E Ecoark Remains Focused On Delivering Long-Term Shareholder Value

Introduction

It is seldom, if ever, that one comes across a company that bills itself as being in the “freshness management” business, so when I learned of Ecoark Holdings, Inc. (OTCQX: EARK) it immediately piqued my interest. I wanted to learn more about:

what such a business was all about,

if the company had anything unique to offer in concepts and products,

how sound, yet aggressive, their business plan was,

how successful they had been in their initial launch and what their rollout plans were

how solid their financials were,

how soon it was going to get a Nasdaq listing as opposed to the current OTC

and, most importantly, if they had the management strength to make a success of their aspirations.

To that end I made contact with Peter Mehring, the CEO of Ecoark Holdings’ subsidiary, Zest Labs, and put forth a series of questions which he was good enough to answer in full. I think that after you have seen his frank replies you will be well suited to make an investment decision regarding EARK .

The Company

First some background. Ecoark Holdings, Inc. is a diversified holding company based in Rogers, AR and was founded in 2011. The company currently has three wholly-owned subsidiaries: Zest Labs, Pioneer Products and Magnolia Solar.

Zest Labs

Product Information

My understanding from my research is that:

Zest identified that the primary cause of the roughly 33% of post-harvest waste that occurs annually between the farm, the retailer and consumers in the U.S. was due to the fact that the supply chain struggled to keep produce sufficiently cool, and therefore fresh, along the way from farm to store and that

Zest developed technology – something it called the “Zest Fresh solution” – to monitor the produce at pallet level and provide real-time feedback as to its condition.

Zest maintains that the application of its technology has allowed retailers to reduce their spoilage by 50% thus representing a significant boost to their bottom line.

1. Please expand on what this “Zest Fresh” solution is, and how it works?

Zest Labs offers a complete “freshness management solution.” Our wireless sensors monitor time and temperature at the pallet level throughout the entire supply chain. Our cloud-based Zest Fresh platform is able to combine pallet level data with product profile data (specific to field and pack house) to dynamically calculate a freshness metric – or ZIPR Code – in real time. In this way, Zest Fresh provides two primary benefits to growers:

It improves quality consistency through real-time feedback on adherence to best practices, with process-specific corrective actions.

It improves delivered freshness consistency via intelligent routing that accommodates for natural variances by matching destination requirements with measured freshness.

Zest Fresh also empowers workers with mobile applications and web-based dashboards that provide product visibility and real-time alerts to manage each process step. Zest Fresh is challenging the status quo, which currently assumes all products harvested on the same day have the same remaining freshness, with no visibility into field or processing variances, resulting in arbitrary shipping assignments.

For example:

If a load of fresh strawberries came in from the fields for inspection, but the inspector was late, Zest Fresh would notify the yard manager with a real-time alert, letting them know that the pallets exceeded the inspection process time. While this may seem like a minor adjustment, a typical pack house will have hundreds of pallets in motion every day, with many getting delayed or temporarily misplaced, leading to significant impacts on remaining freshness if not addressed in a timely manner. Further, Zest Fresh also considers the impact on the product, dynamically adjusting the ZIPR code which may alter first expired, first out (FEFO) inventory management and/or subsequent routing.

2. How did the development of your product come about (through acquisition or research and development)?

The Zest Labs team sees food waste as a significant sustainability issue, larger than most people realize. More than 30 percent of post-harvest food is wasted, squandering precious natural resources and contributing to global warming through wasted transportation miles and decomposition in landfills.

While investigating pallet-level monitoring of in-transit temperature – where there can be as much as a 30 percent temperature difference between pallets – the Zest Labs team found that an even greater freshness variance was occurring pre-shipment. Upon review of post-harvest processing, it was evident that even though the science behind extending produce shelf life through refrigeration is well documented, adherence to these practices for each pallet was not being realized. The lack of visibility into the post-harvest process monitoring contributes to significant variance, since most facilities run near capacity. Any problem leads to impacted product, with further impacts propagating through the remainder of the day. Typically, one-third of product is impacted every day, resulting in less than assumed shelf life.

Zest Labs’ solutions were developed through internal research and development. We have been developing and testing our freshness management solution since 2010. Zest Fresh was released in 2016, initially targeting fresh fruits and vegetables. We have taken a “first principles” approach to understanding food waste, and have leveraged existing technology and developed new technology to address these issues. The company was acquired by Ecoark Holdings and operates as a wholly-owned subsidiary.

3. Is the technology proprietary?

Yes. The core workings of the Zest Fresh technology and our Intelleflex wireless temperature monitors are proprietary, and are in part based on 65 U.S. Patents issued to Zest Labs. However, we do embrace open platforms and standards to facilitate ease-of-use integration and deployment. For instance, the Zest Fresh mobile applications are based on the Android platform, enabling use of most third-party rugged handheld devices. Further, Zest supports application integration (i.e. WMS, TMS) through the REST Web API, a standards-based definition that makes for easy integration. Zest Fresh also incorporates traceability standards such as EPC and PTI.