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White River Energy Corp. - Quarter Report: 2021 June (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: June 30, 2021

 

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

 

For the transition period from:

 

Commission file number 333-192060

 

Fortium Holdings Corp.

(Exact name of registrant as specified in its charter)

 

Nevada   45-3797537

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

609 West Dickson St., Suite 102 G,

Fayetteville, AR

  72701
(Address of principal executive offices)   (Zip Code)

 

Issuer’s telephone number: (800) 203-5610

 

Banner Energy Services Corp.

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by checkmark whether the registrant has (1) 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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

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

 

  Large accelerated filer Accelerated filer
  Non-accelerated filer Smaller reporting company
  Emerging growth company    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

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 standard provided pursuant to Section 13(a) of the Exchange Act. ☐

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $2,717,917.

 

As of July 16, 2021, the issuer had 7,000,000 shares of its common stock, $0.0001 par value per share, outstanding.

 

Securities registered pursuant to Section 12(b) of the Act: None

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
  PART I - Financial Information  
     
Item 1 Condensed Consolidated Financial Statements (Unaudited) F-1
  Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020. F-1
  Condensed Consolidated Statements of Operations (unaudited) for the six and three months ended June 30, 2021 and 2020. F-2
  Condensed Consolidated Statement of Stockholders’ Equity (Deficit) (unaudited) for the six and three months ended June 30, 2021 and 2020 F-3
  Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2021 and 2020. F-4
  Notes to Condensed Consolidated Financial Statements (unaudited) F-5
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
Item 3 Quantitative and Qualitative Disclosures About Market Risk 6
Item 4 Controls and Procedures 6
     
  Part II - Other Information  
     
Item 1 Legal Proceedings 7
Item 5 Other Information 7
Item 6 Exhibits 8
     
  Signatures 9

 

2
 

 

PART I: FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS 

 

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020

 

   JUNE 30,   DECEMBER 31, 
   2021   2020 
ASSETS          
           
CURRENT ASSETS:          
Cash  $11,789   $63,151 
Prepaid expenses and other current assets   2,314    2,029 
Investment   910,341    1,752,954 
           
Total current assets   924,444    1,818,134 
           
Fixed assets, net   2,094    - 
           
TOTAL ASSETS  $926,538   $1,818,134 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
LIABILITIES          
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $47,294   $79,842 
Note payable - related parties   -    23,979 
           
Total current liabilities   47,294    103,821 
           
Commitments and contingencies   -     -  
           
Total Liabilities   47,294    103,821 
           
STOCKHOLDERS’ EQUITY (DEFICIT)          
Common stock, par value, $0.00001, 200,000,000 shares authorized, 7,000,000 and 7,000,000 issued and outstanding, respectively   700    700 
Additional paid in capital   3,397,148    3,397,148 
Accumulated deficit   (2,518,604)   (1,683,535)
           
Total stockholders’ equity (deficit)   879,244    1,714,313 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $926,538   $1,818,134 

 

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

 

F-1
 

 

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2021 AND 2020

 

                 
   SIX MONTHS ENDED   THREE MONTHS ENDED 
   JUNE 30,   JUNE 30, 
   2021   2020   2021   2020 
                 
REVENUE  $-   $-   $-   $- 
COST OF REVENUE   -    -    -    - 
GROSS PROFIT (LOSS)   -    -    -    - 
                     
OPERATING EXPENSES                    
Salaries and wages, including stock-based compensation   68,725    55,000    34,498    - 
Selling, general and administrative expenses   153,774    6,709    53,541    1,711 
                     
Total Operating Expenses   222,499    61,709    88,039    1,711 
                     
OPERATING LOSS   (222,499)   (61,709)   (88,039)   (1,711)
                     
OTHER INCOME (EXPENSE)                    
Interest expense, net of interest income   (45)   -    -    - 
Realized gain on investment   173,681    -    47,323    - 
Unrealized gain (loss) on investment   (786,206)   2,556,000    (1,094,455)   2,510,000 
Total other income (expense)   (612,570)   2,556,000    (1,047,132)   2,510,000 
                     
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES   (835,069)   2,494,291    (1,135,171)   2,508,289 
                     
Provision for income taxes   -    -    -    - 
                     
INCOME (LOSS) FROM CONTINUING OPERATIONS   (835,069)   2,494,291    (1,135,171)   2,508,289 
                     
Gain (loss) from discontinued operations   -    6,352,373    -    - 
                     
NET (LOSS) INCOME  $(835,069)  $8,846,664   $(1,135,171)  $2,508,289 
                     
NET (LOSS) INCOME PER SHARE - BASIC                    
Continuing operations  $(0.12)  $0.36   $(0.16)  $0.36 
Discontinued Operations  $-   $0.92   $-   $- 
NET (LOSS) INCOME PER SHARE  $(0.12)  $1.28   $(0.16)  $0.36 
                     
NET (LOSS) INCOME PER SHARE - DILUTED                    
Continuing operations  $(0.12)  $0.36   $(0.16)  $0.36 
Discontinued Operations  $-   $0.91   $-   $- 
NET (LOSS) INCOME PER SHARE  $(0.12)  $1.27   $(0.16)  $0.36 
                     
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   7,000,000    6,900,091    7,000,000    6,916,193 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   7,000,000    6,971,140    7,000,000    6,987,242  

 

 

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

 

F-2
 

 

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

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

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2021 AND 2020

 

                        
       Additional         
     Common Stock   Paid-In   Accumulated     
     Shares   Amount   Capital   Deficit   Total 
                       
Balance, December 31, 2019

Balance - December 31, 2019

   6,865,853   $686   $3,192,162   $(9,001,296)  $(5,808,448)
                            
