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RI

RiskOn International, Inc. (ROI)·Q2 2022 Earnings Summary

Executive Summary

  • Q2 2022 (quarter ended June 30, 2022) revenue declined to $5.42M from $5.16M in the prior-year quarter, while gross margin compressed to 14.9% (from 30.2%) due largely to higher third‑party trucking/fuel costs and Bitcoin segment costs; continuing-ops net loss swung to $(9.79)M vs. income of $2.39M YoY, and total basic EPS was $(0.41) vs. $0.11 YoY .
  • Transportation Services remained the core engine ($5.35M of revenue), while oil & gas was reclassified to discontinued operations as management advanced strategic separations (White River sale closed July 25, 2022; Trend sale June 17, 2022) .
  • Operating expenses surged on Agora (Bitcoin) equity compensation and build‑out (stock comp $5.22M in Q2 and segment opex ~$6.36M), while no Bitcoins were mined during the quarter (mining paused March 3, 2022) and the Bitcoin carrying value fell to $10K after $9K impairment .
  • Management reiterated the plan to maximize value via spin‑offs/divestitures (Agora/HUMBL LOI, Banner Midstream reverse‑merger path, White River/Fortium) and indicated spin‑offs as key near‑term catalysts; no formal quantitative guidance was issued .
  • Street consensus (S&P Global) for Q2 2022 was unavailable; we cannot assess a beat/miss vs estimates. Values retrieved from S&P Global were unavailable.

What Went Well and What Went Wrong

  • What Went Well

    • Transportation Services revenue grew modestly YoY to $5.35M and remained the primary continuing revenue stream despite energy price volatility .
    • Portfolio streamlining advanced: Trend (financial services) sold for a $4.25M secured note (gain $0.71M recognized), and oil & gas (White River) reclassified to discontinued ops ahead of the July 25, 2022 share‑exchange closing with Fortium .
    • Management outlined a clear spin‑off roadmap aimed at unlocking value across subsidiaries (Agora/HUMBL path; Banner reverse merge; White River/Fortium), highlighting the intent to distribute stakes to Ecoark (now ROI) shareholders .

  • What Went Wrong

    • Gross margin compressed sharply to 14.9% vs 30.2% YoY on higher independent trucker costs and fuel, plus Bitcoin segment costs with no offsetting revenue (mining paused) .
    • Continuing-ops swung to a $(9.79)M loss from $2.39M income YoY, driven by a $6.31M Bitcoin segment opex burden (including significant stock comp), a $0.95M loss on equipment sale, and a $0.39M unfavorable derivative mark .
    • Working capital remained tight (working capital deficit ~$0.86M at 6/30/22) and financing covenants tied to the $12M preferred raised in June limit flexibility absent investor approval; cumulative preferred dividend accrues at 12.6% until June 2024 .

Financial Results

MetricQ2 2021 (Jun 30, 2021)Q3 2021 (Dec 31, 2021)Q2 2022 (Jun 30, 2022)
Revenue – Continuing Ops ($M)$5.156 $6.135 $5.419
Gross Profit ($M)$1.558 $1.247 $0.811
Gross Profit Margin (%)30.2% 28.0% (calc from table)14.9%
Net (Loss)/Income – Continuing Ops ($M)$2.393 $4.279 $(9.794)
Net (Loss)/Income to Controlling Interest ($M)$2.560 $4.602 $(10.153)
EPS – Basic (Total)$0.11 $0.02 $(0.41)

Segment revenue and KPIs (continuing operations)

  • Q2 2022 revenue mix: Transportation Services $5.348M; Fuel rebate $0.063M; Equipment rental/other $0.007M .
  • Bitcoin: 0.000 BTC mined in Q2; Bitcoin carrying value $10,145 after $9,122 impairment (mining paused Mar 3, 2022) .
  • Discontinued operations (reclassified): Oil & Gas and Trend results moved to discontinued/held for sale in Q2 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Corporate revenue/marginsFY or Q2 2022Not providedNot providedMaintained (no quantitative guidance)
Strategic actions2022Explore separationsExecute spin‑offs/divestitures (White River/Fortium; Agora/HUMBL LOI; Banner reverse‑merger; distribute shares to holders) Formalized plan; timelines subject to regulatory/closing conditions

Earnings Call Themes & Trends

(No Q2 2022 earnings call transcript located after search; themes below reflect MD&A and press updates.)

