ECOARK HOLDINGS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following management's discussion and analysis of financial condition and
results of operations describes the principal factors affecting the results of
our operations, financial condition, and changes in financial condition. This
discussion should be read in conjunction with the accompanying audited financial
statements, and notes thereto, included elsewhere in this Report. The
information contained in this discussion is subject to a number of risks and
uncertainties. We urge you to review carefully the sections of this Report
entitled "Item 1A - Risk Factors" on page 12 and "Cautionary Note Regarding
Forward-Looking Statements" on page 62 for a more complete discussion of the
risks and uncertainties associated with an investment in our securities.



Overview



Ecoark Holdings is a diversified holding company which, through wholly-owned or
majority owned subsidiaries operates in three areas: (i) oil and gas, including
exploration, production and drilling operations on approximately 30,000
cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi
and transportation and logistics services focused in the Southern states in the
U.S., (ii) development and maintenance of post-harvest shelf-life and freshness
food management technology and related intellectual property, and (iii) a
recently launched Bitcoin mining business which is also designed to assist with
electric power opportunities in a deregulated market which exists in Texas.

                                       44


In fiscal 2022, the following key aspects of our business progressed and developments occurred:

? Revenues from our oil and gas business, which is conducted through Banner,

increased by $10,515,113 year after year due to the expansion of our

drilling programs and new customers for our transportation division;

? Agora’s Bitcoin mining business was launched after entering a number

related agreements, including the purchase of land and the supply

electric power in West Texas;

? Agora has filed Agora’s registration statement for its IPO,

which offer was delayed due to the extra time needed to clear the

The company’s accounting policies for its bitcoin holdings with the personnel of the

   SEC; and



In the current fiscal year, the Company sold the Series A preferred stock, a
poison pill Warrant and Commitment Shares to DPL, a subsidiary of BitNile,
for
$12 million.



The Company also previously operated a financial services segment through Trend
Holdings until June 17, 2022 when (i) Trend Holdings assigned Bitstream to Agora
and Trend Exploration to Ecoark Holdings, and (ii) following those transactions,
Agora, the Company's approximately 90% owned subsidiary, sold Trend Holdings to
a third party in exchange for a $4.25 million secured promissory loan secured by
the assets of the purchaser and guaranteed by the subsidiaries that were sold.



Following the above transactions, the Company's active subsidiaries include
Banner, White River, Pinnacle Frac, Zest, and Agora. Prior to the June 17, 2022
sale of Trend Holdings, all references to "Trend Holdings" or "Trend" are now
synonymous with Agora for the periods covered by this Report.



For an overview of key developments during fiscal 2022 as well as more recent developments and plans of the Company and its subsidiaries, see “Item 1. – Activity”.



Key Terms and Metrics



In connection with the management of our businesses, we identify, measure and
assess a variety of operating metrics. In the Oil and Gas segment, the principal
metrics we use in managing our businesses are set forth below:



"Bbl" - Bbl means barrel of crude oil. Metric used by management to specify the
unit of measure ("in barrels") from which the Company's midstream customers use
to incrementally purchase oil from the Company. Barrels are used as a unit of
measure universally across the oil industry so the Company's adoption of barrels
to measure units of oil is a standard practice.



“Mbbl” – Mbbl means thousand barrels of oil. See comments on the “Bbl” metric. “Mbbl” is a standard for measuring larger quantities of barrels of oil in thousands of units.



"Production (Gross)" - Production (Gross) is defined as barrels of oil produced
before accounting for working interests from non-mineral owning parties. Metric
used by management to specify the total number of barrels of oil produced from a
given oil well. Gross production includes both the barrels owned by the oil and
gas mineral owners as well as the drilling and investing group who funded and
drilled the well which are considered the working interest owners. Gross
production is a standard term used universally across the oil industry, so the
Company's adoption of this term is a standard practice.



"Production (Net)" - Production (Net) is defined as the net barrels of oil
produced after deducting the ownership portion owned by the mineral owning
parties. Unless otherwise specified, management assumes that the mineral
ownership portion of a well is 25%, so a 100% working interest would result in a
75% Net Production or Net Revenue interest after accounting for the ownership
portion of oil production owned by the mineral owners.



Segment information for the years ended March 31, 2022 and 2021:



The Company follows the provisions of ASC 280-10 Segment Reporting. This
standard requires that companies disclose operating segments based on the manner
in which management disaggregates the Company in making internal operating
decisions. The Company and its chief operating decision makers determined that
the Company's operations effective with the May 31, 2019, acquisition of Trend
Holdings and the March 27, 2020 acquisition of Banner Midstream consisted of
three segments, Financial, Oil and Gas and Technology. Effective July 1, 2021,
the Company's chief operating decision makers in discussion with the finance
team determined that the Company would add a fourth reporting segment to account
for their Bitcoin mining business. Additionally, on July 1, 2021 the Company
will report its home office costs into the Oil and Gas segment, charge its
Technology segment a monthly overhead fee, and has recorded typical overhead
expenses in their Finance and Bitcoin Mining segments to account for this home
office allocation. The Company classified their 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 years ended March 31, 2022 and 2021, respectively.



