White River Energy Corp. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended: June 30, 2022

For the transition period from:

Commission file number 333-192060

Fortium Holdings Corp.

(Exact name of registrant as specified in its charter)

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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. ☐

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

As of August 12, 2022, the issuer had 8,400,000 shares of its common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021

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

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2022 AND 2021

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

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

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

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2022 AND 2021

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

FORTIUM HOLDINGS CORP.

(FORMERLY BANNER ENERGY SERVICES CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

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

Fortium Holdings Corp.

(Formerly Banner Energy Services Corp.)

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2022

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.

On July 25, 2022, we acquired White River Holdings Corp., a Delaware corporation (“White River”) from White River’s sole shareholder Ecoark Holdings, Inc. (“Ecoark”), and in exchange the Company issued Ecoark 1,200 shares of the newly designated Series A Convertible Preferred Stock (the “Series A”). We expect White River, an oil and gas driller, will be our primary operating subsidiary. See Note 13. “Subsequent Events.” Although we expect Ecoark to spin-off the common stock underlying the Series A as a dividend to Ecoark’s shareholders, White River will remain our subsidiary.

On March 27, 2020, Banner Midstream Corp., the Company’s principal asset, was acquired by Ecoark Holdings, Inc., (“Ecoark”) pursuant a Stock Purchase Agreement, dated March 27, 2020 (the “Banner Purchase Agreement”), between Ecoark and the Company. 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.

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.

On September 9, 2021, the Company formed Elysian, a Colorado corporation and wholly-owned subsidiary. On September 14, 2021, Elysian entered into a Stock Purchase Agreement (“SPA”) with Treehouse Company, Inc. (“Treehouse”), and its sole shareholder Alex Gosselin (the “Seller”) pursuant to which Elysian shall purchase 80% of the capital stock of Treehouse from the Seller for $200,000. Treehouse’s key assets consist of two licenses for commercial cannabis distribution in the State of California. The acquisition of Treehouse will be consummated upon the completion of the terms of the SPA which pertain to the delivery of the $200,000 purchase price to the escrow agent to be held until release upon receipt of the requisite regulatory approval for the transaction. As of June 30, 2022, the acquisition has not closed.

On December 2, 2021, Elysian, the Company, 7Seeds Inc. (“7Seeds”), and Firebreak Associates, Inc. (“Firebreak”) (collectively, the “Parties”) entered into a joint venture agreement (the “JVA”). Pursuant to the JVA, 7Seeds, Firebreak and Elysian agreed to cooperate in the opening and operation of cannabis distribution facilities as follows: (i) 7Seeds agreed to provide consulting services to Elysian including identifying locations to open new commercial cannabis businesses, including without limitation dispensaries, delivery stores, and other businesses engaging in cannabis related activities (the “Elysian Stores”), securing proper state and local licensure, planning commercial cannabis business operations at those locations in exchange for the compensation described below, and (ii) Firebreak, as the owner of certain trademarks and service marks (the “CannaBlue Marks”), agreed to license the CannaBlue Marks to Elysian for which Elysian obtained the option to open the Elysian Stores under the name “CannaBlue” and making use of the CannaBlue Marks. The Elysian Stores will be owned and operated entirely by Elysian or its affiliates.

Under the JVA, 7Seeds agreed to provide services to Elysian for a 36-month period commencing on the effective date of the JVA, for which Elysian agreed to compensate 7Seeds as follows: (a) $5,000 per month for the first three months following the Effective Date; (b) $10,000 per month beginning in month four and through month twelve; (c) $12,500 per month beginning in month 13 and through month 24; and (d) $15,000 per month beginning in month 25 and through month 36. Additionally, for each Elysian Store for which 7Seeds directly assists in obtaining a cannabis license, 7Seeds will be entitled to receive the following additional compensation: (a) cash payment equal to 6% of that Elysian Store’s gross sales revenues, and (b) $50,000 in shares of the Company’s common stock. As part of the JVA, Elysian granted 7Seeds a limited, non-exclusive, royalty-free, non-transferable, and non-sublicensable, worldwide license during the term of the JVA to all of Elysian’ s intellectual property rights, including all copyrights, patents, trademarks, patent disclosures, and inventions.