Shares issued for services

Shares issued for services

   50,000    5    54,995    -    55,000 
Share adjustment

Share adjustment

   340    1    (1)   -    - 
                            
Net income (loss) for the period

Net income for the period

   -    -    -    6,338,375    6,338,375 
                            
Balance, March 31, 2020

Balance - March 31, 2020

   6,916,193    692    3,247,156    (2,662,921)   584,927 
                            
Net income (loss) for the period

Net income for the period

   -    -    -    2,508,289    2,508,289 
                            
Balance, June 30, 2020

Balance - June 30, 2020

   -   $692   $3,247,156   $(154,632)  $3,093,216 
                            
Balance, December 31, 2020

Balance - December 31, 2020

   7,000,000   $700   $3,397,148   $(1,683,535)  $1,714,313 
                            
Net income (loss) for the period

Net income for the period

   -    -    -    300,102    300,102 
                            
Balance, March 31, 2021

Balance - March 31, 2021

   7,000,000    700    3,397,148    (1,383,433)   2,014,415 
                            
Net income (loss) for the period

Net loss for the period

   -    -    -    (1,135,171)   (1,135,171)
                            
Balance, June 30, 2021

Balance - June 30, 2021

   7,000,000   $700   $3,397,148   $(2,518,604)  $879,244 

 

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

 

F-3
 

 

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

   2021   2020 
CASH FLOW FROM OPERATING ACTIVIITES          
Net (loss) income  $(835,069)  $2,494,291 
Adjustments to reconcile net (loss) income to net cash (used in) operating activities          
Depreciation   419    - 
Stock-based compensation   -    55,000 
Realized gain on investment   (173,681)   - 
Unrealized loss (gain) on investment   786,206    (2,556,000)
           
Changes in assets and liabilities          
Prepaid expenses and other current assets   (285)   - 
Accounts payable and accrued expenses   (34,027)   6,709 
Total adjustments   578,632    (2,494,291)
Net cash (used in) operating activities   (256,437)   - 
           
CASH FLOWS FROM INVESTING ACTIVITES          
Proceeds from sale of investment   230,088    - 
Purchases of fixed assets   (2,513)   - 
Net cash provided by investing activities   227,575    - 
           
CASH FLOWS FROM FINANCING ACTIVITES          
Repayments of note payable   (22,500)   - 
Net cash (used in) financing activities   (22,500)   - 
           
Net cash (used in) discontinued operations - operating activities   -    (1,312,231)
Net cash provided by discontinued operations - investing activities   -    226,968 
Net cash provided by discontinued operations - financing activities   -    1,085,263 
           
Net cash provided by (used in) discontinued operations   -    - 
           
NET DECREASE IN CASH AND CASH EQUIVALENTS   (51,362)   - 
           
CASH - BEGINNING OF PERIOD   63,151    - 
           
CASH - END OF PERIOD  $11,789   $- 
           
SUPPLEMENTAL DISCLOSURES          
Cash paid for interest expense  $1,524   $- 
Cash paid for income taxes  $-   $- 
           
SUMMARY OF NON-CASH ACTIVITIES:          
           
Net assets acquired from White River/Shamrock and then sold to Ecoark  $-   $8,000,000 

 

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

 

F-4
 

 

Fortium Holdings Corp.

(Formerly Banner Energy Services Corp.)

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

 

NOTE 1: DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Description of Business

 

The terms “we,” “us,” “our,” “registrant,” “Fortium Holdings”, and the “Company” refer to Fortium Holdings Corp. (formerly Banner Energy Services, Corp. “Banner Energy”)), a Nevada corporation. On November 18, 2019, the Company merged with Banner Midstream Corp., a Delaware corporation (“Banner Midstream”). Banner Midstream had two operating subsidiaries: Pinnacle Frac Transport LLC, a Texas limited liability company (“Pinnacle Frac”) and Capstone Equipment Leasing LLC, a Texas limited liability company (“Capstone”) as of November 18, 2019.

 

Entry into Merger Agreement; Creation of Merger Subsidiary; Closing Conditions for Merger

 

On September 26, 2019, the Company entered into an Agreement and Plan of Merger (the “Agreement”) by and among the Company, Banner Midstream and MTB Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), relating to a merger (the “Merger”) between Banner Midstream and Merger Sub. The closing of the Merger was conditioned on the satisfaction of certain conditions by the various parties, as discussed in more detail below.

 

In anticipation of the Agreement, on September 23, 2019, the Company formed Merger Sub.

 

Pursuant to the Agreement, the Merger Sub was merged with and into Banner Midstream, with Banner Midstream being the surviving entity (the “Surviving Entity”). The outstanding shares of Banner Midstream prior to the Merger were converted into the right to receive shares of the Company, on a one-share-for-one-share basis. The shares of Merger Sub owned by the Company were converted into shares of the Surviving Entity, pursuant to which the Surviving Entity will be a wholly owned subsidiary of the Company. The directors and officers of Banner Midstream prior to the closing of the Merger remained the directors and officers of the Surviving Entity following the closing of the Merger. The Merger with Banner Midstream represents a reverse merger, and in accordance with the reverse merger, Banner Midstream is the accounting acquirer and the historical amounts presented prior to the Merger are those of Banner Midstream. The shareholders of Banner Midstream received shares equal to 90% of the outstanding stock of Banner Energy following the Merger.

 

The Company amended its Articles of Incorporation (the “Amendment”) to effectuate a 1-for-95 reverse stock split of its outstanding shares of common stock (the “Reverse Split”). The Reverse Split became effective November 14, 2019. As a result of the Reverse Split, all share and per share figures contained in the financial statements have been amended to reflect the Reverse Split for the periods presented.