                                       45



Year Ended March 31, 2022                   Bitcoin Mining       Commodities       Technology          Total
Segmented operating revenues               $         27,182     $  25,572,463     $          -     $  25,599,645
Cost of revenues                                    183,590        13,272,323                -        13,455,913
Gross profit (loss)                                (156,408 )      12,300,140                -        12,143,732
Total operating expenses and income
taxes net of depreciation, amortization,
depletion, accretion and impairment               6,945,688        19,407,433        2,944,567        29,297,688
Depreciation, amortization, depletion,
accretion and impairment                             62,629         7,001,507          291,905         7,356,041
Other (income) expense                              117,616       (13,151,457 )     (1,098,118 )     (14,131,959 )
Income (loss) from continuing operations
                                           $     (7,282,341 )   $    (957,343 )   $ (2,138,354 )   $ (10,378,038 )
Segmented assets as of March 31, 2022
Property and equipment, net                $      7,226,370     $   3,103,203     $          -     $  10,329,573
Oil and Gas Properties/Capitalized
drilling costs                             $              -     $   7,231,367     $          -     $   7,231,367
Intangible assets, net                     $         19,267     $   1,716,331     $          -     $   1,735,598
Goodwill                                   $              -     $   7,001,247     $          -     $   7,001,247
Capital expenditures                       $      7,281,772     $      19,500     $          -     $   7,301,272




Year Ended March 31, 2021                             Oil and Gas       Technology          Total
Segmented operating revenues                         $  15,084,532     $          -     $  15,084,532
Cost of revenues                                        14,726,936                -        14,726,936
Gross profit                                               357,596                -           357,596
Total operating expenses and income taxes net of
depreciation, amortization, depletion and
accretion                                               14,272,115        3,164,696        17,436,811
Depreciation, amortization, depletion and
accretion                                                1,652,844          249,962         1,902,806
Other (income) expense                                   2,200,245           87,334         2,287,579
Loss from continuing operations                      $ (17,767,608 )   $ 

(3,501,992) ($21,269,600)

Segmented assets as of March 31, 2021
Property and equipment, net                          $   3,403,419     $    291,905     $   3,695,324
Oil and Gas Properties/Capitalized drilling costs    $  14,918,531     $   
      -     $  14,918,531
Intangible assets, net                               $   2,065,145     $          -     $   2,065,145
Goodwill                                             $   7,001,247     $          -     $  10,224,046
Capital expenditures                                 $     616,733     $          -     $     616,733



Significant Accounting Policies, Estimates and Assumptions

The critical accounting policies listed below are those that the Company deems most significant 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.



                                       46


Actual results could differ from these estimates.



The estimates of proved, probable and possible oil and gas reserves are used as
significant inputs in determining the depletion of oil and gas properties and
the impairment of proved and unproved oil and gas properties. There are numerous
uncertainties inherent in the estimation of quantities of proven, probable and
possible reserves and in the projection of future rates of production and the
timing of development expenditures. Similarly, evaluations for impairment of
proved and unproved oil and gas properties are subject to numerous uncertainties
including, among others, estimates of future recoverable reserves and commodity
price outlooks. Actual results could differ from the estimates and assumptions
utilized.



Oil and Gas Properties



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



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



Limitation of capitalized costs



Under the full-cost method of accounting, we are required, at the end of each
reporting period, to perform a test to determine the limit on the book value of
our oil and gas properties (the "Ceiling" test). If the capitalized costs of our
oil and natural gas properties, net of accumulated amortization and related
deferred income taxes, exceed the Ceiling, the excess or impairment is charged
to expense. The expense may not be reversed in future periods, even though
higher oil and gas prices may subsequently increase the Ceiling. The Ceiling is
defined as the sum of: (a) the present value, discounted at 10% and assuming
continuation of existing economic conditions, of (1) estimated future gross
revenues from proved reserves, which is computed using oil and gas prices
determined as the unweighted arithmetic average of the first-day-of-the-month
price for each month within the 12-month hedging arrangements pursuant to SAB
103, less (2) estimated future expenditures (based on current costs) to be
incurred in developing and producing the proved reserves; plus, (b) the cost of
properties being amortized; plus, (c) the lower of cost or estimated fair value
of unproven properties included in the costs being amortized; net of (d) the
related tax effects related to the difference between the book and tax basis of
our oil and natural gas properties.



Oil and Gas Reserves



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



Inventories


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



                                       47


Accounting for the Asset Retirement Obligation



Asset retirement obligations ("ARO") primarily represent the estimated present
value of the amount the Company will incur to plug, abandon and remediate its
producing properties at the projected end of their productive lives, in
accordance with applicable federal, state and local laws. The Company determined
its ARO by calculating the present value of the estimated cash flows related to
the obligation. The retirement obligation is recorded as a liability at its
estimated present value as of the obligation's inception, with an offsetting
increase to proved properties or to exploration costs.



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 performance obligations in the contract

? Step 3: Determine the price of the transaction

? Step 4: Assign 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



? Binding estimates of variable consideration

? The existence of a significant financing component in the contract



 ? Noncash consideration



? Consideration payable to a client

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.


                                       48



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. The Company recognizes revenue upon satisfaction of its
performance obligation at either a point in time in accordance with
ASC 606-10-25-30 for its contracts in its Oil and Gas and Financial Services
segments or 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.



Bitcoin Mining


For the purposes of the following discussion of Bitcoin mining accounting policies, reference to “the Company” refers to Agora.



As consideration for providing computing power, the Company receives Bitcoin
from the mining pool in which it participates. Income from Bitcoin mining
(mining earnings are made up of the baseline block reward and transaction fees,
defined as "rewards") which is measured based on the fair value of the Bitcoin
received.



Providing computing power in Bitcoin transaction verification services (known as
"mining") 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. The Company will recognize income
from Bitcoin mining for the provision of computing power upon satisfaction of
its performance obligation. As consideration for the provision of computing
power, the Company is entitled to payment in Bitcoin, which is a form of noncash
consideration. Noncash consideration is measured at fair value at contract
inception. Fair value of the Bitcoin consideration is determined using the
quoted price on the Company's primary trading platform of the Bitcoin at the
beginning of the contract period, which is considered to be the beginning of
each twenty-four-hour period (at contract inception). Specifically, fair value
at contract inception is based on the market price at the beginning of the
contract term, at the single Bitcoin level (one Bitcoin). This amount is
recognized in revenue over the contract term as hash rate is provided. Changes
in the fair value of the noncash consideration due to form of the consideration
(changes in the market price of Bitcoin) are not included in the transaction
price and hence are not included in revenue. Changes in fair value of the
noncash consideration post-contract inception that are due to reasons other than
form of consideration (other than changes in the market value of bitcoin) are
measured based on the guidance on variable consideration, including the
constraint on estimates of variable consideration.



