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HONG KONG, Dec. 2, 2022 /PRNewswire/ -- Lion Group Holding Ltd. ("Lion" or "the Company") (NASDAQ: LGHL), operator of an all-in-one trading platform that offers a wide spectrum of products and services and developer of new growth products that include SPAC sponsorship, NFT, and metaverse-related initiatives, today announced its unaudited financial results for the six months ended June 30, 2022.
Mr. Chunning (Wilson) Wang, CEO of Lion, commented, "Our various business lines continued to be negatively impacted by persisting headwinds in 2022, especially the sudden and rapid decline in economic activity, triggering volatile global financial markets combined with the continued effects of COVID-19. We suffered losses in CFD (contract for difference) and TRS (total return swap) trading business due to unpredictable market events, including China's stringent zero-Covid policy, the Russia and Ukraine conflict, the energy crisis, and tense China-US relations. On the positive side, our futures and securities brokerage services expanded during this period, as a result of an increase in the number of executed futures contracts."
"TRS and CFD trading are major focus areas for Lion, and given the nature of TRS and CFD trading, we understand our business can benefit from gains in good times and risk losses during more difficult times.At the same time, we are prudently managing resources, while focusing on risk management, strategically reducing costs, and trimming less meaningful business areas to help mitigate the impacts of the more difficult business environment. On the other hand, we are pleased to say that given current visibility and assuming no major macroeconomic surprises, we believe that we have seen the bottom in the first half and are seeing positive signs of improvement in our TRS and CFD income for the remainder of the year."
"As we focus on our core business, we are also being responsive to changing business conditions by working closely with our customers, while remaining laser-focused on our strategy and long-term opportunities. We have evolved to incorporate NFT and Metaverse into our core business, and we are pleased to see revenue from the sale of MetaWords NFTs achieve US$0.4 million in the first half of 2022. In addition, we aim to secure new cooperation agreement in our TRS trading business in the second half of 2022, which can bring in new customers as a result of new synergies. We have also added 83 ETFs to the basket of securities eligible for customers to trade."
FINANCIAL RESULTS
For the Six Months Ended June 30, 2022
Revenues
Total revenue for the six months ended June 30, 2022 was severely affected by trading losses in CFD and TRS trading services, resulting in negative revenues of US$(4.3) million, compared to total revenues of US$3.6 million for the six months ended June 30, 2021. Total number of revenue-generating customer accounts decreased to 4,522 as of June 30, 2022, from 5,261 as of December 31, 2021 due to the decline in Lion's insurance business.
Six months ended June 30,
2022
2021
US$
%
US$
%
(Unaudited)
(Unaudited)
Revenues
CFD trading services income (losses)
(6,911,887)
158.9
(1,079,106)
(29.9)
TRS trading services income (losses)
(798,522)
18.3
3,607,526
100.1
Futures and securities brokerage services
1,979,384
(45.5)
1,212,222
33.6
Others
1,381,294
(31.7)
(140,345)
(3.8)
Total
(4,349,731)
100.0
3,600,297
100.0
Expenses
Total expenses were US$18.0 million for the six months ended June 30, 2022, representing an increase of 31.9% yoy from US$13.7 million in the first half of 2021, primarily due to increases in commission expenses, professional fees, research and development, depreciation and impairment of mining equipment, partially offset by the decrease in service fees, change in fair value of option liabilities, change in warrants liabilities, and compensation expenses.
Income Tax Expenses
Income tax expenses decreased from US$54,367 for the six months ended June 30, 2021 to US$3,071 for the six months ended June 30, 2022, primarily due to the taxes paid in 2021 as a result of IRS examination of Proficient Alpha Acquisition Corp.'s tax return for the period ended September 30, 2019.
Net (loss) income
As a result of the above, net loss was US$22.4 million in the first half of 2022, compared to net loss of US$10.1 million in the first half of 2021. Diluted net loss per ADS was US$0.52 in the first half of 2022, compared to US$0.47 in the first half of 2021.
In the first half of 2022, the Company's weighted average number of ADSs used in calculating diluted net loss per ADS, was 40,384,040, compared to 26,732,397 in the prior year period.
