Lion Announces Unaudited Full Year 2022 Financial Results
HONG KONG, April 28, 2023 /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, today announced its unaudited financial results for the full year ended December 31, 2022.
Mr. Chunning (Wilson) Wang, CEO of Lion, commented, "In 2022, the unprecedented combination of global financial market fluctuation and volatility, pandemic-driven excessive restrictions, and customers' compounded reluctance to invest and trade created enormous headwinds for our various business lines, affecting earnings and margins. Although we are still suffering losses in CFD (contract for difference) and TRS (total return swap) trading business due to unpredictable market events, we have seen reversal begin in the second half of 2022. Thanks to our conservative trading strategies, we have also seen positive signs of revenue improvement in the second half of 2022 as well as in the last few months of 2023."
"At the same time, we are prudently managing operating leverage amidst weak market-wide demand to reduce margin pressure. Our general and administrative expenses decreased by 39.1% year-over-year in 2022 as a result of our internal cost control efforts. We will continue to focus on operating leverage management and enhancing operational efficiency."
"With the lifting of the COVID-zero policy in China, we are seeing macroeconomic recovery and business improvements, while we are watching the macroeconomic risks carefully. As we look at 2023, we are confident that the operating environment will improve and the global financial market will be stabilized, and we continue to diligently manage the business in order to best position the Company for future growth and value creation," Mr. Wang concluded.
FINANCIAL RESULTS
For the Full Year ended December 31, 2022
Revenues
Total revenue for the year ended December 31, 2022 was largely affected by trading losses in CFD and TRS trading services, resulting in revenues (losses) of US$(2.5) million, compared to total revenues of US$25.0 million for the full year ended December 31, 2021. Total number of revenue-generating customer accounts decreased to 4,526 as of December 31, 2022, from 5,261 as of December 31, 2021 mainly due to the decline in Lion's insurance business.
- CFD Trading Services Income (Losses). Revenue generated from CFD trading services decreased by US$15.4 million from an income of US$8.7 million for the year ended December 31, 2021 to a loss of US$(6.7) million for the year ended December 31, 2022, primarily attributable to an increase of US$11.9 million in trading losses and a decrease of US$3.5 million in commission income. CFD trading losses increased from trading gains of US$4.4 million for the year ended December 31, 2021 to losses of US$(7.5) million for the year ended December 31, 2022. The Company has suffered significant losses from acting as a counterparty to our clients' CFD trades in 2022, particularly in the first half, as a result of fluctuation and volatility of the global financial markets in reaction to a series of unpredictable events, such as the Russia and Ukraine conflict, Europe's energy crisis, surging inflation, climbing interest rates in the U.S. and Europe, China's housing market slump, etc.. These events impacted major stock indexes, commodity markets including crude oil and metal, and the foreign exchange market. Market making commission income decreased from $4.3 million for the year ended December 31, 2021 to $0.8 million for the year ended December 31, 2022, which was mainly attributable to China's tightened restrictions on promotion and advertisements related to internet financial products and services, leading to a significant decrease in the number of new accounts opened through online advertising. Total revenue-generating CFD trading client accounts slightly decreased to 2,818 accounts as of December 31, 2022, from 2,866 accounts as of December 31, 2021. CFD trading volume decreased to 116,607 lots for the year ended December 31, 2022, from 453,687 lots for the year ended December 31, 2021.
- TRS Trading Services Income (Losses). Revenue generated from TRS trading services decreased by US$13.8 million from an income of US$13.2 million for the year ended December 31, 2021 to a loss of US$(0.6) million for the year ended December 31, 2022, due to the trading losses from proprietary TRS trading activities, which decreased by US$15.0 million from an income of US$11.1 million to a loss of US$(3.9) million, and a decrease of US$0.2 million in commissions and other income partially offset by an increase of US$1.4 million in interest income earned on loans provided to TRS trading customers. Our proprietary TRS trading activities suffered significant losses from Chinese stock markets' high fluctuations in 2022, which was caused by China's dismal economic outlook, renewed lock-downs in cities across China resulting from the stringent zero-Covid policy, heightened geopolitical tensions such as U.S.-China relations, escalated friction over the Taiwan Strait, and unpredictable regional military conflict worldwide, etc. Total revenue-generating TRS trading client accounts increased to 226 accounts as of December 31, 2022, from 180 accounts as of December 31, 2021. TRS trading volume was $484 million and $1,074 million for the years ended December 31, 2022 and 2021, respectively.
