# EDGAR Filing Document

**Accession Number:** 0001437491
**File Stem:** 0001213900-23-013028
**Filing Date:** 2023-2
**Character Count:** 303649
**Document Hash:** 4b6103b57f42e38102d7e983a1ed34d8
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-23-013028.hdr.sgml**: 20230221

**ACCESSION NUMBER**: 0001213900-23-013028

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 97

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230221

**DATE AS OF CHANGE**: 20230221

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Ecoark Holdings, Inc.
- **CENTRAL INDEX KEY:** 0001437491
- **STANDARD INDUSTRIAL CLASSIFICATION:** CRUDE PETROLEUM & NATURAL GAS [1311]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** NV
- **FISCAL YEAR END:** 0331

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40701
- **FILM NUMBER:** 23645091

**BUSINESS ADDRESS:**
- **STREET 1:** 303 PEARL PARKWAY SUITE 200
- **CITY:** SAN ANTONIO
- **STATE:** TX
- **ZIP:** 78215
- **BUSINESS PHONE:** (800) 762-7293

**MAIL ADDRESS:**
- **STREET 1:** 303 PEARL PARKWAY SUITE 200
- **CITY:** SAN ANTONIO
- **STATE:** TX
- **ZIP:** 78215

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Magnolia Solar Corp
- **DATE OF NAME CHANGE:** 20100107

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Mobilis Relocation Services Inc.
- **DATE OF NAME CHANGE:** 20080612

?xml version="1.0" encoding="ASCII"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**Form 10-Q**

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

For the quarterly period ended December 31, 2022

OR

☐ 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 001-40701

**ECOARK HOLDINGS, INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Nevada** | **30-0680177** |
| (State or other jurisdiction of<br> incorporation or organization) | (I.R.S. Employer<br> 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<br> registered** |
| Common Stock | ZEST | The Nasdaq Stock Market LLC<br> (The Nasdaq Capital Market) |

---

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

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

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

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> 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 February 15, 2023, there were 37,666,772 shares of common stock, par value $0.001 per share, outstanding.

**PART I — FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS**

**UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2022**

**<u>Table of Content</u>** 

---

| | |
|:---|:---|
| [Unaudited Condensed Consolidated Balance Sheets](#a_001) | 1 |
| [Unaudited Condensed Consolidated Statements of Operations](#a_002) | 2 |
| [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](#a_003) | 3 |
| [Unaudited Condensed Consolidated Statements of Cash Flows](#a_004) | 4 |
| [Notes to Unaudited Condensed Consolidated Financial Statements](#a_005) | 5 - 39 |

---

i

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**DECEMBER 31, 2022 (UNAUDITED) AND MARCH 31, 2022**

---

| | | |
|:---|:---|:---|
|  | **DECEMBER 31,**<br>**2022** | **MARCH 31,**<br>**2022** |
|  | **(unaudited)** | |
| **ASSETS** |  |  |
| **CURRENT ASSETS:** |  |  |
| &nbsp;&nbsp;&nbsp;Cash ($16,000 pledged as collateral for credit as of December 31, 2022 and March 31, 2022, respectively) | $32642 | $85073 |
| &nbsp;&nbsp;&nbsp;Investment - White River Energy Corp. | 30000000 | - |
| &nbsp;&nbsp;&nbsp;Secured note receivable and accrued interest receivable | 1177604 | - |
| &nbsp;&nbsp;&nbsp;Intangible assets, cryptocurrencies | - | 19267 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets, current portion | 829071 | 862944 |
| &nbsp;&nbsp;&nbsp;Current assets of discontinued operations/held for sale | 1509292 | 2412842 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 33548609 | 3380126 |
| **NON-CURRENT ASSETS:** |  |  |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | 4122365 | 7226370 |
| &nbsp;&nbsp;&nbsp;Power development costs | 1000000 | 2000000 |
| &nbsp;&nbsp;&nbsp;Secured note receivable and accrued interest receivable, net of current portion | 3187500 | - |
| &nbsp;&nbsp;&nbsp;Right of use assets - operating leases | 370315 | 461138 |
| &nbsp;&nbsp;&nbsp;Other assets | 10905 | 11189 |
| &nbsp;&nbsp;&nbsp;Non-current assets of discontinued operations/held for sale | 7829596 | 22898420 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-current assets | 16520681 | 32597117 |
| **TOTAL ASSETS** | $50069290 | $35977243 |
| **<u>LIABILITIES AND STOCKHOLDERS' EQUITY</u>** |  |  |
| **LIABILITIES** |  |  |
| **CURRENT LIABILITIES** |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $2998876 | $2723865 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 1026100 | 668659 |
| &nbsp;&nbsp;&nbsp;Warrant derivative liabilities | 44447 | 4318630 |
| &nbsp;&nbsp;&nbsp;Preferred stock derivative liability | 4811875 | - |
| &nbsp;&nbsp;&nbsp;Current portion of long-term debt | 303136 | 608377 |
| &nbsp;&nbsp;&nbsp;Note payable - related parties | 125000 | - |
| &nbsp;&nbsp;&nbsp;Current portion of lease liability - operating leases | 119975 | 117451 |
| &nbsp;&nbsp;&nbsp;Current liabilities of discontinued operations/held for sale | 3047164 | 3337994 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 12476573 | 11774976 |
| **NON-CURRENT LIABILITIES** |  |  |
| &nbsp;&nbsp;&nbsp;Lease liability - operating leases, net of current portion | 256305 | 345976 |
| &nbsp;&nbsp;&nbsp;Long-term debt, net of current portion | 58662 | 67802 |
| &nbsp;&nbsp;&nbsp;Non-current liabilities of discontinued operations/held for sale | 394852 | 1653901 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-current liabilities | 709819 | 2067679 |
| **Total Liabilities** | 13186392 | 13842655 |
| COMMITMENTS AND CONTINGENCIES |  |  |
| **STOCKHOLDERS' EQUITY (DEFICIT)** |  |  |
| &nbsp;&nbsp;&nbsp;Series A Preferred stock, $0.001 par value; 5,000,000 shares authorized; 882 and 0 shares issued and outstanding as of December 31, 2022 and March 31, 2022, respectively | - | - |
| &nbsp;&nbsp;&nbsp;Common stock, $0.001 par value, 100,000,000 shares authorized, 29,456,342 and 26,364,099 shares issued and 29,456,342 and 26,246,984 shares outstanding as of December 31, 2022 and March 31, 2022, respectively | 29456 | 26364 |
| &nbsp;&nbsp;&nbsp;Additional paid in capital | 195532152 | 183246061 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (157440304) | (158868204) |
| &nbsp;&nbsp;&nbsp;Treasury stock, at cost | - | (1670575) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity before non-controlling interest | 38121304 | 22733646 |
| &nbsp;&nbsp;&nbsp;Non-controlling interest | (1238406) | (599058) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total stockholders' equity** | 36882898 | 22134588 |
| **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | $50069290 | $35977243 |

---

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

**FOR THE NINE AND THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **NINE MONTHS ENDED** | **NINE MONTHS ENDED** | **THREE MONTHS ENDED** | **THREE MONTHS ENDED** |
|  | **DECEMBER 31,** | **DECEMBER 31,** | **DECEMBER 31,** | **DECEMBER 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **CONTINUING OPERATIONS:** |  |  |  |  |
| REVENUES | $- | $17455 | $- | $17455 |
| COST OF REVENUES | 229534 | 92823 | 47460 | 92823 |
| **GROSS PROFIT** | (229534) | (75368) | (47460) | (75368) |
| **OPERATING EXPENSES** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and salaries related costs | 10998108 | 5504833 | 1280078 | 3159979 |
| &nbsp;&nbsp;&nbsp;Professional and consulting fees | 743403 | 649119 | 287630 | 385576 |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative costs | 4440902 | 4455788 | 1424435 | 1092819 |
| &nbsp;&nbsp;&nbsp;Depreciation, amortization, and impairment | 1718308 | 164266 | 13779 | 53474 |
| &nbsp;&nbsp;&nbsp;Cryptocurrency impairment losses | 9122 | 1047 | - | 1047 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 17909843 | 10775053 | 3005922 | 4692895 |
| **LOSS FROM CONTINUING OPERATIONS BEFORE OTHER INCOME (EXPENSE)** | (18139377) | (10850421) | (3053382) | (4768263) |
| **OTHER INCOME (EXPENSE)** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrant derivative liabilities | 4274183 | 15294814 | 1381711 | 10979137 |
| &nbsp;&nbsp;&nbsp;Change in fair value of preferred stock derivative liabilities | 1864777 | - | 1864777 | - |
| &nbsp;&nbsp;&nbsp;Derivative income (expense) | 2878345 | - | 2878345 | - |
| &nbsp;&nbsp;&nbsp;Loss on conversion of derivative liability to common stock in conversion of preferred stock | (3923) | - | (3923) | - |
| &nbsp;&nbsp;&nbsp;Gain (loss) on disposal of fixed assets | (570772) | - | - | - |
| &nbsp;&nbsp;&nbsp;Interest expense, net of interest income | (491075) | (553561) | (172347) | 3594 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense) | 7951535 | 14741253 | 5948563 | 10982731 |
| **(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND DISCONTINUED OPERATIONS** | (10187842) | 3890832 | 2895181 | 6214468 |
| DISCONTINUED OPERATIONS: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;(Loss) income from discontinued operations | (11020812) | (2908619) | (468210) | (1937100) |
| (Loss) on disposal of discontinued operations | (11823395) | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total discontinued operations | (22844207) | (2908619) | (468210) | (1937100) |
| **(LOSS) INCOME FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES** | (33032049) | 982213 | 2426971 | 4277368 |
| PROVISION FOR INCOME TAXES | - | - | - | - |
| **NET (LOSS) INCOME** | (33032049) | 982213 | 2426971 | 4277368 |
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | 2642559 | 322635 | 322351 | 322635 |
| **NET (LOSS) INCOME TO CONTROLLING INTEREST** | $(30389490) | $1304848 | $2749322 | $4600003 |
| Less: Preferred Stock Dividends | 484213 | - | 99737 | - |
| **NET (LOSS) INCOME TO CONTROLLING INTEREST OF COMMON STOCKHOLDERS** | $(30873703) | $1304848 | $2649585 | $4600003 |
| **NET (LOSS) INCOME PER SHARE - BASIC** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Continuing operations | $(0.28) | $0.17 | $0.11 | $0.25 |
| &nbsp;&nbsp;&nbsp;Discontinued operations | (0.83) | (0.12) | (0.02) | (0.07) |
|  | $(1.11) | $0.05 | $0.09 | $0.18 |
| **WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED**  | 27369610 | 24727970 | 28499875 | 26364099 |
| **NET (LOSS) PER SHARE - DILUTED (see NOTE 1)** | $(1.11) | $(0.57) | $(0.12) | $(0.24) |
| **WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (see NOTE 1)** | 27369610 | 24727970 | 72747922 | 26364099 |

---

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)**

**FOR THE NINE MONTHS ENDED DECEMBER 31, 2022 AND 2021**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred** | **Preferred** | **Common Stock** | **Common Stock** | | | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional**<br>**Paid-In**<br>**Capital** |<br>**Accumulated**<br>**Deficit** |<br>**Treasury**<br>**Stock** |<br>**Non-controlling**<br>**Interest** |<br>**Total** |
| Balance - March 31, 2021 |  | $- | 22705775 | $22705 | $167587659 | $(148912810) | $(1670575) | $- | $17026979 |
| Shares issued in the exercise of stock options, including cashless exercises |  | - | 20265 | 20 | 28277 | - | - | - | 28297 |
| Shares issued for services rendered, net of amounts prepaid |  | - | 114796 | 114 | 674886 | - | - | - | 675000 |
| Share-based compensation |  | - |  | - | 399173 | - | - | - | 399173 |
| Net income for the period |  | - | - | - | - | 2559524 | - | - | 2559524 |
| Balance - June 30, 2021 |  | - | 22840836 | 22839 | 168689995 | (146353286) | (1670575) | - | 20688973 |
| Shares issued for services rendered, net of amounts prepaid |  | - | 45000 | 45 | 91955 | - | - | - | 92000 |
| Shares issued in registered direct offering, net of amount allocated to derivative liability |  | - | 3478261 | 3478 | 8023602 | - | - | - | 8027080 |
| Share-based compensation |  | - |  | - | 819009 | - | - | - | 819009 |
| Fractional adjustment |  | - | 2 | 2 | - | - | - | - | 2 |
| Net loss for the period |  | - | - | - | - | (5854679) | - | - | (5854679) |
| Balance - September 30, 2021 |  | - | 26364099 | 26364 | 177624561 | (152207965) | (1670575) | - | 23772385 |
| Vesting of shares issued in prior quarter |  | - |  | - | 114190 | - | - | - | 114190 |
| Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid |  | - |  | - | 2280969 | - | - | - | 2280969 |
| Share-based compensation |  | - |  | - | 493284 | - | - | - | 493284 |
| Recognition of non-controlling interest |  | - |  | - | - | (30000) | - | 30000 | - |
| Net income (loss) for the period |  | - | - | - | - | 4600003 | - | (322635) | 4277368 |
| Balance - December 31, 2021 |  | $- | 26364099 | $26364 | $180513004 | $(147637962) | $(1670575) | $(292635) | $30938196 |
| Balance - March 31, 2022 |  | $- | 26364099 | $26364 | $183246061 | $(158868204) | $(1670575) | $(599058) | $22134588 |
| Shares issued for commitment for preferred stock offering, net of expenses |  | - | 102881 | 103 | 193313 | - | - | - | 193416 |
| Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid |  | - |  | - | 5215287 | - | - | - | 5215287 |
| Share-based compensation |  | - |  | - | 182561 | - | - | - | 182561 |
| Net loss for the period |  | - |  | - | - | (10153383) | - | (571261) | (10724644) |
| Preferred stock dividends |  | - | - | - | - | (43151) | - | - | (43151) |
| Balance - June 30, 2022 |  | - | 26466980 | 26467 | 188837222 | (169064738) | (1670575) | (1170319) | 16958057 |
| Shares issued in conversion of preferred stock to common stock |  | - | 1276190 | 1276 | 2635528 | - | - | - | 2636804 |
| Shares issued in settlement |  | - | 432885 | 433 | (626008) | - | 1670575 | - | 1045000 |
| Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid |  | - |  | - | 2956921 | - | - | - | 2956921 |
| Share-based compensation |  | - |  | - | 160040 | - | - | - | 160040 |
| Disposal of subsidiaries in reverse merger transactions |  | - |  | - |  | 32301782 | - | 2003211 | 34304993 |
| Net loss for the period |  | - |  | - | - | (22985608) | - | (1748947) | (24734555) |
| Preferred stock dividends |  | - | - | - | - | (341325) | - | - | (341325) |
| Balance - September 30, 2022 |  | - | 28176055 | 28176 | 193963703 | (160089889) | - | (916055) | 32985935 |
| Shares issued in conversion of preferred stock to common stock |  | - | 1140447 | 1140 | 544449 | - | - | - | 545589 |
| Shares issued for preferred stock dividends |  | - | 139840 | 140 | 104423 | - | - | - | 104563 |
| Shares issued by Agora Digital Holdings, Inc. for services rendered, net of amounts prepaid |  | - |  | - | 791491 | - | - | - | 791491 |
| Share-based compensation |  | - |  | - | 128086 | - | - | - | 128086 |
| Net income (loss) for the period |  | - |  | - | - | 2749322 | - | (322351) | 2426971 |
| Preferred stock dividends |  | - | - | - | - | (99737) | - | - | (99737) |
| Balance - December 31, 2022 |  | $- | 29456342 | $29456 | $195532152 | $(157440304) | $- | $(1238406) | $36882898 |

---

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

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

**FOR THE NINE MONTHS ENDED DECEMBER 31, 2022 AND 2021**

---

| | | |
|:---|:---|:---|
|  | **DECEMBER 31,** | **DECEMBER 31,** |
|  | **2022** | **2021** |
| **CASH FLOW FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS** |  |  |
| &nbsp;&nbsp;&nbsp;Net (loss) income | $(30873703) | $1304848 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net (loss) income to net cash used in operating activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in non-controlling interest | (2642559) | (322635) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation, amortization, and impairment | 1718308 | 164266 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cryptocurrency impairment losses | 9122 | 1047 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt modification expense | 879368 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation | 470687 | 1711466 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant derivative liabilities | (4274183) | (15294814) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of preferred stock derivative liabilities | (1864777) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative (income) expense | (2878345) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on conversion of derivative liabilities to common stock | 3923 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal of fixed assets | 570772 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) on disposal of White River and Pinnacle Frac | 12534900 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) on disposal of Trend Discovery Holdings | (711505) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common shares issued for services | 1045000 | 881190 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common shares issued for services - Agora | 8963699 | 2280969 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of discount | 47515 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development expenses reduced from refund of power development fee | 155292 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants granted for interest expense | - | 545125 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants granted for commissions | - | 744530 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitment fees on long-term debt | 17681 | - |
| &nbsp;&nbsp;&nbsp;Changes in assets and liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 34157 | (42436) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets - cryptocurrencies | 10145 | (17455) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of right of use asset - financing leases | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of right of use asset - operating leases | 90823 | 15912 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest receivable | (115104) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease expense | (87147) | (14996) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 1130011 | 1758231 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 1154714 | (1140846) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total adjustments | 16262497 | (8730446) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used in operating activities of continuing operations** | (14611206) | (7425598) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by (used in) discontinued operations** | 2225257 | (989135) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used in operating activities** | (12385949) | (8414733) |
| **CASH FLOWS FROM INVESTING ACTIVITIES** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from the sale of power development costs | 844708 | (2000000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of fixed assets | (40074) | (7065639) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by (used in) investing activities of continuing operations** | 804634 | (9065639) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash (used in) investing activities of discontinued operations** | (287413) | (327032) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by (used in) investing activities** | 517221 | (9392671) |
| **CASH FLOWS FROM FINANCING ACTIVITIES** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from the issuance of common stock in a registered direct offering, net of fees | - | 19228948 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options | - | 28300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from notes payable - related parties | 741000 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayments of notes payable - related parties | (616000) | (327500) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from long-term debt | 487500 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayment of long-term debt | (819562) | (23966) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from the sale of preferred stock | 12000000 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by financing activities of continuing operations** | 11792938 | 18905782 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by (used in) financing activities of discontinued operations** | 23359 | (1474708) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by financing activities** | 11816297 | 17431074 |
| **NET (DECREASE) IN CASH AND RESTRICTED CASH** | (52431) | (376330) |
| **CASH - BEGINNING OF PERIOD** | 85073 | 809811 |
| **CASH - END OF PERIOD** | $32642 | $433481 |
| **SUPPLEMENTAL DISCLOSURES** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest expense | $11173 | $20106 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes | $- | $- |
| **SUMMARY OF NON-CASH ACTIVITIES:** |  |  |
| &nbsp;&nbsp;&nbsp;Reclassification of assets of discontinued operations to current operations in fixed assets | $- | $193904 |
| &nbsp;&nbsp;&nbsp;Recognition of non-controlling interest - Agora | $- | $30000 |
| &nbsp;&nbsp;&nbsp;Lease liability recognized for ROU asset | $- | $506610 |
| &nbsp;&nbsp;&nbsp;Issuance costs on mezzanine equity | $193416 | $- |
| &nbsp;&nbsp;&nbsp;Preferred stock dividend paid in common shares | $104563 | $- |
| &nbsp;&nbsp;&nbsp;Non-controlling interest recorded in consolidation of Enviro Technologies US, Inc. | $2003211 | $- |
| &nbsp;&nbsp;&nbsp;Preferred shares/derivative liability converted into common stock | $3182416 | $- |
| &nbsp;&nbsp;&nbsp;Mezzanine equity reclassified to liability upon amendment | $9551074 | $- |

---

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

Ecoark Holdings Inc. ("Ecoark Holdings" or the "Company") is a holding company, incorporated in the State of Nevada on November 19, 2007. Through December 31, 2022, Ecoark Holdings' former wholly owned subsidiaries with the exception of Agora Digital Holdings, Inc., a Nevada corporation ("Agora") and Zest Labs, Inc. ("Zest Labs") have been treated for accounting purposes as divested. See below in this Note 1 and Note 2 "Discontinued Operations." As a result of the divestitures, all assets and liabilities of the former subsidiaries have been reclassified to discontinued operations on the condensed consolidated balance sheet for March 31, 2022 and all operations of these companies have been reclassified to discontinued operations and gain on disposal on the condensed consolidated statements of operations for the nine and three months ended December 31, 2022.

The Company's principal subsidiaries consisted of Ecoark, Inc. ("Ecoark"), a Delaware corporation which was the parent of Zest Labs, Banner Midstream Corp., a Delaware corporation ("Banner Midstream") and Agora which 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, which includes Bitstream Mining, LLC, the Company's Bitcoin mining subsidiary.

As disclosed in these Notes, the Company had decided it was in the best interests of its stockholders that it divest all of its principal operating assets through a series of spin-offs or stock dividends to the Company's stockholders. It intended to do so either by engaging in business combinations with existing public companies which have trading symbols and markets like White River Energy Corp (formerly Fortium Holdings Corp.) ("WTRV") which acquired White River Holdings Corp on July 25, 2022, and Wolf Energy Services, Inc. (formerly Enviro Technologies US, Inc.) ("Wolf Energy") which acquired Banner Midstream Corp. on September 7, 2022, or by direct dividends. The Company's plan was also driven by the dividends it must pay to an investor which provided $12 million on June 8, 2022 in exchange for preferred stock and a warrant, the former of which was subsequently amended, and the latter of which was subsequently cancelled. Because all spin-offs require the transactions to be registered with the Securities and Exchange Commission, the Company did not complete any spin-offs in calendar 2022. Because of the plans to spin-off its principal operating subsidiaries, the Company is searching for one or more operating businesses to acquire. See Note 20. "Subsequent Events" concerning a proposed acquisition. The Company has decided to leave Agora and Zest Labs in the Company and to not proceed with the spin-offs of these entities, although it intends to create a trust to distribute at least 95% of the net proceeds of the pending Zest Labs litigation recoveries, if any, to the Company's stockholders as of September 30, 2022.

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 had 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. White River is and Shamrock was engaged in oil and gas exploration, production, and drilling operations on over 30,000 cumulative acres of active mineral leases in Louisiana, and Mississippi. All of these operating subsidiaries have since been divested in two separate transactions that occurred in July and September 2022.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

For a full description of the operations of White River as well as Pinnacle Frac and Capstone, refer to the Annual Report filed on Form 10-K for the year ended March 31, 2022 filed on July 7, 2022.

On July 25, 2022, the Company entered into and closed a Share Exchange Agreement, by and among the Company, White River and WTRV. As a result, White River became a wholly-owned subsidiary of WTRV and issued the Company non-voting Series A Convertible Preferred Stock (the "Series A") which is convertible into approximately 82% of WTRV's common stock (not giving effect to the conversion of outstanding common stock equivalents) after the Company elects to spin-off WTRV common stock to the Company's stockholders and a registration statement covering the spin-off has been declared effective. The Company's Chief Executive Officer is also the Executive Chairman of WTRV, and the Company's Chief Financial Officer is the Chief Executive Officer of WTRV. The former Chief Executive Officer and director of WTRV is the son-in-law of the Company's Executive Chairman, and he resigned from all positions with WTRV in connection with the closing. The new Board of Directors (the "Board") of WTRV includes the Company's Chief Executive Officer and the Chief Executive Officer's daughter as well as three other designees. The Company has determined that it is not the primary beneficiary in this transaction and has concluded that no consolidation is required for White River as a variable interest entity.

On August 23, 2022 the Company entered into a Share Exchange Agreement (the "Agreement") with Wolf Energy and Banner Midstream. Pursuant to the Agreement, upon the terms and subject to the conditions set forth therein, the Company acquired 51,987,832 shares of the Wolf Energy common stock in exchange for all of the capital stock of Banner Midstream owned by the Company, which represents 100% of the issued and outstanding shares (the "Exchange"). Following the closing of the Agreement which occurred on September 7, 2022, Banner Midstream continues as a wholly-owned subsidiary of Wolf Energy. On September 7, 2022, the Exchange was completed, and Banner Midstream became a wholly-owned subsidiary of Wolf Energy. The shares the Company that were issued by Wolf Energy represented approximately 70% of the total voting shares of Wolf Energy that were outstanding as of that time. As a result, the Company consolidates Wolf Energy in its condensed consolidated financial statements; however because it is the intent of the Company to distribute these shares in Wolf Energy to the stockholders of the Company upon the effectiveness of a registration statement filed by Wolf Energy, the Company has classified the assets and liabilities of Wolf Energy and the results of operations of Wolf Energy in discontinued operations. See Note 2.

