as if the acquisition had occurred on April 1, 2016. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Sable and the Company.
Revenues $ 2,891
Net loss attributable to controlling interest $ (6,585 )
Net loss per share $ (0.21 )
~~440labs~~
On May 18, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”) with Zest Labs, 440labs, SphereIt, LLC, a Massachusetts limited liability company (“SphereIt”) and three of 440labs’ executive employees. Pursuant to the Exchange Agreement, on May 23, 2017 the Company has acquired all of the shares of 440labs in exchange for 300 shares of the Company’s common stock issued to SphereIt. 440labs’ three executive employees signed employment agreements pursuant to which each of the three executive employees received 100 shares of the Company’s common stock and became employed by Zest Labs.
No cash was paid relating to the acquisition of 440labs. 440labs is a software development and information solutions provider for cloud, mobile, and IoT applications. 440labs’ experienced leadership and engineering teams will augment Zest Labs’ development of modern, enterprise scale solutions that robustly connect to distributed IoT deployments. 440labs blends onshore/offshore resources to optimize development and provide extended runtime operations coverage, critical to broad-based deployments.
The Company acquired the assets and liabilities noted below in exchange for the 300 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:
Identifiable intangible assets $ 1,435
Goodwill 65
$ 1,500
The primary business of 440labs is providing development services to Zest Labs. In consolidation, the revenues of 440labs would be eliminated against the expenses of Zest Labs that were paid to 440labs, resulting in an insignificant impact to the net losses of the Company. The goodwill is not expected to be deductible for tax purposes. The goodwill will not be amortized but will be tested annually for impairment.

~~ECOARK HOLDINGS, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)~~
~~THREE MONTHS ENDED JUNE 30, 2017 AND 2016~~
~~NOTE 16:~~ WARRANT DERIVATIVE LIABILITIES

~~As described in Note 10, the~~The Company issued common stock and warrants in several private placements in March ~~2017and~~2017, May ~~2017.~~2017, March 2018 and August 2018. The March and May 2017 and March and August 2018 warrants (collectively the “Derivative Warrant Instruments”) are classified as liabilities. The Derivative Warrant Instruments have been accounted for utilizing ASC 815 “Derivatives and ~~Hedging”.~~Hedging.” The Company has incurred a liability for the estimated fair value of Derivative Warrant Instruments. The estimated fair value of the Derivative Warrant Instruments has been calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense).

The Company identified embedded features in the March and May 2017 warrants which caused the warrants to be classified as a liability. These embedded features included the implicit right for the holders to request that the Company settle the warrants in registered shares. Since maintaining an effective registration of shares is potentially outside the control of the Company, these warrants were classified as liabilities as opposed to equity. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as derivatives as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.

On October 28, 2019, the ~~date~~Company issued 2,243 shares of ~~inception,~~the Company’s common stock to investors in exchange for the March and May 2017 warrants. Upon the issuance of the 2,243 shares, the March and May 2017 warrants were extinguished. The fair value of the shares issued was $2,186, and the fair value of the warrants was $1,966 resulting in a loss of $220 that was recognized on the exchange.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
The Company identified embedded features in the March ~~2017~~and August 2018 warrants which caused the warrants to be classified as a liability. These embedded features included the right for the holders to request that the Company cash settle the warrant instruments from the holder by paying to the holder an amount of ~~$4,609 was determined using~~cash equal to the Black-Scholes ~~Model based~~value of the remaining unexercised portion of the Derivative Warrant Instruments on the date of the consummation of a ~~risk-free interest rate~~fundamental transaction. The accounting treatment of ~~2.13% an expected term of 5.0 years, an expected volatility of 107%~~derivative financial instruments requires that the Company treat the whole instrument as liability and ~~a 0% dividend yield. At March 31, 2017,~~record the fair value of the ~~March 2017 warrants~~instrument as derivatives as of ~~$3,351 was determined using~~ the ~~Black-Scholes Model based on a risk-free interest rate~~inception date of ~~1.93% an expected term of 4.9 years, an expected volatility of 105%~~the instrument and ~~a 0% dividend yield. At June 30, 2017,~~to adjust the fair value of the ~~March 2017 warrants~~instrument as of ~~$2,473 was determined using the Black-Scholes Model based on a risk-free interest rate of 1.89% an expected term of 4.75 years, an expected volatility of 99% and a 0% dividend yield.~~each subsequent balance sheet date.

On July 12, 2019, the ~~date~~March and August 2018 warrants were exchanged for 4,277 shares of ~~inception,~~Company common stock, and all of those warrants were extinguished. The fair value of the shares issued was $3,293, and the fair value of the ~~May 2017~~ warrants was $2,454 resulting in a loss of ~~$7,772~~$839 that was ~~determined using~~recognized on the ~~Black-Scholes Model based~~exchange.
As described further in Note 13 below, on August 22, 2019 the Company issued warrants that can be exercised in exchange for 3,922 shares of Company common stock to investors that invested in shares of Company preferred stock. The fair value of those warrants was estimated to be $1,576 at inception and on January 26, 2020, the Company entered into letter agreements with accredited institutional investors holding the warrants issued with the Company’s Series B Convertible Preferred Stock on August 21, 2019.
Pursuant to the letter agreements, the investors agreed to a ~~risk-free~~cash exercise of 3,921 warrants at a price of $0.51 per share. The Company additionally, granted 5,882 warrants at $0.90. On January 27, 2020, the Company received approximately $2,000 in cash from the exercise of the August 2019 warrants and issued the January 2020 warrants to the investors, which have an exercise price of $0.90 and may be exercised within five years of issuance. This transaction resulted in a loss on extinguishment of $1,038.
On November 11, 2019, the Company issued warrants that can be exercised to purchase a number of shares of common stock of the Company equal to the number of shares of common stock issuable upon conversion of the Series C Preferred Stock purchased by the investors.
The fair value of those warrants was estimated to be $1,107 at inception and $543 as of March 31, 2020. The Company recognized $107 of interest ~~rate of 1.80% an expected term of 5.0 years, an expected volatility of 101% and a 0% dividend yield. At June 30, 2017,~~expense related to the fair value of the warrants at inception that exceeded the proceeds received for the preferred stock on November 11, 2019.
On April 15, 2020, the Company granted 200 warrants with an exercise price of $0.73 per share to extend the maturity date of the Senior Secured Debt acquired in the Banner Midstream acquisition to May ~~2017~~31, 2020. The Company does not believe this transaction constitutes an accounting extinguishment of debt due to a material modification of the debt instrument. The fair value of those warrants was estimated to be $84 at inception and $357 as of ~~$4,609~~September 30, 2020.
On April 15, 2020, the Company granted 50 warrants with an exercise price of $0.73 to extend the maturity date of the Senior Secured Debt acquired in the Banner Midstream acquisition to May 31, 2020. The Company does not believe this transaction constitutes an accounting extinguishment of debt due to a material modification of the debt instrument. The fair value of those warrants was estimated to be $21 at inception and $89 as of September 30, 2020.
On April 15 and 16, 2020, the Company received $438 in proceeds in a loan provided by Trend Discovery SPV I. Since they were the borrower and responsible for repayment of these amounts the Company granted 1,000 warrants at $0.73 for collateral for the loan. The fair value of those warrants was estimated to be $419 at inception and $2,753 as of June 30, 2020. These warrants were exercised in the three months ended September 30, 2020.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
On May 10, 2020, the November 2019 and January 2020 warrants were exchanged for 7,262 shares of Company common stock, and all of those warrants were extinguished resulting in a gain on extinguishment of $1,630.
On May 10, 2020, the Company issued warrants that can be exercised to purchase a number of shares of common stock of the Company. The fair value of those warrants was estimated to be $6,115 at inception and $15,620 as of June 30, 2020.
During the three months ended September 30, 2020, 4,406 of the May 10, 2020 of the warrants were exchanged for 4,406 shares of common stock of the Company for $4,847 cash. The fair value of the 1,476 warrants that remain as of September 30, 2020 is $2,493. In addition, on September 1, 2020, 1,000 April 16, 2020 warrants were exercised into 1,000 shares of the Company’s common stock for $730 in cash.
On September 24, 2020, the Company granted 1,250 warrants, for the early conversion of the April 15, 2020 warrants at a strike price of $1.93 with a term of two-years. The fair value of those warrants was estimated to be $1,265 at inception and $1,425 as of September 30, 2020.
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2020 and March 31, 2020. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes ~~Model based~~valuation model. The following assumptions were used on ~~a risk-free interest rate of 1.89% an expected term of 4.92 years, an expected volatility of 99%~~September 30, 2020, March 31, 2020 and ~~a 0% dividend yield.~~ at inception:
Six Months Ended Year Ended
September 30,
2020 March 31,
2020 Inception
Expected term 4.58 - 5 years 4.67-4.83 years 5.00 years
Expected volatility 94 - 101 % 95 % 91% - 107 %
Expected dividend yield - - -
Risk-free interest rate 0.61 - 0.73 % 0.70 % 1.50% - 2.77 %

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020

The Company’s derivative liabilities associated with the warrants are as follows:

June 30,
2017 March 31,
2017 Inception September 30,
2020 March 31,
2020 Inception
Fair value of 1,000 March 17, 2017 warrants $ 2,473 $ 3,351 $ 4,609 $ - $ - $ 4,609
Fair value of 1,875 May 22, 2017 warrants 4,609 - 7,772
Fair value of 1,850 May 22, 2017 warrants - - 7,772
Fair value of 2,565 March 16, 2018 warrants - - 3,023
Fair value of 2,969 August 14, 2018 warrants - - 2,892
Fair value of 3,922 August 22, 2019 warrants - - 1,576
Fair value of 1,379 November 11, 2019 warrants - 543 1,107
Fair value of 5,882 January 27, 2020 warrants - 2,232 3,701
Fair value of 200 April 15, 2020 warrants 357 - 84
Fair value of 50 April 15, 2020 warrants 89 - 21
Fair value of 1,000 April 16, 2020 warrants - - 419
Fair value of 5,882 May 10, 2020 warrants 2,493 - 6,115
Fair value of 1,250 September 24, 2020 warrants 1,425 - 1,265
$ 7,082 $ 3,351 $ 12,381 $ 4,364 $ 2,775

During the ~~three~~six months ended ~~June~~September 30, ~~2017~~2020 and ~~2016~~2019 the Company recognized changes in the fair value of the derivative liabilities of ~~$3,346~~$(16,382) and $(16), respectively, and $1,011 and ($960) for the three months ended September 30, 2020, respectively. The March and May 2017 warrants, March and August 2018 warrants, the August and November 2019 warrants, and the January 2020, April 16, 2020 and May 10, 2020 warrants were exchanged and thus were no longer outstanding as of September 30, 2020.
Activity related to the warrant derivative liabilities for the six months ended September 30, 2020 is as follows:
Beginning balance as of March 31, 2020 $ 2,775
Issuances of warrants – derivative liabilities 7,904
Warrants exchanged for common stock (22,697 )
Change in fair value of warrant derivative liabilities 16,382
Ending balance as of September 30, 2020 $ 4,364
NOTE 10: OIL AND GAS PROPERTIES
The Company’s holdings in oil and gas mineral lease (“OGML”) properties as of September 30, 2020 and March 31, 2020 are as follows:
September 30,
2020 March 31,
2020
Property acquired from Shamrock $ 1,954 $ 1,970
Properties acquired from White River 3,992 4,165
Asset purchase – June 2020 2 -
Properties acquired from Rabb Resources 3,204 -
Purchase – September 4, 2020 1,500 -
Purchase – September 30, 2020 760 -
Total OGML Properties $ 11,412 $ 6,135

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
Cherry et al OGML including shallow drilling rights was acquired by Shamrock from Hartoil Company on July 1, 2018.
O’Neal Family OGML and Weyerhaeuser OGML including shallow drilling rights were acquired by White River on July 1, 2019 from Livland, LLC and Hi-Tech Onshore Exploration, LLC respectively in exchange for a $125 drilling credit to be applied by Livland, LLC on subsequent drilling operations.
Taliaferro Family OGML including shallow drilling rights was acquired by White River on June 10, 2019 from Lagniappe Operating, LLC.
Kingrey Family OGML including both shallow and deep drilling rights was entered into by White River and the Kingrey Family on April 3, 2019.
Peabody Family OGML including both shallow and deep drilling rights was acquired by White River on June 18, 2019 from SR Acquisition I, LLC, a subsidiary of Sanchez Energy Corporation, for a 1% royalty retained interest in conjunction with White River executing a lease saving operation in June 2019.
Banner Midstream acquired the Cherry et al OGML via the Shamrock acquisition and the remaining OGML’s via the White River acquisition. The Company then acquired all of the OGML properties as part of the acquisition of Banner Midstream on March 27, 2020.
As discussed in Note 16, the Company acquired certain leases on June 11, 2020 and June 18, 2020 in Mississippi and Louisiana valued at $2. These assets were paid entirely in cash. In addition, the Company impaired $83 of property as it let certain leases lapse.
As discussed in Note 16, on August 14, 2020, the Company entered into an Asset Purchase Agreement with Rabb Resources, LTD which included the acquisition of real property. The purchase price for this acquisition was $3,500. Of this amount, $3,224, is reflected as Oil and Gas Properties.
As discussed in Note 16, on September 4, 2020, the Company entered into a Lease Assignment agreement. The purchase price for this acquisition was $1,500. Of this amount, $1,500, is reflected as Oil and Gas Properties.
As discussed in Note 16, on September 30, 2020, the Company entered into three Asset Purchase Agreements. The purchase price for these acquisitions were 750. Of this amount, $750, is reflected as Oil and Gas Properties.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
The following table summarizes the Company’s oil and gas activities by classification for the six months ended September 30, 2020. There was no activity for the six months ended September 30, 2019:
Activity Category March 31,
2020 Adjustments (1) September 30,
2020
Proved Developed Producing Oil and Gas Properties
Cost $ 167 $ 520 $ 687
Accumulated depreciation, depletion and amortization - (5 ) (5 )

Total $ 167 $ 515 $ 682

Undeveloped and Non-Producing Oil and Gas Properties
Cost $ 5,968 $ 4,883 $ 10,851
Accumulated depreciation, depletion and amortization - (121 ) (121 )

