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Lion Group Holding Ltd

Lion Group Holding LtdLGHL财报

Nasdaq · bus manufacturing

LION is a Canadian electric vehicle manufacturer headquartered in Saint-Jérôme, Quebec. Founded in 2011 as Lion Bus, the company is primarily known for its production of yellow school buses, of which it was the first to mass produce as a fully electric vehicle.

What changed in Lion Group Holding Ltd's 20-F — 2022 vs 2023

Top changes in Lion Group Holding Ltd's 2023 20-F

625 paragraphs added · 837 removed · 237 edited across 6 sections

Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 8 ITEM 3. KEY INFORMATION 8 ITEM 4. INFORMATION ON THE COMPANY 56 ITEM 4.A. UNRESOLVED STAFF COMMENTS 82 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 83 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 110 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 118 ITEM 8. FINANCIAL INFORMATION 120 ITEM 9.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 9 ITEM 3. KEY INFORMATION 9 ITEM 4. INFORMATION ON THE COMPANY 53 ITEM 4.A. UNRESOLVED STAFF COMMENTS 81 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 82 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 104 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 113 ITEM 8. FINANCIAL INFORMATION 114 ITEM 9.
THE OFFER AND LISTING 120 ITEM 10. ADDITIONAL INFORMATION 120 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 134 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 135 PART II
THE OFFER AND LISTING 114 ITEM 10. ADDITIONAL INFORMATION 115 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 128 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 130 PART II

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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In addition, as a client who is not a U.S. citizen or resident at the time of account registration may later obtain U.S. citizenship or residential status and fail to update us in a timely manner, our customer database might not be entirely accurate at all time.
In addition, as a client who is not a U.S. citizen or resident at the time of account registration may later obtain U.S. citizenship or residential status and fail to update us in a timely manner, our customer database might not be entirely accurate at all time.
Although the substantial operation of us is based in Hong Kong and the Cayman Islands, we launched our apps in the app stores of China and most of our users are PRC citizens, which may subject us to certain laws and regulations in China.
Although the substantial operation of us is based in Hong Kong and the Cayman Islands, we launched our apps in the app stores of China and most of our users are PRC citizens, which may subject us to certain laws and regulations in China.
Although the substantial operation of us is based in Hong Kong and the Cayman Islands, we launched our apps in the app stores of China and most of our users are PRC citizens, which may subject us to certain laws and regulations in China.
Although the substantial operation of us is based in Hong Kong and the Cayman Islands, we launched our apps in the app stores of China and most of our users are PRC citizens, which may subject us to certain laws and regulations in China.
Additionally, the approval or other administration requirements of the CSRC, or other PRC governmental authorities, may be required under a PRC regulation or any new laws, rules or regulations to be enacted, and if required, we cannot assure you that we will be able to obtain such approval.
Additionally, the approval or other administration requirements of the CSRC, or other PRC governmental authorities, may be required under a PRC regulation or any new laws, rules or regulations to be enacted, and if required, we cannot assure you that we will be able to obtain such approval.
The Draft Cyber Data Regulations provide that data processors refer to individuals or organizations that, during their data processing activities such as data collection, storage, utilization, transmission, publication and deletion, have autonomy over the purpose and the manner of data processing.
The Draft Cyber Data Regulations provide that data processors refer to individuals or organizations that, during their data processing activities such as data collection, storage, utilization, transmission, publication and deletion, have autonomy over the purpose and the manner of data processing.
In accordance with the Draft Cyber Data Regulations, data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listing abroad of data processors that process the personal information of more than one million users and (ii) any data processing activity that affects or may affect national security.
In accordance with the Draft Cyber Data Regulations, data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listing abroad of data processors that process the personal information of more than one million users and (ii) any data processing activity that affects or may affect national security.
Any non-compliance with these laws and regulations may subject us to fines, orders to rectify or terminate any actions that are deemed illegal by regulatory authorities, other penalties, including but not limited to removal of our apps in China market, as well as reputational damage or legal proceedings against us, which may affect our business, financial condition or results of operations.
Any non-compliance with these laws and regulations may subject us to fines, orders to rectify or terminate any actions that are deemed illegal by regulatory authorities, other penalties, including but not limited to removal of our apps in China market, as well as reputational damage or legal proceedings against us, which may affect our business, financial condition or results of operations.
The Overseas Listing Regulations set out new filing requirements, report obligations and guidance for confidentiality and achieves administration with the CSRC for PRC domestic companies seeking direct or indirect listings and offerings in overseas markets.
The Overseas Listing Regulations set out new filing requirements, report obligations and guidance for confidentiality and achieves administration with the CSRC for PRC domestic companies seeking direct or indirect listings and offerings in overseas markets.
An overseas listing will constitute an “indirect listing” where the issuer meets both of the following conditions: (i) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets for the most recent accounting year is accounted for by its PRC subsidiaries; and (ii) main parts of the business activities are conducted within mainland China, or main place of business are located in mainland China, or a majority of the senior managers in charge of business operation and management are Chinese citizens or domiciled in mainland China.
An overseas listing will constitute an “indirect listing” where the issuer meets both of the following conditions: (i) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets for the most recent accounting year is accounted for by its PRC subsidiaries; and (ii) main parts of the business activities are conducted within mainland China, or main place of business are located in mainland China, or a majority of the senior managers in charge of business operation and management are Chinese citizens or domiciled in mainland China.
We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act.
We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act.
On December 23, 2022 the AHFCA Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
On December 23, 2022 the AHFCA Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
The PCAOB is continuing to demand complete access in mainland China and Hong Kong moving forward and is already making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed.
The PCAOB is continuing to demand complete access in mainland China and Hong Kong moving forward and is already making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed.
The scope, determination and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes and proceedings to which we are subject cannot be predicted with certainty, and may result in: ● substantial payments to satisfy judgments, fines or penalties; ● substantial outside counsel legal fees and costs; ● additional compliance and licensure requirements; ● loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business; ● loss of productivity and high demands on employee time; 49 ● criminal sanctions or consent decrees; ● termination of certain employees, including members of our executive team; ● barring of certain employees from participating in our business in whole or in part; ● orders that restrict or suspend our business or prevent us from offering certain products or services; ● changes to our business model and practices; ● delays and/or interruptions to planned transactions, product launches or improvements; and ● damage to our brand and reputation.
The scope, determination and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes and proceedings to which we are subject cannot be predicted with certainty, and may result in: ● substantial payments to satisfy judgments, fines or penalties; ● substantial outside counsel legal fees and costs; ● additional compliance and licensure requirements; ● loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business; ● loss of productivity and high demands on employee time; ● criminal sanctions or consent decrees; ● termination of certain employees, including members of our executive team; ● barring of certain employees from participating in our business in whole or in part; ● orders that restrict or suspend our business or prevent us from offering certain products or services; ● changes to our business model and practices; ● delays and/or interruptions to planned transactions, product launches or improvements; and ● damage to our brand and reputation.
The loss of one or more of our prime brokerage relationships could lead to increased transaction costs and capital posting requirements, as well as having a negative impact on our ability to verify our open positions, collateral balances and trade confirmations. ● We rely on a number of external service providers for technology, processing and supporting functions, and if they fail to provide these services, it could adversely affect our business and harm our reputation. ● We may be liable for improper collection, use or appropriation of personal information provided by our customers. ● We may encounter potential conflicts of interest from time to time, and the failure to identify and address such conflicts of interest could adversely affect our business. ● We face risks related to our know-your-customer, or KYC procedures when our clients provide outdated, inaccurate, false or misleading information. ● Our clients may engage in fraudulent or illegal activities on our platform. ● The current trade war between the U.S. and China may dampen growth in China and other markets where the majority of our clients reside. 9 Risk Related to Our Corporate Structure ● We may rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
The loss of one or more of our prime brokerage relationships could lead to increased transaction costs and capital posting requirements, as well as having a negative impact on our ability to verify our open positions, collateral balances and trade confirmations. ● We rely on a number of external service providers for technology, processing and supporting functions, and if they fail to provide these services, it could adversely affect our business and harm our reputation. ● We may be liable for improper collection, use or appropriation of personal information provided by our customers. ● We may encounter potential conflicts of interest from time to time, and the failure to identify and address such conflicts of interest could adversely affect our business. ● We face risks related to our know-your-customer, or KYC procedures when our clients provide outdated, inaccurate, false or misleading information. ● Our clients may engage in fraudulent or illegal activities on our platform. ● The current trade war between the U.S. and China may dampen growth in China and other markets where the majority of our clients reside. 10 Risk Related to Our Corporate Structure ● We may rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
Risks Related to Our Business and Industry ● We operate in a heavily regulated industry, and are subject to extensive and evolving regulatory requirements in the jurisdictions in which we operate. ● We had incurred net losses in the past, and we may incur losses again in the future. ● We may not be able to obtain or maintain all necessary licenses, permits and approvals and to make all necessary registrations and filings for our business activities in multiple jurisdictions and related to residents therein, especially in the PRC or otherwise relating to PRC residents. 8 ● PRC governmental control of currency conversion, cross-border remittance and offshore investment could have a direct impact on the trading volume on our platform, and the PRC government could further tighten restrictions on converting Renminbi to foreign currencies and/or deems our practices to be in violation of PRC laws and regulations. ● We may be unable to retain existing clients or attract new clients, or we may fail to offer services to address the needs of our clients as they evolve. ● Our level of commission and fee rates may decline in the future.
Risks Related to Our Business and Industry ● We operate in a heavily regulated industry, and are subject to extensive and evolving regulatory requirements in the jurisdictions in which we operate. ● We had incurred net losses in the past, and we may incur losses again in the future. ● We may not be able to obtain or maintain all necessary licenses, permits and approvals and to make all necessary registrations and filings for our business activities in multiple jurisdictions and related to residents therein, especially in the PRC or otherwise relating to PRC residents. 9 ● PRC governmental control of currency conversion, cross-border remittance and offshore investment could have a direct impact on the trading volume on our platform, and the PRC government could further tighten restrictions on converting Renminbi to foreign currencies and/or deems our practices to be in violation of PRC laws and regulations. ● We may be unable to retain existing clients or attract new clients, or we may fail to offer services to address the needs of our clients as they evolve. ● Our level of commission and fee rates may decline in the future.
On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (i) China, and (ii) Hong Kong. On December 2, 2021, the SEC adopted final amendments implementing congressionally mandated submission and disclosure requirements of the HFCA Act.
On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (i) mainland China, and (ii) Hong Kong. On December 2, 2021, the SEC adopted final amendments implementing congressionally mandated submission and disclosure requirements of the HFCA Act.
We may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply, and such compliance or any associated inquiries or investigations or any other government actions may: ● delay or impede our development; ● result in negative publicity or increase our operating costs; ● require significant management time and attention; and ● subject our Company to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices. 34 Further, it is uncertain when and whether we will be required to obtain any pre-approval from the PRC government to list on U.S. exchanges or to conduct our current business operation, and even when such pre-approval is obtained, whether it will be denied or rescinded.
We may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply, and such compliance or any associated inquiries or investigations or any other government actions may: ● delay or impede our development; ● result in negative publicity or increase our operating costs; ● require significant management time and attention; and ● subject our Company to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices. 35 Further, it is uncertain when and whether we will be required to obtain any pre-approval from the PRC government to list on U.S. exchanges or to conduct our current business operation, and even when such pre-approval is obtained, whether it will be denied or rescinded.
For example, we experienced significant decrease in revenues generated from insurance brokerage business in 2020, 2021 and 2022 compared to 2018 and 2019, primarily due to our strategic shift of business focus and the unrest in Hong Kong following the forfeited extradition bill in 2019, which negatively affected our clients’ confidence and interest in Hong Kong market.
For example, we experienced significant decrease in revenues generated from insurance brokerage business in 2020, 2021, 2022 and 2023 compared to 2018 and 2019, primarily due to our strategic shift of business focus and the unrest in Hong Kong following the forfeited extradition bill in 2019, which negatively affected our clients’ confidence and interest in Hong Kong market.
If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us.
If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. 32 Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties. 33 The PRC government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties. 34 The PRC government has recently published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations.
Risks Related to our ADSs and our Securities ● The price of our ADSs may be volatile. ● Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our ADSs. ● Holders of our ADSs may not have the same voting rights as our registered shareholders and might not receive voting materials in time to be able to exercise their right to vote. ● The voting rights ADSs holders are limited by the terms of the deposit agreement, and ADSs holders may not be able to exercise rights to direct how the Class A Ordinary Shares represented by ADSs are voted. 10 Risks Related to Our Business and Industry Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China could adversely affect us.
Risks Related to our ADSs and our Securities ● The price of our ADSs may be volatile. ● Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our ADSs. ● Holders of our ADSs may not have the same voting rights as our registered shareholders and might not receive voting materials in time to be able to exercise their right to vote. ● The voting rights ADSs holders are limited by the terms of the deposit agreement, and ADSs holders may not be able to exercise rights to direct how the Class A Ordinary Shares represented by ADSs are voted. 11 Risks Related to Our Business and Industry Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China could adversely affect us.
Although we include prominent risk warnings and disclaimers on our apps throughout the transaction process and, in accordance with relevant regulations, have designed an appropriateness test to assess the level of experience and risk level of the client to assess whether certain services or products are appropriate for such client, there is no guarantee that the appropriateness test for any product is adequate. 17 Clients who have suffered from unfavorable trading results, financial losses, or even liquidity issues in connection with the financial losses may attribute their losses to us and/or may discontinue trading with us, which may have a material and adverse effect on our business and results of operation.
Although we include prominent risk warnings and disclaimers on our apps throughout the transaction process and, in accordance with relevant regulations, have designed an appropriateness test to assess the level of experience and risk level of the client to assess whether certain services or products are appropriate for such client, there is no guarantee that the appropriateness test for any product is adequate. 18 Clients who have suffered from unfavorable trading results, financial losses, or even liquidity issues in connection with the financial losses may attribute their losses to us and/or may discontinue trading with us, which may have a material and adverse effect on our business and results of operation.
Our failure to correct the material weakness or failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis, which could cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of our securities. 28 Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such accountant might have identified additional material weaknesses.
Our failure to correct the material weakness or failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis, which could cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of our securities. 29 Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such accountant might have identified additional material weaknesses.
Our issuance of additional Class A Ordinary Shares or other equity securities of equal or senior rank would have the following effects: ● our existing shareholders’ proportionate ownership interest and your holdings of ADSs in us will decrease; ● the amount of cash available per share, including for payment of dividends in the future, may decrease; ● the relative voting strength of each previously outstanding ordinary shares may be diminished; and ● the market price of our ADSs may decline. 38 Holders of our ADSs may not have the same voting rights as our registered shareholders and might not receive voting materials in time to be able to exercise their right to vote.
Our issuance of additional Class A Ordinary Shares or other equity securities of equal or senior rank would have the following effects: ● our existing shareholders’ proportionate ownership interest and your holdings of ADSs in us will decrease; ● the amount of cash available per share, including for payment of dividends in the future, may decrease; ● the relative voting strength of each previously outstanding ordinary shares may be diminished; and ● the market price of our ADSs may decline. 39 Holders of our ADSs may not have the same voting rights as our registered shareholders and might not receive voting materials in time to be able to exercise their right to vote.
For additional information regarding the home country practices we follow in lieu of Nasdaq requirements, see “ Corporate Governance Practices ”. 43 We will lose our status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of our outstanding voting securities become directly or indirectly held of record by U.S. holders and one of the following is true: (i) the majority of our directors or executive officers are U.S. citizens or residents; (ii) more than 50% of our assets are located in the United States; or (iii) our business is administered principally in the United States.
For additional information regarding the home country practices we follow in lieu of Nasdaq requirements, see “ Corporate Governance Practices ”. 44 We will lose our status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of our outstanding voting securities become directly or indirectly held of record by U.S. holders and one of the following is true: (i) the majority of our directors or executive officers are U.S. citizens or residents; (ii) more than 50% of our assets are located in the United States; or (iii) our business is administered principally in the United States.
As of the date of this annual report, the Draft Cyber Data Regulations was released for public comment only, and their respective provisions and anticipated adoption or effective date may be subject to change with substantial uncertainty. 35 Although the substantial operation of us is based in Singapore, Hong Kong and the Cayman Islands and all of the data and personal information we collected are stored in servers outside mainland China, we launched our apps in the app stores of China and most of our users are PRC citizens, which may subject us to certain laws and regulations in China.
As of the date of this annual report, the Draft Cyber Data Regulations was released for public comment only, and their respective provisions and anticipated adoption or effective date may be subject to change with substantial uncertainty. 36 Although the substantial operation of us is based in Singapore, Hong Kong and the Cayman Islands and all of the data and personal information we collected are stored in servers outside mainland China, we launched our apps in the app stores of China and most of our users are PRC citizens, which may subject us to certain laws and regulations in China.
The PRC Data Security Law, which was promulgated by the Standing Committee of PRC National People’s Congress, or the SCNPC, on June 10, 2021 and became effective on September 1, 2021, outlines the main system framework of data security protection. 11 In December 2021, the Cyberspace Administration of China (the “CAC”) promulgated the amended Measures of Cybersecurity Review which require cyberspace operators with personal information of more than one million users to file for cybersecurity review with the Cybersecurity Review Office (“CRO”), in the event such operators plan for an overseas listing.
The PRC Data Security Law, which was promulgated by the Standing Committee of PRC National People’s Congress, or the SCNPC, on June 10, 2021 and became effective on September 1, 2021, outlines the main system framework of data security protection. 12 In December 2021, the Cyberspace Administration of China (the “CAC”) promulgated the amended Measures of Cybersecurity Review which require cyberspace operators with personal information of more than one million users to file for cybersecurity review with the Cybersecurity Review Office (“CRO”), in the event such operators plan for an overseas listing.
In addition, any foreign loan procured by our PRC subsidiary is required to be registered with SAFE or its local branches and any of our PRC subsidiary may not procure loans which exceed the difference between its total investment amount and registered capital or, as an alternative, they may only procure loans subject to the calculation approach and limitation as provided by the People’s Bank of China. 16 We may be unable to retain existing clients or attract new clients, or we may fail to offer services to address the needs of our clients as they evolve.
In addition, any foreign loan procured by our PRC subsidiary is required to be registered with SAFE or its local branches and any of our PRC subsidiary may not procure loans which exceed the difference between its total investment amount and registered capital or, as an alternative, they may only procure loans subject to the calculation approach and limitation as provided by the People’s Bank of China. 17 We may be unable to retain existing clients or attract new clients, or we may fail to offer services to address the needs of our clients as they evolve.
Even though we have adopted these procedures, we may still fail to detect the existence of such breaches in our KYC procedures and system, which may lead to disciplinary or other actions by the U.S. regulatory agencies due to claimed noncompliance which could have a material adverse effect on our business, financial condition and results of operations. 25 Despite our safeguards, we could still be subject to certain legal or regulatory sanctions, fines or penalties, financial loss, or damage to reputation resulting from such violations.