Under the JVA, Firebreak has granted Elysian a license to use the CannaBlue Marks in connection with the Elysian Stores in the license territory, consisting of the United States. The license term is for a period of five years and is automatically renewable for successive one-year terms, unless terminated in accordance with the JVA. In exchange for the license, Elysian agreed to pay Firebreak (a) an annual royalty fee of $5,000 per year; and (b) a fee equal to 6% of that Elysian Store’s gross sales revenues.

In December 2021, Norr entered into a term sheet for an Advisory Agreement with three individual contractors. The Advisory Agreements, were effective upon the signing of the definitive documents on January 24, 2022 and are for a period of five years. If any of the advisors voluntarily or involuntarily terminates his services, his agreement will automatically terminate. All advisors will be paid $1,000 per month for the first eighteen months immediately following execution of the Advisory Agreement. In addition to the cash compensation, the Company shall compensate the advisors who have not terminated their relationship with Norr based on the following events (amounts have been aggregated among the advisors):

The maximum ownership the advisors may collectively receive in Norr is 25%. In addition, the advisors may receive shares of Fortium common stock based on meeting enumerated net operating free cash flow thresholds ranging from $1,000,000 to $5,000,000, for a total potential Fortium equity compensation to these advisors of up to $900,000 of shares of Fortium common stock. As a result of Norr generating revenue on January 22, 2022, the aforementioned contractors received a total of 5% of the ownership interests of Norr. Therefore, the Company has recognized a noncontrolling interest of this 5%.

Simultaneously with the SPA, Elysian and the Seller entered into a Memorandum of Understanding with Treehouse pursuant to which the parties agreed that Elysian will purchase the remaining 20% of the capital stock of Treehouse for an additional $200,000 and enter into a second SPA on substantially similar terms to the SPA in connection therewith, subject to state and local regulatory clearance of the transfer of ownership of the two cannabis licenses owned by Treehouse. The SPA provides that if required state and local regulatory clearance is not obtained, the SPA will terminate, Elysian will return the Treehouse capital stock to the Seller and the Seller will return the $200,000 purchase price to Elysian. In July and August 2022, the Company paid deposit on the $400,000 of $50,000.

The Company is subject to a number of risks, including the need to develop the Elysian, Norr business and/or acquire and successfully operate a new business, and the risk of raising capital through equity and/or debt financings.

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 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, 2021. 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 intercompany accounts, balances and transactions have been eliminated in the consolidation.

The Company has utilized the guidance under ASC 810-10-55-4B, Case A for a Change that has resulted in the recognition of non-controlling interest. On January 22, 2022, Norr commenced generating revenues and this triggered the recognition of ownership interests being allocated to three contractors per their agreements. As a result 5% interest has been allocated to them and the Company now owns 95% of Norr.

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.

Inventory

Inventory is stated at the lower of cost or market. Inventory cost is determined on a first-in first-out basis. Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their estimated useful.

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. The licenses anticipated to be acquired in the Treehouse acquisition are indefinite, however management will have an estimated useful life of ten years from the date of acquisition.

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.

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.

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

● Step 1: Identify the contract with the customer  

● Step 2: Identify the performance obligations in the contract  

● Step 3: Determine the transaction price  

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

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

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

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

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

● Variable consideration  

● Constraining estimates of variable consideration  

● The existence of a significant financing component in the contract  

● Noncash consideration  

● Consideration payable to a customer  

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The 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.

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.

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.

Segment Reporting

The Company, through the formation of Norr and anticipated acquisition of Treehouse, has created two distinct business segments. The Company has only nominal operations in Norr as they are in the start-up phase of this organization and upon the acquisition of Treehouse will have the commercial cannabis distribution licenses transferred to Elysian. Upon operations commencing, the Company will segment report these two segments. There are currently only nominal operations of Norr and Elysian (approximately 1% of total net loss). For 2021, there were no segments.

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. With the anticipated acquisition of Treehouse, the leases to be acquired in that transaction will be accounted for under the guidance of ASC 842.