Total $ 5,968 $ 4,762 $ 10,730

Grand Total $ 6,135 $ 5,277 $ 11,412
(1) Relates to acquisitions and impairments of reserves.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
NOTE 11: LONG-TERM DEBT
Long-term debt consisted of the following as of September 30, 2020 and March 31, 2020:
September 30,
2020 March 31,
2020
Credit facility – Trend Discovery SPV 1, LLC (a) $ - $ -
Senior secured bridge loan – Banner Midstream (b) - 2,222
Note payable – LAH 1 (c) - 110
Note payable – LAH 2 (d) - 77
Note payable – Banner Midstream 1 (e) - 303
Note payable – Banner Midstream 2 (f) - 397
Note payable – Banner Midstream 3 (g) - 500
Merchant Cash Advance (MCA) loan – Banner Midstream 1 (h) - 361
MCA loan – Banner Midstream 2 (i) - 175
MCA loan – Banner Midstream 3 (j) - 28
Note payable – Banner Midstream – Alliance Bank (k) 1,146 1,239
Commercial loan – Pinnacle Frac – Firstar Bank (l) 772 952
Auto loan 1 – Pinnacle Vac – Firstar Bank (m) 34 40
Auto loan 2 – Pinnacle Frac – Firstar Bank (n) 45 52
Auto loan 3 – Pinnacle Vac – Ally Bank (o) 38 42
Auto loan 4 – Pinnacle Vac – Ally Bank (p) 40 47
Auto loan 5 – Pinnacle Vac – Ally Bank (q) 40 44
Auto loan 6 – Capstone – Ally Bank (r) 85 97
Tractor loan 7 – Capstone – Tab Bank (s) 208 235
Equipment loan – Shamrock – Workover Rig (t) - 50
Ecoark – PPP Loan (u) 386 -
Pinnacle Frac Transport – PPP Loan (v) 1,483 -
Total long-term debt 4,277 6,971
Less: debt discount (- ) (149 )
Less: current portion (719 ) (6,401 )
Long-term debt, net of current portion $ 3,558 $ 421
(a) On December 28, 2018, the Company entered into a $10,000 credit facility that includes a loan and security agreement (the “Agreement”) where the lender agreed to make one or more loans to the Company, and the Company may make a request for a loan or loans from the lender, subject to the terms and conditions. The Company is required to pay interest biannually on the outstanding principal amount of each loan calculated at an annual rate of 12%. The loans are evidenced by demand notes executed by the Company. The Company is able to request draws from the lender up to $1,000 with a cap of $10,000, including the $1,000 advanced on December 28, 2018 and an additional $350 advanced through March 31, 2019, resulting in a balance of $1,350 at March 31, 2019.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
An additional $1,137 was advanced during the year ended March 31, 2020; and $38 of commitment fees, to bring the balance of the notes payable to $2,525 at March 31, 2020. Loans made pursuant to the Agreement are secured by a security interest in the Company’s collateral held with the lender and guaranteed by the Company’s subsidiary, Zest Labs.
The Company pays to the lender a commitment fee on the principal amount of each loan requested thereunder in the amount of 3.5% of the amount thereof. The Company also paid an arrangement fee of $300 to the lender which was paid upon execution of the Agreement. The aforementioned fees were and are netted from proceeds advanced and are recorded as interest expense. Zest Labs is a plaintiff in a litigation styled as Zest Labs, Inc. vs Walmart, Inc., Case Number 4:18-cv-00500 filed in the United States District Court for the Eastern District of Arkansas (the “Zest Litigation”). The Company agrees that within five days of receipt by Zest Labs or the Company of any settlement proceeds from the Zest Litigation, the Company will pay or cause to be paid over to lender an additional fee in an amount equal to (i) 0.50 multiplied by (ii) the highest aggregate principal balance of the loans over the life of the loans through the date of the payment from settlement proceeds; provided, however, that such additional fee shall not exceed the amount of the settlement proceeds.
Subject to customary carve-outs, the Agreement contains customary negative covenants and restrictions for agreements of this type on actions by the Company including, without limitation, restrictions on indebtedness, liens, investments, loans, consolidation, mergers, dissolution, asset dispositions outside the ordinary course of business, change in business and restriction on use of proceeds. In addition, the Agreement requires compliance by the Company of covenants including, but not limited to, furnishing the lender with certain financial reports and protecting and maintaining its intellectual property rights. The Agreement contains customary events of default, including, without limitation, non-payment of principal or interest, violation of covenants, inaccuracy of representations in any material respect and cross defaults with certain other indebtedness and agreements.
Interest expense on the note for the six months ended September 30, 2020 and 2019 was $0 and $135, respectively.
On March 31, 2020, the Company converted all principal and interest in the Trend Discovery SPV I, LLC credit facility into shares of the Company’s common stock. The conversion of $2,525 of principal and $290 of accrued interest resulted in the issuance of 3,855 shares of common stock at a value of $0.59 per share. This transaction resulted in a gain on conversion of $541. As a result of the conversion, there are no amounts outstanding as of March 31, 2020.
(b) Senior secured bridge loan of $2,222, containing a debt discount of $132 as of March 31, 2020. This was assumed in the Banner Midstream acquisition, and fully repaid in May 2020, and was secured by machinery and equipment of Pinnacle Frac.
(c) Unsecured note payable previously issued April 2, 2018 which was assumed by Banner Midstream in the acquisition of a previous entity. The amount was past due and bears interest at 10% per annum. This amount along with accrued interest of $22 was assumed on March 27, 2020 in the acquisition of Banner Midstream. Amount was paid off in May 2020, and $24 of accrued interest remains at September 30, 2020.
(d) Unsecured note payable previously issued April 2, 2018 which was assumed by Banner Midstream in the acquisition of a previous entity. The amount was past due and bears interest at 10% per annum. This amount along with accrued interest of $22 was assumed on March 27, 2020 in the acquisition of Banner Midstream. Amount was paid off in May 2020, and $24 of accrued interest remains at September 30, 2020.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
(e) Junior secured note payable issued January 16, 2019 to an unrelated third party at 10% interest. This amount along with accrued interest of $39 was assumed on March 27, 2020 in the acquisition of Banner Midstream. This note along with the accrued interest was repaid in May 2020.
(f) Unsecured notes payable issued in June and July 2019 to an unrelated third party at 10% interest. There are three notes to this party in total. This amount along with accrued interest of $29 was assumed on March 27, 2020 in the acquisition of Banner Midstream. These notes were converted in May 2020.
(g) Unsecured note payable issued October 2019 to an unrelated third party at 10% interest. This amount along with accrued interest of $23 was assumed on March 27, 2020 in the acquisition of Banner Midstream. The balance of this note and remaining accrued interest was converted into 430 shares of common stock in the Company’s fiscal quarter ended September 30, 2020.
(h) Merchant cash advance loan on Banner Midstream. The Company assumed $368 of this note along with accrued interest of $144. This note along with the accrued interest was repaid in May 2020.
(i) Merchant cash advance loan on Banner Midstream. The Company assumed $181 of this note along with accrued interest of $70. This note along with the accrued interest was repaid in May 2020.
(j) Merchant cash advance loan on Banner Midstream. The Company assumed $69 of this note along with accrued interest of $21. This note along with the accrued interest was repaid in May 2020.
(k) Original loan date of June 14, 2019 with an original maturity date of April 14, 2020. The Company extended this loan for $1,239 at 4.95% with a new maturity date of April 14, 2025. This loan and discount was assumed in the Banner Midstream acquisition.
(l) Original loan date of February 28, 2018, due November 28, 2020 at 4.5% interest. This loan was assumed in the Banner Midstream acquisition.
(m) On July 20, 2018, Pinnacle Vac Service entered into a long-term secured note payable for $56 for a service truck maturing July 20, 2023. The note is secured by the collateral purchased and accrued interest annually at 6.50% with principal and interest payments due monthly. There is no accrued interest as of September 30, 2020. This note was assumed in the acquisition of Banner Midstream on March 27, 2020.
(n) On August 3, 2018, Pinnacle Frac Transport entered into a long-term secured note payable for $73 for a service truck maturing August 3, 2023. The note is secured by the collateral purchased and accrued interest annually at 6.50% with principal and interest payments due monthly. There is no accrued interest as of September 30, 2020. This note was assumed in the acquisition of Banner Midstream on March 27, 2020.
(o) On July 18, 2018, Pinnacle Vac Service entered into a long-term secured note payable for $56 for a service truck maturing August 17, 2024. The note is secured by the collateral purchased and accrued interest annually at 9.00% with principal and interest payments due monthly. There is no accrued interest as of September 30, 2020. This note was assumed in the acquisition of Banner Midstream on March 27, 2020.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
(p) On July 26, 2018, Pinnacle Vac Service entered into a long-term secured note payable for $54 for a service truck maturing September 9, 2024. The note is secured by the collateral purchased and accrued interest annually at 7.99% with principal and interest payments due monthly. There is no accrued interest as of September 30, 2020. This note was assumed in the acquisition of Banner Midstream on March 27, 2020.
(q) On July 26, 2018, Pinnacle Vac Service entered into a long-term secured note payable for $54 for a service truck maturing September 9, 2024. The note is secured by the collateral purchased and accrued interest annually at 7.99% with principal and interest payments due monthly. There is no accrued interest as of September 30, 2020. This note was assumed in the acquisition of Banner Midstream on March 27, 2020.
(r) On November 5, 2018, Capstone Equipment Leasing entered into four long-term secured notes payable for $140 maturing on November 5, 2021. The notes are secured by the collateral purchased and accrued interest annually at rates ranging between 6.89% and 7.87% with principal and interest payments due monthly. There is no accrued interest as of September 30, 2020. These notes were assumed in the acquisition of Banner Midstream on March 27, 2020.
(s) On November 7, 2018, Capstone Equipment Leasing entered into a long-term secured note payable for $301 maturing on November 22, 2023. The note is secured by the collateral purchased and accrued interest annually at 10.25% with principal and interest payments due monthly. There is no accrued interest as of September 30, 2020. This note was assumed in the acquisition of Banner Midstream on March 27, 2020.
(t) Equipment loan assumed in the acquisition of Banner Midstream on March 27, 2020, and repaid with accrued interest in June 2020.
(u)
PPP loan received by Ecoark Holdings Inc. in April 2020. Loan bears interest at 1% per annum and matures April 2022. On October 2, 2020, the Company completed their paperwork for the request for forgiveness. It is anticipated that any amounts forgiven can take up to 90 days to take effect.
(v) PPP loan received by Pinnacle Frac Transport in April 2020. Loan bears interest at 1% per annum and matures April 2022.
The following is a list of maturities as of September 30:
2021 $ 719
2022 2,630
2023 457
2024 310
2025 161
$ 4,277
During the six months ended September 30, 2020, the Company received proceeds of $1,869 in new long-term debt, repaid $3,730 in existing long-term debt, and converted $830 in existing long-term debt that resulted in a loss on conversion of $1,337. In addition, the Company converted $65 of accrued interest and paid $361 in accrued interest during this period. The Company recognized a loss of $146 on conversion of the accrued interest to common stock in the six months ended September 30, 2020.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
NOTE 12: NOTES PAYABLE - RELATED PARTIES
Notes payable to related parties consisted of the following as of September 30, 2020 and March 31, 2020:
September 30,
2020 March 31,
2020
Ecoark Holdings Board Member (a) $ 578 $ 578
Ecoark Holdings Officers (b) 61 1,242
Banner Midstream Officers (c) 133 152
Ecoark Holdings – common ownership (d) - 200
Total Notes Payable – Related Parties 772 2,172
Less: Current Portion of Notes Payable – Related Parties (772 ) (2,172 )
Long-term debt, net of current portion $ - $ -
(a) A board member advanced $328 to the Company through March 31, 2020, under the terms of a note payable that bears 10% simple interest per annum, and the principal balance along with accrued interest is payable upon demand. Interest expense on the note for the six and three months ended September 30, 2020 was $35 and $27, respectively, and $61 is accrued as of September 30, 2020. In addition, the Company assumed $250 in notes entered into in March 2020 via the acquisition of Banner Midstream from the same board member at 15% interest. In addition, another board member advanced $4 in the six months ended September 30, 2020 which is non-interest bearing and due on demand, and has been repaid in the quarter ended September 30, 2020.
(b) William B. Hoagland, Chief Financial Officer, advanced $30 to the Company in May 2019 pursuant to a note with the same terms as the note with the board member. Randy May, CEO, advanced $45 to the Company in August 2019 pursuant to a note with the same terms as the note with the board member. Interest expense on both of these notes was $5. Both of these amounts, along with the accrued interest, was repaid during the year ended March 31, 2020. In addition, Randy May advanced $1,242 in five separate notes to Banner Midstream and its subsidiaries prior to the acquisition by the Company. These amounts are due at various times through December 2020 and bear interest at 10-15% interest per annum. Accrued interest on these notes as of September 30, 2020 is $15. $1,181 of these notes were repaid through September 30, 2020.
(c) An officer of Banner Midstream who remains an officer of this subsidiary advanced $152 in three separate notes to Banner Midstream and its subsidiaries prior to the acquisition by the Company and an additional $180 in four separate advances in the six months ended September 30, 2020. These amounts are due at various times through December 2020 and bear interest at 10-15% interest per annum. Accrued interest on these notes as of September 30, 2020 is $11. $187 of these notes were repaid through September 30, 2020.
(d) A company controlled by an officer of the Company advanced $200 to Banner Midstream and its subsidiaries prior to the acquisition by the Company. These amounts were due April 15, 2020 and bears interest at 14% interest per annum. These notes were converted in May 2020.
During the six months ended September 30, 2020, the Company received proceeds of $559 in notes payable – related parties, repaid $1,384 in existing notes payable – related parties, and converted $575 in existing notes payable – related parties that resulted in a loss on conversion of $1,239. In addition, the Company converted $15 of accrued interest during this period.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
NOTE 13: STOCKHOLDERS’ EQUITY (DEFICIT)
Ecoark Holdings Preferred Stock
On March 18, 2016, the Company created 5,000 shares of “blank check” preferred stock, par value $0.001. On August 21, 2019 (the “Effective Date”), the Company and two accredited investors entered into a Securities Purchase Agreement pursuant to which the Company sold and issued to the investors an aggregate of 2 shares of Series B Convertible Preferred Stock, par value $0.001 per share at a price of $1,000 per share.
Pursuant to the Securities Purchase Agreement, the Company issued to each investor a warrant (a “Warrant”) to purchase a number of shares of common stock of the Company, par value $0.001 per share (“Common Stock”), equal to the number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock purchased by the investor. Each Warrant has an exercise price equal to $0.51, subject to full ratchet price anti-dilution provisions in accordance with the terms of the Warrants (the “Exercise Price”) and is exercisable for five years after the Effective Date. In addition, if the market price of the Common Stock on the 11 month anniversary of the closing date of the offering is less than $0.51, holder of the warrants shall be entitled to receive additional shares of common stock based on the number of shares of common stock that would have been issuable upon conversion of the Series B Convertible Preferred Stock had the initial conversion price been equal to the market price at such time (but not less than $0.25) less the number of shares of common stock issued or issuable upon exercise of the Series B Convertible Preferred Stock based on the $0.51 conversion price.
The Company also agreed to amend the current exercise price of the warrants that the investors received in connection with the Securities Purchase Agreements dated March 14, 2017 (the “March Warrants”) and May 22, 2017 (the “May Warrants” and, together with the March Warrants, the “Existing Securities”). The Existing Securities have a current exercise price of $0.59, which was amended from $2.50 on July 12, 2019. The current exercise price for the Existing Securities shall be amended to reduce the exercise price to $0.51 on August 21, 2019, subject to adjustment pursuant to the provisions of the Existing Securities.
Each share of the Series B Preferred Stock has a par value of $0.001 per share and a stated value equal to $1,000 (the “Stated Value”) and is convertible at any time at the option of the holder into the number of shares of Common Stock determined by dividing the stated value by the conversion price of $0.51, subject to certain limitations and adjustments (the “Conversion Price”).
The Company received gross proceeds from the Private Placement of $2,000, before deducting transaction costs, fees and expenses payable by the Company. The Company intends to use the net proceeds of the Private Placement to support the Company’s general working capital requirements.
On August 21, 2019, the Company issued 300 shares of common stock to advisors that assisted with the securities purchase agreement and exchange agreement
On October 15, 2019, nearly all the Series B Preferred Stock shares were converted into 3,761 shares of Common Stock.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
On November 11, 2019, the Company and two accredited investors entered into a securities purchase agreement (the “Securities Purchase Agreement”) pursuant to which the Company sold and issued to the investors an aggregate of 1 share of Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), at a price of $1,000 per share (the “Private Placement”).
Pursuant to the Securities Purchase Agreement, the Company issued to each investor a warrant (a “Warrant”) to purchase a number of shares of common stock of the Company, par value $0.001 per share (“Common Stock”), equal to the number of shares of Common Stock issuable upon conversion of the Series C Preferred Stock purchased by the Investor. Each Warrant has an exercise price equal to $0.73, subject to full ratchet price anti-dilution provisions in accordance with the terms of the Warrants (the “Exercise Price”) and is exercisable for five years after the Effective Date. In addition, if the market price of the Common Stock for the five trading days prior to July 22, 2020 is less than $0.73, holder of the warrants shall be entitled to receive additional shares of common stock based on the number of shares of common stock that would have been issuable upon conversion of the Series C Convertible Preferred Stock had the initial conversion price been equal to the market price at such time (but not less than $0.25) less the number of shares of common stock issued or issuable upon exercise of the Series C Convertible Preferred Stock based on the $0.73 conversion price.
Each share of the Series C Preferred Stock has a par value of $0.001 per share and a stated value equal to $1,000 (the “Stated Value”) and is convertible at any time at the option of the holder into the number of shares of Common Stock determined by dividing the stated value by the conversion price of $0.73, subject to certain limitations and adjustments (the “Conversion Price”).
The Company received gross proceeds from the Private Placement of $1,000. The Company intends to use the net proceeds of the Private Placement to support the Company’s general working capital requirements.
In April 2020, the remaining shares of preferred stock in these transactions were converted into 1,540 shares of common stock.
Ecoark Holdings Common Stock
The Company has 100,000 shares of common stock, par value $0.001 which were authorized on March 18, 2016. On March 31, 2020 this amount was increased to 200,000, par value $0.001.
On May 31, 2019, the Company acquired Trend Discovery Holdings, Inc. for 5,500 shares of common stock. The value of this transaction was $3,237.
In the three months ended June 30, 2020, the Company issued 1,540 shares of common stock in April and May 2020 to convert the remaining shares of preferred B and C shares; 7,657 shares of common stock in the exercise of warrants; 443 shares in the exercise of stock options; 466 shares of common stock in the conversion of accounts payable and accrued expenses; and 2,622 shares of common stock in the conversion of long-term debt, notes payable – related parties and accrued interest.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
In the three months ended September 30, 2020, the Company issued 5,440 shares of common stock in the exercise of warrants; 5 shares in the exercise of stock options; 153 shares of common stock for services rendered; 855 shares of common stock to acquire assets; and 958 shares of common stock in the conversion of long-term debt, notes payable – related parties and accrued interest.
As of September 30, 2020, 106,016 shares of common stock were issued and 105,431 shares of common stock were outstanding, net of 585 treasury shares. As of March 31, 2020, 85,876 shares of common stock were issued and 85,291 shares of common stock were outstanding, net of 585 treasury shares.
Share-based Compensation
Share-based compensation expense is included in selling, general and administrative expense in the condensed consolidated statements of operations as follows:
2013
Incentive Stock Plan 2017
Omnibus Incentive Plan Non-Qualified Stock Options
Common
Stock
Total
Six months ended September 30, 2020
Employees/Directors $ - $ 188 $ 767 $ 479 $ 1,434
Services - 25 170 6 201
$ - $ 213 $ 937 $ 485 $ 1,635