TopicPrevious Mentions (Q2 FY2022 – Sep 30, 2021; Q3 FY2022 – Dec 31, 2021)Current Period (Q2 2022 – Jun 30, 2022)Trend
Spin‑offs/portfolio streamliningBuilding Bitcoin mining (Agora) and considering spin of 80% of Agora; Energy assets active; Transportation growth Executed Trend sale; reclassified/sold White River; outlined multi‑spin roadmap (Agora/HUMBL LOI, Banner reverse‑merger, Fortium) Acceleration toward pure‑play holding with distributed stakes
Bitcoin mining (Agora)Initial miners online in Nov 2021; capital outlays for power/infrastructure; began recognizing digital asset revenue Mining paused Mar 3, 2022; no BTC mined; impairment; significant segment opex and stock comp burden Pause/rightsizing; waiting on capital/market recovery
Transportation services (Pinnacle Frac)Core revenue driver; exposure to oilfield activity; improving commodity backdrop Still core ($5.35M revenue), but margins pressured by higher independent operator/fuel costs Stable top line, margin headwinds
Litigation/regulatoryWalmart verdict (under appeal/post‑trial motions); Deloitte trade secrets case filed (early stage) Walmart order reduced judgment by $5M; attorneys’ fees motion pending; Deloitte case continues Ongoing, potential optionality but long‑dated
Capital structureAug‑21 equity raise with warrants; working capital tight but improving June‑22 $12M Series A Preferred (12.6% dividend, covenants, poison‑pill‑style warrant) Added liquidity with strict covenants

Management Commentary

  • Strategy: “Ecoark’s goal is to spin-off all of its active subsidiaries and Fortium to the Company’s shareholders by December 31, 2022… and acquire another business so we do not become a shell corporation” (MD&A) .
  • Portfolio updates: “On July 25, 2022, the Company sold White River…to Fortium… convertible into 42.25M shares of Fortium common stock upon registration and stock dividend to Ecoark shareholders” .
  • Investor update: Management communicated a “spin-off strategy designed to maximize shareholder value,” citing executed agreements for White River (Fortium), Agora (HUMBL), and LOI for Banner; anticipated aggregate closing value “approximately $100,000,000” prior to stock dividends (timing/conditions apply) .

Q&A Highlights

  • No Q2 2022 earnings call transcript located. We synthesized themes from the 10‑Q MD&A and contemporaneous press releases .

Estimates Context

  • Street consensus (S&P Global) for Q2 2022 EPS and revenue was unavailable; consequently, we cannot assess beat/miss. Values retrieved from S&P Global were unavailable.

Clear Implications

  • Mix and margin: Transportation Services remains resilient on revenue but lower gross margin underscores sensitivity to pass‑through fuel and third‑party trucking costs; pricing and mix discipline will be crucial to restore margins .
  • Bitcoin optionality vs drag: With mining paused and impairments recognized, Agora is currently a cost center; any resumption likely depends on capital availability and crypto economics .
  • Corporate simplification could unlock value: Completed/announced divestitures and prospective spin‑offs (with share distributions) are the primary catalysts; execution hinges on regulatory clearances, counterparties, and market windows .
  • Balance sheet/covenants: The June 2022 $12M preferred provides liquidity but adds a 12.6% dividend burden and restrictive covenants that may require investor consent for future financings or material actions .

Key Takeaways for Investors

  • Watch spin‑off execution: Closing Fortium share distribution and resolving HUMBL/Agora path are near/intermediate‑term stock catalysts; delays could push realizations into later periods .
  • Transportation margin recovery is critical: Repricing, mix, and cost pass‑throughs are needed to lift gross margin back toward historical levels (14.9% in Q2 vs 30.2% YoY) .
  • Bitcoin segment remains optionality, not a driver: With mining paused and opex heavy (including stock comp), treat Agora as a levered call option on future capital and crypto markets .
  • Legal outcomes are long‑dated: Walmart/Deloitte matters carry potential upside but timing and amounts are uncertain; avoid embedding near‑term proceeds into models .
  • Capital/covenants: The preferred structure limits financing flexibility; monitor dividend accruals, covenant consents, and cash needs to fund operations and any spin‑off costs .
  • Stock catalysts: Regulatory/closing milestones for spin‑offs, any resumption of Bitcoin operations, and Transportation margin inflection.

Appendix – Additional Detail

  • Discontinued operations (Q2 2022): Revenue $1.741M; Operating expenses $3.782M; Net loss $(1.642)M; Gain on disposal (Trend) $0.712M .
  • Selected cash/working capital: Cash $8.26M at 6/30/22 (includes $3.0M transferred pre‑sale to White River); working capital deficit $(0.86)M at 6/30/22 .
  • One‑time/non‑cash items impacting Q2: Agora stock‑based comp $5.22M; loss on asset sale $(0.95)M; derivative fair value loss $(0.39)M; Bitcoin impairment $(0.009)M .

Sources: Q2 2022 Form 10‑Q (quarter ended June 30, 2022) and MD&A ; comparative quarters Q3 FY2022 (Dec 31, 2021) 10‑Q ; prior‑year quarter Q2 FY2022 (Sep 30, 2021) 10‑Q ; Ecoark investor update press release (Aug 12, 2022) .