| ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Dollar amounts and numbers of shares that
follow in this report are presented in thousands, except per share amounts. Ecoark Holdings Inc. (“Ecoark Holdings”
or the “Company”) is a diversified holding company, incorporated in the State of Nevada on November 19, 2007. Through Ecoark
Holdings 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 preparing to
launch a Bitcoin mining operation. Since the acquisition of Banner Midstream Corp. 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. The Company’s principal
subsidiaries consist of Ecoark, Inc. (“Ecoark”), a Delaware corporation which is the parent of Zest Labs, Inc. (“Zest
Labs”), Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and Agora Digital Holdings, Inc., a Nevada
corporation (“Agora”) who was assigned the membership interest in Trend Discovery Holdings LLC, a Delaware limited liability
corporation (all references to “Trend Holdings” or “Trend” are now synonymous with Agora) from the Company on
September 17, 2021 upon its formation. On March 27, 2020, the Company and Banner Energy
Services Corp., a Nevada corporation (“Banner Parent”), entered into a Stock Purchase and Sale Agreement (the “Banner
Purchase Agreement”) to acquire Banner Midstream Corp., a Delaware corporation (“Banner Midstream”). Pursuant to the
acquisition, Banner Midstream became a wholly owned subsidiary of the Company and Banner Parent received shares of the Company’s
common stock in exchange for all of the issued and outstanding shares of Banner Midstream. Banner Midstream 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 20,000 cumulative acres of active mineral
leases in Texas, Louisiana, and Mississippi. 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.
One of the leases acquired in this transaction was sold in November 2020. 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 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 103 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 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 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 GeoTerre, LLC, an unrelated privately held limited liability company (the “Assignor”),
to conduct drilling of wells in the Austin Chalk formation. Pursuant to the Participation Agreement, the
Company and White River SPV pre-funded a majority of the cost, approximately $5,800, associated with the drilling and completion of an
initial deep horizontal well in the Austin Chalk formation of which $3,387 was expensed as drilling costs. The Participation Agreement
required the drilling costs that were paid into a designated escrow account at the commencement of the drilling in January 2021, which
it was. BlackBrush 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 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. Prior to payout, the Company
will own 90% of the working interest and 67.5% of the net revenue interest in each well. Following payout, the Company will own 70% of
working interest and 52.5% net revenue interest in each well. 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 and/or maintain leasehold by paying its proportionate share of any rental payments. 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 prices of these leases were $126,
$312 and $312, respectively, totaling $750. The consideration paid to the Sellers was in the form of 68 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. In February and March 2021, the Company acquired
additional leases for $916 under the Blackbrush/Deshotel lease related to the Participation Agreement. On August 16, 2021 the Company and Shamrock Upstream Energy, LLC, a
wholly-owned subsidiary of the Company entered into an agreement with a privately-held limited liability company to acquire working interests
in the Luling Prospect for $250. No other assets were acquired in this transaction, nor was there any recognized ARO for this working
interest. 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 1, 2021 the Company and White River Energy, LLC, a wholly-owned
subsidiary of the Company entered into an agreement with several individuals to acquire working interests in the various leases in Concordia,
LA for $54. No other assets were acquired in this transaction, nor was there any recognized ARO for this working interest. 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. Effective with the opening of trading on December
17, 2020, the Company effected a one-for-five reverse split of its issued and outstanding common stock and a simultaneous proportionate
reduction of its authorized common stock. The reverse stock split was implemented without obtaining stockholder approval as permitted
by Nevada law, and the authorized common stock was proportionately reduced to 40,000 shares. All share and per share figures are reflected
on a post-split basis herein. Effective December 29, 2020, the Company amended
its Articles of Incorporation to reduce the authorized common stock from 40,000 shares to 30,000 shares. On December 31, 2020, the Company completed a
registered direct offering, whereby the Company issued 889 shares of common stock and 889 accompanying warrants to one institutional
investor under the effective Form S-3 at $9.00 per share and accompanying warrant for a total of $8,000 in gross proceeds, before placement
agent fees and other offering expenses. The warrants are exercisable for a two-year term at a strike price of $10.00 per share. The Company
granted 62 warrants to the placement agent as compensation in addition to the $560 cash commission received by the placement agent. The
placement agent warrants are exercisable at $11.25 per share and expire on January 2, 2023. On April 9, 2021,
a Little Rock, Arkansas jury awarded Ecoark and Zest a total of $115 million in damages which includes $65 million in compensatory damages
and $50 million in punitive damages and found Walmart Inc. liable on three counts. The federal jury found that Walmart Inc. misappropriated
Zest’s trade secrets, failed to comply with a written contract, and acted willfully and maliciously in misappropriating Zest’s
trade secrets. The Company has filed post-trial motions to add an award for their attorneys’ fees as the prevailing party in the
litigation. In addition to other post-trial motions, Walmart, Inc. has filed a renewed motion for judgment as a matter of law or,
in the alternative, for remittitur or a new trial. As of the date of this Report, the court has not ruled on any of the post-trial motions Trend Holdings formed four subsidiaries: Bitstream
Mining, LLC, a Texas Limited Liability Corp. (“Bitstream”) on May 16, 2021, REStream Processing LLC, a Texas Limited Liability
Corp (“REStream”) on May 16, 2021, Trend Discovery Exploration LLC, a Texas Limited Liability Corp. (“Trend Exploration”)
on May 27, 2021, and OTZI, LLC, a Delaware Limited Liability Corp. (“OTZI”) on September 2, 2021, in addition to Barrier
Crest, LLC (“Barrier Crest”) that was acquired along with Trend Capital Management, Inc. (“TCM”) that was acquired
by Ecoark on May 31, 2019. Agora was organized by Ecoark to enter the digital
asset mining business. Because of regulatory uncertainty over digital assets being deemed to be securities, Agora’s initial focus
is on mining Bitcoin which the Securities and Exchange Commission (the “SEC”) administratively determined is not a security.