                                       49



Because the consideration to which the Company expects to be entitled for
providing computing power is entirely variable, as well as being noncash
consideration, the Company assesses the estimated amount of the variable noncash
consideration to which it expects to be entitled for providing computing power
at contract inception and subsequently, to determine when and to what extent it
is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur once the uncertainty associated with the variable
consideration is subsequently resolved (the "constraint"). Only when significant
revenue reversal is concluded probable of not occurring can estimated variable
consideration be included in revenue. Based on evaluation of likelihood and
magnitude of a reversal in applying the constraint, the estimated variable
noncash consideration is constrained from inclusion in revenue until the end of
the contract term, when the underlying uncertainties have been resolved and
number of Bitcoin to which the Company is entitled becomes known.



Bitcoins are recorded on the consolidated balance sheet, as an intangible asset – Bitcoin.



The Company has entered into a Bitcoin mining pool with the mining pool operator
F2Pool, to provide computing power to the mining pool. The arrangement is
terminable at any time by either party and the Company's enforceable right to
Bitcoin compensation only begins when the Company provides computing power
to
the mining pool operator.



The Company's performance obligation extends over the contract term given the
Company's continuous provision of hash rate. This period of time corresponds
with the period of service for which the mining pool operator determines
compensation due the Company. Given cancelation terms of the contracts, all
contracts effectively provide the Company with the option to renew for
successive contract terms of twenty-four hours. The options to renew are not
material rights because they are offered at the standalone selling price of
computing power. In exchange for providing computing power, the Company is
entitled to consideration equal to a fractional share of the fixed Bitcoin
reward the mining pool operator receives (referred to as a "block reward") after
such amount has been reduced by a digital asset transaction fee retained by the
mining pool operator, and potentially network transaction fees. The Company's
fractional share is based on the proportion of computing power the Company
contributed to the mining pool operator to the total computing power contributed
by all mining pool participants in solving the current algorithm, over the
contract term. The Company is entitled to compensation for providing computing
power to a mining pool even if a block is not successfully placed. The block
reward provides an incentive for Bitcoin miners to process transactions made
with the cryptocurrency. Creating an immutable record of these transactions is
vital for the cryptocurrency to work as intended. The blockchain is like a
decentralized bank ledger, one that cannot be altered after being created. The
miners are needed to verify the transactions and keep this ledger up to date.
Block rewards, and to a lesser extent, network transaction fees, are their
payment for doing so.



The terms of the agreement with the mining pool operator provide that neither party may challenge the terms of the settlement after thirty-five days of settlement.



For the mining pool in which the Company participates, the Company is entitled
to a transaction price calculated by the Company's mining pool operator.
Specifically, the mining pool operator determines the amount of block rewards to
which the Company is entitled by using the Pay-Per-Shares-Plus (PPS+) payment
method, retaining 2.5% to cover costs of operating the pool (the "digital asset
transaction fee"), and includes network transaction fees as applicable. When the
Company's number of Bitcoin reaches the minimum threshold of 0.005 Bitcoin, the
Company receives a payout and the pool transfers the cryptocurrency
consideration to the Company's designated wallet within 8 hours, between 00:00
and 08:00 UTC.



The PPS+ payment method pays miners for the number of shares they contribute to
the pool (effectively, the amount of computing power provided to the pool) plus
network transaction fees. Shares can be described as discrete amounts of valid
work each miner or mining farm contributes to the pool. The value of each share
contributed is determined by the Bitcoin's current network difficulty and the
number of total shares contributed from miners and mining farms. Bitcoin rewards
are received regardless if a pool successfully finds a block because the mining
pool operator understands that, probabilistically, blocks will be successfully
found in a statistically predictable manner by the pool depending on the total
amount of hashing power (shares) contributed by the miners and mining farms and
therefore, pays out as if a block was found. This is a strategy that provides
regular payments to miners and allows consistent payouts.



Network transaction fees, however, are paid out based on blocks actually found
and solved and therefore the network transaction fee revenue is not consistently
paid out. We expect that network transaction fees will be a very small
contributor to total miner Bitcoin rewards.



The Company's cost of Bitcoin revenue consists primarily of direct costs of
earning the Bitcoins related to mining operations, namely electric power costs,
other utilities, labor, insurance whether incurred directly from self-mining
operations or reimbursed, including any revenue sharing arrangements under
hosting agreements, but excluding depreciation and amortization, which are
separately stated in the Company's Consolidated Statement of Operations.



                                       50



Commodities



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



Pinnacle Frac’s cost of sales includes all direct expenses incurred to generate revenue for the period. This includes, but is not limited to, direct employee labor, direct contract labor, and fuel.

Revenue from master service agreements is recognized when the performance obligation is satisfied. Typically, satisfaction of the performance obligation occurs when the load of frac sand is delivered to the customer’s site and that load is invoiced and successfully accepted by the Company’s factoring agent.


Bitcoin


Bitcoin is included in current assets on the Consolidated Balance Sheets as indefinite life intangible assets. Bitcoin is carried at cost less depreciation.