Six months ended September 30, 2019
Employees/Directors $ - $ 431 $ 669 $ - $ 1,100
Amortization of services cost - 111 - 211 322
$ - $ 542 669 $ 211 $ 1,422
NOTE 14: COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are presently involved in the following legal proceedings in Arkansas and Florida. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company.
● On August 1, 2018, Ecoark Holdings, Inc. and Zest Labs, Inc. filed a complaint against Walmart Inc. in the United States District Court for the Eastern District of Arkansas, Western Division. The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the Federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. Ecoark Holdings and Zest Labs are seeking monetary damages and other related relief to the extent it is deemed proper by the court. The Company does not believe that expenses incurred in pursuing the complaint have had a material effect on the Company’s net income or financial condition for the fiscal year ended March 31, 2020 or any individual fiscal quarter. On October 22, 2018, the Court issued an order initially setting a trial date of June 1, 2020, which has been delayed due to COVID-19. The trial date has been rescheduled to March 29, 2021.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
● On December 12, 2018, a complaint was filed against the Company in the Twelfth Judicial Circuit in Sarasota County, Florida by certain investors who invested in the Company before it was public. The complaint alleges that the investment advisors who solicited the investors to invest into the Company made omissions and misrepresentations concerning the Company and the shares. The Company filed a motion to dismiss the complaint which is pending.
In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon the Company’s financial condition, results of operations or cash flows.
NOTE 15: CONCENTRATIONS
Four and two customers, all in the commodity segment accounted for more than 10% of the accounts receivable balance at September 30, 2020 and March 31, 2020 for a total of 60% and 63% of accounts receivable, respectively. In addition, one customer represents approximately 65% and 64% of total revenues for the Company for the six months ended September 30, 2020 and 2019, respectively, and one customer represents approximately 77% and 63% of total revenues for the Company for the three months ended September 30, 2020, respectively.
Supplier Concentration. Certain of the raw materials, components and equipment used by the Company in the manufacture of its products are available from single-sourced vendors. Shortages could occur in these essential materials and components due to an interruption of supply or increased demand in the industry. If the Company were unable to procure certain materials, components or equipment at acceptable prices, it would be required to reduce its manufacturing operations, which could have a material adverse effect on its results of operations. In addition, the Company may make prepayments to certain suppliers or enter into minimum volume commitment agreements. Should these suppliers be unable to deliver on their obligations or experience financial difficulty, the Company may not be able to recover these prepayments.
The Company occasionally maintains cash balances in excess of the FDIC insured limit. The Company does not consider this risk to be material.
Commodity price risk
We are exposed to fluctuations in commodity prices for oil and natural gas. Commodity prices are affected by many factors, including but not limited to, supply and demand.
NOTE 16: ACQUISITIONS
Trend Discovery Holdings, Inc.
On May 31, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Trend Discovery Holdings Inc., a Delaware corporation (“Trend Holdings”) for the Company to acquire 100% of Trend Holdings pursuant to a merger of Trend Holdings with and into the Company (the “Merger”). The Merger was completed as agreed in the Merger Agreement, the Company is the surviving entity in the Merger and the separate corporate existence of Trend Holdings has ceased to exist. Pursuant to the Merger, each of the 1,000 issued and outstanding shares of common stock of Trend Holdings was converted into 5,500 shares of the Company’s common stock. No cash was paid relating to the acquisition.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
The Company acquired the assets and liabilities noted below in exchange for the 5,500 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows:
Cash $ 3
Receivables 10
Other assets 1
Goodwill 3,223
$ 3,237
The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. In order to ultimately determine the fair values of tangible and intangible assets acquired and liabilities assumed for Trend Holdings, we have engaged a third-party independent valuation specialist. The Company has recognized the purchase price allocations based on historical inputs and data as of May 31, 2019.
The allocation of the purchase price is based on the best information available, amongst other things: (i) the valuation of the fair values and useful lives of tangible assets acquired; (ii) valuations and useful lives for intangible assets; (iii) valuation of accounts payable and accrued expenses; and (iv) the fair value of non-cash consideration.
The Company had an independent valuation consultant confirm the valuation of Trend Holdings and the allocation of the intangible assets.
The goodwill is not expected to be deductible for tax purposes.
Banner Midstream
On March 27, 2020, the Company and Banner Parent, entered into the Banner Purchase Agreement to acquire Banner Midstream. Pursuant to the acquisition, Banner Midstream became a wholly-owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued and outstanding shares of Banner Midstream.
The Company issued 8,945 shares of common stock (which Banner Parent issued to certain of its noteholders) and assumed $11,774 in debt and lease liabilities of Banner Midstream. The Company’s Chief Executive Officer and another director recused themselves from all board discussions on the acquisition of Banner Midstream as they are stockholders and/or noteholders of Banner Midstream. The transaction was approved by all of the disinterested members of the Board of Directors of the Company. The Chairman and CEO of Banner Parent is a former officer of the Company and is currently the Principal Accounting Officer of the Company and Chief Executive Officer and President of Banner Midstream.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
The Company acquired the assets and liabilities noted below in exchange for the 8,945 shares and accounted for the acquisition in accordance with ASC 805. Based on the fair values at the effective date of acquisition the purchase price was recorded as follows (subject to adjustment):
Cash (including restricted cash) $ 205
Accounts receivables 110
Prepaid expenses and other current assets 585
Machinery and equipment 3,426
Oil and gas properties 6,135
Customer relationships 2,100
Trade name 250
Right of use assets 731
Assets of discontinued operations 249
Goodwill 7,002
Intercompany advance (1,000 )
Accounts payable (268 )
Accrued liabilities (2,362 )
Due to prior owners (2,362 )
Lease liabilities (732 )
Liabilities of discontinued operations (228 )
Asset retirement obligation (295 )
Notes payable – related parties (1,844 )
Long-term debt (6,836 )
$ 4,866
The consideration paid for Banner Midstream was in the form of 8,945 shares of stock at a fair value of $0.544 per share or $4,866. The Company had an independent valuation consultant perform a valuation of Banner Midstream.
The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Banner Midstream, we have engaged a third-party independent valuation specialist. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of March 27, 2020. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and useful lives for the reserves and intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
The goodwill is not expected to be deductible for tax purposes.
The following table shows the unaudited pro-forma results for the six months ended September 30, 2019, as if the acquisitions had occurred on April 1, 2019. These unaudited pro forma results of operations are based on the historical financial statements and related notes of Trend Holdings, Banner Midstream (which includes White River and Shamrock) and the Company.
Six Months Ended
September 30,
2019
(Unaudited)
Revenues $ 5,500
Net loss $ (11,683 )
Net loss per share $ (0.20 )
Energy Assets
On June 11, 2020, the Company acquired certain energy assets from SR Acquisition I, LLC for $1 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of 262 total wells in Mississippi and Louisiana, approximately 9,000 acres of active mineral leases, and drilling production materials and equipment. The 262 total wells include 57 active producing wells, 19 active disposal wells, 136 shut-in with future utility wells, and 50 shut-in pending plugging wells. Included in the assignment are 4 wells in the Tuscaloosa Marine Shale formation.
On June 18, 2020, the Company acquired certain energy assets from SN TMS, LLC for $1 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of wells, active mineral leases, and drilling production materials and equipment.
Rabb Resources
On August 14, 2020, the Company entered into an Asset Purchase Agreement by and among the Company, White River E&P LLC, a Texas Limited Liability Company and a wholly-owned subsidiary of the Company Rabb Resources, LTD. and Claude Rabb, the sole owner of Rabb Resources, LTD. Pursuant to the Asset Purchase Agreement, the Company completed the acquisition of certain assets of Rabb Resources, LTD. The acquired assets consisted of certain real property and working interests in oil and gas mineral leases. The Company in June 2020 previously provided for bridge financing to Rabb Resources, LTD under the $225 Senior Secured Convertible Promissory Note. As consideration for entering into the Asset Purchase Agreement, the Company agreed to pay Rabb Resources, LTD. A total of $3,500 consisting of (i) $1,500 in cash, net of $304 in outstanding amounts related to the note receivable and accrued interest receivable, and (ii) $2,000 payable in common stock of the Company, which based on the closing price of the common stock as of the date of the Asset Purchase Agreement equaled 514 shares. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the Rabb Resources, LTD. historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
Building $ 236
Land 140
Oil and Gas Properties 3,224
Asset retirement obligation (100 )
$ 3,500
Unrelated Third Party
On September 4, 2020, White River SPV 3, LLC, a wholly-owned subsidiary of Banner Midstream entered into an Agreement and Assignment of Oil, Gas and Mineral Lease with a privately held limited liability company (the “Assignor”). Under the Lease Assignment, the Assignor assigned a 100% working interest (75% net revenue interest) in a certain oil and gas lease covering in excess of 1,600 acres (the “Lease”), and White River paid $1,500 in cash to the Assignor. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.
O’Neal Family
On September 30, 2020, the Company and White River Energy, LLC entered into three asset purchase agreements (the “Asset Purchase Agreements”) with privately-held limited liability companies to acquire working interests in the Harry O’Neal oil and gas mineral lease (the “O’Neal OGML”), the related well bore, crude oil inventory and equipment. Immediately prior to the acquisition, White River Energy owned an approximately 61% working interest in the O’Neal OGML oil well and a 100% working interest in any future wells.
The purchase price of these leases were $126, $312 and $312, respectively, totaling $750. The consideration paid to the Sellers was in the form of 341 shares of common stock. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.
Oil and Gas Properties $ 760
Asset retirement obligation (10 )
$ 750

NOTE 17: FAIR VALUE MEASUREMENTS

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

Level 1 – quoted prices for identical instruments in active markets;

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
~~THREE MONTHS ENDED JUNE~~SEPTEMBER 30, ~~2017 AND 2016~~2020

Financial instruments consist principally of cash, accounts receivable and other receivables, accounts payable and accrued liabilities, notes payable, and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the ~~periods~~six months ended ~~June~~September 30, ~~2017~~2020 and ~~March 31, 2017.~~2019. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The Company records the fair value of the of the warrant derivative liabilities disclosed in ~~Note 16 in~~ accordance with ASC 815,Derivatives and Hedging. The fair values of the derivatives were calculated using the Black-Scholes Model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in other income (expense) in the consolidated statement of operations.
The following table presents assets and liabilities that are measured and recognized at fair value on a recurring basis as ~~of and for the periods June 30, 2017 and March 31, 2017:~~ of:

June 30, 2017 Level 1 Level 2 Level 3 Total Gains and
(Losses)
September 30, 2020 Level 1 Level 2 Level 3 Total Gains and (Losses)
Warrant derivative liabilities - - $ 7,082 $ 3,346 - - $ 4,364 $ (16,382 )

March 31, 2017
March 31, 2020
Warrant derivative liabilities - - $ 3,351 $ 829 - - $ 2,775 $ (369 )

NOTE 18: ~~RESTATEMENTS~~
In connection with the preparation of the Company’s consolidated financial statements as of and for the three months ended June 30, 2017, the Company identified inadvertent errors in the accounting for certain embedded derivative liabilities associated with warrants issued as a part of capital raises in 2017. In connection with those capital raises, proceeds (net of fees) were accounted for as equity. Upon further evaluation, the Company determined that a portion of the capital raised should have been accounted for as liabilities with fair value changes recorded in the Company’s consolidated statements of operations. Accordingly, the Company is restating herein its previously issued condensed consolidated financial statements and the related disclosures for the three months ended June 30, 2017 as well as an adjustment to the opening balance sheet for the first interim period of fiscal 2018 (the “Restated Periods”). The adjustment to the opening balance sheet as of April 1, 2017 consisted of establishing a current derivatives liability of $3,351, offset by a reduction in additional paid-in-capital of $4,180 and a reduction of accumulated deficit of $829.
~~The categories of misstatements and their impact on previously reported condensed consolidated financial statements for the periods is described below:~~
~~Derivative Liability:~~~~The recognition, measurement and presentation and disclosure related to the warrants issued in conjunction with reserved private placements of the Company’s common stock.~~SEGMENT INFORMATION

~~Stockholders’ Deficit:~~The ~~measurement~~Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and ~~presentation~~Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions. As of September 30, 2020, and ~~disclosure related to~~for the ~~derivative liability associated with~~six months ended September 30, 2020, the ~~warrants issued~~Company operated in ~~conjunction with~~three segments. The segments are Financial Services (Trend Holdings), Technology (Zest Labs (which includes the ~~reserved private placements originally classified as additional paid~~operations of 440IoT Inc.)), and Commodities (Banner Midstream). As of September 30, 2019 and for the six months ended September 30, 2019, the Company operated in ~~capital.~~two segments only (Technology and Financial).

~~Change in Fair Value of Derivative Liabilities:~~~~The recognition, measurement and presentation and disclosure related to changes in the fair value of the derivative liability~~
Six Months Ended September 30, 2020 Commodities Financial Technology Total
Segmented operating revenues $ 5,397 $ 194 $ - $ 5,591
Cost of revenues 3,426 - - 3,426
Gross profit 1,971 194 - 2,165
Total operating expenses net of depreciation, amortization, depletion and accretion 5,951 194 1,481 7,626
Depreciation, amortization, depletion and accretion 498 - 126 624
Other (income) expense 5,270 140 701 6,111
Loss from continuing operations $ (9,748 ) $ (140 ) $ (2,308 ) $ (12,196 )

In addition to the restatement of the financial statements, certain information within the following notes to the financial statements have been restated to reflect the corrections of misstatements discussed above as well as to add disclosure language as appropriate:
~~Note 1: Organization and Summary of Significant Accounting Policies~~
~~Note 16: Warrant Derivative Liabilities~~
~~Note 10: Stockholders’ Equity~~
~~Note 17: Fair Value Measurements~~
The financial statement misstatements reflected in previously issued condensed consolidated financial statements did not impact cash flows from operations, investing, or financing activities in the Company’s consolidated statements of cash flows for any period previously presented, however they did impact individual line items.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
~~THREE MONTHS ENDED JUNE~~SEPTEMBER 30, ~~2017 AND 2016~~2020

~~Comparison of restated financial statements to financial statements as previously reported~~
Three Months Ended September 30, 2020 Commodities Financial Technology Total
Segmented operating revenues $ 3,174 $ 104 $ - $ 3,278
Cost of revenues 2,333 - - 2,333
Gross profit 841 104 - 945
Total operating expenses net of depreciation, amortization, depletion and accretion 3,884 65 562 4,511
Depreciation, amortization, depletion and accretion 260 - 63 323
Other (income) expense (8,467 ) (735 ) (3,672 ) (12,874 )
Income from continuing operations $ 5,164 $ 774 $ 3,047 $ 8,985

Segmented assets as of September 30, 2020
Property and equipment, net $ 3,677 $ - $ 416 $ 4,093
Oil and Gas Properties $ 11,412 $ - $ - $ 11,412
Intangible assets, net $ 9,210 $ 3,223 $ - $ 12,433
Capital expenditures $ 617 $ - $ - $ 617

Six Months Ended September 30, 2019 Commodities Financial Technology Total
Segmented operating revenues $ - $ 52 $ 27 $ 79
Cost of revenues            - - 61 61
Gross profit - 52 (34 ) 18
Total operating expenses net of depreciation, amortization, depletion and accretion - 200 4,717 4,917
Depreciation, amortization, depletion and accretion - - 148 148
Other (income) expense - - 990 990
Loss from continuing operations $ - $ (148 ) $ (5,889 ) $ (6,037 )
The following tables compare the Company’s previously issued Condensed Consolidated Balance Sheet, Condensed Consolidated Statements of Operations, and Consolidated Statement of Cashflows as of and for the three months ended June 30, 2017 to the corresponding restated condensed consolidated financial statements for that period. The Condensed Consolidated Statement of Changes in Stockholders’ Equity in the financial statements reflect all changes related to the as originally reported line items that have been affected as denoted by “(Restated)”.