On April 9, 2021, a Little Rock, Arkansas jury awarded Ecoark and Zest a total of $115 million in damages (later reduced to $110 million) which includes $65 million in compensatory damages and $50 million in punitive damages and found Walmart Inc. ("Walmart") liable on three counts. The federal jury found that Walmart misappropriated Zest's trade secrets, failed to comply with a written contract, and acted willfully and maliciously in misappropriating Zest's trade secrets. See Note 15 – Commitments and Contingencies – Legal Proceedings.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

Trend Holdings formed four subsidiaries, including Bitstream Mining, LLC, a Texas limited liability company ("Bitstream"), on May 16, 2021. In addition, Trend Holdings owned Barrier Crest, LLC ("Barrier Crest") which was acquired along with Trend Capital Management, Inc. ("TCM") which was acquired by Ecoark Holdings on May 31, 2019. On June 17, 2022, Agora sold Trend Holdings to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV and sold Trend Discovery Exploration LLC ("Trend Exploration") to the Company. See Note 2, "Discontinued Operations". The Company reclassified the operations of Barrier Crest and TCM, as discontinued operations as the disposal represents a strategic shift that will have a major effect on the Company's operations and financial results as of March 31, 2022.

The Company made this determination for these segments to be held for sale as the criteria established under ASC 205-20-45-1E have been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a) upon the closing of the sale on June 17, 2022 at which time the gain was recognized.

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 100 shares for $10. On October 1, 2021, the Company purchased 41,671,121 shares of Agora common stock for $4,167,112 which Agora used to purchase equipment to commence the Bitstream operations.

Agora was organized by Ecoark Holdings to enter the Bitcoin mining business. Because of the plunge in the price of Bitcoin in 2022 and the type of miners Agora acquired during its attempt to close an initial public offering, Agora determined it was not presently feasible to conduct Bitcoin mining operations and ceased such activities on March 3, 2022. In September 2022, Agora determined to become a power-centric hosting company and thus, subject to raising capital, will focus its attention on generating revenues in this capacity.

On August 4, 2021, the Company's common stock commenced trading on the Nasdaq Capital Market.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

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 30,000,000 shares to 40,000,000 shares; (b) an amendment to the Ecoark Holdings 2017 Omnibus Incentive Plan to increase the number of shares of common stock authorized for issuance under this plan from 800,000 shares to 1,300,000 shares; and (c) the issuance of 272,252 restricted stock units and an additional 63,998 restricted stock units to the then President of Zest Labs and director of the Company under this Plan, in exchange for the cancellation of 672,499 previously issued stock options.

On September 9, 2022, the Company held an annual meeting of its stockholders, and the stockholders approved the issuance of the shares of common stock issuable upon conversion of the Series A Redeemable Convertible Preferred Stock sold on June 8, 2022. Additionally, the stockholders approved increasing authorized common stock to 100,000,000 shares. Articles of Amendment were filed that day.

On October 28, 2022, the Company and Ecoark, Inc. assigned all of its residual intellectual property rights and rights in the Zest Labs lawsuits to Zest Labs in connection with the anticipated spin-off of Zest Labs common stock to the Company's stockholders. The Board of Directors subsequently determined not to proceed with the Zest Labs spin-off, however the assignment was not affected by that determination.

**<u>Overview of Agora Digital Holdings, Inc.</u>**

**<u>Bitstream</u>**

Bitstream was organized to be our principal Bitcoin mining subsidiary. Bitstream entered into a series of agreements and arrangements including arranging for a reliable and economical electric power source needed to efficiently mine Bitcoin, order miners, housing infrastructure and other infrastructure to mine Bitcoin and locate a third-party hosting service to operate the miners and the service's more advanced miners.

As discussed in this Note 1, Agora has refocused its efforts and will become a power-centric hosting company rather than a Bitcoin mining company and will not hold any Bitcoin in its digital wallets. To that end, Agora entered into a Master Services Agreement ("MSA") on December 7, 2022 with BitNile, Inc. ("BitNile"), whereby BitNile agreed to provide mining equipment which Agora would host at its West Texas location and supply the electricity for the cryptocurrency mining. The MSA requires Agora to initially provide up to 12MW of electricity at the West Texas site for BitNile's use. An additional 66MW of power can be made available to BitNile as well for a total of 78MW. To meet this obligation, the Company is required to raise at least $5,000,000 to enable the build out of the hosting facility, including the initial 12MW of power within 45 days of the date of the MSA. As of the date of this Report, this requirement has not been met.

All significant accounting policies related to Pinnacle Frac, Capstone, White River, Shamrock, Barrier Crest and Trend Discovery Capital Management have been removed as these entities are reflected in discontinued operations. For full details on the policies refer to the Annual Report on Form 10-K for the year ended March 31, 2022 filed on July 7, 2022.

***Principles of Consolidation***

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 it owned in Trend Holdings to Agora on September 22, 2021 when the Company purchased 100 shares of Agora common stock for $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 sold all divisions of Banner Midstream in July 2022 and September 2022 as discussed herein.

The Company applies the guidance of Topic 810 *Consolidation* of 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.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

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.

The Company has utilized the guidance under ASC 810-10-55-4B, Case A for a Change that has resulted in the recognition of non-controlling interest. On October 1, 2021, Agora issued restricted common stock to non-employee directors, management, employees and advisors. As a result of the restricted common share issuances, the Company owns now owns less than 100% of Agora (approximately 89%). The Company expects it will continue to control Agora until it completes the distribution of Agora common stock to its security holders described above; after that event occurs, it may still have sufficient equity ownership to control Agora unless one or more third parties acquire a larger equity position.

During the six months ended September 30, 2022, Agora issued 400,000 shares of common stock to consultants and management. As a result of these issuances, the Company's ownership percentage in Agora dropped from approximately 90% to approximately 89%.

The Company sold both White River and Banner Midstream (Pinnacle/Capstone) in July and September 2022, respectively. These entities are no longer subsidiaries of the Company. The Company has investments in WTRV and Wolf Energy that represent the shares it received for the sale of these entities. The investment in WTRV is in non-voting preferred shares, and Management has concluded that the Company is not the primary beneficiary in this transaction, and thus no consolidation is required for White River as a variable interest entity. The Company currently owns approximately 65% of the total issued common shares of Wolf Energy and has consolidated Wolf Energy; however, the Company expects to distribute these shares to its stockholders of record as of September 30, 2022, and thus has reflected Wolf Energy in the discontinued operations of the Company for the nine months ended December 31, 2022.

***Reclassifications***

The Company has reclassified certain amounts in the December 31, 2021 condensed consolidated financial statements to be consistent with the December 31, 2022 presentation, including the reclassification of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone assets and liabilities from continuing operations to held for sale and reclassifications of operations of Barrier Crest, TCM, White River, Pinnacle Frac, and Capstone to discontinued operations. The March 31, 2022 consolidated balance sheet has been reclassified to include the assets and liabilities sold for White River, Pinnacle Frac, and Capstone as well. Additionally, we have removed all rounding of amounts and shares from the December 31, 2021 presentation to conform to the December 31, 2022 presentation. These changes had no impact on the Company's financial position or result of operations for the periods presented.

***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 October 2021 and July 2022, with the issuance of restricted common stock to directors, management and advisors, the Company no longer owns 100% of Agora. As of December 31, 2022 and March 31, 2022, approximately 11% and 9.1% is reflected as non-controlling interest of that entity. In addition, we have reflected 30% of Wolf Energy as noncontrolling interests as the Company represents approximately 65% of the voting interests in Wolf Energy.

 ****

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

***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.

 ****

***Revenue Recognition***

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

● Step 1: Identify the contract with the customer

● Step 2: Identify the performance obligations in the contract

● Step 3: Determine the transaction price

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

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

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

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

● Variable consideration

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

● Constraining estimates of variable consideration

● The existence of a significant financing component in the contract

● Noncash consideration

● Consideration payable to a customer

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

The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The standalone selling price is the price at which the Company would sell a promised service separately to a customer. The relative selling price for each performance obligation is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the promised service. In instances where the Company does not sell a service separately, establishing standalone selling price requires significant judgment.

The Company estimates the standalone selling price by considering available information, prioritizing observable inputs such as historical sales, internally approved pricing guidelines and objectives, and the underlying cost of delivering the performance obligation. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

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

Although, Agora since March 3, 2022, has not recognized revenue from its mining operations, prior to this time, it recognized revenue upon satisfaction of its performance obligation over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.

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

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

<u>Bitcoin Mining</u>

The discussion here should be understood as being applicable while Agora was conducting mining operations which it ceased beginning March 3, 2022. On September 16, 2022, the Company determined to conduct operations as a power-centric hosting company, rather than a Bitcoin mining company. For the past revenue recognition, refer to the Company's Annual Report on Form 10-K filed on July 7, 2022.

<u>Hosting Revenues</u>

Agora effective in September 2022 began efforts to generate revenue via hosting agreements. Agora entered into a MSA on December 7, 2022 with BitNile, whereby BitNile agreed to provide mining equipment which Agora would host at its West Texas location and supply the electricity for the cryptocurrency mining, subject to the Company raising $5 million to support the hosting operations. See Note 1. "Organization and Summary of Significant Accounting Policies**.**"

When Agora generates hosting revenues, it will follow ASC 606 as outlined above and recognize revenue upon the completion of the performance obligations as stipulated under the MSA. For the nine months ended December 31, 2022 and 2021, no revenue has been recognized under any hosting agreements.

All Bitcoin that is mined under these arrangements will be transmitted directly into the third-party digital wallets and the Company will not hold any Bitcoin in its accounts.

***Accounts Receivable and Concentration of Credit Risk***

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

***Fair Value Measurements***

ASC 820 *Fair Value Measurements* defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles ("GAAP"), and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

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

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

Level 3 inputs: Instruments with primarily unobservable value drivers.

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

Bitcoin assets will be presented in current assets. Fair value will be determined by taking the price of the coins from the trading platforms which Agora will most frequently use.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

***Bitcoin***

Prior to March 3, 2022 when the Company was mining Bitcoin, it included the Bitcoin in current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. Bitcoin was recorded at cost less impairment. For the past Bitcoin accounting policies, refer to the Company's Annual Report on Form 10-K filed on July 7, 2022. As of December 31, 2022, the Company neither owns nor mines any Bitcoin.

 ****

***Impairment of Long-lived Assets***

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

***Segment Information***

The Company follows the provisions of ASC 280-10 *Segment Reporting.* The Company classified its reporting segments in these three divisions through March 31, 2022, when the Company determined that pursuant to ASC 205-20-45-1E that the operations related to the Financial Services segment would be reclassified as held for sale as those criteria identified in the pronouncement had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022. As a result of this reclassification, the Company's segment reporting has removed the Financing segment for the nine months ended December 31, 2021. Effective April 1, 2022, the Company has classified its segments in the Commodity Segment, Technology Segment and Bitcoin Mining Segment. It now charges a monthly overhead charge to the Technology Segment and to the Transportation component and Oil and Gas Production component (each part of the Commodities Segment). On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment, and on September 7, 2022, the Company sold the remaining part (Pinnacle Frac and Capstone) of the Commodities Segment. Under ASC 855-10-55, the Company has reflected the sale of these entities and the operations as discontinued operations as of and for the nine months ended December 31, 2022. As a result of the share exchanges involving White River and Wolf Energy, and the immaterial nature of the operations of Zest Labs, the Company no longer segregates its operations as most of the limited continuing operations are related to Agora.

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

Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share ("EPS") include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.

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 the basic weighted average number of common shares are used in the computations.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

The Company has adjusted the diluted EPS for the nine and three months ended December 31, 2021 and three months ended December 31, 2022 for warrants classified as derivative liabilities as well as the preferred stock classified as derivative liabilities in accordance with ASC 260-10-45 as follows. No calculation is necessary for the nine months ended December 31, 2022 because to do so would be anti-dilutive.

 ****

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| | |
|:---|:---|
|  | **December 31,<br> 2021** |
| <u>Nine months ended December 31, 2021</u> |  |
| Diluted EPS: |  |
| &nbsp;&nbsp;&nbsp;Net income to controlling interest | $1304848 |
| &nbsp;&nbsp;&nbsp;Change in fair value of derivative liability | (15294814) |
| &nbsp;&nbsp;&nbsp;Adjusted net loss | $(13989966) |
| &nbsp;&nbsp;&nbsp;Weighted Average Shares Outstanding | 24727970 |
| &nbsp;&nbsp;&nbsp;Adjusted (loss) per share | $(0.57) |

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| | |
|:---|:---|
|  | **December 31,<br> 2021** |
| <u>Three months ended December 31, 2021</u> |  |
| Diluted EPS: |  |
| &nbsp;&nbsp;&nbsp;Net income to controlling interest | $4600003 |
| &nbsp;&nbsp;&nbsp;Change in fair value of derivative liability | (10979137) |
| &nbsp;&nbsp;&nbsp;Adjusted net loss | $(6379134) |
| &nbsp;&nbsp;&nbsp;Weighted Average Shares Outstanding | 26364099 |
| &nbsp;&nbsp;&nbsp;Adjusted (loss) per share | $(0.24) |

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| | |
|:---|:---|
|  | **December 31,<br> 2022** |
| <u>Three months ended December 31, 2022</u> |  |
| Diluted EPS: |  |
| &nbsp;&nbsp;&nbsp;Net income to controlling interest | $2749322 |
| &nbsp;&nbsp;&nbsp;Change in fair value of derivative liability and derivative income | (6124833) |
| &nbsp;&nbsp;&nbsp;Adjusted net loss | $(3375511) |
| &nbsp;&nbsp;&nbsp;Weighted Average Shares Outstanding | 28499875 |
| &nbsp;&nbsp;&nbsp;Adjusted (loss) per share | $(0.12) |

---

***Derivative Financial Instruments***

The Company does not currently 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 re-measured at the end of each reporting period. The Black-Scholes model is used to estimate the fair value of the derivative liabilities.

***Recently Issued Accounting Standards***

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 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 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 single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.

In May 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-04 "Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815- 40) Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options" which clarifies and reduces diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a "debt" or "debt instrument"), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company does not believe this new guidance will have a material impact on its consolidated financial 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 nine months ended December 31, 2022 and 2021, the Company had a net (loss) income to controlling interest of common stockholders of $(30,389,490) and $1,304,848, respectively, has working capital (deficit) of $21,072,036 and $(8,394,850) as of December 31, 2022 and March 31, 2022, respectively, and has an accumulated deficit as of December 31, 2022 of $(157,440,304). As of December 31, 2022, the Company has $32,642 in cash and cash equivalents. The working capital at December 31, 2022 is the direct result of the investment in WTRV valued at $30,000,000. This positive working capital is based upon Generally Accepted Accounting Principles and should not be viewed as reflecting available cash or other short term assets. These represent the value of the 1,200 shares of Series A that are expected to be distributed to the Company's stockholders, as discussed in Note 5.

The Company's financial statements are prepared using accounting principles generally accepted in the United States ("U.S. GAAP") applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company sold its interests in Banner Midstream in two separate transactions on July 25, 2022 and September 7, 2022. In addition, it sold the non-core business of Trend Discovery on June 17, 2022. The Company expects to distribute the common stock it received (or issuable upon conversion of preferred stock) in the sales to its stockholders upon the effective registration statements for the two entities the companies were sold to. See Note 13, "Series A Convertible Redeemable Preferred Stock" for information on the Company's recent $12 million convertible preferred stock financing. That financing has restrictive covenants that require approval of the investor for the Company to engage in any equity or debt financing.

The Company believes that the current cash on hand is not sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements, and it needs to raise capital to support their operations. The Company has recently established a potential source of revenue upon entering into the MSA with BitNile If revenue is generated from the MSA, management expects that it will go towards covering the Company's operating costs and to allow it to continue as a going concern. However, in order to proceed under the MSA, the Company will require additional financing to fund its future planned operations. Under the terms of the MSA, the Company was required to raise a minimum of $5,000,000 by January 21, 2023, although the parties have verbally agreed to extend that deadline. Based on the Company's relationship with Ault alliance, Inc. ("Ault") which is described in this Report, the Company expects Ault will not terminate the MSA, although it could elect to do so for any reason whether related to the Company or Ault. See Note 20. "Subsequent Events" concerning a significant pending transaction with Ault. The MSA contemplates the Company providing services and infrastructure to BitNile to enable the build out of the hosting facility, including the initial 12MW of power within 45 days of the date of the MSA which as disclosed above was not met. We have generated no revenue to date under any hosting arrangement. The accompanying financial statements for the period ended December 31, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes continued revenue streams and becomes profitable. Management's plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. See "Risk Factors" included in this Report.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

<u>Impact of COVID-19</u>

COVID-19 may continue to affect the economy and the industries in which we operate, depending on the vaccine and booster rollouts and the emergence of virus mutations.

COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the nine months ended December 31, 2022 or year ended March 31, 2022 in contrast to the material impact it had in the prior fiscal year.

COVID-19 has also contributed to the supply chain disruptions which have not yet had a material effect for the Company. The Company will continue to monitor the supply chain shortages affecting its business.

The extent to which COVID-19 may impact 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 Coronavirus Aid, Relief, and Economic Security Act ("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 businesses are eligible for a loan to fund payroll expenses, rent and related costs. We had received funding under the PPP, and a majority of that has been forgiven.

**NOTE 2: DISCONTINUED OPERATIONS**

On June 17, 2022, the Company sold Trend Discovery to an entity formed by the investment manager of Trend Discovery LP and Trend Discovery SPV for a three-year $4,250,000 secured note (see Note 4). Each of the Trend Discovery subsidiaries including Barrier Crest guaranteed the note and provided Agora with a first lien on its assets. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a). The Company had reclassified the operations of Barrier Crest and Trend Discovery Capital Management (the other entities were inactive) as discontinued operations as the disposal represents a strategic shift that will have a major effect on the Company's operations and financial results. The Company made this determination for these segments to be held for sale as the criteria established under ASC 205-20-45-1E had been satisfied as of June 8, 2022. Under ASC 855-10-55, the Company has reflected the reclassification of assets and liabilities of these entities as held for sale and the operations as discontinued operations as of and for the year ended March 31, 2022 as well as for the period April 1, 2022 through June 17, 2022. The Company accounted for this sale as a disposal of the business under ASC 205-20-50-1(a) on June 17, 2022 at which time the gain was recognized. As a result of this reclassification, the Company identified the following assets and liabilities that were reclassified from continuing operations to discontinued operations as they are discontinued.

On July 25, 2022, the Company sold its oil and gas production business (White River) which is part of the Commodities segment. The Company has reflected the reclassification of assets and liabilities of these entities discontinued operations as of and for the period April 1, 2022 through July 31, 2022. The Company used July 31, 2022 as a cut-off as a majority of its revenue and expenses are billed on a monthly basis and it is more convenient to do so.

On September 7, 2022, the Company sold its transportation business (Pinnacle Frac and Capstone) which is part of the Commodities segment. The Company has reflected the reclassification of assets and liabilities of these entities discontinued operations as of and for the period April 1, 2022 through August 31, 2022. The Company used August 31, 2022 as a cut-off as a majority of its revenue and expenses are billed on a monthly basis and it is more convenient to do so. The shares the Company were issued by Wolf Energy represent approximately 70% of the total voting shares of Wolf Energy. As a result, the Company will consolidate Wolf Energy in the condensed consolidated financial statements. It is the intent of the Company to distribute these shares in Wolf Energy to the stockholders of the Company upon the effectiveness of a registration statement filed by Wolf Energy. Therefore, the Company has classified the assets and liabilities of Wolf Energy and the results of operations of Wolf Energy in discontinued operations.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

Current assets as of December 31, 2022 and March 31, 2022 – Discontinued Operations:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **March 31,<br> 2022** |
| Cash | $- | $391125 |
| Accounts receivable | - | 1075960 |
| Inventory | - | 107026 |
| Prepaid expenses | - | 838731 |
| Wolf Energy Services, Inc. | 1509292 | - |
|  | $1509292 | $2412842 |

---

Non-current assets as of December 31, 2022 and March 31, 2022 – Discontinued Operations:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **March 31,<br> 2022** |
| Goodwill | $- | $10224046 |
| Property and equipment, net | - | 3117962 |
| Intangible assets, net | - | 1716331 |
| Oil and gas properties, full cost-method | - | 6626793 |
| Capitalized drilling costs, net of depletion | - | 604574 |
| Right of use asset – operating and financing leases | - | 608714 |
| Wolf Energy Services, Inc. | 7829596 | - |
|  | $7829596 | $22898420 |

---

Current liabilities as of December 31, 2022 and March 31, 2022 – Discontinued Operations:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **March 31,<br> 2022** |
| Accounts payable and accrued expenses | $- | $2419909 |
| Current portion of long-term debt | - | 572644 |
| Current portion of lease liability – operating and financing leases | - | 345441 |
| Wolf Energy Services, Inc. | 3047164 | - |
|  | $3047164 | $3337994 |

---

Non-current liabilities as of December 31, 2022 and March 31, 2022 – Discontinued Operations:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **March 31,<br> 2022** |
| Lease liabilities – operating and financing leases, net of current portion | $- | $282638 |
| Long-term debt | - | 67512 |
| Asset retirement obligations | - | 1303751 |
| Wolf Energy Services, Inc. | 394852 | - |
|  | $394852 | $1653901 |

---

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

The Company reclassified the following operations to discontinued operations for the nine months ended December 31, 2022 and 2021, respectively.

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Revenue | $10955153 | $19107195 |
| Operating expenses | 17110005 | 22654861 |
| Wolf Energy Services, Inc. – net loss | (4305129) | - |
| Other (income) loss | 560831 | (639047) |
| Net loss from discontinued operations | $(11020812) | $(2908619) |

---

The Company reclassified the following operations to discontinued operations for the three months ended December 31, 2022 and 2021, respectively.

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Revenue | $- | $6117622 |
| Operating expenses | - | 8032666 |
| Wolf Energy Services Inc. – net loss | (468210) | - |
| Other (income) loss | - | 22056 |
| Net loss from discontinued operations | $(468210) | $(1937100) |

---

The following represents the calculation of the gain on disposal of Trend Discovery at June 17, 2022:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Secured Note Receivable | $4250000 | $&nbsp;&nbsp;&nbsp;&nbsp; - |
| Cash | (27657) | - |
| Accounts receivable | (222400) | - |
| Prepaid expenses | (99566) | - |
| Goodwill | (3222799) | - |
| Other assets | (284) | - |
| Accounts payable and accrued expenses | 34211 | - |
| Gain on disposal of discontinued operations | $711505 | $- |

---

The following represents the calculation of the loss on disposal of Banner Midstream Corp in two separate transactions – July 25, 2022 and September 7, 2022:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Investment – White River Energy Corp./Wolf Energy Services, Inc.. | $35328753 | $&nbsp;&nbsp;&nbsp;&nbsp;- |
| Cash | (3000000) | - |
| Forgiveness of amounts due from subsidiaries | (39997461) | - |
| Reversal of investment booked on March 27, 2020 when acquired | (4866192) | - |
| Loss on disposal of discontinued operations | $(12534900) | $- |

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**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 3: REVENUE**

The Company recognizes revenue when it transfers promised services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those services. In the nine months ended December 31, 2022 the Company recognized no revenue and for the nine months ended December 31, 2021, the Company recognized revenue from continuing operations related to their Bitcoin mining operations in the amount of $17,455.

*Bitcoin Mining*

Prior to March 3, 2022, the Company recognized revenue for Bitcoin mining as follows:

Providing computing power to solve complex cryptographic algorithms in support of Bitcoin blockchains, in a process known as "solving a block", is an output of the Company's ordinary activities. The provision of computing power is the only performance obligation in the Company's contracts with mining pool operators, its customers. When the Company engaged in mining, satisfied its performance obligation over time as it provides computing power.

The contract term is short, limited to the period of time the Company's miners were contributing to the mining pool computational operations in support of the blockchain, measured in "hash rate" or "hashes per second". The contract term was the payout period under the Company's mining pool contracts, which is a twenty-four-hour period. After each contract period, the Company had the right to renew the contract for subsequent, successive payout periods.

Bitcoin received in exchange for providing computing power represents noncash consideration. The fair value of the noncash consideration determined at contract inception was recognized in revenue as the Company performed over the contract term using an output method based on hash rate contributed. Changes in the fair value of the noncash consideration post-contract consideration due to reasons other than form of consideration (that is, other than the price of bitcoin or ether) were estimated under the expected value method but constrained from inclusion in the transaction price (and hence revenue) until end of the contract term when the uncertainty has been resolved and amount was known.

The Company received payment for its provision of hash rate under the Pay-Per-Shares-Plus ("PPS+") payment method. The payment method contains two components, (1) the block rewards issued by the blockchain network and paid by the mining pool operator, and (2) transaction fees generated from (paid by) blockchain users and distributed (paid out) to individual miners by the mining pool operator. The pool, as a collective entity, develops its own technology that, on one end, gathers individual miner's hash rate, and on the other end contributes hash rate to the network to compete for block rewards from the network.

For PPS+, as long as individual miners contribute hash rate to the pool, the Company (as an individual miner) is entitled to receive its corresponding amount of block rewards based on the mining pool's calculation methodology, which is standard across pool operators.