The Company accounts for its Bitcoins as indefinite-lived intangible assets in
accordance with Accounting Standards Codification ("ASC") 350, Intangibles -
Goodwill and Other. An intangible asset with an indefinite useful life is not
amortized but assessed for impairment annually, or more frequently, when events
or changes in circumstances occur indicating that it is more likely than not
that the indefinite-lived asset is impaired. Impairment exists when the carrying
amount exceeds its fair value. The Company determines the fair value of its
Bitcoins on a nonrecurring basis in accordance with ASC 820, Fair Value
Measurement, based on quoted prices on the active trading platform that the
Company has determined is its principal market for Bitcoin (Level 1 inputs). The
Company performs an analysis each day, comparing the carrying amount of the
Company's Bitcoin with their fair value based on the lowest market price that
day at the single Bitcoin level (one bitcoin). The excess, if any, represents a
recognized impairment loss.. Impairment losses are recorded in the line item
"Bitcoin impairment losses" in the Company's Consolidated Statements of
Operations.



To the extent an impairment loss is recognized, the loss establishes the new
cost basis of the asset. Subsequent reversal of impairment losses is not
permitted. Bitcoin awarded to the Company through its mining activities are
included as an adjustment to reconcile net loss to cash provided by (or used in)
operating activities on the accompanying Consolidated Statements of Cash Flows.
The sales (if any) of Bitcoin are included within investing activities in the
accompanying Consolidated Statements of Cash Flows and any realized gains or
losses (if any) from such sales are included in operating income in the
Company's Consolidated Statement of Operations. The Company accounts for sales
of Bitcoins in accordance with the first in first out (FIFO) method of
accounting.



Bitcoin-related impairment losses are included in the Bitcoin Mining segment.



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 whose value drivers are mainly unobservable.


                                       51


The carrying value of the Company’s financial instruments, such as cash, accounts payable and accrued liabilities, approximate their respective fair values ​​due to the short-term nature of these financial instruments.



Bitcoin will consist of Bitcoin assets and 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.



Segment Information



The Company follows the provisions of ASC 280-10 Segment Reporting. This
standard requires that companies disclose operating segments based on the manner
in which management disaggregates the Company in making internal operating
decisions. The Company and its chief operating decision makers determined that
the Company's operations effective with the May 31, 2019, acquisition of Trend
Holdings and the March 27, 2020 acquisition of Banner Midstream consisted of
three segments, Financial, Oil and Gas and Technology. Effective July 1, 2021,
the Company's chief operating decision makers in discussion with the finance
team determined that the Company would add a fourth reporting segment to account
for their Bitcoin mining business. Additionally, on July 1, 2021 the Company
will report its home office costs into the Oil and Gas segment, charge its
Technology segment a monthly overhead fee, and has recorded typical overhead
expenses in their Finance and Bitcoin Mining segments to account for this home
office allocation. The Company classified their 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 years ended March 31, 2022 and 2021, respectively.



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.



                                       52



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 statements that are not expected to have an impact or do not relate to its financial condition, results of operations, cash flows or disclosures.


Production Data



The following tables set forth our production data for the years ended March 31,
2022 and 2021:



                                Years Ended March 31,
                           2022                      2021
                           Bbls                      Bbls
                    Gross         Net         Gross         Net
Production Data:
By State/County
Mississippi
Holmes                1,838        1,378            6            3
Amite                12,054        9,629       13,853       11,063
Wilkinson            13,619       10,560       10,964        8,765
Pike                  1,327        1,019          752          611
                     28,838       22,586       25,575       20,442

Louisiana
Catahoula             5,534        4,186        4,019        3,197
Concordia             8,626        4,407        6,650        3,128
Tensas                3,209        2,407        2,724        2,024
Lasalle                 609          330        1,013          549
Avoyelles            44,558       30,371       12,166        8,469
                     62,536       41,701       26,572       17,367

Total                91,374       64,287       52,147       37,809




                                       53



Results of Operations



Fiscal year ended March 31, 2022 compared to the fiscal year ended March 31,
2021



Revenues



                                          2022             2021
Revenue from continuing operations:
Bitcoin mining                        $     26,495     $          -
Oil and Gas Production                   6,814,706        2,362,577
Transportation Services                 18,457,567       12,318,309
Fuel Rebate                                251,945          243,961
Equipment Rental and other                  48,932          159,685
                                      $ 25,599,645     $ 15,084,532



Oil, natural gas and natural gas liquids revenues. Our oil production revenues are based on the volumes of oil production sold and the average selling prices received for those volumes.


                                                  Years Ended
                                                   March 31,
                                             2022            2021
Revenues:
Oil and natural gas sales, net of taxes   $ 6,769,419     $ 2,362,577
Other                                          45,287               -
Total revenues                            $ 6,814,706     $ 2,362,577




Revenues for FY 2022 were $25,599,645 as compared to $15,084,532 for FY 2021.
The increase was primarily due to an increase in revenues from its oil
production and transportation services operations related to higher average oil
prices during FY 2022, as well as an overall increase in production from 127
barrels of oil per day ("BOPD") in FY 2021 to 186 in BOPD in FY 2022, and
additional customers added with respect to our transportation services business.



Revenues were comprised of $25,572,463 and $15,084,532 in the oil and gas
segment (including $18,457,567 and $12,318,309 in the transportation services
business and $6,814,706 and $2,362,577 in the oil and gas production business,
respectively), and $27,182 and $0 from the Bitcoin mining segment for FY 2022
and FY 2021, respectively. Additionally, revenue from fuel rebates were $251,945
and $243,961, and revenue from equipment rental and other sources were $48,932
and $159,685 for FY 2022 and FY 2021, respectively, which amounts are also
included in the oil and gas segment. There were no revenues from our technology
segment during FY 2022 or FY 2021.



The Company's Bitcoin operations began in FY 2022, and therefore no amounts are
reflected for that segment for FY 2021. The equipment leasing has begun winding
down and is expected to continue to be an immaterial portion of overall revenue
in future periods.