Even though we have adopted these procedures, we may still fail to detect the existence of such breaches in our KYC procedures and system, which may lead to disciplinary or other actions by the U.S. regulatory agencies due to claimed noncompliance which could have a material adverse effect on our business, financial condition and results of operations. 26 Despite our safeguards, we could still be subject to certain legal or regulatory sanctions, fines or penalties, financial loss, or damage to reputation resulting from such violations.
Under the circumstances that we decide to make an amendment to the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying Class A Ordinary Shares, but will have no right to any compensation whatsoever. 39 ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
Under the circumstances that we decide to make an amendment to the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying Class A Ordinary Shares, but will have no right to any compensation whatsoever. 40 ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement. 40 ADSs holders might not receive distributions on our equity shares, or any value for them at all, if it is unlawful or impracticable for us to make them available to such holders.
In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement. 41 ADSs holders might not receive distributions on our equity shares, or any value for them at all, if it is unlawful or impracticable for us to make them available to such holders.
As a result of all the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company. 42 Provisions in our Amended and Restated Memorandum and Articles of Association may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our securities and could entrench management.
As a result of all the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company. 43 Provisions in our Amended and Restated Memorandum and Articles of Association may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our securities and could entrench management.
These PCAOB inspections could result in findings in our auditors’ quality control procedures, question the validity of the auditor’s reports on our published consolidated financial statements and cast doubt upon the accuracy of our published audited financial statements. 44 We are a “controlled company” within the meaning of Nasdaq Stock Market LLC listing rules and, as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
These PCAOB inspections could result in findings in our auditors’ quality control procedures, question the validity of the auditor’s reports on our published consolidated financial statements and cast doubt upon the accuracy of our published audited financial statements. 45 We are a “controlled company” within the meaning of Nasdaq Stock Market LLC listing rules and, as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
In the event of the insolvency of a prime broker, we might not be able to fully recover the assets we have deposited (and have deposited on behalf of our clients) with the prime broker or our unrealized profits since we will be among the prime broker’s unsecured creditors. 20 We rely on a number of external service providers for technology, processing and supporting functions, and if they fail to provide these services, it could adversely affect our business and harm our reputation.
In the event of the insolvency of a prime broker, we might not be able to fully recover the assets we have deposited (and have deposited on behalf of our clients) with the prime broker or our unrealized profits since we will be among the prime broker’s unsecured creditors. 21 We rely on a number of external service providers for technology, processing and supporting functions, and if they fail to provide these services, it could adversely affect our business and harm our reputation.
If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Hong Kong, our operation may experience material disruptions, such as temporary closure of our system and suspension of services, which may materially and adversely affect our business, financial condition and results of operations. 30 Our business is sensitive to general economic and political conditions and other factors beyond our control, and our results of operation are prone to significant and unpredictable fluctuations.
If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Hong Kong, our operation may experience material disruptions, such as temporary closure of our system and suspension of services, which may materially and adversely affect our business, financial condition and results of operations. 31 Our business is sensitive to general economic and political conditions and other factors beyond our control, and our results of operation are prone to significant and unpredictable fluctuations.
In such cases, our business, financial condition, results of operations and prospects may be materially and adversely affected. 15 PRC governmental control of currency conversion, cross-border remittance and offshore investment could have a direct impact on the trading volume on our platform, and the PRC government could further tighten restrictions on converting Renminbi to foreign currencies and/or deems our practices to be in violation of PRC laws and regulations.
In such cases, our business, financial condition, results of operations and prospects may be materially and adversely affected. 16 PRC governmental control of currency conversion, cross-border remittance and offshore investment could have a direct impact on the trading volume on our platform, and the PRC government could further tighten restrictions on converting Renminbi to foreign currencies and/or deems our practices to be in violation of PRC laws and regulations.
Russia’s recent military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, European Union and other countries against Russia.
Russia’s military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, European Union and other countries against Russia.
In addition, as the online brokerage service industry in Hong Kong is at a relatively early stage of development, interpretation and enforcement of the applicable regulatory regime are subject to significant uncertainties, which may result in difficulties in determining whether our existing practices violate any applicable laws and regulations. 14 Compliance with these regulations is complicated, time consuming and expensive.
In addition, as the online brokerage service industry in Hong Kong is at a relatively early stage of development, interpretation and enforcement of the applicable regulatory regime are subject to significant uncertainties, which may result in difficulties in determining whether our existing practices violate any applicable laws and regulations. 15 Compliance with these regulations is complicated, time consuming and expensive.
As a result, capital appreciation, if any, of our ADSs will be an investor’s sole source of gain for the foreseeable future. 41 We are a Cayman Islands exempted company and, because judicial precedent regarding the rights of shareholders is different under Cayman Islands law than under U.S. law, you could have less protection of your shareholder rights than you would under U.S. law.
As a result, capital appreciation, if any, of our ADSs will be an investor’s sole source of gain for the foreseeable future. 42 We are a Cayman Islands exempted company and, because judicial precedent regarding the rights of shareholders is different under Cayman Islands law than under U.S. law, you could have less protection of your shareholder rights than you would under U.S. law.
This regulatory requirement may discourage, delay or prevent a change in control of Lion, which could deprive our shareholders the opportunity to receive a premium for their shares as part of a future sale and may reduce the price of our shares upon the consummation of a future proposed business combination. 32 Uncertainties with respect to the PRC legal system could adversely affect us.
This regulatory requirement may discourage, delay or prevent a change in control of Lion, which could deprive our shareholders the opportunity to receive a premium for their shares as part of a future sale and may reduce the price of our shares upon the consummation of a future proposed business combination. 33 Uncertainties with respect to the PRC legal system could adversely affect us.
This could affect client confidence, our ability to grow, our costs of funds and professional insurance costs, our ability to pay dividends on ordinary shares, our ability to make acquisitions, and in turn, our business, results of operations and financial condition. 18 Our total return swap (TRS) trading services may not be successful, and we may not find adequate funding at reasonable costs to successfully operate our TRS trading business.
This could affect client confidence, our ability to grow, our costs of funds and professional insurance costs, our ability to pay dividends on ordinary shares, our ability to make acquisitions, and in turn, our business, results of operations and financial condition. 19 Our total return swap (TRS) trading services may not be successful, and we may not find adequate funding at reasonable costs to successfully operate our TRS trading business.
If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business. 24 We face risks related to our know-your-customer, or KYC procedures when our clients provide outdated, inaccurate, false or misleading information.
If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business. 25 We face risks related to our know-your-customer, or KYC procedures when our clients provide outdated, inaccurate, false or misleading information.
Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CSRC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless. 37 Risks Related to our ADSs and our Securities The price of our ADSs may be volatile.
Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CSRC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless. 38 Risks Related to our ADSs and our Securities The price of our ADSs may be volatile.
Furthermore, if we remove any assets from trading on our platform, our decision may be unpopular with users and may reduce our ability to attract and retain customers, especially if such assets remain traded on unregulated exchanges, which includes many of our competitors. 54 The loss or destruction of any private keys required to access our digital assets may be irreversible.
Furthermore, if we remove any assets from trading on our platform, our decision may be unpopular with users and may reduce our ability to attract and retain customers, especially if such assets remain traded on unregulated exchanges, which includes many of our competitors. 52 The loss or destruction of any private keys required to access our digital assets may be irreversible.
Based on the foregoing, we do not expect that, as of the date of this annual report, the PRC Data Security Law would have a material adverse impact on our business. 12 On July 6, 2021, the relevant PRC governmental authorities publicized the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
Based on the foregoing, we do not expect that, as of the date of this annual report, the PRC Data Security Law would have a material adverse impact on our business. 13 On July 6, 2021, the relevant PRC governmental authorities publicized the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
These may adversely affect our results of operations and financial conditions. 19 Fluctuations in exchange rates could have a material adverse effect on our results of operations. The functional currency for Lion Brokers Limited, our Cayman Islands subsidiary, is U.S. dollars, whereas the functional currencies for our other operating subsidiaries are Hong Kong dollars.
These may adversely affect our results of operations and financial conditions. 20 Fluctuations in exchange rates could have a material adverse effect on our results of operations. The functional currency for Lion Brokers Limited, our Cayman Islands subsidiary, is U.S. dollars, whereas the functional currencies for our other operating subsidiaries are Hong Kong dollars.
The volatility of global stock market may adversely affect our clients’ confidence and willingness in trading and/or investing in the financial market. As a result, our operating results may be subject to significant and unpredictable fluctuations. The current trade war between the U.S. and China may dampen growth in China and other markets where the majority of our clients reside.
The volatility of global stock market may adversely affect our clients’ confidence and willingness in trading and/or investing in the financial market. As a result, our operating results may be subject to significant and unpredictable fluctuations. The current trade frictions between the U.S. and China may dampen growth in China and other markets where the majority of our clients reside.
We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. 36 On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, which will come into effect on March 31, 2023.
We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. 37 On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, which will come into effect on March 31, 2023.
Additionally, any new business that we may acquire or joint ventures we may form, once integrated with our existing operations, may not produce expected or intended results. 29 A sustained outbreak of the COVID-19 pandemic could have a material adverse impact on our business, operating results and financial condition.
Additionally, any new business that we may acquire or joint ventures we may form, once integrated with our existing operations, may not produce expected or intended results. 30 A sustained outbreak of the COVID-19 pandemic could have a material adverse impact on our business, operating results and financial condition.
As of December 31, 2022, all of our operating subsidiaries have not been subject to any administrative penalty or fine in relation to regulatory capital requirements that, individually or in the aggregate, would be reasonable expected to have a material adverse effect on our results of operations or financial condition.
As of December 31, 2023, all of our operating subsidiaries have not been subject to any administrative penalty or fine in relation to regulatory capital requirements that, individually or in the aggregate, would be reasonable expected to have a material adverse effect on our results of operations or financial condition.
To the extent we have not complied with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.
To the extent we had not complied with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.
Our business, especially the NFT business, is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services, crypto asset custody, exchange, and transfer, cross-border money and crypto asset transmission, foreign currency exchange, cybersecurity, fraud detection, and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.
Our historical business, especially the NFT business, was subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services, crypto asset custody, exchange, and transfer, cross-border money and crypto asset transmission, foreign currency exchange, cybersecurity, fraud detection, and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.
Even if we expand our businesses into new jurisdictions or areas, the expansion may not yield intended profitable results. 23 Fraud, misconduct or errors by our directors, officers, employees, agents and other third-party service providers could harm our business and reputation.
Even if we expand our businesses into new jurisdictions or areas, the expansion may not yield intended profitable results. 24 Fraud, misconduct or errors by our directors, officers, employees, agents and other third-party service providers could harm our business and reputation.
Although the Lion NFT platform does not provide digital wallet services to its users, the Lion NFT platform allows its users to connect and link their own digital wallets, such as Metamask, to the Lion NFT platform, therefore, any failure by our service providers to maintain the necessary controls or to manage customers’ crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, significant financial losses, lead customers to discontinue or reduce their use of our and our service providers’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition.
Although the Lion NFT platform did not provide digital wallet services to its users, the Lion NFT platform allowed its users to connect and link their own digital wallets, such as Metamask, to the Lion NFT platform, therefore, any failure by our service providers to maintain the necessary controls or to manage customers’ crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, significant financial losses, lead customers to discontinue or reduce their use of our and our service providers’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition.
Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. 27 We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. 28 We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
See “Item 3. Key Information—D. Risk Factors—Risk Factors— Risks Related to Doing Business in Jurisdictions We Operate” for more details. 13 We may be liable for improper collection, use or appropriation of personal information provided by our customers.
See “Item 3. Key Information—D. Risk Factors—Risk Factors—Risks Related to Doing Business in Jurisdictions We Operate” for more details. 14 We may be liable for improper collection, use or appropriation of personal information provided by our customers.
Any such system failure could impair our reputation, damage our brand, subject us to claims and materially and adversely affect our business, financial condition, operating results or prospects. 21 Failure of third-party systems upon which we rely could adversely affect our business operation.
Any such system failure could impair our reputation, damage our brand, subject us to claims and materially and adversely affect our business, financial condition, operating results or prospects. 22 Failure of third-party systems upon which we rely could adversely affect our business operation.
If notwithstanding this new framework, the PCAOB was unable to fully inspect UHY LLP (or any other auditor of the Company) in the future, or if PRC or American authorities further regulate auditing work of Chinese or Hong Kong companies listed on the U.S. stock exchanges in a manner that would restrict UHY LLP (or any future auditor of the Company) from performing work in Hong Kong, the Company may be required to change its auditor.
If notwithstanding this new framework, the PCAOB was unable to fully inspect UHY LLP or HTL International, LLC (or any other auditor of the Company) in the future, or if PRC or American authorities further regulate auditing work of Chinese or Hong Kong companies listed on the U.S. stock exchanges in a manner that would restrict UHY LLP or HTL International, LLC (or any future auditor of the Company) from performing work in Hong Kong, the Company may be required to change its auditor.
If any of the foregoing were to occur, our results of operations and financial conditions could be materially and adversely affected. 26 Our business depends on the continued efforts of our senior management, particularly our founder and controlling shareholder, Mr. Jian Wang.
If any of the foregoing were to occur, our results of operations and financial conditions could be materially and adversely affected. 27 Our business depends on the continued efforts of our senior management, particularly our founder and controlling shareholder, Mr. Jian Wang.
Because of the uncertainty surrounding it, the financial impact related to the COVID-19 outbreak and the response to it cannot be reasonably estimated at this time, but our financial condition and operating results for 2020, 2021, and 2022 were adversely affected.
Because of the uncertainty surrounding it, the financial impact related to the COVID-19 outbreak and the response to it cannot be reasonably estimated at this time, but our financial condition and operating results for 2021, 2022, and 2023 were adversely affected.
In the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB expands the scope of the determination so that we are subject to the HFCA Act, as the same may be amended, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the national exchange and trading on “over-the-counter” markets, may be prohibited under the HFCA Act. 45 The management of Company believes that this determination does not impact the Company, as the auditor of the Company, UHY LLP, (i) is headquartered in New York, U.S., (ii) is an independent registered public accounting firm with the PCAOB, and (iii) has been inspected by the PCAOB on a regular basis.
In the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB expands the scope of the determination so that we are subject to the HFCA Act, as the same may be amended, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the national exchange and trading on “over-the-counter” markets, may be prohibited under the HFCA Act. 46 The management of Company believes that this determination does not impact the Company, UHY LLP or HTL International, LLC, (i) is headquartered in New York, U.S. and Texas, U.S., (ii) is an independent registered public accounting firm with the PCAOB, and (iii) has been inspected by the PCAOB on a regular basis.
The nature of many NFT transactions also involve circumstances which present higher risks for potential violations, such as anonymity, subjective valuation, use of intermediaries, lack of transparency, and decentralization associated with blockchain technology. However, we require our users to provide their identity cards to verify their identities and citizenship at registration.
The nature of many NFT transactions involve circumstances which present higher risks for potential violations, such as anonymity, subjective valuation, use of intermediaries, lack of transparency, and decentralization associated with blockchain technology. However, we required our users to provide their identity cards to verify their identities and citizenship at registration.
As of the date of this annual report, Jian Wang, our chairman of the board and Chunning Wang, our chief executive officer collectively hold approximately 86.91% of our voting power total issued and outstanding share capital. As a result, we are considered as a “controlled company” within the meaning of the Nasdaq Stock Market LLC listing rules.
As of the date of this annual report, Jian Wang, our chairman of the board and Chunning Wang, our chief executive officer collectively hold approximately 92% of our voting power total issued and outstanding share capital. As a result, we are considered as a “controlled company” within the meaning of the Nasdaq Stock Market LLC listing rules.
Revenues generated from commission amounted to US$7.8 million, US$8.05 million, and US$4.6 million in 2020, 2021, and 2022, respectively. We may experience pressure on our commission or fee rates as a result of competition in the financial service industry and online brokerage industry.
Revenues generated from commission amounted to US$8.05 million, US$4.6 million, and US$7.0 million in 2021, 2022, and 2023, respectively. We may experience pressure on our commission or fee rates as a result of competition in the financial service industry and online brokerage industry.
The failure to comply with the requirement in the HFCA Act, as amended by the AHFCA Act, that the PCAOB be permitted to inspect the issuer’s public accounting firm within two years, would subject us to consequences including the delisting of our Company in the future if the PCAOB is unable to inspect the Company’s accounting firm (whether UHY LLP or another firm) at such future time. 46 Risks Related to Our Cryptocurrency Mining Operations and NFT Business Our business, especially the NFT business, is subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition.
The failure to comply with the requirement in the HFCA Act, as amended by the AHFCA Act, that the PCAOB be permitted to inspect the issuer’s public accounting firm within two years, would subject us to consequences including the delisting of our Company in the future if the PCAOB is unable to inspect the Company’s accounting firm (whether UHY LLP, HTL International, LLC or another firm) at such future time. 47 Risks Related to Our Historical Cryptocurrency Mining Operations and NFT Business Our historical business, especially the NFT business, was subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition.
The amended Measures of Cybersecurity Review will take effect on February 15, 2022. In August 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection Law which became effective on November 1, 2021.
The amended Measures of Cybersecurity Review took effect on February 15, 2022. In August 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection Law which became effective on November 1, 2021.
We face risks related to insurance brokerage business. We operate our insurance brokerage business through our HKIA-licensed subsidiary, BC Wealth Management Limited. Our revenues from insurance brokerage business amounted to US$1.0 million, US$0.5 million, US$0.5 million, in 2020, 2021, and 2022, respectively, representing 9.3%, 2.2%, and (18.3)% of our total revenues during the same periods.
We face risks related to insurance brokerage business. We operate our insurance brokerage business through our HKIA-licensed subsidiary, BC Wealth Management Limited. Our revenues from insurance brokerage business amounted to US$0.5 million, US$0.5 million, and US$1.2 million, in 2021, 2022, and 2023, respectively, representing 2.2%, (18.5)%, and 5.5% of our total revenues during the same periods.
Uncertainties in or changes to regulatory or financial accounting standards could result in the need to change our accounting methods and restate our financial statements and impair our ability to provide timely and accurate financial information, which could adversely affect our financial statements, result in a loss of investor confidence, and more generally impact our business, operating results and financial condition. 50 Digital asset trading platforms may be subject to varying levels of regulation, which exposes our digital asset holdings to risks.
Uncertainties in or changes to regulatory or financial accounting standards could result in the need to change our accounting methods and restate our financial statements and impair our ability to provide timely and accurate financial information, which could adversely affect our financial statements, result in a loss of investor confidence, and more generally impact our business, operating results and financial condition. 49 Digital asset trading platforms may be subject to varying levels of regulation.
The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act if needed. UHY LLP is not included in the list of determinations announced by the PCAOB on December 21, 2021 in their HFCA Act Determination Report under PCAOB Rule 6100.
The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act if needed. UHY LLP or HTL International, LLC is not included in the list of determinations announced by the PCAOB on December 21, 2021 in their HFCA Act Determination Report under PCAOB Rule 6100.
