LGHL 20-F
Lion Group Holding Ltd (LGHL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report ____
For the transition period from to
Commission file number:
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
+65 8877 3871
(Address of principal executive offices)
Chief Executive Officer
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
US$0.0001 per share |
| * | Effective from November 26, 2025, the ratio of ADSs representing the Class A ordinary shares changed from one (1) ADS representing one (1) Class A ordinary shares to one (1) ADS representing thirty two thousand and five hundred (32,500) Class A ordinary shares. |
| ** | Not for trading, but only in connection with the listing on The Nasdaq Capital Market of our American depositary shares, each representing one Class A ordinary share. |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
As of December 31, 2025, there
were 151,658,568,130 ordinary shares outstanding, being the sum of
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
If this annual report is an
annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934. ☐ Yes ☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether
the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. ☒
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer and large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether
the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has been to prepare the financial statements included in this filing:
| International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18
If this is an annual report,
indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☒ Yes ☐ No
TABLE OF CONTENTS
i
INTRODUCTION
Unless otherwise indicated and except where the context otherwise requires, references in this annual report to:
“$,” “USD,” “US$” and “U.S. dollar” each refers to the United States dollar.
“2019 Warrant” means a warrant to purchase shares of common stock of Proficient issued in Proficient’s Initial Public Offering and simultaneous private placements. Each Warrant entitles the holder thereof to purchase one share of common stock of Proficient at a price of $11.50 per share.
“August 2022 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on August 9, 2025 pursuant to a Senior Secured Convertible Debenture dated August 9, 2022.
“December 2022 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on December 7, 2022 pursuant to a Senior Secured Convertible Debenture dated December 7, 2022.
“September 2023 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on September 5, 2026 pursuant to a Senior Secured Convertible Debenture dated September 5, 2023.
“January 2024 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on January 23, 2027 pursuant to a Senior Secured Convertible Debenture dated January 23, 2024.
“August 2024 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on August 9, 2027 pursuant to a Senior Secured Convertible Debenture dated August 9, 2024.
“January 2025 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on January 23, 2028 pursuant to a Senior Secured Convertible Debenture dated January 23, 2025.
“May 2025 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on May 23, 2028 pursuant to a Senior Secured Convertible Debenture dated May 23, 2025.
“June 2025 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on June 23, 2028 pursuant to a Senior Secured Convertible Debenture dated June 23, 2025.
“July 2025 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on July 21, 2028 pursuant to a Senior Secured Convertible Debenture dated July 21, 2025.
“December 2025 Convertible Debenture” means the senior secured convertible debentures, convertible into ADSs, which will mature on December 3, 2028 pursuant to a Senior Secured Convertible Debenture dated December 3, 2025.
“A-Share” refers to the stocks that are denominated in Renminbi and traded in Shanghai and Shenzhen Stock Exchange in PRC. Hong Kong stock means the stocks that are traded in Hong Kong Exchange.
“ADSs” refers to our American depositary shares, each of which represents one Class A Ordinary Share.
ii
“Amended and Restated Memorandum and Articles of Association” means the currently effective amended and restated memorandum and articles of association of Lion Group Holding Ltd.
“Business Combination Agreement” means the Business Combination Agreement, dated as of March 10, 2020, which is later amended and restated as of May 12, 2020, by and among us, Proficient, Merger Sub, Lion, the Sellers and the other parties thereto.
“Business Combination” means the Merger and the Share Exchange, and other transactions contemplated by the Business Combination Agreement.
“CFD” means a contract for differences, an agreement between an investor and a CFD broker to exchange the difference in the value of a financial product between the time the contract opens and closes.
“Class A Ordinary Shares” means our Class A ordinary shares, par value $0.0001 per share.
“Class B Ordinary Shares” means our Class B ordinary shares, par value $0.0001 per share.
“Code” means the Internal Revenue Code of 1986, as amended.
“Companies Act” means the Companies Act (2020 Revision) of the Cayman Islands, as may be amended from time to time.
“Escrow Shares” means 45% of the Exchange Shares otherwise issuable to the Sellers at the Closing set aside in escrow upon the closing of the Business Combination.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Shares” means the ordinary shares that Sellers received in exchange of their original holdings in Lion Financial Group Limited upon the consummation of the Business Combination.
“Founder Shares” means shares of Proficient common stock, 2,875,000 of which are currently outstanding and were issued to the Initial Stockholders prior to the Initial Public Offering of Proficient.
“HK$” or “Hong Kong dollars” means the legal currency of Hong Kong.
“Initial Public Offering” means the initial public offering of Proficient, consummated on June 3, 2019.
“Initial Stockholders” means the holders of Founder Shares.
“iResearch” means iResearch Consulting Group.
“JOBS Act” means the Jumpstart Our Business Startups Act.
“Lion” means Lion Financial Group Limited, a corporation organized under the laws of the British Virgin Islands.
“Merger” means the merger of Merger Sub with Proficient, with Proficient surviving such merger, prior security holders of Proficient receiving our securities and Proficient becoming a wholly-owned subsidiary of us.
“Merger Sub” means Lion MergerCo I, Inc., a Cayman Islands exempted company.
“Nasdaq” means the Nasdaq Stock Market LLC.
“Ordinary Shares” means our ordinary shares, par value $0.0001 per share, including Class A Ordinary Shares and Class B Ordinary Shares, unless otherwise specified.
“PIPE Warrants” means the warrant represents the right to purchase one Class A Ordinary Share in the form of ADSs at a price of $3.00 per share or $3.00 per ADS.
iii
“Private Warrants” or “Private Placement Warrants” means the Warrants sold to Sponsor simultaneously with the closing of the Initial Public Offering, each of which is exercisable for one share of common stock of Proficient, in accordance with its terms.
“Proficient”, “PAAC” or “Purchaser” means Proficient Alpha Acquisition Corp., currently known as Lion Group North America Corp., a Nevada corporation.
“PRC” or “China” refers to the People’s Republic of China, excluding, for the purpose of this annual report, Taiwan.
“Public Warrants” means the Warrants included in the Units sold in the Initial Public Offering, each of which is exercisable for one share of common stock of Proficient, in accordance with its terms.
“Purple Tee” means Purple Tee Capital Limited, an independent third party industry consultant.
“Rights” means the rights included in the Units sold in the Initial Public Offering, each of which is exercisable for one-tenth (1/10) of one share of common stock of Proficient, in accordance with its terms.
“RMB” and “Renminbi” each refers to the legal currency of China.
“SEC” means the U.S. Securities and Exchange Commission.
“Sellers” means the shareholders of Lion named as seller parties to the Business Combination Agreement dated March 10, 2020.
“Series A Convertible Preferred Shares” means our 8% Series A Convertible Preferred Shares, par value $0.0001 per share, and stated value $1,000.00 per share.
“Series A Warrant” means a warrant until on or prior to 5:00 p.m. (New York City time) on December 14, 2027 exercisable into 1,200,000 ADSs at an exercise price of $2.45 per ADS pursuant to the Series A American Depositary Shares Purchase Warrant dated December 14, 2020.
“Series B Warrant” means a 2-year warrant exercisable into 5,000,000 ADSs at an exercise price of $2.00 per ADS pursuant to the Series B American Depositary Shares Purchase Warrant dated December 14, 2020.
“Series C Warrant” means a 7-year warrant exercisable into 7,500,000 ADSs at an exercise price of $2.45 per ADS pursuant to the Series C American Depositary Shares Purchase Warrant dated December 14, 2020.
“Series D Warrant” means a warrant until on or prior to 5:00 p.m. (New York City time) on the five year anniversary of the closing date of the February Private Placement exercisable into 2,333,333 ADSs at an exercise price of $3.00 per ADS pursuant to the Series D American Depositary Shares Purchase Warrant dated February 18, 2021.
“Series E Warrant” means a one-year warrant exercisable into 13,333,333 ADSs at an exercise price of $3.00 per ADS which entitles the Series E warrant holder pursuant to the Series E American Depositary Shares Purchase Warrant dated February 18, 2021, each exercise of which entitles the Series E Warrant holder to receive one ADS and a 8% cash discount.
“Series F Warrant” means a five-year warrant exercisable into 13,333,333 ADSs at an exercise price of $3.00 per ADS pursuant to the Series F American Depositary Shares Purchase Warrant dated February 18, 2021, but the exercisability of which shall vest ratably from time to time in proportion to the exercise of the Series E Warrants by the holder of the Series E Warrant.
Series G Warrant” means a five-year warrant exercisable into 2,285,715 ADSs at an exercise price of $2.50 per ADS pursuant to the Series G American Depositary Shares Purchase Warrant dated December 13, 2021, but the exercisability of which shall vest ratably from time to time in proportion to the exercise of the Series G Warrants by the holder of the Series G Warrant.
iv
“Series H Warrant” means a five-year warrant exercisable into 13,158 ADSs at an exercise price of $1.90 per ADS pursuant to the Series H American Depositary Shares Purchase Warrant dated September 2, 2023, but the exercisability of which shall vest ratably from time to time in proportion to the exercise of the Series H Warrants by the holder of the Series H Warrant.
