SOS Limited Reports 2023 Interim Financial Results

Rhea-AI Summary

SOS Limited reports 2023 Interim financial results. Revenues decline due to economic slowdown and disposal of legacy business. GAAP net loss narrows to $11.0 million. U.S. Hosting Service sees growth. Cash balance slightly increased to $249.9 million.

Positive

• U.S. Hosting Service shows growth
• Cash balance increased

Negative

• Revenues decline
• GAAP net loss

Revenues decline due to legacy business disposal and economic slow down

GAAP net loss narrows to $11.0 million, compared to a net loss of $14.3 million in the first half of 2022

U.S. Hosting Service Growth underway

Cash balance slightly increased from $247.4 million to $249.9 million

NEW YORK, Sept. 28, 2023 /PRNewswire/ -- SOS Limited ("SOS" or the "Company") (NYSE: SOS) today reports its 2023 Interim financial results from operations.

Six months ended June 30, 2023 compared to June 30, 2022

Revenue

As at June 30, 2023, SOS focuses on four product and service lines including Commodity Trading, Cryptocurrency Mining, Hosting Service and Others. Commodity Trading contributes 90.5% of the total revenue, 0.8% from cryptocurrency mining, 2.9% from Hosting Service and 5.8% from Others, (i.e. legacy data mining).

Revenue by products and service

Revenue by products and service		Six months ended June 30, 2023
Product and service		$ "000"				Percentage
Commodity Trading			37,815				90.5	%
Cryptocurrency mining			350				0.8	%
Hosting Service			1,225				2.9	%
Others			2,416				5.8	%
Total revenue -net		$	41,806				100	%

 

Revenue by products and service		Six months ended June 30, 2022
Product and service		$ "000"				Percentage
Commodity Trading			84,348				99.5	%
Cryptocurrency Mining			305				0.4	%
Hosting Service			102				0.1	%
Others			25				-	%
Total revenue -net		$	84,780				100	%

Net revenue was $41.8 million, down 50.7% to $84.8 million period-on-period. The decline in revenues can be primarily attributed to an economic downturn within China and disposal of our data mining operation. We are experiencing weak demand from small businesses and grain & food factories - both key markets for our commodity products. Internationally, we are witnessing a surge in commodity and energy prices, consequently commodity trading dropped 55.2% from $84.4 million the same period of last year to $37.8 million for six months ended June 30, 2023. Additionally, in November 2022, our primary data-mining service line was disposed off, for regulatory reason, resulting in a reduced operational footprint and a corresponding decrease in revenue. However, revenue from hosting service in US jumped up 12 times from $0.10 million to $1.2 million period-on-period.  As the Company continues to expand its business development, US hosting service is seeing result and growth is underway.

Unaudited Condensed Consolidated Statements of Comprehensive Loss
(US$ thousands, except share data and per share data, or otherwise notes)
		Six months ended
		30-Jun-22				30-Jun-23
		$"000"				$"000"
Revenue			132,710				41,835
Business taxes and surcharges			(45)				(29)
Net revenue			132,665				41,806
Operating costs			(120,294)				(41,716)
Gross profit			12,371				90
Gross profit ratio			9.3	%			0.2	%

Revenue and service by products

Revenue by products and service		Six months ended June 30, 2023								Six months ended June 30, 2022
Product and service		$ "000"				Percentage				$ "000"				Percentage
Commodity trading			37,815				90.5	%			84,384				99.5	%
Cryptocurrency mining			350				0.8	%			305				0.4	%
Hosting Service			1,225				2.9	%			102				0.1	%
Others			2,416				5.8	%			25				-	%
Total			41,806				100	%			84,780				100	%

We began generating revenues from cyptocurrency mining at 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 were still relocating and building our cryptocurrency mining facilities in the US. We recorded 179.32 units of ETH output and generated no BTC revenue for the period of six month ended June 30, 2022. We generated 11.48 units of BTC and NIL unit of ETH output six months ended June 30, 2023. As BTC price dropped further during the reporting period, we found that costs of per unit input exceeded output per unit, we shut down some of the miners to stop operation temporarily, then total output decreased immediately.

Operating Costs and Expenses

Operating costs were $41.7 million, down 49.2% period-on-period from $82.2 million in the first half of 2022 which is consistent with our revenue decline and disposal of the legacy business of data-mining business segment. Operating costs comprised of hardware & software, electricity power and depreciation from PP&E 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 decreased to $1.1 million from $3.1 million for the same period last year. The decrease is largely driven by the corresponding reduction of our commodity business footprint.