Non-GAAP financial results
Non-GAAP net loss, which excludes change in fair value of warrant liabilities, stock-based compensation expenses and amortization of debt discounts, was US$19.5 million in the first half of 2022, compared to non-GAAP net loss of US$6.5 million[1] in the first half of 2021. Non-GAAP diluted net loss per ADS was US$0.48, compared to non-GAAP diluted net loss per ADS of US$0.33[2] in the first half of 2021.
Liquidity
As of June 30, 2022, the Company's cash and restricted cash were US$14.8 million, compared to US$15.8 million as of December 31, 2021 and US$15.7 million as of June 30, 2021. Net cash used in operating activities was US$0.9 million. Net cash used in investing activities was US$3.6 million. Net cash provided by financing activities was US$3.7 million.
Lion commentary on recent challenges in crypto sector
During the months of May through November 2022, market volatility in the prices of digital assets has been elevated due to a variety of factors, including, but not limited to, the macroeconomic environment (high inflation and rising interest rates) as well as the 'crypto credit crisis' brought on by the collapse and bankruptcy of a number of key players in the sector (cryptocurrency Luna collapse, hedge fund Three Arrows Capital default on loans and filing for bankruptcy, crypto-lending platform Celsius freezing all withdraws, cryptocurrency lender Voyager Digital filing for bankruptcy, crypto platform FTX filing for bankruptcy, crypto platform BlockFi filing for bankruptcy among others). The Company does not have counterparty exposure to any of the foregoing firms affected by the recent crypto credit crisis nor have its plans for NFT business operation been materially adversely impacted.
Non-GAAP Financial Measures
This press release includes reconciliations of the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. ("GAAP") to non-GAAP financial measures. The Company's calculation of Non-GAAP (loss) income (net loss or income before change in fair value of warrant liabilities, stock-based compensation, amortization of debt discounts, depreciation expenses and impairment of fixed assets) and Non-GAAP EPS differs from EPS based on net (loss) income because it does not include change in fair value of warrant liabilities, stock-based compensation, amortization of debt discounts, depreciation expenses and impairment of fixed assets, which are non-cash charges. The Company believes that these measures help the management identify underlying trends in the Company's business that could otherwise be distorted by the effect of certain expenses that the Company includes in net loss. The Company believes that these measures provide useful information about its operating results, enhance the overall understanding of its past performance and future prospects, and allow for greater comparability with respect to key metrics used by its management in its financial and operational decision-making.
For more information on the non-GAAP financial measures, please see the table, titled "Unaudited Reconciliations of Non-GAAP and GAAP Financial Results," set forth at the end of this press release.
[1] Numbers for the first half of 2021 were restated due to depreciation expenses included in the calculation of non-GAAP measures in order to keep consistent and comparable with the first half of 2022.
[2] Numbers for the first half of 2021 were restated due to depreciation expenses included in the calculation of non-GAAP measures in order to keep consistent and comparable with the first half of 2022.
About Lion
Lion Group Holding Ltd. (Nasdaq: LGHL) operates an all-in-one, state-of-the-art trading platform that offers a wide spectrum of products and services, including (i) total return service (TRS) trading, (ii) contract-for-difference (CFD) trading, (iii) insurance brokerage, and (iv) futures and securities brokerage. In addition, Lion owns a professional and experienced SPAC sponsorship team to become a leader in the SPAC arena, helping guide private companies through their listing journey while creating value for Lion itself. Lion is also fully committed to building the world's top one-stop, cross-chain, high-expansion non-fungible token (NFT) marketplace and entering metaverse space through blockchain technology. Additional information may be found at http://ir.liongrouphl.com.
Forward-Looking Statements
This press release contains, "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Lion's actual results may differ from their expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "might" and "continues," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, but are not limited to, statements about: Lion's goals and strategies; our ability to retain and increase the number of users, members and advertising customers, and expand its service offerings; Lion's future business development, financial condition and results of operations; expected changes in Lion's revenues, costs or expenditures; the impact of the COVID-19 pandemic; competition in the industry; relevant government policies and regulations relating to our industry; general economic and business conditions globally and in China; and assumptions underlying or related to any of the foregoing. Lion cautions that the foregoing list of factors is not exclusive. Lion cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Lion does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, subject to applicable law. Additional information concerning these and other factors that may impact our expectations and projections can be found in Lion's periodic filings with the SEC, including Lion's Annual Report on Form 20-F for the fiscal year ended December 31, 2021. Lion's SEC filings are available publicly on the SEC's website at www.sec.gov.