Accordingly, there can be no assurance that UHY LLP will be able to meet the requirements of the HFCA Act and that the Company will not suffer the resulting material and adverse impact on its stock performance, as a company listed in the United States.
Accordingly, there can be no assurance that UHY LLP or HTL International, LLC will be able to meet the requirements of the HFCA Act and that the Company will not suffer the resulting material and adverse impact on its stock performance, as a company listed in the United States.
A substantial part of our operations are located in Hong Kong. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in Hong Kong and China generally and by continued economic growth in Hong Kong and China as a whole.
Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in Hong Kong and China generally and by continued economic growth in Hong Kong and China as a whole.
Nonetheless, there can be no assurance that future changes in laws or regulations will not impact the Company, UHY LLP or any future auditor of the Company.
Nonetheless, there can be no assurance that future changes in laws or regulations will not impact the Company, UHY LLP or HTL International, LLC or any future auditor of the Company.
Any of the foregoing could materially and adversely affect our reputation, business, financial condition, and results of operations. 22 We derived a substantial portion of revenue from a small number of key clients. In 2020, 2021 and 2022, we derived a substantial portion of our revenue from a small number of key clients.
Any of the foregoing could materially and adversely affect our reputation, business, financial condition, and results of operations. 23 We derived a substantial portion of revenue from a small number of key clients. In 2021, 2022 and 2023, we derived a substantial portion of our revenue from a small number of key clients.
Our total revenue-generating clients grew from 1,722 as of December 31, 2017 to 4,526 as of December 31, 2022. To further grow our business and expand our operation, we rely on continuous efforts in retaining existing clients and attracting new ones. Our ability to retain existing clients is dependent upon multiple factors, some of which are beyond our control.
Our total revenue-generating clients grew from 1,722 as of December 31, 2017 to 2,443 as of December 31, 2023. To further grow our business and expand our operation, we rely on continuous efforts in retaining existing clients and attracting new ones. Our ability to retain existing clients is dependent upon multiple factors, some of which are beyond our control.
As advised by our PRC legal counsel, JunHe LLP, based on their understanding of the current PRC laws, rules and regulations that the CSRC’s approval is not required for our listing and trading of our securities on Nasdaq, given that our PRC subsidiary was incorporated as wholly foreign-owned enterprises by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are our beneficial owners.
Based on our management’s assessment and our understanding of the current PRC laws, rules and regulations that the CSRC’s approval is not required for our listing and trading of our securities on Nasdaq, given that our disposed-PRC subsidiary was incorporated as wholly foreign-owned enterprises by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are our beneficial owners.
In respect of matters requiring the votes of shareholders, holders of Class A Ordinary Shares will be entitled to one vote per share, while holders of Class B Ordinary Shares will be entitled to one hundred votes per share.
Furthermore, our ordinary shares consist of Class A Ordinary Shares and Class B Ordinary Shares. In respect of matters requiring the votes of shareholders, holders of Class A Ordinary Shares will be entitled to one vote per share, while holders of Class B Ordinary Shares will be entitled to one hundred votes per share.
Although we will use all reasonable efforts to achieve compliance with Rule 5550(a)(2), there can be no assurance that we will be able to regain compliance with that rule or will otherwise be in compliance with other Nasdaq listing criteria.
Although we will use all reasonable efforts to achieve compliance with Nasdaq continued listing rules, there can be no assurance that we will be able to regain compliance with that rule or will otherwise be in compliance with other Nasdaq listing criteria.
However, our PRC counsel has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules.
However, there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules.
Currently, four of the directors are based in Hong Kong.
Currently, six of the directors are based in Hong Kong.
As of December 31, 2022, Jian Wang, our chairman of the board and Chunning Wang, our chief executive officer collectively hold a total of 9,843,096 Class B Ordinary Shares and a total of 200,000 Class A Ordinary Shares, representing approximately more than 83% of our voting power total issued and outstanding share capital.
As of December 31, 2023, Jian Wang, our chairman of the board and Chunning Wang, our chief executive officer collectively hold a total of 23,843,096 Class B Ordinary Shares and a total of 200,000 Class A Ordinary Shares, representing approximately 93% of our voting power total issued and outstanding share capital.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Removed
Item 4. Information on the Company ” or “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” or elsewhere in this annual report on Form 20-F. D. Exchange Controls See “Item 3. Key Information — D. Risk factors — Risks Related to our Business and Industry E.
Added
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company Lion Group Holding Ltd. was incorporated under the laws of the Cayman Islands as an exempted company on February 11, 2020, solely for the purpose of effectuating the Business Combination.
Removed
Taxation The following summary of the material Cayman and U.S. federal income tax consequences of an investment in the ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change.
Added
Prior to the Business Combination, Lion Group Holding Ltd. owned no material assets and did not operate any business.
Removed
This summary does not deal with all possible tax consequences relating to an investment in the ADSs or ordinary shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, Hong Kong, and the United States.
Added
On June 16, 2020, we consummated the Business Combination pursuant to the terms of the Business Combination Agreement, upon which Lion Group Holding Ltd. became the ultimate parent company of Lion and it has no operating assets other than its ownership of interests in Lion. 53 In June 2015, Lion Financial Group Limited (previously known as BC Financial Holdings Limited) was incorporated under the laws of the British Virgin Islands, as a holding company of our businesses In May 2016, Lion International Securities Group Limited, Lion Futures Limited, Lion Capital Management Limited, BC Wealth Management Limited and Lion Foreign Exchange Limited in Hong Kong, were incorporated, to engage in securities and futures brokerage business, asset management business and forex trading business, respectively.
Removed
To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Ogier, our Cayman Islands counsel. Material U.S.
Added
In October 2014, BC Wealth Management Limited was incorporated in Hong Kong, through which we started to carry out our insurance brokerage business. In February 2017, Lion Wealth Management Limited was incorporated under the laws of British Virgin Islands as a holding company of BC Wealth Management Limited.
Removed
Federal Income Tax Considerations The following summary discusses the material U.S. federal income tax considerations for the ownership and disposition of our ADSs and the Class A Ordinary Shares underlying the ADSs (collectively, the “Securities”).
Added
In March 2017, Lion Brokers Limited was incorporated under the laws of Cayman Islands as a wholly owned subsidiary of Lion Financial Group Limited. In October 2018, Lion Wealth Limited was incorporated in Hong Kong as our Asia head office.
Removed
This discussion applies only to Securities held as capital assets for U.S. federal income tax purposes, and does not describe all of the tax consequences that may be relevant to beneficial owners of our Securities in light of their particular circumstances, including alternative minimum tax and Medicare contribution tax consequences, or beneficial owners who are subject to special rules, such as: ● financial institutions or financial services entities; ● insurance companies; ● government agencies or instrumentalities thereof; ● regulated investment companies and real estate investment trusts; ● expatriates or former residents of the United States; ● persons that acquired our securities pursuant to an exercise of employee share options, in connection with employee incentive plans or otherwise as compensation; ● dealers or traders subject to a mark-to-market method of tax accounting with respect to our Securities; ● persons holding our Securities as part of a “straddle,” hedge, integrated transaction or similar transaction; ● U.S. holders (as defined below) whose functional currency is not the U.S. dollar; ● partnerships or other pass-through entities for U.S. federal income tax purposes or investors in such entities; ● holders who are controlled foreign corporations or passive foreign investment companies; ● U.S. holders actually or constructively owning 5% or more of our Securities; or ● tax-exempt entities. 126 This discussion does not consider the tax treatment of entities that are partnerships or other pass-through entities for U.S. federal income tax purposes or persons who hold our securities through such entities.
Added
In June 2019, Lion Investment Fund SPC was incorporated under the laws of Cayman Islands as a wholly owned subsidiary of Lion Capital Management Limited. As of the date of this annual report, we have not provided any financial services through this entity. In July 2019, Lion International Financial (Singapore) Pte. Ltd. was incorporated in Singapore.
Removed
If a partnership or other pass-through entity for U.S. federal income tax purposes is the beneficial owner of our Securities, the U.S. federal income tax treatment of partners of the partnership will generally depend on the status of the partners and the activities of the partner and the partnership.
Added
As of the date of this annual report, we have not provided financial services through this entity. In December 2019, Lion Capital Management Limited was changed name to Lion Asset Management Limited. In June 2020, we restructured pursuant to the Business Combination Agreement, by which Lion Group Holding Ltd. became our parent company and listed on Nasdaq.
Removed
This discussion also does not address or consider the tax treatment of Lion Group North America Corp.’s (formerly “Proficient Alpha Acquisition Corp”) direct or indirect owners. This discussion is based on the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed U.S.
Added
In January 2021, the Proficient Alpha Acquisition Corp. was renamed to Lion Group North America Corp. In April 2021, Lion Financial Group Limited acquired Lion Fintech Group Limited from Jian Wang.
Removed
Treasury regulations all in effect as of the date hereof, changes to any of which subsequent to the date of this annual report may affect the tax consequences described herein.
Added
Lion Fintech Group Limited was incorporated under the laws of British Virgin Islands in February 2017, as a holding company of Royal Lion Investment Limited, a Cayman Islands company, in which we hold 70% voting rights of the shareholders. Royal Lion Middle East DMCC is a wholly-owned subsidiary of Royal Lion Investment Limited.
Removed
This discussion does not take into account potential suggested or proposed changes in such tax laws which may impact the discussion below and does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes. Each of the foregoing is subject to change, potentially with retroactive effect.
Added
As of the report date, both Royal Lion Investment Limited and Royal Lion Middle East DMCC are dormant.
Removed
You are urged to consult your tax advisor with respect to the application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any state, local or foreign jurisdiction.
Added
In May 2021, Lion NFT Limited was incorporated under the laws of British Virgin Islands in which we hold 90% equity interest, as a holding company of Flying Lion Limited, a Cayman Islands company, in which we hold 70% equity interest through Lion NFT Limited.
Removed
Our ADSs For U.S. federal income tax purposes, holders of our ADSs generally should be treated as the owner of the underlying Class A Ordinary Shares that are represented by such ADSs. Accordingly, deposits or withdrawals of Class A Ordinary Shares for ADSs should not be subject to United States federal income tax.
Added
Flying Lion Lab is a team of independent contractors engaged by Flying Lion Limited and is the workshop which designs the NFT products. We conducted our NFT business through Lion NFT Limited. All the products designed by Flying Lion Lab are to be sold at Lion NFT Platform.
Removed
Our Tax Treatment Our Tax Residence for U.S. Federal Income Tax Purposes Under current U.S. federal income tax law, a corporation generally will be considered to be resident for U.S. federal income tax purposes in its place of organization or incorporation.
Added
In May 2021, Lion Group (Hangzhou) Investment Limited was incorporated under the laws of PRC as a wholly owned subsidiary of Lion Wealth Limited, as a holding company of our investments in PRC.
Removed
Accordingly, under the generally applicable U.S. federal income tax rules, we, a Cayman Islands-incorporated entity, would generally be classified as a non-U.S. corporation (and, therefore, not a U.S. tax resident).
Added
On September 28, 2023, LWL entered into a Share Transfer Agreement with a third party, pursuant to which LWL sold its 100% ownership in Lion Group (Hangzhou ). In October 2021, Lion Metaverse Limited was incorporated under the laws of British Virgin Islands in which we hold 50% equity interest.
Removed
Section 7874 of the Code and the regulations promulgated thereunder, however, contain specific rules (more fully discussed below) that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes.
Added
In December 2021, Lion Multi-Series Fund SPC was incorporated under the laws of Cayman Islands as a wholly owned subsidiary of Lion Wealth Management Limited.
Removed
If it were determined that we should be taxed as a U.S. corporation for U.S. federal income tax purposes under section 7874, we would be liable for U.S. federal income tax on its income like any other U.S. corporation, and certain distributions made by us to non-U.S. holders of our Securities would be subject to U.S. withholding tax.
Added
As of the date of this annual report, we have not provided any financial services through this entity. 54 In February 2022, Lion Silver Capital Limited was incorporated under the laws of British Virgin Islands in which we hold 51% equity interest. As of the date of this annual report, we have not provided any financial services through this entity.
Removed
Taxation as a U.S. corporation could have a material adverse effect on our financial position and results from operations. The section 7874 rules are complex and require analysis of all relevant facts and circumstances, and there is limited guidance and significant uncertainties as to their application.
Added
As of the date of this annual report, we do not have any equity interest in any corporations incorporated in mainland China or have any contractual arrangements with any corporations incorporated in mainland China. Our Current Corporate Structure in China We sold our equity interests in Lion Group (Hangzhou) Investment Limited to a third party in September 2023.
Removed
Under section 7874, a corporation created or organized outside the United States (i.e., a non-U.S. corporation) will nevertheless be treated as a U.S. corporation for U.S. federal income tax purposes (and, therefore, be a U.S. tax resident subject to U.S. federal income tax on its worldwide income) if (1) the non-U.S. corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a U.S. corporation (including through the acquisition of all of the outstanding stock of the U.S. corporation), (2) the non-U.S. corporation’s expanded affiliated group does not have substantial business activities in the non-U.S. corporation’s country of organization or incorporation relative to the expanded affiliated group’s worldwide activities (the “ substantial business activities test ”), and (3) the shareholders of the acquired U.S. corporation hold at least 80% (by either vote or value) of the stock of the non-U.S. acquiring corporation after the acquisition by reason of holding shares in the U.S. acquired corporation, as determined under complex share ownership rules described below, which are uncertain in their application in many circumstances and are intended to increase the percentage ownership for these purposes (the “ Ownership Test ”).
Added
The PRC subsidiary was established solely for purpose of passive equity investment in China with no substantial business activities, which did not require contractual arrangements or variable interest entity, or VIE, to operate.
Removed
For this purpose, “expanded affiliated group” generally means the foreign acquiring corporation and all subsidiary corporations in which such foreign corporation owns, directly or indirectly, more than 50% of the stock (by vote and value) after the foreign acquiring corporation’s acquisition of the assets of the U.S. corporation. 127 In the Business Combination, we indirectly acquired all of Lion Group North America Corp.
Added
After the sale of our equity interests in Lion Group (Hangzhou) Investment Limited, as of the date of this annual report, we do not have any we do not have any equity interest in any corporations incorporated in mainland China or have any contractual arrangements with any corporations incorporated in mainland China.
Removed
(formerly “Proficient Alpha Acquisition Corp.”) ’s assets through the acquisition of all of the outstanding Proficient common stock. As a result, the determination of whether we are treated as a U.S. corporation for U.S. federal income tax purposes depends on the application of the substantial business activities test and the Ownership Test.
Added
Corporate Information Our principal executive office is 3 Phillip Street, #15-04 Royal Group Building, Singapore 048693. The phone number is +65 8877 3871. Our website is https://ir.liongrouphl.com/. SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov .
Removed
We are not expected to satisfy the substantial business activities test based on our activities in the Cayman Islands after the completion of the Business Combination. Accordingly, we must determine whether the Ownership Test has been met.
Added
You can also find information on our website https://ir.liongrouphl.com/ The information contained on our website is not a part of this annual report. B. Business Overview We are one of the few Chinese investor-focused trading platforms that offer a wide spectrum of products and services.
Removed
Based on the complex rules for determining share ownership under section 7874 and certain factual assumptions and determinations that are uncertain in application, former Proficient stockholders are expected to be treated as holding less than 80% (by both vote and value) of our stock by reason of their former ownership of Proficient common stock for these purposes.
Added
Currently, our business lines include (i) total return swap (TRS) trading business, (ii) contracts for difference (CFD) trading services, (iii) Hong Kong-based Over-The-Counter (“OTC”) stock options trading business, and (iv) futures and securities brokerage services. We provide these services through our all-in-one Lion Brokers Pro app and a variety of other apps available on iOS, Android, PC and Mac platforms.
Removed
Therefore, we are not expected to satisfy the Ownership Test, and we are not expected to be treated as a U.S. corporation for U.S. federal income tax purposes under section 7874.
Added
Our clients are mostly well-educated and affluent Chinese investors residing both inside and outside the PRC (excluding the United States), as well as institutional clients in Hong Kong that use our futures trading service.
Removed
However, the application of the Ownership Test is extremely complex, and the applicable Treasury regulations relating to the Ownership Test are subject to significant uncertainty and there is limited guidance regarding their application. Moreover, the application of the Ownership Test to the facts and circumstances of the Business Combination are uncertain.
Added
Our trading platform allows users to trade approximately 100 futures products on major futures exchanges worldwide (excluding the PRC), including the Chicago Mercantile Exchange (CME), Singapore Exchange (SGX), the Hong Kong Futures Exchange (HKFE) and Eurex Exchange (Eurex), as well as stocks listed on the New York Stock Exchange (NYSE), Nasdaq and Hong Kong Stock Exchange (HKSE), and PRC stocks listed on the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) that are eligible for the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect programs (together, “Stock Connect”).
Removed
In addition, changes to the rules in section 7874 or the Treasury Regulations promulgated thereunder, or other changes in law, could adversely affect our status as a non-U.S. entity for U.S. federal income tax purposes.
Added
In addition, our customers may also use our platform to trade various financial products, such as stock indices, commodities, futures, forex, ETFs, warrants and callable bull/bear contracts, on global exchanges or OTC markets. Our financial performance increased significantly from 2020 to 2021, as our revenue increased from US$10.2 million to US$25.0 million, respectively.
Removed
Accordingly, there can be no assurance that the IRS will not take a contrary position to those described above or that a court will not agree with a contrary position of the IRS in the event of litigation. Limitation on the Use of Lion Group North America Corp.’s U.S.
Added
We had a loss before income taxes of US$0.8 million in 2021 as compared to a loss before income taxes of US$2.6 million in 2020. Our financial performance decreased significantly from 2021 to 2022, as our revenue decreased significantly from US$25.0 million to a loss of US$2.5 million, respectively.
Removed
Federal Income Tax Attributes Following the acquisition of a U.S. corporation by a non-U.S. corporation, even if the 80% Ownership Test is not met, section 7874 may apply to limit the ability of the acquired U.S. corporation, i.e., Proficient, and its U.S. affiliates to utilize certain U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S. taxable income resulting from certain transactions.
Added
We had a loss before income taxes of US$34.0 million in 2022 as compared to a loss before income taxes of US$0.8 million in 2021. Our financial performance improved from 2022 to 2023, as our revenue increased from a loss of US$2.5 million to an income of US$21.1 million, respectively.
Removed
Specifically, if (a) we do not satisfy the “substantial business activities test” and (b) the former Proficient stockholders are treated as holding, as determined under the Ownership Test, at least 60% (but less than 80%), by either vote or value, of the shares of ours by reason of holding stock in Proficient (the “ 60% Ownership Test ”), the taxable income of Proficient (and any person related to it) for any given year, within a ten-year period beginning on the date of the merger, will be no less than that person’s “inversion gain” for that taxable year.