“Series I Warrant” means a five-year warrant exercisable into 8,850 ADSs at an exercise price of $1.13 per ADS pursuant to the Series I American Depositary Shares Purchase Warrant dated January 23, 2024, but the exercisability of which shall vest ratably from time to time in proportion to the exercise of the Series I Warrants by the holder of the Series I Warrant.
“Series J Warrant” means a seven-year warrant exercisable into 4,017,858 ADSs at an exercise price of $0.28 per ADS pursuant to the Series J American Depositary Shares Purchase Warrant dated August 9, 2024, but the exercisability of which shall vest ratably from time to time in proportion to the exercise of the Series J Warrants by the holder of the Series J Warrant.
“Series K Warrant” means a seven-year warrant exercisable into 10,007,812 ADSs at an exercise price of $0.16 per ADS pursuant to the Series K American Depositary Shares Purchase Warrant dated January 23, 2025, but the exercisability of which shall vest ratably from time to time in proportion to the exercise of the Series J Warrants by the holder of the Series J Warrant.
“Series L Warrant” means a warrant until on or prior to 5:00 p.m. (New York City time) on May 23, 2032, exercisable into 140,625 ADSs at an exercise price of $4.00 per ADS pursuant to the Series H American Depositary Shares Purchase Warrant dated May 23, 2025, but the exercisability of which shall vest ratably from time to time in proportion to the exercise of the Series L Warrants by the holder of the Series L Warrant.
“Share Exchange” means the exchange of 100% of the ordinary shares of Lion for our capital shares.
“Sponsor” means Complex Zenith Limited, a British Virgin Islands company controlled by Shih-Chung Chou, a director of Proficient. Shih-Chung Chou had served as the sponsor of Proficient since its Initial Public Offering until March 12, 2020, when he entered into an agreement with Complex Zenith Limited and assigned all of his equity interest in Proficient and his rights and obligations as a sponsor to Complex Zenith Limited.
“Strategic Cooperation Agreement” means the strategic cooperation agreement, dated as of January 6, 2021, by and among us and Yao Yongjie.
“Trust Account” means the trust account that holds a portion of the proceeds of the Initial Public Offering and the concurrent sale of the Private Placement Warrants.
“Units” means units issued in the Initial Public Offering, each consisting of one share of common stock of Proficient, one Warrant and one Right.
“U.S.” means the United States of America.
“U.S. GAAP” means United States generally accepted accounting principles.
“Warrant” means a warrant to purchase shares of common stock of Proficient issued in the Initial Public Offering and simultaneous private placements. Each Warrant entitles the holder thereof to purchase one share of common stock of Proficient at a price of $11.50 per share.
“we,” “our,” “us,” “the company,” “the Group” and other similar terms refer to Lion Group Holding Ltd. and its consolidated subsidiaries.
This annual report contains translations of Hong Kong dollars into U.S. dollars solely for the convenience of the reader. The conversion of Hong Kong dollars into U.S. dollars are based on the exchange rates set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Unless otherwise noted, all translations from Hong Kong dollars to U.S. dollars and from U.S. dollars to Hong Kong dollars in this annual report were made at a rate of HK$7.7833 to US $1.00, buying rate at closing in effect as of December 31, 2025.
v
FORWARD-LOOKING INFORMATION
This annual report contains forward-looking statements that involve risks and uncertainties. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995.
You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:
| ● | our goals and strategies; |
| ● | our ability to retain and increase the number of users, members and advertising customers, and expand our service offerings; |
| ● | our future business development, financial condition and results of operations; |
| ● | expected changes in our revenues, costs or expenditures; |
| ● | competition in our industry; |
| ● | relevant government policies and regulations relating to our industry; |
| ● | general economic and business conditions globally and in China, Hong Kong, and Southeast Asia; and |
| ● | assumptions underlying or related to any of the foregoing. |
You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect. Other sections of this annual report discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
vi
PART I.
Lion Group Holding Ltd. is incorporated in Cayman Islands. As a holding company with no material operations of our own, we conduct our substantial operations through our subsidiaries in Hong Kong, Singapore, the Cayman Islands, and the United States, and our apps are available to download in the app stores of China and most of our users are PRC citizens. As such, the Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time. Such governmental actions:
| ● | could result in a material change in our operations; |
| ● | could hinder our ability to continue to offer securities to investors; and |
| ● | may cause the value of our ADSs to significantly decline or be worthless. |
Currently, we are not aware there are any material restrictions on foreign exchange, the ability to transfer cash between our entities, or the ability to distribute earnings to investors outside of China. Further, we are aware that, the Chinese government recently initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using entity variable interest entity (“VIE”) structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on the Company’s business operations in China, the ability to accept foreign investments and list on an U.S. or other foreign exchange. We do not have any VIE agreements with our subsidiaries, instead, we hold equity interests in our subsidiaries. As of the date of this annual report, we do not have a subsidiary incorporated in mainland China. Any future action by the Chinese government expanding the categories of industries and companies whose foreign securities offerings are subject to government review 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. For a detailed description of the risks related to doing business in the PRC and our securities, see “Risks Related to Doing Business in Jurisdictions We Operate” and “Risks Related to our ADSs and our Securities” in the Risk Factors section.
Risks Associated with Having Part of the Company’s Operations 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, and expose us to legal and operational risks associated with our operations in China. The PRC government has significant authority to exert influence on the ability of a company with operations in China, including us, to conduct its business. Changes in China’s economic, political or social conditions or government policies could materially and adversely affect our business and results of operations. We are subject to risks due to the uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to the risks of uncertainty about any future actions of the PRC government on U.S. listed companies. We may also be subject to sanctions imposed by PRC regulatory agencies, including the China Securities Regulatory Commission, or CSRC, if we fail to comply with their rules and regulations. Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in companies having operations in China, including us, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of our securities to significantly decline or become worthless. These China-related risks could result in a material change in our operations and/or the value of our securities, or could significantly limit or completely hinder our ability to offer securities to investors in the future and cause the value of such securities to significantly decline or become worthless.
The PRC government may exert, at any time, substantial intervention and influence over the manner our operations. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews and new laws and regulations related to data security, and expanding the efforts in anti-monopoly enforcement.
1
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of personal information and important data worldwide is rapidly evolving in PRC and is likely to remain uncertain for the foreseeable future. Regulatory authorities in China have implemented and are considering a number of legislative and regulatory proposals concerning data protection. For example, the PRC Cybersecurity Law, which became effective in June 2017, established China’s first national-level data protection for “network operators,” which may include all organizations in China that connect to or provide services over the internet or other information network. 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.
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 amended Measures of Cybersecurity Review provide that, among others, an application for cybersecurity review must be made by an issuer that is a “critical information infrastructure operator” or a “data processing operator” as defined therein before such issuer’s securities become listed in a foreign country, if the issuer possesses personal information of more than one million users, and that the relevant governmental authorities in the PRC may initiate cybersecurity review if such governmental authorities determine an operator’s cyber products or services, data processing or potential listing in a foreign country affect or may affect China’s national security. 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. The Personal Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The Personal Information Protection Law also provides that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in China the personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. Moreover, pursuant to the Personal Information Protection Law, persons who seriously violate this law may be fined for up to RMB50 million or 5% of annual revenues generated in the prior year and may also be ordered to suspend any related activity by competent authorities.
In November 2021, the CAC released the Regulations on Network Data Security (draft for public comments) and accepted public comments until December 13, 2021. The draft Regulations on Network Data Security provide more detailed guidance on how to implement the general legal requirements under laws such as the Cybersecurity Law, Data Security Law and the Personal Information Protection Law. The draft Regulations on Network Data Security follow the principle that the state will regulate based on a data classification and multi-level protection scheme, under which data is largely classified into three categories: general data, important data and core data. Under the current PRC cybersecurity laws in China, critical information infrastructure operators that intend to purchase internet products and services that may affect national security must be subject to the cybersecurity review. On July 30, 2021, the State Council of the PRC promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, which took effect on September 1, 2021. The regulations require, among others, that certain competent authorities shall identify critical information infrastructures. If any critical information infrastructure is identified, they shall promptly notify the relevant operators and the Ministry of Public Security.
Currently, the cybersecurity laws and regulations have not directly affected our business and operations, but in anticipation of the strengthened implementation of cybersecurity laws and regulations and the expansion of our business, we face potential risks if we are deemed as a critical information infrastructure operator under the Cybersecurity Law. In such case, we must fulfill certain obligations as required under the Cybersecurity Law and other applicable laws, including, among others, storing personal information and important data collected and produced within the PRC territory during our operations in China, which we are already doing in our business, and we may be subject to review when purchasing internet products and services. As of the date of this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis, and we have not received any inquiry, notice, warning, or sanctions in such respect. Based on the foregoing, we do not expect that, as of the date of this annual report, the current applicable PRC laws on cybersecurity would have a material adverse impact on our business.
2
On September 1, 2021, the PRC Data Security Law became effective, which imposes data security and privacy obligations on entities and individuals conducting data-related activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used. As of the date of this annual report, we have not been involved in any investigations on data security compliance made in connection with the PRC Data Security Law, and we have not received any inquiry, notice, warning, or sanctions in such respect. 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.