Revenue cost and gross profit

The following table presents the revenue costs for fiscal years 2022 and 2021:


                 Years Ended
                  March 31,
            2022             2021
Total   $ 13,455,913     $ 14,726,936




                                       54


Cost of revenues for FY 2022 was $13,455,913 as compared to $14,726,936 for FY
2021, primarily because of decreased owner operator and fuel expenses in the
year ended March 31, 2022 compared to the year ended March 31, 2021. The
increase in gross profit margins to 47.4% in FY 2022 compared to 2.4% in FY 2021
was primarily due to the increase in revenues in the Company's oil and gas
operations, which operates at a much higher gross margin than the Company's
transportation business. Cost of revenues was comprised of $13,272,323 and
$14,726,936 in the oil and gas segment and $183,590 and $0 in the Bitcoin mining
segment for FY 2022 and FY 2021, respectively. There were no cost of revenues in
the technology segment for FY 2022 and FY 2021.



Operating Expenses



The following table shows operating expenses by segment for FY 2022 and FY 2021:



                               Year Ended
                                March 31,
                          2022             2021
Segment
Oil and gas segment   $ 26,408,940     $ 15,924,959
Technology segment       3,236,472        3,416,658
Bitcoin Segment          7,008,317                -
Total                 $ 36,653,729     $ 19,339,617




The following table shows operating expenses for continuing operations for FY
2022 and FY 2021:



                                                                            Years Ended
                                                                             March 31,
                                                                       2022             2021
Operating Expenses
Salaries and salaries related costs                                $ 12,091,385     $  6,836,443
Professional and consulting fees                                      1,271,247        1,381,774
Oilfield supplies and repairs                                         4,467,431        1,909,545
Selling, general and administrative costs                            11,382,625        6,368,409
Depreciation, amortization, depletion, accretion, and impairment      7,348,813        1,902,806
Bitcoin impairment losses                                                 7,228                -
Research and development                                                      -          882,640
                                                                   $ 36,568,729     $ 19,281,617




The increase in total operating expenses was due principally to expenses
incurred in establishing our Bitcoin mining operations within Agora and
additional expenses related to preparing the Agora Registration Statement and
planning for its upcoming spin-off. The remaining increase in operating expenses
related to the Company's scaling of its oil and gas operations and
transportations divisions, which increased in correlation with the revenues
of
those business respectively.



Increased oil prices in FY 2022 have aided our oil and gas production operations
by increasing revenue as a result of the higher prices, but are also increasing
drilling costs due to the increase in demand for ancillary drilling services.



Selling, general and administrative expenses

The following table presents selling, general and administrative expenses in continuing operations for fiscal years 2022 and 2021:


                                                    Years Ended
                                                     March 31,
                                                2022            2021
Selling, general and administrative costs
Capital Raising Costs                       $  2,129,776     $   772,661
Insurance                                      3,229,679       1,550,684
Legal/Audit/Accounting expenses                1,411,284       1,341,661
Factoring expenses                               417,338         317,609
Equipment Rental                                 633,062          71,048
Development Costs                                151,805               -
Other                                          3,409,681       2,314,746
                                            $ 11,382,625     $ 6,368,409




                                       55



Selling, general and administrative expenses for FY 2022 were $11,382,625
compared with $6,368,409 for FY 2021. The increase in selling, general and
administrative expenses for FY 2022 compared to FY 2021 related to additional
expenses related to the commencement of operations in Agora. Insurance expense
for FY 2021 included a one-time adjustment in oil and gas segment.



Salaries and salary-related costs



Salaries and salaries related costs were $12,091,385 for FY 2022 compared to
$6,836,443 for FY 2021, with the increase primarily due to the staffing of Agora
and preparation of its initial public offering, which included procuring
employees and management and related compensation for Agora as well as
stock-based compensation expense related to Agora.



Oilfield Supplies and repairs



Oilfield supplies and repairs were $4,467,431 for FY 2022 compared to $1,909,545
for FY 2021, with the increase primarily due to additional procedures performed
related to the completion and production of the Deshotel well in addition to
various workover procedures to increase production on existing wells.



Depreciation, amortization, depletion, accretion and depreciation

The following table shows the depreciation, depletion, accretion and impairment charges for the years ended March 31, 2022 and 2021:


                                                                       Years Ended
                                                                        March 31,
                                                                  2022            2021
Depletion and impairment of proved oil and natural gas
properties                                                     $ 2,832,370     $   739,036
Depletion of drilled wells                                       1,961,477 

130 490

Impairment of undeveloped oil and gas reserves                   1,235,285               -
Depreciation of sand frac transportation equipment                 460,464 

434,063

Depreciation of midstream assets                                     7,485               -
Depreciation and impairment of technology segment assets           291,905 

249,962

Depreciation of Bitstream mining assets                             55,401               -
Amortization of intangible assets                                  348,814 

284,855

Asset retirement obligation accretion                              155,612 

64,400

Depreciation, amortization, depletion, accretion and
impairment expense                                             $ 7,348,813     $ 1,902,806




Depreciation, amortization, depletion, accretion and impairment expenses were
comprised of $7,001,507 and $1,652,844 in the oil and gas segment; $55,401 and
$0 in the Bitcoin mining segment, and $291,905 and $249,962 in the technology
segment for FY 2022 and FY 2021, respectively.



The increase in depletion of proved oil and natural gas properties of $2,093,334
and the increase in depletion of drilled wells of $1,830,987 for FY 2022 is
primarily due to an adjustment of projected lifetime production at the Deshotel
#24 well.



Research and Development



There were no research and development expense in FY 2022, compared to $882,640
in FY 2021. The reduction in costs related primarily to the inactive status of
Zest as the litigation affected its ability to operate with our limited cash.