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 anticipated commercial cannabis distribution business and 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 management team has experience in the cannabis space and 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 condensed 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 February 28, 2022, the Company has sold all 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.

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 and anticipated Elysian business with the acquisition of Treehouse. In addition, the Company’s new oil and gas business may encounter supply shortages.

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.

The following represents the disaggregation of revenue by major source for the six months ended June 30, 2022 and 2021:

SCHEDULE OF DISAGGREGATION OF REVENUE BY MAJOR SOURCE

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, 2022 and December 31, 2021 were as follows:

 SCHEDULE OF FIXED ASSETS

Depreciation expense for the six months ended June 30, 2022 and 2021 were $419 and $419, respectively.

NOTE 4: DEPOSIT

On March 8, 2022, the Company entered into a Stock Purchase Agreement whereby the Company paid a non-refundable $50,000 to Firebreak Associates, Inc. in exchange for a total of 5% equity in any of the corporations that Firebreak Associates, Inc. controls if they are selected through the State of California’s retail cannabis license lottery process in Encinitas, California. As of June 30, 2022, the lottery has not taken place.

NOTE 5: INVENTORY

The following represents inventory as of June 30, 2022 and December 31, 2021, respectively:

 SCHEDULE OF INVENTORY

NOTE 6: NOTES PAYABLE - RELATED PARTIES

The Company borrowed funds from Atikin Investments LLC (“Atikin”), an entity managed by our current (as of July 25, 2022) Chief Executive Officer, 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 months ended June 30, 2021 was $45.

NOTE 7:  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, 2022 and December 31, 2021, there were 8,400,000 shares of the Company’s common stock issued and outstanding, respectively. As of July 25, 2022, the Company authorized a class of preferred stock. See Note 13. “Subsequent Events.”

On September 14, 2021, the Company issued 1,400,000 shares of common stock in the exercise of warrants for $14,000.

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.

There have been no stock options granted since 2018.

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.

 SCHEDULE OF STOCK OPTIONS WEIGHTED AVERAGE ASSUMPTIONS

As summary of option activity under the 2016 Plan as of June 30, 2022 and December 31, 2021 and changes during the periods then ended are presented below:

SCHEDULE OF STOCK OPTION ACTIVITY

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 of these warrant agreements expire August 10, 2022.

On July 21, 2021, the Company entered into a Consulting Agreement with Atikin for a period of one year, expiring July 20, 2022 and issued Atikin, a company controlled by our current Chief Executive Officer, 1,400,000 warrants that have a term of five years and an exercise price of $0.01, which were issued to Atikin effective upon the execution of a definitive written agreement with a cannabis company, which occurred on September 14, 2021, the effective date of the Treehouse SPA. See Note 9. “Related Party Transactions.” On September 14, 2021, 700,000 of these warrants were assigned to a third party and all 1,400,000 warrants were exercised for $14,000 immediately thereafter.

 SCHEDULE OF WARRANTS ACTIVITY

The following assumptions were used for the six months ended June 30, 2022 and year ended December 31, 2021:

 SCHEDULE OF FAIR VALUE ASSUMPTION OF WARRANTS

NOTE 8: LEASES

The Company has adopted ASU No. 2016-02, Leases (Topic 842), as of January 2019.

The Company 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 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.

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

NOTE 9: RELATED PARTY TRANSACTIONS

During the period ended June 30, 2020, the Company borrowed from Atikin, an entity managed by our then and now again our Chief Executive Officer, 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.

On July 21, 2021, the Company entered into a Consulting Agreement with Atikin for a period of one year, expiring July 20, 2022. Pursuant to the Consulting Agreement, as amended in September 2021, in exchange for Atikin’s provision of consulting services with respect to mergers and acquisitions and general business and operational assistance, the Company granted Atikin 1,400,000 warrants that have a term of five years and an exercise price of $0.01, which were issued to Atikin effective upon the execution of a definitive written agreement with a cannabis company, which occurred on September 14, 2021, the effective date of the Treehouse SPA. The Company recognized a charge to the Consolidated Statement of Operations of $905,771 for the fair value of these warrants. On September 14, 2021, 700,000 of these warrants were assigned to a third party and all 1,400,000 warrants were exercised for $14,000 immediately thereafter. The Company also paid Atikin a $5,000 consulting fee monthly. The Consulting Agreement was terminated June 30, 2022.