On July 6, 2021, the relevant PRC governmental authorities published the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions require the relevant regulators to coordinate and accelerate amendments of legislation on the confidentiality and archive management related to overseas issuance and listing of securities, and to improve the legislation on data security, cross-border data flow and management of confidential information. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As these opinions were recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from the CSRC or any other PRC government authorities. Based on the foregoing and the currently effective PRC laws, we are of the view that, as of the date of this annual report, these opinions do not have a material adverse impact on our business.
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 have come into effect on March 31, 2023. As a supplement to the Overseas Listing Trial Measures, on February 24, 2023, the CSRC, together with other authorities, jointly revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, collectively with the Overseas Listing Trial Measures, the Overseas Listing Regulations, which have come into effect on March 31, 2023. 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. Based on our management’s assessment, we do not believe we will be subject to the filing and reporting requirement under the Overseas Listing Regulations since our business activities and management team do not meet either of the conditions. However, as the Overseas Listing Regulations were recently released and their interpretation and implementation remain uncertain.
As there are still uncertainties regarding these new laws and regulations as well as the amendment, interpretation and implementation of the existing laws and regulations related to cybersecurity and data protection, We cannot assure you that we will be able to comply with these laws and regulations in all respects. The regulatory authorities may deem our activities or services non-compliant and therefore require us to suspend or terminate its business. We may also be subject to fines, legal or administrative sanctions and other adverse consequences, and may not be able to become in compliance with relevant laws and regulations in a timely manner, or at all. These may materially and adversely affect its business, financial condition, results of operations and reputation.
Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign investments and conduct follow-on offerings, and listing or continuing listing on a U.S. or other foreign exchanges. In addition, 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 any other industry including the industry in which we operate, which could adversely affect our business, financial condition and results of operations. See “Item 3. Key Information—D. Risk Factors—Risk Factors— 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.” for more details.
3
Risks Associated with the Holding Foreign Companies Accountable Act.
The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted into U.S. law on December 18, 2020. The HFCA Act states that if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board of the United States (the “PCAOB”) for three consecutive years beginning in 2021, the SEC shall prohibit its securities from being traded on a national securities exchange or in the over-the-counter trading market in the U.S. 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. 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 29, 2022, a legislation entitled the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCA Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the Holding Foreign Companies Accountable Act from three years to two. Whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. 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 has indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act if needed, without having to wait another year to reassess its determinations. 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.
Lack of access to PCAOB inspections prevents the PCAOB from fully evaluating audits and quality control procedures of the accounting firms headquartered in mainland China or Hong Kong. As a result, investors in companies using such auditors may be deprived of the benefits of such PCAOB inspections. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC, and PCAOB signed a Statement of Protocol, or the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. Pursuant to the Protocol, the PCAOB has independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022, and the PCAOB board vacated its previous determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. 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.
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. If notwithstanding this new framework, the PCAOB was unable to fully inspect 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 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. Furthermore, there can be no assurance that the SEC, Nasdaq, or other regulatory authorities would not apply additional and more stringent criteria to the Company in connection with audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of the Company’s financial statements. 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 securities in the future if the PCAOB is unable to inspect the Company’s accounting firm (whether HTL International, LLC, or another firm) at such future time.
4
Our current auditor, GGF CPA LTD (“GGF”), the independent registered public accounting firm that issues the audit report included in this annual report on Form 20-F, as a firm registered with the PCAOB (PCAOB ID:2729), is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. GGF, whose audit report is included in this report, is headquartered in Guangzhou, China. While our auditor is based in the PRC and is registered with PCAOB and subject to PCAOB inspection, in the event it is later determined that the PCAOB is unable to inspect or investigate completely the Company’s auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading of our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities exchange to delist the Company’s securities. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and resumed regular inspections in 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act, if needed.
The HFCA Act also imposes additional certification and disclosure requirements for Commission Identified Issuers, and these requirements apply to issuers in the year following their listing as Commission Identified Issuers. The additional requirements include a certification that the issuer is not owned or controlled by a governmental entity in the Relevant Jurisdiction, and the additional requirements for annual reports include disclosure that the issuer’s financials were audited by a firm not subject to PCAOB inspection, disclosure on governmental entities in the Relevant Jurisdiction’s ownership in and controlling financial interest in the issuer, the names of Chinese Communist Party, or CCP, members on the board of the issuer or its operating entities, and whether the issuer’s article’s include a charter of the CCP, including the text of such charter. For more detailed information, see “Our ADSs and warrants may be delisted or prohibited from being traded “over-the-counter” under the Holding Foreign Companies Accountable Act (as amended by the Accelerating Holding Foreign Companies Accountable Act) if the PCAOB were unable to fully inspect the company’s auditor.”
How Cash is Transferred through Our Organization
We were incorporated in Cayman Islands on February 11, 2020, to be the ultimate parent company of the Group upon the consummation of a business combination on June 16, 2020. As a holding company with no material operations of our own, we conducted our substantial operations through our subsidiaries in Hong Kong and the Cayman Islands during the financial year ended December 31, 2025, and our apps are available to download 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. Lion Group Holding Ltd. is permitted under the laws of Cayman Islands to provide funding to our subsidiaries in Hong Kong and Cayman Islands through loans or capital contributions without restrictions on the amount of the funds. Lion Group Holding Ltd. can distribute earnings from its businesses, including subsidiaries, to the U.S. investors. Our operations in Hong Kong and the Cayman Islands were in loss position since the second half of 2020, and the Company has raised capital through equity and debt financing transactions and provided funding to our operations in Hong Kong and the Cayman Islands. During late 2024 to 2025, we have gradually scaled down the operations of our subsidiaries in Hong Kong. As of December 31, 2025, we have ceased the operations of our subsidiaries in Hong Kong and now conduct our operations primarily through our subsidiaries in the Cayman Islands.
Our operating subsidiaries are permitted under the laws of Hong Kong, Cayman Islands, Singapore, British Virgin Islands, and the United States, respectively, to provide funding to Lion Group Holding Ltd., the holding company incorporated in the Cayman Islands through dividend distributions. Our Group currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. 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.
We established Lion Group (Hangzhou) Investment Limited, our PRC subsidiary, holding through Lion Wealth Limited in May 2021. The PRC subsidiary was established solely for purpose of passive equity investment in China with no substantial business activities, which does not require contractual arrangements or variable interest entity, or VIE, to operate. We disposed of Lion Group (Hangzhou) Investment Limited to a third party in September 2023. As of December 31, 2025, we do not have any operating subsidiaries in the PRC
5
Since Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, providing Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. We are dependent on our customers in the PRC, the laws and regulations of the PRC currently have restrictions on currency conversion, cross-border remittance and offshore investment for PRC citizens. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — 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.” for more information on the risk of PRC governmental control of currency conversion, cross-border remittance and offshore investment with respect to our operations. However, the laws and regulations of the PRC do not currently have any material impact on transfer of cash from the Company to our Cayman Islands and Hong Kong subsidiaries to or from Cayman Islands and Hong Kong subsidiaries to the Company and the investors in the U.S. As a result, cash can be transferred freely between the Company and its operating subsidiaries, across borders, and to U.S. investors.
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. There is no further Cayman Islands statutory restriction on the amount of funds which may be distributed by us in the form of dividends.
