F-1/A: SOS Limited Announces Offering of ADSs and Warrants to Institutional Investors

SOS Limited plans to offer ADSs and warrants to purchase ADSs to institutional investors, aiming to raise capital for general corporate purposes.

Summary

• SOS Limited has announced a best efforts offering of up to 3,865,979 American Depositary Shares (ADSs) and warrants to purchase up to 7,731,958 ADSs.
• The offering is targeted towards certain institutional investors.
• The assumed offering price is $3.88 per ADS and accompanying warrant.
• Maxim Group LLC is acting as the exclusive placement agent.
• The company intends to use the net proceeds for general corporate purposes, including working capital, construction of cryptocurrency mining hosting centers, and construction of a solar equipment factory.
• The offering is expected to close within two business days following commencement.
• The company will file with the CSRC notice of its offering of ADSs representing its Class A ordinary shares and the Warrants.

Sentiment

Score: 5

Explanation: The document is primarily factual, outlining the terms of a securities offering. While the company expresses optimism about its future, the document also acknowledges significant risks and uncertainties, resulting in a neutral sentiment score.

Positives

• The offering aims to provide additional capital for the company's growth initiatives.
• The company has a diversified business model with operations in big data, blockchain, and commodity trading.
• The company is expanding its operations in North America with the construction of a supercomputing and hosting center in Texas.

Negatives

• The offering is on a best efforts basis, and there is no guarantee that the company will raise the desired amount of capital.
• The company faces various legal and operational risks and uncertainties related to doing business in China.
• The company may be required to obtain additional licenses in relation to its ongoing business operations and may be subject to penalties for failing to obtain certain licenses with respect to its past operations.
• The company is subject to restrictions on foreign exchange and its ability to transfer cash between entities, across borders, and to U.S. investors.
• There is no public market for the warrants offered in this offering.

Risks

• The PRC government may intervene or influence the company's operations at any time.
• Changes in China's economic, political, or social conditions could have a material adverse effect on the company.
• The company may be required to obtain permission from the China Securities Regulatory Commission (CSRC) for future offerings.
• The company is subject to laws regarding cybersecurity and data protection.
• The company may be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act (HFCA ACT) if the PCAOB is unable to inspect the company's auditor.
• The company relies on dividends from its PRC subsidiaries, and any limitation on their ability to pay dividends could have a material adverse effect.
• The company's cryptocurrency mining, security, and insurance businesses are still under development and have many uncertainties.
• The company's cryptocurrency mining operations rely on a steady and inexpensive power supply.
• The company may not be able to develop its cryptocurrency mining capacity and blockchain-based technologies in a timely manner.
• Adverse changes in the regulatory environment in the PRC market could have a material adverse impact on the company's planned cryptocurrency-related business.
• The company may inadvertently violate the Investment Company Act and incur large losses.
• Banks and financial institutions may not provide banking services to businesses that engage in bitcoin-related activities.
• The company may face intense industry competition.
• The company's bitcoins and Ethereum may be subject to loss, theft, or restriction on access.
• The company's results of operations may be negatively impacted by sharp Bitcoin and Ethereum price decreases.
• The company may fail to obtain, maintain and update licenses and permits necessary to conduct our operations in the PRC, and our business may be materially and adversely affected as a result of any changes in the laws and regulations governing the VATS industry in the PRC.
• The reinforcement by China regulatory authority on supervision or law enforcement on offerings that are conducted overseas and/or foreign investment in China-based issuers, which could limit or hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline.

Future Outlook

The company plans to use the net proceeds of this offering for general corporate purposes, which could include working capital to fund daily operations, construction of cryptocurrency mining hosting centers, and construction of a solar equipment factory.

Industry Context

The announcement reflects a company seeking capital in the evolving landscape of blockchain technology and commodity trading, industries characterized by both high growth potential and significant regulatory scrutiny.

Comparison to Industry Standards

• SOS Limited's strategy of diversifying into cryptocurrency mining and hosting services mirrors the approach taken by companies like Marathon Digital Holdings and Riot Blockchain, which have invested heavily in mining infrastructure.
• The company's reliance on intercompany transfers and related party transactions is a common practice among Chinese companies listed in the U.S., but it also raises concerns about transparency and potential conflicts of interest.
• The company's efforts to comply with the HFCA Act and the PCAOB's inspection requirements are similar to those of other China-based companies listed in the U.S., such as Alibaba and Baidu.
• The company's risk factors related to doing business in China are consistent with those faced by other China-based companies listed in the U.S., such as JD.com and Pinduoduo.

Legal Proceedings

• The company is subject to a securities class action complaint filed on March 30, 2021, in the United States District Court District of New Jersey.
• The company is subject to an on-going case Number of 1:23cv02581 in District Court, Eastern District Court of New York on April 5, 2023: TRUE NORTH FINANCIAL LLC, TNA CAPITAL INC., TNA CAPITAL LLC, AND MICHAEL JALIMAN, Plaintiffs VS SOS LIMITED AND YANDAI WANG, Defendants alleging breaching of fiduciary duties in disposing off legacy business of P2P from the year of 2020 onwards.

Related Party Transactions

• The company's top ten customers take up 76.2% of our total sales compared to top 10 customers made up of our 66.2% sales in 2021 and 84.3% in 2020 respectively.
• Yongbao Insurance Agency Co, Ltd and its subsidiaries accounted 63.2% and 43.8% of total sales in the year of 2022 and 2021 respectively.
• Jiangxi Tuotong Hongli Technology Co., Ld.() accounted 6.5% and nil in the year of 2022 and 2021, respectively.
• Zhejiang Yongbao Information Technology Co., Ltd. () accounted 6.5% and nil in the year of 2022 and 2021, respectively.
• For the fiscal year ended December 31, 2022, SOS Limited transferred $79,637,006 to its subsidiaries inside China and $35,156,994 to its subsidiaries outside China.
• For the six months ended June 30, 2023, SOS Limited transferred $46,284,172 to its subsidiaries outside China.
• One of SOS Limiteds subsidiaries outside China, FD LLC, transferred $1,025,000 to SOS Limited.
• Since July 1, 2023 and until the date of this prospectus, SOS Limited has transferred, as intercompany borrowing, an aggregate of $64,797,841 to its subsidiaries outside China, mainly to SOS NY Inc. and FD LLC.
• One of SOS Limiteds subsidiaries outside China, Future Digital Trade Ltd., transferred $1,585,250 to SOS Limited.

Stakeholder Impact

• Shareholders may experience dilution as a result of the offering.
• The company's ability to grow, make investments, pay dividends, or otherwise fund and conduct its business may be materially and adversely affected.
• The company's operations could be adversely affected by changes in PRC laws and regulations.
• The company's ability to offer or continue to offer securities to investors may be limited by actions taken by the PRC government.

Next Steps

• The company will file with the CSRC notice of its offering of ADSs representing its Class A ordinary shares and the Warrants.
• The offering is expected to close within two business days following commencement.

Key Dates

Keywords

ADS, Warrants, Offering, Securities, SOS Limited, Institutional Investors, Maxim Group LLC, Registration Statement, Prospectus, China, Cryptocurrency, Blockchain