During the year ended December 31, 2021, the Chief Executive Officer advanced the Company $10,000 on a short-term basis and the amount was promptly repaid.

The May Family Foundation controls 18.89% of the outstanding common stock of the Company as of June 30, 2022. Additionally, Atikin, an entity which is controlled by Jay Puchir, our Chief Executive Officer, controls 8.2% of the outstanding common stock and Richard Horgan, the former Chief Executive Officer and a former director of the Company, is a director of the Foundation. Mr. Horgan resigned following the White River transaction. Randy May, our new Executive Chairman, is the father-in-law of Mr. Horgan. In addition, Mr. May’s daughter, Alisa Horgan, became a director on July 28, 2022 following the White River acquisition. Mr. May is the Chief Executive Officer of Ecoark. Each of Messrs. May, Horgan and Puchir disclaim beneficial ownership of the securities held by The May Family Foundation except to the extent of any pecuniary interest therein.

NOTE 10: FAIR VALUE MEASUREMENTS

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

Level 1 – quoted prices for identical instruments in active markets;

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments consist principally of cash, 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, 2022 and the year ended December 31, 2021. 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:

SCHEDULE OF ASSETS AND LIABILITIES MEASURED ON RECOGNIZED FAIR VALUE ON RECURRING BASIS

NOTE 11: COMMITMENTS

On December 2, 2021, Elysian, the Company, 7Seeds and Firebreak entered into the JVA. See Note1. “Description of Business.”

NOTE 12: SEGMENT REPORTING

The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions.

For 2021, the Company was just starting operations in Norr and did not segment their operations. Commencing January 1, 2022, the Company’s chief operating decision maker determined that they met the qualifications to segment their business into two distinct divisions: Norr and Elysian.

 SCHEDULE OF SEGMENT REPORTING

NOTE 13: SUBSEQUENT EVENTS

The Company executed a Share Exchange Agreement (the “Exchange Agreement”) on July 25, 2022 and pursuant to the Exchange Agreement that day acquired 100% of the outstanding shares of capital stock of White River from Ecoark, White River’s sole shareholder. In exchange the Company issued Ecoark 1,200 shares of the newly designated non-voting Series A Convertible Preferred Stock (the “Series A”). The Series A will become convertible into approximately 42,253,521 shares of the Company’s common stock upon such time as (A) the Company has filed a Form S-1 or Form 10, or other applicable form, with the Securities and Exchange Commission (the “SEC”) and such Form S-1 or other registration statement has been declared effective, or such Form 10 or other applicable form is no longer subject to comments from the Staff of the SEC, and (B) Ecoark elects to distribute shares of the Company’s common stock to Ecoark’s shareholders. The Series A has a stated value of $30 million and has a liquidation preference over the common stock and any subsequent series of junior preferred stock equal to the stated value, plus any accrued but unpaid dividends.

Pursuant to the Exchange Agreement Mr. Randy May, Ecoark’s Chief Executive Officer, was appointed as Executive Chairman and as a director, and Mr. Jay Puchir, Ecoark’s Chief Financial Officer, was appointed as Fortium’s Chief Executive Officer and Principal Financial Officer. Effective July 28, 2022, the number of directors of the Company was fixed at five, and Danny Hames, James Cahill, Greg Landis, and Alisa Horgan were appointed as directors. Alisa Horgan is the daughter of Randy May, and wife of Richard Horgan, who was the Company’s Chief Executive Officer and sole director until after the closing of the White River acquisition.

Ecoark has advised us that it plans to spin-off the common stock issuable upon conversion of the Series A this fall, subject to regulatory approvals including the effectiveness of the Form S-1 or Form 10.