Block rewards are the new coins awarded to Bitcoin miners by the network (bitcoin for the bitcoin network) and is a theoretical number calculated by the mining pool operator based on inputs including difficulty level, network hash rate, and block rewards (for example, 6.25 for Bitcoin). Transaction fees refers to the total fees paid by users of the network to execute transactions.

Digital asset transaction fees are payable to the mining pool operator to cover the costs of maintaining the pool and are deducted from the block reward payout. This fee was deducted from the block reward the Company received and recorded as a reduction of revenue because it does not represent payment for a distinct good or service.

Effective September 16, 2022, Agora commenced efforts to become a power-centric hosting company and if it becomes operational it will recognize revenue in accordance with the provisions of ASC 606.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 4: SENIOR SECURED PROMISSORY NOTE RECEIVABLE**

Agora was issued a Senior Secured Promissory Note by Trend Ventures, LP ("Trend Ventures Note") on June 16, 2022. The Trend Ventures Note was the consideration paid to Agora for the acquisition of Trend Discovery Holdings. The Trend Ventures Note is in the principal amount of $4,250,000, bears interest at the rate of 5% per annum, and matures June 16, 2025. Under Trend Ventures Note, Trend Ventures, LP has agreed to make interest-only payments, in arrears on a monthly basis commencing on June 30, 2022 and continuing thereafter until June 16, 2023. Beginning on June 30, 2023, Trend Ventures, LP agreed to make 24 consecutive equal monthly payments of principal each in an amount which would fully amortize the principal, plus accrued interest. All principal and any unpaid accrued interest will be due and payable on or before the maturity date. The Trend Ventures Note will be granted a first lien senior secured interest as set forth in the Security Agreement executed on the same date as the Trend Ventures Note, by and among Trend Ventures, LP, its future subsidiaries (each a Guarantor) and Agora dated as of June 16, 2022. Trend has not made any interest payments on the Note.

As of December 31, 2022, the Company has recognized $115,104 in interest income and accrued interest receivable. The Company has waived Trend Ventures, LP's failure to pay the interest. The Company has included $1,177,604 in current assets, and the remaining $3,187,500 in non-current assets.

**NOTE 5: INVESTMENT – SERIES A CONVERTIBLE PREFERRED STOCK – WHITE RIVER ENERGY CORP**

On July 25, 2022, the Company entered into a Share Exchange Agreement pursuant to which that day it sold to WTRV its oil and gas production business (White River) which is part of the Commodities segment. The Company received 1,200 shares of WTRV's Series A Convertible Preferred Stock, which becomes convertible into 42,253,521 shares of WTRV common stock upon such time as (A) WTRV has filed a Form S-1 with the SEC and such Form S-1 has been declared effective, or is no longer subject to comments from the Staff of the SEC, and (B) Ecoark elects to distribute shares of its common stock to its stockholders. Based on the lower of cost or market, the value of the investment was determined to be $30,000,000. As of December 31, 2022, WTRV has not filed a registration statement. The Company has determined that as of December 31, 2022, there is no impairment of this investment. The Company has treated the investment as a Level 3 asset and that the fair value of the investment exceeds the cost basis which thereby implies no impairment as of December 31, 2022.

As of December 31, 2022, the Company has determined that Ecoark is not the primary beneficiary, and this transaction has not resulted in Ecoark controlling WTRV as the preferred shares are unable to be converted until the effectiveness of the registration statement being filed for WTRV, does not have the power to direct activities of WTRV, control the Board of Directors of WTRV and WTRV is not reliant upon funding by Ecoark moving forward.

**NOTE 6: INVESTMENT – COMMON STOCK – WOLF ENERGY SERVICES, INC.** 

On August 23, 2022 the Company entered into a Share Exchange Agreement (the "Agreement") with Wolf Energy and Banner Midstream. Pursuant to the Agreement, upon the terms and subject to the conditions set forth therein, the Company acquired 51,987,832 shares of the Wolf Energy common stock in exchange for all of the capital stock of Banner Midstream owned by the Company, which represents 100% of the issued and outstanding shares (the "Exchange"). Following the closing of the Agreement which occurred on September 7, 2022, Banner Midstream continues as a wholly-owned subsidiary of Wolf Energy. Based on the lower of cost or market, the value of the investment was determined to be $5,328,753. On September 7, 2022, the Exchange was completed, and Banner Midstream became a wholly-owned subsidiary of Wolf Energy. The Company has determined that as of December 31, 2022, there is no impairment of this investment.

The Company has determined that this transaction has resulted in Ecoark having a controlling interest in Wolf Energy as the common stock issued represent approximately 65% of the voting common stock of Wolf Energy common stock outstanding at December 31, 2022. Since Ecoark will be distributing to the Ecoark stockholders a stock dividend to all common and preferred stockholders with a stock dividend date of December 31, 2022, the Company has reflected Wolf Energy, in discontinued operations as the Company intends to hold no shares and thus no voting interest upon the effectiveness of a registration statement for Wolf Energy, and the investment has been eliminated in the consolidation.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 7: BITCOIN**

Agora commenced its Bitcoin mining operations in November 2021. Through March 31, 2022, Agora mined 0.57 Bitcoins. Agora ceased Bitcoin mining on March 3, 2022. The value of the Bitcoin mined was $26,495 of which $16,351 has been impaired through September 12, 2022. On September 12, 2022, the Company liquidated its Bitcoin holdings into fiat currency (USD), of $12,485. This transaction resulted in a gain on sale of Bitcoin of $2,340. During the nine months ended December 31, 2022, the Company recognized Bitcoin impairment losses of $9,122.

The following table presents additional information about Agora's Bitcoin holdings during the nine months ended December 31, 2022:

---

| | |
|:---|:---|
| Beginning balance – April 1, 2022 | $19267 |
| Gain on sale of Bitcoin | 2340 |
| Bitcoin converted into fiat currency | (12485) |
| Bitcoin impairment losses | (9122) |
| Ending balance – December 31, 2022 | $- |

---

**NOTE 8: PROPERTY AND EQUIPMENT**

Property and equipment consisted of the following as of December 31, 2022 and March 31, 2022:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **March 31,<br> 2022** |
|  | (unaudited) | |
| Zest Labs freshness hardware, equipment and computer costs | $2915333 | $2915333 |
| Land | 125000 | 125000 |
| Furniture | 40074 | - |
| Mining technology equipment– Bitcoin | 5639868 | 7065630 |
| Machinery and equipment – Bitcoin | 91132 | 91132 |
| Total property and equipment | 8811407 | 10197095 |
| Accumulated depreciation and impairment | (4689042) | (2970725) |
| Property and equipment, net | $4122365 | $7226370 |

---

As of December 31, 2022, the Company performed an evaluation of the recoverability of these long-lived assets. As a result of the evaluation, there was impairment of fixed assets necessary in the amount of $1,655,969 in September 2022 as the Agora's focus changed to a power-centric power company from a Bitcoin Mining company. As a result, the Company determined the value of the miners purchased have nominal value.

In September 2022, Agora renegotiated a settlement with one of its vendors, and provided them transformers (in mining technology equipment) valued at $1,425,772 in exchange for a credit against amounts owed to them of $855,000. This resulted in a loss on settlement of $570,772.

Depreciation expense for the nine months ended December 31, 2022 and 2021 was $62,338 and $143,321, respectively.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 9: POWER DEVELOPMENT COST**

Agora has paid $1,000,000 each under two separate agreements for two different land sites to a non-related third party for a total of $2,000,000 in connection with the commencement of Bitstream's Bitcoin mining operations. The payments represent the fee for securing 48 MW and 30 MW, respectively of utility capacity as defined and agreed by ERCOT West Load Zone in the Oncor Electric Delivery Company LLC ("Utility") at the "one-span" tariff rate classification of "6.1.1.1.5 Primary greater than 10kw". If the Utility is unable to deliver these terms as defined in the facilities extension agreement, the non-related third party is obligated to secure a new location for Bitstream with at least the stated capacity and same rate tariff. The non-related third party secured the 48 MW and 30 MW of available capacity by signing a distribution facilities extension agreement with the Utility and posting the required collateral.

The $2,000,000 was used to purchase this right to the distribution facilities extension agreement which gives Bitstream immediate access to the 78 MW electric capacity from the Utility.

Bitstream also reimbursed the utility deposits paid by the non-related third party in connection with these agreements in the amount of $96,000 and $326,500, respectively. The power development fees are deemed non-refundable unless the non-related third party cannot find a suitable location within 6 months. Bitstream and the non-related third party are still negotiating a definitive power agreement.

On August 10, 2022, the Company had $844,708 returned from one of the distribution facilities extension agreements, which is net of $155,292 of fees related to development costs paid to our power broker. As a result, $1,000,000 remains as an asset as of December 31, 2022.

The Company has classified these payments as "Power Development Costs" as a noncurrent asset on the Consolidated Balance Sheets.

**NOTE 10: WARRANT DERIVATIVE LIABILITIES**

The Company issued common stock and warrants in several private placements and two public offerings ("Derivative Warrant Instruments") and some of these warrants have been classified as liabilities. The Derivative Warrant Instruments have been accounted for utilizing ASC 815 *"Derivatives and 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 some of the warrant agreements which were classified as a liability. These embedded features included (a) 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; (b) 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 cash equal to the Black-Scholes value of the remaining unexercised portion of the Derivative Warrant Instruments on the date of the consummation of a fundamental transaction; and (c) certain price protections in the agreements. 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.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

On November 14, 2020, the Company granted 60,000 two-year warrants exercisable at $7.75 per share in exchange for the early conversion of a portion of the September 24, 2020 warrants. The fair value of the November 14, 2020 warrants was estimated to be $251,497 at inception, and these warrants have expired as of November 14, 2022.

On December 30, 2020, the Company granted 888,889 two-year warrants, with a strike price of $10.00, in the registered direct offering. The fair value of those warrants was estimated to be $4,655,299 at inception. During the three months ended March 31, 2021, 176,000 warrants were exercised for $1,760,000, and no shares were exercised during the year ended March 31, 2022 and nine months ended December 31, 2022. The remaining 712,889 warrants have expired as of December 30, 2022.

On December 30, 2020, the Company granted 62,222 two-year warrants to the placement agent as additional compensation in connection with the registered direct offering closed December 31, 2020, exercisable at a strike price of $11.25 per share. The fair value of those warrants was estimated to be $308,205 at inception and these warrants have expired as of December 30, 2022.

The fair value of the 200,000 warrants that remain outstanding from the 250,000 warrants granted on September 24, 2020 have expired on September 24, 2022.

On June 30, 2021, the Company granted 200,000 two-year warrants with a strike price of $10.00 per share, pursuant to a purchase agreement entered into the same day with the warrant holder. The fair value of those warrants was estimated to be $545,125 at inception, on June 30, 2021 and $0 as of December 31, 2022.

On August 6, 2021, the Company closed a $20,000,000 registered direct offering. The Company sold 3,478,261 shares of common stock and 3,478,261 warrants at $5.75 per share. The warrants are exercisable through April 8, 2025. The Company also issued the placement agent 243,478 warrants exercisable at $7.1875 per share. Further information on the offering and compensation to the placement agent is contained in the prospectus supplement dated August 4, 2021. The fair value of the investor warrants was estimated to be $11,201,869 at inception and $42,208 as of December 31, 2022. The fair value of the placement agent warrants was estimated to be $744,530 at inception and $2,239 as of December 31, 2022.

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 December 31, 2022 and 2021. 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.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

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 valuation model. The following assumptions were used on December 31, 2022, March 31, 2022 and at inception:

---

| | | | |
|:---|:---|:---|:---|
|  | **Nine Months Ended<br> December 31,<br> 2022** | **Year Ended<br> March 31,<br> 2022** | **Inception** |
| Expected term | 0.50 – 2.10 years | 0.5 – 2.85 years | 5.00 years |
| Expected volatility | 107 - 109% | 110 – 113% | 91% – 107% |
| Expected dividend yield |  |  |  |
| Risk-free interest rate | 3.33 – 4.25% | 0.25 – 0.42% | 1.50% – 2.77% |
| Market price | $0.18 – $1.30 | $2.00 - $5.89 |  |

---

The Company's remaining derivative liabilities as of December 31, 2022 and March 31, 2022 associated with warrant offerings are as follows. All fully extinguished warrants liabilities are not included in the chart below.

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,<br> 2022 (unaudited)** | **March 31,<br> 2022** | **Inception** |
| Fair value of 200,000 (originally 250,000) September 24, 2020 warrants | $- | $8354 | $1265271 |
| Fair value of 60,000 November 14, 2020 warrants | - | 7695 | 251497 |
| Fair value of 888,889 December 31, 2020 warrants | - | 82436 | 4655299 |
| Fair value of 62,222 December 31, 2020 warrants | - | 5741 | 308205 |
| Fair value of 200,000 June 30, 2021 warrants | - | 60866 | 545125 |
| Fair value of 3,478,261 August 6, 2021 warrants | 42208 | 3904575 | 11201869 |
| Fair value of 243,478 August 6, 2021 warrants | 2239 | 248963 | 744530 |
|  | $44447 | $4318630 |  |

---

During the nine months ended December 31, 2022 and 2021 the Company recognized changes in the fair value of the derivative liabilities of $(4,274,183) and $(15,294,814), respectively. In addition, the Company recognized $0 and $1,289,655 in expenses related to the warrants granted for the nine months ended December 31, 2022 and 2021.

Activity related to the warrant derivative liabilities for the nine months ended December 31, 2022 is as follows:

---

| | |
|:---|:---|
| Beginning balance as of March 31, 2022 | $4318630 |
| Issuances of warrants – derivative liabilities | - |
| Warrants exchanged for common stock | - |
| Change in fair value of warrant derivative liabilities | (4274183) |
| Ending balance as of December 31, 2022 | $44447 |

---

Activity related to the warrant derivative liabilities for the nine months ended December 31, 2021 is as follows:

---

| | |
|:---|:---|
| Beginning balance as of March 31, 2021 | $7213407 |
| Issuances of warrants – derivative liabilities | 12491524 |
| Warrants exchanged for common stock | - |
| Change in fair value of warrant derivative liabilities | (15294814) |
| Ending balance as of December 31, 2021 | $4410117 |

---

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 11: LONG-TERM DEBT**

Long-term debt included in continuing operations consisted of the following as of December 31, 2022 and March 31, 2022. All debt instruments repaid during the year ended March 31, 2022 are not included in the below chart and the chart only reflects those instruments that had a balance owed as of these dates.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **March 31,<br> 2022** |
|  | (unaudited) | |
| Credit facility - Trend Discovery SPV 1, LLC (a) | $291036 | $595855 |
| Auto loan – Ford (b) | 70762 | 80324 |
| Total long-term debt | 361798 | 676179 |
| Less: current portion | (303136) | (608377) |
| Long-term debt, net of current portion | $58662 | $67802 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(a) On December 28, 2018, the Company entered into a $10,000,000 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 $1,000,000 with a cap of $10,000,000. In the year ended March 31, 2022, the Company borrowed $595,855, which includes $25,855 in commitment fees, with the balance of $570,000 being deposited directly into the Company. In the nine months ended December 31, 2022, the Company borrowed $505,181, which includes $17,681 in commitment fees, with the balance of $487,500 being deposited directly into the Company, and repaid $810,000 in the nine months ended December 31, 2022. Interest incurred for the nine months ended December 31, 2022 was $50,888, and accrued as of December 31, 2022 was $53,111. There were no advances in the nine months ended December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;(b) On February 16, 2022, entered into long-term secured note payable for $80,324 for a service truck maturing February 13, 2028. The note is secured by the collateral purchased and accrued interest annually at 5.79% with principal and interest payments due monthly. There is no accrued interest as of December 31, 2022.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

The following is a list of maturities as of December 31:

---

| | |
|:---|:---|
| 2023 | $303136 |
| 2024 | 12819 |
| 2025 | 13582 |
| 2026 | 14389 |
| 2027 | 15245 |
| Thereafter | 2627 |
|  | $361798 |

---

During the nine months ended December 31, 2022, the Company received proceeds of $487,500, repaid $810,000, and incurred $17,681 in commitment fees added to the credit facility with Trend Discovery SPV 1, LLC for its long-term debt from continuing operations. All discontinued operation totals are not reflected in these figures.

During the nine months ended December 31, 2021, the Company repaid $23,966.

Interest expense on long-term debt during the nine months ended December 31, 2022 and 2021 are $66,635 and $276, respectively.

**NOTE 12: NOTES PAYABLE - RELATED PARTIES**

A Board member advanced $577,500 to the Company through August 8, 2021, under the terms of notes payable that bears interest at rates ranging between 10% and 15% interest per annum. On August 9, 2021, the Company repaid the entire $577,500 to the Board member with accrued interest of $42,535. Interest expense on the notes for the nine months ended December 31, 2021 was $17,514.

An officer of the Company advanced $116,000 and was repaid this amount during the year ended March 31, 2022, and $25,000 was advanced and repaid during the year ended March 31, 2022 from an officer of Agora. In the nine months ended December 31, 2022, the Company's Chief Executive Officer and Chief Financial Officer advanced a total of $716,000 of which $591,000 was repaid in the same period leaving a balance due in the amount of $125,000; and an officer of Agora advanced $25,000 which was fully repaid in the same period. These were short-term advances and no interest was charged as the amounts were outstanding for just a few weeks.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 13: SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK**

On June 8, 2022, the Company entered into a Securities Purchase Agreement (the "Agreement") with Ault Lending, LLC (formerly Digital Power Lending, LLC), a California limited liability company (the "Purchaser"), pursuant to which the Company sold the Purchaser 1,200 shares of Series A Convertible Redeemable Preferred Stock (the "Ecoark Series A"), 102,881 shares of common stock (the "Commitment Shares") and a warrant to purchase shares of common stock (the "Warrant," and together with the Ecoark Series A and the Commitment Shares, the "Securities") for a total original purchase price of $12,000,000. The Purchaser is a subsidiary of Ault Alliance, Inc. [NYSE American: AULT]. The Company determined that the classification of the Ecoark Series A was Mezzanine Equity as the option to convert the shares belongs to the Purchaser. A description of the material transaction components are as follows:

**Ecoark Series A**

<u>Conversion Rights</u>

Prior to the November 2022 amendment described below, each share of Ecoark Series A had a stated value of $10,000 and were convertible into shares of common stock at a conversion price of $2.10 per share, subject to customary adjustment provisions. The holder's conversion of the Ecoark Series A was subject to a beneficial ownership limitation of 19.9% of the issued and outstanding common stock as of any conversion date of the Ecoark Series A, unless and until the Company obtains stockholder and The Nasdaq Stock Market ("Nasdaq") approval for the conversion of more than that amount, in order to comply with Nasdaq Rules. Stockholder approval was obtained on September 9, 2022. In addition, the conversion rights in general did not become effective until July 23, 2022, which is one day after the record date for the stockholders meeting seeking such stockholder approval at the September 9, 2022 meeting. The shares of Ecoark Series A as amended are also subject to a 4.99% beneficial ownership limitation, which may be increased to up to 9.9% by the holder by giving 61 days' notice to the Company.

On November 28, 2022, the Company, following an agreement with the Purchaser, the Company amended the Certificate of Designations of Rights, Preferences and Limitations (the "Certificate") of the Ecoark Series A previously issued to the Purchaser to: (i) increase the stated value of the Ecoark Series A from $10,000 to $10,833.33; (ii) provide for the dividends payable under the Ecoark Series A to be payable in common stock rather than cash effective November 1, 2022, and (iii) reduce the conversion price of the Ecoark Series A from $2.10 to the lesser of (a) $1.00 or (b) the higher of (1) 80% of the 10-day daily volume weighted average price, or (2) $0.25. The amendment on November 28, 2022 constituted a modification to the classification of the Series A from mezzanine equity to liability. The Company determined in accordance with ASC 470-50-40, that the amendment would be accounted for as a debt modification as opposed to a debt extinguishment as the amendment did not meet the 10% threshold when comparing the present value of the remaining cash flows to the value to the original terms of the Series A. As a result of this modification, the Company recognized a debt modification expense of $879,368. Upon reclassification to preferred stock liability, the Company analyzed the terms and determined that the preferred stock liability was considered a derivative liability and measured the derivative liability at inception (November 28, 2022). This measurement resulted in a gain of $2,878,345.

As described in Note 15**. "**Commitments and Contingencies", Nasdaq is alleging that the November 2022 amendment to the Series A violated its voting and stockholder approval requirements, and we expect it may do so with regard to the recent BitNile.com transaction, although the Company plans to seek stockholder approval for both transactions and make any modifications Nasdaq requires. See "Risk Factors" contained in this Report.

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of the preferred stock liability is estimated using the Black-Scholes valuation model. The following assumptions were used on December 31, 2022, and at inception:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **Inception** |
| Expected term | 1.91 – 2.00 years | 2.00 years |
| Expected volatility | 108 - 109% | 108% |
| Expected dividend yield |  | - |
| Risk-free interest rate | 3.57 – 3.88% | 3.69% |
| Market price | $0.18 – $0.76 | $0.76 |

---

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

<u>Negative Covenants and Approval Rights</u>

The Ecoark Series A Certificate of Designation (the "Certificate") subjects the Company to negative covenants restricting its ability to take certain actions without prior approval from the holder(s) of a majority of the outstanding shares of Ecoark Series A for as long as the holder(s) continue to hold at least 25% (or such higher percentage as set forth in the Certificate (as defined below)) of the Ecoark Series A shares issued on the closing date under the Agreement. These restrictive covenants include the following actions by the Company, subject to certain exceptions and limitations:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) payment or declaration of any dividend (other than pursuant to the Ecoark Series A Certificate);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) investment in, purchase or acquisition of any assets or capital stock of any entity for an amount that exceeds $100,000 in any one transaction or $250,000, in the aggregate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) issuance of any shares of common stock or other securities convertible into or exercisable or exchangeable for shares of common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) incurrence of indebtedness, liens, or guaranty obligations, in an aggregate amount in excess of $50,000 in any individual transaction or $100,000 in the aggregate with customary exceptions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) sale, lease, transfer or disposal of any of its properties having a value calculated in accordance with GAAP of more than $50,000;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) increase in any manner the compensation or fringe benefits of any of its directors, officers, employees; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(**vii**)** merger or consolidation with, or purchase a substantial portion of the assets of, or by any other manner the acquisition or combination with any business or entity.

The above and other negative covenants in the Series A Certificate do not apply to a reverse merger with an entity with securities quoted on a market operated by OTC Markets or listed on a national securities exchange.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**Warrant**

Prior to its cancellation, the Warrant, as amended, provided the Purchaser or its assignees (the "Holder") with the right to purchase a number of shares of common stock as would enable the holder together with its affiliates to beneficially own 49% of the Company's common stock, calculated on a fully diluted basis, at an exercise price of $0.001 per share, including the Commitment Shares and Conversion Shares unless sold. Subject to stockholder approval, the Warrant was to vest and become exercisable into shares of the Company's stock if as of June 8, 2024: (i) the Company had failed to complete the distributions to the Company's security holders or to any other subsidiary of the Company's equity ownership of its three principal subsidiaries: Agora, Banner Midstream and Zest Labs (or their principal subsidiaries) (the "Distributions"), and/or (ii) the Holder together with its affiliates does not beneficially own at least 50% of the Company's outstanding common stock. Provided, the Company must retain 20% of its common stock of Agora. The Warrant was to be exercised on a cashless basis and expire on June 8, 2027.

On November 14, 2022, the Company and the warrant holder canceled the warrant which was originally issued to the holder on June 8, 2022, as subsequently amended and restated, in exchange for $100 as the Company has substantially met the conditions under Section 1(a) of the warrant, therefore, the Company did not compute any derivative liability on the warrants.

**Registration Rights**

Pursuant to the Agreement, the Company has agreed to register the sale by the Purchaser of up to 5,246,456 shares of common stock, representing the Commitment Shares issued at the closing plus 5,143,575 of the shares of common stock issuable upon conversion of the Ecoark Series A. This amount equals 19.9% of the Company's outstanding common stock immediately prior to the closing. The Company registered the sale by filing a prospectus supplement pursuant to the Company's registration statement on Form S-3 (File No. 333-249532), originally filed with the SEC on October 16, 2020, as amended, which became effective on December 29, 2020, and the base prospectus included therein. On January 23, 2023, the Purchaser agreed to reduce its secondary offering of shares of our common stock issuable upon conversion of the Series A by $3,500,000. See Note 20. "Subsequent Events."

The value of the Commitment Shares of $193,416 were considered issuance costs and have been reflected in the total for Mezzanine Equity of $11,806,584. During the nine months ended December 31, 2022, a total of 318 shares of the Series A have been converted into 2,416,637 shares of common stock. As of December 31, 2022, a total of 882 shares of Series A are issued and outstanding. In addition, the Company amortized $34,609 in discount on the preferred stock, prior to the reclassification to the preferred stock liability on November 22, 2022. Upon this reclassification, the balance of unamortized discount of $166,350, was expensed as part of the debt modification expense.

The description above is not a substitute for reviewing the full text of the referenced documents, which were attached as exhibits to the Company's Current Report on Form 8-K as filed with the SEC on June 9, 2022, and the Company's Current Report on Form 8-K as filed with the SEC on July 15, 2022 when we filed the amended and restated warrant, and the aforementioned amendment filed on November 29, 2022.

