tem 1.01 Entry into a Material Definitive Agreement.
On August 23, 2022 Enviro Technologies U.S., Inc. (the “Company” or “Enviro”) entered into a Share Exchange Agreement (the “Agreement”) 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 provides that, upon the terms and subject to the conditions set forth therein, the Company shall acquire all of the capital stock of Banner Midstream owned by Ecoark, which represents 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”). Upon closing of the Agreement Banner Midstream will continue as a wholly-owned subsidiary of the Company.
Banner Midstream, through its wholly owned subsidiary Pinnacle Frac Transport LLC, 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 it 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. Banner Midstream’s transportation and logistics services operations are primarily centered in the Southern United States, although it also occasionally services fracking operations in the Northeastern United States.
Subject to the terms of the Agreement the closing (the “Closing”) shall take place on or before September 9, 2022, subject to the satisfaction or waiver of the conditions to closing of the Agreement (the “Closing Date”). At the Closing, the Board of Directors of Enviro shall fix the number of directors of Enviro at four and shall appoint two individuals designated by Banner Midstream to serve on the Board of Directors. As such time as Enviro complies with Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder, the two current Enviro directors shall resign. Immediately prior to the Closing, John A. DiBella, the sole officer of Enviro shall have tendered his resignation as the sole officer of Enviro, and the Board of Directors of Enviro shall appoint Jim Galla as Enviro’s Chief Executive Officer and Chief Financial Officer as well as such other officers as Banner Midstream shall designate, effective upon the Closing. Jim Gallo currently serves as Chief Accounting Officer of Ecoark. Jay Puchir, the Chief Financial Officer of Ecoark, currently serves as Chief Executive Officer and President of Banner Midstream. Immediately following the Closing Ecoark will own approximately 70% of the issued and outstanding shares of Enviro common stock.
The Agreement contains customary representations and warranties, customary covenants and conditions to closing and additional conditions to closing, including (i) Banner Midstream shall have satisfied all Enviro third party long-term liabilities at or before Closing and shall have at least $500,000 in cash in its bank accounts at Closing, subject to the exclusive control of Banner Midstream; and (ii) all intercompany balances owed by Banner Midstream to Ecoark shall have been eliminated. At or prior to the Closing, Banner Midstream shall have delivered to Enviro its unaudited financial statements for the: (i) year ended December 31, 2021 and 2020 and (ii) three and six month period ended June 30, 2022 and 2021, which shall have been prepared in compliance with generally accepted accounting principles in the U.S.
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) at the Closing Enviro shall issue 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.
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