Because of regulatory concerns and the changing regulatory environment, Agora intends to seek opportunities to engage with cryptocurrencies
that do not involve the offer or sale of any securities. The Company intends to issue a stock dividend
through a pro rata distribution of Agora’s common stock to Ecoark’s common shareholders and holders of common stock equivalents.
Ecoark plans to distribute 80% of the Agora common stock it holds to its shareholders as of a future record date to be determined upon
completion of regulatory compliance. Ecoark plans to retain the remaining 20% ownership in Agora on its balance sheet. As a result of
the approval by the board of directors of the Company to divest Agora, the Company, has accounted for this as a disposal other than by
sale. Assets to be disposed of other than by sale should continue to be classified as held and used until they are disposed of. Upon
disposal, the Company must assess whether the disposed of assets qualify for discontinued operations reporting. If so, the Company will
apply the presentation and disclosure requirements of ASC 205-20, and if not, the Company will apply the presentation and disclosure
requirements of ASC 360-10. The Company assigned its membership interest
in Trend Holdings and its related wholly owned subsidiaries to Agora on September 22, 2021, for the sale of the initial one hundred shares
for ten dollars. On October 1, 2021, the Company purchased 41,671 shares of Agora common stock for $4,167 which Agora used to purchase
equipment to commence the Bitstream operations. On August 4, 2021, the Company’s common
stock commenced trading on the Nasdaq Capital Market. On October 6, 2021, the Company held a Special
Meeting of Stockholders, at which the stockholders approved (a) an amendment to the Articles of Incorporation to increase the number
of shares of authorized common stock of the Company from 30,000 shares to 40,000 shares; (b) an amendment to the Ecoark Holdings, Inc.
2017 Omnibus Incentive Plan to increase the number of shares of common stock authorized for issuance under this plan from 800 shares
to 1,300 shares; and (c) the issuance of 272 restricted stock units and an additional 64 restricted stock units to the President and
director of the Company under this plan, in exchange for the cancellation of 672 previously issued stock options. Overview of Agora Digital Holdings, Inc. Bitstream Bitstream was organized to be our principal cryptocurrency
subsidiary. Bitstream has entered into a series of agreements including arranging for a reliable and economical electric power source
needed to efficiently mine Bitcoin, ordering miners, housing infrastructure and other infrastructure to mine Bitcoin and locating a third-party
hosting service to operate the miners and the service’s more advanced miners. Agora has spent (and agreed to spend) between $12-$14
million in connection with these agreements, not including future revenue sharing. Agora anticipates that the initial miners will begin
operating in early November and by late December or January 2022, the Bitmain S19 Pro miners supplied by the hosting service will be operational.
As of October 25, 2021, Bitstream has paid unaffiliated third parties a total of $4,755 and is obligated to pay certain of these third
parties an additional $8,686 pursuant to the arrangements described below. Bitstream anticipates that they will deploy and
operate modularized data centers (facilities) with the sole purpose of mining digital assets, with Bitcoin initially as the focus. Agora
anticipates powering these data centers by acquiring a long-term power contract to purchase electric power from the electric grid in
Texas. Once the business is operational, Bitstream intends to continuously add data center facilities by reinvesting their revenues.