(Dollars in thousands,
except per share data)
June 30, Restatement June 30,
2017 Adjustment 2017
As Reported As Restated
ASSETS
CURRENT ASSETS
Cash ($265 pledged as collateral for credit) $ 11,562 $ - $ 11,562
Accounts receivable, net of allowance of $25 1,462 - 1,462
Inventory, net of reserves 2,775 - 2,775
Prepaid expenses 1,227 - 1,227
Assets held for sale – production equipment 158 - 158
Other current assets 504 - 504
Total current assets 17,688 - 17,688
NON-CURRENT ASSETS
Property and equipment, net 2,254 - 2,254
Intangible assets, net 2,918 - 2,918
Other assets 53 - 53
Total non-current assets 5,225 - 5,225
TOTAL ASSETS $ 22,913 - $ 22,913

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable $ 1,267 $ - $ 1,267
Accrued liabilities 1,138 - 1,138
Derivative liabilities - 7,082 7,082
Current liabilities held for sale - - -
Total current liabilities 2,405 7,082 9,487
NON-CURRENT LIABILITIES
Long-term debt, net of current portion 500 - 500
Long-term debt, net of current portion - related party 100 - 100
COMMITMENTS AND CONTINGENCIES
Total liabilities 3,005 7,082 10,087

STOCKHOLDERS’ EQUITY (Numbers of shares rounded to thousands)

Preferred stock, $0.001 par value; 5,000 shares authorized; none issued - - -
Common stock, $0.001 par value; 100,000 shares authorized, 45,528 shares issued and 45,400 shares outstanding as of June 30, 2017 45 - 45
Additional paid-in-capital 104,278 (11,257 ) 93,021
Accumulated deficit (83,838 ) 4,175 (79,663 )
Treasury stock, at cost (577 ) - (577 )
Total stockholders’ equity 19,908 (7,082 ) 12,826
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 22,913 - $ 22,913
Three Months Ended September 30, 2019 Commodities Financial Technology Total
Segmented operating revenues $ - $ 29 $ 15 $ 44
Cost of revenues           - - 16 16
Gross profit - 29 (1 ) 28
Total operating expenses net of depreciation, amortization, depletion and accretion - 61 2,410 2,471
Depreciation, amortization, depletion and accretion - - 71 71
Other (income) expense - - 1,875 1,875
Loss from continuing operations $ - $ (32 ) $ (4,357 ) $ (4,389 )

Segmented assets as of September 30, 2019
Property and equipment, net $ - $ - $ 676 $ 676
Oil and Gas Properties $ - $ - $ - $ -
Intangible assets, net $ - $ 3,223 $ - $ 3,223
Capital expenditures $ - $ - $ - $ -

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
~~THREE MONTHS ENDED JUNE~~SEPTEMBER 30, ~~2017 AND 2016~~2020

Three Months Ended Three Months Ended
June 30, Restatement June 30,
2017 Adjustment 2017
As
Reported As
Restated
CONTINUING OPERATIONS:

REVENUES $ 2,506 $ - $ 2,506

COST OF REVENUES 2,794 - 2,794

GROSS PROFIT (LOSS) (288 ) - (288 )
OPERATING EXPENSES:
Salaries and salary related costs, including share-based compensation 9,678 - 9,678
Professional fees and consulting, including share-based compensation 1,907 1,907
Selling, general and administrative 499 - 499
Depreciation and amortization 181 - 181
Research and development 1,620 - 1,620
Total operating expenses 13,885 - 13,885
Loss from continuing operations before other expenses (14,173 ) - (14,173 )

OTHER INCOME (EXPENSE):
Change in fair value of derivative liabilities - 3,346 3,346
Interest expense, net of interest income (15 ) - (15 )
Total other income (expenses) (15 ) 3,346 3,331
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES (14,188 ) 3,346 (10,842 )
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations (57 ) - (57 )
Gain on disposal of discontinued operations 636 - 636
Total discontinued operations 579 - 579
PROVISION FOR INCOME TAXES - - -
NET LOSS (13,609 ) 3,346 (10,263 )
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST - -
NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST $ (13,609 ) $ 3,346 $ (10,263 )

NET LOSS PER SHARE
Basic and diluted: Continuing operations $ (0.32 ) $ 0.08 $ (0.24 )
Discontinued operations - - -
Total $ (0.32 ) $ 0.08 $ (0.24 )

SHARES USED IN CALCULATION OF NET LOSS PER SHARE
Basic and diluted 43,247 43,247
NOTE 19: LEASES
The Company has adopted ASU No. 2016-02, Leases (Topic 842), as of April 1, 2019 and will account for their leases in terms of the right of use assets and offsetting lease liability obligations under this pronouncement. The Company had had only short-term leases up through the acquisition of Banner Midstream. The Company acquired a right of use asset and lease liability of $731 and $732, respectively on March 27, 2020. The Company recorded these amounts at present value, in accordance with the standard, using discount rates ranging between 2.5% and 6.8%. 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 remeasurement. This lease will be treated as an operating lease under the new standard. In addition, the Company entered into a new thirty-nine month operating lease for office space in September 2020 which also is included in the right of use asset and lease liabilities.
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.
The Company’s portfolio of leases contains both finance and operating leases that relate primarily to the commodity segment. As of September 30, 2020, the value of the unamortized lease right of use asset is $1,048, of which $515 is from financing leases (through maturity at June 30, 2024) and $533 is from operating leases (through maturity at November 30, 2023). As of September 30, 2020, the Company’s lease liability was $1,063, of which $505 is from financing leases and $558 is from operating leases.
Maturity of lease liability for the operating leases for the period ended September 30,
2021 $ 192
2022 $ 195
2023 $ 150
2024 $ 25
Imputed interest $ (4 )

Total lease liability $ 558
Disclosed as:
Current portion $ 190
Non-current portion $ 368
Maturity of lease liability for the financing leases for the period ended September 30,
2021 $ 151
2022 $ 151
2023 $ 143
2024 $ 85
Imputed interest $ (25 )

Total lease liability $ 505
Disclosed as:
Current portion $ 139
Non-current portion $ 366

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
~~THREE MONTHS ENDED JUNE~~SEPTEMBER 30, ~~2017 AND 2016~~2020

Three Months Ended
June 30, Restatement Three Months Ended
June 30,
2017 Adjustment 2017
As Reported As Restated
Cash flows from operating activities:
Net loss attributable to controlling interest $ (13,609 ) $ 3,346 $ (10,263 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 254 - 254
Shares of common stock issued for services rendered 1,201 - 1,201
Share-based compensation – stock - employees 7,048 - 7,048
Share-based compensations - options 3 - 3
Share-based compensation due to employment agreements 1,500 - 1,500
Change in value of derivative liabilities (3,346 ) (3,346 )
(Income) loss from discontinued operations 57 57
Gain on sale of discontinued operations (636 ) - (636 )
Changes in assets and liabilities:
Accounts receivable 95 - 95
Inventory (494 ) - (494 )
Prepaid expenses (290 ) - (290 )
Other current assets (498 ) - (498 )
Other assets 4 - 4
Accounts payable (479 ) - (479 )
Accrued liabilities (1,824 ) - (1,824 )
Net cash used in operating activities of continuing operations (7,668 ) - (7,668 )
Net cash provided by discontinued operations 92 - 92
Net cash used in operating activities (7,576 ) - (7,576 )

Cash flows from investing activities:
Proceeds from sale of Eco3d 2,006 - 2,006
Purchases of property and equipment (45 ) - (45 )
Net cash provided by investing activities 1,961 - 1,961

Cash flows from financing activities:
Proceeds from issuance of common stock, net of fees 9,106 - 9,106
Purchase of treasury shares from employees (577 ) - (577 )
Repayments of debt - related parties - - -
Net cash provided by financing activities 8,529 - 8,529
NET INCREASE IN CASH 2,914 - 2,914
Cash - beginning of period 8,648 - 8,648
Cash - end of period $ 11,562 $ - $ 11,562

SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 15 $ - $ 15
Cash paid for income taxes $ - $ - $ -

SUMMARY OF NONCASH ACTIVITIES:
Inventory in transit recorded as liability $ 177 $ - $ 177

Assets and liabilities acquired via acquisition of companies:
Identifiable intangible assets $ 1,435 $ - $ 1,435
Goodwill $ 65 $ - $ 65
Amortization of the right of use asset for the period ended September 30,
2021 $ 340
2022 $ 322
2023 $ 278
2024 $ 108
2025 $ -

Total $ 1,048
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
Three months ended
September 30,
2020 Six months ended
September 30,
2020
Operating lease expense $ 32 $ 52

Finance lease expense
Depreciation of capitalized finance lease assets 34 69
Interest expense on finance lease liabilities 4 8

Total lease cost $ 70 $ 129

NOTE ~~19:~~20: ASSET RETIREMENT OBLIGATIONS
In conjunction with the approval permitting the Company to resume drilling in the existing fields, the Company has recorded an asset retirement obligation based upon the plan submitted in connection with the permit. The following table summarizes activity in the Company’s ARO for the periods ended September 30, 2020 and March 31, 2020:
September 30,
2020 March 31,
2020
Balance, beginning of period $ 295 $ -
Accretion expense 16 -
ARO liability acquired in Banner Midstream acquisition - 295
Reclamation obligations settled - -
Additions and changes in estimates 110 -
Balance, end of period $ 421 $ 295

ECOARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLAR AMOUNTS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, 2020
NOTE 21: SUBSEQUENT EVENTS

Subsequent to ~~June~~September 30, ~~2017,~~2020, the Company ~~has~~had the following transactions:
On October 2, 2020, the Company completed their paperwork for the request for PPP loan forgiveness. It is anticipated that any amounts forgiven can take up to 90 days to take effect.
From October 5, 2020 through November 2, 2020, the Company issued ~~152~~740 shares of common stock ~~pursuant~~in the exercise of warrants for $814.
On October 9, 2020, the Company and White River SPV, entered into a Participation Agreement (the “Participation Agreement”) by and among the Company, White River SPV, BlackBrush Oil & Gas, L.P. (“BlackBrush”) and an unrelated privately-held limited liability company (the “Assignor”), to ~~stock awards granted~~conduct drilling of wells in the Austin Chalk formation.
Pursuant to the Participation Agreement, the Company and ~~awarded grants~~White River SPV have agreed, among other things, to fund 100% of the cost, estimated to be approximately $4,700, associated with the drilling and completion of an initial deep horizontal well in the Austin Chalk formation. The Participation Agreement requires the estimated amount of the drilling costs to be paid into a designated escrow account by December 1, 2020. BlackBrush has agreed to assign to the other parties to the Participation Agreement, subject to certain exceptions and limitations specified therein, specified portions of its leasehold working interest in certain Austin Chalk formation units. The Participation Agreement provides for an ~~additional 136 shares.~~initial allocation of the working interests and net revenue interests among the assignor, BlackBrush and the Company and then a re-allocation upon payout or payment of drilling and completion costs for each well drilled. Following payout, the Company will own 70% of working interest and 52.5% net revenue interest in each well. BlackBrush also agreed to share with the Company certain seismic information relating to other wells in which the Company has no interests.
The Parties to the Participation Agreement, except for the Company, had previously entered into a Joint Operating Agreement, dated September 4, 2020 (the “Operating Agreement”) establishing an area of mutual interest, including the Austin Chalk formation, and governing the parties’ rights and obligations with respect to drilling, completion and operation of wells therein. The Participation Agreement and the Operating Agreement require, among other things, that White River SPV and the Company drill and complete at least one horizontal Austin Chalk well with a certain minimum lateral each calendar year.
In connection with the transactions contemplated by the Participation Agreement, on October 12, 2020 White River SPV entered into an Agreement and Assignment of Oil, Gas and Mineral Lease (the “Lease Assignment”) with the Assignor. Under the Lease Assignment, the Assignor assigned to White River SPV a 100% working interest (75% net revenue interest) in a certain oil and gas lease covering in excess of 400 acres (the “Lease”), and White River SPV paid approximately $600 to the Assignor. White River SPV had previously entered into an agreement with the Assignor for the assignment to White River SPV of a 100% working interest in a certain oil and gas lease covering in excess of 1,600 acres in exchange for $1,500.
On October 13, 2020, Mr. William B. Hoagland, who had previously served as the Company’s Principal Financial Officer, was appointed Chief Financial Officer of the Company. On October 15, 2020, the Board of Directors of the Company approved an increase in Mr. Hoagland’s annual base salary from $180,000 to $270,000, retroactive to October 15, 2020.
On October 22, 2020, the Board of Directors of the Company approved the appointment of Mr. Jim Galla as the Company’s Chief Accounting Officer, effective immediately. Mr. Jay Puchir, the Company’s former Chief Accounting Officer, will continue as the Treasurer of the Company and Chief Executive Officer of Banner Midstream.
On October 27, 2020, the Board of Directors of the Company approved an increase in the annual base salary of Mr. Randy May, the Chairman and Chief Executive Officer of the Company from $200,000 to $400,000, effective July 29, 2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words. Such forward-looking statements may be contained in the sections “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Notes to Consolidated Financial Statements (Unaudited)” among other places in this Form 10-Q/A.

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

~~Ecoark Holdings, Inc.~~OVERVIEW

Ecoark Holdings Inc. (“Ecoark Holdings” or the “Company”) is ~~an innovative AgTech~~a diversified holding company, ~~focused~~incorporated in the state of Nevada on solutions that reduce food waste and improve delivered freshness and product margins for fresh and perishable foods for a wide range of organizations including growers, processors, distributors and retailers.November 19, 2007. Through Ecoark Holdings ~~addresses this through its indirect wholly-owned subsidiary:~~wholly owned subsidiaries, the Company has operations in three areas: (i) oil and gas, including exploration, production and drilling operations on over 20,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi and transportation services, (ii) post-harvest shelf-life and freshness food management technology, and (iii) financial services including investing in a select number of early stage startups each year. The Company’s subsidiaries consist of Ecoark, Inc. (“Ecoark”), a Delaware corporation which is the parent of Zest Labs, Inc. (“Zest Labs” ~~or “Zest”~~), 440IoT Inc., a Nevada corporation (“440IoT”), Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and Trend Discovery Holdings Inc., a Delaware corporation (“Trend Holdings”).
See Note 16 to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the information regarding the merger with Trend Discovery Holdings Inc. in May 2019 and the acquisition of Banner Midstream Corp. (“Banner Midstream”) in March 2020.
Banner Midstream has four operating subsidiaries: Pinnacle Frac Transport LLC (“Pinnacle Frac”), Capstone Equipment Leasing LLC (“Capstone”), White River Holdings Corp. (“White River”), and Shamrock Upstream Energy LLC (“Shamrock”). Pinnacle Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures and finances equipment to oilfield transportation service contractors. These two operating subsidiaries of Banner Midstream are revenue producing entities.
White River and Shamrock are engaged in oil and gas exploration, production, and drilling operations on over 10,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi.
Since the acquisition of Banner Midstream on March 27, 2020, which currently comprises the exploration, production and drilling operations, the Company has focused its efforts to a considerable extent on expanding its exploration and production footprint and capabilities by acquiring real property and working interests in oil and gas mineral leases.
On June 11, 2020, the Company acquired certain energy assets from SR Acquisition I, LLC for $1 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of 262 total wells in Mississippi and Louisiana, approximately 9,000 acres of active mineral leases, and drilling production materials and equipment. The 262 total wells include 57 active producing wells, 19 active disposal wells, 136 shut-in with future utility wells, and 50 shut-in pending plugging wells. Included in the assignment are 4 wells in the Tuscaloosa Marine Shale formation.
On June 18, 2020, the Company acquired certain energy assets from SN TMS, LLC for $1 as part of the ongoing bankruptcy reorganization of Sanchez Energy Corporation. The transaction includes the transfer of wells, active mineral leases, and drilling production materials and equipment.
On August 14, 2020, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) by and among the Company, White River E&P LLC, a Texas Limited Liability Company and a wholly-owned subsidiary of the Company Rabb Resources, LTD. and Claude Rabb, the sole owner of Rabb Resources, LTD. Pursuant to the Asset Purchase Agreement, the Company completed the acquisition of certain assets of Rabb Resources, LTD. The acquired assets consisted of certain real property and working interests in oil and gas mineral leases. The Company ~~committed~~in June 2020 previously provided for bridge financing to ~~a plan~~Rabb Resources, LTD under the $225 Senior Secured Convertible Promissory Note. As consideration for entering into the Asset Purchase Agreement, the Company agreed to ~~focus its business~~pay Rabb Resources, LTD. A total of $3,500 consisting of (i) $1,500 in cash, net of $304 in outstanding amounts related to the note receivable and accrued interest receivable, and (ii) $2,000 payable in common stock of the Company, which based on ~~Zest Labs and divested non-core assets in 2019 that included assets~~the closing price of Pioneer Products, LLC (“Pioneer Products” or “Pioneer”) and Magnolia Solar, Inc. (“Magnolia Solar”). Those assets are reported as held for sale and their operations are reported as discontinued operations in the consolidated financial statements. The subsidiary Eco3d, LLC (“Eco3d”) was sold on April 14, 2017 and is also reported as held for sale and discontinued operations in the consolidated financial statements. The Company has 20 employees of continuing operations and no employees of discontinued operationscommon stock as of the date of the Asset Purchase Agreement equaled 514 shares. The Company accounted for this ~~filing.~~acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the Rabb Resources, LTD historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.
On September 4, 2020, White River SPV 3, LLC, a wholly-owned subsidiary of Banner Midstream entered into an Agreement and Assignment of Oil, Gas and Mineral Lease with a privately held limited liability company (the “Assignor”). Under the Lease Assignment, the Assignor assigned a 100% working interest (75% net revenue interest) in a certain oil and gas lease covering in excess of 1,600 acres (the “Lease”), and White River paid $1,500 in cash to the Assignor. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

On September 30, 2020, the Company and White River Energy, LLC (“White River Energy”), a wholly-owned subsidiary of the Company entered into three asset purchase agreements (the “Asset Purchase Agreements”) with privately-held limited liability companies to acquire working interests in the Harry O’Neal oil and gas mineral lease (the “O’Neal OGML”), the related well bore, crude oil inventory and equipment. Immediately prior to the acquisition, White River Energy owned an approximately 61% working interest in the O’Neal OGML oil well and a 100% working interest in any future wells.
The purchase price of these leases were $126, $312 and $312, respectively, totaling $750. The consideration paid to the Sellers was in the form of 341 shares of common stock. The Company accounted for this acquisition as an asset acquisition under ASC 805 and that the Company has early adopted the amendments of Regulation S-X dated May 21, 2020 and has concluded that this acquisition was not significant. Accordingly, as a result of the amendment, the presentation of the historical financial statements under Rule 3-05 and related pro forma information under Article 11 of Regulation S-X, respectively, were not required to be presented.

Our principal executive offices are located at ~~5899 Preston Road #505, Frisco,~~303 Pearl Parkway, Suite 200, San Antonio, TX ~~75034,~~78215, and our telephone number is ~~(479) 259-2977.~~(800) 762-7293. Our website address is http://ecoarkusa.com/. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in and are not considered part of this report.

