- Operating loss of $4.8 million compared to $215 million in 2022
- Revenues declined from $260.0 million to $92.4 million driven by a decline in commodity revenues due to slowdown in China economic activity.
- Crypto-Mining revenue up over 50X
- Cash and cash equivalents of approximately $280 million
NEW YORK, May 15, 2024 /PRNewswire/ -- SOS Limited ("SOS" or the "Company") (NYSE:SOS) today reported its full year financial results for the twelve-months ended December 31, 2023.
Results of operations
Revenue
The company reported a notable decline in revenue from 2022 to 2023, with revenues dropping from $260.0 million to $92.4 million. This downturn was driven by the recession in the Chinese economy, which led to weakened demand in domestic markets.
FY 2023 | FY 2022 | |||||||||||||||
Amount | Percentage | Amount | Percentage | |||||||||||||
Commodity trading | 68,456 | 74 | % | 255,668 | 98.4 | % | ||||||||||
Cryptocurrency mining | 18,898 | 20 | % | 329 | 0.1 | % | ||||||||||
Hosting service | 2,365 | 2.6 | % | - | - | |||||||||||
Other | 2,746 | 3 | % | 4,113 | 1.5 | % | ||||||||||
Total | 92,465 | 100 | % | 260,110 | 100 | % | ||||||||||
As of December 31, 2023, SOS has centered its operations around four primary product lines and services: commodity trading, cryptocurrency mining, hosting services and others. These product lines constitute 74.1%, 20.4%, 2.6%, and 3.0% of the total revenue, respectively. The "others" category encompasses the legacy business of SaaS, call centers, and insurance marketing services for uncompleted contracts. Commodity trading experienced a significant slowdown in 2023, from $255.7 million in 2022 to $68.5 million. This decline can be attributed to mainland China's ongoing sluggish demand in both the food processing and individual consumer markets.
The Company commenced generating revenue from cryptocurrency mining in February 2021. As of December 31, 2023, it had successfully mined an aggregate of 675.65 units of BTC and 2,949.79 units of ETH from its mining pools. Revenue from cryptocurrency mining experienced a significant surge, soaring from $0.33 million in 2022 to $18.9 million in 2023. This surge can be attributed to the substantial increase in the price of BTC, which rose from $16,477.60 per coin on January 1, 2023, to $44,786.80 per coin on December 31, 2023, over the course of the year. The Company benefited greatly from this price increase, leading to incremental profitability. The Company had suspended most of its ETH production by December 31, 2022, but has since maintained operation of a few ETH machines.
Costs of revenue
Revenue costs decreased from $270.60 million in 2022 to $78.2 million in 2023, constituting a reduction of $192.4 million. This includes the cost of goods sold for commodity trading, data acquisition costs for the power supply, salaries & benefits for on-site staff, software amortization & hardware depreciation for cryptocurrency mining rigs & hosting PP&E.
Operating expenses
The following table presents our operating expense by source and proportion for the periods indicated (in thousands, except percentages):
FY 2023 | FY 2022 | |||||||||||||||
Selling | 672 | 4 | % | 8,556 | 4 | % | ||||||||||
General and administrative | 11,058 | 58 | % | 180,704 | 89 | % | ||||||||||
Share-based compensation | 7,264 | 38 | % | 14,714 | 7 | % | ||||||||||
18,994 | 203,974 | |||||||||||||||
Operating expenses decreased from $204.0 million in 2022 to $18.9 million in 2023, representing a year-on-year reduction of $185.0 million.
Selling expenses decreased from $8.6 million in 2022 to $0.7 million in 2023, representing a decrease of $7.9 million mainly attributable to decrease in customs duties, service fee of customs clearance and warehouse rental as the Company bough less goods & service as a result of decrease in sales & revenue.
General and administrative expenses decreased from $180.7 million in 2022 to $11.1 million in 2023, or 87.9% ($158.9M) attributable to the decrease of crypto mining rigs impairment loss, miner-related inventory write-down, bad debt provision for other receivables & prepayment; this write-down was $3.97 million in total in 2023. Initially the Company's accounting policy is to amortize mining property, plant and equipment (PP&E) over its useful life of five years, then the PP&E and related inventory is required to be written down to align with its peers in block-chain industry, to conform with the common practice of amortizing the PP&E over its useful life of 2-3 years. Share-based compensation expenses also decreased from $14.7 million in 2022 to $7.3 million in 2023.
GAAP Operating Loss and EPS
The Company had operating loss of $4.8 million for the year of 2023, compared to an operating loss of $214.5 million for the year of 2022; the Company has far less G&A expenses e.g. write-down for inventory, impairment loss for miners and bad debt provision for other receivables and prepayments.
GAAP EPS Basic (Diluted EPS is the same as EPS Basic）was $(0.0005) per share for the period ended December 31, 2023, as compared to $(0.07) per share for the period ended December 31, 2022.
Income Tax
The company incurred $0.6 million in corporate income tax mainly from mainland Chinese business of commodity trading segments for the current period compared to $0.5 million last year.
Balance Sheet and Cash Flow
As of December 31, 2023, we had cash and cash equivalents of approximately $279.2 million, compared to $259.5 million for the period ended December 31, 2022. The net decrease in cash flow was mainly due to the decrease in operating activity, partially offset by financing activities through registered direct offerings. The Company believes that its cash resources are adequate to fund its current operations and short-term growth initiatives.