- Futures and Securities Brokerage Services. Revenues from futures and securities brokerage services increased from US$2.8 million for the year ended December 31, 2021 to US$3.3 million for the year ended December 31, 2022 as a result of an increase in the number of executed futures contracts, primarily due to Hong Kong's economic rebound as the local pandemic subsided starting in 2021 and sophisticated investors wanted to take advantage of the volatile markets and allocated more to speculative trading. Total revenue-generating futures trading client accounts increased to 177 accounts from 149 accounts. Futures brokerage trading volume increased by 15.4% to 1,298,452 lots from 1,124,805 lots.
- Others. Other income increased by US$1.2 million from US$0.3 million for the year ended December 31, 2021, to US$1.5 million for the year ended December 31, 2022. The increase in other income was primarily attributed to trading gains from OTC call options of US$0.9 million, sale of MetaWords NFTs of US$0.4 million and interest, other income of US$0.7 million generated in 2022, and the decrease of US$0.9 million in trading losses from exchange-traded stock, offset by the decrease of US$1.7 million in Bitcoin mining income as the Company ceased Bitcoin mining operations in October 2021.
Year ended December 31, | |||||||||
2022 | 2021 | ||||||||
US$ | % | US$ | % | ||||||
Revenues | |||||||||
CFD trading services | (6,694,312) | 269.6 | 8,700,009 | 34.8 | |||||
TRS trading services | (595,871) | 24.0 | 13,182,716 | 52.7 | |||||
Futures and securities brokerage services | 3,284,729 | (132.3) | 2,800,543 | 11.2 | |||||
Others | 1,522,954 | (61.3) | 309,444 | 1.3 | |||||
Total | (2,482,500) | 100.0 | 24,992,712 | 100.0 | |||||
Expenses
Our total expenses increased by 22.2% from US$25.8 million for the year ended December 31, 2021 to US$31.5 million for the year ended December 31, 2022, primarily due to increases in research and development, communication and technology expenses, marketing expenses, depreciation and impairment of mining equipment, partially offset by the decrease in service fees, compensation expenses, change in fair value of warrants liabilities, and cost of crypto mining.
- Commission and fees expenses decreased by 3.6% to US$3.2 million from US$3.3 million in the prior year period, primarily due to a decrease in TRS trading commission expenses of US$0.4 million, partially offset by an increase in our futures brokerage commission expenses of US$0.3 million, which is in line with the overall trend of such businesses.
- Compensation expenses decreased by 11.0% to US$3.6 million from US$4.1 million in the prior year period, primarily due to the discretionary bonus paid out in 2021.
- Occupancy expenses slightly increased to US$826,254 from US$778,881 in the prior year period.
- Communication and technology expenses increased by 75.8% to US$3.4 million from US$1.9 million in the prior year period, primarily due to an increase in acquiring external information technology service and market data.
- Cost of crypto mining was US$1.2 million for the year ended December 31, 2021. There has been no crypto mining operation since October 2021.
- General and administrative expenses decreased by 39.1% to US$1.2 million from US$2.0 million in the prior year period, primarily resulting from the internal cost control measures.
- Professional fees slightly decreased by 3.1% to US$3.7 million from US$3.8 million in the prior year period, remaining comparable to the corresponding period in 2021.
- Research and development expenses increased to US$4.7 million from US$1.2 million. The increased expenses were mainly incurred in connection with developing and enhancing the Company's Metaverse project.
- Service fees decreased by 45.3% to US$2.0 million from US$3.6 million in the prior year period, due to a one-off special incentive scheme for the year ended December 31, 2021.
- Interest expenses increased by 45.2% to US$2.3 million from US$1.6 million in the prior year period, mainly attributable to an increase of US$0.8 million in the interest we paid for loans borrowed from our TRS trading service business partners, offset by a decrease of US$0.1 million in the interest and the amortization of debt discounts from convertible debentures.