~~Acquisition of Sable~~

On May 3, 2016, the Company entered into a share exchange agreement by and among the Company, Pioneer Products, Sable Polymer Solutions, LLC, an Arkansas limited liability company (“Sable”), and the holderImpact of all of Sable’s membership interests. The Company issued 2,000 shares of the Company’s common stock in exchange for all of Sable’s membership interests. Sable has since been a wholly-owned subsidiary of Pioneer Products.
~~Sale of Eco3d~~COVID-19
On April 14, 2017, the Company sold the assets, liabilities and membership interests in Eco3d to a group led by executives of Eco3d after the Company’s Board concluded that Eco3d did not fit the future strategic direction of the Company. The Company received $2,006 in cash, future payments of $94 to be received by August, 2017 and 560 shares of the Company’s common stock that were held by executives of Eco3d, which shares were canceled. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company reflected amounts relating to Eco3d as a disposal group classified as held for sale at March 31, 2017 and included them as part of discontinued operations for the three months ended June 30, 2017 and 2016. Eco3d had been included in the Services segment, and segment disclosures no longer include amounts relating to Eco3d following the reclassification to discontinued operations. There will be no significant continuing involvement with Eco3d. Gain on the sale of $636 was recognized in the Company’s quarter ended June 30, 2017.
~~Acquisition of 440 Labs~~
On May 18, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”) with Zest Labs, 440labs, Inc., a Massachusetts corporation (“440labs”), SphereIt, LLC, a Massachusetts limited liability company (“SphereIt”) and three of 440labs’ executive employees. Pursuant to the Exchange Agreement, on May 23, 2017 the Company acquired all of the shares of 440labs in exchange for 300 shares of the Company’s common stock issued to SphereIt. 440labs is a cloud and mobile software developer which is now a subsidiary of Zest Labs. 440labs’ three executive employees signed employment agreements pursuant to which each of the three executive employees received 100 shares of the Company’s common stock and became employed by Zest Labs.
~~Description of Business~~
~~Ecoark Holdings operates through two wholly-owned operating subsidiaries, Ecoark and Magnolia Solar. Further, Ecoark has two operating subsidiaries: Zest Labs and Pioneer Products.~~
~~Zest Labs~~
Zest Labs’ Zest Data Services is a secure, multi-tenant cloud-based data collection platform for aggregating and real-time permission-based sharing and analysis of information. Zest Fresh, a fresh food management solution that utilizes the Zest Data Service platform, focuses on three primary value propositions – consistent food quality, reduced waste, and improved food safety. Zest Fresh empowers workers with real-time analytic tools and alerts that improve efficiency while driving quality consistency through best practice adherence on every pallet of delivered fresh food. Zest Delivery offers real-time monitoring and control for prepared food delivery containers, helping delivery and dispatch personnel ensure the quality and safety of delivered food. Zest Labs was previously known as Intelleflex Corporation. Effective on October 28, 2016, Intelleflex Corporation changed its name to Zest Labs, Inc. to align its corporate name with its mission and the brand name of its products and services.

The Zest Fresh value proposition is to reduce fresh food loss by improving quality consistency. In the U.S. produce market, it is reported that roughly 30% of post-harvest fresh food is lost or wasted and therefore not consumed. Both fresh food producers and retailers bear significant expense when harvested food is either rejected due to early spoilage, or reduced in value due to early ripening. Zest Labs believes that a significant portion of this waste can be attributed to inconsistent quality or freshness based on variable post-harvest processing and handling. Fresh food producers and retailers manage food distribution and inventory based on the harvest date, with the assumption that all food harvested on the same day will have the same freshness. However, studies have shown that post-harvest handling can have a significant effect on the actual remaining freshness, and if not properly accounted for, can result in food loss or spoilage ahead of expectations. Zest Fresh empowers fresh food producers and retailers to significantly reduce the post-harvest loss by providing real-time guidance to process adherence, intelligent distribution and best handling practices, thereby providing significant savings to fresh food producers and retailers.
Zest Fresh is offered to fresh food producers and retailers with pricing based on the number of pallets managed by Zest, typically from the field harvest through retail delivery. The Zest service includes a re-usable wireless sensor device that travels with the pallet of fresh food from the field through retail delivery, continuously collecting product condition data. The collected pallet product data is analyzed in real time by the Zest Fresh cloud application, with the fresh food producers and retailers accessing data through Zest web and mobile applications. Zest Fresh provides workers with real-time feedback on the current handling or processing of each pallet, empowering best practice adherence to achieve maximum freshness. Zest Fresh also provides real-time updates as to actual product freshness for each pallet, enabling intelligent routing and inventory management of each pallet in a manner that ensures optimum delivered freshness.
Zest Delivery manages prepared food delivery from the restaurant through to the customer. Zest Delivery manages the delivery container environment, both monitoring and controlling the product condition. The value of Zest Delivery is to manage prepared meals in an ideal state for consumption, while accommodating extended pre-staging or delivery times. Extended pre-staging times are associated with “instant delivery” services of prepared meals, where the meals are often pre-staged in a delivery area ahead of demand. While pre-staging enables fast demand response time, it can result in prepared meals being staged for extended periods. Zest Delivery monitors and controls the delivery container environment to preserve the prepared meal in ideal, ready to consume condition. Zest Delivery also provides the dispatcher with real-time remote visibility to the condition of available meals, and confirming quality prior to dispatch. Zest Delivery provides automated, real-time visibility for a very distributed fleet of drivers, reflecting prepared meal food safety, quality and availability. Zest Delivery is offered to meal delivery companies based on the quantity of delivery containers and frequency of use.
Zest Labs currently holds rights to 66 U.S. patents, numerous related foreign patents, and U.S. copyrights relating to certain aspects of its Zest software, hardware devices including Radio-Frequency Identification (“RFID”) technology, software, and services. In addition, Zest Labs has registered, and/or has applied to register trademarks and service marks in the U.S. and a number of foreign countries for “Intelleflex,” the Intelleflex logo, “Zest,” “Zest Data Services,” and the Zest logo, and numerous other trademarks and service marks. Many of Zest Labs’ products have been designed to include licensed intellectual property obtained from third-parties. Laws and regulations related to wireless communications devices in the jurisdictions in which Zest Labs operates and seeks to operate are extensive and subject to change. Wireless communication devices, such as RFID readers, are subject to certification and regulation by governmental and standardization bodies. These certification processes are extensive and time consuming, and could result in additional testing requirements, product modifications or delays in product shipment dates.
Although most components essential to Zest Labs’ business are generally available from multiple sources, certain key components including, but not limited to, microprocessors, enclosures, certain RFID custom integrated circuits, and application-specific integrated circuits are currently obtained by Zest Labs from single or limited sources, principally in Asia.

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

The ~~acquisition~~recent outbreak of ~~440labs in May 2017 allowed Zest Labs to internally maintain its software development and information solutions for cloud, mobile, and IoT applications. 440labs~~COVID-19, which has been declared by the World Health Organization to be a ~~key development partner with Zest Labs~~pandemic, has spread across the globe and is impacting worldwide economic activity. The COVID-19 public health epidemic prevented the Company from conducting business activities at full capacity for ~~more than four years, contributing its expertise in scalable enterprise cloud solutions and mobile applications.~~an indefinite period of time, including due to risk of spread of the disease within these groups or due to shutdowns requested or mandated by governmental authorities.

COVID-19 did not have a material effect on the Condensed Consolidated Statements of Operations or the Condensed Consolidated Balance Sheets included in this Form 10-Q. However, it did have a material impact on our management’s ability to operate effectively and meet some of our filing deadlines. The impact included the difficulties of working remotely from home including slow Internet connection, the inability of our accounting and financial officers to collaborate as effectively as they would otherwise have in an office environment and issues arising from mandatory state quarantines.
While it is not possible at this time to estimate with sufficient certainty the impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by federal, state, local and foreign governments could disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have also had and may continue to have an adverse impact on global and domestic economic conditions, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company has taken temporary precautionary measures intended to help minimize the risk of the virus to its employees, including temporarily requiring employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. These measures are continuing. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small business are eligible for a loan to fund payroll expenses, rent and related costs.
~~Pioneer Products~~Critical Accounting Policies, Estimates and Assumptions

~~Pioneer Products began by creating~~In reading and understanding the Company’s discussion of results of operations, liquidity and capital resources, one should be aware of key policies, judgments and assumptions that are important to the portrayal of financial conditions and results. The Company has recently entered into the commodity business through its acquisition of Banner Midstream. The Company has included several new ~~consumer products using plastic reclaimed~~accounting policies related to this segment of this business.
Our revenues from ~~post-consumer and retailers’ waste streams. One of these products is Pioneer Products’ “closed-loop” 45-gallon trash can. Pioneer Products generates revenue~~periods prior to fiscal 2020 were generated principally from the sale of ~~products such~~hardware. In the six months ended September 30, 2020, revenues were principally from professional services from our financing segment as ~~plastic trash cans~~well as oil and gas services related to ~~3,700 retail stores of the largest retailer~~our production, transportation and logistics service business contained in ~~the continental U.S., Walmart, a major customer of the Company. Pioneer Products’ competitors include large consumer products companies such as Rubbermaid and Hefty.~~Banner Midstream.

~~Building on a platform~~
A significant percentage of ~~proven retail success, Pioneer Products leverages its reputation~~our operating expenses results from non-cash share-based compensation, which is typical of technology companies as well as costs related to our exploration and strategic network by acting as a broker for other products and companies that fit into its brand portfolio. Pioneer owns direct vendor relationships and vendor numbers with some of the largest retailers in the U.S. This vendor number facilitates introduction of a new product to a retailer. Additionally, Pioneer’s offerings enable Ecoark to play a key role in supporting and working to achieve one of Walmart’s goals of retail-level sustainability: reduction of waste within its supply chain and operations.driver costs.

For the share-based compensation, we have granted shares, options and warrants to employees, consultants and investors as incentives to generate success for the Company instead of making cash payments. The ~~acquisition~~accounting calculations for this type of Sable in May 2016 allowed Pioneer to purchase, process and sell quality post-consumer and post-industrial plastic materials. In addition to providing plastic for Pioneer’s trash cans, Sable sells to other customers in the plastics processing industry.
~~Magnolia Solar~~
~~Magnolia Solar is principally engaged in the development and commercialization of nanotechnology-based, high-efficiency, thin-film technology that~~compensation can be ~~deposited on a variety of substrates, including glass~~complex and flexible structures. Magnolia Solar believes that this technology has the potential to capture a larger part of the solar spectrum to produce high-efficiency solar cells and incorporates a unique nanostructure-based antireflection coating technology to possibly further increase the solar cell’s performance. If these goals are met, there is the potential of significantly reducing the cost per watt. Since its inception, Magnolia Solar has not generated material revenues or earnings as a result of its activities. Magnolia Solar currently holds 8 U.S. patents related to its technologies.
~~Competition~~
~~The Company’s subsidiaries operate in markets for products and services that are highly competitive and face aggressive competition in all areas of their business.~~
The market for cloud-based, real-time supply chain analytic solutions—the market in which Zest Labs competes—is rapidly evolving. There are several new competitors with competing technologies, including companies that have greater resources than Ecoark Holdings, which operate in this space. Some of these companies have brand recognition, established relationships with retailers, and own the manufacturing process.

Pioneer Products competes in the market for recycled products to support sustainability programs of its customers. There are currently hundreds of sustainability programs available in the market. These programs are offered through retailers, manufacturers, and service providers. Several competitors operating in this industry are vertically integrated and offer recycled products similar to those sold by Pioneer.
The market for electricity from renewable sources—the market in which Magnolia Solar competes—is still evolving and is dependent on government incentives and subsidies in the U.S. Several large companies and some foreign nation states aggressively compete to expand their portfolio of products/services for renewable energy solutions. Intense competition in the solar power energy sector has created financial pressures for many market participants.
~~Sales and Marketing~~
~~We sell our products and services through direct sales efforts and indirectly through distributors and resellers. Virtually all sales to date have been~~ derived from ~~our direct sales efforts. However, we continue our efforts to establish a network of indirect sales channels.~~
~~Research~~models like the Black-Scholes option pricing model that requires judgment in making assumptions and ~~Development~~developing estimates.

We have ~~devoted a substantial amount of our resources to software~~also invested heavily in research and ~~hardware~~ development ~~activities in recent years,~~expenses. Those investments have required cash payments principally for the ~~Zest initiatives. Ecoark Holdings believes that, analyzing the competitive factors affecting the market for the~~development of our software solutions and ~~services its subsidiaries provide, its products~~the testing of those solutions in our labs and ~~services compete favorably by offering integrated solutions to customers. The Company has incurred~~on some customer projects. We have not capitalized any of that development effort, so there are no research and development ~~expenses of $1,620 and $943~~costs to amortize in the three months ended June 30, 2017 and 2016, respectively, to develop its solutions and differentiate those solutions from competitive offerings. We incurred no capitalized software development costs in the three months ended June 30, 2017 and 2016.future.

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

~~Ecoark Holdings and its subsidiaries have had 74 patents issued by the United States Patent and Trademark Office, and about 24 additional patent applications are currently pending.~~
~~Impact of Restatement Adjustments on Other Income and Net Loss of Previously Reported Periods~~
As more fully described in Note 18 to the condensed consolidated financial statements included in this report, the Company identified inadvertent errors in the accounting for certain embedded derivative liabilities associated with warrants issued as a part of capital raises in 2017. In connection with those capital raises, proceeds (net of fees) were accounted for as equity. Upon further evaluation, the Company determined that a portion of the capital raised should have been accounted for as liabilities with fair value changes recorded in the Company’s condensed consolidated statements of operations. Accordingly, the Company is restating its previously issued condensed consolidated financial statements for the three months ended June 30, 2017 as well as an adjustment to the opening balance sheet for the first interim period of fiscal 2018 (the “Restated Periods”).
The only impact on the condensed consolidated statements of operations is an adjustment to other income which impacts the net loss for the respective Restated Periods. There is no impact to the income tax provision or net deferred tax asset because both the current tax benefit and deferred tax assets were offset by a full valuation allowance. Impacts to the consolidated balance sheets consisting of establishing derivative liabilities and adjustments to stockholders’ equity are addressed in the Liquidity and Capital Resources section below.
The adjustment to the opening balance sheet as of April 1, 2017 consisted of establishing a current derivatives liability of $3,351, offset by a reduction in additional paid-in-capital of $4,180 and a reduction of accumulated deficit of $829.
~~For the three months ended June 30, 2017, other income increased by $3,346 with a corresponding reduction in net loss from $13,609 to $10,263.~~

RESULTS OF OPERATIONS
Overview

The discussion below addresses the Company’s operations and liquidity which were ~~significantly~~ impacted by the acquisition of ~~Sable~~Trend Holdings in May ~~2016, 440labs~~2019 and Banner Midstream in ~~May 2017 and the sale of Eco3d in April 2017~~March 2020 as described above. No activity from 440labs and only two months of activity from Sable are included in the 2016 results as the Sable acquisition occurred May 3, 2016. Results from Eco3d are included as discontinued operations in the statements of operations. Therefore, Eco3d revenues and expenses are not included in the amounts and discussion of results of continuing operations below, except in the Net Loss summary.

Results of ~~Continuing~~ Operations for the Three Months Ended ~~June~~September 30, ~~2017~~2020 and ~~2016~~
~~Revenues, Cost of Revenues and Margins~~2019

The Company’s principal source of revenues in 2017 and 2016 was Pioneer Products’ sale of recycled plastic products and materials, which includes the sales of Sable, its wholly-owned subsidiary. Pioneer salesRevenues
Revenues for the three months ended ~~June~~September 30, ~~2017 increased~~2020 were $3,278 as compared to ~~$2,505 from $2,387 during~~$44 for the ~~same period in 2016,~~three months ended September 30, 2019, an increase of ~~$118 or 5%~~$3,234. The increase was primarily due to the addition of the oil and gas operations as the result of the Banner Midstream acquisition on March 27, 2020. Revenues were comprised of $104 and $28 in the financing segment; $0 and $16 in the technology segment; and $3,174 and $0 in the commodity segment for the three months of sales from Sable included in 2017 versus just under two months in 2016. The increase in Sable’s sales of recycled plastic materials was offset by a $22 decrease in sales of consumer trash cans made from recycled materials. Commissions from product representation increased from $21 in 2016 to $44 in 2017.ended September 30, 2020 and 2019, respectively.

~~The Company’s cost~~Cost of Revenues and Gross Profit
Cost of revenues for the three months ended ~~June~~September 30, ~~2017 and 2016~~2020 was also principally from Pioneer, including Sable. Cost of revenues for Pioneer of $2,781 in 2017 increased $340 from the same period in 2016, or 14%. The increase in cost of revenues resulted from the inclusion of the full three months of operations of Sable in 2017$2,333 as compared to ~~the inclusion of only the two-month period after the May 2016 acquisition of Sable in 2016.~~
Resulting margins on Pioneer sales were negative 11% in 2017 compared to negative 2% in 2016. The worsening margin in 2017 reflects an increase in labor and materials costs in the production of recycled plastic materials.
~~Zest Labs sold a small number of RFID tags in~~$16 for the three months ended ~~June~~September 30, ~~2017~~2019, an increase of $2,317. The increase was primarily due to the addition of the oil and ~~2016 resulting in immaterial revenue from product sales. No revenues from services have been achieved to date. The cost~~gas operations as the result of ~~revenues~~the Banner Midstream acquisition on March 27, 2020. Cost of ~~$13~~Revenues were comprised of $0 and $0 in the ~~2017 quarter~~financing segment; $0 and ~~$15~~$16 in the ~~2016 quarter principally consist~~technology segment; and $2,333 and $0 in the commodity segment for the three months ended September 30, 2020 and 2019, respectively. Gross margins decreased from 63% for the three months ended September 30, 2019 to 28% for the three months September 30, 2020 due to changes in inventory of ~~minimum royalties recorded relating to cross-licensing agreements.~~crude oil.