**Preferred Stock Derivative Liability**

As discussed herein, the Company determined that the Series A upon the amendment on November 28, 2022, constituted a derivative liability under ASC 815. As a result of this classification, the Company determine that on November 28, 2022 (inception), the value of the derivative liability was $7,218,319.

On December 9, 2022, the Series A holder converted 50 shares of Series A into 1,140,447 common shares that resulted in a loss on conversion of $3,923.

The derivative liability for the preferred stock was remeasured at December 31, 2022 and is valued at $4,811,875, resulting in a gain of $1,864,777 in the change in fair value.

During the nine months ended December 31, 2022 the Company recognized changes in the fair value of the derivative liabilities related to the Series A of $(1,864,777).

Activity related to the preferred stock derivative liabilities for the nine months ended December 31, 2022 is as follows:

---

| | |
|:---|:---|
| Beginning balance as of March 31, 2022 | $- |
| Reclassification of mezzanine equity to preferred stock liability | 10096664 |
| Gain on fair value at inception | (2878345) |
| Conversion of preferred stock for common stock | (541667) |
| Change in fair value of preferred stock derivative liabilities | (1864777) |
| Ending balance as of December 31, 2022 | $4811875 |

---

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 14: STOCKHOLDERS' EQUITY (DEFICIT)**

On July 26, 2022, the Company filed a Definitive Proxy Statement with respect to its 2022 Annual Meeting of the Stockholders, being held virtually at 1:00 p.m., Eastern Time, on September 9, 2022, at which the stockholders of the Company approved the following proposals:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Approve for purposes of complying with Listing Rule 5635 of the Nasdaq Stock Market, the issuance by the Company of shares of the Company's Common Stock pursuant to the terms of the private placement financing transaction pursuant to the Securities Purchase Agreement dated June 8, 2022 between the Company and Ault Lending, LLC, formerly known as Digital Power Lending, LLC, a California limited liability company, without giving effect to any beneficial ownership limitations contained therein;

(2) Approve an amendment to the Company's Articles of Incorporation to increase the number of shares of Common Stock the Company is authorized to issue from 40,000,000 shares to 100,000,000 shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Elect four members to the Company's Board of Directors for a one-year term expiring at the next annual meeting of stockholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Ratify the selection of RBSM LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Approve the adjournment of the Annual Meeting to a later date or time, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Annual Meeting, there are not sufficient votes to approve any of the other proposals before the Annual Meeting.

***<u>Ecoark Holdings Preferred Stock</u>***

On March 18, 2016, the Company created 5,000,000 shares of "blank check" preferred stock, par value $0.001.

As of March 31, 2022, there were no shares of any series of preferred stock issued and outstanding. On June 8, 2022, as noted in Note 13, "Series A Convertible Redeemable Preferred Stock", the Company issued 1,200 shares of Series A , and as of December 31, 2022, there are 882 shares of preferred stock issued and outstanding, and 318 shares were converted into common stock in the period ended December 31, 2022.

***<u>Ecoark Holdings Common Stock</u>***

The Company is authorized to issue 100,000,000 shares of common stock, par value $0.001 which followed stockholder approval on September 9, 2022. Effective with the opening of trading on December 17, 2020, the Company implemented a one-for-five reverse split of its issued and outstanding common stock and a simultaneous proportionate reduction of its authorized common stock. All share and per share figures are reflected on a post-split basis herein.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

In the three months ended June 30, 2021, the Company issued 114,796 shares of common stock which had been accrued for at March 31, 2021 in consulting fees under a contract entered into February 2, 2021. In addition, the Company issued 20,265 shares of common stock for the exercise of stock options.

In the three months ended September 30, 2021, the Company issued 45,000 shares of common stock for services, and 3,478,261 shares issued in a registered direct offering.

In the three months ended December 31, 2021, the Company did not issue any shares of common stock.

In the three months ended June 30, 2022, the Company issued 102,881 shares of common stock which were the commitment shares in the BitNile transaction as discussed in Note 13.

In the three months ended September 30, 2022, the Company issued 1,276,190 shares of common stock in conversion of 268 shares of Series A. In addition, the Company issued 550,000 shares (including the 117,115 shares held as treasury stock, for a net 432,885 common shares) as settlement with a Trend Ventures investor. The Company has expensed the value of $1,045,000 ($1.90 per share) as a settlement expense.

In the three months ended December 31, 2022, the Company issued 1,140,447 shares of common stock in conversion of 50 shares of Series A and 139,840 shares of common stock in payment of the Series A dividend for November 2022. The Company accrued the December 2022 dividend of 411,854 shares with a value of $103,934, which were issued January 5, 2023.

As of December 31, 2022, 29,456,342 shares of common stock were issued and outstanding.

***<u>Agora Common Stock</u>***

Agora is authorized to issue 250,000,000 shares of common stock, par value $0.001. On September 22, 2021, the Company purchased 100 shares of Agora for $10.

On October 1, 2021, the Company purchased 41,671,121 shares of Agora common stock for $4,167,112 which Agora used to purchase equipment to commence the Bitstream operations.

In addition, between October 1 and December 7, 2021, Agora issued 4,600,000 restricted common shares to its management, non-employee directors, employees and advisors. After issuance of these shares, Ecoark controls approximately 90% of Agora. The future stock-based compensation related to these shares that will be measured consists of $12,166,680 over a three-year period in service-based grants ($9,611,145 in year one, $1,861,096 in year two, and $694,436 in year 3) and $10,833,320 in performance-based grants ($5,416,660 for the deployment of 20 MW in the State of Texas, and $5,416,660 for the deployment of 40 MW in the State of Texas) for a total of $23,000,000. These restricted common shares were measured pursuant to ASC 718-10-50 at an estimated value per share of $5.00 and consist of both service-based and performance-based criteria.

On August 7, 2022, Agora issued 400,000 shares of common stock to its management, non-employee directors, employees and advisors. After issuance of these shares, Ecoark controls approximately 89% of Agora. The future stock-based compensation related to these shares that will be measured consists of $2,000,000 ranging from immediate vesting through the three-year anniversary in service-based grants. These restricted common shares were measured pursuant to ASC 718-10-50 at an estimated value per share of $5.00 and consist of service-based criteria only.

Of the 5,000,000 restricted shares of common stock — 2,833,336 shares of restricted stock are considered service grants and 2,166,664 are considered performance grants.

The performance grants vest as follows: 1,083,332 restricted common shares upon Agora deploying a 20 MW power contract in Texas; and 1,083,332 restricted common shares upon the Company deploying a 40 MW power contract in Texas. As of December 31, 2022, none of the performance criteria are probable as no contracts have been signed as the proper funding has not been secured, therefore no compensation expense is recognized in accordance with ASC 718-10-25-20 related to the performance grants. On April 12, 2022, Agora upon board of director approval accelerated the vesting of 250,000 restricted shares for deploying a 20 MW power contract in Texas; and 250,000 restricted shares for deploying a 40 MW power contract in Texas with Agora's former Chief Financial Officer. All remaining performance grants remain unvested.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

The Company recognized $8,963,700 in stock-based compensation for the nine months ended December 31, 2022, which represented $5,838,700 in service grants, and $3,125,000 in the accelerated vesting of the former CFO's grants ($625,000 in service-based grants and $2,500,000 in performance grants). The unrecognized stock-based compensation expense as of December 31, 2022 is $8,333,320 in performance based grants and $3,019,224 in service based grants for a total of $11,352,544.

The Company accounts for stock-based payments in accordance with ASC 718, Compensation — Stock Compensation ("ASC 718"). During the year ended March 31, 2022, in addition to the value measured by the 4,600,000 restricted stock grants, stock-based compensation consists primarily of RSUs granted to a Company employee while employed by Ecoark Holdings. The Company measures compensation expense for RSUs based on the fair value of the award on the date of grant. The grant date fair value is based on the closing market price of Ecoark Holdings' common stock on the date of grant.

***<u>Share-based Compensation Expense</u>***

 ****

Share-based compensation for employees is included in salaries and salary related costs and directors and services are included in professional fees and consulting in the consolidated statement of operations for the nine months ended December 31, 2022 and 2021.

Share-based compensation for the nine months ended December 31, 2022 and 2021 for stock options and RSUs granted under the 2013 Incentive Stock Plan and 2017 Omnibus Incentive Stock Plan and non-qualified stock options were $470,687 and $1,711,466, respectively.

There is $252,120 in share-based compensation accrued as of December 31, 2022 for Ecoark Holdings and $237,499 accrued in Agora for a total of $489,619.

In order to have sufficient authorized capital to raise the $20,000,000, on August 4, 2021, a then officer and director of the Company agreed to cancel stock options in exchange for a lesser number of restricted stock units, subject to future vesting. In accordance with the restricted stock agreement, the director was granted 272,252 RSUs that vest over 12 quarterly increments, in exchange for cancelling 672,499 stock options. In addition, on October 6, 2021, this officer and director received 63,998 additional RSUs. The expense related to the modification of these grants is included in the share-based compensation expense in the year ended March 31, 2022.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 15: COMMITMENTS AND CONTINGENCIES**

***<u>Legal Proceedings</u>***

We are presently involved in the following legal proceedings. 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 and Zest Labs 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. On April 9, 2021, a Little Rock, Arkansas jury awarded Ecoark and Zest Labs a total of $115 million in damages (subsequently reduced to $110 million) which includes $65 million in compensatory damages (subsequently reduced to $60 million) and $50 million in punitive damages and found Walmart Inc. liable on three claims. The federal jury found that Walmart Inc. misappropriated Zest Labs' trade secrets, failed to comply with a written contract, and acted willfully and maliciously in misappropriating Zest Labs' trade secrets. We expect Walmart to continue to vigorously defend the litigation and to oppose the verdict in post-trial motions and an appeal. The Company has filed post-trial motions to add an award for its 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 allowed post-trial discovery but has not ruled on the motion for new trial.

● On September 21, 2021, Ecoark Holdings and Zest Labs filed a complaint against Deloitte Consulting, LLP ("Deloitte") in the Eight Judicial District Court in Clark County, Nevada. The complaint is for violation of the Nevada Uniform Trade Secret Act and will also be seeking a preliminary and permanent injunction, attorney's fees, and punitive damages. Zest Labs began working with Deloitte in 2016, in a confidential matter in a pilot program that Zest Labs had been engaged for by Walmart. Zest Labs engaged in significant discussions, presentations, demonstrations, and information downloads with Deloitte who specifically acknowledged that this information was confidential. Deloitte's motion to dismiss was denied, it filed an answer denying substantive allegations and the parties are engaging in discovery. The Company cannot reasonably determine the outcome and potential reward at this time.

● On April 22, 2022, BitStream Mining and Ecoark Holdings were sued in Travis County, Texas District Court (Docket #79176-0002) by Print Crypto Inc. in the amount of $256,733.28 for failure to pay for equipment purchased to operate BitStream Mining's Bitcoin mining operation. The defendants intend to vigorously defend themselves and have filed counterclaims in the 353<sup>rd</sup> Judicial District in Travis County, Texas on May 6, 2022 for fraudulent inducement, breach of contract, and for payment of attorney's fees and costs. The Company provided additional documents to our attorneys on October 7, 2022, and there is no update since then. The Company has accrued the full amount of the claim in its consolidated financial statements as of December 31, 2022.

● On July 15, 2022, BitStream Mining and two of their Management were parties to a petition filed in Ward County District Court by 1155 Distributor Partners-Austin, LLC d/b/a Lonestar Electric Supply in the amount of $414,026.83 for failure to pay for equipment purchased to operate the Company's Bitcoin mining operation. The Company filed a petition to remove one of its Management from the claim in December 2022, and there is no update since then. The Company has accrued the full amount of the claim in its consolidated financial statements as of December 31, 2022.

● On October 17, 2022, BitStream Mining was a party to a petition filed in Ward County District Court by VA Electrical Contractors, LLC in the amount of $1,666,187.18 for failure to pay for equipment purchased to operate the Company's Bitcoin mining operation. The Company's registered agent was served with this lawsuit on January 3, 2023, the Company answered the claim in January, and is in process of supplying documents for discovery. The Company has accrued the full amount of the claim in its consolidated financial statements as of December 31, 2022.

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.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**<u>Nasdaq Compliance</u>**

On December 27, 2022, the Company received a letter from Nasdaq notifying the Company of its noncompliance with stockholder approval requirements set forth in Listing Rule 5635(d), which requires stockholder approval for transactions, other than public offerings, involving the issuance of 20% or more of the pre-transaction shares outstanding at less than the Minimum Price (as defined therein). Additionally, the letter indicates that the Company violated Nasdaq's voting rights rule set forth in Listing Rule 5640. The matters described in the letter relate to an amendment to the Certificate of Designation of Rights, Preferences and Limitations (the "Certificate") of the Series A, shares of which were issued by the Company on June 8, 2022 in a private placement transaction which was previously disclosed on a Current Report on Form 8-K filed on June 9, 2022. Specifically, the Company amended the Certificate on November 28, 2022 to: (i) increase the stated value of the Series A from $10,000 to $10,833.33; (ii) provide for the dividends payable under the Series A to be payable in Common Stock rather than cash effective beginning November 1, 2022, and (iii) reduce the conversion price of the Series A from $2.10 to the lesser of (1) $1.00 and (2) the higher of (A) 80% of the 10-day daily volume weighted average price and (B) $0.25 (the "Amendment"). According to the letter, the Company was required to obtain stockholder approval to effect the Amendment because the Series A as amended provides for the potential issuance of 51,999,984 shares of Common Stock at less than the Minimum Price under Listing Rule 5635(d), and the Amendment also violates Listing Rule 5640 by providing the holder of the Series A with voting rights on an as-converted basis with the Series A convertible into Common Stock at a discount, thereby violating Listing Rule 5640.

In the letter, the Company was provided 45 calendar days from the date of the letter, or until February 10, 2023, to submit a plan to regain compliance with the referenced Listing Rules, and if such plan is accepted by Nasdaq, the Company can receive an extension of up to 180 calendar days from the date of the letter to evidence compliance. However, if the Company's plan is not accepted by Nasdaq, or is not sufficiently executed to regain compliance and remedy the matters set forth in the letter, the Company's Common Stock will be subject to delisting. In connection with the letter the Company was also requested certain documents and information related to its sale of White River.

In connection with the December 27<sup>th</sup> letter, the Company was also requested to provide certain documents and information related to its sale of White River, including as it pertains to the $30,000,000 in preferred stock value being carried on the Company's balance sheet as consideration for the sale of the entity. According to the correspondence, the request was made under Listing Rule 5250 which provides that a listed company will provide Nasdaq with requested information deemed necessary to make a determination regarding such company's continued listing.

Further, on December 30, 2022, the Company received another letter from the Nasdaq notifying the Company of its noncompliance with Listing Rule 5550(a)(2) by failing to maintain a minimum bid price for its Common Stock of at least $1.00 per share for 30 consecutive business days and providing the Company with a 180 calendar day grace period to regain compliance with the Listing Rule 5550(a)(2), subject to a potential 180 calendar day extension, as described below. To regain compliance, the Company's Common Stock must have a minimum closing bid price of at least $1.00 per share for at least 10 consecutive business days within the grace period which ends on June 28, 2023. To qualify for the additional grace period, the Company will be required to meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second grace period, by effecting a reverse stock split if necessary, which would also require stockholder approval unless completed with a proportionate reduction in our authorized Common Stock under our Articles of Incorporation.

On January 26, 2023, Nasdaq sent an email to the Company raising 13 questions concerning the White River transaction, White River's business, seeking verification that the Company had in fact transferred $3 million to White River last July and questioning the time allocations of the two senior executive officers of the Company and White River, among other things. The Company responded on February 15, 2023.

The Company provided responses to Nasdaq on January 11, 2023, February 10, 2023 and February 15, 2023. As of the date of this Report, the Company has not heard back from Nasdaq.

If our Common Stock is delisted from Nasdaq, we could face significant material adverse consequences, including:

● a risk that Ault may refuse to close the proposed BitNile.com transaction;

● it may adversely affect the Company's ability to raise capital which it needs to stay operational;

● a limited availability of market quotations for our Common Stock;

● reduced liquidity with respect to our Common Stock;

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

● a determination that our shares of Common Stock are a "penny stock" which will require broker-dealers trading in our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our Common Stock; and

If we are unable to rectify any of the above-described Nasdaq issues, for failure to timely obtain stockholder approval, a delisting will subject us and our stockholders to the above and other adverse consequences, and could also delay us from effecting the announced spin-offs of common stock of White River and Wolf Energy certain entities as described elsewhere in this Report. See "Risk Factors" contained elsewhere in this Report.

**NOTE 16: CONCENTRATIONS**

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

**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.

Financial instruments consist principally of cash, prepaid expenses, 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 nine months ended December 31, 2022 and 2021. The recorded values of all other financial instruments approximate its current fair values because of its 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 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:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Level 1** | **Level 2** | **Level 3** | **Total Gains<br> and (Losses)** |
| December 31, 2022 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Warrant derivative liabilities | $- | $- | $44447 | $4274183 |
| &nbsp;&nbsp;&nbsp;Preferred stock derivative liabilities | - | - | 4811875 | 1864777 |
| &nbsp;&nbsp;&nbsp;Bitcoin | - | - | - | (9122) |
| &nbsp;&nbsp;&nbsp;Investment – White River Energy Corp | - | - | 30000000 | - |
| March 31, 2022 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Warrant derivative liabilities | $- | $- | $4318630 | $15386301 |
| &nbsp;&nbsp;&nbsp;Bitcoin | 19267 | - | - | (7228) |

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**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

The table below shows a reconciliation of the beginning and ending liabilities measured at fair value using significant unobservable inputs (Level 3) for the nine months ended December 31, 2022:

---

| | |
|:---|:---|
|  | **December 31,<br> 2022**<br>**(unaudited)** |
| Beginning balance | $(4318630) |
| Net change in unrealized (depreciation) appreciation included in earnings | 6138960 |
| Reclassification from mezzanine equity | (10096664) |
| Gain on derivative at inception of amendment | 2878345 |
| Purchases | 30000000 |
| Sales/conversions to equity | 541667 |
| Transfers in and out | - |
| Ending balance | $25143678 |

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**NOTE 18: LEASES**

The Company has adopted ASU No. 2016-02, *Leases (Topic 842)*, as of April 1, 2019 and will account for its 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 on March 27, 2020. The Company recorded these amounts at present value, in accordance with the standard, using a discount rate of 5%. 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 24 and 60 months. Upon the election by the Company to extend the lease for additional years, that election will be treated as a lease modification and the lease will be reviewed for re-measurement.

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

As of December 31, 2022, the value of the unamortized lease right of use asset is $370,315 (through maturity at October 31, 2026). As of December 31, 2022, the Company's lease liability was $376,280.

---

| | |
|:---|:---|
| Maturity of lease liability for the operating leases for the period ended December 31, | Maturity of lease liability for the operating leases for the period ended December 31, |
| 2023 | $135983 |
| 2024 | $94743 |
| 2025 | $97585 |
| 2026 | $83344 |
| Imputed interest | $(35375) |
| Total lease liability | $376280 |

---

---

| | |
|:---|:---|
| Disclosed as: |  |
| Current portion | $119975 |
| Non-current portion | $256305 |

---

---

| | |
|:---|:---|
| Amortization of the right of use asset for the period ended December 31, | Amortization of the right of use asset for the period ended December 31, |
| 2023 | $122346 |
| 2024 | $83433 |
| 2025 | $87787 |
| 2026 | $76749 |
| Total | $370315 |

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**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**Total Lease Cost**

Individual components of the total lease cost incurred by the Company is as follows:

---

| | | |
|:---|:---|:---|
| Operating lease expense – nine months ended December 31, 2022 and 2021 | $106765 | $19726 |
| Operating lease expense – three months ended December 31, 2022 and 2021 | $35588 | $19726 |

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**NOTE 19: RELATED PARTY TRANSACTIONS**

Trend Capital Management was founded in 2011 and through June 30, 2021, was Trend Holding's primary asset. Trend Capital Management is not the investment manager of these entities, nor the beneficial owner of Ecoark securities held by Trend Discovery LP ("Trend LP") nor Trend Discovery SPV I, LLC ("Trend SPV") since it assigned the power to vote and dispose of securities to a third party not affiliated with Ecoark. The investment capital in Trend LP and Trend SPV is from individual limited partners and members, and not from the Company. Trend Capital Management does not have the obligation to absorb losses or the right to receive benefits that could be significant as a result of the entities' performance. Trend Capital Management does not have any ownership of or a controlling financial interest in Trend LP nor Trend SPV and therefore management has concluded consolidation of these entities with Trend Capital Management is not required. Trend Capital Management provides services and collects fees from entities which include Trend LP and Trend SPV.

Trend Discovery which held Barrier Crest and Trend Capital Management was sold on June 17, 2022.

Jay Puchir, the Company's Chief Financial Officer, Secretary and Treasurer, served as a consultant to the Company from May 2019 to March 2020 and was paid solely in stock options totaling 40,000 stock options at an exercise price of $3.15 per share. In addition, any outstanding notes with Mr. Puchir have been repaid along with all accrued interest.

Gary Metzger, a director, advanced $577,500 to the Company through March 31, 2020, under the terms of notes payable that bears interest at rates ranging between 10% and 15% interest per annum. These notes along with all accrued interest were repaid in August 2021.

In the Banner Midstream acquisition, Randy S. May, Chief Executive Officer and Chairman, was the holder of approximately $1,242,000 in notes payable by Banner Midstream and its subsidiaries, which were assumed by the Company in the transaction. Additionally, Mr. May held a note payable by Banner Energy in the amount of $2,000,000 in principal and accrued interest, which was converted into 2,740,000 shares of common stock (on a pre-reverse stock split basis) as a result of the transaction. Neither of these amounts remain outstanding.

On August 31, 2021, William B. Hoagland, the then Chief Financial Officer of the Company, transferred 550,000 shares of Ecoark Holdings common stock to Trend LP, of which Mr. Hoagland owns an approximately 25% of Trend LP. Additionally, Trend SPV holds 344,000 shares of Ecoark Holdings common stock and 460,000 warrants to purchase Ecoark Holdings common stock.

Ecoark Holdings has made periodic loans to Agora to permit it to begin its Bitcoin mining business. On November 13, 2021, Agora issued Ecoark Holdings a $7.5 million term note which accrues 10% per annum interest and is due March 31, 2023. As of December 31, 2022, Agora owed principal of $5,515,174 and interest of $547,621 to Ecoark Holdings. These amounts have been eliminated in consolidation.

On February 2, 2022, Peter Mehring, a director and executive officer, gave notice of his intent to resign as an executive officer and director effective on February 11, 2022. Mr. Mehring resigned as a result of his entering into an Employment Agreement with a leading Internet service company. He also entered into a Consulting Agreement with the Company.

Under the Consulting Agreement, Mr. Mehring will advise the Company (including Zest Labs) on its current intellectual property litigation and matters relating to Zest Lab's intellectual property as well as provide transition services. The Consulting Agreement is for a one-year term. The Company agreed to pay Mr. Mehring $16,667 per month. His unvested stock awards will continue to vest during the term and the expiration date on any stock awards will be extended for one year following the termination. The Company and Mr. Mehring agreed to not renew this agreement and have parted amicably.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

**NOTE 20: SUBSEQUENT EVENTS**

Subsequent to December 31, 2022, the Company had the following transactions:

On January 24, 2023, the Company entered into an At-The-Market ("ATM") Issuance Sales Agreement (the "Agreement") with Ascendiant Capital Markets, LLC ("Ascendiant"), pursuant to which the Company may issue and sell from time to time, through Ascendiant, shares of the Company's common stock, par value $0.001 per share (the "Shares"), with offering proceeds of up to $3,500,000.

Sales of the Shares, if any, may be made by any method permitted by law deemed to be an "at-the-market" offering as defined in Rule 415 of the Securities Act of 1933 (the "Securities Act"), including without limitation sales made directly on or through The Nasdaq Capital Market, the trading market for the Company's common stock, on any other existing trading market in the United States for the Company's common stock, to or through a market maker, directly to Ascendiant as principal for its account in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, in privately negotiated transactions, in block trades, or through a combination of any such methods of sale. Ascendiant will use commercially reasonable efforts to sell on the Company's behalf all of the Shares requested to be sold by the Company, consistent with its normal trading and sales practices, subject to the terms of the Agreement. Under the Agreement, Ascendiant will be entitled to compensation of 3% of the gross proceeds from the sales of the Shares sold under the Agreement. The Company also agreed to reimburse Ascendiant for certain specified expenses, including the fees and disbursements of its legal counsel, in an amount not to exceed $30,000 as well as up to $2,500 for each quarterly and annual bring-down while the Agreement is ongoing.