The following are the aggregate transfers from the Company to its subsidiaries for the years ended December 31, 2025 and 2024:
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| US$ | US$ | |||||||
| Subsidiary | ||||||||
| Lion Broker Limited (1) | $ | 538,350 | $ | 4,954,178 | ||||
| Lion Wealth Limited (2) | 5,565,142 | 8,438,652 | ||||||
| Lion Financial Group Limited (3) | 2,687,945 | 993,788 | ||||||
| Lion Wealth Management Limited (4) | 4,513,291 | 117,479 | ||||||
| Lion Workshop Limited(5) | 3,292,538 | - | ||||||
| Lion Investment (HK) Ltd(6) | 29,474 | - | ||||||
| Lion Metaverse Ltd. (7) | 48 | - | ||||||
| Lion Group North American Corp. (8) | 438,250 | 619,500 | ||||||
| Total | $ | 17,065,038 | $ | 15,123,597 | ||||
| (1) | Lion Broker Ltd was incorporated under the laws of the Cayman Islands in March 2017. |
| (2) | Lion Wealth Limited was incorporated in Hong Kong in October 2018. |
| (3) | Lion Financial Group Limited was incorporated under the laws of the British Virgin Islands in June 2015. |
| (4) | Lion Wealth Management Ltd was incorporated under the laws of the British Virgin Islands in February 2017. |
| (5) | Lion Workshop Limited was incorporated under the laws of the British Virgin Islands in April 2021. |
| (6) | Lion Investment (HK) Ltd was incorporated in Hong Kong in May 2016. |
| (7) | Lion Metaverse Ltd. was incorporated under the laws of the British Virgin Islands in October 2021. |
| (8) | Lion Group North American Corp was incorporated under the laws of the State of Nevada in July 2018. |
6
The following are the aggregate transfers from its subsidiaries to the Company for the years ended December 31, 2025 and 2024:
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| US$ | US$ | |||||||
| Subsidiaries | ||||||||
| Lion Broker Limited (1) | $ | - | $ | 9,234,037 | ||||
| Lion Financial Group Limited (2) | 2,451,718 | 962,616 | ||||||
| Lion Wealth Management Ltd (3) | 14 | 63,955 | ||||||
| Lion Investment (HK) Limited (4) | 128 | - | ||||||
| Lion International Securities Group Limited (5) | 24,399 | - | ||||||
| Lion Workshop Limited (6) | 385,754 | 638,896 | ||||||
| Lion Wealth Limited (7) | 5,033,813 | 134,611 | ||||||
| BC Wealth Management Limited (8) | - | 11,047 | ||||||
| Total | $ | 7,895,826 | $ | 11,045,162 | ||||
| (1) | Lion Broker Ltd was incorporated under the laws of the Cayman Islands in March 2017. |
| (2) | Lion Financial Group Limited was incorporated under the laws of the British Virgin Islands in June 2015. |
| (3) | Lion Wealth Management Ltd was incorporated under the laws of the British Virgin Islands in February 2017. |
| (4) | Lion Investment (HK) Ltd was incorporated in Hong Kong in May 2016. |
| (5) | Lion International Securities Group Limited was incorporated under the laws of the Hong Kong in May 2016, and was dissolved in December 2025. |
| (6) | Lion Workshop Limited was incorporated under the laws of the British Virgin Islands in April 2021. |
| (7) | Lion Wealth Limited was incorporated in Hong Kong in October 2018. |
| (8) | BC Wealth Management Limited was incorporated in Hong Kong in October 2014 and became a wholly owned subsidiary of the Group in May 2016. The Group’s interest in BC Wealth Management Limited was sold to third parties in June 2024. |
We did not pay any dividends to our shareholders in 2025 and 2024. We are able to distribute earnings from our operating subsidiaries, to the parent company and U.S. investors and settle amounts owed, although we currently do not have any dividend policy. There were no dividends or distributions that a subsidiary made to the holding company during the period. 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. 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.
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 are 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 exchange controls in Cayman Islands.
For more detailed information, see “Liquidity of our Subsidiaries” and “Item 3. Key Information — D. 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.”
7
Limitation on Oversea Listing and Share Issuances
Although the substantial operation of us is based in 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. Recent cybersecurity regulations mandate clearance of cybersecurity review of internet platform operator holding personal information of more than one million users before applying for listing at a foreign stock exchange, and relevant governmental authorities in the PRC may initiate cybersecurity review if they determine an operator’s data processing activities affect or may affect national security. However, it remains unclear as to whether relevant requirements will be applicable to companies that have already been listed in the United States, such as us, for our future offerings, and the laws and regulations then effective as of our previous listing did not require any issuer to obtain pre-approval from the Cybersecurity Administration Committee, or CAC, before listing at a foreign stock exchange. As of the date of this annual report, we do not hold personal information of more than one million users and our business activities do not involve risk factors regarding national security as stipulated in the Cybersecurity Review Measures. We have not been informed by any government authorities that we are deemed as a critical information infrastructure operator, and we have not received any inquiry or notice of and is not currently subject to any proceedings initiated by the CAC. Based on the foregoing and our management’s assessment, we believe that we are not required to apply for pre-approval from CAC before the issuance of our securities to foreign investors and we are not subject to mandatory application requirement for cybersecurity review under the current PRC laws and regulations. However, no detailed rules or implementation rules regarding the cybersecurity review have been issued and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. We cannot assure you that we would not be deemed as a critical information infrastructure operator or carrying out data processing activities that affect or may affect national security, which may subject us to order of clearance of cybersecurity review or other specific actions.
In addition, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. Based on our management’s assessment, we believe that the CSRC’s approval is not required for our listing, 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. 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. 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. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do.
Furthermore, 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. Based on our management’s assessment, we do not believe we will be subject to the Overseas Listing Regulations since our business activities and identity of management team do not meet either of the conditions and our offering will not be determined as indirect overseas offering under the Overseas Listing Trial Measures. However, as the Overseas Listing Regulations were recently released and their interpretation and implementation remain uncertain.
The substantial operation of us is based in Hong Kong and the Cayman Islands, and we do not operate through any VIE agreement with our subsidiaries in China or own any equity interest in corporations incorporated in mainland China. However, if it is determined that any CSRC approval, filing, cybersecurity review or other governmental authorization is required for our previous or future offering, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies for failure to do so, and if we are denied from PRC authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, which would materially affect the interest of the investors.
For more detailed information, see “Item 3. Key Information — D. Risk Factors —The Chinese government may exercise significant oversight and discretion over the conduct of business in the PRC and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our securities,” “Item 3. Key Information — D. Risk Factors — The PRC government may intervene or influence our business operations at any time or may exert more control over offerings conducted overseas and foreign investment in China based issuers, which could result in a material change in our business operations or the value of our securities. 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 regulation also establishes more complex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.”
8
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Uncertainties with respect to the PRC legal system could affect us
Changes in the policies, regulations, rules, and the enforcement of laws of the PRC government may be quick with little advance notice and could have a significant impact upon our ability to operate profitably in the PRC.
The Chinese government may exercise significant oversight and discretion over the conduct of business in the PRC and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our securities. We are also currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if we are required to obtain approval in the future and are denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, which would materially affect the interest of the investors.
The PRC government may intervene or influence our business operations at any time or may exert more control over offerings conducted overseas and foreign investment in China based issuers, which could result in a material change in our business operations or the value of our securities. Additionally, the governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. see “Risks Related to Doing Business in Jurisdictions We Operate” and “Risks Related to our ADSs and our Securities” in the Risk Factors section.
| A. | [Reserved] |
| B. | Capitalization and Indebtedness |
Not Applicable.
| C. | Reasons for the Offer and Use of Proceeds |
Not Applicable.
9
| D. | Risk Factors |
Summary of Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may materially and adversely affect our business, financial condition, results of operations, cash flows and prospects that you should consider before making a decision to invest in our ADSs. You should carefully consider the matters discussed under “Item 3. Key Information — D. Risk factors” in our Form 20-F.
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. |
| ● | 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. Any material reduction in our commission or fee rates could reduce our profitability. |
| ● | We cannot guarantee the profitability of our clients’ investments or ensure that our clients will make rational investment judgements. |
| ● | We may incur material trading losses from our market making activities. |
| ● | We may incur material trading losses from our over-the-counter stock options trading business. |
| ● | Failure to comply with regulatory capital requirements set by local regulatory authorities could materially and negatively affect our business operation and overall performance. |
| ● | 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. |
| ● | We depend on the services of prime brokers and clearing agents to assist in providing us with access to liquidity in CFD trading. 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 Doing Business in Jurisdictions We Operate
| ● | A downturn in the Hong Kong, China or global economy, and economic and political policies of China could materially and adversely affect our business and financial condition. |
| ● | The Hong Kong legal system embodies uncertainties which could limit the legal protections available to Lion. |
| ● | Hong Kong regulatory requirement of prior approval for transfer of shares in excess of certain threshold may restrict future takeovers and other transactions. |
| ● | Uncertainties with respect to the PRC legal system could adversely affect us. |
| ● | Changes in the policies, regulations, rules, and the enforcement of laws of the PRC government may be quick with little advance notice and could have a significant impact upon our ability to operate profitably in the PRC. |
| ● | The Chinese government may exercise significant oversight and discretion over the conduct of business in the PRC and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our securities. |
| ● | The PRC government may intervene or influence our business operations at any time or may exert more control over offerings conducted overseas and foreign investment in China based issuers, which could result in a material change in our business operations or the value of our securities. 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 regulation also establishes more complex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions. |
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. |
| ● | The delisting of our American Depositary Shares, or the threat of their being delisted, may materially and adversely affect the value of your investment, even making it worthless. |
Risks Related to Our Cryptocurrency Strategy and Holdings
| ● | A significant decrease in the market value of our BTC, HYPE, SOL, and SUI holdings could adversely affect our ability to satisfy our financial obligations. |
| ● | Our staking program is subject to operational, market, and regulatory risks. |
| ● | Our cryptocurrency reserve strategy exposes us to various risks, including risks associated with BTC, HYPE, SOL, and SUI. |
| ● | BTC, HYPE, SOL, and SUI are highly volatile assets, and fluctuations in the price of BTC, HYPE, SOL, and SUI have in the past influenced and are likely to continue to influence our financial results and the market price of our listed securities. |
| ● | BTC, HYPE, SOL, and SUI and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty |
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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 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. 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 affect our business, financial condition and results of operations. Furthermore, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties could adversely affect our business that relates to China or PRC citizens.
The PRC government has significant authority to exert influence on the ability of a company with operations in China, including us, to conduct its business. Changes in China’s economic, political or social conditions or government policies could materially and adversely affect our business and results of operations. We are subject to risks due to the uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to the risks of uncertainty about any future actions of the PRC government on U.S. listed companies. We may also be subject to sanctions imposed by PRC regulatory agencies, including CSRC, if we fail to comply with their rules and regulations. Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in companies having operations in China, including us, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of our securities to significantly decline or become worthless. These China-related risks could result in a material change in our operations and/or the value of our securities, or could significantly limit or completely hinder our ability to offer securities to investors in the future and cause the value of such securities to significantly decline or become worthless.