- Depreciation expenses increased to US$2.0 million from US$0.9 million in the prior year period, mainly attributable to the depreciation of acquired copyrighted trading software programs related to CFD and TRS trading services in 2021.
- Marketing expenses increased to US$3.7 million from US$0.9 million in the prior year period, mainly attributable to an increase in acquiring external marketing resources to developing marketing strategies, providing marketing analysis and setting and implementing marketing plans to promote existing and newly-launched products and services.
- Impairment of fixed assets was US$1.7 million resulting from the full impairment of mining equipment.
- Impairment of cryptocurrencies was US$0.3 million resulting from the impairment charges of the BNB and wBNB tokens.
- Other expenses were US$32,406, compared to US$144,175 in the prior year period.
Income Tax Expenses
Income tax expenses decreased from US$54,367 for the year ended December 31, 2021 to US$3,419 for the year ended December 31, 2022, primarily due to the taxes paid in 2021 as a result of IRS examination of PAAC's tax return for the period ended September 30, 2019.
Net (loss) income
As a result of the above, net loss was US$34.0 million for the year ended December 31, 2022, compared to a net loss of US$0.8 million for the year ended December 31, 2021. Diluted net loss per ADS was US$0.70 for the year ended December 31, 2022, compared to a diluted net loss per ADS of US$0.27 for the year ended December 31, 2021.
For the full year of 2022, the Company's weighted average number of ADSs used in calculating diluted net loss per ADS, was 45,974,492, compared to 30,088,087 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, amortization of debt discounts, depreciation expenses and impairment of fixed assets was US$27.1 million for the year ended December 31, 2022, compared to non-GAAP net income of US$3.0 million for the year ended December 31, 2021. Non-GAAP diluted net loss per ADS was US$0.59 for the year of 2022, compared to non-GAAP diluted net income per ADS of US$0.09 in the prior year period.
Liquidity
As of December 31, 2022, the Company's cash and restricted cash were US$14.4 million, compared to US$15.8 million as of December 31, 2021. Net cash used in operating activities was US$4.0 million. Net cash used in investing activities was US$7.1 million. Net cash provided by financing activities was US$9.8 million.
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.
About Lion
Lion Group Holding LTD. (NASDAQ:LGHL) operates an all-in one, state-of-the-art trading platform that offer 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.
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, Hong Kong, and Southeast Asia; 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, 2022. 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: [email protected]
ICR, LLC
William Zima
Tel: +1 203 682 8233
Email: [email protected]
Lion Group Holding Limited | |||||||||||
Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||||||
(in dollar amount) | |||||||||||
Years Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
Revenues (losses) | |||||||||||
Insurance brokerage commissions | $ 455,394 | $ 542,795 | |||||||||
Securities brokerage commissions and fees | 3,412,644 | 3,188,684 | |||||||||
Market making commissions and fees | 781,878 | 4,324,650 | |||||||||
Interest income | 3,229,716 | 1,351,318 | |||||||||
Trading (loss) gains | (11,467,969) | 13,379,146 | |||||||||
Other income | 1,105,837 | 2,206,119 | |||||||||
(2,482,500) | 24,992,712 | ||||||||||
Expenses and others | |||||||||||
Commissions and fees | 3,198,934 | 3,317,692 | |||||||||
Compensation and benefits | 3,620,506 | 4,069,203 | |||||||||
