UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

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

For the transition period from _______ to _______

Commission File Number 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)		(I.R.S. Employer Identification No.)

303 Pearl Parkway, Suite 200, San Antonio, TX		78215
(Address of principal executive offices)		(Zip Code)

(800) 762-7293

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

ZEST

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

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 of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer	☐	Accelerated filer	☐
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 Act). Yes ☐ No ☒

As of August 13, 2021, there were 26,349,099 shares of common stock, par value $0.001 per share, outstanding.

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 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	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	44

Part II. Other Information		45

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Default Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

Signatures		47

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Table of Contents

Unaudited Condensed Consolidated Balance Sheets	2
Unaudited Condensed Consolidated Statements of Operations	3
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 - 31

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2021 (UNAUDITED) AND MARCH 31, 2021

(in thousands, except per share data)

	JUNE 30,			MARCH 31,
	2021			2021
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash ($85 and $85 pledged as collateral for credit as of June 30, 2021 and March 31, 2021, respectively and $250 restricted as of June 30, 2021 and March 31, 2021, respectively)	$	842		$	1,316
Accounts receivable, net of allowance of $209 and $109 as of June 30, 2021 and March 31, 2021, respectively		1,047			1,136
Inventories - Crude Oil		115			122
Prepaid expenses and other current assets		2,603			1,995

Total current assets		4,607			4,569

NON-CURRENT ASSETS:
Property and equipment, net		3,714			3,695
Intangible assets, net		1,978			2,065
Oil and gas properties, full cost-method		11,908			12,352
Capitalized drilling costs, net of depletion		2,293			2,567
Goodwill		10,225			10,225
Right of use assets - financing leases		409			445
Right of use assets - operating leases		456			479
Non-current assets of discontinued operations		-			194

Total non-current assets		30,983			32,022

TOTAL ASSETS	$	35,590		$	36,591

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	3,192		$	3,614
Accrued liabilities		4,005			3,591
Warrant derivative liabilities		2,813			7,213
Current portion of long-term debt		953			1,056
Note payable - related parties		578			578
Current portion of lease liability - financing leases		142			141
Current portion of lease liability - operating leases		218			212
Current liabilities of discontinued operations		-			9

Total current liabilities		11,901			16,414

NON-CURRENT LIABILITIES
Lease liability - financing leases, net of current portion		259			295
Lease liability - operating leases, net of current portion		276			309
Long-term debt, net of current portion		901			1,012
Asset retirement obligations		1,563			1,532

Total non-current liabilities		2,999			3,148

Total Liabilities		14,900			19,562

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT) (Numbers of shares rounded to thousands)
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding as of June 30, 2021 and March 31, 2021, respectively		-			-
Common stock, $0.001 par value, 30,000 shares authorized, 22,840 and 22,723 shares issued and 22,840 and 22,705 shares outstanding as of June 30, 2021 and March 31, 2021, respectively		23			23
Additional paid in capital		168,690			167,588
Accumulated deficit		(146,352	)		(148,911	)
Treasury stock, at cost		(1,671	)		(1,671	)

Total stockholders’ equity		20,690			17,029

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	35,590		$	36,591

See notes to consolidated financial statements.

ECOARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(in thousands, except per share data)

	THREE MONTHS ENDED JUNE 30,
	2021			2020
	(unaudited)			(unaudited)
CONTINUING OPERATIONS:
REVENUES	$	6,879		$	2,313
COST OF REVENUES		3,942			1,093
GROSS PROFIT		2,937			1,220

OPERATING EXPENSES
Salaries and salaries related costs		1,569			2,012
Professional and consulting fees		137			262
Oilfield supplies and repairs		344			5
Selling, general and administrative costs		2,272			605
Depreciation, amortization, depletion, and accretion		1,016			301
Research and development		-			230

Total operating expenses		5,338			3,415

LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSES)		(2,401	)		(2,195	)

OTHER INCOME (EXPENSE)
Change in fair value of derivative liabilities		4,945			(17,393	)
Gain (loss) on exchange of warrants for common stock		-			1,630
Loss on conversion of long-term debt and accrued expenses		-			(2,194	)
Gain (loss) on disposal of fixed assets		-			(105	)
Loss on abandonment of oil and gas property		-			(83	)
Gain on disposal of ARO related to sale of oil and gas property		7			-
Gain on sale of oil and gas property		592			-
Interest expense, net of interest income		(584	)		(841	)

Total other income (expense)		4,960			(18,986	)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES		2,559			(21,181	)

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

Total discontinued operations		-			-

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES		2,559			(21,181	)

BENEFIT (PROVISION) FOR INCOME TAXES		-			-

NET INCOME (LOSS)	$	2,559		$	(21,181	)

SEC Form 10-Q filed by Ecoark Holdings Inc.