SOS(SOS) - 2022 Q4 - Annual Report

Corporate Governance and Share Structure - The company held its 2023 Annual General Meeting on May 1, 2023, where shareholders approved a share consolidation at a ratio of one-for-fifty[14]. - Following the share consolidation, the authorized share capital increased to US$1,200,000, divided into 240,000,000 ordinary shares[16]. - The company has not yet implemented the share consolidation as of the filing date of the annual report[14]. - The company adjusted its ADS Ratio from 1 ADS representing 500 Class A ordinary shares to 1 ADS representing 10 Class A ordinary shares, pending the effectiveness of the 2023 Share Consolidation[102]. - The trading price of the company's American Depositary Shares (ADSs) may be volatile, influenced by market factors and company-specific operations, including revenue variations and announcements of new products or partnerships[102]. - The company’s trading symbol was changed to "SOS" after the transition to a high-technology services business[126]. - Class A ordinary shares have one vote per share, while Class B ordinary shares have ten votes per share, which may limit the influence of Class A shareholders on corporate matters[112]. - The company is registered under Cayman Islands law, which may limit shareholders' ability to protect their interests and enforce rights in U.S. courts[113]. - The company is exempt from certain U.S. securities regulations, resulting in less extensive and timely information being available to shareholders compared to U.S. domestic issuers[116]. Financial Performance and Results - The company reported a net loss from continuing operations of US$ (10,284) thousand, with total cash flows from operating activities amounting to US$ (229,447) thousand[133]. - The company recorded an impairment of cryptocurrencies amounting to US$ 170,842 thousand, which significantly impacted the financial results[133]. - The company reported a net cash generated from financing activities of US$ 34,695 thousand, reflecting successful capital raising efforts[134]. - The company reported a total shareholders' equity of US$ 454,734 thousand, reflecting a retained earnings loss of US$ 272,920 thousand[170]. - The company reported a total revenue of $260.1 million for 2022, a decrease from $290.9 million in 2021, primarily due to macroeconomic challenges and the impact of COVID-19[175]. - Commodity trading accounted for 98.4% of total revenue in 2022, generating $255.7 million, while cryptocurrency mining contributed only 0.1%[176]. - The company reported an operating loss of $204.4 million for 2022, compared to a loss of $41.4 million in 2021, primarily due to inventory write-downs and impairment losses[185]. - The net loss from continuing operations was $230.2 million for 2022, a significant decline from a net income of $52.4 million in 2021[187]. Market and Industry Risks - The company anticipates growth in the marketing data and cryptocurrency mining industry in China, which may positively impact future operations[11]. - The company emphasizes the importance of understanding risk factors that may affect its financial condition and results of operations[11]. - The company faces significant risks due to its dependence on a limited number of major clients, which could adversely affect financial condition if any client fails to make payments[25]. - The competitive market environment may lead to pricing pressures, affecting revenues and profitability if the company cannot compete effectively[24]. - The company faces risks from rapidly changing technologies and industry standards, which could lead to obsolescence of its data warehouse and mining facilities[30]. - The company may experience interruptions in service or technical failures, which could lead to significant costs and damage to client relationships[32]. - The company faces significant cybersecurity risks related to cryptocurrencies, which could adversely affect its operations and the value of mined cryptocurrencies[61]. Regulatory Environment - The company’s ADSs may face trading prohibitions under the Holding Foreign Companies Accountable Act if PCAOB cannot inspect auditors for three consecutive years[14]. - The company’s auditor, Audit Alliance LLP, is based in Singapore and is subject to PCAOB inspections, mitigating some risks associated with audit compliance[14]. - Regulatory changes in the PRC market could materially impact the company's planned cryptocurrency-related business operations[20]. - The PRC Cybersecurity Law mandates that personal information and important data must be stored in China, affecting critical information infrastructure operators[71]. - The PRC Data Security Law requires data processing to be conducted based on a classification and hierarchical protection system, with penalties for non-compliance[71]. - The PRC government controls currency conversion, which may limit the company's ability to utilize net revenue effectively and transfer cash across borders[75]. - The company faces regulatory scrutiny from various governmental agencies in China, which could impose added costs and operational challenges[83]. Business Operations and Strategy - The company ceased its legacy peer-to-peer lending business and shifted focus to high-technology services, including marketing data and technology solutions for insurance companies and emergency rescue services in China[126]. - The company has established a subsidiary focused on cryptocurrency mining and blockchain-based insurance, which was sold as part of disposed group assets for $17 million[142]. - The company plans to launch a decentralized wallet and exchange system for digital assets, which will include insurance services for cryptocurrencies[145]. - The company has begun penetrating the cryptocurrency mining industry, with a focus on generating units of bitcoin through mining pools[147]. - The company intends to cooperate with the SEC regarding ongoing investigations and subpoenas related to its operations[153]. Client and Revenue Concentration - The company’s top ten customers accounted for 76.2% of total sales in 2022, compared to 66.2% in 2021 and 84.3% in 2020, indicating a trend towards a more diverse customer portfolio[25]. - 24% of revenues for the twelve months ended December 31, 2022, were generated from the insurance marketing business, with three key clients contributing significantly[25]. - Yongbao Insurance Agency Co., Ltd. accounted for 63.2% of total sales in 2022, up from 43.8% in 2021, highlighting reliance on major clients[25]. Asset Management and Liabilities - The total cash and cash equivalents at the end of the year were US$ 264,434 thousand, showing a decrease due to operational losses[134]. - Total liabilities amount to US$ 409,602 thousand, with current liabilities at US$ 165,335 thousand[170]. - The company has a statutory reserve of US$ 513,945 thousand, contributing to its overall equity structure[170]. - The amount due to related parties is US$ 643 thousand, with total current liabilities including payroll payable of US$ 20,385 thousand[170]. Technological Development and Innovation - The company achieved significant R&D milestones, including the development of a blockchain inventory management system and a decentralized antivirus system[198]. - The company has a well-established data infrastructure system for data mining and analytics, differentiating it from competitors in the insurance marketing sector[138]. - The company has 99 registered software copyrights, 2 granted utility model patents, and 1 domain name, indicating a strong focus on intellectual property protection[149].