                                       56



Other Income (Expense)



The following table shows other income (expense) for continuing operations for
FY 2022 and FY 2021:



                                                                        Years Ended
                                                                         March 31,
                                                                   2022             2021
Change in fair value of derivative liabilities                 $ 15,386,301     $ (18,518,459 )
Gain on exchange of warrants for common stock                             -

21,084,040

Loss on conversion of long-term debt and accrued expenses                 -        (3,969,165 )
Loss on disposal of fixed assets                                          -          (104,938 )
Loss on abandonment of oil and gas property                               -          (109,407 )
Loss on sale of oil and gas property and ARO                       (586,292 )               -
Forgiveness of debt                                                       -

1 850 133

Interest expense, net of interest income                           (668,050
)      (2,519,783 )
Other income (expense)                                         $ 14,131,959     $  (2,287,579 )




Total other income was $14,131,959 in FY 2022, compared to total other (expense)
of $(2,287,579) in FY 2021. Change in fair value of derivative liabilities for
FY 2022 was a non-cash gain of $15,386,301 as compared to a non-cash loss of
($18,518,459) for FY 2021. The income was a result of the decrease in our stock
price in FY 2022 compared to an increase in our stock price in FY 2021 as well
as the issuance of warrants in August 2021.



There was a gain in FY 2021 from the extinguishment of the derivative
liabilities that when converted to shares of common stock of $21,084,040. In
addition, in FY 2021, there was a loss on the conversion of debt and other
liabilities to shares of common stock of $3,969,165. The negative change in fair
value of derivative liabilities in FY 2021 was offset by a non-cash gain on
exchange of warrants for common stock of $21,084,040 in FY 2021, with no
corresponding gain or loss in FY 2022.



Interest expense, net of interest income, for FY 2022 was $(668,050) as compared
to $(2,519,783) for FY 2021. The decrease in interest expense was the result of
a reduction in our long-term debt and interest incurred on the debt assumed in
the Banner acquisition, the amortization of debt discount of $149,394 as well as
the value related to the granting of warrants for interest of $1,789,227. For FY
2022, value related to the granting of warrants for interest was $545,125.

Oil, natural gas and natural gas liquids costs and expenses


                                                      Years Ended
                                                       March 31,
                                                 2022            2021
Costs and expenses (income):
Production                                    $ 1,333,666     $ 5,705,958
Exploration, abandonment, and impairment          397,198           7,420
Oilfield supplies and repairs                   4,021,600       1,813,469
Oil & Gas production taxes                        235,166         135,717
General and administrative                      2,161,153       4,773,821
Depreciation and amortization                      33,438         355,280
Depletion                                       4,793,847         739,037
Accretion                                         155,612          64,400
Impairment                                      1,235,285               -
Loss on sale of oil and gas property              885,797               -
Loss on abandonment of oil and gas property             -         109,407




                                       57


Net income (loss) from continuing operations

The following table shows net income (loss) from continuing operations for the years ended March 31, 2022 and 2021:


                                                         Years Ended
                                                          March 31,
                                                   2022              2021
Oil and gas Segment                            $    (957,343 )   $ (17,767,608 )
Bitcoin Mining Segment                            (7,282,341 )               -
Technology Segment                                (2,138,354 )     

(3,501,992 ) Net income (loss) from continuing operations $(10,378,038) ($21,269,600)




FY 2022 was ($10,378,038) as compared to ($21,269,600) for FY 2021. The
$10,891,562 decrease in net loss from continuing operations was primarily due to
a $15,386,301 increase in fair value of derivative liabilities caused by a
decrease in our stock price, together with an increase in revenue to
$25,599,645, in FY 2022. In FY 2021, revenue of $15,084,532 and a gain on
exchange of warrants for common stock of $21,084,040 were offset primarily by a
change in fair value of derivative liabilities of ($18,518,459), loss on
conversion of long-term debt of ($3,969,165), and interest expense, net of
interest income, of ($2,519,783).



Income (loss) from continuing operations was comprised of $325,005 and
($17,767,608) in the oil and gas segment; ($7,282,341) and $0 in the Bitcoin
mining segment; and ($2,138,354) and $(3,501,992) in the technology segment for
FY 2022 and FY 2021, respectively. The difference in our oil and gas segment was
primarily due to the commencement of production on the Deshotel well in addition
to increased revenues in our transportation division.



Cash 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.



For FY 2022 and FY 2021, the Company had a net loss from continuing operations
of ($10,293,038) and ($21,211,600), respectively, had a working capital deficit
of $8,394,850 and $11,846,156 as of March 31, 2022 and 2021, and has an
accumulated deficit as of March 31, 2022 of ($158,868,204). As of July 1, 2022,
the Company has $8,013,181 in cash and cash equivalents. The increase in the
working capital deficit is the result of the start-up of Agora's Bitcoin mining
operation and the expansion of our oil and gas drilling programs in FY 2022. The
Company believes this cash plus revenue from operations is sufficient to meet
our cash needs for the 12 months following the filing of this Report.



Net cash used in operating activities was ($9,884,095) for FY 2022, as compared
to ($12,584,771) for FY 2021. Cash used in operating activities is related to
the Company's net loss partially offset by non-cash expenses, including
share-based compensation, change in non-controlling interest and the change in
the fair value of the derivative liability and net losses incurred in the
conversion of debt and liabilities to shares of common stock, as well as losses
on the sale of fixed assets and disposal or abandonment of oil and gas
properties.



Net cash used in investing activities was ($8,618,205) for FY 2022, compared to
($6,385,565) for FY 2021. Net cash used in investing activities in FY 2022
related primarily to the purchase of fixed assets as well as power development
costs for Agora's Bitcoin mining operations of ($2,000,000) and oil and gas
properties of $(303,500), offset by sale of fixed assets of $2,500 and proceeds
from the sale of oil and gas properties of $906,274. For FY 2021, the cash used
in investing activities related to advancement of a note receivable of
($275,000), the net purchases of fixed assets and oil and gas properties
including drilling costs of $(3,414,023), and capitalized drilling costs
($2,696,542).