Added
We had a loss before income taxes of US$5.8 million in 2023 as compared to a loss before income taxes of US$34.0 million in 2022. 55 History of our NFT Business and Current Status In January 2022, we launched our NFT business through Flying Lion Limited, including (i) issuance of MetaWords character NFTs and MetaWords work NFTs (collectively, the “MetaWords NFTs”), and (ii) the establishment of our NFT trading platform, namely the Lion NFT platform (f/k/a/ Meta World).
Removed
Lion Group North America Corp.’s inversion gain includes gain from the transfer of stock or any other property (other than property held for sale to customers) and income from the license of any property that is either transferred or licensed as part of the transactions, or, if after the transactions, is transferred or licensed to a non-U.S. related person.
Added
The Lion NFT platform is an online marketplace where user customers can mint, buy, and sell their own NFT assets. We have performed KYC check on the identity of the registered users since the launch and have blocked all U.S. persons from accessing the platform.
Removed
Further, the Tax Cuts and Jobs Act imposed additional requirements on a U.S. corporation that has failed the “substantial business activities test” and the 60% Ownership Test (an “ expatriated entity ”), including that the expatriated entity must include, as base erosion payments that may be subject to a minimum tax, any amounts treated as reductions in gross income paid to a related foreign person within the meaning of section 59A of the Code.
Added
We did not issue or sell MetaWords NFTs to U.S. persons in January 2022 and blocked U.S. persons from registering on the Lion NFT platform. We will also keep tracking users’ IP addresses and block visitors with a U.S. IP address.
Removed
Based on the rules under section 7874, it is expected that the former Proficient stockholders will be treated as having received at least 60% of the vote or value of our stock by reason of holding shares of Proficient common stock.
Added
We created and minted the MetaWords NFTs by converting Xu Bing’s characters in his artwork Book from the Ground and sold MetaWords NFTs to the NFT collectors. MetaWords characters serve as the basic units of the MetaWords language system. MetaWords works are excerpts drawn from Mr. Xu’s artwork Book from the Ground .
Removed
In such case, Proficient would be subject to the adverse rules described in the preceding paragraph, as we expanded affiliated group is not expected to meet the “substantial business activities” test in connection with the Business Combination (see discussion under “ —Our Tax Residence for U.S. Federal Income Tax Purposes ”).
Added
The sales were conducted through an online auction and blind boxes direct sell on the Lion NFT platform in January 2022.
Removed
Nevertheless, the application of these rules to Proficient is not expected to have a material impact on us, as Proficient is a special purpose acquisition corporation with little to no tax attributes, although there can be no assurances in this regard. The inversion rules in section 7874 are complex and there is limited guidance regarding their application.
Added
We sold in an aggregate of six MetaWords NFTs created by us by the auction in the amount of 197 wrapped BNB, and 2,742 blind-boxes which includes MetaWords NFTs at 0.40 BNB per unit for a total amount of 749 BNB, net of the consideration paid to customers of 348 BNB in form of incentive credits.
Removed
No opinion of counsel or IRS ruling has been sought regarding the application of these rules to the Business Combination. Accordingly, there can be no assurance that the IRS will not take a contrary position to those described above or that a court will not agree with a contrary position of the IRS in the event of litigation.
Added
We record revenue on a gross basis of the sale price, net of considerations paid to the users as the incentive, in an aggregate of approximately US$438,000 at the spot token price upon the completion of the sale of character NFTs and blind boxes.
Removed
Holders of shares of our Securities should consult with their independent tax advisors regarding the potential application of section 7874 to the Business Combination. 128 U.S. Holders This section applies to you if you are a U.S. holder.
Added
In addition, we launched a MetaWords NFT creation tool, giving users the ability to create their own MetaWords NFTs. The profits generated from the Lion NFT platform will be retained by Flying Lion Limited, a Cayman Islands company, one of our subsidiaries, as working capital. We conduct our NFT business through Flying Lion Limited.
Removed
A “ U.S. holder ” is a beneficial owner of Securities who or that is, for U.S. federal income tax purposes: ● an individual who is a citizen or resident of the United States; ● a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof or the District of Columbia; ● an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or ● a trust if (1) a U.S. court can exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person.
Added
We hold 70% equity interest in Flying Lion Limited through Lion NFT Limited, a British Virgin Islands company, in which we hold 90% equity interest. As of December 31, 2022, we held 197 wrapped BNB and 749 BNB on hand in the carrying value of approximately US$144,000, and recorded an impairment charge of approximately US$294,000 in 2022.
Removed
ALL HOLDERS OF OUR SECURITIES SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE BUSINESS COMBINATION TO THEM, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Added
We have liquidated most of the BNB (691 BNB out of 749 BNB) into USDT 230,000 and recognized a gain of approximately US$90,000 from the sale of BNB in 2023. As of December 31, 2023, the value of BNB and USTD we held is approximately US$5,000, which is immaterial to our total assets.
Removed
Passive Foreign Investment Company Rules Certain adverse U.S. federal income tax consequences could apply to a U.S. holder if we, or any of our subsidiaries, is treated as a passive foreign investment company, or PFIC, for any taxable year during which the U.S. holder holds our Securities.
Added
The users can resell the MetaWords NFTs to other users on the Lion NFT platform, or MetaWords Resale.
Removed
A non-U.S. corporation, such as us, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year in which, after applying certain look-through rules, either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passive income.
Added
For the MetaWords Resale conducted on the Lion NFT platform, we charge 5% of the purchase price as the authorization fee for Xu Bing’s artwork; 5% of the purchase price as the licensing fee for the author; and 2.5% of the purchase price as the transaction fee. Lion is the author for MetaWords NFTs.
Removed
Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains.
Added
The commissions are collected in the form of BNB tokens when the users buy and sell MetaWords NFTs on the Lion NFT platform. We may record three types of fees abovementioned when applicable on a net basis, and earned revenue based on a specific percentage of the gross sale value as the subsequent sales occur.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

97 edited+39 added−95 removed94 unchanged
The mining equipment was fully impaired during the six-month period of 2022 in an amount of US$1.7 million. Impairment of cryptocurrencies. The impairment charges of the BNB and wBNB tokens held from the sale of MetaWords NFTs in the year ended December 31, 2022 was US$0.3 million. 97 Change in fair value of warrant liabilities.
The mining equipment was fully impaired during the six-month period of 2022 in an amount of US$1.7 million. Impairment of cryptocurrencies. The impairment charges of the BNB and wBNB tokens held from the sale of MetaWords NFTs in the year ended December 31, 2022 was US$0.3 million. Change in fair value of warrant liabilities.
We have incurred substantial research and development expenses, and expect to incur additional significant expenses relating to future development, maintenance and operation of our technology infrastructure and project-based expenditures. Regulatory environment and compliance We operate in highly regulated industries across multiple jurisdictions, especially in the Cayman Islands and Hong Kong.
We have incurred substantial research and development expenses in the past, and expect to incur additional significant expenses relating to future development, maintenance and operation of our technology infrastructure and project-based expenditures. Regulatory environment and compliance We operate in highly regulated industries across multiple jurisdictions, especially in the Cayman Islands and Hong Kong.
E. Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.
Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.
If any of the relevant regulatory authorities, such as the Cayman Islands Monetary Authority (CIMA), the Hong Kong Securities and Futures Commission (HKSFC), and Monetary Authority of Singapore, introduce new regulations or impose greater restrictions on us, we may incur additional compliance costs.
If any of the relevant regulatory authorities, such as the Cayman Islands Monetary Authority (CIMA), the Hong Kong Securities and Futures Commission (HKSFC), and Monetary Authority of Singapore (MAS), introduce new regulations or impose greater restrictions on us, we may incur additional compliance costs.
We incurred R&D expenses of US$4.7 million in connection with developing and enhancing our Metaverse project for the year ended December 31, 2022, increased from that of US$1.2 million for the year ended December 31, 2021. Interest Expenses.
We incurred R&D expenses of US$4.7 million in connection with developing and enhancing our Metaverse project for the year ended December 31, 2022, increased from that of US$1.2 million for the year ended December 31, 2021. 94 Interest Expenses.
Our cost of Bitcoin mining was US$1.2 million for the year ended December 31, 2021. There was no crypto mining operation since October 2021. 96 General and Administrative Expenses.
Our cost of Bitcoin mining was US$1.2 million for the year ended December 31, 2021. There was no crypto mining operation since October 2021. General and Administrative Expenses.
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. 95 Futures and Securities Brokerage Income.
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. 93 Futures and Securities Brokerage Income.
See “ Transfers of Cash from Our Subsidiaries to the Company” below for the ability of subsidiaries to transfer funds to the holding company. 101 Regulatory Capital Requirements We are required to hold sufficient regulatory capital at both group and individual entity level to cover our risk exposures, among other financial obligations imposed by regulatory authorities in the multiple jurisdictions where our subsidiaries operate.
See “ Transfers of Cash from Our Subsidiaries to the Company” below for the ability of subsidiaries to transfer funds to the holding company. 96 Regulatory Capital Requirements We are required to hold sufficient regulatory capital at both group and individual entity level to cover our risk exposures, among other financial obligations imposed by regulatory authorities in the multiple jurisdictions where our subsidiaries operate.
Various factors that we use in determining the impact of these assessments include the expected useful lives of long-lived assets and the ability to realize any undiscounted cash flows in excess of the carrying amounts of such asset or asset groups, and are affected primarily by changes in the expected use of the assets, changes in technology or development of alternative assets, changes in economic conditions, changes in operating performance and changes in expected future cash flows.
Impairment of Long-lived Assets Various factors that we use in determining the impact of the impairment assessments include the expected useful lives of long-lived assets and the ability to realize any undiscounted cash flows in excess of the carrying amounts of such asset or asset groups, and are affected primarily by changes in the expected use of the assets, changes in technology or development of alternative assets, changes in economic conditions, changes in operating performance and changes in expected future cash flows.
(“LIFSL”), Lion’s Singapore subsidiary, is licensed by the MAS to conduct the regulated activities of dealing in capital markets products and it is subject to specified licensing condition. LIFSL is subject to the requirements of Securities and Futures Act (Cap. 289) (“SFA”). Under the rule, LIFSL is required to maintain a minimum liquid capital of approximately US$744,000 (SGP 1,000,000).
(“LIFSL”), Lion’s Singapore subsidiary, is licensed by the MAS to conduct the regulated activities of dealing in capital markets products and it is subject to specified licensing condition. LIFSL is subject to the requirements of Securities and Futures Act (Cap. 289) (“SFA”). Under the rule, LIFSL is required to maintain a minimum liquid capital of approximately US$758,000 (SGP 1,000,000).
The following table presents our cash and cash equivalents held in various currencies as of the years ended December 31, 2022, 2021 and 2020. We closely monitor our cash balance and future payments obligations by preparing monthly cash balance and fund requirement reports to provide a timely overview of our overall cash position and liquidity and risk control measurements.
The following table presents our cash and cash equivalents held in various currencies as of the years ended December 31, 2023, 2022 and 2021. We closely monitor our cash balance and future payments obligations by preparing monthly cash balance and fund requirement reports to provide a timely overview of our overall cash position and liquidity and risk control measurements.
To the extent our unrestricted cash, short-term investments and cash flow from operating activities are insufficient to satisfy its liquidity needs in accordance with our strategic plan in the future, we may determine to raise additional funds through the sale of equity or convertible debt securities.
To the extent our unrestricted cash, short-term investments and cash flow from operating activities are insufficient to satisfy its liquidity needs in accordance with our strategic plan in the future, we may decide to raise additional funds through the sale of equity or convertible debt securities.
The short-term investments we held are mainly equity securities listed on Shanghai/Shenzhen Stock Exchange and Hong Kong Stock Exchange. The Company did not have available and unused external source of liquidity as of the years ended December 31, 2022, 2021 and 2020.
The short-term investments we held are mainly equity securities listed on Shanghai/Shenzhen Stock Exchange and Hong Kong Stock Exchange. The Company did not have available and unused external source of liquidity as of the years ended December 31, 2023, 2022 and 2021.
The following table illustrates the minimum regulatory capital as established by the HKSFC, the Insurance Association (Hong Kong), the CIMA and MAS that our subsidiaries were required to maintain as of December 31, 2022, 2021 and 2020 and the actual amounts of capital that were maintained.
The following table illustrates the minimum regulatory capital as established by the HKSFC, the Insurance Association (Hong Kong), the CIMA and MAS that our subsidiaries were required to maintain as of December 31, 2023, 2022 and 2021 and the actual amounts of capital that were maintained.
Deferred tax expenses or benefits are recognized in the consolidated financial statements for the changes in deferred tax liabilities or assets between years. 108 We recognize the effect of income tax positions only if those positions are more likely than not of being sustained.
Deferred tax expenses or benefits are recognized in the consolidated financial statements for the changes in deferred tax liabilities or assets between years. 102 We recognize the effect of income tax positions only if those positions are more likely than not of being sustained.
In addition, governmental policies and regulatory environment such as any capital control measures that impose restrictions on cross-border transfer also affect our business and results of operations. 87 Key Components of Results of Operations for the Years Ended December 31, 2022, 2021, and 2020 Revenues (Losses) Our revenues consist of commissions, trading gains (losses), interest income, interest income and others.
In addition, governmental policies and regulatory environment such as any capital control measures that impose restrictions on cross-border transfer also affect our business and results of operations. Key Components of Results of Operations for the Years Ended December 31, 2023, 2022, and 2021 Revenues (Losses) Our revenues consist of commissions, trading gains (losses), interest income, interest income and others.
Net Loss (income) attributable to LGHL After allocating net loss to non-controlling interest, net loss attributable to parent company was a net loss of US$31.6 million for the year ended December 31, 2022, compared to a net income of US$23,000 for the year ended December 31, 2021.
Net Loss (income) attributable to LGHL After allocating net loss to non-controlling interest, net loss attributable to parent company was a net loss of US$31.6 million for the year ended December 31, 2022, compared to a net income of US$23,000 for the year ended December 31, 2021. 95 B.
Operating Lease Commitments The following table sets forth our operating lease commitments as of December 31, 2022. Our lease obligations primarily comprise future aggregate minimum lease payments in respect of office premises under non-cancellable lease agreements.
Operating Lease Commitments The following table sets forth our operating lease commitments as of December 31, 2023. Our lease obligations primarily comprise future aggregate minimum lease payments in respect of office premises under non-cancellable lease agreements.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trend, uncertainty, demand, commitment or events for the year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our revenues, income, profitability, liquidity, capital resources, or that would cause disclosed financial information to be not necessarily indicative of future operation results or financial conditions.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trend, uncertainty, demand, commitment or events for the year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our revenues, income, profitability, liquidity, capital resources, or that would cause disclosed financial information not to be necessarily indicative of future operation results or financial conditions. 101 E.
It has been dormant since we acquired it in June 2020. 93 Results of Operations for the Years Ended December 31, 2022, 2021, and 2020 The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our revenues for the periods indicated.
It has been dormant since we acquired it in June 2020. 89 Results of Operations for the Years Ended December 31, 2023, 2022, and 2021 The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our revenues for the periods indicated.
Our TRS trading income consisting of (i) trading gains/(losses) from our proprietary TRS trading activities, (ii) interest income earned on loans provided to TRS trading customers, and (iii) commissions and other income resulting from TRS trading services, were US$(3.9) million, US$2.7 million and US$0.6 million, respectively for the year ended December 31, 2022, were US$11.1 million, US$1.3 million and US$0.8 million, respectively for the year ended December 31, 2021, and were nil, US$0.1 million and US$0.1 million, respectively for the year ended December 31, 2020.
Our TRS trading income consisting of (i) trading gains/(losses) from our proprietary TRS trading activities, (ii) interest income earned on loans provided to TRS trading customers, and (iii) commissions and other income resulting from TRS trading services, were US$(5.1) million, US$2.1 million and US$0.6 million, respectively for the year ended December 31, 2023, were US$(3.9) million, US$2.7 million and US$0.6 million, respectively for the year ended December 31, 2022, and were US$11.1 million, US$1.3 million and US$0.8 million, respectively for the year ended December 31, 2021.
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 Bitcoin mining operation has ceased since October 2021.
The decrease in other income was primarily attributed to 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 Bitcoin mining operation has ceased since October 2021.
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.
Expenses Our total expenses increased by 21.4% from US$25.9 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.
BCWML is subject to the minimum requirements specified by the Insurance Authority (“IA”) under section 70(2) of the Ordinance. Under the rule, BCWML is required to maintain a minimum capital and net assets of approximately US$38,000 (HK$300,000). 102 Lion International Financial (Singapore) Pte. LTD.
BCWML is subject to the minimum requirements specified by the Insurance Authority (“IA”) under section 70(2) of the Ordinance. Under the rule, BCWML is required to maintain a minimum capital and net assets of approximately US$64,000 (HK$500,000). Lion International Financial (Singapore) Pte. LTD.
Our cash and cash equivalents primarily consist of cash on hand and cash deposited with banks which are unrestricted for withdrawal or use. We also held short-term investments that can be redeemed on demand of US$11.1 million, and US$15.9 million as of December 31, 2022 and 2021, respectively.
Our cash and cash equivalents primarily consist of cash on hand and cash deposited with banks which are unrestricted for withdrawal or use. We also held short-term investments that can be redeemed on demand of US$4.5 million, and US$11.1 million as of December 31, 2023 and 2022, respectively.
Of our commission revenues derived from CFD trading services in 2022, approximately 88.3% related to stock indices and near 11.7% related to commodities, with a remaining insignificant proportion relating to other CFD products. In 2021 and 2020, these two percentages were 80.0% and 20.0%, respectively, and were 68.5% and 31.5%, respectively.
Of our commission revenues derived from CFD trading services in 2023, approximately 70.3% related to stock indices and near 29.7% related to commodities, with a remaining insignificant proportion relating to other CFD products. In 2022 and 2021, these two percentages were 88.3% and 11.7%, respectively, and were 80.0% and 20.0%, respectively.
We currently do not have any dividend policy, any future determination will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments. 104 Currently, we conduct our substantial operations through our subsidiaries in Hong Kong and the Cayman Islands.
We currently do not have any dividend policy, any future determination will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
Currently, our business lines include (i) total return swap (TRS) trading business, (ii) contracts for difference (CFD) trading services, (iii) futures and securities brokerage services, and (iv) insurance brokerage services. We provide these services through our all-in-one Lion Brokers Pro app and a variety of other apps available on iOS, Android, PC and Mac platforms.
Currently, our business lines include (i) total return swap (TRS) trading business, (ii) contracts for difference (CFD) trading services, (iii) Hong Kong-based Over-The-Counter (“OTC”) stock options trading business, and (iv) futures and securities brokerage services. We provide these services through our all-in-one Lion Brokers Pro app and a variety of other apps available on iOS, Android, PC and Mac platforms.
Other income Other income primarily includes sale of MetaWords NFTs, bitcoin mining income, order processing charges, and dividend income etc. Our revenues are generated from our main business lines, TRS trading business, CFD trading services, futures and securities brokerage services and others.