On July 29, 2022, the Company filed a Certificate of Designation with the Nevada Secretary of State designating a new series of preferred stock as Series B Preferred Stock (the “Series B”). The single authorized share of Series B is entitled to vote with the Company’s common stock as a single class on any matter brought before the shareholders, and the Series B is entitled to a number of votes equal to the greater of (A) 100,000,000 votes, or (B) 50.1% of the Company’s voting power as of the applicable date of determination. Any outstanding Series B will be automatically cancelled upon the Company applying to have its common stock listed on a national securities exchange. As of the date of this Report, the Series B is unissued. The Board authorized the Series B because the Company is not subject to Section 13 of the Securities Exchange Act of 1934, so the protections and disclosure provided by Section 13(d) and the rules and regulations promulgated thereunder do not apply to the Company, and the Series B is intended to enable the Board to act quickly to react to any potential hostile takeover. The auto-cancellation provision was included because the super-voting rights contained in the Series B would violate the rules of a prospective national securities exchange.

In July and August 2022, the Company paid $50,000 of the $400,000 due on the license for Treehouse.

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

Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the planned spin-off by Ecoark of our common stock issuable upon conversion of its preferred stock, our entrance into the oil and gas drilling industry through our acquisition of White River Holdings Corp., the expected results from oil drilling, our anticipated acquisition of Treehouse Company, Inc. and our ability to pay the full purchase price and obtain regulatory approval for the transfer of licenses, our planned operations under our Joint Venture Agreement with 7Seeds Inc., and Firebreak Associates, Inc. and our ability to use the license thereunder to establish and operate cannabis retail stores at one or more locations, our ability to develop and grow our sporting goods and apparel business or generate material revenue therefrom, our working capital needs, 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 further development and implementation of our 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 oil and gas price volatility and the continuation of high oil prices, the impact of (i) the Securities and Exchange Commission’s (“SEC”) propose climate change rules on us including enhanced regulatory compliance costs, (ii) future strains of COVID-19, (iii) the Russian invasion of the Ukraine, (iv) inflation and (v) Federal Reserve interest rate increases in response thereto on the economy including any resulting recession, 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, together with those described in this Report under Item 1A of Part II – Risk Factors, which refer to the risk factors applicable to each of our subsidiaries. We also refer to Ecoark’s risk factors relating to its oil and gas drilling business contained in its Form 10-K for the year ended March 31, 2022 which it filed with the SEC. We may also encounter regulatory delays in causing the registration statement to go effective with the SEC. 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

Fortium Holdings Corp. (“Fortium” or the “Company”) is a holding company which beginning in late July 2022 operates primarily in oil and gas drilling through White River Holdings Corp. (“White River”). The Company is also in the early stages of operations in the online sporting goods space through Norr LLC, and is developing a business plan for the commencement of operations as a retail distributor of cannabis products in California through Elysian Premium Corp. The cannabis operations are subject to full payment of and receipt of regulatory for the Company’s purchase of two cannabis licenses in California under an agreement entered into in October 2021. The financial statements contained in this report do not reflect the oil and gas business through White River which was acquired by the Company after the period covered by this report. Set forth below is an overview of our current and planned operations.

White River Acquisition

On July 25, 2022, the Company entered into a Share Exchange Agreement with Ecoark and White River pursuant to which the Company acquired White River from Ecoark and in exchange issued Ecoark 1,200 shares of a new series of Series A Convertible Preferred Stock of Fortium (the “Series A”). The transaction was treated as a business combination. Ecoark funded White River with $3 million prior to the business combination.

The Series A is non-voting, has a stated value of $30 million, and is convertible into 42,253,521 shares of Fortium common stock, provided that the Series A will only become convertible if and when a Registration Statement on Form S-1 or Form 10 filed by the Company for the purpose of effecting a spin-off of Fortium’s common stock to Ecoark’s shareholders has been filed and declared effective by the Securities and Exchange Commission, and Ecoark elects to effect said spin-off. The Company has been informed that Ecoark intends to effect the spin-off as soon as practicable following the closing of the business combination and the closing of this Offering. Ecoark’s two senior management members are our management. Our Executive Chairman, Randy May, is one of five directors, his daughter is a new director and he recommended the other three new directors. Our previous sole officer and director was Mr. May’s son-in-law. Following the business combination, Ecoark caused the changes to the Company’s management and Board of Directors.

