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 full year ended December 31, 2021.

FINANCIAL AND OPERATING HIGHLIGHTS

All comparisons are made on a year-over-year (“yoy”) basis^[1].

For the Full Year Ended December 31, 2021

• Total revenues increased by 164.5% to $27.1 million from $10.2 million in the prior year.
• Net income attributable to LGHL was $22,782, compared to a net loss of $2.6 million in the prior year.
• Non-GAAP net income attributable to LGHL increased by 726% to $3.0 million from $0.4 million in the prior year.
• Total number of revenue-generating client accounts increased by 5% to 5,261 from 5,010 last year.
• Total revenue-generating CFD (contract for difference) client trading accounts increased by 7% to 2,866 from 2,668 last year.
• Total return swap (“TRS”) trading volume was $1,074 million.
• Contract-for-difference (“CFD”) trading volume increased by 103.4% to 453,687 lots from 223,018 lots last year.
• Futures brokerage trading volume increased by 52.3% to 1,124,805 lots from 738,444 lots last year.

Mr. Chunning (Wilson) Wang, CEO of Lion, commented: “We concluded the year of 2021 on a strong note, as revenue doubled and user numbers grew steadily. Our entire team worked tirelessly to deliver monumental results in 2021 and remain competitive in the industry, despite challenges attributable to the ongoing pandemic and capricious regulatory environment. Non-GAAP net income attributable to LGHL increased by nearly sevenfold, largely attributable to our diverse products and high-quality services.”

“Our CFD and TRS trading businesses remain stable and continue to contribute as key drivers of revenue growth. The NFT business and our Metaverse project also played significant roles in becoming new revenue sources this year. Lion’s NFT project, MetaWords, created in collaboration with renowned Chinese calligrapher and conceptual artist Mr. Xu Bing, attracted numerous users and creators. Relevant MetaWords blind boxes, containing MetaWords characters as well as fragments of Xu Bing’s Book from the Ground, have sold out since its launch,” Mr. Wang continued.

“2022 will be a year of reacceleration for Lion. We have re-located our corporate headquarters to Singapore to further our expansion in Southeast Asia, after being granted our trading license in Singapore. To provide a better experience to our growing global user base and accelerate our market expansion, we will continue to make decisive investments in core technologies and services for the years ahead. We are dedicated to providing high-quality products to our customers and generating long-term value to our stakeholders,” Mr. Wang concluded.

RECENT DEVELOPMENTS

• Granted Trading License in Singapore, Further Expansion into Southeast Asia

On October 4, 2021, Lion announced its subsidiary, Lion International Financial (Singapore) Pte. Ltd. (“Lion Singapore”), had been granted a Capital Markets Service License (“CMS License”) from the Monetary Authority of Singapore. The CMS License allows Lion Singapore to deal in exchange-traded derivatives contracts, over-the-counter derivatives contracts and spot foreign exchange contracts for the purposes of leveraged foreign exchange trading.

• Significant Success of NFT Language Project, MetaWords

On December 20, 2021, Lion’s NFT project, MetaWords, passed CertiK security audit. MetaWords was created in collaboration with renown Chinese calligrapher and conceptual artist Mr. Xu Bing. MetaWords consists of Character NFTs derived from Mr. Xu’s Book of the Ground.

– Launch of NFT Platform, MetaWords Art Project

In January 2022, Lion announced the official launch of its Lion NFT market platform, Lion NFT (https://lionnft.io/). Simultaneously, the Company introduced its cooperative NFT art project, MetaWords.

– Successful Blind Box Sales and Auction

In January 2022, Lion also announced the successful sales of its MetaWords blind boxes. All 2,742 blind boxes, containing MetaWords characters as well as MetaWords works of Xu Bing’s Book from the Ground, sold out since their first market offering on January 17, 2022. The auction sale of six MetaWords characters was completed on January 22, 2022. Lion received an aggregate of 749 Binance Coins, or BNB, net of the incentive credits to customers, which was approximately $438,000 USD at the spot token price upon the completion of the sale.

– Introduction of its “Creation Tools” feature

On January 18, 2022, MetaWords announced the introduction of its “Creation Tools” feature that allows users to easily create new characters. True to the essence of the NFT community’s bottom-up method, this new launch confirms that MetaWords, as a meta-language infrastructure, differs from other digital collections. Users can log onto lionnft.io and make their own metaverse creations.

FINANCIAL RESULTS

For the Full Year ended December 31, 2021

Revenues

Total revenues increased by 164.5% yoy to $27.1 million for the year ended December 31, 2021, from $10.2 million for the year ended December 31, 2020, primarily due to an increase in each segment.

• CFD trading services income. Revenues generated from CFD trading services increased by 27.5% yoy to US$8.7 million from US$6.8 million in the prior year. The increase was primarily due to an increase in CFD trading volume, mainly attributable to the partial recovery of the overall economy and market with the relief of pandemic in the second half of 2021.  Total CFD products trading volume was 453,687 lots, compared to 223,018 lots in 2020. The commission revenues derived from CFD trading services in 2021 are approximately 80% related to stock indices and near 20% related to commodities with a remaining insignificant proportion relating to other CFD products. In 2020, the two percentages were 68.5% and 31.5%, respectively.
• TRS trading services income. Revenues generated from TRS trading services income increased to US$13.1 million from US$0.2 million in the prior year. As one of the core businesses, Lion strategically directed significant resources to developing and expanding TRS trading services to customers in 2021. In the meantime, Lion achieved significant gains from its proprietary TRS trading activities. TRS trading volume was $1,074 million in 2021.
• Futures and securities brokerage income. Revenues generated from futures and securities brokerage income increased by 38.0% yoy to US$2.8 million from US$2.0 million in the prior year. The increase was primarily due to the rebound of futures market in Hong Kong in 2021. Total number of executed futures contracts was 1,124,805 lots, compared to 738,444 lots in 2020.
• Others. Revenue generated from other services increased by 108.0% yoy to US$2.4 million from US$1.2 million in the prior year, primarily attributed to bitcoin mining revenue of $1.7 million generated in 2021.