The Shares are being offered and sold pursuant to a prospectus supplement filed with the Securities and Exchange Commission (the "SEC") on January 24, 2023 and the accompanying base prospectus which is part of the Company's effective Registration Statement on Form S-3 (File No. 333-249532) (the "Registration Statement"). As of February 17, 2023, the Company had sold 1,425,928 shares and received $475,623 in net proceeds.

The Agreement contains representations, warranties and covenants customary for the transactions of this kind.

The Company has allocated 7,500,000 shares of common stock to be sold as of February 10, 2023 under the Ascendiant ATM.

On January 23, 2023, the Series A holder agreed to reduce its secondary offering of shares of our common stock issuable upon conversion of the Series A by $3,500,000 in connection with the ATM offering.

The Company issued 710,430 shares of common stock for the December 2022 and January 2023 preferred stock dividend payments to Ault.

On February 8, 2023, the Company entered into a Share Exchange Agreement (the "SEA") by and among Ault Alliance, Inc. ("Ault"), the owner of approximately 86% of BitNile.com, Inc. ("BitNile.com"), and the minority stockholders of BitNile.com (the "Minority Shareholders"). The SEA provides that, subject to the terms and conditions set forth therein, the Company will acquire all of the outstanding shares of capital stock of BitNile.com as well as the common stock of Earnity, Inc. beneficially owned by BitNile.com (which represents approximately 19.9% of the outstanding common stock of Earnity, Inc. as of the date of the SEA), in exchange for the following: (i) 8,637.5 shares of newly designated Series B Convertible Preferred Stock of the Company to be issued to Ault (the "Series B"), and (ii) 1,362.5 shares of newly designated Series C Convertible Preferred Stock of the Company to be issued to the to the Minority Shareholders (the "Series C," and together with the Series B, the "Preferred Stock"). The Series B and the Series C, the terms of which are summarized in more detail below, each have a stated value of $10,000 per share (the "Stated Value"), for a combined stated value of $100,000,000, and subject to adjustment are convertible into a total of up to 400,000,000 shares of the Company's common stock, which represent approximately 92.4% of the Company outstanding common stock on a fully-diluted basis.

The terms of the Series B and Series C as set forth in the Certificates of Designations of the Rights, Preferences and Limitations of each such series of Preferred Stock (each, a "Certificate," and together the "Certificates") are essentially identical except the Series B is super voting and must approve any modification of various negative covenants and certain other corporate actions as more particularly described below.

Pursuant to the Series B Certificate, each share of Series B is convertible into a number of shares of the Company's common stock determined by dividing the Stated Value by $0.25, or 40,000 shares of common stock. The conversion price is subject to certain adjustments, including potential downward adjustment if the Company closes a qualified financing resulting in at least $25,000,000 in gross proceeds at a price per share that is lower than the conversion price. The Series B holders are entitled to receive dividends at a rate of 5% of the Stated Value per annum from issuance until February 7, 2033 (the "Dividend Term"). During the first two years of the Dividend Term, dividends will be payable in additional shares of Series B rather than cash, and thereafter dividends will be payable in either additional shares of Series B or cash as each holder may elect. If the Company fails to make a dividend payment as required by the Series B Certificate, the dividend rate will be increased to 12% for as long as such default remains ongoing and uncured. Each share of Series B also has an $11,000 liquidation preference in the event of a liquidation, change of control event, dissolution or winding up of the Company, and ranks senior to all other capital stock of the Company with respect thereto other than the Series C with which the Series B shares equal ranking. Each share of Series B is entitled to vote with the Company's common stock at a rate of 10 votes per share of common stock into which the Series B is convertible.

**ECOARK HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2022**

In addition, for as long as at least 25% of the shares of Series B remain outstanding, Ault (and any transferees) must consent rights with respect to certain corporate events, including reclassifications, fundamental transactions, stock redemptions or repurchases, increases in the number of directors, and declarations or payment of dividends, and further the Company is subject to certain negative covenants, including covenants against issuing additional shares of capital stock or derivative securities, incurring indebtedness, engaging in related party transactions, selling of properties having a value of over $50,000, altering the number of directors, and discontinuing the business of any subsidiary, subject to certain exceptions and limitations.

The terms, rights, preferences and limitations of the Series C are substantially the same as those of the Series B, except that the Series B holds certain additional negative covenant and consent rights, and Series C holders vote with the Company's common stock on an as-converted basis. The Company is required to maintain a reserve of authorized and unissued shares of common stock equal to 200% of the shares of common stock issuable upon conversion of the Preferred Stock, which is initially 800,000,000 shares.

Pending stockholder approval of the transaction, the Series B and the Series C combined are subject to a 19.9% beneficial ownership limitation. That limitation includes shares of Series A issued to Ault on June 8, 2022 and any common stock held by Ault. Certain other rights are subject to stockholder approval as described below. The SEA provides that the Company will seek stockholder approval following the closing. The entire transaction is subject to compliance with Nasdaq Rules and the Series B and Series C Certificates each contain a savings clause that nothing shall violate such Rules. Nasdaq may nonetheless disregard the savings clause.

Under the SEA, effective at the closing Ault is entitled to appoint three of the Company's directors, and following receipt of approval from the Company's stockholders, a majority of the Company's directors. The SEA also provides the holders of Preferred Stock with most favored nations rights in the event the Company offers securities with more favorable terms than the Preferred Stock for as long as the Preferred Stock remains outstanding. Under the SEA, while any Preferred Stock is outstanding, the Company is prohibited from redeeming or declaring or paying dividends on outstanding securities other than the Preferred Stock. Further, the SEA prohibits the Company from issuing or amending securities at a price per share below the conversion price of the Preferred Stock, or to engage in variable rate transactions, for a period of 12 months following the closing.

The SEA further provides that following the closing the Company will prepare and distribute a proxy statement and hold a meeting of its stockholders to approve each of the following: (i) the SEA and the transactions contemplated thereby, (ii) a ratification of the Third Certificate Designations of Rights, Preferences, and Limitations of the Series A, (iii) a reverse stock split with a range of between 1-for 2 and 1-for-20, (iv) a change in the Company's name to BitNile.com, Inc., (v) an increase of the Company's authorized common stock to 1,000,000,000 shares of common stock; and (vi) any other proposals to which the Parties shall mutually agree. In addition, pursuant to the SEA the Company agreed to use its reasonable best efforts to effect its previously announce spin-offs of the common stock of Wolf Energy and White River held by or issuable to the Company, use its best efforts to complete one or more financings resulting in total gross proceeds of $100,000,000 on terms acceptable to Ault, and (financially support the ongoing Zest Labs litigation. The holders of the Preferred Stock will not participate in the aforementioned spin-offs and distribution. In connection with the SEA, the Company and Ault also agreed that the net litigation proceeds from the Zest Labs litigation that was ongoing as of November 15, 2022 would be held in a trust for the benefit of the Company's stockholders of record as of such date.

In connection with the SEA, the Company also entered into a Registration Rights Agreement with Ault and the Minority Shareholders pursuant to which the Company agreed to file a registration statement on Form S-3 or Form S-1 with the Securities and Exchange Commission (the "SEC") registering the resale by the holders of the Preferred Stock and/or the shares of common stock issuable upon conversion of the Preferred Stock, to be initially filed within 15 days of the closing, and to use its best efforts to cause such registration statement to be declared effective by the SEC within 45 days thereafter, subject to certain exceptions and limitations.

The SEA contains certain representations and warranties made by each of the Company, Ault and the Minority Shareholders. Upon the closing, which is subject to the closing conditions set forth in the SEA, including among other conditions the parties obtaining a fairness opinion from a national independent valuation firm and satisfactory completion of due diligence by each of the Company and Ault, BitNile.com will continue as a wholly-owned subsidiary of the Company. BitNile.com's principal business entails the development and operation of a metaverse platform, the beta for which is scheduled to launch in March 2023. However, no assurances can be given that the transaction will close, or that if the transaction closes the Company will realize the anticipated or expected benefits of the transaction.

**ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and notes thereto presented in this Report as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2022.

**Overview**

Ecoark Holdings Inc. ("Ecoark Holdings," "Ecoark" or the "Company") is a holding company, incorporated in the State of Nevada on November 19, 2007. Through September 30, 2022, Ecoark Holdings' former subsidiaries with the exception of Agora Digital Holdings, Inc., a Nevada corporation ("Agora") and Zest Labs, Inc. ("Zest Labs") has been treated as divested for accounting purposes. See Notes 1 and 2 to the financial statements included in this Report. As a result of the divestitures, all assets and liabilities of the former subsidiaries have been reclassified to discontinued operations on the condensed consolidated balance sheet for March 31, 2022 and all operations of these companies have been reclassified to discontinued operations and gain on disposal on the condensed consolidated statements of operations for the nine and three months ended December 31, 2022.

Prior to the recent divestitures, the Company's principal subsidiaries consisted of Ecoark, Inc., a Delaware corporation which was the parent of Zest Labs, Banner Midstream Corp., a Delaware corporation ("Banner Midstream") and Agora which 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, which includes Bitstream Mining, LLC, the Company's Bitcoin mining subsidiary.

**Recent Developments**

During the current fiscal year ending March 31, 2023, the Company engaged in the following transactions:

● Agora entered into a Master Services Agreement ("MSA") on December 7, 2022 with an Ault subsidiary whereby the Ault subsidiary agreed to provide mining equipment which Agora would host at its West Texas location and supply the electricity for the cryptocurrency mining. The MSA requires Agora to initially provide up to 12MW of electricity at the West Texas site for the Ault subsidiary's use. An additional 66MW of power can be made available to the Ault subsidiary as well for a total of 78MW. To meet this obligation, the Company is required to raise at least $5,000,000 to enable the build out of the hosting facility, including the initial 12MW of power within 45 days of the date of the MSA which deadline was not met.

● On July 25, 2022 the Company sold White River Holdings Corp ("White River") and with it its oil and gas production business to White River Energy Corp, formerly Fortium Holdings Corp. ("WTRV") in exchange for 1,200 shares of WTRV's non-voting Series A Convertible Preferred Stock (the "WTRV Series A"). Subject to certain terms and conditions set forth in the Certificate of Designation of the WTRV Series A, the WTRV Series A will become convertible into 42,253,521 shares of WTRV's common stock upon such time as (A) WTRV has filed a Form S-1, with the Securities and Exchange Commission (the "SEC") and such Form S-1 has been declared effective, and (B) Ecoark elects to distribute shares of its common stock to its stockholders. The Form S-, as amended, is pending SEC Staff review.

● On August 23, 2022 the Company sold Banner Midstream, which consisted of its transportation business to Wolf Energy Services, Inc. (formerly Enviro Technologies US, Inc.) ("Wolf Energy ") in exchange for 51,987,832 shares of the Wolf Energy common stock.

● In September 2022, the Company announced a record date of September 30, 2022 for the spin-offs of common stock of Wolf Energy and WTRV to holders of the Company's common stock and preferred stock (on an as-converted basis).

● On January 24, 2023, the Company entered into an At-The-Market ("ATM") Issuance Sales Agreement with Ascendiant Capital Markets, LLC ("Ascendiant") as sales agent, pursuant to which the Company may issue and sell from time to time, through Ascendiant, shares of the Company's common stock, with offering proceeds of up to $3,500,000. In connection with the ATM offering, the Series A holder agreed to reduce its secondary offering of shares of common stock issuable upon conversion of the Series A it holds by $3,500,000.

● On February 8, 2023, the Company entered into a Share Exchange Agreement (the "SEA") by and among Ault Alliance, Inc. ("Ault"), the owner of approximately 86% of BitNile.com, Inc. ("BitNile.com"), and the minority stockholders of BitNile.com which contemplates the Company acquiring all of the outstanding shares of capital stock of BitNile.com in exchange for shares if newly designated preferred stock to have a combined stated value of $100,000,000, and subject to adjustment will be convertible into a total of up to 400,000,000 shares of the Company's Common Stock, which represent approximately 92.4% of the Company outstanding Common Stock on a fully-diluted basis. BitNile.com's principal business envisions operating a metaverse platform which is under development, and the beta for which is scheduled to launch in March 2023. However, no assurances can be provided that this transaction will close, including due to closing conditions such as the requirement that the Company obtain a fairness opinion from an independent national third party appraisal firm, as well as satisfactory due diligence by the parties.

In addition to the potential acquisition of BitNile.com as contemplated by the SEA, the Company's goal is to spin-off all of the Wolf Energy common stock and WTRV common stock to the Company's stockholders in calendar year 2023, although because of regulatory delays or other reasons we may not meet that deadline. At the same time, we expect to acquire either BitNile.com under the SEA described above or another business so we do not become a shell corporation. This will result in a change of control and may or may not be subject to stockholder approval.

<u>Future Spin-Offs</u>

As described in this Report, Ecoark's goal is to spin-off its common stock of White River and Wolf Energy. While the Company previously planned on spinning off Zest Labs common stock in a similar fashion, the Company decided not to proceed with that spin-off. Due to market conditions, the Company decided it was inadvisable to seek to raise capital for Zest Labs which it needed to operate as a stand-alone public company. To protect the Company's stockholders, it granted its stockholders of record as of September 30, 2022 the right to receive 95% of the net proceeds of the Zest Labs litigation with Walmart and Deloitte, which is describe under Note 15 to the financial statements contained in this Report. That right is part of the Zest Labs certificate of incorporation. Under the SEA, the BitNile.com stockholders agreed that they will not participate in any of these distributions if the transaction closes.

Following the above transactions, the Company's only remaining subsidiaries are Agora, which ceased mining Bitcoin but is now exploring operating as a hosting company for Bitcoin mining ventures, and Zest Labs which holds technology and related intellectual property rights for fresh food solutions, and is not operating due to ongoing litigation involving its technology an intellectual property.

**Segment Reporting for the Nine and Three Months Ended December 31, 2022:**

As a result of the sales of White River and Banner Midstream, and the immaterial nature of the operations of Zest Labs, the Company no longer segregates its operations as most of the continuing operations are related to Agora.

**Key Trends**

<u>Impact of Inflation</u>

In 2022, there has been a sharp rise in inflation in the U.S. and globally. Given our limited operations, the most significant future impact will be on employee salaries and benefits and electricity costs.

<u>Impact of COVID-19</u>

COVID-19 may continue to affect the economy and our business, depending on the vaccine rollouts and the emergence of virus mutations as well as the impact of supply chain disruptions.

COVID-19 did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets for the fiscal quarter ended December 31, 2022 included in this Report.

COVID-19 has been a contributing factor in supply and labor shortages which have been pervasive in many industries. The extent to which a future COVID-19 outbreak and other adverse developments may impact the Company's results will depend on future developments that are highly uncertain and cannot be predicted.

**Results of Operations For Continuing Operations For the Three Months Ended December 31, 2022 and 2021 Revenues**

The discussion of our results of operations should be evaluated considering that our primary subsidiaries were sold in the three months ended December 31, 2022 and their results of operations are now treated as discontinued operations.

The Company had no revenue in the three months ended December 31, 2022 ("Q3 2023") and had $17,455 in 2021 ("Q3 2022") as it had just recently commenced Bitcoin mining operations. Agora has recently focused on becoming a hosting company as reflected below. To that end, Agora entered into the MSA with Ault described above, whereby Agora agreed to host Ault's cryptocurrency mining equipment at Agora's West Texas location and supply the electricity for the cryptocurrency mining.

The Company's Bitcoin operations began in the fiscal year ended March 31, 2022 and ceased on March 3, 2022 due to the low price of Bitcoin and the inability of Agora to timely complete its initial public offering which created a working capital issue. The Company intends to refocus Agora to operating as a hosting company providing infrastructure and energy to cryptocurrency mining enterprises assuming the Company can raise the necessary capital. Unless and until we are successful in generating revenue for Agora or acquire another operating

**Cost of Revenues and Gross Profit**

Cost of revenues for Q3 2023 was $47,460 as compared to $92,823 for Q3 2022. We expect cost of revenues to increase once we have commenced Agora's hosting operations.

**Operating Expenses**

Total operating expenses were $3,005,922 for Q3 2023 compared to $4,692,895 for Q3 2022. The decrease between periods were primarily related to a decrease in salaries and salaries related costs to $1,280,078 in Q3 2023 from $3,159,979 in Q3 2022 primarily due to higher stock-based compensation in Q3 2022 compared to Q3 2023.

**Other Income (Expense)**

Total other income was $5,948,563 in Q3 2023, compared to total other income of $10,982,731 in Q3 2022, almost all of which was non-cash. Change in fair value of derivative liabilities for Q3 2023 was a non-cash gain of $1,381,711 related to the changes in our stock price, a change in the fair value of the preferred stock derivative liability for Q3 2023 of $1,864,777, a gain of $2,878,345 related to the preferred stock derivative liability at inception, and interest expense, net of ($172,347). Change in fair value of derivative liabilities for Q3 2022 was a non-cash gain of $10,979,137 related to the changes in our stock price.

**Net Income from Continuing Operations**

Net income from continuing operations for Q3 2023 was $2,895,181 as compared to net income from continuing operations of $6,214,468 for Q3 2022. The decrease was primarily due to the decrease in operating expenses as noted above offset by the change in the fair value of the derivative liability and the change in the preferred stock derivative liability arising from the decrease in the Company's Common Stock price.

**Results of Operations For Continuing Operations For the Nine Months Ended December 31, 2022 and 2021 Revenues**

The Company had no revenue in the nine months ended December 31, 2022 ("9M 2023") and $17,455 in the nine months ended December 31, 2021 related to the Bitcoin mining operation ("9M 2022"). To that end, on December 7, 2022, Agora entered into the MSA with Ault described above.

**Cost of Revenues and Gross Profit**

Cost of revenues for 9M 2023 was $229,534 as compared to $92,823 for 9M 2022. We expect cost of revenues to increase once we have commenced Agora's hosting operations.

**Operating Expenses**

Total operating expenses were $17,909,843 for 9M 2023 compared to $10,775,053 for 9M 2022. The increase between periods were primarily related to an increase in salaries and salaries related costs to $10,998,108 in 9M 2023 from $5,504,833 in 9M 2022 arising from the stock-based compensation of $9,370,769 in 9M 2023 versus $3,786,342 in 9M 2022, and to a lesser extent an $1,655,969 increase related to the impairment of the miners that Agora had purchased as it has moved to a hosting model from a mining model for Bitcoin.

**Other Income (Expense)**

Total other income was $7,951,535 in 9M 2023, compared to total other income of $14,741,253 in 9M 2022. Change in fair value of derivative liabilities for 9M 2023 was a non-cash gain of $4,274,183, and the change in the fair value of the preferred stock derivative liability of $1,864,777, a gain of $2,878,345 related to the preferred stock derivative liability at inception, partially offset by a loss on disposal of fixed assets of $(570,772) related to Agora's settlement wherein mining equipment valued at $1,425,772 were exchanged with a vendor for a credit of $855,000; and interest expense, net of interest income of $(491,075). Change in fair value of derivative liabilities for 9M 2022 was a non-cash gain of $15,294,814, partially offset by interest expense, net of interest income of $(553,561).

**Net Income (Loss) from Continuing Operations**

Net loss from continuing operations for 9M 2023 was ($10,187,842) as compared to net income from continuing operations of $3,890,832 for 9M 2022. The decrease was primarily attributable to increases in salaries and salaries related costs and our 9M 2023 impairment charge, partially offset by the change in the fair value of the derivative liabilities and the change of the preferred stock liability.

**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 revenue generated from operations, levels of accounts receivable and accounts payable and capital expenditures.

Net cash used in operating activities for continuing operations was $(12,385,949) for 9M 2023, as compared to $(8,414,833) for 9M 2022. Cash used in operating activities for 9M 2023 was primarily caused by the net loss offset by increases in common shares issued for services, and losses on disposal of former subsidiaries without similar amounts in 9M 2022 as well as changes in accounts payable and accrued expenses from 9M 2022 to 9M 2023.

Net cash provided by investing activities was $517,221 for 9M 2023 compared to net cash used in investing activities of $(9,392,671) for 9M 2022. Net cash provided by investing activities in 9M 2023 were comprised of proceeds received from the refund of the power development costs partially offset by purchases of fixed assets and discontinued operations, and the amounts used in 9M 2022 related to the purchase of fixed assets and power development costs as we commenced operations in Agora.

Net cash provided by financing activities for 9M 2023 was $11,816,297 which comprised primarily of proceeds from our June 2022 sale of the Ecoark Series A, Commitment Shares described elsewhere in this Report. This compared with 9M 2022 net cash provided by financing activities of $17,431,074 comprised primarily of the sale of our common stock in a registered direct offering.

As of February 14, 2023, the Company has $31,294 in cash and cash equivalents. The Company believes that the current cash on hand is not sufficient to conduct planned operations for one year from the issuance of the consolidated financial statements and needs to raise capital to support their operations.

To date we have financed our operations through sales of common stock, convertible preferred stock and other derivative securities and the issuance of debt. We may also issue common stock, preferred stock or other securities in connection with any business acquisition we undertake in the future following our planned spin-offs. Presently we may not raise capital without the consent of the Purchaser.

On January 24, 2023, the Company entered an ATM Agreement with Ascendiant as sales agent, which contemplates sales of shares of our common stock in a registered "at-the-market" offering for offering proceeds of up to $3,500,000. As of the date of this Report, the Company has sold 1,425,928 shares for total gross proceeds of $475,623, at an average price of $0.333 per share.

The Company's financial statements are prepared using accounting principles generally accepted in the United States ("U.S. GAAP") applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company sold its interests in Banner Midstream in two separate transactions on July 25, 2022 and September 7, 2022. In addition, it sold the non-core business of Trend Discovery on June 17, 2022. The Company expects to distribute the common stock it received (or issuable upon conversion of preferred stock) in the sales to its stockholders upon the effective registration statements for the two entities the companies were sold to. See Note 13, "Series A Convertible Redeemable Preferred Stock" for information on the Company's recent $12 million convertible preferred stock financing. That financing has restrictive covenants that require approval of the investor for the Company to engage in any equity or debt financing. The Company believes that the current cash on hand is not sufficient to conduct planned operations for 12 months from the issuance of the consolidated financial statements and may need to raise capital to support their operations. While the Company entered into the MSA with Ault which if the hosting arrangement is established would provide a source of revenue, as of the date of this Report the Company has not yet met its obligations under the MSA, including raising at least $5,000,000 to establish the initial infrastructure and power for the hosting arrangement. Further, if we acquire BitNile.com as contemplated by the SEA, we expect to require substantial additional capital to further develop its metaverse platform and launch revenue-generating operations therefrom, and no assurance can be given that we will be able to close that acquisition or that if we are we will be able to leverage the BitNile.com business as needed to generate material revenue or raise the necessary capital. See "Risk Factors" included in this Report.

The accompanying financial statements for the period ended December 31, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes continued revenue streams and becomes profitable. Management's plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

<u>Agora Line of Credit</u>

As of February 14, 2023, the Company has advanced a total of $5,692,463 to Agora under a $7.5 million term line of credit note issued to the Company by Agora which bears interest at a rate of 10% per annum. Agora will be required to repay any sums we lend it on March 31, 2023 with accrued interest.

<u>2018 Line of Credit</u>

On December 28, 2018, the Company entered into a $10,000,000 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. In the nine months ended December 31, 2022, the Company borrowed $505,181, which includes $17,681 in commitment fees, with the balance of $487,500 being deposited directly into the Company, and repaid $810,000 in the nine months ended December 31, 2022. Interest incurred for the nine months ended December 31, 2022 was $50,888, and accrued as of December 31, 2022 was $53,111. There were no advances in the nine months ended December 31, 2021. With the sale of Trend Holdings, we no longer can access this line of credit.

**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 statements regarding closing the SEA with Ault, the potential terms, timing and success of the planned spin-offs by us to our security holders of White River's and Wolf Energy's common stock, our ability to raise capital, our plans to maintain our Nasdaq listing, the expected changes to Agora's business, our expectations with respect to future developments in our ongoing litigation, and our liquidity. All statements other than statements of historical fact are "forward-looking statements" 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, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include possibility that the acquisition of BitNile.com contemplated by the SEA does not close including possibly due to closing conditions that are beyond either party's control, the failure to obtain a favorable fairness opinion, the risks and uncertainties surrounding the anticipated launch of the BitNile.com platform, the acceptance of such platform by consumers, advertisers and others, the ability to complete and timelines of our planned spin-offs and any regulatory, registration or other delays or obstacles including the potential for the Depository Trust Company to require a change in the record date, risks and uncertainties relating to undisclosed liabilities or the integration if the acquisition of BitNile.com closes, risks and uncertainties due to factors beyond our control, our ability to refocus Agora into a hosting company, challenges in securing our maintaining relationships with customers operating cryptocurrency mining businesses and vendors, the future price of Bitcoin and other cryptocurrencies if we host any mining for them, our failure to meet Nasdaq continued listing requirements, the inability to obtain stockholder approval of (i) the acquisition ofBitNile.com and the issuance of more than 19.9% of our common stock to Ault, and (ii) the November 2022 amendments to our Series A, the impact of future strains of COVID-19, the Russian invasion of the Ukraine, inflation and Federal Reserve interest rate increases in response thereto on the economy including the potential for a recession which may result, supply chain shortages, any issues which could result in unfavorable outcomes of one or both of our ongoing Zest Labs lawsuits, the outcome of the lawsuits against Agora, and the availability of capital on acceptable terms when needed or at all including all risks relating to the capital markets in general and small public companies in particular. Further information on the risks and uncertainties affecting our business is contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 under Part I. Item 1A. – Risk Factors. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

**<u>Critical Accounting Policies, Estimates and Assumptions</u>**

The critical accounting policies listed below are those the Company deems most important to its operations.