 

Additionally, immediately following the closing of the Merger, the Company and its secured debt holders finalized an agreement whereby the debt holders took possession of the Company’s biotechnology assets and assumed certain other Company obligations in lieu of payment by the Company of the amounts due in the secured debt instruments.

 

On March 27, 2020, Banner Midstream was acquired by Ecoark Holdings, Inc., (“Ecoark”) pursuant a Stock Purchase Agreement, dated March 27, 2020 (the “Banner Purchase Agreement”), between Ecoark and Banner Energy. Pursuant to the Banner Purchase Agreement, Ecoark acquired 100% of the outstanding capital stock of Banner Midstream in consideration for 1,789,041 shares of common stock of Ecoark valued at $2.72 per share and assumed approximately $11,774,000 in short-term and long-term debt of Banner Midstream and its subsidiaries.

 

As of March 27, 2020, Banner Midstream had four operating subsidiaries: Pinnacle Frac, Capstone, White River Holdings Corp., a Delaware corporation (“White River”); and Shamrock Upstream Energy LLC, a Texas limited liability company (“Shamrock”). White River and Shamrock were both acquired on March 27, 2020 by Banner Midstream for a total of $8,000,000, and were then acquired by Ecoark in this transaction.

 

F-5
 

 

On March 18, 2021, the Company formed Norr LLC (“Norr”), a Nevada limited liability company and wholly-owned subsidiary of the Company, and commenced operations as a sports equipment and apparel manufacturer and retailer. Prior to organization of Norr, the Company’s Chief Executive Officer had explored this business opportunity and commenced preparation of a business plan for the business. On March 23, 2021, the Company engaged the services of two consultants and entered into consulting agreements through Norr pursuant to which each consultant provides services to Norr in exchange for $1,000 per month, payable in cash or, at Norr’s election for a given month or months, options to purchase shares of the Company’s common stock.

 

History

 

Prior to the Merger with Banner Midstream, the Company was an early-stage life sciences and technology company pursuing the development of bio-pharmaceuticals to treat autoimmune diseases, which was known as Mount Tam Biotechnologies, Inc.

 

The following reflected the Company’s post-merger corporate structure (State of Incorporation):

 

Mount Tam Biotechnologies, Inc., formerly TabacaleraYsidron, Inc. (Nevada)

 

Mount Tam Biotechnologies, Inc. (Delaware) - Sold October 2018.

 

Mount Tam Therapeutics, Inc. (Delaware) – Formed October 2018.

 

The Company is subject to a number of risks, including the need to develop the Norr business and/or acquire and successfully operate a new business, the risk of selling its Ecoark common stock and raising capital through equity and/or debt financings. See Item 1A “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed February 4, 2021.

 

The Company was established in November 2011 under the name TabacaleraYsidron.

 

On July 31, 2020, Mr. Jay Puchir notified the Board of Directors (the “Board”) that he was resigning as the Chairman of the Board and Chief Executive Officer of the Company. On July 31, 2020, the Board appointed Mr. Richard Horgan as the Chief Executive Officer, and as our sole director and Chairman of the Board, effective August 1, 2020.

 

On January 7, 2021, shareholders of the Company representing approximately 57% of the outstanding common shares, acted by written consent in lieu of a meeting to approve an amendment to the Company’s Articles of Incorporation to change the name of the Company to Fortium Holdings Corp. (the “Amendment”). The Financial Industry Regulatory Authority approved the name change on May 18, 2021.

 

Basis of Presentation

 

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). All adjustments considered necessary for a fair presentation have been included. These adjustments consist of normal and recurring accruals, as well as non-recurring charges.

 

The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Therefore, the interim condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year due to various factors.

 

Principles of Consolidation

 

The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, all of which have a year end of December 31. All intercompany accounts, balances and transactions have been eliminated in the consolidation.

 

Use of Estimates

 

The preparation of 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, estimates of discount rates in lease, liabilities to accrue, 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.

 

F-6
 

 

Acquisition Accounting

 

The Company’s acquisitions are accounted for under the acquisition method of accounting whereby purchase price is allocated to tangible and intangible assets acquired and liabilities assumed based on fair value. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired is recorded as goodwill. The excess of the fair value of the net assets acquired over the fair value of the consideration conveyed is recorded as a non-operating gain on acquisition. The statements of operations for the periods presented include the results of operations for each of the acquisitions from the date of acquisition.

 

Property and Equipment and Long-Lived Assets

 

Property and equipment is stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, of ten years for all property and equipment, except leasehold improvements which are depreciated over the term of the lease, which is shorter than the estimated useful life of the improvements. Computer equipment has an estimated useful life of three years.

 

ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

 

ASC 360-10 addresses criteria to be considered for long-lived assets expected to be disposed of by sale. Six criteria are listed in ASC 360-10-45-9 that must be met in order for assets to be classified as held for sale. Once the criteria are met, long-lived assets classified as held for sale are to be measured at the lower of carrying amount or fair value less costs to sell.

 

The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1. Significant underperformance relative to expected historical or projected future operating results;

 

2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

 

3. Significant negative industry or economic trends.

 

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

 

Accrued Expenses

 

To prepare its financial statements, the Company estimates accrued expenses. The accrual process involves reviewing open contracts, communicating with personnel to identify services that have been performed on behalf of the Company and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of the actual cost. The Company makes estimates of accrued expenses as of each balance sheet date based on the facts and circumstances known to the Company at that time.

 

F-7
 

 

Although the Company does not expect the estimates to be materially different from amounts actually incurred, if the estimates of the status and timing of services performed differs from the actual status and timing of services performed, the Company may report amounts that are too high or too low in any particular period. Historically, the estimated accrued liabilities have approximated actual expenses incurred. Subsequent changes in estimates may result in a material change in the accruals.