Following the business combination, our principal operations will consist of generating revenue through oil and gas exploration, production and drilling. Through White River the Company is now engaged in oil and gas exploration, production, and drilling operations on over 30,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi. These subsidiaries are each engaged in oil and natural gas development, production, acquisition, and exploration activities principally in the above-referenced states. We may also expand our energy asset portfolio or engage in other energy-related strategic transactions as they arise, provided we have sufficient capital and market and regulatory conditions otherwise enable favorable to such transactions. Such transactions may serve a number of business objectives, including by seeking to expand our product and service offerings and/or to increase our geographic footprint.

Because the acquisition of White River occurred after the period covered by this Report, the unaudited financial statements contained herein and the discussion below do not reflect the Company’s new oil and gas operations through White River. In future periods, the Company expects that a substantial majority of its revenue-generating activities will be conducted through White River, particularly in the short-term.

In March 2021 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. In September 2021, the Company formed Elysian Premium Corp., a Colorado corporation (“Elysian”) in order to enter into the cannabis industry.

Formation of Norr

In March 2021 formed Norr and 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 sporting goods and apparel industry, in overseeing the development, manufacture, advertising and sale of our products. In January 2022, we terminated the prior consulting agreements and entered into new consulting agreements replacing the compensatory terms with these contractors, and procured the services of a third contractor to assist in marketing and sales efforts, including for Norr’s online and social media presence and brand strategy. Management believes that having an online focus, at least in the short term, will allow us to leverage existing online platforms.

Development of Cannabis Business

Until our recent acquisition of White River, our principal business focus was on growing our operations and attempting to generate revenue following our entry into the cannabis industry through the anticipated acquisition of Treehouse Company, Inc. (“Treehouse”) through which we intend to acquire two cannabis licenses in California, subject to regulatory approval and other closing conditions and to establish our brand as a cannabis retail company through a Joint Venture Agreement (the “JVA”) with 7Seeds Inc. (“7Seeds”), and Firebreak Associates, Inc. (“Firebreak”), as more fully described below and in the footnotes to the financial statements contained in this Report.

White River Acquisition

On July 25, 2022, the Company entered into a Share Exchange Agreement with Ecoark Holdings, Inc. (“Ecoark”) and White River pursuant to which the Company acquired White River from Ecoark and in exchange issued Ecoark 1,200 shares of a new series of Series A Convertible Preferred Stock of Fortium (the “Series A”). The transaction was treated as a business combination. The Series A is non-voting, has a stated value of $30 million, and is convertible into 42,253,521 shares of Fortium common stock, provided that the Series A will only become convertible if and when a Registration Statement on Form S-1 or Form 10 filed by the Company for the purpose of effecting a spin-off of Fortium’s common stock to Ecoark’s shareholders has been filed and declared effective by the Securities and Exchange Commission, and Ecoark elects to effect said spin-off. The Company has been informed that Ecoark intends to effect the spin-off as soon as practicable following the closing of the business combination and the closing of this Offering. Ecoark’s management acts as the Company’s management, and Ecoark has designated its Board of Directors. Following the business combination, Ecoark caused the changes to the Company’s management and Board of Directors. Ecoark funded White River with $3 million prior to the business combination.

Following the business combination, our principal operations will consist of generating revenue through oil and gas exploration, production and drilling. Through White River the Company is now engaged in oil and gas exploration, production, and drilling operations on over 30,000 cumulative acres of active mineral leases in Texas, Louisiana, and Mississippi. These subsidiaries are each engaged in oil and natural gas development, production, acquisition, and exploration activities principally in the above-referenced states. We may also expand our energy asset portfolio or engage in other energy-related strategic transactions as they arise, provided we have sufficient capital and market and regulatory conditions otherwise enable favorable to such transactions. Such transactions may serve a number of business objectives, including by seeking to expand our product and service offerings and/or to increase our geographic footprint.

Because the acquisition of White River occurred after the period covered by this Report, the unaudited financial statements contained herein and the discussion below do not reflect the Company’s new oil and gas operations through White River’s operations. In future periods, the Company expects that a substantial majority of its revenue-generating activities will be conducted through White River, particularly in the short-term.