Operating Expenses

Operating expenses for the three months ended ~~June~~September 30, ~~2017~~2020 were ~~$13,885~~$4,834 as compared to $5,908 for the same period in 2016. The increase of $7,977 was primarily attributable to the increase in operating expenses for our Zest Labs segment, including share-based compensation in 2017. The Pioneer Products operational activities described above are charged with direct allocations for required home office support. Other operating expenses described below were allocated to the Zest Labs segment to reflect the considerable resources provided to Zest.
~~Salaries and Salary Related Costs~~
~~Salaries and related costs~~$2,542 for the three months ended ~~June~~September 30, ~~2017~~2019, an increase of $2,292. Operating expenses were ~~$9,678 compared to $1,262~~comprised of $65 and $61 in the financing segment; $625 and $2,481 in the technology segment; and $4,144 and $0 in the commodity segment for the three months ended ~~June~~September 30, ~~2016.~~2020 and 2019, respectively. The ~~$8,416~~$2,292 increase was ~~almost entirely~~ due principally to ~~previously disclosed share-based compensation of $8,551 in 2017 compared to $312 in 2016 that did not require cash payments.~~
~~The Company elected to make stock awards a significant part of~~ the total compensation packages offered in order to provide incentives for employees without requiring cash expenditures at this stage of the Company’s development. This also aligns employee goals with those of stockholders. The 2017 cost was principally derived from amortization of stock awards granted in March 2017 that amounted to $7,048 in the quarter ended June 30, 2017. Under that award program, the Company issues shares of Company stock to employees’ accountsexpenses, including wages and ~~has engaged a broker to “sell to cover” a sufficient number of shares from the employees’ accounts to cover the required taxes~~consulting fees, related to the ~~income attributable to the employees. The cost~~addition of the ~~awards is amortized over~~oil and gas operations as the ~~expected service period~~result of the ~~employees. In addition to these costs, $1,500 of non-cash share-based compensation was expensed~~Banner Midstream acquisition on March 27, 2020 and the depreciation, depletion, amortization and accretion for Banner Midstream in ~~2017 related to shares issued upon the execution of employment agreements with employees of 440labs when that entity was acquired in May 2017 and those individuals became employees of Zest Labs.~~
The 2016 expense represented estimates of stock option expense calculated using a Black-Scholes model, results of which can vary based on assumptions utilized. Additional information on equity expense can be found in Note 10 to the consolidated financial statements, which complies with critical accounting policies driven by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 718-10.

~~Professional Fees and Consulting~~
Professional fees and consulting expenses for the three months ended June 30, 2017 of $1,907 were down $1,254, or 40% from $3,161 incurred for the three months ended June 30, 2016. The decrease was due primarily to $2,500 of non-cash share-based compensation to investment and legal advisors in 2016 related to the Merger described in Note 1 to the consolidated financial statements,2020, partially offset by the ~~accelerated amortization of share-based compensation~~reduction in ~~2017 previously recorded as a prepaid asset but expensed upon termination of a contract with a consultant engaged by~~ the ~~Company, along with additional share-based compensation for a small number of consultants.~~Zest Labs selling expenses.

Selling, General and Administrative

Selling, general and administrative expenses for the three months ended ~~June~~September 30, ~~2017~~2020 were ~~$499~~$4,375 compared with ~~$433~~$1,683 for the three months ended September 30, 2019. Cost reduction initiatives were focused on salary related and professional fees for the technology segment offset by the costs incurred for Banner Midstream as this was acquired in March ~~31, 2016. The 15% increase was principally due~~2020. These were offset by changes in share-based compensation which for the three month period ended September 30, 2020 were not comparable to ~~increased legal costs associated with the development of the business, increased investor relation costs and increased amortization of insurance premiums.~~2019.

Depreciation, Amortization, Depletion and ~~Amortization~~Accretion

Depreciation, amortization, depletion and ~~amortization~~accretion expenses for the three months ended ~~June~~September 30, ~~2017~~2020 were ~~$181~~$323 compared to ~~$109~~$71 for the three months ended ~~June~~September 30, ~~2016 (net~~2019. Depreciation, amortization, depletion and accretion expenses were comprised of ~~$67~~$0 and ~~46 included~~$0 in ~~cost of product sales related to production equipment at Sable~~the financing segment; $63 and $71 in the technology segment; and $260 and $0 in the commodity segment for ~~2017~~the three months ended September 30, 2020 and ~~2016, respectively).~~2019, respectively. The ~~$72~~$252 increase resulted primarily ~~resulted~~ from the acquisition of ~~440labs in May 2017~~Banner Midstream and the ~~amortization~~depletion and accretion is the result of the ~~related identifiable intangible assets for the period subsequent to the May 23, 2017 acquisition.~~ oil and gas properties maintained by Banner Midstream. The technology and financing segment do not have depletion or accretion.

Research and Development

Research and development expense ~~increased $677 or 72%~~decreased 82% to ~~$1,620~~$136 in the three months ended ~~June~~September 30, ~~2017~~2020 compared with ~~$943 during~~$788 in the ~~same period~~three months ended September 30, 2019. The $652 reduction in ~~2016. These~~ costs related primarily to the maturing of development of the Zest ~~Fresh solution~~Labs freshness solutions.
Other Income (Expense)
Change in fair value of derivative liabilities for the three months ended September 30, 2020 was a non-cash gain of $1,011 as ~~pilots~~compared to a non-cash loss of ($960) for the three months ended September 30, 2019. The $1,971 increase was a result of the ~~solution expanded~~reduction in ~~2017~~the stock price in the three months ended September 30, 2020 compared to the three months ended September 30, 2019. In addition, there was a non-cash gain in the three months ended September 30, 2020 from the extinguishment of the derivative liabilities that when converted to shares of common stock of $14,952 compared to ($839) in the three months ended September 30, 2019. In the period ended September 30, 2020, there was a non-cash loss on the conversion of debt and ~~additional wages and development costs for research and development activities were incurred. Significant research and development expenditures related~~other liabilities to ~~Zest Fresh are expected to continue.~~
42
~~Interest Expense~~shares of common stock of $1,775.

Interest expense, net of interest income, for the three months ended ~~June~~September 30, ~~2017~~2020 was ~~$15~~$1,314 as compared to ~~$87~~$76 for the three months ended ~~June~~September 30, ~~2016.~~2019. The ~~$72 decrease~~increase was the result of the interest incurred on the debt assumed in the Banner Midstream acquisition as well as the value related to the granting of warrants for interest of $1,265.
Net Income (Loss)
Net income from continuing operations for the three months ended September 30, 2020 was $8,985 as compared to a net loss of ($4,389) for the three months ended September 30, 2019. The $13,374 increase in net income was primarily due to the non-cash changes in the fair value of the derivative liability and the non-cash losses incurred on the conversion of debt to equity, offset by the non-cash gain on the exchange of warrants for common stock described herein. The net income (loss) was comprised of $774 and ($32) in the financing segment; $3,047 and ($4,357) in the technology segment; and net income of $5,164 and $0 in the commodity segment for the three months ended September 30, 2020 and 2019, respectively.

Results of Operations for the Six Months Ended September 30, 2020 and 2019
Revenues
Revenues for the six months ended September 30, 2020 were $5,591 as compared to $79 for the six months ended September 30, 2019, an increase of $5,512. The increase was primarily due to the addition of the oil and gas operations as the result of the Banner Midstream acquisition on March 27, 2020. Revenues were comprised of $194 and $52 in the financing segment; $0 and $27 in the technology segment; and $5,397 and $0 in the commodity segment for the six months ended September 30, 2020 and 2019, respectively.
Cost of Revenues and Gross Profit
Cost of revenues for the six months ended September 30, 2020 was $3,426 as compared to $61 for the six months ended September 30, 2019, an increase of $3,365. The increase was primarily due to the addition of the oil and gas operations as the result of the Banner Midstream acquisition on March 27, 2020. Cost of Revenues were comprised of $0 and $0 in the financing segment; $0 and $61 in the technology segment; and $3,426 and $0 in the commodity segment for the six months ended September 30, 2020 and 2019, respectively. Gross margins increased from 22% for the six months ended September 30, 2019 to 38% for the six months ended September 30, 2020 due to lower costs involved with executing the projects and changes in inventory of crude oil.
Operating Expenses
Operating expenses for the six months ended September 30, 2020 were $8,250 as compared to $5,065 for the six months ended September 30, 2019, an increase of $3,185. Operating expenses were comprised of $194 and $200 in the financing segment; $1,607 and $4,865 in the technology segment; and $6,449 and $0 in the commodity segment for the six months ended September 30, 2020 and 2019, respectively. The $3,185 increase was due principally to the expenses, including wages and consulting fees, related to the addition of the oil and gas operations as the result of the Banner Midstream acquisition on March 27, 2020 and the depreciation, depletion, amortization and accretion for Banner Midstream in 2020, partially offset by the reduction in the Zest Labs selling expenses.
Selling, General and Administrative
Selling, general and administrative expenses for the six months ended September 30, 2020 were $7,260 compared with $3,232 for the six months ended September 30, 2019. Cost reduction initiatives were focused on salary related and professional fees for the technology segment offset by the costs incurred for Banner Midstream as this was acquired in March 2020.
Depreciation, Amortization, Depletion and Accretion
Depreciation, amortization, depletion and accretion expenses for the six months ended September 30, 2020 were $624 compared to $148 for the six months ended September 30, 2019. Depreciation, amortization, depletion and accretion expenses were comprised of $0 and $0 in the financing segment; $126 and $148 in the technology segment; and $498 and $0 in the commodity segment for the six months ended September 30, 2020 and 2019, respectively. The $476 increase resulted primarily from the acquisition of Banner Midstream and the depletion and accretion is the result of the ~~retirement~~oil and gas properties maintained by Banner Midstream. The technology and financing segment do not have depletion or accretion.

Research and Development
Research and development expense decreased 78% to $366 in the six months ended September 30, 2020 compared with $1,685 in the six months ended September 30, 2019. The $1,319 reduction in costs related primarily to the maturing of ~~$2,327~~development of the Zest Labs freshness solutions.
Other Income (Expense)
Change in fair value of derivative liabilities for the six months ended September 30, 2020 was a non-cash loss of ($16,382) as compared to a non-cash loss of ($16) for the six months ended September 30, 2019. The $16,366 decrease was a result of the reduction in the stock price in the six months ended September 30, 2020 compared to the six months ended September 30, 2019. In addition, there was a non-cash gain in the six months ended September 30, 2020 from the extinguishment of the derivative liabilities that when converted to shares of common stock of $16,583 compared to ($839) in the prior year period. In the period ended September 30, 2020, there was a non-cash loss on the conversion of debt ~~during~~and other liabilities to shares of common stock of $3,969 and a loss on the ~~three-month transition period~~sale of fixed assets and abandonment of oil and gas properties of $105 and $83, respectively.
Interest expense, net of interest income, for the six months ended ~~March 31, 2017.~~September 30, 2020 was $2,155 as compared to $135 for the six months ended September 30, 2019. The ~~only~~increase was the result of the interest incurred on the debt ~~now outstanding is $600~~assumed in the Banner Midstream acquisition as well as the value related to the granting of ~~convertible notes with an annual~~warrants for interest ~~rate~~ of ~~10%.~~$1,790 and the amortization of debt discount of $149.

Net Loss

Net loss from continuing operations for the ~~three~~six months ended ~~June~~September 30, ~~2017~~2020 was ~~$10,263~~$12,196 as compared to ~~$5,938~~$6,035 for the ~~three~~six months ended ~~June~~September 30, ~~2016.~~2019. The ~~$4,325 increase~~$6,161 decrease in net loss was primarily due to the ~~$6,940 increase in~~ non-cash share-based compensation, the $677 increase in research and development expense on Zest and an unfavorable change from income from discontinued operations of $184 in 2016 to a $57 loss from discontinued operations in 2017 and other smaller increased costs, offset by the $636 gain from the sale of Eco3d, and the changechanges in the fair value of the derivative ~~liabilities~~liability and the non-cash losses incurred on the conversion of ~~$3,346. As~~debt to equity, offset by the non-cash gain on the exchange of warrants for common stock described ~~in Note 12 to the consolidated financial statements, the Company has a~~herein. The net ~~operating loss carryforward for~~ income tax purposes totaling approximately $70,800 at June 30, 2017 that can be utilized to reduce future income taxes. A valuation allowance has been estimated such that no deferred tax assets have been recognized(loss) was comprised of ($140) and ($148) in the ~~financial statements,~~financing segment; ($2,308) and ~~no tax benefit has been accrued~~($5,887) in the technology segment; and net loss of ($9,748) and $0 in the commodity segment for ~~either continuing or discontinued operations.~~the six months ended September 30, 2020 and 2019, respectively.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

~~To date we have financed our operations through sales of common stock and the issuance of debt.~~
At June 30, 2017 and March 31, 2017, we had cash of $11,562 and $8,648, respectively. Working capital of $8,201 at June 30, 2017 compared favorably with working capital of $7,793 at March 31, 2017. The increase in working capital was principally due to the May 2017 issuance of common stock to institutional investors for $9,106 net of expenses and the $2,006 proceeds from the sale of Eco3d, offset by net operating losses and the change in the fair value of the derivative liabilities. The Company is dependent upon raising additional capital from future financing transactions until such time that cash flow from operations is positive.
Net cash used in operating activities was ~~$7,576 in~~($5,171) for the ~~three~~six months ended ~~June~~September 30, ~~2017,~~2020, as compared to net cash used in operating activities of ~~$3,671 in~~($3,137) for the ~~same period in 2016.~~six months ended September 30, 2019. Cash used in operating activities is related to the Company’s net loss partially offset by non-cash expenses, including share-based compensation and ~~depreciation, amortization~~the change in the fair value of the derivative liability and ~~impairments.~~net losses incurred in the conversion of debt and liabilities to shares of common stock as well as losses on the sale of fixed assets and abandonment of oil and gas properties.

Net cash used in investing activities was $3,171 for the six months ended September 30, 2020, as compared to $8 net cash provided byfor the six months ended September 30, 2019. Net cash used in investing activities in the three months ended June 30, 2017 was $1,961 reflecting the $2,006 proceeds from the sale of Eco3d, offset by $45 of capital expenditures. In the three months ended June 30, 2016, investing activities consisted of $341 of capital expenditures (including $155 for discontinued operations), a $600 advance to Sable prior2020 related to the ~~acquisition~~advancement of a note receivable of $275, and the ~~purchase~~net purchases of ~~$3,500 certificates of deposit.~~fixed assets and oil and gas properties.

Net cash provided by financing activities infor the ~~three~~six months ended ~~June~~September 30, ~~2017~~2020 was ~~$8,529 as a result~~$9,600 that included $12,602 (net of ~~the~~fees) raised via issuance of stock for ~~$9,106 net~~the exercise of ~~expenses~~warrants and stock options, offset by proceeds and repayments of long-term debt and notes payable including related parties of $3,002. This compared with the ~~purchase of $577 treasury shares of common stock acquired from employees in lieu of amounts required to satisfy minimum withholding requirements upon vesting of the employees’ stock. In the three~~six months ended ~~June~~September 30, ~~2016, $7,736 net cash was~~2019 amounts of $3,334 provided by financing ~~activities, notably $7,792 in~~that included $951 provided through the credit facility, $1,980 from proceeds ~~from the issuance of common stock net of fees offset by repayments of debt of $56.~~

At June 30, 2017, $600 of Ecoark Holdings’ convertible notes payable are due in July 2018. Future minimum lease payments required under operating leases are as follows (by fiscal year): 2018 - $449, 2019 - $496, 2020 - $413, and 2021 - $250. Other less significant commitments and contingencies are disclosed in Note 11 to the consolidated financial statements.
Since our inception, the Company has experienced negative cash flow from operations and may experience significant negative cash flow from operations in the future. We will need to raise additional funds in the future to continue to expand the Company’s operations and meet its obligations. The inability to obtain additional capital may restrict our ability to grow and may reduce the ability to continue to conduct business operations as a going concern.
~~Critical Accounting Policies and Estimates~~
In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on revenue, income (loss) from operations and net income (loss), as well as the value of certain assets and liabilities on our balance sheet. The application of our critical accounting policies requires an evaluation of a number of complex criteria and significant accounting judgments by us. Our management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We evaluate our estimates on a regular basis and make changes accordingly. Senior management has discussed the development, selection and disclosure of these estimates. Actual results may materially differ from these estimates under different assumptions or conditions. If actual results were to materially differ from these estimates, the resulting changes could have a material adverse effect on our financial condition.
~~Our critical accounting polices include the following:~~
~~Principles of Consolidation~~
The consolidated financial statements include the accounts of Ecoark Holdings and its direct and indirect subsidiaries, collectively referred to as “the Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Ecoark Holdings is a holding company that holds 100% of Ecoark and Magnolia Solar. Ecoark holds 100% of Eco360, Pioneer Products (which owns 100% of Sable), Zest Labs (which owns 100% of 440labs) and previously Eco3d until April 2017. In March 2017, the Ecoark Holdings Board approved a plan to sell Eco3d, and the sale was completed in April 2017. Ecoark previously owned 65% of Eco3d and the remaining 35% interest was owned by executives of Eco3d until September 2016 when the executives’ 35% interest was acquired in exchange for 525 shares of Ecoark Holdings stock. In conjunction with the sale of Eco3d in April 2017, the 525 shares were reacquired by the Company and canceled.
~~The Company applies the guidance of Topic 810~~~~Consolidation~~ of the FASB ASC to determine whether and how to consolidate another entity. Pursuant to ASC 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except when control does not rest with the parent. Pursuant to ASC 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.

