Correspondence 0001213900-22-079398 from SOS Ltd (SOS)
SOS Ltd
Date: Dec. 13, 2022 · CIK: 0001346610 · Accession: 0001213900-22-079398
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-38051
Letter
VIA EDGAR Division of Corporation Finance Office of Finance Filed January 7, 2022 Form 20-F for the fiscal period ending December 31, 2021 Filed May 2, 2022 File No. 001-38051
Dear Ms. Miller:
SOS Limited (the “Company”, “SOS,” “we”, “us” or “our”) hereby supplementally transmits its response to the letter received from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”), dated October 20, 2022 regarding our annual report on Form 20-F previously submitted on May 2, 2022 (the “Form 20-F”). For ease of reference, we have repeated the Commission’s comments in this response and numbered them accordingly.
Form 20-F for the fiscal period ending December 31, 2021
Introduction, page iii
1. We note your disclosure that “China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of your annual report only, Hong Kong and Macau, your primary reference to China and or the PRC in your risk factors with regard to operating, regulatory, legal, and governmental authorities and the flow of capital contributions/loans and or dividends/distributions through China SOS Limited, your wholly-owned subsidiary located in Hong Kong, and your PRC subsidiaries and the consolidated VIEs as reflected in your diagram on page 11. Please address the following:
● Either remove the exclusion of Hong Kong and Macau from your definition of China or the PRC and clarify that the same legal and operational risks associated with operations in China also apply to operation in Hong Kong or disclose how any regulatory actions related to data security or anti-monopoly concerns in Hong Kong or Macau have or may impact the company’s ability to conduct its business, accept foreign investments, or list on a U.S. or foreign exchange.
● Provide risk factor disclosure to explain whether there are any commensurate laws or regulations in Hong Kong or Macau which result in oversight over data security and explain how this oversight impacts your business and to what extent you believe you are compliant with the regulations or policies that have been issued.
● Expand your “Enforceability of Civil Liability” discussion to address enforceability of civil liabilities in Hong Kong and Macau.
Provide us with your proposed disclosure.
Response: In response to the Staff’s comment, please see the revised disclosure below.
● “China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Taiwan;
Part 1, page 1
2. We note your response and revised disclosures in the 2021 Form 20-F in response to prior comment 1. Please address the following:
● Revise references of “our VIE”, “the Company’s VIE” and “our VIE agreements” on pages 1, 3, 7, 26, 27, 30, 36 and 55 to “the VIE(s)” to reflect the contractual nature of the VIE agreements.
● Remove your disclosures on pages 1, 2 and 26 that “the assets and liabilities of the VIE are treated as our assets and liabilities and the results of operations of the VIE are treated in all aspects as if they were the results of our operations” and “under generally accepted accounting principles in the United States (“U.S. GAAP”), the assets and liabilities of the VIE are treated as our assets and liabilities and the results of operations of the VIE are treated in all aspects as if they were the results of our operations” and instead disclose the conditions you satisfied for consolidation of the VIE under U.S. GAAP.
Provide us with your proposed disclosure.
Response: In response to the Staff’s comment, please see the revised disclosure below.
● Page 1 - The VIE Agreements may not be effective in providing control over the VIE.
● Page 3 - The VIE Agreements may not be effective in providing control over the VIE.
● Page 7 - Our ADSs are shares of our Cayman Islands holding company instead of shares of the VIE in China.
● Page 26 - Because of the practical restrictions on direct foreign equity ownership imposed by provincial government authorities, we must rely on contractual rights through the VIE structure to effect control over and management of the VIE, which exposes us to the risk of potential breach of contract by the shareholders of the VIE.
● Page 27 - If the PRC courts or regulatory authorities determine that our contractual arrangements are in violation of applicable PRC laws, rules or regulations, the VIE Agreements will become invalid or unenforceable, and the VIE will not be treated as VIE entities and we will not be entitled to treat the VIE’s assets, liabilities and results of operations as our assets, liabilities and results of operations, which could effectively eliminate the assets, revenue and net income of the VIE from our balance sheet, which would most likely require us to cease conducting our business and would result in the delisting of our ADSs from the New York Stock Exchange and a significant impairment in the market value of our ADSs.
● Page 27 - As all of the VIE Agreements with the VIE are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures.
● Page 30 - In any of these cases, it will be uncertain whether the VIE Agreements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations.
● Page 36 - In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements our WFOEs currently have in place with the VIEs in a manner that would materially and adversely affect their ability to pay dividends and other distributions to us.
● Page 55 - Total assets and liabilities presented on the Company’s consolidated balance sheets and revenue, expense, net income presented on consolidated statement of operations and comprehensive income as well as the cash flow from operating, investing and financing activities presented on the consolidated statement of cash flows are substantially the financial position, operation and cash flow of the VIE and the VIE’s subsidiaries.
