Item 2.01 Completion of Acquisition or Disposition of Assets.
Effective September 6, 2022
(the “Closing Date”) Enviro Technologies U.S., Inc. (the “Company” or “Enviro”) completed a Share
Exchange Agreement (the “Closing”) with Banner Midstream Corp., a Delaware corporation (“Banner Midstream”) and
Ecoark Holdings, Inc., a Nevada corporation (“Ecoark”) and the sole shareholder of Banner Midstream (the “Agreement”).
On the Closing Date Enviro acquired 100% of the issued and outstanding shares of Banner Midstream in exchange for 12,996,958 shares of
the Company’s common stock (the “Exchange”). Effective on the Closing Date, Banner Midstream is a wholly-owned subsidiary
of the Company. Immediately following the Closing Ecoark owns approximately 70% of the issued and
outstanding shares of Enviro common stock. Ecoark is quoted on the Nasdaq Capital Market under the symbol “ZEST”.
On the Closing Date all intercompany
balances owed by Banner Midstream to Ecoark were eliminated. Furthermore, pursuant to the Agreement (i) on August 23, 2022, Enviro issued
John A. DiBella and Raynard Veldman 6% unsecured convertible promissory notes in the principal amount of $815,565 and $90,000, respectively,
convertible at the option of the holder at $0.06 per share, with a maturity date of 12 months from the Closing Date in satisfaction all
of their accrued payroll and Mr. Veldman’s advances to Enviro (the “Payroll Notes”), and (ii) on the Closing Date Enviro
issued John A. DiBella a 6% unsecured promissory note in the principal amount of $139,000, with a maturity date of three months from the
Closing Date in satisfaction of Mr. DiBella’s advances to Enviro (the “Short Term Note”).
Banner Midstream has two operating
subsidiaries: Pinnacle Frac Transport LLC (“Pinnacle Frac”) and Capstone Equipment Leasing LLC (“Capstone”). Pinnacle
Frac provides transportation of frac sand and logistics services to major hydraulic fracturing and drilling operations. Capstone procures
and finances equipment to oilfield transportation service contractors.
Pinnacle Frac provides transportation
of frac sand and logistics services to major hydraulic fracturing and drilling operations. Its transportation services entail using third
party drivers who assist in transporting sand and related materials to customers’ locations for the customers’ hydraulic fracturing,
or fracking. The logistics services Pinnacle Frac provides for its customers’ fracking and drilling enterprises, include the operation
of a 24/7 dispatch service center based in Texas through which Banner Midstream dispatches the trucks for hauling frac sand and related
equipment. Pinnacle Frac uses independent third party owner-operators of trucks to service its customers in their fracking operations
by transporting materials, mainly frac sand. Its transportation and logistics services operations are primarily centered in the Southern
United States, although Banner Midstream also occasionally services fracking operations in the Northeastern United States.
Pinnacle Frac uses a third
party’s licensed software known as “Sandbox” to monitor and execute its transportation and logistics operations. Use
of this service offers the following benefits for customers and other industry participants: reduced road traffic; reduced personnel on
frac site; and eliminate silica dust particles.
By operating a call center
and using specialized licensed software to meet customers’ demand for timely delivery and movement of fracking materials, Pinnacle
Frac facilitates customers’ fracking operations through the life cycle of the drilling process.
Hydraulic fracturing, or fracking,
is a process that creates fractures extending from the well bore into the rock formation to enable natural gas or oil contained in the
rock to move more easily from the rock pores to a production conduit, or an opening at the surface designed to allow for extraction of
the energy resource. The hydraulic fracturing technique is used to enable the extraction of natural gas or oil from shale and other forms
of “tight” rock, or in other words, impermeable rock formations that lock in oil and gas and make fossil fuel production difficult.
The process entails blasting water, chemicals, and sand into these formations at pressures high enough to crack the rock in which the
targeted resources is embedded, allowing the once-trapped gas and oil to flow to the surface.
Because the process is highly
reliant on an ample supply of sand and other materials, Pinnacle Frac capitalizes on this demand by helping its customers timely supply
the materials to the drilling site in sufficient quantities to complete the process. Banner Midstream’s customers consist of oil
and gas drilling to which Banner Midstream may be the prime contractor, and third party contractors assisting with another party’s
drilling operation for which Banner Midstream serves as the subcontractor.
Due to concerns surrounding
health, safety and environmental, or HSE, impacts of hydraulic fracturing, Pinnacle Frac takes an active role in assessing occupational
risk and finding methods to better manage these issues. To further these efforts, Banner Midstream has implemented an HSE program which
consists of the following key features aimed at avoiding, preventing, detecting and mitigating certain hazards that are inherent in operating
as a participant in the hydraulic fracturing field: Jobs Safety Analysis (JSA) Program; Near-Miss Reporting System; and Accident Reporting
System.
All programs are designed
with the purpose of mitigating the risk of future safety incidents, while also ensuring that when rare instances occur when a safety incident
does occur, that Banner Midstream has a plan to address in a consistent, formal manner to ensure the utmost safety for its employees and
contractors.
To enhance safety, each of
Pinnacle Frac employee and contractor are put through a safety program to meet the needs of its customers while maintaining adequate safety
protocols. Through this system, workers gain knowledge of how to maintain optimum work conditions and be prepared for the variety of potential
challenges that may arise.
Pinnacle Frac monitors performance
under its HSE program throughout the year to evaluate its goals are being met or address any concerns in this regard should they arise.
Regulation
Federal regulation of oil
and gas is also extensive. The recent spike in gasoline and other fuel costs is at least in part been driven by the Biden Administration’s
efforts to reduce oil drilling and transition away from fossil fuels. Banner Midstream’s transportation services are regulated by
the U.S. Department of Transportation (“DOT”), the Federal Motor Carrier Safety Administration (“FMCSA”) and by
various state agencies. These regulatory authorities have broad powers, generally governing matters such as authority to engage in motor
carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and
drivers, transportation of hazardous materials and periodic financial reporting. The transportation industry is subject to possible other
regulatory and legislative changes (such as the possibility of more stringent environmental, climate change, security and/or occupational
safety and health regulations, limits on vehicle weight and size and a mandate to implement electronic logging devices) that may affect
the economics of our transportation services by requiring changes in operating practices or by changing the demand for motor carrier services
or the cost of providing truckload or other transportation or logistics services.
Banner Midstream is or may
become subject to numerous laws and regulations relating to environmental protection and climate change. These laws and regulations change
frequently, and the effect of these changes is often to impose additional costs or other restrictions on our operations. Banner Midstream
cannot predict the occurrence, timing, nature or effect of these changes. Banner Midstream also operates under a number of environmental
permits and authorizations. The issuing agencies may take the position that some or all of these permits and authorizations are subject
to modification, suspension, or revocation under certain circumstances, but any such action would have to comply with applicable procedures
and requirements.
The foregoing description
of the Exchange and the Agreement and the related transactions does not purport to be complete and is qualified in its entirety by reference
to the full text of the Agreement, which is filed as Exhibit 2.1 to the Company’s Form 8-K Current Report filed on August 29,
2022.