Contacts
Lion Group Holding
Tel: +852 2820 9011
Email: ir@liongrouphl.com
ICR, LLC
William Zima
Tel: +1 203 682 8233
Email: ir@liongrouphl.com
LION GROUP HOLDING LTD
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(in dollar amount)
Six Months Ended June 30,
2022
2021
Revenues
Insurance brokerage commissions
$ 340,218
$ 295,343
Securities brokerage commissions and fees
2,130,975
1,178,062
Market making commissions and fees
677,338
1,069,656
Interest income
1,894,170
304,406
Trading (loss) gains
(10,175,033)
369,484
Other income (loss)
782,601
383,346
(4,349,731)
3,600,297
Expenses and others
Commissions and fees
2,116,021
1,189,243
Compensation and benefits
1,923,259
2,383,547
Occupancy
372,628
347,660
Communication and technology
930,518
947,292
Cost of crypto mining
-
219,662
General and administrative
681,860
630,059
Professional fees
2,982,570
990,011
Research and development
4,160,033
-
Services fees
1,070,887
2,474,122
Interest
1,021,773
942,264
Depreciation
1,198,122
279,680
Marketing
391,211
553,758
Payment service charge
(2,361)
292,630
Impairment of fixed assets
1,691,079
-
Impairment of cryptocurrencies
293,619
-
Change in fair value of warrant liabilities
(759,375)
2,411,429
Other operating
(23,328)
19,474
18,048,516
13,680,831
Loss before income taxes
(22,398,247)
(10,080,534)
Income tax expense
(3,071)
(54,367)
Net loss
$ (22,401,318)
$ (10,134,901)
Net loss attributable to non-controlling interests
(2,124,600)
(36,227)
Net loss attributable to LGHL
$ (20,276,718)
$ (10,098,674)
Deemed dividend on the effect of the down round features
-
(1,021,500)
Dividends and deemed dividends on preferred shares
(546,141)
(1,562,905)
Net loss attributable to LGHL ordinary shareholders
$ (20,822,859)
$ (12,683,079)
Loss per share for both Class A and Class B
- basic and diluted
$ (0.52)
$ (0.47)
Weighted average Class A ordinary shares outstanding
- basic and diluted
35,295,167
22,690,522
Weighted average Class B ordinary shares outstanding
- basic and diluted
5,088,873
4,041,875
40,384,040
26,732,397
LION GROUP HOLDING LTD
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in dollar amount)
June 30,
December 31,
2022
2021
Assets
Current Assets
Cash and cash equivalents
$ 11,868,738
$ 15,098,151
Restricted cash-bank balances held on behalf of customers
2,942,560
653,324
Securities owned, at fair value
11,547,039
15,900,369
Receivables from broker-dealers and clearing organizations
50,775,530
87,938,377
Short-term loans receivable
3,578,046
-
Other receivables
118,506
67,352
Prepaids, deposits and other
3,616,933
8,741,735
Total current assets
84,447,352
128,399,308
Long term investment
1,492,582
1,550,314
Fixed assets, net
14,611,365
17,507,742
Right-of-use assets
1,279,030
-
Other assets
1,404,791
1,459,467
Total Assets
$ 103,235,120
$ 148,916,831
Liabilities, Mezzanine Equity and Stockholders' Equity
Liabilities
Current Liabilities
Payables to customers
$ 28,613,350
$ 35,959,925
Payables to broker-dealers and clearing organizations
31,578,383
53,101,820
Accrued expenses and other payables
1,813,313
1,623,354
Derivative liabilities, at fair value
-
554,710
Short-term borrowings
110,000
110,000
Lease liability - current
535,228
-
Due to director
154,697
161,044
Total current liabilities
62,804,971
91,510,853
Lease liability - noncurrent
819,161
-
Convertible debentures
105,000
-
Warrant liabilities
1,181,250
1,940,625
Total Liabilities
64,910,382
93,451,478
Commitments and Contingencies
Mezzanine Equity
Series B Convertible Preferred Shares - 4,000 shares authorized,