We are a Cayman Islands holding company conducting a portion of our operations in China through Qingdao SOS Industrial Holding Co., Ltd., a variable interest entity (“VIE”), and its subsidiaries. Investors of our ADSs are not investing in the VIE. Neither we nor our subsidiaries own any share in the VIE. Instead, for accounting purposes, we control and receive the economic benefits of the VIE’s business operation through a series of contractual arrangements, also known as VIE Agreements, dated May 14, 2020, which enables us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under U.S. GAAP. The consolidation of the VIEs under U.S. GAAP are limited to the following conditions that we have met: (i) we controls the VIE through power to govern the activities which most significantly impact the VIE’s economic performance, (ii) We are contractually obligated to absorb losses of the VIE that could potentially be significant to the VIE, and (iii) we are entitled to receive benefits from the VIE that could potentially be significant to the VIE. Only if we meet the aforementioned conditions for consolidation of the VIE under U.S. GAAP, will we be deemed as the primary beneficiary of the VIE, and the VIE will be treated as our consolidated affiliated entities for accounting purposes.
3. Please enhance your disclosure at the onset of Part 1 to disclose that uncertainty with regard to the PRC regulatory environment could cause the value of your ADS to significantly decline in value or become worthless. Provide us with your proposed disclosure.
Response: In response to the Staff’s comment, please see the revised disclosure below.
Uncertainties in the PRC legal system and the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us, hinder our ability and the ability of any holder of our securities to offer or continue to offer such securities, result in a material adverse change to our business operations, and damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our ADSs to significantly decline in value or become worthless.
Item 3. Key Information, page 2
4. We note your response prior comment 2 and your proposed enhanced disclosures. Please address the following:
● Currently your SOS Organization Chart diagram reflects solid lines between all entities. Revise to present dashed lines for your VIE contractual agreements to clearly differentiate from your equity interests.
Clarify the legal entity of “the operating entity in China” in the related SOS Organization Chart diagram disclosures and reflect with an arrow from and to, the ability to pay dividends and other distributions of equity as well as consulting and service fees.
● You disclose that subsidiaries inside China refers to the VIE’s subsidiaries, including SOS Information Technology Co., Ltd (“SOSIT”), Inner Mongolia SOS Insurance Agency Co., Ltd (“IMSOS”); and directly owned subsidiaries including SOS International Trading Co., Ltd (“SOSINT”), Qingdao SOS Investment LLP (“SOSIL”), Qingdao SOS Digital Technologies Ltd. (“SOSDT”), Common Prosperity Technology Co., Ltd. (“SOSCP”), SOS Ronghe Digital Technology Co., Ltd. (“SOSRD”), Weigou International Trading Co., Ltd (“SOSWI”), Shuyun International Trading Co., Ltd (“SOSSI”), SOS Auto Service Co., Ltd. (“SOSAS”), and Chexiaoer Technology Co., Ltd (“SOSCX”). Please reconcile this disclosure to your definition of variable interest entity(ies) on page iii, to your disclosures on page F-7 of entities, legal structure and or contractual relationship, including that SOSRD is a 31.22% subsidiary of SOSIT versus the 69% how Qingdao Enterprise Co. Ltd is reflected on page 4, to your related disclosures beginning on page F-28.
● Clarify your disclosures that as of December 31, 2021 and 2020, the VIE accounted for an aggregate of 99% and 100%, respectively, of your consolidated total assets, 99% and 100% respectively, of your consolidated total liabilities, and 100% and 100% respectively, of your consolidated total net revenues since your consolidating financial schedules on pages F-30 through F-38 and the VIE column reflect immaterial activity for the periods presented.
● Disclose in Item 3., consolidating schedules of your financial position and operations, together with related cash flows consistent with your audited consolidating financial schedules on pages F-30 through F-38.
● Disclose a roll-forward of investments in subsidiaries outside China, in WFOE and in China SOS that reconciles beginning and or ending balance, plus or minus equity in earnings of VIEs, equity in earnings of subsidiaries, foreign currency translation and other in arriving at investments in subsidiaries outsid
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CORRESP
1
filename1.htm
SOS
Limited
Building
6, East Seaview Park
298
Haijing Road, Yinzhu Street
West
Coast New District, Qingdao City, Shandong Province
People’s
Republic of China
December
13, 2022
VIA
EDGAR
Michelle
Miller
U.S.
Securities and Exchange Commission
Division
of Corporation Finance
Office
of Finance
100
F Street, N.E.