Other income Other income primarily includes sale of MetaWords NFTs, bitcoin mining income, order processing charges, foreign currency exchange gain, and dividend income etc. Our revenues are generated from our main business lines, TRS trading business, CFD trading services, OTC stock option trading, futures and securities brokerage services and others.
Our total number of executed futures contracts was 1,298,452 lots, 1,124,805 lots, and 738,444 lots for the years ended December 31, 2022, 2021, and 2020, respectively.
Our total number of executed futures contracts was 913,583 lots, 1,298,452 lots, and 1,124,805 lots for the years ended December 31, 2023, 2022, and 2021, respectively.
See “ Business — Our Business Lines — CFD Trading Services .” Our CFD trading income consisting of (i) commissions, (ii) bid/offer spreads and trading gains/(losses), and (iii) difference in interest rates, were US$0.8 million, US$(7.5) million, and nil, respectively for the year ended December 31, 2022, and were US$4.3 million, US$4.4 million, and nil, respectively for the year ended December 31, 2021, and were US$4.9 million, US$1.8 million, and US$0.1 million, respectively for the year ended December 31, 2020.
See “ Business — Our Business Lines — CFD Trading Services .” Our CFD trading income consisting of (i) commissions, and (ii) bid/offer spreads and trading gains/(losses), were US$3.1 million and US$16.2 million, respectively for the year ended December 31, 2023, were US$0.8 million and US$(7.5) million, respectively for the year ended December 31, 2022, and were US$4.3 million and US$4.4 million, respectively for the year ended December 31, 2021.
Subject to the Companies Act and our Amended and Restated Memorandum and Articles of Association, our board of directors may authorize and declare a dividend to shareholders from time to time out of the profits from the Company, realized or unrealized, or out of the share premium account, provided that the Company will remain solvent, meaning the Company is able to pay its debts as they come due in the ordinary course of business.
As a result, cash can be transferred freely between the Company and its operating subsidiaries, across borders, and to U.S. investors. 99 Subject to the Companies Act and our Amended and Restated Memorandum and Articles of Association, our board of directors may authorize and declare a dividend to shareholders from time to time out of the profits from the Company, realized or unrealized, or out of the share premium account, provided that the Company will remain solvent, meaning the Company is able to pay its debts as they come due in the ordinary course of business.
For the years ended December 31, 2022 and 2021, we did not pay any dividends to our shareholders. If we determine to pay dividends on any of our ADSs in the future, as a holding company, we will be dependent on receipt of funds from our operating subsidiaries in Hong Kong and Cayman Islands.
If we determine to pay dividends on any of our ADSs in the future, as a holding company, we will be dependent on receipt of funds from our operating subsidiaries in Hong Kong and Cayman Islands.
Year ended December 31, 2022 2021 2020 US$ US$ US$ Unrestricted cash $ 11,159,610 $ 15,098,151 $ 3,426,467 Short-term investments 11,104,047 15,900,369 17,622 $ 22,263,657 $ 30,998,520 $ 3,444,089 We have been able to meet our working capital needs in the past, and based on our current operating plan, we expect that our existing unrestricted cash and short-term investments and our anticipated cash flows from operations will be sufficient to meet our anticipated cash needs for the next 12 months.
Year ended December 31, 2023 2022 2021 US$ US$ US$ Unrestricted cash $ 28,953,780 $ 11,159,610 $ 15,098,151 Short-term investments 4,522,805 11,104,047 15,900,369 $ 33,476,585 $ 22,263,657 $ 30,998,520 We have been able to meet our working capital needs in the past, and based on our current operating plan, we expect that our existing unrestricted cash and short-term investments and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and material cash requirements for the next 12 months.
These were partially offset by an increase of US$1.4 million in payables to customers and an increase of US$3.8 million in payables to broker-dealers and clearing organizations. 103 Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was US$7.0 million, primarily attributable to short-term loans receivable to unrelated parties in an aggregate of US$8.5 million, partially offset by US$1.5 million of collection of such loans.
Net cash used in investing activities for the year ended December 31, 2022 was US$7.0 million, primarily attributable to short-term loans receivable to unrelated parties in an aggregate of US$8.5 million, partially offset by US$1.5 million of collection of such loans.
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.
Others. Other income decreased by US$0.1 million from US$0.7 million for the year ended December 31, 2021, to US$0.6 million for the year ended December 31, 2022.
Year ended December 31, 2022 2021 2020 US$ % US$ % US$ % Non-GAAP (loss) income 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 (27,141,993 ) 1,093.3 2,954,850 11.8 357,919 3.5 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues Our total revenues decreased by US$27.5 million from an income of US$25.0 million for the year ended December 31, 2021 to a loss of US$(2.5) million for the year ended December 31, 2022, primarily due to the trading losses in CFD and TRS trading services.
Year ended December 31, 2023 2022 2021 US$ % US$ % US$ % Non-GAAP (loss) income 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 (1,833,108 ) (8.7 ) (27,141,993 ) 1,098.8 2,954,850 11.7 90 Year ended December 31, 2023 Compared to Year ended December 31, 2022 Revenues Our total revenues increased by US$23.6 million from a loss of US$(2.5) million in 2022 to US$21.1 million in 2023, primarily due to an increase in CFD trading services.
Others Others include the revenue generated from insurance brokerage services, sale of MetaWords NFTs, Bitcoin mining operations, trading gains (losses) from OTC call options we sold to our customers and interests earned on short-term loans we extend to unrelated third parties and bank deposit etc.
Others Others include the revenue generated from insurance brokerage services, sale of MetaWords NFTs, Bitcoin mining operations, foreign currency exchange gain and interests earned on short-term loans we extend to unrelated third parties and bank deposit etc.
Liquidity and Capital Resources Our principal sources of liquidity have been cash generated from our operations and capital injections by our shareholder. As of December 31, 2022, and 2021, we had US$11.1 million, and US$15.1 million of cash and cash equivalents (excluding cash held on behalf of clients), respectively.
Liquidity and Capital Resources Our principal sources of liquidity have been cash generated from our operations and capital raised through equity and debt transactions. As of December 31, 2023, and 2022, we had US$29.0 million, and US$11.1 million of cash and cash equivalents (excluding cash held on behalf of clients), respectively.
The following is a reconciliation of our net (loss) income to Non-GAAP (loss) income and GAAP EPS to our Non-GAAP EPS: Year ended December 31, 2022 2021 2020 US$ US$ US$ Net (loss) income attributable to LGHL $ (31,563,283 ) $ 22,782 $ (2,575,459 ) Stock-based compensation 1,300,550 381,800 3,656,800 Amortization of debt discounts 658,680 783,994 13,288 Depreciation expenses 2,032,386 1,295,470 40,556 Impairment of fixed assets 1,690,028 - - Change in fair value of warrant liabilities (1,260,354 ) 470,804 (777,266 ) Non-GAAP (loss) income 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 $ (27,141,993 ) $ 2,954,850 $ 357,919 Non-GAAP (losses) earnings per share for both Class A and Class B - basic (i) $ (0.59 ) $ 0.10 $ 0.04 - diluted (i) $ (0.59 ) $ 0.09 $ 0.04 Weighted average Class A ordinary shares outstanding - basic (i) 40,438,604 26,046,212 6,180,795 - diluted (i) 40,438,604 29,145,497 6,180,795 Weighted average Class B ordinary shares outstanding - basic and diluted (i) 5,535,888 4,041,875 3,962,294 (i) Share and per share data have been retroactively restated to give effect to the reverse recapitalization Year ended December 31, 2022 2021 2020 Basic Fully Diluted Basic Fully Diluted Basic Fully Diluted Earnings (Loss) attributable to LGHL per share for both Class A and Class B $ (0.69 ) $ (0.69 ) $ 0.00 $ 0.00 $ (0.25 ) $ (0.25 ) Stock-based compensation 0.03 0.03 0.01 0.01 0.36 0.36 Amortization of debt discounts 0.01 0.01 0.03 0.02 0.00 0.00 Depreciation expenses 0.04 0.04 0.04 0.04 0.00 0.00 Impairment of fixed assets 0.04 0.04 - - - - Change in fair value of warrant liabilities (0.03 ) (0.03 ) 0.02 0.01 (0.08 ) (0.08 ) Non-GAAP (losses) earnings 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) $ (0.59 ) $ (0.59 ) $ 0.10 $ 0.09 $ 0.04 $ 0.04 109
The following is a reconciliation of our net (loss) income to Non-GAAP (loss) income and GAAP EPS to our Non-GAAP EPS: Year ended December 31, 2023 2022 2021 US$ US$ US$ Net (loss) income attributable to LGHL $ (5,259,008 ) $ (31,563,283 ) $ 22,782 Stock-based compensation 1,673,883 1,300,550 381,800 Amortization of debt discounts 522,319 658,680 783,994 Depreciation expenses 1,795,011 2,032,386 1,295,470 Impairment of fixed assets - 1,690,028 - Change in fair value of warrant liabilities (565,313 ) (1,260,354 ) 470,804 Non-GAAP (loss) income 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 $ (1,833,108 ) $ (27,141,993 ) $ 2,954,850 Non-GAAP (losses) earnings per share for both Class A and Class B - basic (i) $ (0.02 ) $ (0.59 ) $ 0.10 - diluted (i) $ (0.02 ) $ (0.59 ) $ 0.09 Non-GAAP income (loss) per ADS - basic $ (0.75 ) $ (29.52 ) $ 4.91 - diluted $ (0.75 ) $ (29.52 ) $ 4.45 Weighted average Class A ordinary shares outstanding - basic (i) 108,269,640 40,438,604 26,046,212 - diluted (i) 108,269,640 40,438,604 29,145,497 Weighted average Class B ordinary shares outstanding - basic and diluted (i) 13,478,813 5,535,888 4,041,875 Year ended December 31, 2023 2022 2021 Basic Fully Diluted Basic Fully Diluted Basic Fully Diluted Earnings (Loss) attributable to LGHL per share for both Class A and Class B (0.04 ) (0.04 ) (0.69 ) (0.69 ) 0.00 0.00 Stock-based compensation 0.01 0.01 0.03 0.03 0.01 0.01 Amortization of debt discounts 0.00 0.00 0.01 0.01 0.03 0.02 Depreciation expenses 0.01 0.01 0.04 0.04 0.04 0.04 Impairment of fixed assets - - 0.04 0.04 - - Change in fair value of warrant liabilities (0.00 ) (0.00 ) (0.03 ) (0.03 ) 0.02 0.01 Non-GAAP (losses) earnings 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) (0.02 ) (0.02 ) (0.59 ) (0.59 ) 0.10 0.09 103
The changes in the fair value of the Warrants may be material to our future operating results. Determining the appropriate valuation model and estimating the fair values of warrant liabilities requires the input of subjective assumptions, including risk-free interest rate, expected stock price volatility, dividend yields, and expected term.
Public and Private Warrants Liabilities Determining the appropriate valuation model and estimating the fair values of warrant liabilities requires the input of subjective assumptions, including risk-free interest rate, expected stock price volatility, dividend yields, and expected term.
See “ Risk Factors — Risk Related to Our Corporate Structure — We may rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business .” for more information.
See “ Risk Factors — Risk Related to Our Corporate Structure — We may rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business .” for more information. 100 Financing Arrangements The following is a summary of our borrowings and redeemable securities as of December 31, 2023, 2022 and 2021, which were obtained for working capital purpose.
Year ended December 31, 2022 2021 2020 US$ US$ US$ Held in USD $ 8,373,124 $ 9,195,207 $ 1,878,055 Held in HKD 2,652,077 5,781,609 1,424,879 Held in RMB 13,719 12,477 1,610 Held in SGD and other currencies 120,690 108,858 121,923 Total cash and cash equivalents $ 11,159,610 $ 15,098,151 $ 3,426,467 As of December 31, 2022, 2021 and 2020, 0.09%, 0.07%, and nil of our cash and cash equivalents were held in China.
Year ended December 31, 2023 2022 2021 US$ US$ US$ Held in USD $ 25,933,029 $ 8,373,124 $ 9,195,207 Held in HKD 2,856,008 2,652,077 5,781,609 Held in RMB 12,492 13,719 12,477 Held in SGD and other currencies 152,251 120,690 108,858 Total cash and cash equivalents $ 28,953,780 $ 11,159,610 $ 15,098,151 As of December 31, 2023, 2022 and 2021, 0.03%, 0.09%, and 0.07% of our cash and cash equivalents were held in China.
In December 2020, September 2021 and April 2023, we entered into three asset acquisition agreements with Hangzhou Lanlian Technology Co., Ltd, to acquire various copyrighted trading software programs including market quotes system, operation and trading system and risk management system.
In December 2020, September 2021 and April 2023, we entered into three asset acquisition agreements with Hangzhou Lanlian Technology Co., Ltd, to acquire various copyrighted trading software programs including market quotes system, operation and trading system and risk management system. 83 In addition, there is a strong demand in Hong Kong and China’s online trading service industry for talented and experienced personnel.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2022 was US$9.8 million, primarily attributable to (i) net proceeds of US$8.1 million from convertible debenture and (ii) capital contribution of US$1.7 million from noncontrolling shareholder.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was US$1.7 million, primarily attributable to (i) US$0.7 million of proceeds as a result of the exercise of warrants, and (ii) US$2.4 million of net proceeds from issuance of convertible debenture, partially offset by (i) repayment of US$1.3 million to minority shareholder and (ii) US$0.1 million of repayment to director. 98 Net cash provided by financing activities for the year ended December 31, 2022 was US$9.8 million, primarily attributable to (i) net proceeds of US$8.1 million from convertible debenture and (ii) capital contribution of US$1.7 million from noncontrolling shareholder.
Effectiveness of cost control measures Our results of operations depend on our ability to manage our costs and expenses. The commission expenses and interest rates we pay to our business partners, such as prime brokers and clearing houses, have historically constituted a significant portion of our total expenses.
The commission expenses, interest rates and options premium we pay to our business partners, such as prime brokers and clearing houses, have historically constituted a significant portion of our total expenses.
Our TRS trading volume was $484 million and $1,074 million for the years ended December 31, 2022 and 2021, respectively. Futures and securities brokerage income We charge commissions for our futures and securities brokerage services when using our trading platform, which is based on the trading volume of securities or the number of futures contracts executed.
Futures and securities brokerage income We charge commissions for our futures and securities brokerage services when using our trading platform, which is based on the trading volume of securities or the number of futures contracts executed.
Our total revenue-generating client accounts increased from 1,722 as of December 31, 2017 to 4,047 as of December 31, 2019, and continued to increase to 5,010 as of December 31, 2020 and 5,261 as of December 31, 2021, and then decreased to 4,526 as of December 31, 2022.
Our total revenue-generating client accounts increased from 1,722 as of December 31, 2017 to 4,047 as of December 31, 2019, and continued to increase to 5,010 as of December 31, 2020 and 5,261 as of December 31, 2021, and then decreased to 4,526 as of December 31, 2022 and further decreased to 2,443 as of December 31, 2023, due to the decline in policy renewal clients in insurance business and CFD trading customers.
The economic and political conditions in major jurisdictions, such as the U.S., China and Hong Kong, could affect our clients’ perception of the market sentiment, which may change their investment decisions.
The economic and political conditions in major jurisdictions, such as the U.S., China and Hong Kong, could affect our clients’ perception of the market sentiment, which may change their investment decisions. Our financial performance is prone to changing global market conditions, especially the fluctuation and volatility of trading activities on major exchanges worldwide.
Year ended December 31, 2022 2021 2020 US$ % US$ % US$ % CFD trading gains/(losses) (7,476,190 ) 65.1 4,374,807 32.6 1,883,958 102.7 TRS trading gains/(losses) (3,913,422 ) 34.1 10,523,974 78.6 13,157 0.7 Other trading gains/(losses) (78,357 ) 0.8 (1,519,635 ) (11.2 ) (63,240 ) (3.4 ) Total (11,467,969 ) 100.0 13,379,146 100.0 1,833,875 100.0 88 Interest income Interest income primarily consist of interest income earned on loans provided to TRS trading customers, interests earned on short-term loans we extend to unrelated third parties and bank deposit, and also include interest rate difference between currency pairs we hold resulting from rolling over foreign exchange positions from CFD trading services.
Year ended December 31, 2023 2022 2021 US$ % US$ % US$ % CFD trading gains/(losses) 16,204,480 154.6 (7,476,190 ) 65.1 4,374,807 32.6 TRS trading gains/(losses) (5,076,247 ) (48.4 ) (3,913,422 ) 34.1 10,523,974 78.6 OTC stock option trading gains/(losses) (798,725 ) (7.6 ) 937,109 (8.1 ) (199,624 ) (1.4 ) Other trading gains/(losses) 149,996 1.4 (1,015,466 ) 8.9 (1,320,011 ) (9.8 ) Total 10,479,504 100.0 (11,467,969 ) 100.0 13,379,146 100.0 Interest income Interest income primarily consist of interest income earned on loans provided to TRS trading customers, interests earned on short-term loans we extend to unrelated third parties and bank deposit, and also include interest rate difference between currency pairs we hold resulting from rolling over foreign exchange positions from CFD trading services.
Among our total 4,526 revenue-generating client accounts, 62% of accounts are CFD trading accounts which decreased from 2,866 in 2021 to 2,818 in 2022.
Among our total 2,443 revenue-generating client accounts, 63% of accounts are CFD trading accounts which decreased from 2,818 in 2022 to 1,547 in 2023.
The following table sets forth a summary of our cash flows for the periods indicated: Year ended December 31, 2022 2021 2020 Net cash (used in) provided by operating activities $ (3,940,552 ) $ (20,482,499 ) $ 105,675 Net cash used in investing activities (7,093,339 ) (12,104,687 ) (6,549,514 ) Net cash provided by financing activities 9,808,775 43,578,397 2,640,316 Effect of exchange rate changes on cash (123,760 ) (33,833 ) 16,441 Net increase in cash and restricted cash (1,348,876 ) 10,957,378 (3,787,082 ) Cash and restricted cash at beginning of period 15,751,475 4,794,097 8,581,179 Cash and restricted cash at end of period $ 14,402,599 $ 15,751,475 $ 4,794,097 Operating Activities Net cash used in operating activities for the year ended December 31, 2022 was US$4.0 million, primarily attributable to our net losses of US$34.0 million, as adjusted by (i) change in fair value of warrant liabilities and option liabilities in total of US$1.8 million, (ii) a decrease of US$12.1 million in payables to customers and (iii) a decrease of US$28.1 million in payables to broker-dealers and clearing organizations.
