SOS Limited Reports 2022 Interim Financial Results

Rhea-AI Summary

SOS Limited (SOS) reported a net revenue of $132.7 million for the six months ended June 30, 2022, a decline of 28.1% year-over-year, mainly due to COVID-19 lockdowns in China impacting business activities. Despite this revenue drop, the company increased its cash balance to $247.4 million from $185.5 million. The gross profit decreased to $12.4 million, maintaining a steady gross profit ratio of 9.3%. Although the operating loss shrank to $14.3 million from $20.4 million, the company faces challenges in expanding its cryptocurrency mining operations in the U.S.

Positive

• Cash balance increased from $185.5 million to $247.4 million.
• Operating loss reduced from $20.4 million to $14.3 million, a 29.8% decrease.
• Gross profit ratio remained stable at 9.3%.

Negative

• Net revenue declined by 28.1% compared to the previous year.
• Generated no BTC revenue and significantly reduced income from cryptocurrency mining.
• Selling expenses surged from $0.03 million to $3.1 million, indicating increased operational costs.

Cryptocurrency mining and hosting services being rolled out in the  U.S.

Revenue declines due to global economy slow down

Cash balance increased  from $185.5 million to $247.4 million

NEW YORK, Sept. 28, 2022 /PRNewswire/ -- SOS Limited ("SOS" or the "Company") (NYSE: SOS) today repot 2022 Interim financial results from operation

Interim financial results from operation

Six months ended June 30, 2022 compared to June 30, 2021

Revenue

Net revenue was $132.7 million, down 28.1% period-on-period. The decrease in revenues was negatively impacted by the continuing lock-down during the period; within China, the central government's control measures severely restricted business activities causing a material slowdown in revenues and growth especially in our data mining.  Our commodity business was also negatively affected  by the global slowdown.

Unaudited Condensed Consolidated Statements of Comprehensive Loss
(US$ thousands, except share data and per share data, or otherwise notes)
		Six months ended
		30-Jun-21				30-Jun-22
		$"000"				$"000"
Revenue			184,489				132,710
Business taxes and surcharges			(11)				(45)
Net revenue			184,478				132,665
Operating costs			(167,238)				(120,294)
Gross profit			17,240				12,371
Gross profit ratio			9.3	%			9.3	%

As of June 30, 2022, SOS focuses on four product and service lines, including data marketing, cryptocurrency mining, hosting service and commodity trading. Data marketing represents 36.1% of the total revenue, 0.2% from cryptocurrency mining, 0.1% from hosting service and 63.6% from commodity trading respectively.

Revenue and service by products

Revenue by products and service		Six months ended June 30, 2022								Six months ended June 30, 2021
Product and service		$ "000"				Percentage				$ "000"				Percentage
Commodity trading			84,348				63.6	%			155,170				84.1	%
Cryptocurrency mining			305				0.2	%			15,126				8.2	%
Hosting serice			102				0.1	%			-				-
Data marketing			47,910				36.1	%			14,193				7.7	%
Total			132,665				100	%			184,489				100	%
Data Marketing Includes the following four sub-category Revenue streams:
Insurance marketing			47,830				36.0	%			13,338				7.2	%
Telecom call center			76				0.1	%			324				0.2	%
Bank call center			4				0.0	%			278				0.2	%
SaaS			-				0.0	%			253				0.1	%
Total			47,910				36.1	%			14,193				7.7	%

We started to generate cryptocurrency revenue from the end of February 2021. We were allocated 132.1 units of BTC and 1,853.1 units of ETH in Q2 2021 from our mining pools as compared to 42.2 units of BTC and 916.9 units of ETH in Q1, 2021. During the first half of 2022, we are still re-locating and building our cryptocurrency mining facilities to and in Wisconsin USA. We recorded 179.32 units of ETH output and generated no BTC revenue for the six month ended June 30, 2022, which shows our plan to move our cryptocurrency mining business to U.S. is behind schedule as we are picking up mining capacity over time.