 

Fair Value Measurements

 

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

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

 

Investments

 

The Company measures their investments at fair value with changes in fair value recognized in net income (loss) pursuant to ASU 2016-01, “Financial Instruments-Overall”.

 

Revenue Recognition

 

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. All revenues for the period January 1, 2020 through March 27, 2020 are included in discontinued operations. Since the sale of Banner Midstream, the Company has not recognized any revenue.

 

The Company accounts for a contract when it has been approved and committed to, each party’s rights regarding the goods or services to be transferred have been identified, the payment terms have been identified, the contract has commercial substance, and collectability is probable. Revenue is generally recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. Revenue recognition for multiple-element arrangements requires judgment to determine if multiple elements exist, whether elements can be accounted for as separate units of accounting, and if so, the fair value for each of the elements.

 

The Company accounts for contract costs in accordance with ASC Topic 340-40, Contracts with Customers. The Company recognizes the cost of sales of a contract as expense when incurred or at the time a performance obligation is satisfied. The Company recognizes an asset from the costs to fulfil 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 incremental costs of obtaining a contract are capitalized unless the costs would have been incurred regardless of whether the contract was obtained.

 

F-8
 

 

Share-Based Payment Arrangements

 

The Company has accounted for stock-based compensation arrangements in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718”). This guidance addresses all forms of share-based payment awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights, as well as share grants and other awards issued to employees and non-employees under free-standing arrangements. These awards are recorded at costs that are measured at fair value on the awards’ grant dates, based on the estimated number of awards that are expected to vest and will result in charges to operations.

 

Leases

 

The Company followed ASC 840 Leases in accounting for leased properties until 2019 when it adopted ASC 842 for its accounting for finance and operating leases in 2019. Included in the Company’s discontinued operations are leases for office and production facilities for terms typically ranging from three to five years. Rent escalations over the term of a lease are considered at the inception of the lease such that the monthly average for all payments is recorded as straight-line rent expense with any differences recorded in accrued liabilities. In continuing operations, there is only an office lease that is on a month-to-month basis.

 

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 per share (“EPS”) include additional dilution from common stock equivalents, such as 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 basic weighted average number of common shares are used in the computations.

 

Recently Issued Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

 

Going Concern

 

The Company concluded that its negative cash flows from operations raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the unaudited condensed consolidated financial statements are issued.

 

Management intends to oversee the development and growth of the Company’s sporting goods and apparel business and continue to explore and identify business opportunities within the U.S., including a potential acquisition of an operating entity through a reverse merger, asset purchase or similar transaction. Our Chief Executive Officer has experience in the sporting goods and apparel industry and in consulting both private and public companies in operational processes, although no assurances can be given that he can successfully grow our operations through our subsidiary or identify and implement a viable business strategy or that any such strategy will result in profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies. Even though management believes this plan will allow the Company to continue as a going concern, there are no guarantees to the successful execution of this plan.

 

These consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time.

 

On March 27, 2020, Banner Midstream was acquired by Ecoark for 1,789,041 shares of common stock (after giving effect to Ecoark’s subsequent one-for-five reverse stock split which was effected on December 10, 2020), and Ecoark assumed all of the debt of the Company. As of July 16, 2021, of the 200,000 shares of Ecoark common stock the Company retained from the March 2020 acquisition, after distributing the other 1,589,041 shares to the former owners of Banner Midstream, the Company has sold 45,443 shares.

 

F-9
 

 

Impact of COVID-19

 

Since the sale of Banner Midstream, the COVID-19 pandemic has not had a material impact on the Company, particularly due to our lack of operations until recently. The pandemic may, however, have an impact on our ability to develop the Norr business. See “Risk Factors” contained in the annual report on Form10-K for the fiscal year ended December 31, 2020 filed February 4, 2021.

 

NOTE 2: REVENUE

 

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted effective January 1, 2019. No cumulative adjustment to members equity was required, and the adoption did not have a material impact on our financial statements, as no material arrangements prior to the adoption were impacted by the new pronouncement.

 

All of the Company’s revenue for the period January 1, 2020 through March 27, 2020 are included in discontinued operations:

   2021   2020 
Revenue:          
Transportation and logistics  $-   $3,686,120 
Equipment rental revenue   -    74,448 
Other revenue   -    100,107 
   $-   $3,860,675 

 

There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

 

Collections of the amounts billed are typically paid by the customers within 30 to 60 days.

 

NOTE 3: FIXED ASSETS

 

Fixed assets as of June 30, 2021 and December 31, 2020 were as follows:

 

Computer equipment  $2,513   $- 
Accumulated depreciation   (419)   - 
Net fixed assets  $2,094   $- 

 

All of the fixed assets through December 31, 2020 of the Company was related to Banner Midstream Corp. and was sold to Ecoark on March 27, 2020.

 

Depreciation expense for the six and three months ended June 30, 2021 was $419 and $209, respectively.

 

Depreciation expense for the three months ended March 31, 2020 of $103,451 is included in discontinued operations for the period January 1, 2020 through March 27, 2020.

 

NOTE 4: LONG-TERM DEBT

 

All of the long-term debt of the Company was related to Banner Midstream Corp. and was assumed by Ecoark on March 27, 2020 as part of the merger with Ecoark. As of March 27, 2020, there is no long-term debt recorded.

 

NOTE 5: NOTES PAYABLE - RELATED PARTIES

 

All of the notes payable – related parties of the Company concerned Banner Midstream Corp. and were assumed by Ecoark on March 27, 2020 as part of the merger with Ecoark. As of March 27, 2020, there were no notes payable – related parties recorded until August 1, 2020.