**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.

**Revenue Recognition**

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

● Step 1: Identify the contract with the customer

● Step 2: Identify the performance obligations in the contract

● Step 3: Determine the transaction price

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

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

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

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

● Variable consideration

● Constraining estimates of variable consideration

● The existence of a significant financing component in the contract

● Noncash consideration

● Consideration payable to a customer

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

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

Management judgment is required when determining the following: when variable consideration is no longer probable of significant reversal (and hence can be included in revenue); whether certain revenue should be presented gross or net of certain related costs; when a promised service transfers to the customer; and the applicable method of measuring progress for services transferred to the customer over time. Although, Agora since March 3, 2022, has not recognized revenue from its mining operations, prior to this time, it recognized revenue upon satisfaction of its performance obligation over time in accordance with ASC 606-10-25-27 for its contracts with mining pool operators.

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

<u>Hosting Revenues</u>

Agora effective in September 2022 began efforts to generate revenue via hosting agreements. Agora entered into a MSA on December 7, 2022 with Ault, whereby Ault agreed to provide mining equipment which Agora would host at its West Texas location and supply the electricity for the cryptocurrency mining.

When Agora generates hosting revenues, it will follow ASC 606 as outlined above and recognize revenue upon the completion of the performance obligations as stipulated under the MSA.

***Fair Value Measurements***

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

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

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

Level 3 inputs: Instruments with primarily unobservable value drivers.

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

***Derivative Financial Instruments***

The Company does not currently use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks, but may explore hedging oil prices in the current fiscal year. 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.

***Recently Issued Accounting Standards***

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 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 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 single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.

The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its consolidated financial statements.

In May 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-04 "Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815- 40) Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options" which clarifies and reduces diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a "debt" or "debt instrument"), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company does not believe this new guidance will have a material impact on its consolidated financial 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.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Not applicable.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

Not applicable.

**ITEM 4. CONTROLS AND PROCEDURES**

***Evaluation of Disclosure Controls and Procedures***

Our management, with the participation of our principal executive officer and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the 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 financial officers have concluded that as of the end of the period covered by this report the Company's disclosure controls and procedures were effective.

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.

***Changes in Internal Control Over Financial Reporting***

There were no material changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

***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**

Other than discussed below, during the period covered by this report, there were no material developments in the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended March 31, 2022.

**ITEM 1A. RISK FACTORS**

Investing in our common stock involves a high degree of risk. Investors should review the risk factors described in our Annual Report on Form 10-K for the year ended March 31, 2022. In addition, investors should consider the risk factors described below.

**Although we reported net income for the three months ended December 31, 2022, such results are unrelated to our actual performance.**

During the third quarter ended December 31, 2022, we reported net operating income from continuing operations of $2,895,181. Investors should consider that the income arose from GAAP which provides that our derivative liabilities operate inversely to our stock price. If our stock price in a given quarter goes down, we recognize non-cash income. Conversely if our stock price goes up, we report a non-cash loss.

**There is substantial doubt about our ability to continue as a going concern, and if we are unable to close the acquisition of BitNile.com or raise sufficient capital to launch cryptocurrency mining hosting operations through Agora, we may be forced to cease operations.**

As disclosed under "Liquidity and Capital Resources," we do not have sufficient capital to fund our operations for the next 12 months, and there is substantial doubt as to our ability to continue as a going concern. As disclosed elsewhere, on February 8, 2023 we entered into the SEA contemplating our acquisition of BitNile.com, the result of which would be BitNile.com becoming our wholly-owned subsidiary and us operating a development stage metaverse platform through BitNile.com. However, the acquisition may not close due to reasons beyond our control, including a closing condition that we acquire a fairness opinion, and that each party complete satisfactory due diligence. Further, if we are delisted from Nasdaq, which may result from inquiries which are currently pending as more particularly described in this Report, the stockholders of BitNile.com, particularly Ault, may determine not to proceed with the transaction, as one of the principal benefits envisioned by the SEA for BitNile.com is for the BitNile.com business to operate autonomously under the corporate umbrella of a Nasdaq-issuer, and be able to have access to capital thereby.

If we acquire BitNile.com, we anticipate requiring substantial additional capital to fund its operations, particularly given its metaverse platform is still under development, with its beta test scheduled to launch in March 2023. Further, if the acquisition of BitNile.com contemplated by the SEA does not close and in any event, we will need to raise at least $5,000,000 in order to fully launch our planned cryptocurrency mining hosting business through Agora under the MSA with an affiliate Ault and may require additional capital beyond the initial $5,000,000 to expand that business. In order to raise the capital required, we may need to issue common stock or common stock equivalents which will dilute our current stockholders, and/or debt securities which could subject us to negative covenants that hinder our ability to manage our business and take certain corporate actions as intended or at all. If we fail to proceed with the above-described transactions and/or raise sufficient capital to fund our planned operations as and when needed, we could be forced to cease operations, in which case you could lose some or all of your investment in us.

**Nasdaq has recently provided us with correspondence containing violation notices and questions arising from certain of our prior transactions, the result of which could be our common stock being delisted from Nasdaq.**

As disclosed elsewhere in this Report under "Note 15: Commitments And Contingencies – Nasdaq Compliance," in December 2022 the Company was notified by Nasdaq of alleged violations of the Nasdaq Listing Rules in connection with an amendment to the Series A that was effected in November 2022. Specifically, the notice alleges that by reducing the conversion price of the Series A and entitling the holder to vote with the common stock on an as-converted basis, the Company violated Nasdaq Listing Rule 5635(d) by issuing over 20% of the outstanding common stock without first obtaining stockholder approval, and Nasdaq Listing Rule 5640 by providing the holder of the Series A with disproportionate voting rights relative to the holders of common stock. While the Company submitted its initial response to Nasdaq including a plan of remediation, we cannot predict how Nasdaq will respond, including whether it will deem our responses and plan of remediation to be acceptable to remain compliant with the Nasdaq Listing Rules and maintain compliance therewith and listing on Nasdaq. Additionally, Nasdaq also sent two separate rounds of correspondence in December 2022 and January 2023 containing inquiries regarding the Company's July 25, 2022 divestment of White River Holdings to White River Energy Corp, including questions focused on whether the transaction was appropriately valued and whether any conflicts of interest or other issues are present given that Jay Puchir and Randy May are on the management teams of both the Company and White River Energy Corp. Finally, in December 2022 the Company also received a notice of deficiency with Nasdaq Rules because the closing price of our common stock was below $1.00 for 30 consecutive trading days, and unless our stock price goes above the $1.00 minimum bid price requirement for 10 consecutive trading days on its own, we will need to effect a reverse stock split or take other action to remediate this deficiency. In addition to all of these matters, Nasdaq may take the position that the acquisition of BitNile.com not only requires stockholder approval to issue more than 19.9% of our common stock to Ault and the minority stockholders of BitNile.com but also that the super voting rights violate Nasdaq Rules. We cannot assure you that Nasdaq will permit us to have our common stock to remain listed.

Any of the foregoing matters could result in our common stock being delisted from Nasdaq. If our common stock is delisted from Nasdaq, we could face significant material adverse consequences, including:

● Ault may decide not to proceed with the BitNile.com transaction under the SEA, in which case we will not realize the anticipated benefits of that transaction;

● We could face greater difficulty raising capital as and when need, on favorable terms, or at all, and could be forced to enter into more dilutive or onerous financing transactions given the relative lack of liquidity following a delisting;

● We could also face challenges in locating and obtaining a viable replacement acquisition target if the BitNile.com transaction does not close;

● There could be a limited availability of market quotations for our common stock and reduced liquidity with respect to our common stock;

● Our shares of common stock could become a "penny stock" which will require broker-dealers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; and

● There will be a limited amount of news and analyst coverage for our Company.

If we are unable to rectify any of the above-described Nasdaq issues, including potentially for failure to timely obtain stockholder approval, delisting will subject us and our stockholders to the above and other adverse consequences, and could also delay or prevent us from acquiring BitNile.com or effecting the announced spin-offs of common stock of certain entities as described elsewhere in this Report.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

Not applicable.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

**ITEM 5. OTHER INFORMATION**

None.

**ITEM 6. EXHIBITS**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **Incorporated by Reference** | **Incorporated by Reference** | **Incorporated by Reference** | |
| <br>**Exhibit No.** | <br>**Exhibit Description** | **Form** | **Date** | **Number** | **Filed or**<br> **Furnished**<br>**Herewith** |
| 2.1 | [Agreement and Plan of Merger between the Company and Trend Holdings, dated May 31, 2019](http://www.sec.gov/Archives/edgar/data/1437491/000121390019010242/f8k053119ex2-1_ecoarkhold.htm) | 8-K | 6/6/19 | 2.1 |  |
| 2.2 | [Stock Purchase and Sale Agreement, dated March 27, 2020, by and between the Company and Banner Energy Services Corp.](http://www.sec.gov/Archives/edgar/data/1437491/000121390020008472/ea120385ex10-1_ecoarkhold.htm) | 8-K | 4/2/20 | 10.1 |  |
| 2.3 | [Share Exchange Agreement dated August 23, 2022 by and among Enviro Technologies U.S., Inc., Banner Midstream Corp. And Ecoark Holdings, Inc.\*](http://www.sec.gov/Archives/edgar/data/1437491/000121390022051874/ea165065ex2-1_ecoarkhold.htm) | 8-K | 8/30/22 | 2.1 |  |
| 3.1(a) | [Articles of Incorporation, as amended](http://www.sec.gov/Archives/edgar/data/1437491/000121390021008954/f10q1220ex3-1_ecoarkhold.htm) | 10-Q | 2/12/21 | 3.1 |  |
| 3.1(b) | [Certificate of Amendment to Articles of Incorporation](http://www.sec.gov/Archives/edgar/data/1437491/000121390021052407/ea148701ex3-1_ecoarkhold.htm) | 8-K | 10/12/21 | 3.1 |  |
| 3.1(c) | [Certificate of Designation for the Series A Convertible Redeemable Preferred Stock](http://www.sec.gov/Archives/edgar/data/1437491/000121390022031979/ea161389ex3-1_ecoarkhold.htm) | 8-K | 6/9/22 | 3.1 |  |
| 3.1(d) | [Certificate of Amendment to the Certificate of Designation for the Series A Convertible Redeemable Preferred Stock](http://www.sec.gov/Archives/edgar/data/1437491/000121390022035030/ea162072ex3-1_ecoark.htm) | 8-K | 6/27/22 | 3.1 |  |
| 3.1(e) | [Second Certificate of Amendment to the Certificate of Designation for the Series A Convertible Redeemable Preferred Stock](http://www.sec.gov/Archives/edgar/data/1437491/000121390022039639/ea162897ex3-1_ecoark.htm) | 8-K | 7/15/22 | 3.1 |  |
| 3.1(f) | [Third Certificate of Amendment to the Certificate of Designation for the Series A Convertible Redeemable Preferred Stock](http://www.sec.gov/Archives/edgar/data/1437491/000121390022076451/ea169495ex3-1_eocarkhold.htm) | 8-K | 11/30/22 | 3.1 |  |
| 3.1(g) | [Form of Certificate of Designations of Rights, Preferences and Limitations of Series B Convertible Preferred Stock](http://www.sec.gov/Archives/edgar/data/1437491/000121390023011494/ea173243ex10-2_ecoark.htm) | 8-K | 2/14/23 | 10.2 |  |
| 3.1(h) | [Form of Certificate of Designations of Rights, Preferences and Limitations of Series C Convertible Preferred Stock](http://www.sec.gov/Archives/edgar/data/1437491/000121390023011494/ea173243ex10-3_ecoark.htm) | 8-K | 2/14/23 | 10.3 |  |
| 3.2(a) | [Amended and Restated Bylaws](http://www.sec.gov/Archives/edgar/data/1437491/000121390017004333/f8k042117ex3i_ecoarkhold.htm) | 8-K | 4/28/17 | 3.1 |  |
| 3.2(b) | [Amendment to Bylaws](http://www.sec.gov/Archives/edgar/data/1437491/000121390021045601/ea146549ex3-1_ecoarkhold.htm) | 8-K | 8/30/21 | 3.1 |  |
| 3.2(c) | [Amendment to Bylaws](http://www.sec.gov/Archives/edgar/data/1437491/000121390022031979/ea161389ex3-2_ecoarkhold.htm) | 8-K | 6/9/22 | 3.2 |  |
| 10.1 | [Agreement between Ecoark Holdings, Inc. and Ault lending LLC\*](http://www.sec.gov/Archives/edgar/data/1437491/000121390022075873/ea169393ex10-1_ecoarkhold.htm) | 8-K | 11/29/22 | 10.1 |  |
| 10.2 | [Master Service Agreement dated December 7, 2022 between Agora Digital Holdings, Inc. and BitNile Inc.](f10q1222ex10-2_ecoarkhold.htm) |  |  |  | Filed |
| 10.4 | [Form of Share Exchange Agreement\*](http://www.sec.gov/Archives/edgar/data/1437491/000121390023011494/ea173243ex10-1_ecoark.htm) | 8-K | 2/14/23 | 10.1 |  |
| 10.5 | [Form of Registration Rights Agreement\*](http://www.sec.gov/Archives/edgar/data/1437491/000121390023011494/ea173243ex10-4_ecoark.htm) | 8-K | 2/14/23 | 10.4 |  |
| 31.1 | [Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002](f10q1222ex31-1_ecoarkhold.htm) |  |  |  | Filed |
| 31.2 | [Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002](f10q1222ex31-2_ecoarkhold.htm) |  |  |  | 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](f10q1222ex32-1_ecoarkhold.htm) |  |  |  | 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](f10q1222ex32-2_ecoarkhold.htm) |  |  |  | Furnished\*\* |
| 101.INS | Inline XBRL Instance Document. |  |  |  | Filed |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |  |  |  | Filed |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |  |  |  | Filed |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |  |  |  | Filed |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |  |  |  | Filed |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |  |  |  | Filed |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |  |  |  | Filed |

---

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

\*\* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 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.** | **Ecoark Holdings, Inc.** |
| Date: February 21, 2023 | By: | */s/ Randy May* |
|  |  | Randy May |
|  |  | Chief Executive Officer |
| Date: February 21, 2023 | By: | */s/ Jay Puchir* |
|  |  | Jay Puchir |
|  |  | Chief Financial Officer |

---

## Exhibit 10.2

**Exhibit 10.2**

**MASTER SERVICES AGREEMENT**

This MASTER SERVICES AGREEMENT (the "***Agreement***"), dated as of December 6, 2022 ("***Effective Date***"), is by and between BitNile, Inc., a Nevada corporation having an office at 11411 Southern Highlands Parkway, Suite 240, Las Vegas, NV 89141 (the "***Customer***"), and Agora Digital Holdings Inc., a majority-owned subsidiary of Ecoark Holdings Inc., having an office or address at 303 Pearl Parkway, Suite 200, San Antonio, TX 78215 (the "***Provider***"). Each of the Provider and the Customer shall be referred to individually as a "***Party***" or collectively as the "***Parties***".

**RECITALS** 

**WHEREAS**, Customer owns and operates digital asset mining hardware.

**WHEREAS**, Provider engages in the business of digital asset mining hosting services which include, but are not limited to, colocation, hosting, rack space, security, monitoring, power supply and usage, equipment maintenance, facility management, account management, network and data access, and technical support in data centers owned or operated by Provider or its affiliates.

**NOW THEREFORE**, in consideration of the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

**TERMS AND CONDITIONS** 

**ARTICLE I – SERVICES** 

**Section 1.1 Services Description**. Provider shall do all such things as are necessary for the operation of Customer Hardware delivered from time to time to its Facility (as identified in the relevant Service Order (as hereinafter defined)), including installation, configuration, operation, and maintenance of Customer Hardware and operation, electricity provision, physical and network security, maintenance and support of the Facilities as well as any additional services reasonably required for Customer's use of the Services, even if not specifically listed (the "***Services***").

**Section 1.2 Service Orders**. The Services will be ordered through the issuance of service orders which have been duly executed by the authorized representative of each Party (each, a "***Service Order***"). Each Service Order will detail the Services to be provided, timelines, location(s), the fees to be paid therefor, and such other relevant terms as the Parties may agree. Service Orders may be changed only upon the written agreement of both Parties. In the event of a conflict between the terms of this Agreement and the terms contained in any agreed Service Order, the terms contained in the Service Order shall govern. Upon execution by both Parties, a Service Order shall be deemed to be a valid and binding part of this Agreement. Service Order Number 1 is attached hereto as **<u>Schedule A</u>**.

**Section 1.3 Service Levels**. Provider shall timely perform the Services in accordance with the terms and conditions described herein as any Service Order. Provider will use commercially reasonably efforts to maintain the availability of the Customer Hardware hashing capability above a monthly average equal to or greater than 95% of the total capable hashpower (the "***Required Monthly Minimum***"), as measured by Customer's software management tools. If during any month, Provider fails to achieve the Required Monthly Minimum, then Provider shall issue the Customer a credit on the next invoice (or, if there is no further invoices, a refund) in an amount equal to the lost potential value of the digital assets (as reasonably determined by Customer) not mined during such month, but in no case shall the credit be less than ten percent (10%) of Provider's previous monthly invoice.

&nbsp;&nbsp;&nbsp;&nbsp;(a) Customer agrees that monthly average calculations used to assess Customer's and Provider's
performance will exclude downtime from Load Resource participation programs (as described in Section 1.1(c) below), Force Majeure incidents,
Customer Hardware errors and failures (excluding any errors or failures caused by Provider), manufacturers' defects, degraded or
limited performance due to the capacity of the Customer Hardware Units, and or downtime during a unit's troubleshooting and repair
process. Tracking a unit's downtime during the trouble shooting and or repair period is measured on a daily basis, rounded up to
the nearest day and a unit's downtime is omitted from any and all of Provider's and equipment's performance metrics.

&nbsp;&nbsp;&nbsp;&nbsp;(b) Customer acknowledges that the power to the Facility is ultimately provided by third parties, whose provision
and transmission of power is governed by Applicable Law, including but not limited to rules, regulations, tariffs, orders, decisions and
directives adopted by a Governmental Authority (collectively, the "Power Regulations"). To the extent that the available power
to the Facility is reduced or discontinued pursuant to Power Regulations, a Force Majeure Event or an Outage, Provider may reduce or discontinue
the power available to Customer; provided that in such case, Provider shall not treat Customer, in any respect, less favorably than any
similarly situated Provider customer. Any such reductions, and any unavailability of the Hosting Services arising out of such reductions,
pursuant to Power Regulations, a Force Majeure Event or a Forced Outage shall not be deemed to be unavailability for purposes of (and
shall be excluded from) calculating Provider's achievement of performance metrics.

&nbsp;&nbsp;&nbsp;&nbsp;(c) Customer hereby expressly consents to Provider's participation in the Electric Reliability Council
of Texas, Inc. ("  ***ERCOT***") Ancillary Services markets and/or any Demand Response or Load Resource Participation
Programs, as determined by Provider in its sole discretion. Customer acknowledges that any such participation may result in partial or
complete reduction in power available to Customer from time to time. Customer acknowledges that Provider's right to participate
in any Demand Response or Load Resource Participation Programs, as determined by Provider in its sole discretion, forms an essential basis
of the agreements set forth in this Agreement, and that, absent such right, the terms of this Agreement, including the Hosting Fees, would
be substantially different. Furthermore, Customer and Provider will work to incorporate the use of the power firmware by Provider or its
affiliate in connection with the foregoing ERCOT Ancillary Services markets and/or Demand Response or Load Resource Participation Programs.
Any such reductions, and any unavailability of the Hosting Services arising out of such programs shall not be deemed to be unavailability
for purposes of (and shall be excluded from) calculating Provider's achievement of performance metrics.

**Section 1.4 Suppliers and Subcontractors**. With the Customer's prior written approval, such approval not to be unreasonably withheld, Provider may procure products, services and facilities from, and subcontract the provision of the Services only to, duly qualified third party providers and Subcontractors, provided that Provider shall remain wholly liable to Customer for the acts or omissions of the third party providers and Subcontractors subject to any limitations of liability set out in this Agreement.

2 <br> Customer Initials ___________ Provider Initials ____________

**Section 1.5 Subsidiaries**. Any of Customer's Subsidiaries may purchase Services under this Agreement through the execution of a Service Order between such Subsidiary and the Provider. Each Subsidiary shall be liable to Provider for any breach by it of the terms of this Agreement, including any Service Order executed by the Subsidiary. For the purposes of a Service Order executed by a Subsidiary, references to "Customer" in this Agreement and the Service Order shall be deemed to be references to the Subsidiary executing the Service Order. Each Service Order executed between Provider and a Subsidiary will create a binding legal agreement between Provider and the Subsidiary, and will be enforceable as such. Subject to the limits on aggregate liability contained herein, Customer shall be liable for compliance by its Subsidiaries with the terms of this Agreement. For the purposes of this Agreement, "***Subsidiary***" means any entity that is Controlled by Customer, and "***Control***" (including its correlative form "***Controlled***") means the power to direct the management and policies of an entity, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise.

**Section 1.6 Time is of the Essence**. Time is of the essence with respect to the performance of all Services to be performed by the Provider under this Agreement.

**Section 1.7 Hashpower and Mining Reward Ownership**. The Parties agree that the Customer shall at all times have full discretion to direct the hashpower of the Customer Hardware to any specific pool and can freely allocate such hashpower to addresses of choice given by the Customer. The Customer and the Provider will agree on a formal process for establishing addresses, changes to addresses, and changes to the allocation of hashpower which will include secondary verifications and multiple written approvals. Provider shall not in any way redirect Customer's hashpower to a wallet not authorized in writing by the Customer. All mining rewards and output generated through Customer's use of the Services (collectively, "***Output***") shall be the property of Customer. "Output" is expressly understood to include all digital asset and any other type of commercially measurable reward, and other output generated through the running of diverse cryptographic hash functions using the Customer Hardware.

**ARTICLE II – CUSTOMER HARDWARE; DELIVERY; INSTALLATION** 

**Section 2.1 Customer Hardware**. Customer shall select, supply, and deliver to the Provider the Customer Hardware required to conduct its mining business. Provider shall have the right to inspect and test any equipment from the Customer and reserves the right to decline receipt of any equipment deemed physically damaged or performing at a suboptimal hashrate to factory specifications by the Provider. Upon signature and acceptance of Customer Hardware at the Facility, risk of loss shall shift to Provider, while title shall remain with Customer, or Customer's end customers. Provider shall do all things necessary to ensure that only duly authorized personnel of the Provider sign and accept Customer Hardware and shall track all deliveries of Customer Hardware from receipt to installation to avoid risk of loss, damage, theft or misappropriation.

**Section 2.2 Installation**. Provider shall be responsible for the installation and configuration of the Customer Hardware at the Facility, and will do all such other things as are necessary to render the Customer Hardware fully operational within the period indicated in the relevant Service Order.

**Section 2.3 Unmounting and Relocation of Customer Hardware**. The Customer shall be responsible for the following costs associated with and resulting from relocation of the Customer Hardware: shipping costs of the Customer Hardware; storage beyond 30 calendar days, packaging or other material and other costs necessary to relocate the Customer Hardware. Provider shall provide for mounting and unmounting of Customer Hardware at no charge to the Customer.

3 <br> Customer Initials ___________ Provider Initials ____________

**Section 2.4 Other Materials**. Provider shall be solely responsible for providing, at its cost, all other equipment and materials that are required for the performance of the Services ("***Provider Materials***"). Customer is granted a non-transferable, fully paid-up right and license to use the Provider Materials during the term of this Agreement, solely in conjunction with Customer's use of the Services. Customer may not transfer this license to any third party except for a Subsidiary, nor may Customer remove the Provider Materials from the Facilities (as hereinafter defined) without Provider's prior written permission. Any modifications made by Provider to the Provider Materials in connection with the Services shall also be considered Provider's property, and shall be deemed an indivisible part of the Provider Materials.

**Section 2.5 Monitoring and Operating System Software**. Customer shall provide Provider with monitoring software, which Provider shall install and maintain such software on each mining rig (the monitoring software and the operating system are collectively referred to as the "***Monitoring Software***"). Provider shall be given "view-only" or limited access to the Monitoring Software in order to provide the Services hereunder. Provider may not load or operate any other software on the Customer Hardware without Customer's prior written consent, which consent may be withheld in Customer's sole and absolute discretion. To the extent permitted by the license agreement related to the Monitoring Software, Customer grants to Provider a non-exclusive, royalty-free, fully paid up right and license to use the Monitoring Software on the Customer Hardware solely in connection with Provider's provision of the Services during the Term. Subject to the limited rights granted to Provider under this Agreement, all rights, title and interest in and to the Monitoring Software shall remain vested in the Customer.