Net cash provided by financing activities for FY 2022 was $17,691,852 which
included $19,228,948 (net of fees) raised via issuance of common stock and
warrants in a registered direct offering and stock for the exercise of stock
options, partially offset by $1,434,855 in net repayments of debt including
notes issued to related parties. This compared with FY 2021 net cash provided by
financing activities of $19,782,269 which included $7,666,303 (net of fees)
raised via issuance of common stock in a registered direct offering, stock for
the exercise of warrants of $16,119,595, $501,958 from the exercise of stock
options, $2,470,209 from proceeds received from debt from loans made by related
and non-related parties, partially offset by ($5,723,404) from payments on debt
to both related and non-related parties and ($1,130,068) in payments to prior
owners.



                                       58


To date, we have funded our operations by selling common stock, convertible preferred stock and other derivative securities and by issuing debt securities.

We expect that in the long term the revenue generated operations in our oil and
gas segment will continue to provide liquidity to the Company moving forward.
The Company's capital program for production enhancement and development is
expected to be significantly focused on exploiting legacy acreage positions that
are economically viable at today's oil prices. We anticipate that management's
focus on legacy acreage enhancement and development will positively benefit the
balance sheet by producing hydrocarbons during a time of increasing demand after
the negative impacts of COVID-19 and other geopolitical and economic factors
have driven up the prices of crude oil. We continue to identify drilling
projects and our revenue continues to experience increases due to the price of
oil, if and to the extent they remain at relatively high levels in future
periods. Supply chain issues and inflationary concerns have not materially
impacted our business to-date, however we plan to monitor these developments and
adjust our business where management deems necessary.



The amount and timing of our capital expenditures are largely discretionary and
within the control of our management and Board of Directors. We could choose to
defer a portion of these planned capital expenditures depending on a variety of
factors, including but not limited to the success of our drilling activities,
prevailing and anticipated prices for oil, the availability of necessary
equipment, infrastructure and capital, the receipt and timing of required
regulatory permits and approvals, seasonal conditions, drilling and acquisition
costs and the level of participation by other interest owners. We currently
continue to execute on our strategy to reinvest cash flow from operations to
enhance, develop and increase oil production, strengthening our balance sheet.
We intend to continue monitoring commodity prices and overall market conditions
and can adjust capital deployment in response to changes in commodity prices and
overall market conditions.


We monitor and adjust our projected capital expenditures for our operations in
response to the results of our drilling activities, changes in prices,
availability of financing, drilling and acquisition costs, industry conditions,
the timing of regulatory approvals, the availability of rigs, contractual
obligations, internally generated cash flow and other factors both within and
outside our control. If we require additional capital, we may seek such capital
through traditional reserve base borrowings, joint venture partnerships,
production payment financing, asset sales, offerings of debt and/or equity
securities or other means. There is no assurance that the needed capital will be
available on acceptable terms or at all. If we are unable to obtain funds when
needed or on acceptable terms, we may be required to curtail our drilling
programs, which could result in a loss of acreage through lease expirations. In
addition, we may not be able to complete acquisitions that may be favorable
to
us or finance the capital.



Well Opening Requirements


The Company has continuous drilling requirements to drill or re-complete a well
on its 9,615 Peabody Blackhawk lease every 270 days to keep the lease active.
The Company drilled and completed a well in February 2022 on this oil and gas
mineral lease and extended the lease to at least November 2022. In February
2022, our cost to drill a well in this formation was approximately $200,000 but
depending on the formation drilled, the costs could be as high as approximately
$2,000,000. In this event, we would likely seek significant partners to share
the cost. We have already agreed to afford the BitNile subsidiary a 25%
participation right in future wells we drill.



Agora Line of Credit



As of June 30, 2022, the Company has advanced a total of $5,614,367 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. The Company has
agreed to loan Agora $5 million from the proceeds it received from the June 2022
private placement transaction described below to fund Agora's Bitcoin mining
business.



Impairment


For fiscal years 2022 and 2021, the Company impaired undeveloped reserves totaling
$1,235,285 and $0respectively.


                                       59



June 2022 Private Placement



On June 8, 2022 the Company entered into a Securities Purchase Agreement with
DPL, pursuant to which the Company sold the Purchaser 1,200 shares of Series A,
102,881 Commitment Shares, and a Warrant to purchase shares of common stock (the
"Warrant") for a total purchase price of $12,000,000. As of June 29, 2022, the
Company has received the $12,000,000 purchase price from DPL.



Each share of Series A has a stated value of $10,000 and is convertible into
shares of common stock at a conversion price of $2.10 per share, subject to
certain adjustment provisions. The holder's conversion of the Series A is
subject to a beneficial ownership limitation of 19.9% of the issued and
outstanding common stock as of the issuance date of the Series A, unless and
until the Company obtains shareholder and Nasdaq approval for the conversion of
more than that amount, in order to comply with Nasdaq Rules. In addition, the
conversion rights in general do not become effective until the first day after
the record date for the shareholders meeting seeking such shareholder approval.
There are also standard 4.99% and 9.9% beneficial ownership limitations. The
Series A is entitled to vote with the common stock as a single class on an
as-converted basis, subject to certain limitations. Initially, the holder may
designate one director.


The holder of shares of the Series A is entitled to receive cumulative cash
dividends at an annual rate of 12.6% of the stated value, which is equivalent to
$1,260 per year per share, payable monthly beginning on the issuance date and
continuing until the earlier of (a) June 8, 2024, and (b) the date on which the
holder no longer holds any shares of Series A. If the Company fails to make one
or more dividend payments, whether or not consecutive, a default dividend rate
of 18% per annum will apply until all accumulated dividend payments have been
made. Additionally, at any time beginning on or after June 8, 2024, the holder
of Series A may cause the Company to redeem some or all of the shares of Series
A it holds at a redemption price of $1,200 per share, plus any accumulated
and
unpaid dividends thereon.