Mail
Stop 4631
Washington,
DC 20549
Re:
SOS Limited
Form 20-F for the fiscal
period ending December 31, 2020
Filed
May 5, 2021
Form
20-F/A for the fiscal period ending December 31, 2020
Filed
October 12, 2021
Form
20-F/A for the fiscal period ending December 31, 2020
Filed
January 7, 2022
Form
20-F for the fiscal period ending December 31, 2021
Filed
May 2, 2022
File No. 001-38051
Dear
Ms. Miller:
SOS
Limited (the “Company”, “SOS,” “we”, “us” or “our”)
hereby supplementally transmits its response to the letter received from the staff (the “Staff”) of the Securities
and Exchange Commission (the “Commission”), dated October 20, 2022 regarding our annual report on Form 20-F previously
submitted on May 2, 2022 (the “Form 20-F”). For ease of reference, we have repeated the Commission’s comments
in this response and numbered them accordingly.
Form
20-F for the fiscal period ending December 31, 2021
Introduction,
page iii
1. We
note your disclosure that “China” or the “PRC” refers to the People’s
Republic of China, excluding, for the purposes of your annual report only, Hong Kong and
Macau, your primary reference to China and or the PRC in your risk factors with regard to
operating, regulatory, legal, and governmental authorities and the flow of capital contributions/loans
and or dividends/distributions through China SOS Limited, your wholly-owned subsidiary located
in Hong Kong, and your PRC subsidiaries and the consolidated VIEs as reflected in your diagram
on page 11. Please address the following:
● Either
remove the exclusion of Hong Kong and Macau from your definition of China or the PRC and
clarify that the same legal and operational risks associated with operations in China also
apply to operation in Hong Kong or disclose how any regulatory actions related to data security
or anti-monopoly concerns in Hong Kong or Macau have or may impact the company’s ability
to conduct its business, accept foreign investments, or list on a U.S. or foreign exchange.
● Provide
risk factor disclosure to explain whether there are any commensurate laws or regulations
in Hong Kong or Macau which result in oversight over data security and explain how this oversight
impacts your business and to what extent you believe you are compliant with the regulations
or policies that have been issued.
● Expand
your “Enforceability of Civil Liability” discussion to address enforceability
of civil liabilities in Hong Kong and Macau.
Provide
us with your proposed disclosure.
Response:
In response to the Staff’s comment, please see the revised disclosure below.
● “China”
or the “PRC” refers to the People’s Republic of China, excluding, for the
purposes of this annual report only, Taiwan;
Part
1, page 1
2. We
note your response and revised disclosures in the 2021 Form 20-F in response to prior comment
1. Please address the following:
● Revise
references of “our VIE”, “the Company’s VIE” and “our
VIE agreements” on pages 1, 3, 7, 26, 27, 30, 36 and 55 to “the VIE(s)”
to reflect the contractual nature of the VIE agreements.
● Remove
your disclosures on pages 1, 2 and 26 that “the assets and liabilities of the VIE are
treated as our assets and liabilities and the results of operations of the VIE are treated
in all aspects as if they were the results of our operations” and “under generally
accepted accounting principles in the United States (“U.S. GAAP”), the assets
and liabilities of the VIE are treated as our assets and liabilities and the results of operations
of the VIE are treated in all aspects as if they were the results of our operations”
and instead disclose the conditions you satisfied for consolidation of the VIE under U.S.
GAAP.
Provide
us with your proposed disclosure.
Response:
In response to the Staff’s comment, please see the revised disclosure below.
● Page
1 - The VIE Agreements may not be effective in providing control over the VIE.
● Page
3 - The VIE Agreements may not be effective in providing control over the VIE.
● Page
7 - Our ADSs are shares of our Cayman Islands holding company instead of shares of the VIE
in China.
● Page
26 - Because of the practical restrictions on direct foreign equity ownership imposed by
provincial government authorities, we must rely on contractual rights through the VIE structure
to effect control over and management of the VIE, which exposes us to the risk of potential
breach of contract by the shareholders of the VIE.
● Page
27 - If the PRC courts or regulatory authorities determine that our contractual arrangements
are in violation of applicable PRC laws, rules or regulations, the VIE Agreements will become
invalid or unenforceable, and the VIE will not be treated as VIE entities and we will not
be entitled to treat the VIE’s assets, liabilities and results of operations as our
assets, liabilities and results of operations, which could effectively eliminate the assets,
revenue and net income of the VIE from our balance sheet, which would most likely require
us to cease conducting our business and would result in the delisting of our ADSs from the
New York Stock Exchange and a significant impairment in the market value of our ADSs.
● Page
27 - As all of the VIE Agreements with the VIE are governed by the PRC laws and provide for
the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance
with PRC law and any disputes would be resolved in accordance with PRC legal procedures.
● Page
30 - In any of these cases, it will be uncertain whether the VIE Agreements will be deemed
to be in violation of the market access requirements for foreign investment under the PRC
laws and regulations.
● Page
36 - In addition, the PRC tax authorities may require us to adjust our taxable income under
the contractual arrangements our WFOEs currently have in place with the VIEs in a manner
that would materially and adversely affect their ability to pay dividends and other distributions
to us.