**ARTICLE III – FACILITIES**

**Section 3.1. Facilities and Physical Security**. Each site will be identified by the physical address of the location (each, a "***Facility***" and collectively "***Facilities***") specified in the applicable Service Order. Provider represents that it has exercised due skill and care in selecting the Facilities, that the Facilities are and will remain appropriate for their intended use (i.e., digital asset hosting services), and that it is not aware of any reason why the Services, as anticipated under this Agreement, cannot be provided at the Facilities. Provider further represents that its agreements with entities related to the Facilities (e.g., landlords, leaseholders, mortgage holders, etc.) are, and will continue to be, valid and enforceable throughout the Term of the relevant Service Order. During the Term, Provider is responsible for ensuring that the physical services needed to support the overall operation of the Facilities, such as cleaning services, security, environmental systems maintenance and power plant maintenance, are provided for the benefit of Customer, all as more specifically provided in a Service Order.

**Section 3.2 Customer Space.** During the term of the applicable Service Order, Customer is granted an exclusive right and license to access and use the space allocated to Customer within the Facility as set forth in the applicable Service Order ("***Customer Space***") for the purpose of installing, operating and supporting the Customer Hardware, or engaging Provider to do so. Customer acknowledges that its right to use is not a grant of any real property interest in the Customer Space or the Facilities. Provider, on Customer's behalf, is responsible for maintaining the Customer Space in a safe and orderly condition. Customer acknowledges that Provider and Provider's third party Facilities provider, through their respective officers, employees and contractors, may access the Customer Space, without notice to Customer, for the purpose of performing the Services and, generally, to undertake such activities as are necessary to ensure the optimal operation, safety and security of the Facility and all of its tenants.

4 <br> Customer Initials ___________ Provider Initials ____________

**Section 3.3 Power**. Provider shall ensure that adequate power at appropriate voltage is delivered to the Customer Space for the operation of the Facilities and the Customer Hardware. Pricing for all power will be as set forth in a Service Order.

**Section 3.4 Access**. Customer shall have the right, but not the obligation, to access the Facilities 24 hours per day, 7 days per week upon providing not less than one (1) days' notice to Provider. Customer may exercise this right through its employees or through duly qualified Subcontractors. All Customer personnel accessing the Facilities must be bound by obligations of confidentiality which are no less onerous than those set out in Article VII, below, and must be accompanied by Provider personnel at all times.

**Section 3.5 Climate and Cooling**. The Provider shall ensure sufficient and appropriate cooling of the Customer Hardware within the range required for proper operation of the computing machinery as recommended by its manufacturer with the exception of force majeure events and circumstances outside the Provider's control such as emergency power cuts.

**Section 3.6 Protection and Security.** During the Term of this Agreement, Provider shall maintain, and shall cause each of its Subcontractors to maintain, a formal security program in accordance with industry best practice standards that will: (i) ensure the security, confidentiality and integrity of Customer Hardware and data; (ii) protect against actual or anticipated threats or hazards to the security, confidentiality or integrity of Customer Hardware and data; (iii) prevent unauthorized access to Customer Hardware and data; and (iv) comply with Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45(a) regarding unfair acts or deceptive practices) and other Laws applicable to Provider.

**Section 3.7 Unauthorized Disclosure and Notifications.** If Provider becomes aware of a security breach (as defined in any applicable Law) or any other event that compromises the security, confidentiality or integrity of Customer Hardware or data or has a reasonable basis to believe that such an breach or event has occurred (an "***Incident***"), Provider shall, at its expense, immediately notify Customer and take all appropriate actions to contain and mitigate the Incident, including those actions set forth in this Section 3.7. Provider shall fully cooperate, at Provider's expense, with Customer to investigate the nature and scope of any Incident. Provider will comply with the following obligations in connection with any Incident involving the use or disclosure of Customer Hardware or data that is not expressly permitted by this Agreement, and that takes place while such Customer Hardware is in the custody or control of Provider.

&nbsp;&nbsp;&nbsp;&nbsp;(A) Provider will report to Customer each Incident of which it
becomes aware. The initial report of an Incident will be made by telephone call to the Customer relationship manager no later than twenty-four
(24) hours after Provider becomes aware of the Incident. The initial report will be followed by a written report to Customer no later
than forty-eight (48) hours after Provider became aware of the Incident.

&nbsp;&nbsp;&nbsp;&nbsp;(B) Provider will promptly supplement the written report with
additional information in writing about the Incident as Provider obtains the information, including Provider's assessment as to
whether the Incident is reportable under applicable Law.

**ARTICLE IV – FEES AND TAXES** 

**Section 4.1 Fees.** The monthly fee ("***Hosting Fee***") for the Services to be paid by Customer to Provider for all included Services shall be as set out in the applicable Service Order. Fees for any additional Services that are not included in the Services ("***Additional Services***") will be invoiced on a time and materials basis, at agreed rates between the Parties from time to time. Unless otherwise agreed in writing, Additional Services will be invoiced following the end of the calendar month during which the Additional Services were provided.

5 <br> Customer Initials ___________ Provider Initials ____________

**Section 4.2. Taxes**. Customer shall be responsible for, and shall promptly pay, all applicable taxes and duties (including but not limited to sales, use and withholding taxes) associated with this Agreement, other than taxes based on Provider's income. In the event that Provider is required to collect any tax for which Customer is responsible, Customer shall pay the amount of such tax directly to Provider.

**ARTICLE V – REPRESENTATIONS AND WARRANTIES** 

**Section 5.1 Services Warranty**. Provider represents and warrants to Customer that, during the Term, (i) the Services will conform to the Services descriptions, and the relevant Service Order(s); and (ii) all Services will be performed in a professional and workmanlike manner in accordance with the highest industry standards. In additional to any other rights or remedies that it may have under contract, at law or in equity, in the event that Provider fails to deliver the Services in accordance with the terms of this Agreement or any Service Order, Provider shall compensate Customer for all losses arising from redirected hashpower or pools, theft or misappropriation of Customer Hardware of other forms of theft or waste by the Provider, its personnel or contractors, affiliates or Facility personnel.

**Section 5.2 Mutual Warranties**. Each Party represents and warrants that: (i) it is a corporate entity in good standing in its jurisdiction of incorporation or formation; (ii) it has obtained all necessary approvals, consents and authorizations to enter into, and to perform its obligations under, this Agreement and each Service Order; (iii) the person executing this Agreement and each Service Order on its behalf has express authority to do so and to bind the Party; (iv) it is not under any current obligation or restriction, nor will it knowingly assume any such obligation or restriction, that does or could interfere with the performance of its obligations under this Agreement; (iv) the execution, delivery, and performance of this Agreement or any Service Order does not violate any provision of any bylaw, charter, regulation, or any other governing authority of the Party, or any other agreement to which it is a party, and its obligations under this Agreement, including each Service Order, are valid and binding obligations of that Party; and (v) each Party represents unto itself that (a) it is not insolvent (either because its financial condition is such that the sum of its indebtedness is greater than the fair value of its assets, or because the fair saleable value of its assets is less than the amount required to pay its probable liability on its existing indebtedness as such indebtedness matures) and that (b) it has not incurred indebtedness (or plans to incur indebtedness) beyond its ability to pay as such indebtedness becomes due.

**Section 5.3 Additional Provider Warranties**. During the Term, Provider further represents and warrants to Customer that: (i) it and its personnel possess the necessary skills and experience to perform Provider's obligations under this Agreement and each Service Order; (ii) it will comply with all applicable requirements, laws, rules and regulations in connection with the use of the Facilities, the delivery of the Services and the exercise of its rights and the performance of its other obligations; (iii) it is in good standing under its agreement(s) with the Facility provider(s) and it will not do or cause to be done, or omit to do, anything that would constitute a breach of such agreement(s); (iv) this Agreement and each Service Order, when executed, are legal, valid and binding obligations of Provider; (v) Provider is the owner or authorized licensee of the Provider Materials, and the authorized user of the Facilities, and possesses all necessary rights to grant Customer the rights and licenses granted under this Agreement; (vi) it maintains, and will continue to maintain throughout the Term, a high degree of financial integrity, service excellence and ethical conduct in its relationships with its suppliers and with Customer; (vii) none of the Provider's, the Facilities' or their Subcontractors' personnel assigned to perform Services have been convicted of or have agreed to enter into a pretrial diversion or similar program in connection with the prosecution of, a criminal offense involving theft, dishonesty, breach of trust, money laundering, the illegal manufacture, sale, distribution of or trafficking in controlled substances, or substantially equivalent activity in a domestic, military or foreign court; and (viii) unless prohibited by applicable law, Provider shall not assign any Provider, Facilities or their Subcontractor personnel to perform Services who are found to have provided any materially false information in connection with any background check or have been convicted of any of the specific crimes identified in sub-section (vii).

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**Section 5.4 Insurance**. Throughout the Term of this Agreement, and in addition to Provider's obligation to indemnify Customer under this Agreement, Provider and its Subcontractors, if any, shall, at Provider's and its Subcontractor's sole cost and expense, maintain the minimum amounts of insurance coverage specified below:

&nbsp;&nbsp;&nbsp;&nbsp;(A) Workers' compensation
insurance with statutory limits, a state certificate of self-insurance for workers' compensation benefits insurance or an alternative
plan of benefits as permitted by applicable Law and employers' liability coverage with a minimum limit of $1,000,000 per occurrence;

&nbsp;&nbsp;&nbsp;&nbsp;(B) Commercial general liability
insurance including products and completed operations coverage written on an occurrence-based form. This policy shall include coverage
for contractual liability that shall not have any additional restrictions or modifications to the definitions of "Insured Contract"
as provided by Insurance Services Office ()"*ISO*") CG 00 01 form, independent
contractors coverage and shall be at least as broad or broader as provided by ISO Form CG 00 01 or later with a minimum limit of $5,000,000
per occurrence and minimum general aggregate limit of $10,000,000;

&nbsp;&nbsp;&nbsp;&nbsp;(C) Automobile liability insurance
covering all owned, hired and non-owned vehicles with a minimum combined single limit of $5,000,000 per occurrence for bodily injury
and property damage liability;

&nbsp;&nbsp;&nbsp;&nbsp;(D) Errors and omissions or
professional liability insurance covering any financial loss due to negligent error or omission of Provider or its employees, agents
or subcontractors with a minimum policy limit of $10,000,000 per claim. Coverage will either include vicarious interest endorsement to
Customer, or provide Customer with coverage as a co-defendant when named as a defendant with Provider in an action arising from Provider's
professional services. If this coverage is provided on a claims-made basis, then the policy must be maintained, or Provider shall purchase
an extended reporting period policy, for a period of not less than any applicable statute of limitations upon termination or expiration
of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;(E) Network security, cyber
and technology liability insurance covering liabilities and claim expenses arising from acts, errors and omissions and neglect of Provider
or its employees, agents or subcontractors, in rendering or failing to render all Services and in the provision of all products in the
performance of the Agreement, including the failure of products to perform the intended function or serve the intended purpose with a
minimum policy limit of $5,000,000 per claim. This policy shall include coverage for loss, disclosure and theft of data in any form;
media and content rights infringement and liability including but not limited to software copyright infringement; network security failure
denial of service attacks and transmission of malicious code or instruction. Coverage will either include vicarious interest endorsement
to Customer, or provide Customer with coverage as a co-defendant when named as a defendant with Provider in an action arising from Provider's
professional services and include the cost of notifying individuals of a security breach and the cost of credit monitoring services for
one (1) year. If this coverage is provided on a claims-made basis, then this policy must be maintained, or Provider shall purchase an
extended reporting period policy, for a period of not less than any applicable statute of limitations upon termination or expiration
of this Agreement;

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&nbsp;&nbsp;&nbsp;&nbsp;(F) Umbrella or excess liability
insurance increasing the limits of the coverages in (A) (employers liability portion only), (B) and (C) above in the in the amount of
$5,000,000 per occurrence. The policy shall follow form and be equal to, or broader than, the coverages available on the underlying insurance
policies;

&nbsp;&nbsp;&nbsp;&nbsp;(G) Crime insurance for claims
arising out of or in connection with fraudulent or dishonest acts committed by the employees, subcontractors or agents of Provider acting
alone or in collusion with others and include coverage for third party property at any location. This policy shall be endorsed to name
Customer as a loss payee as their interests may appear with a minimum amount of $5,000,000 per occurrence;

&nbsp;&nbsp;&nbsp;&nbsp;(H) The insurance coverages
required by sub-sections (A) – (G) above will be primary and non-contributing relative to any other insurance or self-insurance
that Customer may maintain. Provider will cause its insurers (who will be carriers with an AM Best minimum rating of "A"
minus and minimum AM Best financial performance rating of VIII) to issue certificates of insurance evidencing that the coverages and
policy endorsements required under this Agreement are maintained in force and that not less than 30 days' written notice will be
given to Customer before any material modification, cancellation or non-renewal of the policies. Provider shall cause its insurers or
insurer's representatives to issue to Customer within 30 days after the Effective Date and each policy renewal date certificates
of insurance and copies of all policy endorsements required herein evidencing that all policies are in force and all required coverages
are in effect; and

&nbsp;&nbsp;&nbsp;&nbsp;(I) Provider ad its subcontractors
each hereby waives for itself and its Affiliates, and where allowed by Law shall cause its insurers, except insurer for crime insurance,
by policy endorsement, to waive all right of recovery against Customer, its Affiliates, subsidiaries, agents, employees, officers and
directors (the "*Released Parties* "), and agrees that no third party shall
have any right of recovery by way of subrogation, assignment or otherwise, against the Released Parties with regard to losses or claims
insured against or otherwise under this Agreement regardless of whether the Provider maintains a third party insurance policy or elects
to self-insure.

**ARTICLE VI – TERM**

**Section 6.1 Term**. This Agreement will commence on the Effective Date and will continue for a period of one (1) year, which will automatically renew for an additional year unless the Customer provides written notice of termination at least thirty (30) days prior to end of the initial year or any subsequent renewal year ("***Term***"). The term of each Service Order commences on the service commencement date specified in the Service Order and continues for the term set out in the Service Order. Certain Services may be provided on a monthly, weekly, daily or hourly basis, as more fully described in the applicable Service Order.

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**ARTICLE VII – CONFIDENTIALITY** 

**Section 7.1 Confidential Information**. Each Party (the "***Recipient***") agrees that all non-public information furnished to it by the other Party (the "***Discloser***"), including software, hardware design and data center, pricing, financial information, business strategies, design information, methodologies, specifications, and other commercial and technical information to which it has access under this Agreement, are deemed confidential and proprietary information or trade secrets (collectively, "***Confidential Information***") of the Discloser and shall remain the sole and exclusive property of the Discloser. Recipient shall treat the Confidential Information in a confidential manner using the same degree of care as it uses to protect its own confidential information of a like nature, but no less than a reasonable degree of care given the sensitivity of the information and the circumstances of its disclosure. Recipient may use and copy the Discloser's Confidential Information only in direct furtherance of the purposes of this Agreement. Except to the extent necessary in connection with the exercise of its rights or the performance of its obligations under this Agreement, neither Party may directly or indirectly disclose the Discloser's Confidential Information other than to its employees, advisors, and lenders on a "need to know" basis, but only after they have been advised of the information's confidential and proprietary nature, and have agreed to protect same on terms no less onerous than the terms of this Section. Notwithstanding the foregoing, Customer may, in its sole and absolute discretion, disclose certain Confidential Information to third-parties and/or the general public as reasonably determined by Customer's General Counsel in order to comply with its reporting obligations under United States securities laws.

**Section 7.2 Terms and Conditions; Facilities**. The Parties expressly understand and agree that the terms of this Agreement, including all Service Orders, and the location of the Facility is Confidential Information for the purposes of this Article.

**Section 7.3 Exceptions**. Notwithstanding anything to the contrary contained herein, a Recipient has no obligation to preserve the confidentiality of any information that is: (i) previously known, or received rightfully by Recipient without any obligation to keep it confidential; (ii) distributed to third parties by Discloser without restriction; (iii) publicly available other than by unauthorized disclosure by Recipient; or (iv) disclosed to a Governmental Authority lawfully demanding disclosure of the Confidential Information, provided that (unless prohibited) Recipient provides prompt prior written notice of the demand to allow Discloser a reasonable opportunity to object to the scope or terms of the governmental demand or obtain a protective order, and if disclosure ultimately is required, Recipient discloses only the Confidential Information specifically required to be disclosed and only to the extent it is compelled to do so, and Recipient otherwise continues to maintain the confidentiality of Discloser's other Confidential Information after the required disclosure.

**Section 7.4 Survival**. The foregoing obligations regarding Confidential Information shall remain in full force and effect, notwithstanding any termination of this Agreement or of a Service Order for any reason.

**ARTICLE VIII – AUDIT RIGHTS** 

**Section 8.1** **Service Audits**. Upon notice from Customer, Provider and its Subcontractors will provide Customer, and agents and any regulators thereof ("***Customer Auditors***") with access to and any assistance that they may reasonably require with respect to the Provider systems and locations from which the Services are being provided for the purpose of performing audits or inspections of the Services and the business of Customer relating to the Services, including operational, security, financial and other audits. If any audit by a Customer Auditor results in Provider being notified that Provider or its Subcontractors are not in compliance with any applicable Law, audit requirement or other requirement set forth in this Agreement, Provider will, and will cause its Subcontractors to, promptly take actions to comply with such Law, audit requirement or other requirement at Provider's expense.

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**Section 8.2** **Fees Audits**. Upon notice from Customer, Provider will provide Customer Auditors with access to such financial records and supporting documentation as reasonably requested to determine if Fees have been invoiced in accordance with this Agreement. Provider will promptly reimburse Customer for any overcharge revealed by such an audit. If an audit reveals an overcharge that exceeds five percent (5%) of the audited Fees, Provider will also reimburse Customer for the reasonable cost of such audit that relates to the overcharge.

**Section 8.3** **Audit Assistance and Corrective Measures**.

&nbsp;&nbsp;&nbsp;&nbsp;(A) At all times during the
Term and continuing thereafter until the completion of the audit of Customer's financial statements for the fiscal year during
which this Agreement expires or is terminated, Provider will, and will cause each of its Affiliates to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) provide to Customer or Customer
Auditors, on a timely basis, (a) access to the books and records and personnel of Provider and its Affiliates and subcontractors as Customer
may reasonably request, and (b) all information, reports and other materials reasonably requested by Customer to evaluate and confirm
that Customer is in compliance with its legal and reporting obligations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) generally cooperate with
Customer and Customer Auditors in any other way that Customer or Customer Auditors may request to enable Customer to comply, and Customer
and Customer Auditors to evaluate whether Customer complies, with its legal and reporting obligations as it relates to the Services.

&nbsp;&nbsp;&nbsp;&nbsp;(B) Provider will (1) make
available to Customer the sections of any independent audit or other report of Provider's or any of its subcontractors operations
relating to the Services (redacting any information revealing Provider's cost structure and information relating to Provider's
other customers), and (2) promptly correct (a) any error identified in any such report that could reasonably be expected to have an adverse
impact on the Services, Customer or a Client, and (b) any control deficiencies identified in the report.

**Section 8.4 Audit Limitations. All audits performed in connection with this Agreement are subject to the following limitations: (i) the use of a Customer Auditor that is a Provider competitor is subject to Provider's prior written approval, such approval not to be unreasonably withheld; (ii) Customer and the Customer Auditor(s) must comply with the Provider's reasonable security and confidentiality guidelines provided in writing in advance; and (iii) Customer and the Customer Auditor must obtain Provider's written approval (which shall not be unreasonably withheld, delayed or conditioned) prior to utilizing tools or software within Provider's or its subcontractors' network, and Provider is entitled to test such tools and software prior to granting such approval. If an audit requires a testing of the security services provided to Provider by its hosting services provider, Customer and Provider will cooperate on developing a test plan for Provider to submit to its hosting services provider in advance of any such Customer security audit. The test plan will name the entity conducting the security audit. Customer, Provider and its hosting services provider will mutually agree upon any test plan and the time frame in which such testing occurs prior to the implementation of the test plan. The time spent conducting the security audits will constitute scheduled downtime requested by Customer.**

**Section 8.5** **Confidentiality**. All records, and the conduct and results of any audit, will be "Confidential Information" for the purposes of this Agreement.

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**ARTICLE IX – INDEMNITIES** 

**Section 9.1 Provider Indemnity**. Provider agrees to indemnify and hold harmless Customer, its Affiliates, Subsidiaries, successors, and assigns, and their respective officers, employees, shareholders and directors (each, a "***Customer Indemnitee***") from and against all suits at law or in equity and from all liabilities, damages, costs, losses, and expenses (including legal and other professional fees) incurred by a Customer Indemnitee resulting from: (i) any breach by Provider, including its employees, agents and Subcontractors ("***Provider Personnel***"), of its obligations under this Agreement, or under any agreement that Provider may have with the owner or licensor of a Facility or any Provider Materials; (ii) other claims by third parties, including claims for death, personal injury, or damage to property, to the extent caused directly or indirectly by any Provider Personnel; or (iii) Provider having made inaccurate or unauthorized warranties, representations or statements, or otherwise acting beyond the scope of its authority as set out in this Agreement. Provider further agrees to defend or settle, at its sole expense, any third party actions brought against any Customer Indemnitee resulting from (A) any Provider Personnel's acts or omissions, or (B) a claim that the Services, the Software, or any Provider trademarks or other intellectual property infringe a third party's intellectual property rights. Provider will hold the Customer Indemnitees harmless from all resulting losses, costs or damages; provided, however, that Provider will not agree to any settlement or consent judgment that imposes any obligations on a Customer Indemnitee without Customer's express prior consent.

**Section 9.2 Customer Indemnity**. Customer agrees to indemnify and hold Provider, its successors and assigns, and their respective officers, employees and directors (each a "***Provider Indemnitee***") from and against all suits at law or in equity and from all liabilities, damages, costs, losses, and expenses (including legal and other professional fees) incurred by a Provider Indemnitee resulting from any breach by Customer, including its employees, agents and Subcontractors ("***Customer Personnel***") of its obligations under this Agreement. Customer further agrees to defend or settle, at its sole expense, any third party actions brought against any Provider Indemnitee resulting from any acts or omissions by Customer Personnel that constitute gross negligence. Customer will hold the Provider Indemnitees harmless from all resulting losses, costs or damages; provided, however, that Customer will not agree to any settlement or consent judgment that imposes any obligations on a Provider Indemnitee without Provider's express prior consent.

**ARTICLE X – LIMITATIONS OF LIABILITY** 

**Section 10.1 Exclusion of Damages**. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 10.3, NOTWITHSTANDING ANY OTHER PROVISION CONTAINED IN THIS AGREEMENT, INCLUDING IN ANY SERVICE ORDER, IN NO EVENT SHALL EITHER PARTY OR ITS OFFICERS, DIRECTORS, EMPLOYEES, CONTRACTORS OR AGENTS BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR AGGRAVATED DAMAGES OF ANY KIND WHATSOEVER, HOWSOEVER CAUSED AND REGARDLESS OF THE FORM OR CAUSE OF ACTION (INCLUDING IN TORT, CONTRACT, INDEMNIFICATION, FUNDAMENTAL BREACH, GROSS NEGLIGENCE OR OTHERWISE), EVEN IF SUCH DAMAGES ARE FORESEEABLE OR IF CUSTOMER KNEW OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES.

**Section 10.2 Limitation on Liability**. Except as provided in Section 10.3, in no event shall the aggregate liability of either Party, its Subsidiaries, and their respective directors, officers, employees, contractors and agents to the other, for all losses, costs and damages arising under or in connection with this Agreement, including any Service Order, exceed the lesser of (i) actual direct damages; and (ii) the total amount of fees (Hosting Fees and fees for Additional Services) paid by Customer to Provider under the relevant Service Order during the preceding 12 month period.

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**Section 10.3 Exclusions**. The limitations set forth in this Section 10 shall not apply in the case of loss, costs or damage resulting from gross negligence, intentional misconduct, the Parties' indemnity obligations relating to intellectual property infringement or Confidential Information, personal injury or death, fraud or other criminal activity, or to the payment of any Downtime Compensation in accordance with Schedule A.

**Section 10.4 Reasonableness**. Provider agrees that these limitations are fundamental conditions of contract, are reasonable under the circumstances, and that Customer would not have entered into the Agreement or any Service Order with Provider but for the inclusion of these limitations on its liability.

**ARTICLE XI – TERMINATION** 

**Section 11.1 Termination of Agreement**. Unless otherwise expressly agreed by the Parties, this Agreement will terminate upon the termination or expiry of the last Service Order to terminate or expire.