Expenses

Total expenses increased by 117.4% yoy to $27.8 million from US$12.8 million in the prior year, primarily due to increases in commission expenses, cost of crypto mining, service fees, professional fees, research and development, communication and technology, and amortization of debt discounts and depreciation.

• Commissions and Fees increased by 79.7% yoy to $3.3 million from $1.8 million in the prior year, primarily due to an increase in TRS trading commission expenses by US$1.0 million and an increase in the futures brokerage commission expenses of US$0.7 million, partially offset by a decrease in the insurance brokerage commission expenses of US$0.2 million, which is in line with the overall trench of such businesses.
• Compensation Expenses increased by 7.0% yoy to $4.1 million from $3.8 million in the prior year period, primarily due to the increase in average compensation and discretionary bonus paid out in 2021.
• Communication and Technology Expenses increased by 32.7% yoy to $1.9 million from $1.5 million in the prior year, primarily due to an increase in trading service fees and market data fees, which was in line with the launch of TRS trading services.
• Cost of Crypto Mining was $1.2 million in 2021.
• General and Administrative Expenses decreased by 10.9% yoy to $2.0 million from $2.3 million in the prior year, primarily due to a portion of share-based compensation granted in 2020 charged into general and administrative expenses.
• Professional Fees increased by 145.0% yoy to $3.8 million from $1.6 million in the prior year, primarily due to the accounting, legal, investor relations, and consulting services fees additionally incurred after we became a public company in June 2020, compared to the corresponding period of 2020, professional fees of US$2.4 million directly associated with the reverse acquisition with SPAC were charged to equity, instead of earnings.
• Services Fees for independent contractors and consultants increased to $3.6 million from $0.8 million in the prior year as a result of an increased number of contracted service providers needed due to the growth of the business lines such as TRS trading and NFT, as well as a one-off special inventive scheme for the year ended December 31, 2021.
• Research and Development Expenses were $1.2 million in 2021 in connection with developing and enhancing the Metaverse project.
• Interest Expenses increased to $1.6 million from $0.2 million in the prior year, primarily attributable to the amortization of debt discounts of US$0.8 million from convertible debenture, as well as interest of US$0.8 million paid for loans borrowed from TRS trading service business partners.
• Depreciation Expenses increased to $0.9 million from $40,556 in the prior year, mainly attributable to the depreciation of newly acquired copyrighted trading software programs related to CFD and TRS trading services from March 2021.
• Marketing Expenses increased by 40.3% yoy to $0.9 million from $0.7 million in the prior year, mainly due to marketing expenses incurred to maintain existing customers and develop new customers, while promoting the businesses and branding activities.
• Other Expenses increased to $0.1 million from $11,464 in the prior year.

Net (loss) income

Net loss was $0.8 million for the year of 2021, compared to a net loss of $2.6 million in 2020.

Net Income/(loss) attributable to LGHL

Net income attributable to LGHL was US$27,782 for the year of 2021, compared to a net loss of US$2.6 million in 2020.

Net loss attributable to LGHL ordinary shareholders per ADS

Diluted net loss per ADS was $0.27 in 2021, compared to a diluted net loss per ADS of $0.25 in 2020.

Non-GAAP Financial Results

Non-GAAP net income attributable to LGHL, excluding change in fair value of warrant liabilities, stock-based compensation expenses and amortization of debt discounts and depreciation expenses, was $3.0 million for the full year of 2021, compared to non-GAAP net income of $0.4 million for the full year of 2020. Non-GAAP diluted net income attributable to LGHL per ADS was US$0.09 in 2021, compared to a non-GAAP diluted net income per ADS of US$0.04 in 2020.

Liquidity

As of December 31, 2021, the Company’s cash and restricted cash were $15.1 million (excluding $0.7 million of restricted cash), compared to $3.4 million (excluding $1.4 million of restricted cash), as of December 31, 2020, Net cash used in operating activities was $20.5 million. Net cash used in investing activities was $12.1 million. Net cash provided by financing activities was $43.6 million.

BUSINESS OUTLOOK

Based on current market and operating conditions, the Company expects revenue to grow to approximately $41 million for the full year 2022, representing approximately 50% growth on a year-over-year basis, primarily driven by our TRS and CFD trading business. This estimate does not include potential revenues from our SPAC business dealings. This forecast reflects the Company’s current and preliminary views, which is subject to change, including any potential future impact of the COVID-19 pandemic, the effects of which are difficult to analyze and predict.

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 and amortization of debt discounts and depreciation expenses) 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 and amortization of debt discounts and depreciation expenses, which are non-cash charges. The Company believes that the non-GAAP measures provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

For more information on the non-GAAP financial measures, please see the table captioned “Unaudited Reconciliations of Non-GAAP and GAAP Financial Results” set forth at the end of this press release.