2
● Page
55 - Total assets and liabilities presented on the Company’s consolidated balance sheets
and revenue, expense, net income presented on consolidated statement of operations and comprehensive
income as well as the cash flow from operating, investing and financing activities presented
on the consolidated statement of cash flows are substantially the financial position, operation
and cash flow of the VIE and the VIE’s subsidiaries.
We
are a Cayman Islands holding company conducting a portion of our operations in China through Qingdao SOS Industrial Holding Co., Ltd.,
a variable interest entity (“VIE”), and its subsidiaries. Investors of our ADSs are not investing in the VIE. Neither we
nor our subsidiaries own any share in the VIE. Instead, for accounting purposes, we control and receive the economic benefits of the
VIE’s business operation through a series of contractual arrangements, also known as VIE Agreements, dated May 14, 2020, which
enables us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under U.S. GAAP.
The consolidation of the VIEs under U.S. GAAP are limited to the following conditions that we have met: (i) we controls the VIE through
power to govern the activities which most significantly impact the VIE’s economic performance, (ii) We are contractually obligated
to absorb losses of the VIE that could potentially be significant to the VIE, and (iii) we are entitled to receive benefits from the
VIE that could potentially be significant to the VIE. Only if we meet the aforementioned conditions for consolidation of the VIE under
U.S. GAAP, will we be deemed as the primary beneficiary of the VIE, and the VIE will be treated as our consolidated affiliated entities
for accounting purposes.
3. Please
enhance your disclosure at the onset of Part 1 to disclose that uncertainty with regard to
the PRC regulatory environment could cause the value of your ADS to significantly decline
in value or become worthless. Provide us with your proposed disclosure.
Response:
In response to the Staff’s comment, please see the revised disclosure below.
Uncertainties
in the PRC legal system and the interpretation and enforcement of PRC laws and regulations could limit the legal protections available
to you and us, hinder our ability and the ability of any holder of our securities to offer or continue to offer such securities, result
in a material adverse change to our business operations, and damage our reputation, which would materially and adversely affect our financial
condition and results of operations and cause our ADSs to significantly decline in value or become worthless.
Item
3. Key Information, page 2
4. We
note your response prior comment 2 and your proposed enhanced disclosures. Please address
the following:
● Currently
your SOS Organization Chart diagram reflects solid lines between all entities. Revise to
present dashed lines for your VIE contractual agreements to clearly differentiate from your
equity interests.
Clarify
the legal entity of “the operating entity in China” in the related SOS Organization Chart diagram disclosures and reflect
with an arrow from and to, the ability to pay dividends and other distributions of equity as well as consulting and service fees.
● You
disclose that subsidiaries inside China refers to the VIE’s subsidiaries, including
SOS Information Technology Co., Ltd (“SOSIT”), Inner Mongolia SOS Insurance Agency
Co., Ltd (“IMSOS”); and directly owned subsidiaries including SOS International
Trading Co., Ltd (“SOSINT”), Qingdao SOS Investment LLP (“SOSIL”),
Qingdao SOS Digital Technologies Ltd. (“SOSDT”), Common Prosperity Technology
Co., Ltd. (“SOSCP”), SOS Ronghe Digital Technology Co., Ltd. (“SOSRD”),
Weigou International Trading Co., Ltd (“SOSWI”), Shuyun International Trading
Co., Ltd (“SOSSI”), SOS Auto Service Co., Ltd. (“SOSAS”), and Chexiaoer
Technology Co., Ltd (“SOSCX”). Please reconcile this disclosure to your definition
of variable interest entity(ies) on page iii, to your disclosures on page F-7 of entities,
legal structure and or contractual relationship, including that SOSRD is a 31.22% subsidiary
of SOSIT versus the 69% how Qingdao Enterprise Co. Ltd is reflected on page 4, to your related
disclosures beginning on page F-28.
3
● Clarify
your disclosures that as of December 31, 2021 and 2020, the VIE accounted for an aggregate
of 99% and 100%, respectively, of your consolidated total assets, 99% and 100% respectively,
of your consolidated total liabilities, and 100% and 100% respectively, of your consolidated
total net revenues since your consolidating financial schedules on pages F-30 through F-38
and the VIE column reflect immaterial activity for the periods presented.
● Disclose
in Item 3., consolidating schedules of your financial position and operations, together with
related cash flows consistent with your audited consolidating financial schedules on pages
F-30 through F-38.
● Disclose
a roll-forward of investments in subsidiaries outside China, in WFOE and in China SOS that
reconciles beginning and or ending balance, plus or minus equity in earnings of VIEs, equity
in earnings of subsidiaries, foreign currency translation and other in arriving at investments
in subsidiaries outsid