The PRC government may exert, at any time, substantial intervention and influence over the manner our operations. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews and new laws and regulations related to data security, and expanding the efforts in anti-monopoly enforcement.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of personal information and important data worldwide is rapidly evolving in PRC and is likely to remain uncertain for the foreseeable future. Regulatory authorities in China have implemented and are considering a number of legislative and regulatory proposals concerning data protection. For example, the PRC Cybersecurity Law, which became effective in June 2017, established China’s first national-level data protection for “network operators,” which may include all organizations in China that connect to or provide services over the internet or other information network. 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.
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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 amended Measures of Cybersecurity Review provide that, among others, an application for cybersecurity review must be made by an issuer that is a “critical information infrastructure operator” or a “data processing operator” as defined therein before such issuer’s securities become listed in a foreign country, if the issuer possesses personal information of more than one million users, and that the relevant governmental authorities in the PRC may initiate cybersecurity review if such governmental authorities determine an operator’s cyber products or services, data processing or potential listing in a foreign country affect or may affect China’s national security. 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. The Personal Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The Personal Information Protection Law also provides that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in China the personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. Moreover, pursuant to the Personal Information Protection Law, persons who seriously violate this law may be fined for up to RMB50 million or 5% of annual revenues generated in the prior year and may also be ordered to suspend any related activity by competent authorities.
In November 2021, the CAC released the Regulations on Network Data Security (draft for public comments) and accepted public comments until December 13, 2021. The draft Regulations on Network Data Security provide more detailed guidance on how to implement the general legal requirements under laws such as the Cybersecurity Law, Data Security Law and the Personal Information Protection Law. The draft Regulations on Network Data Security follow the principle that the state will regulate based on a data classification and multi-level protection scheme, under which data is largely classified into three categories: general data, important data and core data. Under the current PRC cybersecurity laws in China, critical information infrastructure operators that intend to purchase internet products and services that may affect national security must be subject to the cybersecurity review. On July 30, 2021, the State Council of the PRC promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, which took effect on September 1, 2021. The regulations require, among others, that certain competent authorities shall identify critical information infrastructures. If any critical information infrastructure is identified, they shall promptly notify the relevant operators and the Ministry of Public Security.
Currently, the cybersecurity laws and regulations have not directly affected our business and operations, but in anticipation of the strengthened implementation of cybersecurity laws and regulations and the expansion of our business, we face potential risks if we are deemed as a critical information infrastructure operator under the Cybersecurity Law. In such case, we must fulfill certain obligations as required under the Cybersecurity Law and other applicable laws, including, among others, storing personal information and important data collected and produced within the PRC territory during our operations in China, which we are already doing in our business, and we may be subject to review when purchasing internet products and services. The amended Measures of Cybersecurity Review became effective in February 2022, we may be subject to review when conducting data processing activities, and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices in data processing. As of the date of this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis, and we have not received any inquiry, notice, warning, or sanctions in such respect. Based on the foregoing, we do not expect that, as of the date of this annual report, the current applicable PRC laws on cybersecurity would have a material adverse impact on our business.
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On September 1, 2021, the PRC Data Security Law became effective, which imposes data security and privacy obligations on entities and individuals conducting data-related activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used. As of the date of this annual report, we have not been involved in any investigations on data security compliance made in connection with the PRC Data Security Law, and we have not received any inquiry, notice, warning, or sanctions in such respect. 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.
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 opinions require the relevant regulators to coordinate and accelerate amendments of legislation on the confidentiality and archive management related to overseas issuance and listing of securities, and to improve the legislation on data security, cross-border data flow and management of confidential information. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As these opinions were recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from the CSRC or any other PRC government authorities. Based on the foregoing and the currently effective PRC laws, we are of the view that, as of the date of this annual report, these opinions do not have a material adverse impact on our business.
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 have come into effect on March 31, 2023. As a supplement to the Overseas Listing Trial Measures, on February 24, 2023, the CSRC, together with other authorities, jointly revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, collectively with the Overseas Listing Trial Measures, the Overseas Listing Regulations, which have come into effect on March 31, 2023. 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. Based on our management’s assessment, we do not believe we will be subject to the filing and reporting requirement under the Overseas Listing Regulations since our business activities and management team do not meet either of the conditions. However, as the Overseas Listing Regulations were recently released and their interpretation and implementation remain uncertain.
As there are still uncertainties regarding these new laws and regulations as well as the amendment, interpretation and implementation of the existing laws and regulations related to cybersecurity and data protection, We cannot assure you that we will be able to comply with these laws and regulations in all respects. The regulatory authorities may deem our activities or services non-compliant and therefore require us to suspend or terminate its business. We may also be subject to fines, legal or administrative sanctions and other adverse consequences, and may not be able to become in compliance with relevant laws and regulations in a timely manner, or at all. These may materially and adversely affect its business, financial condition, results of operations and reputation.
Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign investments and conduct follow-on offerings, and listing or continuing listing on a U.S. or other foreign exchanges. In addition, 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 any other industry including the industry in which we operate, which could adversely affect our business, financial condition and results of operations. See “Item 3. Key Information—D. Risk Factors—Risk Factors—Risks Related to Doing Business in Jurisdictions We Operate” for more details.
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We may be liable for improper collection, use or appropriation of personal information provided by our customers.
We collect certain personal data from our customers in connection with our business and operations and we are subject to various regulatory requirements relating to the security and privacy of data in various jurisdictions. Regulatory requirements regarding the protection of data are constantly evolving and can be subject to different interpretations or significant change, making the extent of our responsibilities in that regard uncertain.
PRC regulators, including the Standing Committee of the PRC National People’s Congress (SCNPC) the Central Cyberspace Affairs Commission (CAC), the Ministry of Industry and Information Technology (MIIT), and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection and have enforced laws and regulations with varying and evolving standards and interpretations. For instance, the Civil Code of the PRC provides main legal basis for privacy and personal information infringement claims under the Chinese civil laws. On November 7, 2016, the SCNPC issued the PRC Cybersecurity Law, pursuant to which, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which became effective on September 1, 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities and it specifies that data activities carried out outside China shall also be liable if it involves and damages the interests of PRC citizens. In order to implement the PRC National Security Law, the PRC Cybersecurity Law and the PRC Data Security Law, the CAC, and related authorities promulgated the Cybersecurity Review Measures in December 2021, which took effect in February, 2022, which requires, among others that critical information infrastructure operators that procure internet products and services and network platform operators that carry out data processing activities that affect or may affect national security should be subject to the cybersecurity review, and that network platform operators that possess personal information of more than one million users shall apply for cybersecurity review before seeking to list in a foreign stock exchange. On August 20, 2021, the SCNPC promulgated the PRC Personal Information Protection Law, or the PIPL, which took effect in November 2021. The PIPL imposes specific rules for processing personal information and it also specifies that the law shall also apply to personal information activities carried out outside China but for purpose of providing products or services to PRC citizens. On November 14, 2021, the CAC released the Administration Regulations on the Cyber Data Security (Draft for Comments), or the Draft Cyber Data Regulations. 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. However, there have been no clarifications from the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition, the Draft Cyber Data Regulations requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. In addition, the Administrative Provisions on Internet Information Service Algorithm Recommendation, or Algorithm Recommendation Provisions, that took effect on March 1, 2022 implements classification and hierarchical management for algorithm recommendation service providers based on various criteria, and stipulates that algorithm recommendation service providers with public opinion attributes or social mobilization capabilities shall submit the relevant information within ten business days from the date of providing such services and go through the record-filing formalities. The CAC issued the Measures for the Security Assessment of Data Cross-border Transfer, or the Security Assessment of Data Transfer, on July 7, 2022, which requires that any data processor who provides important data collected and generated during operations within the territory of the PRC or personal information that should be subject to security assessment to a recipient outside of the territory of the PRC shall receive an security assessment. As these opinions and the draft measurers were recently issued, official guidance and interpretation of these two remain unclear in several respects at this time.
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Our substantial operations are carried out in Hong Kong and the Cayman Islands and all of the data and personal information we collected are stored in servers outside mainland China. We do not hold personal information of more than one million users and we believe that we are not subject to PRC cybersecurity review. In addition, as of the date of this annual report, we have not received any notice of and is not currently subject to any proceedings initiated by the CAC or any other PRC regulatory authority. However, since our apps are available to download in the app stores of China and most of our users are PRC citizens, we are subject to and may be ordered to comply with those regulations. In addition, we may be subject to heightened regulatory scrutiny from PRC governmental authorities in the future. As there remains significant uncertainty in the interpretation and enforcement of the laws and regulations in relation to data security and cross-border transfer of personal information, we cannot assure you that we will comply with such regulations in all respects. 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.
We operate in a heavily regulated industry, and are subject to extensive and evolving regulatory requirements in the jurisdictions in which we operate.
