Business Transactions - The Company completed the sale of its oil and gas production business to White River Energy Corp for 1,200 shares of WTRV's non-voting Series A Convertible Preferred Stock, convertible into approximately 42,253,521 shares of WTRV's common stock[277]. - The Company sold its transportation business, Banner Midstream, to Wolf Energy Services for 51,987,832 shares of Wolf Energy common stock[277]. - The Company plans to spin-off all common stock of Wolf Energy and White River in calendar year 2023, although regulatory delays may affect this timeline[290]. Financing Activities - The Company raised approximately $3,500,000 through an At-The-Market Issuance Sales Agreement, which has been terminated as of June 16, 2023[280]. - The Company entered into a Securities Purchase Agreement for the issuance of Senior Secured Convertible Notes with an aggregate principal amount of $6,875,000, convertible into shares of common stock[280]. - The Company entered into an ATM Agreement for up to $3,500,000 in proceeds from the sale of common stock[314]. - The company entered into a $10,000,000 credit facility, borrowing $505,181 in the year ended March 31, 2023, and repaid $810,000 during the same period[317]. - On April 27, 2023, the company issued Senior Secured Convertible Notes with an aggregate principal amount of $6,875,000, convertible into common stock[318]. - The Notes bear no interest unless an event of default occurs and have an original issuance discount of $1,375,000, maturing on April 27, 2024[320]. - The Company anticipates requiring additional financing to support operations and repay liabilities, with no assurance of securing such funds[312]. Preferred Stock and Dividends - The Series B and Series C Preferred Stock have a combined stated value of $100,000,000 and are convertible into up to 13,333,333 shares of the Company's common stock, representing approximately 92.4% of the outstanding common stock on a fully-diluted basis[277]. - 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, initially 26,666,667 shares[284]. - The Series B holders are entitled to receive dividends at a rate of 5% per annum from issuance until February 7, 2033, with potential increases to 12% in case of default[276][278]. - The Company is subject to various negative covenants, including restrictions on issuing additional shares and incurring indebtedness, as part of the terms of the Series B and Series C Preferred Stock[279]. Financial Performance - The Company had no revenue in FY 2023, compared to $27,182 in FY 2022, as it shifted focus to hosting operations[298]. - Total operating expenses increased to $27,981,218 in FY 2023 from $15,871,208 in FY 2022, primarily due to higher salaries and stock-based compensation[303]. - Net loss from continuing operations for FY 2023 was ($57,534,854), significantly higher than the loss of ($1,222,234) in FY 2022[305]. - As of July 10, 2023, the Company had only $3,492 in cash and cash equivalents, indicating insufficient funds to conduct planned operations for the next year[310]. Revenue Recognition and Operations - Cost of revenues for FY 2023 was $263,954, up from $183,590 in FY 2022, with expectations of further increases as hosting operations commence[302]. - The Company has not yet met its obligations under the MSA with Ault, including raising at least $5,000,000 for initial infrastructure[316]. - The Company’s metaverse operations via BNC launched in March 2023, with no revenues realized from these operations by the fiscal year-end[301]. - Hosting revenues began in September 2022, with a Master Service Agreement signed on December 7, 2022, for cryptocurrency mining[333]. - The company follows ASC 606 for revenue recognition, ensuring revenue reflects the transfer of promised goods or services[324]. - Revenue is recognized when the company satisfies its performance obligation related to the redemption of coins for cash[349]. - The company intends to recognize revenues on a gross basis, treating the percentage of sales paid to Meet Kai as an expense[351]. Accounting and Financial Instruments - The carrying values of the company's financial instruments approximate their fair values due to their short-term nature[354]. - The company does not currently use derivative instruments but may explore hedging oil prices in the current fiscal year[355]. - Recent accounting standards updates are not expected to have a material impact on the company's consolidated financial statements[357][358].
ECOARK HOLDINGS(ZEST) - 2023 Q4 - Annual Report