Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

Description of Business

The terms “we,” “us,” “our,” “registrant,” “Fortium Holdings”, and the “Company” refer to Fortium Holdings Corp.

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 the Company’s 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 agreement 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 March 31, 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 thirteen and through month twenty-four; and (d) $15,000 per month beginning in month twenty-five and through month thirty-six. 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 shall be 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.

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 “Amendment”). The Financial Industry Regulatory Authority approved the name change on May 18, 2021.

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).

All adjustments considered necessary for a fair presentation have been included. These adjustments consist of normal and recurring accruals, as well as non-recurring charges.

The condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 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.

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.

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 three months ended March 31, 2022 and 2021:

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.

Fixed assets as of March 31, 2022 and December 31, 2021 were as follows:

Depreciation expense for the three months ended March 31, 2022 and 2021 were $209 and $209, respectively.

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 March 31, 2022, the lottery has not taken place.

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

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

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 March 31, 2022 and December 31, 2021, there were 8,400,000 shares of the Company’s common stock issued and outstanding, respectively.

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.

On May 2, 2016, the Company granted options to purchase up to 2,737 shares of Common Stock under the Plan in the aggregate, with an exercise price of $56.05 per share. On December 28, 2018, the Company granted options to purchase up to 51,683 shares of Common Stock under the Plan in the aggregate, with an exercise price of $1.90 per share. All of the stock options are fully vested. There have been no stock options granted since 2018.

On October 2, 2016, the Company granted options to purchase up to 1,421 shares of Common Stock under the Plan in the aggregate, with an exercise price of $38.00 per share. On December 28, 2018, the Company granted options to purchase up to 4,579 shares of Common Stock under the Plan in the aggregate, an exercise price of $1.90 per share. All of the stock options are fully vested. 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.

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

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. 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 following assumptions were used for the three months ended March 31, 2022 and year ended December 31, 2021:

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.

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

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 pays Atikin a $5,000 consulting fee monthly.

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 common shares outstanding of the Company as of March 31, 2022. Richard Horgan, the Chief Executive Officer, is a director of the Foundation.

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 three months ended March 31, 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:

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 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 thirteen and through month twenty-four; and (d) $15,000 per month beginning in month twenty-five and through month thirty-six. Additionally, for each Elysian Store for which 7Seeds directly assists in obtaining a cannabis license, 7Seeds will be entitled to receive additional compensation in one of the following forms at 7Seed’s election (a) cash payment equal to 6% of that Elysian Store’s gross sales revenues, or (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 advisor 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 shall be 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.

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.