Occupancy | 826,254 | 778,881 | |||||||||
Communication and technology | 3,392,794 | 1,929,981 | |||||||||
Cost of crypto mining | - | 1,163,846 | |||||||||
General and administrative | 1,228,572 | 2,016,582 | |||||||||
Professional fees | 3,716,839 | 3,836,817 | |||||||||
Research and development | 4,693,995 | 1,205,040 | |||||||||
Services fees | 1,956,785 | 3,574,579 | |||||||||
Interest | 2,334,598 | 1,608,100 | |||||||||
Depreciation | 2,032,386 | 916,916 | |||||||||
Marketing | 3,743,567 | 913,675 | |||||||||
Payment service charge | (12,407) | (181,249) | |||||||||
Impairment of fixed assets | 1,690,028 | - | |||||||||
Impairment of cryptocurrencies | 293,619 | - | |||||||||
Change in fair value of warrant liabilities | (1,260,354) | 470,804 | |||||||||
Other operating | 32,406 | 144,175 | |||||||||
31,488,522 | 25,765,042 | ||||||||||
Loss before income taxes | (33,971,022) | (772,330) | |||||||||
Income tax expense | (3,419) | (54,367) | |||||||||
Net loss | $ (33,974,441) | $ (826,697) | |||||||||
Net loss attributable to non-controlling interests | (2,411,158) | (849,479) | |||||||||
Net (loss) gain attributable to LGHL | $ (31,563,283) | $ 22,782 | |||||||||
Deemed dividend on the effect of the down round features | - | (6,354,500) | |||||||||
Dividends and deemed dividends on preferred shares | (595,208) | (1,810,204) | |||||||||
Net loss attributable to LGHL ordinary shareholders | $ (32,158,491) | $ (8,141,922) | |||||||||
Loss per share for both Class A and Class B | |||||||||||
- basic and diluted | $ (0.70) | $ (0.27) | |||||||||
Weighted average Class A ordinary shares outstanding | |||||||||||
- basic and diluted | 40,438,604 | 26,046,212 | |||||||||
Weighted average Class B ordinary shares outstanding | |||||||||||
- basic and diluted | 5,535,888 | 4,041,875 | |||||||||
Lion Group Holding Limited | |||||||||
Consolidated Balance Sheets | |||||||||
(in dollar amount) | |||||||||
December 31, | |||||||||
2022 | 2021 | ||||||||
Assets | |||||||||
Current Assets | |||||||||
Cash and cash equivalents | $ 11,159,610 | $ 15,098,151 | |||||||
Restricted cash-bank balances held on behalf of customers | 3,242,989 | 653,324 | |||||||
Securities owned, at fair value | 11,104,047 | 15,900,369 | |||||||
Receivables from broker-dealers and clearing organizations | 33,342,254 | 87,938,377 | |||||||
Short-term loans receivable | 7,126,021 | - | |||||||
Other receivables | 534,437 | 67,352 | |||||||
Prepaids, deposits and other | 2,534,684 | 8,741,735 | |||||||
Total current assets | 69,044,042 | 128,399,308 | |||||||
Long term investment | 1,436,142 | 1,550,314 | |||||||
Fixed assets, net | 13,786,344 | 17,507,742 | |||||||
Right-of-use assets | 1,160,563 | - | |||||||
Other assets | 1,207,293 | 1,459,467 | |||||||
Total Assets | $ 86,634,384 | $ 148,916,831 | |||||||
Liabilities, Mezzanine Equity and Stockholders' Equity | |||||||||
Liabilities | |||||||||
Current Liabilities | |||||||||
Payables to customers | $ 23,829,192 | $ 35,959,925 | |||||||
Payables to broker-dealers and clearing organizations | 24,963,524 | 53,101,820 | |||||||
Accrued expenses and other payables | 1,923,305 | 1,623,354 | |||||||
Derivative liabilities, at fair value | 2,292,056 | 554,710 | |||||||
Short-term borrowings | 110,000 | 110,000 | |||||||
Lease liability - current | 601,531 | - | |||||||
Due to director | 146,671 | 161,044 | |||||||
Total current liabilities | 53,866,279 | 91,510,853 | |||||||
Lease liability - noncurrent | 618,705 | - | |||||||
Convertible debentures | 4,061,735 | - | |||||||
Warrant liabilities | 675,000 | 1,940,625 | |||||||
Total Liabilities | 59,221,719 | 93,451,478 | |||||||
Commitments and Contingencies | |||||||||
Mezzanine Equity | |||||||||
