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

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.