 

F-10
 

 

During the period ended June 30, 2020, the Company borrowed from Atikin Investments LLC (“Atikin”), an entity managed by the Chief Executive Officer of the Company, to pay for operating expenses. The Company formalized the arrangement on August 1, 2020 when it issued to Atikin a Junior Secured Revolving Promissory Note for a principal amount up to $200,000.

 

Through December 31, 2020, the Company borrowed a total $57,500 and repaid $35,000 leaving a balance of $22,500. This note had a maturity date of December 15, 2020, which was extended to January 15, 2021. The remaining $22,500 and accrued interest of $1,524 was repaid on January 11, 2021. Interest expense for the six and three months ended June 30, 2021 was $45 and $0, respectively. Interest expense for the six and three months ended June 30, 2020 was $0 and $0, respectively.

 

NOTE 6: STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock

 

The Company has authority to issue up to 200,000,000 shares, par value $0.0001 per share. Our shareholders approved an increase in the authorized number of shares from 100,000,000 to 200,000,000 in May 2018. As of June 30, 2021 and December 31, 2020, there were 7,000,000 shares of the Company’s common stock issued and outstanding, respectively. On November 14, 2019, the Company completed a 1 for 95 reverse stock split. All shares and per share figures have been retroactively adjusted to account for this reverse split and reverse acquisition.

 

On February 27, 2020, the Company issued 50,000 shares of common stock for services rendered valued at $55,000. On July 28, 2020, the Company issued 83,807 shares of common stock for services rendered valued at $125,710, and $24,290 of contributed capital for services rendered.

 

Stock Options

 

The Company’s Board of Directors approved the adoption of the Mount Tam 2016 Stock-Based Compensation Plan (the “2016 Plan”) on May 12, 2016.

 

On May 2, 2016, the Company granted options to purchase up to 2,737 shares of Common Stock under the Plan in the aggregate, with an exercise price of $56.05 per share. On December 28, 2018, the Company granted options to purchase up to 51,683 shares of Common Stock under the Plan in the aggregate, with an exercise price of $1.90 per share. Options will vest as per below tables:

Name  Number of Stock
Options
   Vesting Schedule
Brian Kennedy (Chairman) – 5/2/2016   2,632   Fully vested
Juniper Pennypacker – 5/2/2016   105   Fully vested

 

Name  Number of Stock
Options
   Vesting Schedule
Richard Marshak (CEO) – 12/28/2018   37,105   Fully vested
Jim Stapleton (CFO) – 12/28/2018   10,789   Fully vested
Brian Kennedy (Chairman) – 12/28/2018   3,684   Fully vested
Juniper Pennypacker – 12/28/2018   105   Fully vested

 

On October 2, 2016, the Company granted options to purchase up to 1,421 shares of Common Stock under the Plan in the aggregate, with an exercise price of $38.00 per share. On December 28, 2018, the Company granted options to purchase up to 4,579 shares of Common Stock under the Plan in the aggregate, an exercise price of $1.90 per share. Options will vest as per below tables:

 

Name  Number of Stock
Options
   Vesting Schedule
Bryan Cox (consultant) – 10/7/2016   1,053   Fully vested
Jim Stolzenbach (consultant) – 10/7/2016   368   Fully vested

 

F-11
 

 

Name  Number of Stock
Options
   Vesting Schedule
Bryan Cox (consultant) – 12/28/2018   3,158   Fully vested
Jim Stolzenbach (consultant) – 12/28/2018   1,421   Fully vested

 

The Company determined the value of share-based compensation using the Black-Scholes fair value option-pricing model using the following weighted average assumptions for options granted during the year ended December 31, 2018. All options stand completely vested on the date of the reverse merger November 18, 2019.

 

   Date of Grant 
Expected term (years)   10 
Expected volatility   283%
Risk-free interest rate   2.55%
Dividend yield   0%

 

As summary of option activity under the 2016 Plan as of June 30, 2021 and December 31, 2020 and changes during the period then ended is presented below:

 

   Number of Options   Weighted Average
Exercise Price
   Weighted Average Remaining Contractual Term 
Balance outstanding at December 31, 2019   60,421   $5.20    8.02 
Granted   -    -    - 
Exercised   -    -    - 
Forfeited   -    -    - 
Expired   -    -    - 
Cancelled   -    -    - 
Balance outstanding at December 31, 2020   60,421   $5.20    7.02 
Exercisable at December 31, 2020   60,421   $5.20    7.02 

 

   Number of Options   Weighted Average
Exercise Price
   Weighted Average Remaining Contractual Term 
Balance outstanding at December 31, 2020   60,421   $5.20    7.02 
Granted   -    -    - 
Exercised   -    -    - 
Forfeited   -    -    - 
Expired   -    -    - 
Cancelled   -    -    - 
Balance outstanding at June 30, 2021   60,421   $5.20    6.52 
Exercisable at June 30, 2021   60,421   $5.20    6.52 

 

Warrants

 

On August 10, 2017, the Company entered into a Securities Purchase Agreement with two investors to purchase from the Company 42,510 shares of the Company’s common stock for an aggregate purchase price of $525,000. The investors received a warrant to purchase an additional 5,314 shares at an exercise price of $14.25 per share, and a warrant to purchase an additional 5,314 shares at an exercise price of $19.00 per share. Both warrants have a call provision when the Company’s common stock trades for five consecutive days at a price equal or greater than 500% of the exercise price of each warrant agreement. Both warrant agreements expire August 10, 2022.