Series B Convertible Preferred Shares - 4,000 shares authorized, | |||||||||
stated value of $1,000 per share, nil and 4,000 shares issued and outstanding | |||||||||
at December 31, 2022 and 2021, respectively | - | 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, nil and 6,500 shares issued and outstanding | |||||||||
at December 31, 2022 and 2021, respectively | - | 3,929,206 | |||||||
Class A ordinary shares, $0.0001 par value, 300,000,000 shares | |||||||||
authorized, 48,761,596 and 29,677,969 shares issued and outstanding | |||||||||
at December 31, 2022 and 2021, respectively | 4,876 | 2,968 | |||||||
Class B ordinary shares, $0.0001 par value, 150,000,000 shares | |||||||||
authorized, 9,843,096 shares issued and outstanding | |||||||||
at December 31, 2022 and 2021, respectively | 984 | 984 | |||||||
Additional paid in capital | 63,660,939 | 54,057,211 | |||||||
Accumulated deficit | (34,492,863) | (2,929,580) | |||||||
Accumulated other comprehensive losses | (303,213) | (57,532) | |||||||
Total LGHL shareholders' equity | 28,870,723 | 55,003,257 | |||||||
Non-controlling interest | (1,458,058) | (760,675) | |||||||
Total shareholders' equity | 27,412,665 | 54,242,582 | |||||||
Total Liabilities, Mezzanine Equity and Shareholders' Equity | $ 86,634,384 | $ 148,916,831 | |||||||
Lion Group Holding Limited | ||||||
Summary of Condensed Consolidated Statement of Cash Flows Data | ||||||
(in dollar amount) | ||||||
Year ended December 31, | ||||||
2022 | 2021 | |||||
Net cash used in operating activities | $ | (3,940,552) | $ | (20,482,499) | ||
Net cash used in investing activities | (7,093,339) | (12,104,687) | ||||
Net cash provided by financing activities | 9,808,775 | 43,578,397 | ||||
Effect of exchange rate changes on cash | (123,760) | (33,833) | ||||
Net (decrease) increase in cash and restricted cash | (1,348,876) | 10,957,378 | ||||
Cash and restricted cash at beginning of year | 15,751,475 | 4,794,097 | ||||
Cash and restricted cash at end of year | $ | 14,402,599 | $ | 15,751,475 | ||
Lion Group Holding Limited | ||||
Reconciliations of Non-GAAP and GAAP Financial Results | ||||
(in dollar amount) | ||||
Year ended December 31, | ||||
2022 | 2021 | |||
US$ | US$ | |||
Net (loss) income attributable to LGHL | $ (31,563,283) | $ 22,782 | ||
Stock-based compensation | 1,300,550 | 381,800 | ||
Amortization of debt discounts | 658,680 | 783,994 | ||
Depreciation expenses | 2,032,386 | 1,295,470 | ||
Impairment of fixed assets | 1,690,028 | - | ||
Change in fair value of warrant liabilities | (1,260,354) | 470,804 | ||
Non-GAAP (loss) income attributable to LGHL before change in | $ (27,141,993) | $ 2,954,850 | ||
Non-GAAP (losses) earnings per share for both Class A and Class B | ||||
- basic | $ (0.59) | $ 0.10 | ||
- diluted | $ (0.59) | $ 0.09 | ||
Weighted average Class A ordinary shares outstanding | ||||
- basic | 40,438,604 | 26,046,212 | ||
- diluted | 40,438,604 | 29,145,497 | ||
Weighted average Class B ordinary shares outstanding | ||||
- basic and diluted | 5,535,888 | 4,041,875 | ||
Year ended December 31, | ||||||||
2022 | 2021 | |||||||
Basic | Fully Diluted | Basic | Fully Diluted | |||||
Earnings (Loss) attributable to LGHL per share for | $ (0.69) | $ (0.69) | $ 0.00 | $ 0.00 | ||||
Stock-based compensation | 0.03 | 0.03 | 0.01 | 0.01 | ||||
Amortization of debt discounts | 0.01 | 0.01 | 0.03 | 0.02 | ||||
Depreciation expenses | 0.04 | 0.04 | 0.04 | 0.04 | ||||
Impairment of fixed assets | 0.04 | 0.04 | - | - | ||||
Change in fair value of warrant liabilities | (0.03) | (0.03) | 0.02 | 0.01 | ||||
Non-GAAP earnings (losses) per share for both | $ (0.59) | $ (0.59) | $ 0.10 | $ 0.09 | ||||
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SOURCE Lion Group Holding Ltd.