As of December 31, 2023, 2022 and 2021, all of our operating subsidiaries were in compliance with their respective regulatory capital requirements. 97 The following table sets forth a summary of our cash flows for the periods indicated: Year ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 13,412,873 $ (3,940,552 ) $ (20,482,499 ) Net cash provided by (used in) investing activities 1,416,000 (7,093,339 ) (12,104,687 ) Net cash provided by financing activities 1,659,010 9,808,775 43,578,397 Effect of exchange rate changes on cash and restricted cash 205,913 (123,760 ) (33,833 ) Net increase (decrease) in cash and restricted cash 16,693,796 (1,348,876 ) 10,957,378 Cash and restricted cash at beginning of period 14,402,599 15,751,475 4,794,097 Cash and restricted cash at end of period $ 31,096,395 $ 14,402,599 $ 15,751,475 Operating Activities Net cash provided by operating activities for the year ended December 31, 2023 was US$13.4 million, primarily attributable to our net losses of US$5.8 million, as adjusted by (i) share based compensation of US$1.7 million, the depreciation and amortization expenses of US$1.8 million, amortization of debt discounts of US$0.5 million, and change in fair value of warrant liabilities and option liabilities in total of US$0.6 million, (ii) a decrease of US$19.5 million in receivables from broker-dealers and clearing organizations, and (iii) a decrease of US$6.6 million in securities owned.
In the corresponding period of 2020, revenue from TRS trading services was US$0.2 million in aggregate. CFD Trading Services Income. Lion derives a substantial portion of income from CFD trading services from a small number of key clients. As a result, earnings generated from our CFD trading services have demonstrated volatility historically.
Lion derives a substantial portion of income from CFD trading services from a small number of key clients. As a result, earnings generated from our CFD trading services have demonstrated volatility historically.
Our total CFD products trading volume was 116,607 lots, 453,687 lots, and 223,018 lots for the years ended December 31, 2022, 2021 and 2020, respectively. 89 The amount of our commissions we charge is largely based on the trading volume, with commission rates varying between US$2.25 to US$50 per lot, based on the per-lot value and the types of different products traded, as well as discounts offered to different clients.
The amount of our commissions we charge is largely based on the trading volume, with commission rates varying between US$2.25 to US$50 per lot, based on the per-lot value and the types of different products traded, as well as discounts offered to different clients.
The following are the aggregate transfers from its subsidiaries to the Company for the years ended December 31, 2022, 2021, and for the period from June 16, 2020 to December 31, 2020: 2022 2021 From June 16, 2020 to December 31, 2020 US$ US$ US$ Subsidiaries Lion Broker Limited $ 18,203,025 $ 4,508,885 $ - Lion Futures Limited - 130,000 - Lion International Securities Group Limited - 64,271 - Lion Wealth Limited 6,500,000 50,000 - BC Wealth Management Limited - 81,960 - Total $ 24,703,025 $ 4,835,116 $ - In 2020, dividends paid to the individual shareholder were US$386,000.
The following are the aggregate transfers from its subsidiaries to the Company for the years ended December 31, 2023, 2022, and 2021: Year ended December 31, 2023 2022 2021 US$ US$ US$ Subsidiaries Lion Broker Limited $ 12,365,221 $ 18,203,025 $ 4,508,885 Lion Futures Limited - - 130,000 Lion International Securities Group Limited - - 64,271 Lion Wealth Limited 1,971,385 6,500,000 50,000 BC Wealth Management Limited - - 81,960 Total $ 14,336,606 $ 24,703,025 $ 4,835,116 For the years ended December 31, 2023, 2022 and 2021, we did not pay any dividends to our shareholders.
We do not have or intend to set up any subsidiary or enter into any contractual arrangements to establish a VIE structure with any entity in China.
Currently, we conduct our substantial operations through our subsidiaries in Hong Kong and the Cayman Islands. We do not have or intend to set up any subsidiary or enter into any contractual arrangements to establish a VIE structure with any entity in China.
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us, and under the current laws of the Cayman Islands, we are also not subject to tax on income or capital gains and withholding tax is not imposed upon payments of dividends from the Company to its shareholders. 105 There are no restrictions or limitations under the laws of Hong Kong imposed on the conversion of HK dollar into foreign currencies and the remittance of currencies out of Hong Kong, nor is there any restriction on any foreign exchange to transfer cash between the Company and its subsidiaries, across borders and to investors outside of PRC, nor is there any restrictions and limitations to distribute earnings from the subsidiaries, to the Company and investors outside of PRC and amounts owed.
There are no restrictions or limitations under the laws of Hong Kong imposed on the conversion of HK dollar into foreign currencies and the remittance of currencies out of Hong Kong, nor is there any restriction on any foreign exchange to transfer cash between the Company and its subsidiaries, across borders and to investors outside of PRC, nor is there any restrictions and limitations to distribute earnings from the subsidiaries, to the Company and investors outside of PRC and amounts owed.
We earn income from the spread on interest rate loans provided to TRS trading clients and loans borrowed from its business partners. In addition, we also receive commission and fees from customers for trades made through the TRS trading service. As our client base diversifies, the needs for new products and services will further intensify.
We earn income from the spread on interest rate loans provided to TRS trading clients and loans borrowed from its business partners. In addition, we also receive commission and fees from customers for trades made through the TRS trading service. We started to sell OTC stock options, a derivative product to our customers in 2021.
Recently, eruptions of regional tensions, such as the ongoing military conflict involving Ukraine and Russia, and the related sanctions against Russia have resulted in major economic shocks worldwide and substantial volatility across global financial markets. These and other economic factors could materially and adversely affect demand for our products and services.
Recently, eruptions of regional tensions, such as the ongoing military conflict involving Ukraine and Russia, and the Israel-Hamas war have resulted in major economic shocks worldwide and substantial volatility across global financial markets.
Interest expenses Our interest expenses primarily consist of amortization of convertible debenture discounts, interest relating to our one-time bridge loans facilitated by us to unrelated third parties, as well as interest we paid for loans borrowed from our TRS trading service business partners, accounting for (94.0)%, 6.4%, and 1.8% of our revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
Occupancy expenses Our occupancy expenses mainly consist of office rental expenses. Interest expenses Our interest expenses primarily consist of amortization of convertible debenture discounts, interest relating to our one-time bridge loans facilitated by us to unrelated third parties, as well as interest we paid for loans borrowed from our TRS trading service business partners.
Commission expenses accounted for (129.4)%, 14.0%, and 18.1% of our revenues in 2022, 2021, and 2020, respectively. Compensation expenses Our compensation expenses include salaries, wages, bonuses, medical insurance expenses, contribution to employee retirement plans and other benefits as well as share-based compensation for our employees.
Compensation expenses Our compensation expenses include salaries, wages, bonuses, medical insurance expenses, contribution to employee retirement plans and other benefits as well as share-based compensation for our employees.
Ltd. - - 739,694 1,073,516 744,313 856,642 112,329 115 % Lion Brokers Limited 537,164 8,426,049 5,821,258 19,632,458 4,259,858 13,572,706 9,312,849 319 % Total $ 1,336,814 $ 10,914,773 $ 7,356,074 $ 23,517,168 $ 5,825,274 $ 17,371,278 $ 11,546,005 298 % Lion International Securities Group Limited (“LISGL”), Lion’s Hong Kong subsidiary, is licensed by the HKSFC to carry out regulated activities of Type 1, dealing in securities, and it provides securities margin financing, and Type 4, advising on securities, and it is not subject to specified licensing condition.
Ltd. 739,694 1,073,516 744,313 856,642 757,691 794,148 36,457 105 % Lion Brokers Limited 5,821,258 19,632,458 4,259,858 13,572,706 5,555,528 18,036,054 12,480,526 325 % Total $ 7,356,074 $ 23,517,168 $ 5,825,274 $ 17,371,279 $ 7,158,093 $ 21,669,798 $ 14,511,705 303 % Lion International Securities Group Limited (“LISGL”), Lion’s Hong Kong subsidiary, is licensed by the HKSFC to carry out regulated activities of Type 1, dealing in securities, and it provides securities margin financing, and Type 4, advising on securities, and it is not subject to specified licensing condition.
Year ended December 31, 2022 2021 2020 (as restated) US$ % US$ % US$ % Revenues (Losses) CFD trading services (6,694,312 ) 269.6 8,700,009 34.8 6,823,677 66.7 TRS trading services (595,871 ) 24.0 13,182,716 52.7 210,770 2.0 Futures and securities brokerage services 3,284,729 (132.3 ) 2,800,543 11.2 2,029,669 19.9 Others 1,522,954 (61.3 ) 309,444 1.3 1,166,019 11.4 Total revenues (losses) (2,482,500 ) 100.0 24,992,712 100.0 10,230,135 100.0 Expenses Commission and fees expenses (3,198,934 ) 129.4 (3,317,692 ) (14.0 ) (1,845,994 ) (18.1 ) Compensation expenses (3,620,506 ) 145.8 (4,069,203 ) (16.2 ) (3,802,793 ) (37.2 ) Communication and technology expenses (3,392,794 ) 136.6 (1,929,981 ) (7.7 ) (1,454,050 ) (14.3 ) Cost of crypto mining - - (1,163,846 ) (4.6 ) - - General and administrative expenses (1,228,572 ) 49.4 (2,016,582 ) (8.0 ) (2,264,318 ) (22.1 ) Professional fees (3,716,839 ) 149.7 (3,836,817 ) (15.3 ) (1,565,834 ) (15.4 ) Service fees (1,956,785 ) 78.8 (3,574,579 ) (14.3 ) (833,864 ) (8.2 ) Research and development (4,693,995 ) 189.0 (1,205,040 ) (4.8 ) - - Interest expenses (2,334,598 ) 94.0 (1,608,100 ) (6.4 ) (183,157 ) (1.8 ) Occupancy expenses (826,254 ) 33.2 (778,881 ) (3.1 ) (683,160 ) (6.6 ) Marketing (3,743,567 ) 150.7 (913,675 ) (3.6 ) (651,324 ) (6.3 ) Depreciation (2,032,386 ) 81.8 (916,916 ) (3.6 ) (40,556 ) (0.3 ) Payment service charge 12,407 (0.4 ) 181,249 0.7 (245,030 ) (2.3 ) Impairment of fixed assets (1,690,028 ) 68.0 - - - - Impairment of cryptocurrencies (293,619 ) 11.8 - - - - Change in fair value of warrant liabilities 1,260,354 (50.7 ) (470,804 ) (1.8 ) 777,266 7.5 Other expenses (32,406 ) 1.3 (144,175 ) (0.5 ) (11,464 ) (0.1 ) Total expenses (31,488,522 ) 1268.4 (25,765,042 ) (103.2 ) (12,804,278 ) (125.2 ) (Loss)/income before income taxes (33,971,022 ) 1,368.4 (772,330 ) (3.2 ) (2,574,143 ) (25.2 ) Income tax expenses (3,419 ) 0.1 (54,367 ) (0.2 ) (1,316 ) (0.0 ) Net (loss)/income (33,974,441 ) 1368.5 (826,697 ) (3.4 ) (2,575,459 ) (25.2 ) Non-controlling interests Net (loss) attributable to non-controlling interests (2,411,158 ) 97.1 (849,479 ) (3.4 ) - 0.0 Net (loss)/income attributable to LGHL (31,563,283 ) 1,271.4 22,782 (0.0 ) (2,575,459 ) (25.2 ) 94 Non-GAAP Financial Results The following Non-GAAP financial results, both in absolute amount and as a percentage of our revenues for the periods indicated, are used by management to evaluate our financial performance prior to the deduction of change in fair value of warrant liabilities, stock-based compensation expenses, amortization of debt discounts, depreciation expenses and impairment of fixed assets (see Non-GAAP Financial Measures).
Year ended December 31, 2023 2022 2021 US$ % US$ % US$ % Revenues (Losses) CFD trading services 19,326,140 91.6 (6,694,312 ) 271.0 8,700,009 34.5 TRS trading services (2,342,395 ) (11.1 ) (595,871 ) 24.1 13,182,716 52.3 OTC stock options trading (798,725 ) (3.6 ) 937,109 (38.0 ) (199,623 ) (0.7 ) Futures and securities brokerage services 2,570,495 12.1 3,284,729 (132.9 ) 2,800,543 11.1 Others 2,335,729 11.0 598,252 (24.2 ) 690,316 2.8 Total revenues (Losses) 21,091,244 100.0 (2,470,093 ) 100.0 25,173,961 100.0 Expenses Commission and fees expenses (3,418,398 ) (16.2 ) (3,198,934 ) 130.1 (3,317,692 ) (14.0 ) Compensation expenses (4,099,852 ) (19.4 ) (3,620,506 ) 146.5 (4,069,203 ) (16.1 ) Communication and technology expenses (3,059,462 ) (14.5 ) (3,392,794 ) 137.3 (1,929,981 ) (7.6 ) Cost of crypto mining - - - - (1,163,846 ) (4.6 ) General and administrative expenses (1,432,148 ) (6.7 ) (1,228,572 ) 49.7 (2,016,582 ) (8.0 ) Professional fees (3,407,365 ) (16.1 ) (3,716,839 ) 150.4 (3,836,817 ) (15.2 ) Service fees (2,352,832 ) (11.1 ) (1,956,785 ) 79.2 (3,574,579 ) (14.1 ) Research and development (7,115 ) 0.0 (4,693,995 ) 190.0 (1,205,040 ) (4.7 ) Interest expenses (2,413,102 ) (11.4 ) (2,334,598 ) 94.5 (1,608,100 ) (6.3 ) Occupancy expenses (870,254 ) (4.5 ) (826,254 ) 33.4 (778,881 ) (3.0 ) Marketing (4,196,795 ) (19.8 ) (3,743,567 ) 151.5 (913,675 ) (3.6 ) Depreciation and amortization (1,795,011 ) (8.5 ) (2,032,386 ) 82.2 (916,916 ) (3.6 ) Impairment of fixed assets - - (1,690,028 ) 68.4 - - Impairment of cryptocurrencies - - (293,619 ) 11.8 - - Change in fair value of warrant liabilities 565,313 2.6 1,260,354 (51.0 ) (470,804 ) (1.8 ) Other expenses (430,214 ) (2.0 ) (32,406 ) 1.3 (144,175 ) (0.5 ) Total expenses (26,917,235 ) (127.6 ) (31,500,929 ) 1275.3 (25,946,291 ) (103.1 ) Loss before income taxes (5,825,991 ) (27.6 ) (33,971,022 ) 1,375.3 (772,330 ) (3.1 ) Income tax expenses (1,058 ) (0.0 ) (3,419 ) 0.1 (54,367 ) (0.2 ) Net loss (5,827,049 ) (27.6 ) (33,974,441 ) 1375.4 (826,697 ) (3.3 ) Non-controlling interests Net loss attributable to non-controlling interests (568,041 ) (2.7 ) (2,411,158 ) 97.6 (849,479 ) (3.4 ) Net (loss)/income attributable to LGHL (5,259,008 ) (24.9 ) (31,563,283 ) 1,277.8 22,782 0.1 Non-GAAP Financial Results The following Non-GAAP financial results, both in absolute amount and as a percentage of our revenues for the periods indicated, are used by management to evaluate our financial performance prior to the deduction of change in fair value of warrant liabilities, stock-based compensation expenses, amortization of debt discounts, depreciation expenses and impairment of fixed assets (see Non-GAAP Financial Measures).
Because judgment is involved in determining the fair value of long-lived assets, there is risk that the carrying value of these assets may require adjustment in future periods. Public and Private Warrants Liabilities At December 31, 2022, 11,500,000 Public Warrants and 5,375,000 Private Warrants remained outstanding.
Because judgment is involved in determining the fair value of long-lived assets, there is risk that the carrying value of these assets may require adjustment in future periods.
Net cash provided by operating activities for the year ended December 31, 2020 was US$0.1 million, primarily attributable to our net loss of US$2.6 million, as adjusted by (i) change in fair value of warrant liabilities of US$0.8 million and share-based compensation charge of US$3.6 million; and (ii) an increase of US$6.4 million in receivables from broker-dealers and clearing organizations.
Net cash used in operating activities for the year ended December 31, 2022 was US$4.0 million, primarily attributable to our net losses of US$34.0 million, as adjusted by (i) change in fair value of warrant liabilities and option liabilities in total of US$1.8 million, (ii) a decrease of US$12.1 million in payables to customers and (iii) a decrease of US$28.1 million in payables to broker-dealers and clearing organizations.
Year ended December 31, 2022 2021 2020 US$ % US$ % US$ % Revenues (Losses) Market making commissions and fees 781,878 (31.5 ) 4,324,650 17.4 4,940,623 48.3 Futures and securities brokerage commissions 3,412,644 (137.5 ) 3,188,684 12.7 1,890,502 18.4 Insurance brokerage commissions 455,394 (18.4 ) 542,795 2.1 959,299 9.3 Trading gains/(losses) (11,467,969 ) 461.9 13,379,146 53.5 1,833,875 18.0 Interest income 3,229,716 (130.0 ) 1,351,318 5.4 138,799 1.4 Other income 1,105,837 (44.5 ) 2,206,119 8.9 467,037 4.6 Total (2,482,500 ) 100.0 24,992,712 100.0 10,230,135 100.0 Commissions We earn commissions from our (i) insurance brokerage services, (ii) securities and futures brokerage services (including commissions from TRS trading services) and (iii) CFD trading services when we act as market maker.
Year ended December 31, 2023 2022 2021 US$ % US$ % US$ % Commissions Market making commissions and fees 3,121,661 14.8 781,878 (31.6 ) 4,324,650 17.4 Futures and securities brokerage commissions 2,732,846 12.9 3,412,644 (138.2 ) 3,188,684 12.7 Insurance brokerage commissions 1,169,306 5.5 455,394 (18.5 ) 542,795 2.1 Trading gains/(losses) 10,479,504 49.8 (11,467,969 ) 464.2 13,379,146 53.1 Interest income 2,424,676 11.5 3,229,716 (130.7 ) 1,351,318 5.3 Other income 1,163,251 5.5 1,118,244 (45.2 ) 2,387,368 9.4 Total 21,091,244 100.0 (2,470,093 ) 100.0 25,173,961 100.0 84 Commissions We earn commissions from our (i) insurance brokerage services, (ii) securities and futures brokerage services (including commissions from TRS trading services) and (iii) CFD trading services when we act as market maker.