 

F-12
 

 

Warrants  Shares   Weighted Average
Exercise Price
   Weighted Average Remaining Contractual Term   Aggregate Intrinsic Value 
Outstanding at December 31, 2019   10,628   $16.625    2.7   $- 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Forfeited or expired   -    -    -    - 
Outstanding at December 31, 2020   10,628   $16.625    1.7   $- 
Exercisable at December 31, 2020   10,628   $16.625    1.7   $- 

 

Warrants  Shares   Weighted Average
Exercise Price
   Weighted Average Remaining Contractual Term   Aggregate Intrinsic Value 
Outstanding at December 31, 2020   10,628   $16.625    1.7   $- 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Forfeited or expired   -    -    -    - 
Outstanding at June 30, 2021   10,628   $16.625    1.1   $- 
Exercisable at June 30, 2021   10,628   $16.625    1.1   $- 

 

NOTE 7: ACQUISITIONS – BANNER MIDSTREAM

 

Reverse Merger with Banner Midstream

 

On September 26, 2019, the Company executed a reverse merger agreement with Banner Midstream. The merger closed on November 18, 2019, with Banner Midstream becoming a wholly owned subsidiary of the Company. Under terms of the agreement, Banner Midstream as the surviving entity and became a subsidiary of the Company. Upon closure of the transaction, the Company executed a successful reverse split of its common stock at a ratio of one new share for each 95 existing shares. The reverse split and name change to MTB Corp. then Banner Energy took effect November 14, 2019. At the time of closing, shareholders of the Company had a combined ownership position of approximately 10%, and the former Banner Midstream shareholders collectively owned approximately 90% of the outstanding stock. The Company’s shares traded under the temporary ticker symbol “MNTMD” and following a 20-day trading period, the Company’s symbol transitioned to the permanent ticker symbol “BANM.” On February 12, 2020, the name from MTB Corp. was changed to Banner Energy Services Corp.

 

NOTE 8: DISCONTINUED OPERATIONS

 

The Company entered into an agreement with Ecoark and sold Banner Midstream on March 27, 2020. All of the operations for the respective periods for Banner Midstream, who was acquired as of November 18, 2019 in a reverse merger are reflected as discontinued operations.

 

Period Ended January 1, 2020 through March 27, 2020    
Revenue  $3,860,675 
Cost of Sales   2,604,288 
Gross Profit   1,256,387 
Operating and Non-operating Expenses   3,243,052 
Loss from discontinued operations  $(1,986,665)
Gain on discontinued operations   8,339,038 
Net gain from discontinued operations  $6,352,373 

 

F-13
 

 

NOTE 9: LEASES

 

The Company has adopted ASU No. 2016-02, Leases (Topic 842), as of January 2019 when they entered into their first operating lease and will account for their leases in terms of the right of use assets and offsetting lease liability obligations under this pronouncement and the first finance lease was created when the equipment was financed. The Company records their leases at present value, in accordance with the standard, using discount rates ranging between 2.5% and 6.8%. 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 42 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 remeasurement. This lease will be treated as an operating lease under the new standard.

 

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.

 

All of the right of use assets and lease liabilities related to Banner Midstream and were sold/assumed to Ecoark in the merger with Ecoark on March 27, 2020. No right of use assets or lease liabilities exist as of June 30, 2021.

 

The Company currently leases space on a month-to-month basis and that lease is not subject to the provisions of ASC 842.

 

NOTE 10: RELATED PARTY TRANSACTIONS

 

Until the Banner Midstream sale, the Company and its subsidiaries Pinnacle Frac Transport, Pinnacle Vac Service, and Capstone were tenants at 5899 Preston Road #505, Frisco, TX 75034 (“Preston Rd Office”) since inception. In addition, the principal operations of the Company and Capstone were managed out of the aforementioned Preston Road location. The Company previously had entered into a co-tenancy agreement with Razor Medical Science LLC (“Razor”) where the Company would pay $1,600 per month which is equal to one half of the total lease payment owed by Razor to the lessor; the agreement was for 36 months beginning in April 2018, the original usage date by the Company. Razor discontinued operations on January 1, 2019 and an assignment was executed to transfer the lease into the name of Capstone for full-time usage by the Company at a rental rate of $3,300 per month.

 

During the period ended June 30, 2020, the Company borrowed from Atikin Investments LLC (“Atikin”), an entity managed by an officer of the Company, to pay for operating expenses. The Company formalized the arrangement on August 1, 2020 when it issued to Atikin a Junior Secured Revolving Promissory Note for a principal amount up to $200,000. Through December 31, 2020, the Company had borrowed a total $57,500 and repaid $35,000 leaving a balance of $22,500 as of December 31, 2020. This note had a maturity date of December 15, 2020, which was extended through January 15, 2021, and has been repaid as of January 11, 2021. Interest expense for the period August 1, 2020 through December 31, 2020 was $1,479, and this was repaid as of January 11, 2021.

 

There was $24,290 in contributed capital from a former employee in their separation agreement recorded on July 28, 2020.