~~Use of Estimates~~
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for non-collectible accounts receivable, obsolete or slow-moving inventory, fair value of assets held for sale and assets and liabilities acquired, impaired value of equipment and intangible assets, liabilities to accrue, allocation of home office expenses for segment reporting and determination of the fair value of stock awards issued and forfeiture rates. Actual results could differ from those estimates.
~~Inventory~~
Inventory is stated at the lower of cost or market. Inventory cost is determined on a first-in first-out basis that approximates average cost and at standard cost, which approximates average costs in accordance with ASC 330-10-30-12. Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their estimated useful or scrap values. The Company establishes reserves for this purpose.
~~Property and Equipment and Long-Lived Assets~~
Property and equipment is stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from three to ten years for all classes of property and equipment, except leasehold improvements which are depreciated over the shorter of 10 years or the term of the lease.
FASB Codification Topic 360 “Property, Plant and Equipment” (“ASC 360”), requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Intangible assets with definite useful lives are stated at cost less accumulated amortization. Intangible assets represent the valuation of the company-owned patents, customer lists, outsourced vendor relationships and non-compete agreements. These intangible assets are being amortized on a straight-line basis over their estimated average useful lives of thirteen and a half years for the patents and three years for the customer lists and outsourced vendor relationships and two years for the non-compete agreements. Expenditures on intangible assets through Ecoark Holding’s filing of patent and trademark protection for company-owned inventions are expensed as incurred.
Ecoark assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the company considers to be important which could trigger an impairment review include the following:
~~1. Significant underperformance relative to expected historical or projected future operating results;~~
~~2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and~~
~~3. Significant negative industry or economic trends.~~
When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

~~Revenue Recognition~~
~~Product revenue primarily consists of the sale of recycled plastics products. Revenue is recognized when the following criteria have been met:~~
~~Evidence of an arrangement exists.~~~~The Company considers a customer purchase order, service agreement, contract, or equivalent document to be evidence of an arrangement.~~
~~Delivery has occurred.~~The Company’s standard transfer terms are free on board (“FOB”) shipping point. Thus, delivery is considered to have occurred when title and risk of loss have passed to the customer at the time of shipment.
~~The fee is fixed or determinable.~~~~The Company considers the fee to be fixed or determinable if the fee is not subject to refund or adjustment and payment terms are standard, which is generally 30-60 days.~~
~~Collection is deemed reasonably assured~~. Collection is deemed reasonably assured if it is expected that the customer will be able to pay amounts under the arrangement as payments become due. If it is determined that collection is not reasonably assured, then revenue is deferred and recognized upon cash collection.
~~The Company will recognize revenues for its software in accordance with ASC 985-605, Software Revenue Recognition.~~
Revenue from software license agreements is recognized when persuasive evidence of an agreement exists, delivery of the software has occurred, the fee is fixed or determinable, and collectability is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among the elements based on the relative fair value of each of the elements.
License revenue allocated to software products generally is recognized upon delivery of the products or deferred and recognized in future periods to the extent that an arrangement includes one or more elements to be delivered at a future date and for which fair values have not been established. Revenue allocated to maintenance agreements is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. If evidence of fair value does not exist for all elements of a license agreement and post customer support (“PCS”) is the only undelivered element, then all revenue for the license arrangement is recognized ratably over the term of the agreement as license revenue. If evidence of fair value of all undelivered PCS elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.
Cost of license revenue primarily includes product, delivery, and royalty costs. Cost of maintenance and service revenue consists primarily of labor costs for engineers performing implementation services, technical support, and training personnel as well as facilities and equipment costs.
The Company enters into arrangements that can include various combinations of software, services, and hardware. Where elements are delivered over different periods of time, and when allowed under U.S. GAAP, revenue is allocated to the respective elements based on their relative selling prices at the inception of the arrangement, and revenue is recognized as each element is delivered. The Company uses a hierarchy to determine the fair value to be used for allocating revenue to elements: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence, and (iii) best estimate of selling price (“ESP”). For software elements, the Company follows the industry specific software guidance which only allows for the use of VSOE in establishing fair value. Generally, VSOE is the price charged when the deliverable is sold separately or the price established by management for a product that is not yet sold if it is probable that the price will not change before introduction into the marketplace.

ESPs are established as best estimates of what the selling prices would be if the deliverables were sold regularly on a stand-alone basis. The process for determining ESPs requires judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each deliverable.
~~Share-Based Compensation~~
~~The Company follows ASC 718-10~~~~“Share Based Payments”~~. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual forfeitures when estimating the forfeiture rate. The Company facilitates payment of the employee tax withholdings resulting from the issuances of these awards by remitting the employee taxes and recovering the resulting amounts due from the employeereceived from the sale of ~~shares issued sufficient to cover the amount due the Company.~~ preferred stock and $403 from proceeds from advances from related parties.

~~The Company measures compensation expense for its non-employee share-based compensation under ASC 505-50, “~~~~Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services~~”. The fair values of options and shares issued are used to measure the transactions, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on theTo date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to expense, or to a prepaid expense if shareswe have financed our operations through sales of common stock ~~are issued in advance~~and the issuance of ~~services being rendered, and to additional paid-in capital.~~ debt.

~~Recoverability of Long-Lived Assets~~In addition to these transactions, the Company in the period April 1, 2020 through September 30, 2020, entered into the following transactions:

(a) On April 16, 2020, the Company received $386 in Payroll Protection Program funding related to Ecoark Holdings, and the Company also received on April 13, 2020, $1,482 in Payroll Protection Program funds for Pinnacle Frac LLC, a subsidiary of Banner Midstream.
(b) On May 1, 2020, an institutional investor elected to convert its remaining shares of Series B Preferred shares into 161 common shares.
(c) On April 1 and May 5, 2020, two institutional investors elected to convert their 1 Series C Preferred share into 1,379 common shares.
(d) On May 10, 2020, the Company received approximately $6,294 from accredited institutional investors holding 1,379 warrants issued on November 13, 2019 with an exercise price of $0.73 and holding 5,882 warrants with an exercise price of $0.90. The Company agreed to issue to these investors an additional number of warrants as a condition of their agreement to exercise the November 2019 warrants.
At September 30, 2020 we had cash (including restricted cash) of $1,664, and a working capital deficit of $6,731 and $16,689 as of September 30, 2020 and March 31, 2020, respectively. The ~~Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes~~decrease in ~~circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on~~ the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognizedworking capital deficit is the ~~amount by which the carrying value~~result of the ~~assets exceeds the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying value or fair value less estimated costs to sell.~~
~~Derivative Financial Instruments~~
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is remeasured at the end of each reporting period. The Black-Scholes model is used to estimatechange in the fair value of the derivative ~~liabilities.~~liabilities offset by the repayment and conversion of debt and liabilities to shares of common stock. These liabilities were assumed in the Banner Midstream in March 2020. The Company is dependent upon raising additional capital from future financing transactions to meet its needs for cash during the next 12 months. The Company raised approximately $12,253 in warrant exercises in the six months ended September 30, 2020, and can raise an additional $1,624 from the exercise of warrants that remain outstanding. We expect that the revenue generating operations of Banner Midstream will continue to improve the liquidity of the Company moving forward. However, going forward, the effect of the pandemic on the capital markets may limit our ability to raise additional capital on the terms acceptable to us at the time we need it, if at all. As disclosed in Note 1, COVID-19 has had an impact on our management’s ability to operate effectively. The challenges related to remote work and travel restrictions that we as a smaller company have faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our employees have impacted, and may continue to further impact, our ability to raise additional capital.

The Company has agreed to fund 100% of the cost, estimated to be approximately $4,700, associated with the drilling and completion of an initial deep horizontal well in the Austin Chalk formation as part of their Participation Agreement with Blackbrush Oil & Gas, L.P. The Company has agreed to pay the amount of the drilling costs into a designated escrow account by the commencement of the drilling, which is expected in January 2021.

~~Fair Value Measurements~~Contractual Obligations

~~ASC 820~~~~Fair Value Measurements~~~~defines fair value, establishes~~Our contractual obligations are included in our Notes to the Unaudited Condensed Consolidated Financial Statements. To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such 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:~~ need arise.

~~Level 1 inputs: Quoted prices for identical instruments in active markets.~~
Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
~~Level 3 inputs: Instruments with primarily unobservable value drivers.~~
Off-Balance Sheet Arrangements

As ~~of June~~September 30, ~~2017,~~2020 and March 31, ~~2017,~~2020, we had no off-balance sheet arrangements.
Cautionary Note Regarding Forward Looking Statements
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including expected increase in revenues from oil and gas operations, the funding of the initial well drilling in the Austin Chalk formation and future liquidity. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include, among other things, volatility of oil prices, the risks arising from the impact of the COVID-19 pandemic, including its future effect on the U.S. and global economies and on our Company, competition, government regulation or action, the costs and results of drilling activities, risks inherent in drilling operations, availability of equipment, services, resources and personnel required to conduct operating activities, ability to replace reserves and uncertainties related to reserve estimates, the Company’s ability to raise additional capital on acceptable terms when needed, uncertainties related to ongoing litigation, risks related to potential impact of natural disasters, and cybersecurity risks. Further information on our risk factors is contained in our filings with the SEC, including our Annual Report on Form 10-K for the year ended March 31, 2020 and registration statement on Form S-3 filed on October 16, 2020. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, as of June 30, 2017, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and
Our management, with the participation of our principal executive officer and principal financial officers, has evaluated the ~~Company’s current management, including~~effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Company’s Chief Executive Officer~~Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, our principal executive and ~~Principal Financial Officer (Principal Financial and Accounting Officer), who~~financial officers have concluded that as of the end of the period covered by this report the Company’s disclosure controls and procedures were not ~~effective.~~effective given the identification of one material weakness in such controls and procedures.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Principal Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.
We have advised our audit committee of the following material weaknesses in internal control. The weakness relates to inadequate segregation of duties consistent with control objectives. In an effort to reduce expenses, the Company reduced its accounting and administrative staff at the parent company level to the extent that achieving desired control objectives were deemed at risk.
Changes in Internal Control Over Financial Reporting

There were no material changes in our internal control over financial reporting that occurred during ~~our most recent~~the fiscal quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~These changes related to the restatements as a result of the accounting for the warrants in connection with the capital raises.~~

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~From time to time, we may become involved in litigation relating to claims arising out of our operations in~~Except as set forth below, during the normal course of business. We are not presently involved in any pending legal proceeding or litigation. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effectperiod covered by this Quarterly Report on ~~the Company.~~
~~ITEM 1A. RISK FACTORS~~
~~There~~Form 10-Q there have been no material changes to the ~~risk factors affecting our business that were discussed in Part I. “Item 1A. Risk Factors”~~description of legal proceedings set forth in our Annual Report on Form 10-K for the year ended ~~December~~March 31, ~~2016~~2020.
On August 1, 2018, the Company and Zest Labs filed ~~with~~a complaint against Walmart Inc. in the ~~SEC~~United States District Court for the Eastern District of Arkansas, Western Division. The complaint includes claims for violation of the Arkansas Trade Secrets Act, violation of the Federal Defend Trade Secrets Act, breach of contract, unfair competition, unjust enrichment, breach of the covenant of good faith and fair dealing, conversion and fraud. The Company and Zest Labs are seeking monetary damages and other related relief to the extent it is deemed proper by the court. The Company does not believe that expenses incurred in pursuing the complaint have had a material effect on the Company’s net income or financial condition for the fiscal year ended March ~~15, 2017.~~31, 2020 or any individual fiscal quarter. On October 22, 2018, the Court issued an order initially setting a trial date of June 1, 2020, which has been delayed due to COVID-19. The trial date has been rescheduled to March 29, 2021.

ITEM 1A. RISK FACTORS
See risk factors included in the registration statement on Form S-3 filed on October 16, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
~~We did not sell any securities during the quarter ended June 30, 2017, which were not registered under the Securities Act of 1933, as amended.~~
The following table contains information regarding shares of common stock withheld from employees in lieu of amounts required to satisfy minimum tax withholding requirements upon vesting of the employees’ stock during the three months ended June 30, 2017. The shares of common stock withheld to satisfy tax withholding obligations may be deemed purchases of such shares required to be disclosed pursuant to this Item 2.
(Number of shares in thousands) Total Number of Shares Purchased
Average Price Paid Per Share
(1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Amount of Shares That May Yet to Be Purchased
April 1, 2017 to April 30, 2017 36 $ 4.45
May 1, 2017 to May 31, 2017 38 $ 4.45
June 1, 2017 to June 30, 2017 54 $ 4.50
~~(1)~~ ~~The average price paid per share is the weighted-average of the fair market prices at which we calculated the number of shares withheld to cover tax withholdings for the employees.~~

~~ITEM 3. DEFAULT UPON SENIOR SECURITIES~~

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS
Exhibit Incorporated by Reference
Filed or
Furnished
No. Exhibit Description Form Date Number Herewith
2.1 Asset Purchase Agreement by and among the Company, White River E&P LLC, Rabb Resources, Ltd. and Claude Rabb, dated August 14, 2020+ 8-K 8/20/20 2.1
3.1 Articles of Incorporation, as amended S-3 10/16/20 3.1
3.2 Amended and Restated Bylaws 8-K 4/28/17 3.1
10.1 Agreement and Assignment of Oil, Gas and Mineral Lease dated September 3, 2020* Filed
31.1 Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 Filed
31.2 Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 Filed
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished**
32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished**
101.INS XBRL Instance Document Filed
101.SCH XBRL Taxonomy Extension Schema Document Filed
101.CAL XBRL Taxonomy Extension 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

~~Exhibit No.~~ + ~~Description~~Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(a)(5) of ~~Exhibit~~
~~3.1~~ ~~Amended and Restated Bylaws of Ecoark Holdings, Inc., incorporated by reference~~Regulation S-K. The Company undertakes to ~~Exhibit 3.1~~furnish to the ~~Company’s Current Reports on Form 8-K filed with the~~ SEC asa copy of ~~April 28, 2017 (File No. 000-53361)~~
~~4.1~~ ~~Form of Warrant Agreement of Ecoark Holdings, Inc., incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC as of May 23, 2017 (File No. 000-53361)~~
~~4.2~~ ~~Form of Warrant Agreement of Ecoark Holdings, Inc., incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC as of April 3, 2017 (File No. 000-53361)~~
~~10.1~~ Form of Securities Purchase Agreement, dated May 22, 2017, by and between Ecoark Holdings, Inc. and various purchasers named therein, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC as of May 23, 2017 (File No. 000-53361)
~~10.2~~ Asset Purchase Agreement by and between Ecoark Holdings, Inc., Eco3d Acquisition LLC and Eco3d LLC, dated as of April 10, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC as of April 14, 2017 (File No. 000-53361)
~~10.3~~ Exchange Agreement, dated May 18, 2017, by and among Ecoark Holdings, Inc., Zest Labs, Inc., 440labs, Inc., SphereIt, LLC, Kenneth Wilner, David Crisafi, and Scott Durgin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated and filed with the SEC on May 24, 2017 (File No. 000-53361))
~~10.4~~ Form of Employment Agreement for 440Labs, Inc. Executives (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC on May 24, 2017 (File No. 000-53361))
~~10.5~~ Ecoark Holdings, Inc. 2017 Omnibus Incentive Plan, effective June 13, 2017 (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 dated and filed with the SEC on June 14, 2017 (File No. 333-218748))
~~10.6~~ Form of Stock Option Agreement under the Ecoark Holdings, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC on June 20, 2017 (File No. 000-53361))
~~10.7~~ Form of Restricted Stock Award Agreement under the Ecoark Holdings, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated and filed with the SEC on June 20, 2017 (File No. 000-53361))
~~10.8~~ Form of Restricted Stock Unit Award Agreement under the Ecoark Holdings, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated and filed with the SEC on June 20, 2017 (File No. 000-53361))
~~10.9~~ Employment Agreement by and between Ecoark Holdings, Inc. and Stephen Dacus, dated as of May 17, 2017 (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q dated and filed with the SEC on August 9, 2017 (File No. 000-53361)).
31.1* ~~Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002~~
31.2* ~~Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002~~
32.1* ~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
32.2* ~~Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
~~101.INS~~ ~~XBRL Instance Document~~
~~101.SCH~~ ~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~ ~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.DEF~~ ~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~ ~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~ ~~XBRL Taxonomy Extension Presentation Linkbase Document~~any omitted schedule and/or exhibit upon request.