We operate in a highly-regulated industry and must comply with the applicable regulatory requirements in the jurisdictions it operates. Our major regulators include Cayman Islands Monetary Authority (CIMA), Securities and Futures Commission of Hong Kong (HKSFC), the Hong Kong Insurance Authority (HKIA), Hong Kong Customs and Excise Department (HKCED), and Monetary Authority of Singapore. These regulators and self-regulatory organizations govern our business operations in a variety of ways and conduct regular examinations of our business to monitor our compliance with applicable regulations. Among other things, we are subject to regulations with regard to (i) our sales practices, including our interaction with and solicitation of clients and our marketing activities; (ii) the custody, control and safeguarding of our clients’ assets; (iii) maintaining specified minimum amounts of capital and limiting withdrawals of funds from our regulated operating subsidiaries; (iv) submitting regular financial and other reports to regulators; (v) licensing for our operating subsidiaries and our employees; and (vi) the conduct of our directors, officers, employees and affiliates. 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.
Compliance with these regulations is complicated, time consuming and expensive. Our ability to comply with all applicable laws and regulations is largely dependent on our internal compliance system, as well as our ability to attract and retain qualified compliance personnel. While we maintain systems and procedures designed to ensure that we comply with applicable laws and regulations, we cannot assure you that we are able to prevent all possible violations. Non-compliance with applicable laws or regulations could result in sanctions being levied against us, including the imposition of fines or penalties, censures, restrictions on certain business activities, suspension or expulsion from a jurisdiction or market or the revocation or limitation of licenses, which could adversely affect our reputation, prospects, revenues and earnings. Furthermore, any future change in the regulatory, legal and industry environment for the futures brokerage services, securities brokerage services, CFD trading services, insurance brokerage services, or asset management services may have a significant impact on our business.
In addition, we are subject to regular investigations, inquiries and inspections from the relevant regulatory bodies. For example, from time to time, our HKSFC-licensed subsidiaries may be subject to or required to assist in inquiries or investigations by regulatory authorities in Hong Kong, principally the HKSFC. The HKSFC conducts on-site reviews and off-site monitoring to ascertain and supervise our business conduct and compliance with relevant regulatory requirements and to assess and monitor, among other things, our financial soundness. Similarly, our Cayman subsidiary may be subject to CIMA’s on-site inspections and inquiries from time to time. If any misconduct is identified as a result of inquiries, reviews, investigation or inspections, the relevant regulatory authorities may take disciplinary actions against us. There also remains a risk that we may not be able to rectify our practices to be in compliance with the relevant rules and regulations following the identification of any such misconduct or material non-compliance, which may result in regulators taking additional actions against it. We were inspected by both the HKSFC and CIMA during 2019, and both regulators identified certain areas in which our operations can improve. We have finished implementing the measures recommended by the HKSFC and received letters from the HKSFC confirming that they had no further comments relating to their inspections of Lion Asset Management Limited on November 21, 2019, and of both Lion International Securities Group Limited and Lion Futures Limited on May 20, 2020. These are the only subsidiaries subject to HKSFC oversight and inspection. We have also finished implementing the measures recommended by CIMA during 2019 and CIMA had no further comments relating to their 2019 inspection. We were inspected by CIMA separately on February 4, 2021 as a regular exercise following which CIMA had identified certain areas in which our operators can improve, with the changes to be made no later than October 4, 2021. Subsequently, CIMA issued a breach notice for failure of enhancing customer due diligence measures. CIMA issued an administrative fine of US$314,000 as penalty and we paid the administrative fine on February 17, 2022. We have implemented the improvements recommended by CIMA. CIMA conducted another on-site inspection of LBL relating to its policies and procedures, corporate governance and internal controls in February 2025, and issued its inspection report in April 2025, in which CIMA identified certain instances to be rectified and requirements to be implemented within the time frame specified. We are currently working on implementing those requirements noted in the report. However, if we are unable to make these changes we may be subject to fines or other disciplinary actions. If any such outcome occurs, there may be a material and adverse effect on our business, results of operations, financial condition and prospects.
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We had incurred net losses in the past, and we may incur losses again in the future.
We had net losses of US$5.8 million, net losses of US$27.6 million and US$5.0 million in 2023, 2024, and 2025 respectively. We cannot assure you that we will be able to generate net income in the future. We anticipate that our operating cost and expenses will increase in the foreseeable future as we continue to grow our business, attract new clients, enhance our risk management capabilities and increase our brand recognition. These efforts may prove more costly than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. There are other external and internal factors that could negatively affect our financial condition. For example, the trading volume achieved on our platform may be lower than expected, which may lead to lower than expected revenues. Furthermore, we may adopt a new share incentive plans in the future, which will result in significant share-based compensation expenses to us. Any material decrease in our commissions would have a substantial impact on our financial conditions. As a result of the foregoing and other factors, we may continue to incur net losses 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.
We operate in a heavily-regulated industry which requires various licenses, permits and approvals in different jurisdictions to conduct our businesses. Our clients include people who live in jurisdictions where we do not have licenses issued by the local regulatory bodies. It is possible that authorities in those jurisdictions may take the position that we are required to obtain licenses or otherwise comply with local laws and regulations in order to conduct our business with residents living in those jurisdictions. In any jurisdictions, if we fail to comply with the regulatory requirements, we may risk being disqualified for our existing businesses or being rejected for renewal of our qualifications and/or licenses upon expiry by the regulatory authorities as well as other penalties, fines or sanctions. In addition, in respect of any new business that we may contemplate, we may not be able to obtain the relevant approvals for developing such new business if we fail to comply with the relevant regulations and regulatory requirements. As a result, we may fail to develop new business as planned, or we may fall behind our competitors in such businesses.
We do not hold any licenses or permits from any PRC regulatory bodies for our securities brokerage business. Currently, a large number of our clients are PRC residents and certain of the executive directors and other independent contractors are providing supporting services remotely from the PRC. There remains uncertainties as to how the current and any future PRC laws and regulations will be interpreted or implemented in the context of operating securities-related business in China and providing cross-border securities-related brokerage services to PRC residents. We cannot assure you that our current operating model will not be deemed as operating securities brokerage business in China or providing cross-border securities-related brokerage services to PRC residents, subjecting us to further inquiries or rectifications. If certain of our activities in China were deemed by PRC regulators to be providing securities brokerage services, investment consulting services or stock options brokerage business in China or to PRC residents, we would be required to obtain the required licenses or permits from the relevant regulatory bodies, including the CSRC. The failure to obtain such licenses or permits may subject us to regulatory actions and penalties, including fines, suspension of parts or all of our operations in the PRC, and temporary suspension or removal of our websites and mobile application in China. In such cases, our business, financial condition, results of operations and prospects may be materially and adversely affected.
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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.
A majority of our clients are PRC residents and are therefore subject to the restrictions under the rules and regulations promulgated by the State Administration of Foreign Exchange (SAFE), regarding the conversion of Renminbi into foreign currencies and the remittance and the use of such funds outside China. Under current PRC foreign exchange regulations, each PRC citizen is permitted to convert up to an aggregate of US$50,000 equivalent Renminbi each year for appropriate personal use. Such appropriate use does not include direct investment into secondary stock markets, futures, insurances, asset management products or other CFD trading. PRC residents who intend to convert U.S. dollars exceeding such quota are required to go through additional application and review procedures with commercial banks designated by the SAFE. In addition, approval from or registration with appropriate government authorities is required when Renminbi is to be converted into foreign currency for the purpose of offshore investment. Although we require our clients to comply with the relevant rules and regulations in the agreements we enter into with them, we cannot assure you that our clients will follow the rules and regulations or the provisions in the agreements at all times. We do not handle the Renminbi cross-border currency conversion for our Chinese clients through any of our accounts or entities, and we do not require our clients to submit evidence of approval or registration with respect to the foreign currency used for offshore investments. We cannot assure you that our current operating model, which includes redirecting our clients to open accounts with third party service provider, will be not deemed as assisting with the currency conversion by SAFE. In such cases, we may face regulatory warnings, correction orders, condemnation and fines, and may not be able to conduct our current business in the future. In addition, any misbehavior or violation by our clients of applicable laws and regulations could lead to regulatory inquiries, investigations or penalties that involve us.
Since the PRC authorities and the commercial banks designated by the SAFE to conduct foreign exchange services have significant discretion in interpreting, implementing and enforcing the foreign exchange rules and regulations, and due to many other factors that are beyond our control and ability to anticipate, we may face more severe consequences, including being asked to take additional and burdensome measures to monitor the source and use of the foreign currency funds in the accounts of our clients, remove our account opening functions, or suspend our operations pending an investigation or indefinitely. In such cases, we may face regulatory warnings, correction orders, condemnation, fines and confiscation of income, and may not be able to conduct our current business in the future. We may also be subject to regular inspections from relevant authorities from time to time. If such situations occur, our business, financial condition, results of operations and prospects would be materially and adversely affected.
In addition, if the PRC government further tightens the amount of currency exchange allowed for PRC residents, increases control over the remittance of currency out of the PRC, restricts the assistance or participation of any non-resident entities in the currency conversion, or specifically prohibits any exchanges for securities-related investment purposes, the trading activities of Chinese residents on our platform could be restricted, which would significantly reduce the trading volume on our platform. As our revenues from brokerage commission and market making income depends heavily on the total trading volume facilitated on our platform, the occurrence of any of the above regulatory changes would have a material and adverse impact on our business, operating and financial results.