Results of Operations For the Six Months Ended June 30, 2022 compared with the Six Months Ended June 30, 2021

The following discussion of our financial statements is as of June 30, 2022, which reflects our Norr operations which commenced in March 2021 and the continued development of our Elysian business which is still in the early development stage as of June 30, 2022. In subsequent periods following our acquisition of White River in July 2022, we expect our operating revenues, cost of revenues, and operating expenses will increase in the remainder of 2022 and beyond from what they have been in the past two years, particularly as a result of our new oil and gas drilling operations. We expect these metrics may increase further if we are able to raise the required capital, close the acquisition of cannabis licenses and open one or more cannabis retail stores in California as planned. The comparison in our results of operations were for the Company in the very preliminary stages of operations of these respective businesses.

Revenue, Cost of Revenue and Gross Profit

The Company had revenue of $636 and $0 for the six months ended June 30, 2022 and 2021, respectively. Cost of revenue was $10,368 in the six months ended June 30, 2022, which was incurred in connection with the development and implementation of our business plan, resulting in gross loss of $9,732.

Operating Expenses

We incurred operating expenses of $291,243 and $222,499 during the six months ended June 30, 2022 and 2021, respectively. The increase in operating expenses in the 2022 period was mainly due to increases in our selling, general and administrative expenses which totaled $223,243 in the six months ended June 30, 2022 compared to $153,774 in the six months ended June 30, 2021. Operating expenses during each period also included salaries and wages, including stock-based compensation, which were relatively equal between periods. Management expects operating expenses to increase significantly in future periods as a result of our new oil and gas operations through White River and as we continue to establish and grow our Norr and Elysian operations, and as payment obligations under our existing contracts come due as a result of the passage of time or the satisfaction of performance metrics, including those described above.

Other Income (Expense)

Other income (expense) included in continuing operations were $4,648 and $(612,570) during the six months ended June 30, 2022 and 2021, respectively. The difference relates to $786,206 in an unrealized loss on investment partially offset by a realized gain on investment of $173,681 in the 2021 period, with a corresponding $4,648 realized gain on investment recorded during the 2022 period. The amounts in these periods related to the Ecoark common stock we held, all of which has been sold as of February 24, 2022.

Net Loss

During the six months ended June 30, 2022 and 2021, we recorded a net loss of $296,327 and $835,069, respectively. The difference was primarily due to the higher other expense in the 2021 period, partially offset by increased operating losses in the 2022 period.

Liquidity and Capital Resources

The Company had approximately $2,420,000 in available cash as of August 8, 2022. This includes $2,323,767 in cash in bank accounts maintained by White River and its subsidiaries which the Company acquired in the July 25, 2022 business combination described above. The cash in these bank accounts was included as a condition to the closing to enable White River to maintain sufficient working capital to continue its operations following the transaction. With the acquisition of White River, we believe we have sufficient cash to meet our working capital needs for the next 12 months. However, to expand our drilling program, we are exploring the idea of raising additional capital through the private sale of preferred stock and warrants.

Historically, our principal sources of cash have been proceeds from private placements of common stock and incurrence of debt. As of June 30, 2022, the Company had an accumulated deficit of $4,258,133. As of February 24, 2022, the Company has sold all of the shares of Ecoark it held. The Company received a total $1,079,730 in gross proceeds from such sales of Ecoark common stock.

We anticipate that among the most important challenges we will need to overcome in order to materially grow our new oil and gas operations and establish our planned operations in the cannabis industry will be to raise sufficient capital. This will be necessary to acquire working interests and drilling and related equipment, and to establish our initial Elysian Stores. While for the past 12 months we have used the proceeds from sales of Ecoark common stock we held to fund our operations, which were more limited than those currently planned, we have sold the remaining shares of Ecoark common stock we held, and any additional capital in will therefore need to be raised from the sale and issuance of our preferred stock or other securities, which may include the incurrence of indebtedness by us.

We have also agreed to issue a total of 1,200,000 shares of restricted Fortium common stock to White River employees in connection with our recent acquisition of that entity.

We will need additional capital to fund our anticipated acquisition of Treehouse, including both for the second Treehouse SPA which has not been executed, working capital, and to meet our operational obligations in our planned cannabis business such as compensatory arrangements.