 

NOTE 11: 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;

 

F-14
 

 

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, investments, accounts receivable and 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 six months ended June 30, 2021 and 2020. The recorded values of all other financial instruments approximate their current fair values because of their 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 following table presents assets and liabilities that are measured and recognized at fair value on a recurring basis as of:

 

June 30, 2021  Level 1   Level 2   Level 3   Total Gains
and (Losses)
 
Investment  $910,341   $-   $-   $(612,525)
                     
December 31, 2020                    
Investment  $1,752,954   $-   $-   $1,449,579 

 

 


F-15
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

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 our ability to develop and grow our sporting goods and apparel business or generate revenue therefrom, our working capital needs, potential future sales of the remaining shares of Ecoark Holdings, Inc. (“Ecoark”) common stock held by us, potential financings through the sale of our common stock or other securities, the subsequent use and sufficiency of the proceeds from any capital raising methods we may undertake to fund our operations, our ability to locate and acquire an operating business and/or grow our existing operations and the resources and efforts we intend to dedicate to such an endeavor, our further development and implementation of a viable business plan and our ability to locate sources of capital necessary to meet our business needs and objectives. 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 the ongoing impact of the coronavirus pandemic and its negative effect on the U.S. and global economies and our lack of an operating history and revenue. Further information on the risk factors affecting our business is contained in our annual report on Form 10-K for the fiscal year ended December 31, 2020. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

 

Company Overview

 

On March 18, 2021, prior to the expiration of its exemption from the Investment Company Act of 1940, the Company formed Norr LLC (“Norr”) as its wholly-owned subsidiary through which the Company commenced its operations as an early stage manufacturer and retailer of sporting goods and apparel. Norr’s present focus is on online sales, but may seek to expand to physical locations in the future, either directly or as a wholesale distributor. Prior to organization of Norr, the Company’s Chief Executive Officer had explored this business opportunity and commenced preparation of a business plan for the business. On March 23, 2021, the Company engaged the services of two consultants to assist with its operations through Norr.

 

As of about March 31, 2020, we began seeking new business opportunities in the United States after the March 27, 2020 merger with Ecoark. Our search for a business to acquire to grow our operations beyond our current Norr operations is ongoing.

 

We have also sold shares of common stock in Ecoark, and may use the proceeds to fund our operations, or identify an acquisition target and negotiate and consummate a subsequent transaction. We have not identified an acquisition target as of the date of this Report.

 

We have no revenue, have incurred losses since inception and our only asset is shares of common stock of Ecoark which we acquired in March 27, 2020 in exchange for the sale of our operating subsidiaries. Prior to that transaction, we were engaged in providing equipment and services to businesses in the oil and gas industry, but in connection with the transaction, the Company has terminated its operations in the oil and gas industry.

 

Our principal business objective for the next 12 months is to see if we can monetize Norr. We may also continue seeking a reverse merger target to acquire. Our search for a business opportunity is not currently limited to any particular geographical area or industry, except that we are focusing our search to businesses located within the United States.

 

On May 18, 2021, FINRA formally approved the name change of the Company to Fortium Holdings Corp.

 

3
 

 

Plan of Operation

 

The Company commenced operations in the online sporting goods and apparel industry in March 2021, and has not generated revenue from continuing operations as of the date of this Report. All results related to Banner Midstream are reflected in discontinued operations. We are currently in the process of further developing a business plan, including with respect to a potential business acquisition or acquisitions, the disposition of shares of Ecoark common stock and use of proceeds to establish and grow our business.

 

In March 2021 we procured the services of two consultants who assist with our sporting goods and apparel operations through Norr. Specifically, under the respective consulting agreements one of our consultants provides creative design, photography and marketing services and the other provides order management, logistics, warehousing, and import/export services. We believe these services will help our Chief Executive Officer, who has experience in the sporting goods and apparel industry, in overseeing the development, manufacture, advertising and sale of our products. Management also believes that having an online focus, at least in the short term, will allow us to leverage existing online platforms and current market conditions, including an increased demand for contactless transactions as a result of the coronavirus pandemic. Management intends to monitor the evolving market conditions, including the highly competitive nature of the industry in which we operate and the anticipated reopening of retail stores at greater capacities, and may make adjustments to our current business model as an online-only seller as it deems appropriate.

 

Management is also in the process of searching for, and intends to further explore and identify business opportunities within the U.S., including a potential acquisition of an operating entity through a reverse merger, asset purchase or similar transaction. Our Chief Executive Officer has experience in consulting both private and public companies in operational processes, although no assurances can be given that he can identify and implement a viable business strategy or that any such strategy will result in profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies. For more information about the risk of coronavirus on our business, see “Risk Factors” contained in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

 

During the next 12 month period we anticipate incurring costs in continuing our operations and developing our business through Norr and in investigating, evaluating and negotiating potential business combinations, filing SEC reports, and consummating an acquisition of an operating business. We anticipate using a portion of the proceeds from the sale of Ecoark common stock to fund these costs and to compensate our Chief Executive Officer.

 

Given our limited capital resources, we may consider a business combination with an entity which has recently commenced operations, is a developing company or is otherwise in need of additional funds for the development of new products or services or expansion into new markets, or is an established business experiencing financial or operating difficulties and is in need of additional capital. Alternatively, a business combination may involve the acquisition of, or merger with, an entity which desires access to the U.S. capital markets.

 

Any target business that is selected may be financially unstable or in the early stages of development. In such event, we expect to be subject to numerous risks inherent in the business and operations of a financially unstable or early stage entity. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk or in which our management has limited experience, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.

 

Our management anticipates that we will likely only be able to effect one business combination due to our limited capital. This lack of diversification will likely pose a substantial risk in investing in the Company for the indefinite future, because it will not permit us to offset potential losses from one venture or operating territory against gains from another. The risks we face will likely be heightened to the extent we acquire a business operating in a single industry or geographical region.

 

We anticipate that the selection of a business combination will be a complex and risk-prone process. Because of general economic conditions, including unfavorable conditions caused by the coronavirus pandemic, rapid technological advances being made in some industries and shortages of available capital, management believes that there are a number of firms seeking business opportunities at this time at discounted rates with which we will compete. We expect that any potentially available business combinations may appear in a variety of different industries or regions and at various stages of development, all of which will likely render the task of comparative investigation and analysis of such business opportunities extremely difficult and complicated. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations.