Our others income consisted of insurance brokerage commission of US$0.5 million, sale of MetaWords NFTs of US$0.4 million, trading gains from OTC call options of US$0.9 million and interest and other income of US$0.7 million, offset by trading losses of US$(1.0) million from exchange traded stock for the year ended December 31, 2022; it primarily consisted of insurance brokerage commission of US$0.5 million, Bitcoin mining income of US$1.7 million and interest and other income of US$0.2 million, offset by trading losses from OTC call options of US$(0.2) million and trading losses from exchange-traded stock of US$(1.9) million for the year ended December 31, 2021, and it primarily consisted of insurance brokerage commission of US$0.9 million, and interest and other income of US$0.2 million for the year ended December 31, 2020, respectively. 90 Expenses The following table sets forth the breakdown of our expenses in dollar amounts and as percentages of total revenues for the periods indicated: Year ended December 31, 2022 2021 2020 (as restated) US$ % US$ % US$ % Commission and fees expenses 3,198,934 (129.4 ) 3,317,692 14.0 1,845,994 18.1 Compensation expenses 3,620,506 (145.8 ) 4,069,203 16.2 3,802,793 37.2 Communication and technology expenses 3,392,794 (136.6 ) 1,929,981 7.7 1,454,050 14.3 Cost of crypto mining - - 1,163,846 4.6 - - General and administrative expenses 1,228,572 (49.4 ) 2,016,582 8.0 2,264,318 22.1 Professional fees 3,716,839 (149.7 ) 3,836,817 15.3 1,565,834 15.4 Services fees 1,956,785 (78.8 ) 3,574,579 14.3 833,864 8.2 Research and development 4,693,995 (189.0 ) 1,205,040 4.8 - - Occupancy expenses 826,254 (33.2 ) 778,881 3.1 683,160 6.6 Interest expense 2,334,598 (94.0 ) 1,608,100 6.4 183,157 1.8 Depreciation 2,032,386 (81.8 ) 916,916 3.6 40,556 0.3 Marketing 3,743,567 (150.7 ) 913,675 3.6 651,324 6.3 Payment service charge (12,407 ) 0.4 (181,249 ) (0.7 ) 245,030 2.3 Impairment of fixed assets 1,690,028 (68.0 ) - - - - Impairment of cryptocurrencies 293,619 (11.8 ) - - - - Change in fair value of warrant liabilities (1,260,354 ) 50.7 470,804 1.8 (777,266 ) (7.5 ) Other expenses 32,406 (1.3 ) 144,175 0.5 11,464 0.1 Total 31,488,522 (1,268.4 ) 25,765,042 103.2 12,804,278 125.2 Commission and fees expenses Our commission expenses consist of (i) the commissions and fees we paid to third-party market makers in certain CFD and TRS trading transactions, (ii) referral fees we paid to our insurance referral agents, and (iii) the commissions and fees we paid to prime brokers and clearing houses in certain futures and securities trading transactions.
Expenses The following table sets forth the breakdown of our expenses in dollar amounts and as percentages of total revenues for the periods indicated: Year ended December 31, 2023 2022 2021 US$ % US$ % US$ % Commission and fees expenses 3,418,398 16.2 3,198,934 (130.1 ) 3,317,692 14.0 Compensation expenses 4,099,852 19.4 3,620,506 (146.5 ) 4,069,203 16.1 Communication and technology expenses 3,059,462 14.5 3,392,794 (137.3 ) 1,929,981 7.6 Cost of crypto mining - - - - 1,163,846 4.6 General and administrative expenses 1,432,148 6.7 1,228,572 (49.7 ) 2,016,582 8.0 Professional fees 3,407,365 16.1 3,716,839 (150.4 ) 3,836,817 15.2 Services fees 2,352,832 11.1 1,956,785 (79.2 ) 3,574,579 14.1 Research and development 7,115 - 4,693,995 (190.0 ) 1,205,040 4.7 Interest expense 2,413,102 11.4 2,334,598 (94.5 ) 1,608,100 6.3 Occupancy expenses 870,254 4.5 826,254 (33.4 ) 778,881 3.0 Marketing 4,196,795 19.8 3,743,567 (151.5 ) 913,675 3.6 Depreciation and amortization 1,795,011 8.5 2,032,386 (82.2 ) 916,916 3.6 Impairment of fixed assets - - 1,690,028 (68.4 ) - - Impairment of cryptocurrencies - - 293,619 (11.8 ) - - Change in fair value of warrant liabilities (565,313 ) (2.6 ) (1,260,354 ) 51.0 470,804 1.8 Other expenses 430,214 2.0 32,406 (1.3 ) 144,175 0.5 Total 26,917,235 127.6 31,500,929 (1,275.3 ) 25,946,291 103.1 87 Commission and fees expenses Our commission expenses consist of (i) the commissions and fees we paid to third-party market makers in certain CFD and TRS trading transactions, (ii) referral fees we paid to our insurance referral agents, and (iii) the commissions and fees we paid to prime brokers and clearing houses in certain futures and securities trading transactions.
As at December 31, Interest rate or Maturity Date 2022 2021 2020 Original Dividend or Redemption Outstanding principal amount US$ US$ US$ Currency Rate Date Short-term borrowings $ - $ - $ 293,905 HKD 13 % February 2021 Minority shareholder loan 110,000 110,000 - USD 0 % None December 2020 Convertible debenture (1) - - 1,600,000 USD 9 % June 2023 August 2022 Convertible debenture (1) 3,500,000 - - USD 8 % August 2025 December 2022 Convertible debenture (1) 3,000,000 - - USD 8 % December 2025 Series B Convertible Preferred Shares (1) - 4,000,000 - USD 8 % December 2024 $ 6,610,000 $ 4,110,000 $ 1,893,905 (1) The securities are convertible into ADSs since the issuance at the holder’s election.
As at December 31, 2023 2022 2021 US$ US$ US$ Outstanding principal amount Minority shareholder loan $ 110,000 $ 110,000 $ 110,000 December 2020 Convertible debenture (1) - - - August 2022 Convertible debenture (1) - 3,500,000 - December 2022 Convertible debenture (1) - 3,000,000 - September 2023 Convertible debenture (1) 2,500,000 - - Series B Convertible Preferred Shares (1) - - 4,000,000 $ 2,610,000 $ 6,610,000 $ 4,110,000 (1) The securities are convertible into ADSs since the issuance at the holder’s election.
Depreciation Our depreciation primarily consists of the depreciation of copyrighted trading software programs which were acquired in 2021, and other miscellaneous depreciation of office furniture and computers, accounting for (81.8)%, 3.6% and 0.3% of our revenues for the years ended December 31, 2022, 2021 and 2020, respectively.
Depreciation Our depreciation primarily consists of the depreciation of copyrighted trading software programs which were acquired in 2021 and 2023, and other miscellaneous depreciation of office furniture and computers.
Our critical accounting estimates are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 3. Key Information—D.
Our critical accounting estimates are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 3. Key Information—D. Risk Factors.” See Note 2 to our consolidated financial statements for the year ended December 31, 2023 for more information on our significant accounting policies.
Factors Affecting Our Performance We believe that our results of operations are affected by the following factors. The demand for our services and the economic and political conditions in global markets Our principal businesses are providing CFD trading, TRS trading and futures brokerage services to our clients.
The demand for our services and the economic and political conditions in global markets Our principal businesses are providing CFD trading, TRS trading and OTC stock options trading services to our clients.
Marketing expenses increased from US$0.7 million for the year ended December 31, 2020 to US$0.9 million for the year ended December 31, 2021, mainly due to marketing expenses incurred to maintain existing customers and develop new customers, and promote our businesses and branding activities. Depreciation.
Marketing expenses increased by 12.1% from US$3.7 million in 2022 to US$4.2 million in 2023, mainly due to marketing expenses incurred to maintain existing customers and develop new customers, and promote our businesses and branding activities. Depreciation.
Payments Due by Period Short-term Long-term Total less than 1 Year over 1 year Operating lease obligations $ 1,246,574 $ 623,744 $ 622,830 Other than the Financing Arrangements and Operating Lease Commitments above, we did not have any other significant commitments, long-term obligations, or guarantees as of December 31, 2022. 106 Capital Expenditures Our capital expenditures are primarily incurred for purchase of property, equipment and copyrighted trading software programs.
Payments Due by Period Total Short-term less than 1 Year Long-term over 1 year Operating lease obligations $ 620,920 $ 537,440 $ 83,480 Other than the Financing Arrangements and Operating Lease Commitments above, we did not have any other significant commitments, long-term obligations, or guarantees as of December 31, 2023.
Number of users and transaction volumes We historically derive our revenue mainly from commissions, bid/offer spreads, trading profit and difference in interest rates for transactions on our platform. Generally speaking, the larger the number of transactions carried out on our platform, and the larger the size of those transactions, the greater will be our revenue.
These and other economic factors could materially and adversely affect demand for our products and services. 82 Number of users and transaction volumes We historically derive our revenue mainly from commissions, bid/offer spreads, trading profit and difference in interest rates for transactions on our platform.
Change in fair value of warrant liabilities Change in Fair Value of Warrant Liabilities represents the mark-to-market fair value adjustments to the outstanding Public Warrants and Private Warrants issued in connection with the IPO of PAAC, accounting for 50.7%, 1.8% and (7.5)% of our revenues for the years ended December 31, 2022, 2021 and 2020, respectively.
Change in fair value of warrant liabilities Change in Fair Value of Warrant Liabilities represents the mark-to-market fair value adjustments to the outstanding Public Warrants and Private Warrants issued in connection with the IPO of PAAC. Other expenses Our other expenses primarily consist of other miscellaneous expenses.
Year ended December 31, 2021 Compared to Year ended December 31, 2020 Revenues Our total revenues increased by 144.3% from US$10.2 million for the year ended December 31, 2020 to US$25.0 million for the year ended December 31, 2021, due to an increase in each segment. TRS Trading Services Income.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues Our total revenues decreased by US$27.6 million from an income of US$25.1 million for the year ended December 31, 2021 to a loss of US$(2.5) million for the year ended December 31, 2022, primarily due to the trading losses in CFD and TRS trading services.
As of December 31, 2020 As of December 31, 2021 As of December 31, 2022 Minimum Regulatory Capital Requirements Capital Levels Maintained Minimum Regulatory Capital Requirements Capital Levels Maintained Minimum Regulatory Capital Requirements Capital Levels Maintained Excess Net Capital Percent of Requirement Maintained Operating Subsidiaries Lion International Securities Group Limited $ 386,927 $ 1,043,803 $ 384,736 $ 1,231,361 $ 384,892 1,152,970 768,078 300 % Lion Futures Limited 386,927 948,872 384,736 1,241,548 384,892 1,407,515 1,022,623 366 % Lion Asset Management Limited 12,898 27,770 12,825 53,199 12,830 73,835 61,005 575 % BC Wealth Management Limited 12,898 468,279 12,825 285,086 38,489 307,610 269,121 799 % Lion International Financial (Singapore) Pte.
As of December 31, 2021 As of December 31, 2022 As of December 31, 2023 Minimum Regulatory Capital Requirements Capital Levels Maintained Minimum Regulatory Capital Requirements Capital Levels Maintained Minimum Regulatory Capital Requirements Capital Levels Maintained Excess Net Capital Percent of Requirement Maintained Operating Subsidiaries Lion International Securities Group Limited $ 384,736 $ 1,231,361 $ 384,892 1,152,970 $ 384,034 1,191,452 807,418 310 % Lion Futures Limited 384,736 1,241,548 384,892 1,407,515 384,034 1,105,705 721,671 288 % Lion Asset Management Limited 12,825 53,199 12,830 73,835 12,801 371,207 358,406 2,900 % BC Wealth Management Limited 12,825 285,086 38,489 307,610 64,006 171,232 107,226 268 % Lion International Financial (Singapore) Pte.
Year ended December 31, 2022 2021 2020 US$ % US$ % US$ % CFD trading services (6,694,312 ) 269.6 8,700,009 34.8 6,823,677 66.7 TRS trading services (595,871 ) 24.0 13,182,716 52.7 210,770 2.0 Futures and securities brokerage services 3,284,729 (132.3 ) 2,800,543 11.2 2,029,669 19.9 Insurance brokerage services - Others 1,522,954 (61.3 ) 309,444 1.3 1,166,019 11.4 Total (2,482,500 ) 100.0 24,992,712 100.0 10,230,135 100.0 CFD trading services income Revenues generated from CFD trading services are trading gains and losses from our market making activities where we serve as the counterparty to our clients in CFD transactions.
Year ended December 31, 2023 2022 2021 US$ % US$ % US$ % CFD trading services 19,326,140 91.6 (6,694,312 ) 271.0 8,700,009 34.5 TRS trading services (2,342,395 ) (11.1 ) (595,871 ) 24.1 13,182,716 52.3 OTC stock options trading (798,725 ) (3.6 ) 937,109 (38.0 ) (199,623 ) (0.7 ) Futures and securities brokerage services 2,570,495 12.1 3,284,729 (132.9 ) 2,800,543 11.1 Others 2,335,729 11.0 598,252 (24.2 ) 690,316 2.8 Total 21,091,244 100.0 (2,470,093 ) 100.0 25,173,961 100.0 85 CFD trading services income Revenues generated from CFD trading services are trading gains and losses from our market making activities where we serve as the counterparty to our clients in CFD transactions.
We value our stock options or warrants that have service vesting requirements or performance-based awards with or without market conditions using the Binomial Option Pricing Model. Income Taxes The amount of current taxes payable or refundable is recognized as of the date of the consolidated financial statements, utilizing currently enacted tax laws and rates of the relevant authorities.
Income Taxes The amount of current taxes payable or refundable is recognized as of the date of the consolidated financial statements, utilizing currently enacted tax laws and rates of the relevant authorities.
Revenue generated from TRS trading services for in the year of 2021 includes (i) trading gains/(losses) of US$11.1 million from our proprietary TRS trading activities; (ii) interest income of US$1.3 million earned on loans provided to TRS trading customers, and (iii) commissions and other income of US$ 0.8 million resulting from TRS trading services.
Revenue generated from TRS trading services decreased by US$1.7 million from a loss of US$(0.6) million in 2022 to a loss of US$(2.3) million in 2023, due to the trading losses from our proprietary TRS trading activities increased by US$1.1 million, and a decrease of US$0.6 million in interest income earned on loans provided to TRS trading customers.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Our current corporate governance practices differ from Nasdaq corporate governance requirements for U.S. companies in certain respects, as summarized below: ● Executive Sessions. IM5605-2 of Nasdaq Rules requires independent directors of a Nadaq listed company must meet regularly in executive session (without members of management present), and such executive sessions should occur at least twice a year.
Our current corporate governance practices differ from Nasdaq corporate governance requirements for U.S. companies in certain respects, as summarized below: ● Executive Sessions. IM5605-2 of Nasdaq Rules requires independent directors of a Nasdaq listed company must meet regularly in executive session (without members of management present), and such executive sessions should occur at least twice a year.
Our Hong Kong subsidiaries are required by the Hong Kong Mandatory Provident Fund Schemes Ordinance to make monthly contributions to the mandatory provident fund scheme in an amount equal to 5% of an employee’s salary subject to the statutory maximum at HK$1,500. 112 Employment Agreements and Indemnification Agreements We entered into employment agreements with each of our executive officers.
Our Hong Kong subsidiaries are required by the Hong Kong Mandatory Provident Fund Schemes Ordinance to make monthly contributions to the mandatory provident fund scheme in an amount equal to 5% of an employee’s salary subject to the statutory maximum at HK$1,500. Employment Agreements and Indemnification Agreements We entered into employment agreements with each of our executive officers.
Except as permitted by the plan administrator, and subject to all the transfer restrictions under the applicable laws and regulations and restrictions set forth in the applicable award agreement, all Awards are not transferable or assignable. Term of the Options. The term of any Option granted under the Plan cannot exceed ten years from its effective date. C.
Except as permitted by the plan administrator, and subject to all the transfer restrictions under the applicable laws and regulations and restrictions set forth in the applicable award agreement, all Awards are not transferable or assignable. Term of the Options. The term of any Option granted under the Plan cannot exceed ten years from its effective date. 108 C.
Rule 5605(e)(2) of Nadsaq Rules requires director nominations of a Nasdaq listed company to be made or recommended solely by independent directors and the director nominations process be addressed by a formal written charter or board resolution.
Rule 5605(e)(2) of Nasdaq Rules requires director nominations of a Nasdaq listed company to be made or recommended solely by independent directors and the director nominations process be addressed by a formal written charter or board resolution.
It assists the board in determining its responsibilities in relation to remuneration, including, amongst other matters, making recommendations to the Board on policy on executive compensation, determining the individual remuneration and benefits package of each of the executive directors and recommending and monitoring the remuneration of senior management below board level. 114 Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Jian Wang, Chunning Wang and Chi Fai Choi, and is chaired by Jian Wang.
It assists the board in determining its responsibilities in relation to remuneration, including, amongst other matters, making recommendations to the Board on policy on executive compensation, determining the individual remuneration and benefits package of each of the executive directors and recommending and monitoring the remuneration of senior management below board level. 109 Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Jian Wang, Chunning Wang and Chi Fai Choi, and is chaired by Jian Wang.
Luo served as a deputy trading manager at HGNH International Futures Co., Limited. Mr. Luo received his bachelor’s degree in business administration from Chongqing University in 2007 and his master’s degree in e-commerce from The Hong Kong Polytechnic University in 2008. 110 Zhixiang Zhang serves on our board. Mr.
Luo served as a deputy trading manager at HGNH International Futures Co., Limited. Mr. Luo received his bachelor’s degree in business administration from Chongqing University in 2007 and his master’s degree in e-commerce from The Hong Kong Polytechnic University in 2008. 104 Zhixiang Zhang serves on our board. Mr.
In this regard we have elected to adopt the practices of our home country. In accordance with the provisions of our Amended and Restated Memorandum and Articles of Association, our board of directors is authorized to issue securities, including ordinary shares, warrants and convertible notes. 115 D.
In this regard we have elected to adopt the practices of our home country. In accordance with the provisions of our Amended and Restated Memorandum and Articles of Association, our board of directors is authorized to issue securities, including ordinary shares, warrants and convertible notes. 110 D.
In addition, we also entered into indemnification agreements with each of our directors and executive officers, pursuant to which we will agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or executive officer. 2020 Share Incentive Plan In connection with the consummation of the Business Combination, we adopted the 2020 Share Incentive Plan (“Plan”).
In addition, we also entered into indemnification agreements with each of our directors and executive officers, pursuant to which we will agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or executive officer. 2020 Share Incentive Plan In connection with the consummation of the Business Combination, we adopted the 2020 Share Incentive Plan (“2020 Plan”).
All of our employees are eligible for the grant of Awards under the Plan at the discretion of the compensation committee. A grant of Awards to any member of the compensation committee requires Board approval. 113 Vesting Schedule and Other Restrictions.
All of our employees are eligible for the grant of Awards under the Plan at the discretion of the compensation committee. A grant of Awards to any member of the compensation committee requires Board approval. 107 Vesting Schedule and Other Restrictions.
For share incentive grants to our directors and executive officers, see “—2020 Share Incentive Plan.” We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
For share incentive grants to our directors and executive officers, see “—2020 Share Incentive Plan” and “—2023 Share Incentive Plan” We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Mr. Chunning Wang, the sole shareholder and sole director of Legend Success Ventures Limited, may be deemed to beneficially own shares held by Success Ventures Limited and has sole voting and dispositive control over such securities. (2) Each Class B Ordinary Share is entitled to 25 votes per share as of December 31, 2022.
Mr. Chunning Wang, the sole shareholder and sole director of Legend Success Ventures Limited, may be deemed to beneficially own shares held by Success Ventures Limited and has sole voting and dispositive control over such securities. (2) Each Class B Ordinary Share is entitled to 100 votes per share as of December 31, 2023. 112
Employees We had a total of 38 employees in Hong Kong and Singapore as of December 31, 2022. We enter into individual employment contracts with selected employees to cover matters including non-competition and confidentiality arrangements.