United States generally accepted accounting principles for cryptocurrency mining are complex, emerging and uncertain. Cryptocurrencies may not be recognized as cash or cash equivalents, and mining activities may not qualify for revenue recognition. Cryptocurrencies have no inherent value, are not legal tender recognized by any governmental entity, and might not be able to be converted into fiat currencies. Investors are advised not to place undue reliance on mining results alone, without considering other financial and non-financial metrics.

Operating Costs and Expenses

Operating costs were $120.3 million, 28.1% down period-on-period from $167.2 million in the first half of 2021 which is consistent with our revenue decline. Operating costs comprised data acquisition costs for our insurance marketing business, land line telephone expenses for call centers, maintenance expense and hardware depreciation for cryptocurrency mining well as costs of goods sold for commodity trading.

Selling expenses

Selling expenses mainly relate to our commodity business and include freight-out expenses, custom clearing agency fee, warehouse rental expense, promotional expense, sales commission and payroll expenses to sales team. Selling expenses increased to $3.1 million from $0.03 million from the same period of last year. The increase is largely accounted for by warehouse, freight-out expense and agency fees of commodity business as we directly import goods from outside China instead of purely purchasing commodity products from local vendors in prior period.

General and administrative expenses

General and administrative expenses were $10.1 million, 48.1% down period-on-period from $19.4 million in the first half of 2021. The decrease in general and administrative expenses was mainly associated with share-based compensation expenses and professional fees which decreased 19.3% and 685% respectively.  Senior management continues to be compensated primarily via share-based compensation.

Operating loss

GAAP net loss was $14.3 million, compared to a net loss of $20.4 million in the first half of 2021, representing a decrease of 29.8%. The decrease is primarily due to the spread of pandemic again in mainland China during the period, but was offset somewhat by a decline in the cost of goods and G&A expenses. Consequently, overall gross margin is in line with last year of 9.3%. We believe our stable gross margin demonstrates our ability to manage costs even in a difficult economic environment.

Income tax

The Company's Chinese subsidiaries paid US$1.1 million of corporate income tax for the period ended June 30, 2022.

GAAP net loss attributable to ordinary shareholders was $14.3 million, as compared to a net loss of $20.4 million in the prior year period.

GAAP Basic EPS was $(0.0046) per share, as compared to $(0.04) per share in the prior year period.

Balance Sheet and Cash Flow

Cash flow generated from operating activities

As of June 30, 2022, the Company had cash and cash equivalents of $247.4 million, compared to $185.5 million in the prior year period, an increase of $61.9 million. The net increase in cash and cash equivalents was mainly generated from operating activities. The Company believes that its cash resources are more than adequate to fund operations and growth initiatives.

Unaudited Condensed Consolidated Statement of Cash Flow
(US$ thousands, except share data and per share data, or otherwise noted)
		Six months ended				Six months ended
		30-Jun-21				30-Jun-22
		Unaudited				Unaudited
		$				$
Cash flows from operating activities:
Net loss			(20,411)				(14,334)
Adjustments:
Depreciation and amortization			5,509				2,700
Share-based compensation			17,927				14,472
Allowance for doubtful accounts-accounts receivable			-				189
Allowance for doubtful accounts-other receivable			-				800
Inventory			(102,566)				11,217
Accounts receivable			-				20,391
Other receivables			(196,620)				(138,389)
Amount due from related parties			(10,183)				(10,622)
Intangible assets			(12,221)				(837)
Accrued liabilities			24				(3,085)
Accounts payable			(13,118)				5,400
Tax payable			(6,024)				(2,323)
Other payables			(8,338)				7,415
Amount due to related parties			2,406				1,390
Contract liability			4,450				192
Lease liabilities			-				1,107
Net cash used in operating activities			(339,165)				(104,317)
Cash flows from investing activities:
Purchase of property, equipment and software			(34,205)				-
Proceeds from disposal of property, equipment and software							1,597
Disposition of assets-P2P			3,500				-
Net cash (used in)/generated from investing activities			(30,705)				1,597
Cash flows from financing activities
Proceeds from share issuance, net of issuance costs			551,824				18,483
Net cash generated from financing activities			551,824				18,483
Effect of exchange rates on cash and cash equivalents			2,887				(6,443)
Net increase/(decrease) in cash and cash equivalents			184,841				(90,680)
Cash and cash equivalents at beginning of the period			610				338,026
Cash and cash equivalents at end of the period			185,451				247,346
Supplemental cash flow information
Cash paid for income tax			-				1,061