All data centers will be remotely managed with onsite personnel for servicing and troubleshooting any operational issues. Bitstream plans
to utilize the energy to power its energy intensive operations of digital asset mining. Additionally, if Texas experiences another power
shortage during the winter or summer months from extreme weather conditions, Bitstream would be able to arbitrage power at favorable
margins. Bitstream will do this by temporarily shutting down their cryptocurrency mining operations and selling their purchased power
back to the grid at favorable margins. Last winter, during the blackout, the price per kWh exceeded $10 at its peak imbalance, whereas
Bitstream’s power cost is expected to be $0.023 per kWh. Bitstream has
● entered into a letter of
intent to obtain a source of electric power in West Texas, including the initial 12 megawatts (“MW”) of power plus an
additional 30 MW which have already been secured;
● paid the power management
company $1,096 which includes a $1,000 development fee and is negotiating a definitive agreement (the “Power Agreement”)
which if executed will allow for the increase of the facility’s electrical capacity to up to 60 MW; and ● ordered 5,000 used Canaan
Avalon 841 13 tera hash per second (“TH/s”) miners for $1,350, plus shipping costs to be delivered on 1,000-unit increments
through December 2021, of which 2,000 miners have been delivered as of November 1, 2021. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Mining Equipment Because Bitstream has secured a source for 42 MW of electrical power
as more fully described below and expects to increase the capacity through conditional and unconditional rights to a number of sites across
West Texas to up to 372 MW assuming this can be done on acceptable terms. In September 2021 Bitstream ordered 5,000 used Canaan Avalon
841 13 TH/s miners for $1,350. Delivery of the first shipment of 2,000 of these miners occurred in October 2021. Bitstream’s plan
is to use trailer or shipping container-like units as housing infrastructure to house our miners. Bitstream will either build their own
or partner with another third-party vendor to build entry level housing infrastructure to deploy the initial mining equipment in November.
In August 2021, Bitstream entered into an agreement with a third party which will supply Bitstream with more advanced housing infrastructure
in exchange for approximately $375. Delivery of these enhanced housing infrastructure is expected in late 2021 or early 2022. In September 2021, Bitstream entered into a binding
agreement referred to as a Memorandum of Understanding with Elite Mining Inc. (the “Hosting Company”) that will supply high
speed miners, host the Company’s data center and operate the miners it installs. In Phase 1 which is a beta test phase, Bitstream
paid $600 to the Hosting Company which will also supply 6 MW capacity’s worth of very high speed and efficient miners by mid-January
2022. Bitstream has an option to purchase these high-speed miners at replacement cost (which may be higher than current cost). The Hosting
Company may provide hosting for third parties during Phase 1 which reduces the cash flow for Bitstream. This agreement will also allow
Bitstream to utilize a minimum of 25 MW of electricity under the initial power purchase agreement in Phase 2. Bitstream can terminate
the hosting agreement as soon as Bitstream has secured sufficient capital to replace the hosted Bitmain S19 Pros with their own. Once
Bitstream purchases the high-efficiency miners, the Hosting Company cannot host third parties. The Hosting Company uses immersion cooling, and
other technological enhancements, for the miners it will install for Bitstream. Immersion cooling is a technique where Bitcoin mining
units are submerged in a dielectric fluid to keep the integrated circuits operating at lower temperatures. When successful, this has
the potential to: prolong equipment life, enhance hashing efficiencies, and provides the opportunity to “overclock” the processors,
i.e., running at speeds beyond factory specified design. Overclocking, including when assisted by immersion cooling, is a technique that
can be used to increase a miner’s overall hash rate. Phase 2 is planned to begin in May 2022 which
is subject to Bitstream agreeing to proceed. If Bitstream elects to enter Phase 2, it will be required to loan the Hosting Company the
funds to develop a production facility in Texas on terms to be negotiated. Bitstream will have certain rights to the production facility
capacity from Phase 2 and will pay the Hosting Company for its services. In October 2021 Bitstream secured an additional
30 MWs of electrical capacity at a different West Texas location. This supplements the Company’s prior agreement to secure 12 MWs
and as a result the Company will have a total of 42 MWs of electric power for immediate use and benefit to Bitstream. Bitstream also
plans to participate in the Electric Reliability Council of Texas’ (“ERCOT”) responsive reserve market by relinquishing
its power back to the Texas grid as power stabilization events are needed. Additionally, Bitstream has procured mining infrastructure
to power the 42 MWs and expects the equipment and infrastructure to be delivered over the next 120 days. This mining infrastructure includes
twenty-one 2,600 kilo-volt amp (KVA) or similar transformers and the Company’s first shipment of Bitcoin mining application-specific
integrated circuits (“ASIC”). The Company has agreed to pay a total $3,376 for the new equipment and infrastructure as follows:
(i) $506 upon the order which has been paid, (ii) $506 by November 11, 2021, and (iii) the remaining $2,364 by December 15, 2021. In connection with the increase in electrical capacity,
Bitstream entered into a second binding letter of intent with the power management company pursuant to which the Company has paid a total
of $2,955, consisting of a $2,628 development fee and a $327 reimbursement for payments made by the power management company to the electric
utility to secure the power. In addition, the Company agreed to pay a total of $450 upon the power management company signing a binding