We expect to utilize any capital raising to develop, expand and run our operations for White River, Norr and Elysian. We expect our cash outlays to be much greater than the past two years.

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, 2022 and 2021 in the amount of $(314,358) and $(256,437), respectively. We are unable to predict future trends in cash flows from operating activities at this time given our recent acquisition of White River which now entails a substantial majority of our revenue producing operations but comes with it significant additional working capital requirements to maintain the oil and gas operations.

Cash Flows from Investing Activities:

We had net cash provided in investing activities from continuing operations related to the proceeds received from the sale of the shares of Ecoark common stock we held in the amount of $38,111 for the six months ended June 30, 2022 and $227,575 in the six months ended June 30, 2021. We sold all the remaining shares of Ecoark stock we held during the six months ended June 30, 2022.

Cash Flows from Financing Activities:

We had no cash flows provided by or used in financing activities during the six months ended June 30, 2022. For the six months ended June 30, 2021, the only cash flows from financing activities related to payments of the Junior Secured Promissory Note in connection with our continuing operations, and cash provided by financing activities from proceeds received from our current Chief Executive Officer for working capital purposes. We expect that we will need to 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 one or more financings. The Company anticipates pursuing a private offering of convertible preferred stock and warrants in the coming months in which it will seek to raise up to $20 million to fund its operations and growth objectives. Further, if we are able to close the Treehouse acquisition, it is likely we will need additional capital to commercialize the resulting licenses. 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.

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

To date, the COVID-19 pandemic has not had a material impact on the Company, particularly due to our lack of operations until the formation of Norr in March 2021. The pandemic may, however, have an impact on our ability to develop and commercialize the White River, Norr and Elysian businesses.

While the COVID-19 pandemic appears to no longer threaten the economy as it did, supply chain shortages seem to have evolved from COVID-19. Moreover, the risk of a serious new COVID-19 strain or other serious virus evolving, as well as the possibility of reduced efficacy of vaccines over time and the possibility that a large number of people decline to get vaccinated or receive booster shots, creates inherent uncertainty as to the potential future impact of the pandemic on our business, the industries in which we operate or plan to operate and the economy in general.

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.

Going Concern

The independent registered public accounting firm auditors’ report accompanying our December 31, 2021 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. Jay Puchir, 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.

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

For the risks related to White River which the Company now faces as a result of its acquisition of White River on July 25, 2022, see Item 1A – Risk Factors of Ecoark’s Annual Report on Form 10-K for its fiscal year ended March 31, 2022, as filed with the SEC on July 7, 2022 (the “Ecoark 10-K”), at pages 12 - 26 thereof. However, investors should note that the Ecoark 10-K, including certain of the risk factors described above, also relate to other Ecoark subsidiaries which Fortium did not acquire in the business combination, including Pinnacle Frac LLC, a frac sand transportation and logistics company, Zest Labs, Inc. a technology holding company, and Agora Digital Holdings, Inc., a Bitcoin mining company, which disclosure is not relevant to White River or Fortium.

For the risks related to Norr and Elsyian, see Item 1A- Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 15, 2022.

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

All unregistered sales of equity securities were previously disclosed.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 - OTHER INFORMATION

On July 22, 2022, following approval of the Board of Directors and shareholders, the Company filed Amended and Restated Articles of Incorporation (the “Amended Articles”) with the Nevada Secretary of State. The Amended Articles, among other things, (i) limits the liability of the Company’s officers and directors, and authorizes the Company to indemnify its officers, directors and agents, to the maximum extent permitted by applicable law, and (ii) provide that the internal affairs of the Company, including stockholder derivative actions but excluding claims under the Securities Exchange Act of 1934, shall be brought exclusively in state courts located in Nevada, and that the federal district courts of the United States shall have exclusive jurisdiction over claims brought under the Securities Act of 1933, and that the United States District Court for the District of Nevada shall be the exclusive venue with respect to any cause of action brought under the Securities Act of 1933 or the Securities Exchange Act of 1934. The Amended Articles are filed with this Report as Exhibit 3.1.

ITEM 6 – EXHIBITS

* 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.

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.