Employees We had a total of 46 employees in Hong Kong and Singapore as of December 31, 2023. We enter into individual employment contracts with selected employees to cover matters including non-competition and confidentiality arrangements.
Our employees’ remuneration packages generally include salary, bonus and social security benefits in accordance with all applicable laws and regulations. following table sets forth the number of our employees by function as of December 31, 2022: Sales and Marketing 4 Operation 16 General and Administration 7 Finance and Accounting 6 Management 5 Total 38 Our success depends on our ability to attract, retain and motivate qualified employees.
Our employees’ remuneration packages generally include salary, bonus and social security benefits in accordance with all applicable laws and regulations. following table sets forth the number of our employees by function as of December 31, 2023: Sales and Marketing 4 Operation 20 General and Administration 11 Finance and Accounting 5 Management 6 Total 46 Our success depends on our ability to attract, retain and motivate qualified employees.
Choi is a member of Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. Mr. Choi has over 10 years of experience in internal and external auditing, merger and acquisition, and direct investment. Rahul Mewawalla is our independent director. Mr.
Choi is a member of Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. Mr. Choi has over 10 years of experience in internal and external auditing, merger and acquisition, and direct investment. Anthony Lau Hoi Ho is our independent director. Since January 2023, Mr.
For the fiscal year ended December 31, 2022, we paid an aggregate of US$1.75 million in cash to our executive officers and directors, and an aggregate of US$0.07 million in cash to our non-executive directors.
For the fiscal year ended December 31, 2023, we paid an aggregate of US$1.3 million in cash and US$0.4 million in shares to our executive officers and directors, and an aggregate of US$0.08 million in cash to our non-executive directors.
Share Ownership The following table sets forth information regarding the beneficial ownership based on a total number of 58,604,692 ordinary shares outstanding as of the date of December 31, 2022, including 48,761,596 Class A Ordinary Shares and 9,843,096 Class B Ordinary Shares, with respect to the beneficial ownership of our shares by: ● each person known by us to be the beneficial owner of more than 5% of our outstanding shares; ● each of our officers and directors; and ● all our officers and directors as a group. 116 Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Share Ownership The following table sets forth information regarding the beneficial ownership based on a total number of 203,093,850 ordinary shares outstanding as of the date of December 31, 2023, including 179,250,754 Class A Ordinary Shares and 23,843,096 Class B Ordinary Shares, with respect to the beneficial ownership of our shares by: ● each person known by us to be the beneficial owner of more than 5% of our outstanding shares; ● each of our officers and directors; and ● all our officers and directors as a group. 111 Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Directors and Executive Officers The following sets forth certain information concerning our directors and executive officers as of the date of this annual report: Directors and Executive Officers Age Position/Title Jian Wang 41 Chairman of the Board (Class II) Chunning Wang 44 Director, Chief Executive Officer (Class II) Yan Zhang 42 Director and President (Class I) Hua Luo 38 Director and Chief Operating Officer (Class I) Zhixiang Zhang 54 Director (Class I) Chi Fai Choi 45 Independent Director (Class I) Rahul Mewawalla 45 Independent Director (Class II) Chi-yang Chen 36 Independent Director (Class II) Sze Hau Lee 37 Chief Financial Officer Jian Wang is our chairman of the board.
Directors and Executive Officers The following sets forth certain information concerning our directors and executive officers as of the date of this annual report: Directors and Executive Officers Age Position/Title Jian Wang 42 Chairman of the Board (Class II) Chunning Wang 45 Director, Chief Executive Officer (Class II) Yan Zhang 43 Director and President (Class I) Hua Luo 39 Director and Chief Operating Officer (Class I) Zhixiang Zhang 55 Director (Class I) Chi Fai Choi 46 Independent Director (Class I) Anthony Lau Hoi Ho 38 Independent Director (Class II) Tak Wing Lo 37 Independent Director (Class II) Sze Hau Lee 38 Chief Financial Officer Jian Wang is our chairman of the board.
Each executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information or trade secrets.
An executive officer may terminate his or her employment at any time with a three- to six-month prior written notice. 106 Each executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information or trade secrets.
We have adopted a charter for each of the three committees. Audit Committee Our audit committee comprises of Chi Fai Choi, Rahul Mewawalla and Chi-yang Chen, and is chaired by Chi Fai Choi.
We have adopted a charter for each of the three committees. Audit Committee Our audit committee comprises of Chi Fai Choi, Anthony Lau Hoi Ho and Tak Wing Lo, and is chaired by Chi Fai Choi.
Name and Address of Beneficial Owner Number of Class A Ordinary Shares Beneficially Owned Number of Class B Ordinary Shares Beneficially Owned % of Total Ordinary Shares Outstanding % of Voting Power (2) Directors and Executive Officers Jian Wang * 7,911,956 13.67 % 67.12 % Chunning Wang (1) * 1,931,140 3.47 % 16.41 % Hua Luo * — * Zhixiang Zhang * — * Chi Fai Choi * — * Rahul Mewawalla * — * Yan Zhang * — * Chi-yang Chen * — * Sze Hau Lee * — * All executive officers and directors as a group 410,000 9,843,096 17.41 % 83.58 % Five Percent or Greater Shareholders Legend Success Ventures Limited (1) * 1,931,140 3.47 % 16.41 % * Beneficially owns less than 1% of our Class A Ordinary Shares (1) Represents 1,931,140 Class B Ordinary Shares held by Legend Success Ventures Limited.
Name and Address of Beneficial Owner Number of Class A Ordinary Shares Beneficially Owned Number of Class B Ordinary Shares Beneficially Owned % of Total Ordinary Shares Outstanding % of Voting Power (2) Directors and Executive Officers Jian Wang * 14,911,956 7.39 % 58.17 % Chunning Wang (1) * 8,931,140 4.45 % 34.84 % Hua Luo * — * Zhixiang Zhang * — * Chi Fai Choi * — * Anthony Lau Hoi Ho * — * Yan Zhang * — * Tak Wing Lo * — * Sze Hau Lee * — * All executive officers and directors as a group 360,000 23,843,096 11.92 % 93.01 % Five Percent or Greater Shareholders Legend Success Ventures Limited (1) * 8,931,140 4.45 % 34.84 % * Beneficially owns less than 1% of our Class A Ordinary Shares (1) Represents 8,931,140 Class B Ordinary Shares held by Legend Success Ventures Limited.
Lee worked in Carnival Group International Holdings Limited (0996.HK) as a corporate finance director from September 2017 to February 2019. While working there, Mr. Lee was primarily responsible for leading, originating, structuring and executing financing transaction and providing investment advice to the management. Before that, Mr. Lee had years of experience in banking industry.
Lee was primarily responsible for leading, originating, structuring and executing financing transaction and providing investment advice to the management. Before that, Mr. Lee had years of experience in banking industry.
Thomas and a Master’s degree in accounting from Golden Gate University. Mr. Chen is a Certified Public Accountant licensed in California. Sze Hau Lee is our Chief Financial Officer . Mr. Lee joined Lion as a corporate finance director in May 2019, mainly responsible for Lion’s fund-raising activities. Prior to that, Mr.
Lee joined Lion as a corporate finance director in May 2019, mainly responsible for Lion’s fund-raising activities. Prior to that, Mr. Lee worked in Carnival Group International Holdings Limited (0996.HK) as a corporate finance director from September 2017 to February 2019. While working there, Mr.
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Mewawalla is a product, technology, digital and business leader with extensive strategic and operational leadership expertise across technology, internet, software, telecommunications, financial services, media, consumer, enterprise, digital and blockchain companies. Mr. Mewawalla serves on the board of Phunware, Inc. (Nasdaq: PHUN), a software and technology company, Mawson Infrastructure Group, Inc.
Added
Anthony Lau Hoi Ho has been serving as a managing director of Vanzbon CPA Co., Limited, where he provides technical support for audit assignment. Starting from March 2022, Mr. Anthony Lau Hoi Ho has been an FP&A manager of Guest Supply Asia Pacific, where he leads the budgeting and analysis function of APAC area. Mr.
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(Nasdaq: MIGI), a digital infrastructure provider, Aquarius II Acquisition Corporation, Four Leaf Acquisition Corporation (Nasdaq: FORL). Mr. Mewawalla also served on the board of Rocky Mountain Chocolate Factory Inc. (Nasdaq: RMCF), an e-commerce, consumer and retail company, and SOS Children’s Villages USA, a philanthropic organization.
Added
Ho was a commercial finance manager at Pandora between November 2020 and February 2022, where he led the finance function of Hong Kong, Macau, and Taiwan with market leaders. Prior to that, Mr. Ho was a brand management controller at L’Oréal Hong Kong Limited between May 2018 and November 2020. Mr.
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He served as Chief Executive Officer and President of Xpanse Inc., a financial technology company from 2020 to 2021, as Chief Digital Officer and Executive Vice President of Platforms and Technology Businesses at Freedom Mortgage Corporation, a financial services company, from 2020 to 2021, as Chief Executive Officer and President at Zenplace Inc., a software and technology company from 2014 to 2020, as Vice President at Nokia Corporation (NYSE: NOK), a global telecommunications, infrastructure and technology company, from 2010 to 2012, as Vice President at General Electric Company’s NBC Universal (NYSE: GE), a global digital, media and technology conglomerate, from 2008 to 2010, and Senior Director at Yahoo!
Added
Ho obtained his bachelor’s degree in Accountancy from The Hong Kong Polytechnic University in June 2007. Mr. Ho is an authorized supervisor, practicing accountant, and certified public accountant at Hong Kong Institute of Certified Public Accountants. Tak Wing Lo serves on our board. Since December 2022, Mr.
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Inc., a global Internet, software, platforms and technology company, from 2005 to 2008. He has also served as Senior Advisor to the San Francisco Mayor’s Office on Innovation, as Advisor to Stanford University's Persuasive Technology Lab and as Committee Chair of the VC TaskForce SIG on Systems and Services. Mr.
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Lo has been serving as the responsible officer of Tianda Financial Limited, a company principally engaged in the provision of financial services. From February 2018 to January 2023, Mr. Lo served as the head of corporate finance of Zhenro Properties Group Limited (HKEx: 06158), a company principally engaged in real estate development and property leasing. Mr.
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Mewawalla earned an MBA from the Kellogg School of Management at Northwestern University and a BBS from the University of Delhi. 111 Chi-yang Chen serves on our board. Mr. Chen has been serving as a Senior Financial Executive in XLD Group N.A.
Added
Lo obtained a Master of Science degree in Finance (Investment Management) from the Hong Kong University of Science and Technology and a Bachelor of Arts degree in Accountancy from the Hong Kong Polytechnic University, in 2012 and 2007, respectively. 105 Sze Hau Lee is our Chief Financial Officer . Mr.
Removed
Real Estate Development, Inc., a private hospitality company, since March 2020, and responsible to work with executive management and offer analytical insight on critical financial and operational risks, as well as to resolve complex accounting and financial reporting matters. Prior to that, Mr.
Added
Except as permitted by the plan administrator, and subject to all the transfer restrictions under the applicable laws and regulations and restrictions set forth in the applicable award agreement, all Awards are not transferable or assignable. Term of the Options.
Removed
Chen was a senior manager in ASAM, LLP, a public accounting firm from September 2013 to February 2020 and his responsibilities included in consulting, financial due diligence and business valuation. Mr. Chen received his Bachelor of Science degree in Industrial Engineering from National University of Kaohsiung, Taiwan, an MBA degree from University of St.
Added
The term of any Option granted under the Plan cannot exceed ten years from its effective date. 2023 Share Incentive Plan In 2023, we adopted the 2023 Share Incentive Plan (“2023 Plan”). Under this Plan, up to 33,818,770 of our ordinary shares outstanding are available for Awards.
Removed
An executive officer may terminate his or her employment at any time with a three- to six-month prior written notice.
Added
Each vested RSU (as reported) entitles the participant of the 2023 Plan to receive one ADS, subject to adjustments for dividend payments. As of the date of this annual report, we have granted 32,000,000 deferred shares under this Plan to our executive officers and directors. The following paragraphs summarize the terms of the Plan: Plan administration.
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In January 2023, it increased from 25 votes per Class B Ordinary Share to 100 votes per Class B Ordinary Share. 117
Added
Our compensation committee or executive officers delegated by our compensation committee acts as the plan administrator. Type of Awards. The Plan permits the award of Options, restricted shares, dividend equivalents, deferred shares, share payments and RSUs singly, in combination or in tandem. Award Agreement . Each Award is evidenced by an Award agreement between the Award recipient and our Company.
Added
Eligibility. All of our employees are eligible for the grant of Awards under the Plan at the discretion of the compensation committee. A grant of Awards to any member of the compensation committee requires Board approval. Vesting Schedule and Other Restrictions.
Added
The plan administrator has discretion in making adjustment in the individual vesting schedules and other restrictions applicable to the Awards granted under the Plan. The vesting period is set forth in each Award agreement. Exercise price. The plan administrator has discretion in determining the price of the Awards, subject to a number of limitations.
Added
The plan administrator has absolute discretion in making adjustments to the exercise price of Options. Payment . The plan administrator determines the methods by which payments by any recipient of any Awards under the Plan are made. Transfer Restrictions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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In such Lock-Up Agreement, the directors, officers, and 10% or greater shareholders of the Company save except for Greentree Financial Group, Inc. agreed that they will not, during the period commencing from December 14, 2020 and ending on until thirty (30) days after the earliest of the date that (a) the registration statement relating to the 2020 Warrants and 2020 Debentures has been declared effective by the SEC, (b) all of the underlying shares pursuant to the December Private Placement have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following the one year anniversary of the closing date of the December Private Placement (being December 14, 2020), provided that a holder of the underlying shares pursuant to the December Private Placement is not an Affiliate of the Company, or (d) all of the underlying shares pursuant to the December Private Placement may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions and Company Counsel has delivered to such holders a standing written unqualified opinion that resales may then be made by such holders of the Underlying Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders (the “Lock-Up Period”), (i) offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any affiliate of the undersigned or any person in privity with the undersigned or any affiliate of the undersigned), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any ordinary shares or ordinary shares equivalents beneficially owned, held or hereafter acquired by the undersigned during the Lock-Up Period.
In such Lock-Up Agreement, the directors, officers, and 10% or greater shareholders of the Company save except for Greentree Financial Group, Inc. agreed that they will not, during the period commencing from February 18, 2021 and ending on until thirty (30) days after the earliest of the date that (a) a registration statement has been declared effective by the SEC, (b) all of the underlying shares pursuant to the February Private Placement have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following the one year anniversary of the closing date of the February Private Placement (being February 18, 2020), provided that a holder of the underlying shares pursuant to the February Private Placement is not an Affiliate of the Company, or (d) all of the underlying shares pursuant to the February Private Placement may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions and Company Counsel has delivered to such holders a standing written unqualified opinion that resales may then be made by such holders of the Underlying Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders (the “Lock-Up Period”), (i) offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any affiliate of the undersigned or any person in privity with the undersigned or any affiliate of the undersigned), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any ordinary shares or ordinary shares equivalents beneficially owned, held or hereafter acquired by the undersigned during the Lock-Up Period.
As of December 31, 2022 and 2021, LML recorded payable to DAWA for research and development expenses in the amount of approximately $838,000 and $119,000, respectively. 2021 Securities Purchase Agreement Lock-up Agreements Simultaneously with the execution of the Securities Purchase Agreement, the directors, officers, and 10% or greater shareholders of the Company save except for Greentree Financial Group, Inc. entered into a lock-up agreement (each a “Lock-Up Agreement”) with the selling shareholder.
As of December 31, 2023 and 2022, LML recorded payable to DAWA for research and development expenses in the amount of approximately $838,000 each. 2021 Securities Purchase Agreement Lock-up Agreements Simultaneously with the execution of the Securities Purchase Agreement, the directors, officers, and 10% or greater shareholders of the Company save except for Greentree Financial Group, Inc. entered into a lock-up agreement (each a “Lock-Up Agreement”) with the selling shareholder.
Directors, Senior Management and Employees—B. Compensation.” C. Interests of Experts and Counsel Not applicable. 119
Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Share Incentive Plan See “Item 6. Directors, Senior Management and Employees—B. Compensation.” C. Interests of Experts and Counsel Not applicable. 113
Removed
In such Lock-Up Agreement, the directors, officers, and 10% or greater shareholders of the Company save except for Greentree Financial Group, Inc. agreed that they will not, during the period commencing from February 18, 2021 and ending on until thirty (30) days after the earliest of the date that (a) a registration statement has been declared effective by the SEC, (b) all of the underlying shares pursuant to the February Private Placement have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following the one year anniversary of the closing date of the February Private Placement (being February 18, 2020), provided that a holder of the underlying shares pursuant to the February Private Placement is not an Affiliate of the Company, or (d) all of the underlying shares pursuant to the February Private Placement may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions and Company Counsel has delivered to such holders a standing written unqualified opinion that resales may then be made by such holders of the Underlying Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders (the “Lock-Up Period”), (i) offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any affiliate of the undersigned or any person in privity with the undersigned or any affiliate of the undersigned), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any ordinary shares or ordinary shares equivalents beneficially owned, held or hereafter acquired by the undersigned during the Lock-Up Period. 118 2020 Securities Purchase Agreement Lock-up Agreements Simultaneously with the execution of the securities purchase agreement dated December 11, 2020, the directors, officers, and 10% or greater shareholders of the Company save except for Greentree Financial Group, Inc. entered into a lock-up agreement (each a “Lock-Up Agreement”) with the selling shareholder.
Removed
Business Combination Lock-up Agreements Simultaneously with the execution of the Business Combination Agreement, each Jian Wang and Chunning Wang (collectively, the “Class B Seller”) entered into a lock-up agreement (each a “Lock-Up Agreement”) with regard to the Exchange Shares to be received by such Class B Seller.
Removed
In such Lock-Up Agreement, each Class B Seller agreed that such Seller will not, during the period commencing from the Closing and ending on the earlier of the six month anniversary of the Closing (or if earlier, the date on which we consummate a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of our shareholders having the right to exchange their equity holdings in us for cash, securities or other property) (the “Lock-Up Period”) (i) lend, offer, pledge (except as provided below), hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of such Class B Seller’s Exchange Shares, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such Class B Seller’s Exchange Shares, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii).
Removed
Each holder also agreed that the Escrow Shares will continue to be subject to such transfer restrictions until they are released from the Escrow Account.
Removed
However, each Class B Seller is allowed to transfer any of its Exchange Shares (other than the Escrow Shares while they are held in the Escrow Account) by gift, will or intestate succession or to any immediate family member (or related trust), trustor or trust beneficiary, as a distribution to equity holders upon liquidation or to an affiliate or pursuant to a court order or settlement agreement in divorce; provided in each such case that the transferee thereof agrees to be bound by the restrictions set forth in the Lock-Up Agreement.
Removed
The Class B Sellers are also permitted to pledge their shares during the Lock-Up period so long as the pledgee agrees not to exercise its remedies with respect to the Exchange Shares during the Lock-Up Period. Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Share Incentive Plan See “Item 6.

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