* ~~Filed herewith.~~Portions of this exhibit have been omitted as permitted by the rules of the SEC. The information excluded is both (i) not material and (ii) would be competitively harmful if publicly disclosed. The Company undertakes to submit a marked copy of this exhibit for review by the SEC staff, to the extent it has not been previously provided, and provide supplemental materials to the SEC staff promptly upon request.
** This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at Ecoark Holdings, Inc., 303 Pearl Parkway Suite #200, San Antonio, Texas 78215.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ecoark Holdings, Inc.
~~(Registrant)~~

Date: ~~December 10, 2019~~November 6, 2020 By: /s/ RANDY MAY
Randy May
Chief Executive Officer
~~(Principal Executive Officer)~~

Date: ~~December 10, 2019~~November 6, 2020 By: /s/ WILLIAM B. HOAGLAND
William B. Hoagland
~~Principal~~Chief Financial ~~and Accounting~~ Officer

51
52

	(Dollars in thousands, except per share data)
	June 30, 2017 (Restated)			March 31, 2017 (Restated)
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash ($265 pledged as collateral for credit)	$	11,562		$	8,648
Accounts receivable, net of allowance of $25 and $76 as of June 30, and March 31, 2017, respectively		1,462			1,627
Inventory, net of reserves		2,775			2,104
Prepaid expenses		1,227			2,006
Assets held for sale - production equipment		158			158
Other current assets		504			-
Current assets – discontinued operations		-			1,404
Total current assets		17,688			15,947
NON-CURRENT ASSETS
Property and equipment, net		2,254			2,308
Intangible assets, net		2,918			1,567
Non-current assets – discontinued operations		-			366
Other assets		53			53
Total non-current assets		5,225			4,294
TOTAL ASSETS	$	22,913		$	20,241

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,267		$	1,720
Accrued liabilities		1,138			2,620
Derivative liabilities		7,082			3,351
Current liabilities – discontinued operations		-			463
Total current liabilities		9,487			8,154
NON-CURRENT LIABILITIES
Long-term debt, net of current portion		500			500
Long-term debt, net of current portion - related party		100			100
COMMITMENTS AND CONTINGENCIES
Total liabilities		10,087			8,754

STOCKHOLDERS' EQUITY (Number of shares rounded to thousands)

Preferred stock, $0.001 par value; 5,000 shares authorized; none issued		-			-
Common stock, $0.001 par value; 100,000 shares authorized, 45,528 shares issued and 45,400 shares outstanding as of June 30, 2017, and 42,330 issued and outstanding as of March 31, 2017		45			42
Additional paid-in-capital		93,021			80,845
Accumulated deficit		(79,663	)		(69,400	)
Treasury stock, at cost, 128 shares as of June 30, 2017		(577	)		-
Total stockholders' equity		12,826			11,487
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	22,913		$	20,241

	(Dollars in thousands, except per share data)
	2017			2016
	(Restated)			(Restated)
CONTINUING OPERATIONS:
REVENUES
Revenue from product sales	$	2,462		$	2,362
Revenue from services		44			31
		2,506			2,393
COST OF REVENUES
Cost of product sales, including $67 and $46 of depreciation expense on manufacturing equipment in 2017 and 2016, respectively		2,753			2,433
Cost of services		41			23
		2,794			2,456
GROSS LOSS		(288	)		(63	)
OPERATING EXPENSES:
Salaries and salary related costs, including share-based compensation of $8,551 and $312 in 2017 and 2016, respectively		9,678			1,262
Professional fees and consulting, including share-based compensation of $1,201 and $2,500 in 2017 and 2016, respectively		1,907			3,161
Selling, general and administrative		499			433
Depreciation and amortization		181			109
Research and development		1,620			943
Total operating expenses		13,885			5,908
Loss from continuing operations before other income (expenses)		(14,173	)		(5,971	)

OTHER INCOME (EXPENSE):
Change in fair value of derivative liability		3,346			-
Interest expense, net of interest income		(15	)		(87	)
Total other income (expense)		3,331			(87	)
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND DISCONTINUED OPERATIONS		(10,842	)		(6,058	)
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations		(57	)		184
Gain on disposal of discontinued operations		636			-
Total discontinued operations		579			184
PROVISION FOR INCOME TAXES FROM CONTINUING AND DISCONTINUED OPERATIONS		-			-
NET LOSS		(10,263	)		(5,874	)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		-			64
NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST	$	(10,263	)	$	(5,938	)

NET LOSS PER SHARE
Basic: Continuing operations	$	(0.24	)	$	(0.19	)
Discontinued operations	$	-		$	-
Total	$	(0.24	)	$	(0.19	)
Diluted: Continuing operations	$	(0.24	)	$	(0.19	)
Discontinued operations	$	-		$	-
Total	$	(0.24	)	$	(0.19	)

SHARES USED IN CALCULATION OF NET LOSS PER SHARE (in thousands)
Basic		43,247			30,909
Diluted		43,247			30,909

	(Dollar amounts and number of shares in thousands)
	Preferred				Common Stock						Additional Paid-in			Accumulated			Treasury
	Shares		Amount		Shares			Amount			Capital			Deficit			Stock			Total

Balance at March 31, 2017 (Restated)		-	$	-		42,330		$	42		$	80,845		$	(69,400	)	$	-		$	11,487

Shares issued for cash in private placement, net of expenses (Restated)		-		-		2,500			3			2,026			-			-			2,029

Share-based compensation - stock - Board of Directors		-		-		28			-			125			-			-			125

Share-based compensation - stock - employees		-		-		581			1			7,047			-			-			7,048

Share-based compensation - options - employees		-		-		-			-			3			-			-			3

Share-based compensation - employment agreements		-		-		300			-			1,500			-			-			1,500

Warrant conversion -cashless		-		-		49			-			-			-			-			-

Shares issued for 440labs acquisition		-		-		300			-			1,500			-			-			1,500

Shares received and canceled - sale of Eco3d		-		-		(560	)		(1	)		(25	)		-			-			(26	)

Purchase of treasury shares from employees		-		-		-			-			-			-			(577	)		(577	)

Net loss for the period		-				-			-			-			(10,263	)		-			(10,263	)

Balance at June 30, 2017 (Restated)		-	$	-		45,528		$	45		$	93,021		$	(79,663	)	$	(577	)	$	12,826

	June 30, 2017		March 31, 2017
	(Unaudited)
Cash	$	-	$	34
Accounts receivable, net of allowance		-		1,293
Prepaid expenses		-		67
Other current assets		-		10
Current assets - discontinued operations	$	-	$	1,404

Property and equipment, net	$	-	$	362
Other assets		-		4
Non-current assets - discontinued operations	$	-	$	366

Accounts payable	$	-	$	67
Accrued liabilities		-		396
Current liabilities - discontinued operations	$	-	$	463

Current asset
Cash	$	-
Total current assets	$	-

Property and equipment, net	$	249
Non-current assets	$	249

Accounts payable	$	228
Current liabilities	$	228

	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Revenue:
Software as a Service (“SaaS”)	$	-	$	16	$	-	$	28
Professional Services		-		28		-		51
Financial Services		104		-		194		-
Oil and Gas Production		525		-		676		-
Transportation Services		2,575		-		4,549		-
Fuel Rebate		31		-		77		-
Equipment Rental		43		-		95		-
	$	3,278	$	44	$	5,591	$	79

	June 30, 2017			March 31, 2017			September 30, 2020			March 31, 2020
	(Unaudited)
Machinery and equipment	$	2,769		$	2,724
Zest Labs freshness hardware							$	2,493		$	2,493
Computers and software costs		406			406			222			222
Furniture and fixtures		107			107
Leasehold improvements		4			4
Land								140			-
Buildings								236			-
Leasehold improvements – Pinnacle Frac								18			18
Machinery and equipment - Technology								200			200
Machinery and equipment – Commodity								3,458			3,405
Total property and equipment		3,286			3,241			6,767			6,338
Accumulated depreciation and impairment		(1,032	)		(933	)		(2,674	)		(2,373	)
Property and equipment, net	$	2,254		$	2,308		$	4,093		$	3,965

	June 30,			March 31,			September 30, 2020			March 31, 2020
	2017			2017
	(Unaudited)
Customer lists	$	5,008		$	5,008
Patents		1,090			1,090		$	1,013		$	1,013
Customer relationships								2,100			2,100
Non-compete agreements – Banner Midstream								250			250
Outsourced vendor relationships		1,016			-			1,017			1,017
Non-compete agreements		419			-
Goodwill, net of impairment		647			582
Non-compete agreements – Zest Labs								340			340
Total intangible assets		8,180			6,680			4,720			4,720
Accumulated amortization and impairment		(5,262	)		(5,113	)		(2,512	)		(2,370	)
Intangible assets, net	$	2,918		$	1,567		$	2,208		$	2,350

Acquisition – Trend Discovery	$	3,223
Acquisition – Banner Midstream		7,002
Goodwill – September 30, 2020 and March 31, 2020	$	10,225

	September 30, 2020		March 31, 2020
Professional fees and consulting costs	$	39	$	106
Vacation and paid time off		92		126
Legal fees		84		503
Compensation		323		865
Interest		369		673
Insurance		1,110		548
Other		370		215
Total	$	2,387	$	3,036

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

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2015		659		$	2.50		2.1
Granted		125		$	2.50		0.4
Exercised		-
Forfeited		(125	)	$	2.50
Balance at December 31, 2016		659		$	2.50		1.2
Granted		250		$	2.50		1.0
Exercised		(25	)	$	2.50
Forfeited		-
Balance at March 31, 2017		884		$	2.50		1.0
Granted		-
Exercised		-
Forfeited		-
Balance at June 30, 2017		884		$	2.50		0.8
Intrinsic value of options	$	981

	~~Number of Shares~~
~~Available under the 2013 Incentive Stock Plan~~		~~5,500~~
~~Granted pre-Merger~~		~~(13~~	)
~~Shares canceled pre-Merger~~		10
~~Available at the Merger date~~		~~5,497~~
~~Shares granted post-Merger~~		~~(476~~	)
~~Shares forfeited~~		-
~~Balance at December 31, 2016~~		~~5,021~~
~~Shares granted~~		~~(5,010~~	)
~~Shares forfeited~~		-
~~Balance at March 31, 2017~~		11
~~Shares granted~~		-
~~Shares forfeited~~		65
~~Balance at June 30, 2017~~		76
~~Vested stock awards at June 30, 2017~~		~~1,581~~

	Number of Shares Issued		Weighted Average Remaining Contractual Life (Years)

Balance at December 31, 2015		3
Issued post-Merger		159		1.9
Balance at December 31, 2016		162
Issued		813		1.9
Balance at March 31, 2017		975		1.8
Issued		606		1.5
Balance at June 30, 2017		1,581		1.5

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)

2017 Omnibus Incentive Plan
Granted		400	$	3.36		10.0
Exercised		-
Forfeited		-
Balance at June 30, 2017		400	$	3.36		10.0
Intrinsic value of options	$	100

			Weighted
			Average
	Number of		Remaining
	Performance		Contractual
	Shares		Life (Years)
2017 Omnibus Incentive Plan
Granted		135		3.0
Forfeited		-
Balance at June 30, 2017		135		3.0
Vested stock awards at June 30, 2017		-

	Number of		Weighted Average Remaining
	Service		Contractual
	Shares		Life (Years)
2017 Omnibus Incentive Plan
Granted		1,105		3.0
Forfeited		-
Balance at June 30, 2017		1,105		3.0

	~~Number of Shares~~
~~Available under the 2017 Omnibus Incentive Plan~~		~~4,000~~
~~Shares granted~~		~~(1,668~~	)
~~Shares forfeited~~		-
~~Balance at June 30, 2017~~		~~2,332~~
~~Vested stock awards at March 31, 2017~~		28

	June 30, 2017			March 31, 2017
Net operating loss carryover	$	25,243		$	20,961
Depreciable and amortizable assets		871			1,464
Share-based compensation		2,452			1,003
Accrued liabilities		128			122
Inventory reserve		112			119
Change in fair value of derivative liabilities		(1,171	)		(290	)
Allowance for bad debts		137			154
Other		5			4
Less: valuation allowance		(27,777	)		(23,537	)
Net deferred tax asset	$	-		$	-

June 30, 2017	Pioneer Products			Zest Labs			Total
Segmented operating revenues	$	2,505		$	1		$	2,506
Cost of revenues		2,781			13			2,794
Gross loss		(276	)		(12	)		(288	)
Total operating expenses net of depreciation, amortization, and interest expense, net		1,264			12,440			13,704
Depreciation and amortization		53			128			181
Change in fair value of derivative liabilities		-			(3,346	)		(3,346	)
Interest expense, net of interest income		-			15			15
Loss from continuing operations	$	(1,593	)	$	(9,249	)	$	(10,842	)
Segmented assets
Property and equipment, net	$	2,056		$	198		$	2,254
Intangible assets, net	$	747		$	2,171		$	2,918
Capital expenditures	$	33		$	12		$	45

June 30, 2016	Pioneer Products			Zest Labs			Total
Segmented operating revenues	$	2,387		$	6		$	2,393
Cost of revenues		2,441			15			2,456
Gross loss		(54	)		(9	)		(63	)
Total operating expenses net of depreciation, amortization, and interest expense, net		413			5,386			5,799
Depreciation and amortization		57			52			109
Interest expense, net of interest income		17			70			87
Loss from continuing operations	$	(541	)	$	(5,517	)	$	(6,058	)
Segmented assets
Property and equipment, net	$	2,908		$	270		$	3,178
Intangible assets, net	$	2,280		$	833		$	3,113
Capital expenditures	$	109		$	77		$	186

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

Revenues	$	2,891
Net loss attributable to controlling interest	$	(6,585	)
Net loss per share	$	(0.21	)

	Six Months Ended			Year Ended
	September 30, 2020			March 31, 2020			Inception
Expected term		4.58 - 5 years			4.67-4.83 years			5.00 years
Expected volatility		94 - 101	%		95	%		91% - 107	%
Expected dividend yield		-			-			-
Risk-free interest rate		0.61 - 0.73	%		0.70	%		1.50% - 2.77	%

Beginning balance as of March 31, 2020	$	2,775
Issuances of warrants – derivative liabilities		7,904
Warrants exchanged for common stock		(22,697	)
Change in fair value of warrant derivative liabilities		16,382
Ending balance as of September 30, 2020	$	4,364

	September 30, 2020		March 31, 2020
Property acquired from Shamrock	$	1,954	$	1,970
Properties acquired from White River		3,992		4,165
Asset purchase – June 2020		2		-
Properties acquired from Rabb Resources		3,204		-
Purchase – September 4, 2020		1,500		-
Purchase – September 30, 2020		760		-
Total OGML Properties	$	11,412	$	6,135

Activity Category	March 31, 2020		Adjustments (1)			September 30, 2020
Proved Developed Producing Oil and Gas Properties
Cost	$	167	$	520		$	687
Accumulated depreciation, depletion and amortization		-		(5	)		(5	)

Total	$	167	$	515		$	682

Undeveloped and Non-Producing Oil and Gas Properties
Cost	$	5,968	$	4,883		$	10,851
Accumulated depreciation, depletion and amortization		-		(121	)		(121	)

Total	$	5,968	$	4,762		$	10,730

Grand Total	$	6,135	$	5,277		$	11,412

	September 30, 2020			March 31, 2020
Credit facility – Trend Discovery SPV 1, LLC (a)	$	-		$	-
Senior secured bridge loan – Banner Midstream (b)		-			2,222
Note payable – LAH 1 (c)		-			110
Note payable – LAH 2 (d)		-			77
Note payable – Banner Midstream 1 (e)		-			303
Note payable – Banner Midstream 2 (f)		-			397
Note payable – Banner Midstream 3 (g)		-			500
Merchant Cash Advance (MCA) loan – Banner Midstream 1 (h)		-			361
MCA loan – Banner Midstream 2 (i)		-			175
MCA loan – Banner Midstream 3 (j)		-			28
Note payable – Banner Midstream – Alliance Bank (k)		1,146			1,239
Commercial loan – Pinnacle Frac – Firstar Bank (l)		772			952
Auto loan 1 – Pinnacle Vac – Firstar Bank (m)		34			40
Auto loan 2 – Pinnacle Frac – Firstar Bank (n)		45			52
Auto loan 3 – Pinnacle Vac – Ally Bank (o)		38			42
Auto loan 4 – Pinnacle Vac – Ally Bank (p)		40			47
Auto loan 5 – Pinnacle Vac – Ally Bank (q)		40			44
Auto loan 6 – Capstone – Ally Bank (r)		85			97
Tractor loan 7 – Capstone – Tab Bank (s)		208			235
Equipment loan – Shamrock – Workover Rig (t)		-			50
Ecoark – PPP Loan (u)		386			-
Pinnacle Frac Transport – PPP Loan (v)		1,483			-
Total long-term debt		4,277			6,971
Less: debt discount		(-	)		(149	)
Less: current portion		(719	)		(6,401	)
Long-term debt, net of current portion	$	3,558		$	421

(c)	Unsecured note payable previously issued April 2, 2018 which was assumed by Banner Midstream in the acquisition of a previous entity. The amount was past due and bears interest at 10% per annum. This amount along with accrued interest of $22 was assumed on March 27, 2020 in the acquisition of Banner Midstream. Amount was paid off in May 2020, and $24 of accrued interest remains at September 30, 2020.

(d)	Unsecured note payable previously issued April 2, 2018 which was assumed by Banner Midstream in the acquisition of a previous entity. The amount was past due and bears interest at 10% per annum. This amount along with accrued interest of $22 was assumed on March 27, 2020 in the acquisition of Banner Midstream. Amount was paid off in May 2020, and $24 of accrued interest remains at September 30, 2020.

(f)	Unsecured notes payable issued in June and July 2019 to an unrelated third party at 10% interest. There are three notes to this party in total. This amount along with accrued interest of $29 was assumed on March 27, 2020 in the acquisition of Banner Midstream. These notes were converted in May 2020.

(g)	Unsecured note payable issued October 2019 to an unrelated third party at 10% interest. This amount along with accrued interest of $23 was assumed on March 27, 2020 in the acquisition of Banner Midstream. The balance of this note and remaining accrued interest was converted into 430 shares of common stock in the Company’s fiscal quarter ended September 30, 2020.