stated value of $1,000 per share, 4,000 shares issued and outstanding
at June 30, 2022 and December 31, 2021, respectively
2,980,188
1,222,771
Stockholders' Equity
Preferred shares, $0.0001 par value, 50,000,000 shares authorized
Series A Convertible Preferred Shares - 345,000 shares authorized,
stated value of $1,000 per share, 150 and 6,500 shares issued and outstanding
at June 30, 2022 and December 31, 2021, respectively
90,674
3,929,206
Class A ordinary shares, $0.0001 par value, 300,000,000 shares
authorized, 40,194,722 and 29,677,969 shares issued and outstanding
at June 30, 2022 and December 31, 2021, respectively
4,020
2,968
Class B ordinary shares, $0.0001 par value, 150,000,000 shares
authorized, 9,843,096 shares issued and outstanding
at June 30, 2022 and December 31, 2021, respectively
984
984
Additional paid in capital
59,864,908
54,057,211
Accumulated deficit
(23,206,298)
(2,929,580)
Accumulated other comprehensive losses
(238,238)
(57,532)
Total LGHL shareholders' equity
36,516,050
55,003,257
Non-controlling interest
(1,171,500)
(760,675)
Total shareholders' equity
35,344,550
54,242,582
Total Liabilities, Mezzanine Equity and Shareholders' Equity
$ 103,235,120
$ 148,916,831
LION GROUP HOLDING LTD
UNAUDITED SUMMARY OF CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS DATA
(in dollar amount)
Six months ended June 30,
2022
2021
Net cash used in operating activities
$
(904,809)
$
(24,342,405)
Net cash used in investing activities
(3,587,440)
(4,468,824)
Net cash provided by financing activities
3,668,775
39,736,327
Effect of exchange rate changes on cash
(116,703)
(21,628)
Net increase in cash and restricted cash
(940,177)
10,903,470
Cash and restricted cash at beginning of period
15,751,475
4,794,097
Cash and restricted cash at end of period
$
14,811,298
$
15,697,567
LION GROUP HOLDING LTD
UNAUDITED RECONCILIATIONS OF NON-GAAP AND GAAP FINANCIAL RESULTS
(in dollar amount)
Six months ended June 30,
2022
2021
US$
US$
Net income (loss) attributable to LGHL
(22,401,318)
(10,134,901)
Stock-based compensation
650,275
190,900
Amortization of debt discounts
105,000
783,994
Depreciation expenses
1,198,122
279,680
Impairment of fixed assets
1,691,079
-
Change in fair value of warrant liabilities
(759,375)
2,411,429
Non-GAAP income (loss) attributable to LGHL before change in fair value of warrant
liabilities, stock-based compensation, amortization of debt discounts, depreciation
expenses and impairment of fixed assets
(19,516,217)
(6,468,898)
Non-GAAP earnings (losses) per share for both Class A and Class B
- basic and diluted
(0.48)
(0.33)
Weighted average Class A ordinary shares outstanding
- basic and diluted
35,295,167
22,690,522
Weighted average Class B ordinary shares outstanding
- basic and diluted
5,088,873
4,041,875
Six months ended June 30,
2022
2021
Basic
Fully
Diluted
Basic
Fully
Diluted
Earnings (Loss) attributable to LGHL per share for both Class A and Class B
(0.55)
(0.55)
(0.47)
(0.47)
Stock-based compensation
0.02
0.02
0.01
0.01
Amortization of debt discounts
0.00
0.00
0.03
0.03
Depreciation expenses
0.03
0.03
0.01
0.01
Impairment of fixed assets
0.04
0.04
-
-
Change in fair value of warrant liabilities
(0.02)
(0.02)
0.09
0.09
Non-GAAP earnings (losses) per share for both Class A and Class B (before
change in fair value of warrant liabilities, stock-based compensation, amortization
of debt discounts, depreciation expenses and impairment of fixed assets)
(0.48)
(0.48)
(0.33)
(0.33)
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SOURCE Lion Group Holding Ltd.