Cash flow used in investing activities

The Company, through its subsidiary, SOS Information Technology New York Inc. and China SOS Ltd., purchased BTC and ETH mining equipment for an aggregate cost of approximately $34.2 million for the six months ended June 30, 2021. The Company disposed of some office equipment in China and realized proceeds of $1.6 million for the period ended June 30, 2022.

Financing activities

The Company received net proceeds of US$18.5 million from registered direct offering for the period ended June 30, 2022 as compared to the same period of last year, the Company received aggregate net proceeds of US$551.8 million   

About SOS Limited

SOS provides big data-driven marketing solutions and is also engaged in blockchain and cryptocurrency operations and commodity trading. The core infrastructure of SOS' marketing data solutions to insurance and emergency rescue services is built on big data, blockchain-based technology, cloud computing, AI, satellite, and 5G network, etc. For more information, please visit: http://www.sosyun.com/.

Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking statements" within the meaning of the federal securities laws, including, but not limited to, our expectations for future financial performance, business strategies or expectations for our business. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. SOS cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Words such as "may," "can," "should," "will," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "target," "look" or similar expressions may identify forward-looking statements. Specifically, forward-looking statements may include statements relating to the Company's:

• ability to execute its business plan;
• changes in the market for SOS' products and services; and
• expansion plans and opportunities.

These forward-looking statements are based on information available as of the date of this press release and our management's current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

These risks and uncertainties include, but not are limited to, the risk factors described by SOS in its filings with the Securities and Exchange Commission ("SEC"). These risk factors and those identified elsewhere in this press release, among others, could cause actual results to differ materially from historical performance and include, but are not limited to:

• US government's policies and regulatory oversight of crypto currency mining operation and our other operations;
• SOS's cryptocurrency mining, commodity trading and marketing solutions businesses are still under development, with many uncertainties in integration of these various business segments;
• Failure to manage the newly launched commodities trading business effectively;
• Loss of key customers in the commodity trading business;
• failure to access a large quantity of power at reasonable costs could significantly increase SOS operating expenses and adversely affect our demand for SOS's crypto mining and hosting activities;
• shortages in, or rises in the prices of mining machines may adversely affect the Company's business;
• claims and/or regulatory actions against us related to cybersecurity review in China may result in our being subject to fines, constraints on or modification of our marketing data solution business, damage to our reputation, and material adverse impact on our financial condition, results of operations and prospects.
• any significant or prolonged failure in the data warehouse facilities and data mining facilities that SOS operates or services it provides, including events beyond its control, would lead to significant costs and disruptions and would reduce the attractiveness of its facilities, harm its business reputation and have a material adverse effect on its results of operation;
• security breaches or alleged security breaches of our data warehouses could disrupt SOS operations and have a material adverse effect on its business, financial condition and results of operation; and
• other risks and uncertainties indicated in SOS's SEC reports or documents filed or to be filed with the SEC by SOS.

Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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SOURCE SOS Ltd.

FAQ

What were the main financial results for SOS Limited in 2022?

SOS Limited reported a net revenue of $132.7 million for the six months ended June 30, 2022, a decrease of 28.1% compared to the same period in 2021.

How much did SOS Limited's cash balance increase in 2022?

SOS Limited's cash balance increased from $185.5 million to $247.4 million as of June 30, 2022.

What is the future outlook for SOS Limited's cryptocurrency mining operations?

SOS Limited is relocating its cryptocurrency mining operations to the U.S., but the transition has been delayed, leading to no Bitcoin revenue generation in the first half of 2022.

How did SOS Limited's operating loss change in 2022?

SOS Limited's operating loss decreased to $14.3 million for the first half of 2022, compared to $20.4 million in the same period last year.