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(US$ thousands, except share data and per share data, or otherwise noted) | ||||||||
Year ended | Year ended | |||||||
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (3,651 | ) | $ | (229,447 | ) | ||
Net loss from continuing operation | (3,651 | ) | (229,186 | ) | ||||
Net loss from discontinued operation | (3,597 | ) | (261 | ) | ||||
Adjustments for: | ||||||||
Depreciation of property, plant and equipment | 4,975 | 7,960 | ||||||
Depreciation of right-of-use asset | 800 | 693 | ||||||
Share-based compensation | 7,264 | 14,714 | ||||||
Accretion of finance leases | 32 | 75 | ||||||
Allowance for doubtful accounts - accounts receivable | 451 | (500 | ) | |||||
Allowance for doubtful accounts - other receivables | 228 | 170,842 | ||||||
Impairment of intangible assets | 970 | 8,425 | ||||||
Impairment of mining equipment | 4,455 | 25,043 | ||||||
Inventory impairment | 194 | 16,786 | ||||||
Adjustments, total | 19,369 | 244,038 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 1,172 | 17,911 | ||||||
Investment securities | (307 | ) | - | |||||
Other receivables | (25,194 | ) | (60,083 | ) | ||||
Amount due from related parties | 29,456 | (53,732 | ) | |||||
Inventories | 13,204 | (5,267 | ) | |||||
Intangible assets | (15,960 | ) | (329 | ) | ||||
Accrued liabilities | (5,193 | ) | 1,076 | |||||
Tax (recoverable)/payable | 1,247 | 3,650 | ||||||
Accounts payable | (94 | ) | 1,458 | |||||
Other payables | (4,795 | ) | 5,760 | |||||
Amount due to related parties | 998 | 607 | ||||||
Lease liabilities | (544 | ) | 921 | |||||
Net cash generated from/(used in) operating activities from continuing operations | 9,708 | (73,176 | ) | |||||
Net cash generating from discontinued operating activities | - | 261 | ||||||
Net cash generated from/(used in) operating activities | 9,708 | (72,915 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant and equipment | - | (16,030 | ) | |||||
Net cash used in investing activities from continuing operations | - | (16,030 | ) | |||||
Net cash used in investing activities from discontinued operation | - | - | ||||||
Net cash (used in)/generated from investing activities | - | (16,030 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayment of principle portion of lease liabilities | (288 | ) | (768 | ) | ||||
Proceed from share issuance, net of issuance costs | 17,884 | 18,463 | ||||||
Proceeds from disposal of subsidiaries | - | 17,000 | ||||||
Net cash generated from financing activities | 17,596 | 34,695 | ||||||
EFFECT OF EXCHANGE RATES ON CASH | (7,619 | ) | (24,283 | ) | ||||
NET CHANGES IN CASH AND CASH EQUIVALENTS | 19,685 | (78,533 | ) | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 259,492 | 338,025 | ||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 279,177 | $ | 264,434 | ||||
Net cash used in operating activities was $72.9 million for the year ended December 31, 2022, which increase to positive $9.7 million in 2023. The improvement was primarily due to the following major changes in our working capital and non-cash items:
- A cash inflow of $13.0 million from change in inventory for the year ended December 31, 2023, compared with a cash outflow of $5.3 million for the previous year.
- A cash outflow of $25.2 million from changes in other receivables for the year ended December 31, 2023, compared with a cash outflow of $60.1 million for the previous year.
- A cash inflow of $29.5 million in amount due from related parties for the year ended December 31, 2023, compared with a cash outflow of $53.7 million for the previous year.
Cash Flow Used For Investment Activities
There was no net cash used in investing activities for the year. The Company disposed off its data mining business segment on November 2, 2022 for a consideration of $17 million, which realized a gain of 0.81 million.
Financing Activities
The net cash generated from financing activities was $17.6 million for the year ended December 31, 2023, a decrease of $17.1 million compared to the same period of 2022. During the year ended December 31, 2023, the Company received aggregate net proceeds of US$17.9 million from registered direct offerings compared to $18.5 million in the same period of 2022.
We have financed our operations primarily through cash flows from operations, working capital from our shareholders, and equity financing through public and private offerings of our securities. We plan to support our future operations primarily from cash generated from our operations and equity financing.
About SOS Limited
SOS is an emerging blockchain-based and big data-driven marketing solution provider, with a nationwide membership base of approximately 20 million in China. SOS is also engaged in blockchain and cryptocurrency operations, which currently include cryptocurrency mining and maybe expand into cryptocurrency security and insurance in the future Since April 2021, we launched commodity trading via our subsidiary SOS International Trading Co. Ltd, The core infrastructure of SOS' marketing data, technology and solutions to insurance and emergency rescue services is built on big data, blockchain-based technology, cloud computing, AI, satellite, and 5G network, etc. SOS has created a cloud "software as a service (SaaS)" platform for emergency rescue services, with three major product categories: basic cloud, cooperative cloud, and information cloud. This system provides innovative marketing solutions to clients such as insurance companies, financial institutions, medical institutions, healthcare providers, auto manufacturers, security providers, senior living assistance providers, and other service providers in the emergency rescue services industry. 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.