We established Lion Group (Hangzhou) Investment Limited, our PRC subsidiary, holding through Lion Wealth Limited in May 2021. Our PRC subsidiary was established solely for purpose of passive equity investment in China with no substantial business activities and our PRC subsidiary has not made any dividends or other distributions since its incorporation. We disposed of Lion Group (Hangzhou) Investment Limited to a third party in September 2023. As of December 31, 2025, we do not have any operating subsidiaries in the PRC.
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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.
We derive a significant portion of our revenues from our commissions based upon the trading volume or the number of relevant transaction contracts executed by our clients. The rapidly growing trading volume on our platform is primarily driven by the increasing number of our active clients. Our total revenue-generating clients grew from 1,722 as of December 31, 2017 to 2,172 as of December 31, 2025. 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 clients may not continue to place trading orders or increase the level of their trading activities on our platform if we cannot match the prices offered by other market players or if we fail to deliver satisfactory services. Failure to deliver services in a timely manner at competitive prices and provide a satisfactory experience will cause our clients to lose confidence in us and use our platform less frequently or even stop using our platform altogether. Even if we are able to provide high-quality and satisfactory services on our platform in a timely manner and at favorable pricing terms, we cannot assure you that we will be able to retain existing clients, encourage repeat and increase trading transactions, in part due to reasons beyond our control, such as the personal financial situation of our clients or the deterioration of capital markets generally. We have taken efforts in attracting new clients and expanding our brand influence, and we plan to continue doing so. However, these efforts may not be cost-effective and we cannot assure you that we will be able to grow our client base as we expect, which may in turn materially and adversely affect our business operations and prospects.
Our level of commission and fee rates may decline in the future. Any material reduction in our commission or fee rates could reduce our profitability.
We derived a significant portion of our revenues from commissions. We charge our clients commission for our insurance brokerage services, securities and future brokerage services and CFD and TRS trading services. In 2025, we exited from futures and securities brokerage services in Hong Kong markets. Revenues generated from commission amounted to US$7.0 million, US$1.2 million, and US$ 2,583 in 2023, 2024, and 2025 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. Some of our competitors offer a broader range of services to a larger client base and enjoy higher trading volumes than we do. Consequently, our competitors may be able to offer trading services at lower commissions or fee rates than we currently offer or may be able to offer. For example, some banks in Hong Kong and the United States have started offering zero commission fees or similar promotions to attract clients. As a result of this pricing competition, we could lose both market share and revenues. We believe that any downward pressure on commission or fee rates would likely continue and intensify as we continue to develop our business and gain recognition in our markets. A decline in our commission or fee rates could lower our revenues, which would adversely affect our profitability. In addition, our competitors may offer other financial incentives we may not be able to offer, such as rebates or discounts in order to induce trading in their systems, which may in turn materially and adversely affect our operating and financial results.
We cannot guarantee the profitability of our clients’ investments or ensure that our clients will make rational investment judgements.
We cannot guarantee the profitability of the investment made by clients on our trading platform. The profitability of our clients’ investments is directly affected by elements beyond our control, such as economic and political conditions, broad trends in business and finance, changes in volume of securities and futures transactions, changes in the markets in which such transactions occur and changes in how such transactions are processed.
Moreover, many of our clients are retail investors, who are less sophisticated compared with institutional investors. In addition, CFD products and futures are complex investment products that require a higher level of knowledge and experience that some retail investors may not have. 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.
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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. Some clients who have suffered substantial losses on our platform may seek to recover their damages from us or bring lawsuits against us. These allegations against us, regardless of their veracity, may negatively affect our reputation and clients’ confidence with us. If we were to become the subject of any unfavorable allegations or lawsuits, whether such allegations are proven to be true or untrue and regardless of the outcome of the lawsuits, we may have to expend a significant amount of resources to investigate and/or defend itself, which could divert our management’s attention from the day-to-day operations. In addition, if any litigation or other legal proceeding to which we are a party is resolved adversely, we may be ordered to pay substantial amount of damages or compensation to the other party, which could adversely affect our business, financial condition and results of operations.
We may incur material trading losses from our market making activities.
A portion of our revenue is derived from our market making activities. When an offsetting transaction of CFD trading from another client is not available, we may choose to act as a principal (i.e. market maker) to trade with the client. As a market maker, we attempt to derive a profit from the difference between the prices at which we buy and sell CFD products. Since these activities involve the purchase or sale of CFD products for our own account, we may incur trading losses for a variety of reasons, including price changes in CFD products and lack of liquidity in CFD products in which we have positions. As we offer leveraged trading of up to 100:1 to certain of our forex trading clients, our risk exposure is greatly amplified. If our risk management system fails to identify or prevent high risk trades and the market develops in a way adverse to our position, we may incur significant losses in these trades. We may also incur losses due to inaccuracies in our proprietary pricing mechanism, or rate engine, which evaluates, monitors and assimilates market data and reevaluates our outstanding CFD product quotes, and is designed to publish prices reflective of prevailing market conditions throughout the trading days. Risks of incurring trading losses may affect the prices at which we are able to sell or buy CFD products, or may limit or restrict our ability to either resell CFD products that we have purchased or repurchase CFD products that we have sold.
We may incur material trading losses from our over-the-counter stock options trading business.
A portion of our revenue is derived from our over-the-counter stock options trading business. It involves complex financial instruments and strategies that are inherently risky. These activities expose us to significant market, counterparty, and operational risks, which could result in material trading losses. Key risks may include the followings:
| ● | Market Volatility: The value of OTC stock options can be highly sensitive to fluctuations in market conditions, including changes in stock prices, interest rates, and implied volatility. Sudden or severe market movements could adversely impact our trading positions and result in significant losses. |
| ● | Counterparty Risk: OTC transactions are typically conducted directly with counterparties rather than through an exchange. If a counterparty fails to meet its obligations due to financial distress, insolvency, or other reasons, we may experience trading losses and difficulty recovering funds. |
| ● | Liquidity Risk: The OTC stock options market may have lower liquidity compared to exchange-traded options. Limited liquidity could hinder our ability to close or hedge positions at favorable prices, exacerbating losses during periods of market stress. |
| ● | Operational and Pricing Risks: The valuation and execution of OTC stock options can be complex, relying on sophisticated models and assumptions. Errors in pricing, modeling, or operational execution could lead to unexpected losses. |
| ● | Regulatory and Compliance Risks: Changes in laws, regulations, or enforcement practices related to OTC derivatives could impact our ability to conduct this business effectively or increase our costs and compliance burdens. |
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Based on the above factors, our OTC stock options trading business could result in material losses that adversely affect our financial condition and results of operations. While we have implemented risk management policies and procedures to mitigate trading risks, these measures may not be fully effective in preventing losses.
We are dependent on wholesale forex trading partners to continually provide us with forex market liquidity. If we lost access to the prices and levels of liquidity that we currently have, we may be unable to provide competitive forex trading services, which would materially adversely affect our CFD trading business, financial conditions and results of operations.
Clients frequently trade currency pairs on our platform. In order to continually provide our market making services and to limit our own capital exposure, we maintain cooperative relationships with established market makers and leading international wholesale forex trading partners, which gives us access to a pool of potential liquidity. Through these relationships, we are able to execute our clients’ desired trades at competitive rates while hedging our net positions and limiting our exposure. The trading partners, although under contract with us, have no obligation to provide us with liquidity and may terminate our arrangements at any time. In the event that we no longer have access to the competitive wholesale forex pricing spreads and/or levels of liquidity that we currently have, we may be unable to provide competitive forex trading services, which will materially affect our business, financial conditions and results of operations.
Failure to comply with regulatory capital requirements set by local regulatory authorities could materially and negatively affect our business operation and overall performance.
Our regulated operating subsidiaries are subject to various regulatory capital requirements, including minimum capital requirements, capital ratios and buffers established by competent authorities in their respective jurisdiction. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our business and financial position. For example, our Cayman Islands’ operating subsidiary, Lion Brokers Limited, licensed under the Securities Investment Business Act of the Cayman Islands (2020 Revision) (as amended, “SIBA”), is subject to the regulation of CIMA to maintain minimum regulatory capital.
As of December 31, 2025, 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. However, if any of our operating subsidiaries fail to remain well-capitalized for regulatory purposes, CIMA may take actions against them and their business operation, and we may face penalties, including limitations and prohibitions on our business activities or suspension or revocation of our licenses and trading rights. 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.
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.
We began offering our TRS trading services in early 2020 and officially launched it in July 2020, which may not develop as expected if clients fail to perform their contractual obligations or the value of collateral held to secure the obligations is inadequate. The total rate of return of a portfolio of the underlying assets on which a swap is based may exhibit substantial volatility and may be positive or negative in any given period. In the event that the total rate of return is negative and we are receiving the total rate of return of that portfolio of underlying assets in our part of a swap agreement, we would be required to make a payment to the counterparty in addition to that required on the other, generally floating rate, part of the swap agreement. Also, unusual market conditions affecting the portfolio on which the swap is based may prevent the total rate of return from being calculated, in which case other provisions in the swap agreement may be invoked which could cause us to lose some of the anticipated benefit from the swap or otherwise reduce our return.