**Section 11.2 For Convenience**. Set out in an applicable Service Order.

**Section 11.3 Right of Termination**. This Agreement or any Service Order may be terminated by either Party upon written notice to the other Party ("***Defaulting Party***") if:

(a) the Defaulting Party commits a material breach of any term of the Agreement which (in the case of a breach capable of being remedied) is not remedied within thirty (30) calendar days of receipt of a written request to do so by the non-breaching Party;

(b) the Defaulting Party (a) makes a general assignment for the benefit of its creditors; (b) files an application for a bankruptcy order, or an application for a bankruptcy order is made in respect of such party; (c) applies for or acquiesces in the appointment of any receiver, trustee or similar officer to liquidate or conserve its business or any substantial part of its assets; or

(c) commences under the laws of any jurisdiction any proceeding for relief under the United States Bankruptcy Code or successor legislation, or corresponding legislation in applicable foreign or state jurisdictions, involving its insolvency, reorganization, adjustment of debt, dissolution, liquidation or other similar proceedings for the release of financially distressed debtors; or

(d) the Defaulting Party ceases to carry on business in the normal course, other than in the context of a solvent reorganization.

**ARTICLE XII – EFFECT OF TERMINATION** 

**Section 12.1 Effect of Termination; General**. Upon the termination of this Agreement or a Service Order for any reason, all outstanding and undisputed amounts owing pursuant to a terminated Service Order will become due and payable. The terms and conditions of this Agreement will apply to any Services delivered by Provider after the termination of the relevant Service Order, although the delivery of the Services will not in any way be construed as an agreement by either Party to renew this Agreement or the Service Order for a further term. The termination of a Service Order will be without prejudice to the accrued rights and liabilities of either Party and shall not automatically terminate any other Service Orders in effect under this Agreement.

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**Section 12.2 Transition Assistance**. At Customer's request, the Parties will work together in good faith to determine an efficient plan for disposing of the Customer Space and Customer Hardware, and/or transitioning to an alternate service provider. Provider will provide such reasonable assistance as Customer may require; provided, however, that only the assistance specifically requested in writing by Customer shall be considered an Additional Service and invoiced in accordance with Section 4.1.

**Section 12.3 Survival**. All provisions which are expressly stated to survive or which by their nature should reasonably survive the termination or expiry of the Agreement or a Service Order for any reason, shall so survive, including Sections 5, 6, 7, 9, 10, 11, 12, 13.4, 14.1 and 14.14 of this Agreement.

**ARTICLE XIII – GENERAL PROVISIONS** 

**Section 13.1 Amendment**. Any amendment to this Agreement must be in writing and signed by all Parties.

**Section 13.2 Assignment**. Neither Party may make any assignment of this Agreement or any interest herein, except as otherwise permitted in this Agreement, without the prior written consent of the other Party; except that either Party may assign, in its sole discretion, any and all its rights, interest and obligations under this Agreement to its parent company or any direct or indirect Subsidiary of the Party's parent company. Further, Provider may not employ Subcontractors for the performance of obligations hereunder without the prior written consent of the Customer, such approval not to be unreasonably withheld. Any assignment or employment of Subcontractors by any Party shall not relieve that Party of any of its obligations under this Agreement.

**Section 13.3 Change of Control**. In the event that either Party undergoes a Change of Control, that Party may not assign, transfer, subdivide or otherwise deal with any obligations or benefit under this Agreement, through operation of law or otherwise, without the prior written consent of the other Party, such consent not to be unreasonably withheld, delayed or conditioned. Any attempted assignment in violation of this Section 13.3 shall be null and void. The term "***Change of Control***" with respect to an entity means the occurrence of one or more of the following: (i) the acquisition by any person (or related group of persons), whether by tender or exchange offer made directly to the stockholders, open market purchases or any other transaction or series of transactions, of more than fifty percent (50%) of the capital stock entitled to elect the members of the board of directors or other analogous governing body of such entity, provided, however, that if the majority shareholder (either directly or together with its Affiliates) prior to the transaction remains the largest shareholder (either directly or together with its Affiliates) after such transaction, it shall not constitute a Change of Control; (ii) a merger or consolidation in which such entity is not the surviving entity, except for a transaction in which the securities of such entity immediately prior to consummation of such merger or consolidation are converted by means of such merger or consolidation into securities representing more than fifty percent (50%) of the total combined voting power of the surviving entity; or (iii) any reverse merger in which such entity is the surviving entity but in which the securities of such entity immediately prior to consummation of such reverse merger represents less than fifty percent (50%) of the total combined voting power of such entity's capital stock outstanding immediately after consummation of such merger.

**Section 13.4 Counterparts**. This Agreement may be executed in several counterparts and all so executed constitute one Agreement, binding on all the Parties, notwithstanding that all the Parties are not signatories to the original or the same counterpart.

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**Section 13.5 Force Majeure**. Neither Party will be liable for any loss, damage or delay resulting from any event beyond such Party's reasonable control ("***Force Majeure***"), and delivery and performance dates will be extended to the extent of any such delays. "Force Majeure" includes, without limitation, acts of God, terrorist attack, acts of war, blockade, public riot, civil disturbance or unrest, lightning, fire, storm, flood, hurricane, earthquake, tsunami, tornado, explosion or governmental restraint. For greater certainty, Force Majeure does not include the acts or omissions of a Party's suppliers, licensors, Subcontractors, employees or agents. Upon the occurrence of a Force Majeure event, the Party claiming Force Majeure will promptly provide the other Party with written notice of the event and the estimated period of delay. The Party claiming Force Majeure will have the burden of establishing that a Force Majeure event has delayed delivery or performance, and will take all such actions as may be necessary to avoid or minimize the impact of any delay. If a Force Majeure event results in a delay of more than forty-five (45) calendar days, either Party will have the right to terminate the affected Service Order by giving notice to the other in writing.

**Section 13.6 Further Assurances**. The Parties hereto will sign such further documents, cause meetings to be held, pass resolutions, exercise their votes and do and perform and cause to be done such further acts and things as may be reasonably necessary in order to give full effect to this Agreement and every provision hereof.

**Section 13.7 Governing Law**. This Agreement, including each Service Order, shall be governed by and construed in accordance with the laws of the State of Delaware, but without regard to conflict of laws provisions. Except as provided, the courts of the State of Delaware sitting in the Wilmington, Delaware shall have exclusive jurisdiction over any disputes arising hereunder, and Provider expressly waives (i) any objection to jurisdiction or venue, any (ii) any defense claiming lack of jurisdiction or improper venue, in any action brought in such courts. To the extent to which it would otherwise apply, the Parties hereby expressly exclude the application of the United Nations Convention on the International Sale of Goods (the "***Vienna Convention***") to this Agreement.

**Section 13.8 Injunctive Relief**. The Parties acknowledge that a threatened or actual breach of Article 7 ("Confidential Information"), or a Party's intellectual property rights, will result in immediate, irreparable harm, and injunctive or other equitable relief may be obtained by the non-breaching party from any court having competent jurisdiction.

**Section 13.9 No Waiver**. Failure by either Party to insist upon the performance of any term, covenant, or condition in this Agreement, or to exercise any rights under this Agreement, will not be construed as a waiver or relinquishment of the future performance of any such term, covenant, or condition, or the future exercise of any such right, and the obligation of each Party with respect to such future performance will continue in full force and effect.

**Section 13.10 Notices**. All notices, demands, requests, consents or other communications required or permitted to be given or made under this Agreement must be in writing and signed by the Party giving the same and are deemed given or made upon receipt (a) when transmitted via email, facsimile, graphic scanning or other telegraphic communication, (b) when hand delivered, or (c) when sent by overnight delivery service, in each case to the intended recipient as indicated as follows.

If to Customer:

BitNile, Inc., having an office at 11411 Southern Highlands Parkway, Suite 240, Las Vegas, NV 89141

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If to Provider:

Agora Digital Holdings Inc., having an office at 303 Pearl Parkway, Suite 200, San Antonio, TX 78215.

**Section 13.11 Non-Circumvention; Non-Solicit**. Customer will maintain and manage all its end client information and communications. Provider covenants that it will not in any way, either on its own or via any Affiliate or corporate entity or individual that Provider may currently, in the past or in future work with, circumvent this Agreement and/or solicit any customers of the Customer, the Customer's employees or vendors without Customer's prior written consent. This non-circumvention and non-solicit obligation shall exist throughout the Term and extend for one (1) year after the date of conclusion of the Term. Any violation of this section shall be deemed grounder for immediate termination of this Agreement by the Customer as a breach of the Agreement by the Provider.

**Section 13.12 Publicity**. Neither Party shall use the name of the other Party in any news release, public announcement, advertisement, or other form of publicity without securing the prior written consent of the other. Notwithstanding the foregoing, Customer may, in its sole and absolute discretion, make any public disclosure as reasonably determined by Customer's General Counsel in order to comply with its reporting obligations under United States securities laws.

**Section 13.13 Relationship**. The Parties are independent contractors, and nothing in the Agreement will be construed as to be inconsistent with that relationship. Under no circumstances will any of a Party's personnel be considered employees or agents of the other Party. Nothing in this Agreement grants either Party the right or authority to make commitments of any kind for the other, implied or otherwise, without the other Party's prior written agreement. Neither this Agreement nor any Service Order constitutes or creates, in any manner, a joint venture, agency, partnership, or formal business organization of any kind.

**Section 13.14 Representation of Counsel**. Each Party acknowledges and agrees that, in negotiating and entering into this Agreement, it has been represented by independent legal counsel of its own choice and that it has executed this Agreement with the consent of and/or upon the advice of its legal counsel.

**Section 13.15 Severability**. If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of law or public policy by a court of competent jurisdiction, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect, insofar as the foregoing can be accomplished without materially affecting the economic benefits anticipated by the Parties to this Agreement. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by Applicable Law.

**Section 13.16 Governance**. Each Party will assign a primary point of contact to serve as the conduit for communications between the Parties. These individuals we meet in person and/or discuss via conference calls any issues and concerns along with the status of the Services being performed. The Parties will establish and maintain a reasonable recurring cadence for such meetings and discussions. Provider will document and circulate a summary of the topics reviewed and any actions to be taken.

15 <br> Customer Initials ___________ Provider Initials ____________

**ARTICLE XIV INTERPRETATION** 

**Section 14.1 Definitions**. The following terms, as used herein, have the following meanings:

(a) "***Affiliate(s)***" means any individual, partnership, corporation, trust or other entity or association, directly or indirectly, through one (1) or more intermediaries, controlling, controlled by, or under common control with a Person. The term "control," as used in the immediately preceding sentence, means, with respect to a corporation or limited liability company the right to exercise, directly or indirectly, ten percent (10%) or more of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity. With respect to any Person who is a general partner of a Person, such general partner is an Affiliate of such Person. With respect to a limited partnership, "Affiliate" shall also mean any limited partner of such limited partnership holding ten percent (10%) or more of the capital or interests in profits of such limited partnership. With respect to a trust, any Affiliate shall include any Person which is a trustee or lifetime beneficiary of such trust.

(b) "***Applicable Law***" means all laws, ordinances, building codes, rules, regulations, orders and directives of any Governmental Authority having jurisdiction (including without limitation, any certificate of occupancy), and all covenants, conditions and restrictions, applicable to the Facility now or in the future.

(c) "***Business Day***" means a day other than a Saturday, Sunday or statutory holiday in the jurisdiction in which the Facilities are located.

(d) "***Change of Control***" has the meaning ascribed to such term in Section 13.3.

(e) "***Commencement Date***" means the date on which the provision of Service will commence and as specified in the Service Order.

(f) "***Confidential Information***" has the meaning ascribed to such term in Section 7.1

(g) "***Customer***" has the meaning ascribed to such term in the preamble.

(h) "***Customer Hardware***" means the computer hardware (i.e., specialized hardware, including PSUs, CPUs, ASICs and/or GPU and boards) belonging to the Customer that is delivered to the given Facility employed in connection with the Services for the purpose of digital asset mining. The Customer Hardware is specified in the Service Order.

(i) "***Customer Indemnitee***" has the meaning ascribed to such term in Section 9.1.

(j) ***"Customer Space***" has the meaning ascribed to such term in Section 3.2.

(k) "***Effective Date***" has the meaning ascribed to such term in the preamble.

(l) "***Facility***" or "***Facilities***" has the meaning ascribed to such term in Section 3.1.

(m) "***Force Majeure***" has the meaning ascribed to such term in Section 13.5.

16 <br> Customer Initials ___________ Provider Initials ____________

(n) "***Governmental Authority***" means any government or political subdivision or regulatory body, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision or regulatory authority, or any federal, state, local or foreign court or arbitrator.

(o) "***Hosting Fee***" is the fee charged by the Provider and due by the Customer on a per kWh basis for use of the Services and as specified in each Service Order.

(p) "***kWh***" means kilowatt hour(s).

(q) "***Law***" means any law, statute, code, ordinance, regulation or other requirement of any Governmental Authority.

(r) "***Monitoring Software***" has the meaning ascribed to it in Section 2.5.

(s) "***Output***" has the meaning ascribed to such term in Section 1.7.

(t) "***Party***" or "***Parties***" has the meaning ascribed to such term in the preamble.

(u) "***Person***" means any individual, sole proprietorship, partnership, corporation, limited liability company, unincorporated society or association, trust, or other entity.

(v) "***Provider***" has the meaning ascribed to such term in the preamble.

(w) "***Provider Materials***" has the meaning ascribed to such term in Section 2.4.

(x) "***Service Order***" has the meaning ascribed to such term in Section 1.2.

(y) "***Services***" has the meaning ascribed to such term in Section 1.1 and as further specified in Schedule A.

(z) "***Subcontractor***" means any subcontractor, at any tier, or any other third party that performs any of a Party's obligations under this Agreement;

(aa) "***Subsidiary***" means, with respect to any person, any corporation, association, partnership, limited liability company or other business entity of which 50% or more of the total voting power of equity securities or equity interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of managers, directors, representatives or trustees thereof is at the time owned or controlled, directly or indirectly, by: (i) such person; (ii) such person and one or more Subsidiaries of such person; or (iii) one or more Subsidiaries of such person. For purposes of this definition, the term "controlled" means the possession, directly or indirectly, of the power to direct the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.

(bb) "***Term***" and has the meaning ascribed to such term in Section 6.1.

**Section 14.2 Rules of Construction**. Unless otherwise expressly provided in this Agreement and unless the context otherwise requires, the following rules of interpretation shall apply to this Agreement:

(a) Agreement. The terms "Agreement", "this Agreement", "the Agreement", "hereto", "hereof", "herein", "hereby", "hereunder" and similar expressions refer to this Agreement in its entirety and not to any particular provision hereof, unless the context expressly requires. Any reference to this Agreement means this Agreement as amended, modified, replaced or supplemented from time to time.

17 <br> Customer Initials ___________ Provider Initials ____________

(b) Calculation of Time Period. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

(c) Currency. Any reference in this Agreement to $ shall mean U.S. dollars.

(d) Gender and Number. Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

(e) Headings. The division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any "Section" are to the corresponding Section of this Agreement unless otherwise specified.

(f) Schedules. The Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement. All Schedules annexed hereto or referred to herein are hereby incorporated in, and made a part, of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule but not otherwise defined therein shall be defined as set forth in this Agreement.

**Section 14.3 Entire Agreement**. This Agreement, together with its Service Order(s) and any associated Service Order(s), constitutes the entire agreement of the Parties with respect to matters set forth in this Agreement and supersedes any prior understanding or agreement, oral or written, with respect to such matters.

**Section 14.4 Schedules**. The following are the Schedules to this Agreement, which form an integral part hereof. Any capitalized terms used in any Schedule, but not otherwise defined therein, shall be defined as set forth in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Schedule A: Service Order Number One

*[Signatures on next page]*

18 <br> Customer Initials ___________ Provider Initials ____________

**IN WITNESS WHEREOF**, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the dates set out below.

**"CUSTOMER"** 

**BitNile, Inc.**

---

| | |
|:---|:---|
| By: |  |
| Name: | William B. Horne |
| Title: | Chief Executive Officer |
| **"PROVIDER"** | **"PROVIDER"** |
| **Agora Digital Holdings Inc.** | **Agora Digital Holdings Inc.** |
| By: |  |
| Name: |  |
| Title: |  |

---

19 <br> Customer Initials ___________ Provider Initials ____________

**SCHEDULE A: SERVICE ORDER NUMBER ONE**

In the case of conflict with any other term or condition in this Service Order Number One (this "***Service Order***") and the Master Services Agreement dated December 6, 2022 by and between BitNile, Inc. and Agora Digital Holdings Inc. (the "***Agreement***"), the terms of this Service Order shall govern. Any capitalized terms used in this Service Order but not defined shall have the meaning ascribed to them in the Agreement.

**Service Commencement Date**: December 6, 2022

**Termination for Convenience:** Customer may terminate this Service Order, without penalty or any other cost, with sixty (60) days written notice at any time for any reason or no reason.

**Customer Equipment Rights:** Customer retains all rights, title and interest to the Customer Hardware. At any time, either before or after termination of the Agreement, Customer has the right but not the obligation to collect any/all of Customer Hardware and Provider will provide reasonable assistance and cooperate with Customer's efforts to collect Customer Hardware. Notwithstanding the foregoing, Provider agrees to store, at no expense to the Customer, Customer Hardware for 30 days after the date of termination.

**Location:** All of the Customer Hardware subject to this Service Order will be installed at the Provider's China Lake facility located in West, Texas (the "***Facility***" or "***Customer Space***").

![](ex10-2_001.jpg)

**Security**: At all times, Provider will ensure the Facility has sufficient perimeter fencing in place to prevent unauthorized access as well as a surveillance system providing camera systems with monitoring 24 hours a day, 7 days a week, at a minimum, for all access points in to and out of the Facility, the Customer Space and surrounding areas and the Customer Hardware, along with local operational support. Provider agrees to modify the camera system from time to time upon Customer's reasonable request (e.g., camera positioning and remote access). Provider will maintain surveillance data for a minimum of ninety (90) days for immediate access and will archive such data for not less than a minimum of six (6) months.

**Capital Raise:** Provider is required to raise at least $5,000,000.00 (the "***Capital Raise***") within forty-five (45) calendar days from execution of this Agreement, of which a sufficient amount, as reasonably determined by the Customer, shall be funded and available within ten (10) calendar days of execution of this Agreement (the "***Initial Amount***"), so that the Provider can energize and enable the use of the first four (4) MWs at the Facility. Proceeds from the Capital Raise shall be used to 1) pay off existing debts specifically related to the Facility, 2) build out twelve (12) MWs at the Facility for Customer to run miners and 3) provide for working capital to operate the Facility for a minimum of six (6) months. All expenses associated with the Facility build-out and operation must be approved by Customer in writing prior to incurring those expenses. In the case of existing debt, Provider will deliver a detailed schedule of all outstanding obligations to Customer, for Customer's review and written approval, in advance of making such debt payments. In the event Provider fails to complete the Capital Raise within forty-five (45) calendar days or the Initial Amount within ten (10) calendar days, then Customer may immediately terminate the Agreement and this Service Order at no cost to Customer, and Provider shall reimburse Customer for all out-of-pocket expenses incurred through the date of such termination in connection with this Service Order, plus out-of-pocket expenses incurred by Customer to relocate Customer Hardware to another site as determined by Customer. Provider shall present to Customer the proposed terms and conditions of the Capital Raise, and provided that such terms and conditions are reasonably acceptable to Customer, then Customer and its subsidiary, Ault Lending, LLC (formerly, Digital Power Lending, LLC) ("***AL***") shall waive the provisions pertaining to limitations on raising capital and issuing common stock contained in Section 11, Negative Covenants, of the Certificate of Designation of Rights, Preferences and Limitations of Series A Convertible Redeemable Preferred Stock dated June 8, 2022 between the Provider and AL to allow the Provider to complete the Capital Raise.

**Fees:** As payment for all recurring services rendered, Provider will invoice monthly in arrears the actual kWhs consumed, as evidenced by invoices by the electrical provider that are solely related to the Customer Space (the "***Monthly Power Usage***"). Customer shall reimburse Provider for the Monthly Power Usage and pay Provider a service fee per kWh (the "***Service Fee***") based on the cost per kWh utilized in the Monthly Power Usage as follows:

---

| | | |
|:---|:---|:---|
| **Monthly Power Usage (per kWh)** | **Monthly Power Usage (per kWh)** | **Service Fee (per kWh)** |
| **Minimum per kWh** | **Maximum per kWh** |  |
| &nbsp;&nbsp;$0.0001 | &nbsp;&nbsp;$0.0400 | &nbsp;&nbsp;$0.0150 |
| &nbsp;&nbsp;$0.0401 | &nbsp;&nbsp;$0.0450 | &nbsp;&nbsp;$0.0146 |
| &nbsp;&nbsp;$0.0451 | &nbsp;&nbsp;$0.0500 | &nbsp;&nbsp;$0.0138 |
| &nbsp;&nbsp;$0.0501 | &nbsp;&nbsp;$0.0550 | &nbsp;&nbsp;$0.0124 |
| &nbsp;&nbsp;$0.0551 | &nbsp;&nbsp;---- | &nbsp;&nbsp;$0.0120 |

---

Provider invoices to be paid by Customer within thirty (30) calendar days of receipt of invoice. Customer has the right to audit and validate all data used to determine invoice amounts in accordance with the terms of the Agreement. In the event that Provider's actual electrical provider cost per kWh will reach or exceed $0.06 in any given month, then Provider will immediately notify Customer in writing of such event.

**Deposits and Upfront Payments:** None.

**Power:** Provider will initially deliver up to twelve (12) MWs of electricity for Customer use 24 hours a day, 7 days a week. Provider is solely responsible for securing any power agreements and timely paying the power company. At Customer's direction but at Provider's expense, an additional sixty-six (66) MWs to be made available as determined by Provider, Customer and the electrical provider.

---

| | | |
|:---|:---|:---|
|  | Service Order Number One |  |
|  | A-2 |  |
| Customer Initials ___________ |  | Provider Initials ____________ |

---

**Power Collateral**: Customer will utilize commercially reasonable efforts to assist Provider in obtaining the necessary power purchase agreement to fulfill the Services. Customer may, but is not required to, provide collateral or credit to assist Provider in securing such power purchase structure.

**Power Agreement:** Provider will arrange for a power agreement for Customer's review and approval, such approval to not be unreasonably withheld. Such power agreement to include power abatement features deigned to lower overall electrical expenses.

**Power Rebate (curtailment):** Customer will determine, in its sole discretion, where/how any power rebate is applied.

**Power Deployment Schedule:** Four (4) MWs of power shall be made Available for Use by the Customer ("***Available for Use***" means that miners can be powered on and can communicate with a Customer determined mining pool) no later than twenty (20) calendar days after execution of this Agreement. An additional eight (8) MWs of power shall be made Available for Use by the Customer no later than sixty (60) calendar days after the execution of this Agreement. See High Level Activity Plan section below. In the event Provider does not provide four (4) or twelve (12) MWs of power Available for Use within the twenty (20) or sixty (60) calendar days, as applicable, after the execution of this Agreement, then Customer may immediately terminate the Agreement and this Service Order at no cost to Customer, and Provider shall reimburse Customer for all out-of-pocket expenses incurred through the date of such termination in connection with this Service Order, plus out-of-pocket expenses incurred by Customer to relocate Customer Hardware to another site as determined by Customer.

**Equipment Deployment Schedule:** Provider will provide the space (grounds and containers), connectivity (internet), and power (12 MWs) for the deployment and operation of ~3,750 miners according to the power deployment schedule noted above.

**Secure Storage:** Provider will ensure that all units not deployed are kept in a reasonably environmentally controlled and physically secured location (i.e., a building, container, etc.).

**Right of First Refusal**: Customer has a perpetual right of first refusal on any Facility Provider has, now existing or controlled by Provider or in the future (including any affiliated entities of Provider), including any and all power available on any such Provider Facility.

---

| | | |
|:---|:---|:---|
|  | Service Order Number One |  |
|  | A-3 |  |
| Customer Initials ___________ |  | Provider Initials ____________ |

---

**High Level Activity Plan**

![](ex10-2_002.jpg)

*[end of Service Order]*

---

| | | |
|:---|:---|:---|
|  | Service Order Number One |  |
|  | A-4 |  |
| Customer Initials ___________ |  | Provider Initials ____________ |

---

## Exhibit 31.1

**Exhibit 31.1** 

**CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER**

I, Randy May, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of Ecoark Holdings, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 21, 2023

---

| |
|:---|
| /s/ Randy May |
| Randy May |
| Chief Executive Officer |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER**

I, Jay Puchir, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q of Ecoark Holdings, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 21, 2023

---

| |
|:---|
| /s/ Jay Puchir |
| Jay Puchir |
| Chief Financial Officer |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002** 

In connection with the quarterly report of Ecoark Holdings, Inc. (the "Company") on Form 10-Q for the quarter ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Randy May, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| |
|:---|
| /s/ Randy May |
| Randy May |
| Chief Executive Officer |
| Dated: February 21, 2023 |

---

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002** 

In connection with the quarterly report of Ecoark Holdings, Inc. (the "Company") on Form 10-Q for the quarter ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jay Puchir, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| |
|:---|
| /s/ Jay Puchir |
| Jay Puchir |
| Chief Financial Officer |
| Dated: February 21, 2023 |

---