The Series A Certificate of Designation (the "Series A 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 Series A for as long as the holder(s) continue to hold at
least 25% (or such higher percentage as set forth in the Series A Certificate)
of the Series A shares issued on the closing date of the financing. These
restrictive covenants include the following actions by the Company, subject to
certain exceptions and limitations:



(i) the payment or declaration of any dividend (other than under Series A

     Certificate);



(ii) the investment, purchase or acquisition of any assets or share capital of any

      entity for an amount that exceeds $100,000 in any one transaction or
      $250,000, in the aggregate;



(iii) the issuance of common stock or other securities convertible into

       or exercisable or exchangeable for shares of common stock;



(iv) the occurrence of any debt, lien or obligation of security, in the aggregate

amount greater than $50,000 in any individual transaction or $100,000 in the

      aggregate;




(v) the sale, rental, transfer or assignment of any of its valuable assets

     calculated in accordance with GAAP of more than $50,000;



(vi) increase in any way the compensation or benefits of any of its

      directors, officers, employees; and



(vii) merger or consolidation with, or purchase of a substantial portion of

       assets of, or by any other manner the acquisition or combination with any
       business or entity.




                                       60


The Warrant issued to DPL is structured as a poison pill in order to insure the
Company will spin-off its subsidiaries and favorably consider a proposed reverse
merger. It provides 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 shares of common stock underlying the Series A unless
sold. The Warrant becomes exercisable beginning after the completion by the
Company of 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, and Zest Labs (the "Distributions"), provided that
as of such time (i) the Warrant has been approved by the Company's shareholders
and Nasdaq, and (ii) the holder together with its affiliates does not
beneficially own at least 50% of the Company's outstanding common stock. The
Warrant is subject to forfeiture if (x) the Distributions have not occurred
within two years, (y) the shareholder approvals have not been obtained following
three meetings for such purpose, or (z) the holder and its affiliates
collectively beneficially own 50% or more of the Company's outstanding common
stock. However, in the event of the failure of the Company to complete the
Distributions as contemplated by clause (x) or obtain shareholder approval as
contemplated by clause (y) and provided the event contemplated by clause (z) has
not occurred, the Warrant may be exercised notwithstanding anything in the
Warrant to the contrary. The Warrant may be exercised on a cashless basis. The
Warrant expires on June 8, 2027.



The secured note from the sale of Trend is due June 16, 2025 and bears interest
at a rate of 5% per year, subject to increase to 10% while an event of default
has occurred and is continuing. The Purchaser's obligations under the note are
secured by a first lien secured interest in the assets of the Purchaser, and are
also guaranteed by the Purchaser's newly acquired subsidiaries.



2018 Line of Credit



On December 28, 2018, the Company entered into a $10,000,000 credit facility
that includes a loan and security agreement wherein 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%. Under the facility the Company may
request draws from the lender up to $1,000,000 with a cap of $10,000,000. In FY
2022, the Company borrowed $595,855, which includes $25,855 in commitment fees,
with the balance of $575,000 being deposited directly into the Company. Interest
incurred for FY 2022 and accrued as of March 31, 2022 was $2,233. There were no
advances in FY 2021. With the sale of Trend Holdings, we no longer can access
this line of credit.



Impact of Inflation


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



In response to recent inflationary pressures in the U.S., the Federal Reserve
commenced interest rate hikes in calendar year 2022 in an effort to combat
inflation. Because of these and other developments, a recession is expected in
the coming months by many economic analysts, which may, among other things,
reduce demand for our products and services as well as increase operating costs
to the extent we are unable to procure required resources to continue our
operations.



Due to the global volatility of oil prices, it is not possible to predict the future cost to the Company of the oil it produces or the services it uses or provides.

Off-balance sheet arrangements

From March 31, 2022 and 2021, we had no off-balance sheet arrangements.


                                       61


Caution 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
our oil and gas reserves, future operating results, including the expected
increase in revenues from the energy business and continued losses and negative
cash flows, anticipated or potential transactions with BitNile and/or its
affiliates, expected substantial investments to fund our business and support
growth, including expenditures related to the joint drilling venture, our
Bitcoin mining operations through Agora and Agora's initial public offering, the
planned spin-offs of certain of our other subsidiaries, expected use of proceeds
of our recent financing with DPL and cash generated from our operations, future
impact of reduced oil and gas prices or reduced demand, potential future
expansion of our oil and gas asset portfolio or other strategic transactions,
our beliefs regarding the classification of drivers and owner-operators as
independent contractors, our plans with respect to loss reserves, the
sufficiency of our aggregate insurance limits, our expectations with respect to
future developments in our ongoing litigation, and future liquidity.



All statements other than statements of historical facts contained in this
Report, including statements regarding our future financial position, liquidity,
business strategy and plans and objectives of management for future operations,
are forward-looking statements. 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 oil and gas price volatility and the continuation of high oil prices,
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, the future prices of, and demand for, oil and gas, our ability to
efficiently develop our current oil reserves and economically find or acquire
additional recoverable reserves, general risks related to drilling operations,
any further delays or difficulties in the completion of Agora's initial public
offering or its listing on Nasdaq, regulatory or other delays with our planned
spin-offs, including delays or challenges in obtaining the requisite approvals,
future adverse regulatory changes with respect to oil and gas exploration and
production, Bitcoin, and classification of independent contractors as employees,
any issues which could result in unfavorable outcomes of one or both of our
ongoing lawsuits, continued service of key management and employees, and the
availability of capital on acceptable terms when needed or at all, including as
the result of the recent climate change initiatives and economic volatility.
Further information on the risks and uncertainties affecting our business is
contained in Part I. Item 1A. - Risk Factors. Further, with respect to Agora and
its operations, Agora's registration statement on Form S-1 (File No.
333-261246), as amended, sets forth additional risks and uncertainties specific
to its business. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as the result of new information, future
events or otherwise.

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