 

4
 

 

Liquidity and Capital Resources

 

Historically, our principal sources of cash have been proceeds from private placements of common stock and incurrence of debt. As of June 30, 2021, the Company had an accumulated deficit of $2,518,604. As of July 16, 2021, the Company has sold 45,443 shares of Ecoark and received $470,714 in gross proceeds therefrom.

 

In the future, we will need to consummate one or more capital raising transactions, including potential debt or equity issuances, and/or generate material revenue from Norr or another operating business or businesses we may form or acquire to continue to fund our operations. We may also issue shares of common stock, stock options or other derivative securities to compensate our employees or independent contractors, including pursuant to the consulting agreements for our Norr operations.

 

Net Cash used by Operating Activities:

 

We reported negative cash flow from operations related to our continuing operations for the six months ended June 30, 2021 and 2020 in the amount of $(256,437) and $(0), respectively. It is anticipated that we will continue to report negative operating cash flow in future periods, as we have just formed a new subsidiary and will incur start-up costs to develop this entity.

 

Cash Flows from Investing Activities:

 

We had net cash provided from investing activities from continuing operations related to the proceeds received from the sale of the shares of Ecoark common stock we hold in 2021 in the amount of $230,088 and had $0 in 2020. We also purchased fixed assets of $2,513 in 2021.

 

Cash Flows from Financing Activities:

 

For the six months ended June 30, 2021 and 2020, the only cash flows from financing activities related to the payments of the Junior Secured Promissory Note in connection with our continuing operations. During the six months ended June 30, 2021, we repaid $22,500 of this note. We expect that should the proceeds from the sale of shares in Ecoark be insufficient to provide the necessary capital to the Company, we will incur additional debt or issue common stock or securities convertible or exercisable into common stock to fund continuing operations.

 

Based upon our current operations, we will need additional working capital to fund our operations over the next 12 months, which we may seek to obtain from the sale of the remaining Ecoark common stock we hold and/or one or more financings. Further, if we are able to close a reverse merger, asset purchase or similar transaction to acquire an operating business, it is likely we will need additional capital, including potentially as a condition of closing the acquisition. Because of the inherent uncertainties of the Company at this stage, we cannot be certain as to how much capital we need, if and how we can raise capital or the type or quantity of securities we will be required to issue to do so. In connection with a business combination, we may issue a significant number our shares of our common stock or securities convertible or exercisable into our common stock to the target’s shareholders which will be dilutive to our shareholders.

 

We anticipate that we will incur operating losses during the next 12 months. Our ability to develop and implement our business plan will be subject to a number of risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks for us include, but are not limited to, an evolving and unpredictable business model; recognition of revenue sources; and the management of growth.

 

COVID-19 Update

 

Since the sale of Banner Midstream, the COVID-19 pandemic has not had a material impact on the Company, particularly due to our lack of operations until recently. The pandemic may, however, have an impact on our ability to develop the Norr business. See “Risk Factors” contained in our annual report on Form10-K for the fiscal year ended December 31, 2020 filed February 4, 2021 for more information.

 

Off Balance Sheet Arrangements

 

As of the date of this Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

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Going Concern

 

The independent registered public accounting firm auditors’ report accompanying our December 31, 2020 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures.

 

We are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on his evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, Mr. Richard Horgan, who is presently serving as our Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our company, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal control over financial reporting.

 

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Changes in Internal Control over Financial Reporting.

 

There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II: OTHER INFORMATION

 

ITEM 1 - LEGAL PROCEEDINGS

 

From time-to-time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this Report, we are not aware of any other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A – RISK FACTORS

 

Not applicable.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5 - OTHER INFORMATION

 

None.

 

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ITEM 6 – EXHIBITS

 

        Incorporated by Reference  

Filed or

Furnished

Exhibit #   Exhibit Description   Form   Date   Number   Herewith
3.1              Articles of Incorporation   S-1   11/1/2013   3.1    
3.1(a)   Certificate of Amendment to Articles of Incorporation   8-K   6/1/2018   3.1    
3.1(b)   Certificate of Amendment – reverse stock split   8-K   11/19/2019   3.2    
3.1(c)   Certificate of Amendment to Articles of Incorporation – name change   8-K   2/18/2020   3.1    
3.1(d)   Certificate of Amendment to Articles of Incorporation   8-K   5/19/2021   3.1    
3.2   Bylaws   S-1   11/1/2013   3.2    
3.2(a)   Amendment to Bylaws   8-K   8/19/2015   3.3    
10.1   Employment Agreement between the Company and Richard Horgan dated August 1, 2020*   8-K   8/6/2020   10.1    
10.2   Revolving Promissory Note dated August 1, 2020+   10-Q   12/4/2020   10.2    
10.3   Consulting Agreement between Norr LLC and Brian McKinley dated March 22, 2021   10-Q   4/30/2021   10.3    
10.4   Consulting Agreement between Norr LLC and Alex Souetre dated March 22, 2021   10-Q   4/30/2021   10.4    
31.1   Certification of Principal Executive Officer and Principal Financial Officer (302)               Filed
32.1   Certification of Principal Executive and Principal Financial Officer (906)               Furnished**
101.INS   XBRL Instance Document               Filed
101.SCH   XBRL Taxonomy Extension Schema Document               Filed
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document               Filed
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document               Filed
101.LAB   XBRL Taxonomy Extension Label Linkbase Document               Filed
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document               Filed

 

* Management contract or compensatory plan or arrangement.

 

**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.

 

+ Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request.

 

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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.

 

    FORTIUM HOLDINGS CORP.
     
Dated: July 19, 2021 By: /s/ Richard Horgan
      Richard Horgan
     

Chief Executive Officer (Principal Executive Officer),

Principal Financial Officer and Principal Accounting Officer

 

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