General and administrative expenses

General and administrative expenses were $9.4 million, 39.7% up period-on-period from $6.7 million in the first half of 2022. The increase in general and administrative expenses was mainly associated with professional fees and benefit & salaries. Share-based compensation decreased 85% from 14.5 million to $2.1 million; Senior management continues to be compensated primarily via share-based compensation quarterly.

Operating loss

GAAP net loss was $10.7 million, compared to a net loss of $14.3 million in the first half of 2022, representing a decrease of 23.2%. However, we had a gross margin of 0.2%, a significant drop from the previous year's 9.3%. This was largely driven by the appreciation of the US dollar against the CNY and the commodity price hike, which escalated our cost of goods sold, thereby eroding gross margin.

Income tax

The Company paid $0.65 million of corporate income tax for the current period as compared to $1.1 million last year of the same period.

GAAP net loss attributable to ordinary shareholders was $10.7 million, as compared to a net loss of $14.3 million in the prior year period.

GAAP Basic EPS was $(0.0031) per share, as compared to $(0.0046) per share in the prior year period.

Balance Sheet and Cash Flow

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-22				30-Jun-23
		Unaudited				Unaudited
		$				$
Cash flows from operating activities:
Net loss			(14,333)				(10,697)
Less: Net income from discontinued operation			6,921				-
Net loss from continuing operation			(21,254)				(10,697)
Adjustments:
Depreciation and amortization			2,399				106
Share-based compensation			14,472				2,054
Amortisation of right of use assets			256				268
Accretion of finance leases			-				19
Allowance for doubtful accounts-accounts receivable			189				-
Allowance for doubtful accounts-other receivable			800				(400)
Impairment of cryptocurrencies			-				81
Operating cash flows before movements in working capital			(3,138)				(8,169)
Changes in working capital:
Inventory			9,442				1,224
Accounts receivable			19,298				56
Other receivables			(110,435)				(11,921)
Amount due from related parties			(10,045)				23,916
Intangible assets			(837)				(350)
Accrued liabilities			(3,225)				(3,510)
Accounts payable			1,274				1,089
Tax payable			(47)				211
Other payables			7,199				(3,857)
Amount due to related parties			624				(1)
Lease liabilities			1,184				(269)
Net cash used in operating activities from continuing operations			(88,706)				(1,981)
Net cash used in in generating from discontinued operating activities			(15,611)				-
Net cash used in operating activities			(104,317)				(1,981)
Cash flows from investing activities:
Proceeds from disposal of property, equipment and software			132				-
Net cash generated from investing activity from continuing operations			132				-
Net cash generated from investing activity from discontinuing operations			1,465				-
Net cash generated from investing activities			1,597				-
Cash flows generated from/(used in) financing activities:
Repayment of principle portion of lease liabilities							(288)
Proceeds from share issuance, net of issuance costs			18,483				-
Net cash generated from financing activities			18,483				(288)
Net decrease in cash and cash equivalents			(84,237)				(2,269)
Cash and cash equivalents at beginning of the period			338,026				259,492
Effect of exchange rates on cash and cash equivalents			(6,443)				(7,339)
Less: cash and cash equivalents, from the discontinued operations			3,602				-
Cash and cash equivalents at end of the period			243,744				249,884
Supplemental cash flow information
Cash paid for income tax			1,061				646

Cash flow generated from operating activities

As of June 30, 2023, the Company had cash and cash equivalents of $249.9 million, compared to $243.7 million in the prior year period, an increase of $6.1 million. The net decrease in cash and cash equivalents was mainly due to the lack of financing activities for this period. The Company believes that its cash resources are more than adequate to fund operations and growth initiatives.

Cash flow used in investing activities

The Company did not have investing activities for this period. The Company disposed of some office equipment and realized proceeds of $1.6 million for the period ending June 30, 2022.

Cash Flow Used in Financing Activities

The Company did not raise funds this period compared to US$18.5 million from registered direct offering from the public market for the period ended June 30, 2022

About SOS Limited

SOS is an emerging blockchain-based and big data-driven marketing solution provider. SOS is also engaged in blockchain and cryptocurrency operations, which currently include cryptocurrency mining and may expand into cryptocurrency security and insurance in the future. Since April 2021, we launched commodity trading via our subsidiary SOS International Trading Co. Ltd and Weigou International Trading Co Ltd. Major trading commodity includes mineral resin, soy bean, wheat, sesame, liquid sulfur, petrol coke and latex 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 mining activities;
• shortages in, or rises in the prices of mining machines may adversely affect the Company's business;
• 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.