agreement to acquire or lease 20 or more acres of usable land for Bitstream’s facility and construct a transmission line to the
mining site. Once the business is operational, Bitstream intends
to continuously add data center platforms by reinvesting cash and potentially utilizing leverage to scale operations. All data centers
will be remotely managed with onsite personnel for servicing and troubleshooting any operational issues. Barrier Crest, provides fund administration and
related services for small hedge funds. Trend Discovery Holdings LLC (“Trend Discovery”) owns an entity which is the general
partner but not the investment manager of two investment funds. These investment funds own shares of Ecoark and one also owns warrants
of Ecoark. Trend Exploration was assigned an 80% working
interest in fourteen wells from White River SPV 2, LLC and White River E&P LLC (“Assignors”) on July 1, 2021. In accordance
with ASC 205-20, there is a scope exception for oil and gas properties that use the full-cost method of accounting. Under the full-cost
method of accounting, all costs associated with property acquisition, exploration, and development activities are capitalized to cost
centers, which are established on a country-by-country basis. The definition of discontinued operations, however, applies to disposals
of components of an entity, which is defined as the lowest level for which identifiable cash flows are largely independent of the cash
flows of other assets and liabilities. As a result, the definition of discontinued operations will not be operable under the full-cost
method of accounting because of differences in the tracking and allocation of costs, which is at a much higher level. The Company as
a result has not reflected the working interest on the fourteen wells in discontinued operations. The Trend Exploration business is identical
to the business noted herein for Banner Midstream. Principles of Consolidation The condensed consolidated financial statements
of Ecoark Holdings and its subsidiaries and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the
opinion of management, all adjustments necessary for the fair presentation of the condensed consolidated financial statements have been
included. Such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial
statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States
(“GAAP”) and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 2021. Therefore, the interim unaudited condensed consolidated financial statements should be read in conjunction
with that Annual Report on Form 10-K. On May 31, 2019, the Company entered into an Agreement and Plan of
Merger (the “Merger Agreement”) with Trend Discovery Holdings Inc., a Delaware corporation for the Company to acquire 100%
of Trend Discovery Holdings, LLC pursuant to a merger of Trend with and into the Company (the “Merger”). Trend Discovery Holdings,
Inc. ceased doing business upon completion of the merger and Trend Discovery Holdings LLC is the subsidiary of the Company. Upon the formation
of Agora on September 17, 2021, Ecoark assigned the membership interest they owned in Trend Holdings to Agora on September 22, 2021 when
the Company purchased one hundred shares of Agora common stock for ten dollars. The Company intends to issue a stock dividend
through a pro rata distribution of Agora’s common stock to Ecoark’s common shareholders and holders of common stock equivalents.
Ecoark plans to distribute 80% of the Agora common stock it holds to its shareholders as of a future record date to be determined upon
completion of regulatory compliance. Ecoark plans to retain the remaining 20% ownership in Agora on its balance sheet. As a result of
the approval by the board of directors of the Company to divest Agora, the Company, has accounted for this as a disposal other than by
sale. Assets to be disposed of other than by sale should continue to be classified as held and used until they are disposed of. Upon
disposal, the Company must assess whether the disposed of assets qualify for discontinued operations reporting. If so, the Company will
apply the presentation and disclosure requirements of ASC 205-20, and if not, the Company will apply the presentation and disclosure
requirements of ASC 360-10. On March 27, 2020, the Company and Banner Parent,
entered into the Banner Purchase Agreement to acquire Banner Midstream. Pursuant to the acquisition, Banner Midstream became a wholly
owned subsidiary of the Company and Banner Parent received shares of the Company’s common stock in exchange for all of the issued
and outstanding shares of Banner Midstream. The Company applies the guidance of Topic 810
Consolidation Reclassifications The Company has reclassified certain amounts
in the September 30, 2020 unaudited condensed consolidated financial statements to be consistent with the September 30, 2021 presentation. Use of Estimates The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to,
management’s estimate of provisions required for uncollectible accounts receivable, fair value of assets held for sale and assets
and liabilities acquired, impaired value of equipment and intangible assets, including goodwill, asset retirement obligations, estimates
of discount rates in lease, liabilities to accrue, fair value of derivative liabilities associated with warrants, cost incurred in the
satisfaction of performance obligations, permanent and temporary differences related to income taxes and determination of the fair value
of stock awards. Actual results could differ from those estimates. The 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 proved
and unproved oil and gas properties. There are numerous uncertainties inherent in the estimation of quantities of proven, probable and
possible reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations
for impairment 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 estimates and assumptions utilized. Oil and Gas Properties The Company 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. 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 proper |