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Moreover, the growth and success of our TRS trading business depends on the availability of adequate funding to meet clients’ demand for loans on our platform. We derive the funding for our TRS trading business from a variety of sources, including commercial banks, other licensed financial institutions and other parties as well as financing generated from our business operations. To the extent there is insufficient funding from institutional funding partners who are willing to accept the credit risk related to the collateral from our clients, the funds available might be limited and our ability to provide TRS trading services to our clients to address their demand would be adversely impacted. In addition, as we strive to offer our clients services with competitive prices, we may attempt to further reduce our interest expenses from our funding partners. If we cannot continue to maintain our relationship with these funding partners and obtain adequate funding at reasonable costs, we may not be able to continue to offer or grow our TRS trading business.
Our risk management policies and procedures may not be adequate and effective, which may expose us to unidentified or unexpected risks.
Our business activities expose us to various risks, including regulatory environment risk, market condition risk, credit risk, liquidity risk, capital adequacy risk and operational risk. We have put in place procedures and controls to identify, measure and manage each of these risks. See “Business Overview — Risk Management.” We are dependent on our risk management policies and procedures and adherence to such policies and procedures by our staff to manage the risks inherent in our business. Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market environments or against all types of risks. Some of our methods for managing risks are discretionary by nature and are based on internally developed controls and observed historical market behavior, and also involve reliance on standard industry practices. Many of our risk management policies are based upon observed historical market behavior or statistics based on historical models. During periods of market volatility or due to unforeseen events, the historically derived correlations upon which these methods are based may not be valid. As a result, these methods may not predict future exposures accurately, which could be significantly greater than what our models indicate. This could cause us to incur losses or cause our risk management strategies to be ineffective.
In addition, we may fail to update our risk management system as needed or as fast as the industry evolves, which may weaken our ability to identify, monitor and control new risks. Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated. These may adversely affect our results of operations and financial conditions.
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. However, the financial statements we provided to you and filed with the SEC are presented in U.S. dollars. Our assets and liabilities denominated in foreign currencies are translated at year-end rates of exchange, whereas the income statement accounts are translated at average rates of exchange for the year. Any such translation may result in gains or losses, which are recorded under other comprehensive income (loss) in the financial statements. Changes in the exchange rates between the Hong Kong dollars or other currencies to the U.S. dollars could have a material effect on our results of operations. The value of Hong Kong dollars against U.S. dollars and other currencies is affected by a variety of factors which are beyond our control, including, among other things, changes in Hong Kong’s or China’s political and economic conditions.
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Our reputation, or the reputation of our industry as a whole, may be harmed.
The reputation of our brand is critical to our business and competitiveness. If we fail, or are perceived to have failed, to deal with issues that may give rise to reputational risk, our business and prospects may be harmed. Such issues may include mishandling client complaints, potential conflicts of interest, privacy breaches, client data leak, improper sales practices, as well as failures to identify legal, credit, liquidity, and market risks inherent in our business. Failure to appropriately address these issues could reduce clients’ confidence in us or increase client attrition rate, which may adversely affect our reputation and business. In addition, any malicious or negative allegation made by the media or other parties about the foregoing or other aspects of us, including our management, business, compliance with law, financial condition or prospects, whether with merit or not, could severely compromise our reputation and harm our business and operating results.
Negative publicity about the CFD trading industry, the online brokerage industry, the insurance brokerage industry or asset management in general may also have a negative impact on our reputation, regardless of whether we have engaged in any inappropriate activities. Moreover, negative publicity about our partners, service providers or other counterparties, such as negative publicity about their client complaints and any failure by them to adequately protect the information of our investors and borrowers, to comply with applicable laws and regulations or to otherwise meet required quality and service standards could harm our reputation. If any of the foregoing takes place, our business and results of operations could be materially and adversely affected.
We depend on the services of prime brokers and clearing agents to assist in providing us with access to liquidity in CFD trading. 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 depend on the services of prime brokers to assist in providing us with access to liquidity through our CFD trading partners. We currently have established two prime brokerage relationships with major financial institutions, which act as central hubs through which we are able to deal with our existing CFD trading partners. In return for paying a transaction-based prime brokerage fee, we are able to aggregate our clients and our trading positions, thereby reducing our transaction costs and increasing the efficiency of the capital we are required to post as collateral in order to conduct our market making trading activities. Since we trade with our CFD trading partners through our prime brokers, they also serve as a third party check on our open positions, collateral balances and trade confirmations. If we were to lose one or more of our prime brokerage relationships, we could lose this source of third party verification of our trading activity, which could lead to an increased number of documentation errors. Although we have relationships with CFD trading partners who could provide clearing services as a back-up for our prime brokerage services, if we were to experience a disruption in prime brokerage services due to a financial, technical or other development adversely affecting any of our current prime brokers, our business could be materially adversely affected to the extent that we are unable to transfer positions and margin balances to another financial institution in a timely fashion. 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.
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 collaborate with a number of external service providers in providing services to our clients for technology, processing and supporting functions, including, other market makers to which we pass on certain orders, referring brokers we collaborate with for client acquisition, custody banks, securities exchanges, clearing agents and online payment service providers. Furthermore, external content providers provide us with financial information, market news, charts, option and stock quotes and other fundamental data that we offer to our clients.
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These service providers face technical, operational and security risks of their own. Any significant failures by them, including improper use or disclosure of their confidential client, employee or company information, deterioration in their performance, interruption in these third party services or software, or other improper operation could interfere with our trading activities, cause losses due to erroneous or delayed responses, harm our reputation or otherwise be disruptive to our business. For instance, when there is a sudden surge in trading volume caused by a large amount of concurrent orders, usually subsequent to a major social event, we may not be able to retrieve the real-time quote due to delays or interruptions of third party systems, which may cause a delay in the exercise of automatic settlements initiated by our risk management system. Such delays may result in negative balance in our clients’ account and a potential loss to it. Also, we have contracted with external payment service providers to facilitate our clients’ payment procedures for trading and transactions through our platform. Any failure by these service providers to continue with good business operations, comply with applicable laws and regulations or any negative publicity on these parties could damage our reputation, expose us to significant penalties and decrease our total revenues and profitability.
Furthermore, if our arrangements with any of these external service providers are terminated, we may not be able to find an alternative source to support us on a timely basis or on commercially reasonable terms. This could also have a material adverse effect on our business, financial condition and results of operations.
A failure in our information technology, or IT, systems could cause interruptions in our services, undermine the responsiveness of our services, disrupt our business, damage our reputation and cause losses.
Our IT systems support all phases of our operations. If our systems fail to perform, we could experience disruptions in operations, slower response time or decreased client satisfaction. We must process, record and monitor a large number of transactions and our operations are highly dependent on the integrity of our technology systems and our ability to make timely enhancements and additions to our systems. System interruptions, errors or downtime can result from a variety of causes, including unexpected interruptions to the internet infrastructure, technological failures, changes to our systems, changes in client usage patterns, linkages with third-party systems and power failures. Our systems are also vulnerable to disruptions from human error, execution errors, errors in models such as those used for risk management and compliance, employee misconduct, unauthorized trading, external fraud, computer viruses, distributed denial of service attacks, computer viruses or cyber-attacks, terrorist attacks, natural disaster, power outage, capacity constraints, software flaws, events impacting our key business partners and vendors, and other similar events.
It could take an extended period of time to restore full functionality to our IT systems or other operating systems in the event of an unforeseen occurrence, which could affect our ability to process and settle client transactions. Moreover, instances of fraud or other misconduct might also negatively impact our reputation and client confidence in us, in addition to any direct losses that might result from such instances. Despite our efforts to identify areas of risk, oversee operational areas involving risks, and implement policies and procedures designed to manage these risks, there can be no assurance that we will not suffer unexpected losses, reputational damage or regulatory actions due to technology or other operational failures or errors, including those of our vendors or other third parties.
While we devote substantial attention and resources to the reliability, capacity and scalability of our systems, extraordinary trading volume could cause our computer systems to operate at unacceptably slow speeds or even fail, affecting our ability to process client transactions and potentially resulting in some clients’ orders being executed at prices they did not anticipate. Disruptions in service and slower system response time could result in substantial losses and decreased client satisfaction. We are also dependent on the integrity and performance of securities exchanges, clearinghouses and other intermediaries to which client orders are routed for execution and clearing. System failures and constraints and transaction errors at such intermediaries could result in delays and erroneous or unanticipated execution prices, cause substantial losses for our clients and for ourselves, and subject us to claims from our clients for damages.
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We currently maintain a disaster recovery and business continuity plan, which is intended to minimize service interruptions and secure data integrity, however, our plan may not work effectively during an emergency. IT system failures may lead to interruption of our operations, which in turn will prevent our clients from trading and hence significantly reduce client satisfaction and confidence in us, cause loss or reduce potential gain for our clients, or cause regulatory authorities’ investigation and penalization. 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.
Failure of third-party systems upon which we rely could adversely affect our business operation.
Due to the rapid pace of technological changes in online brokerage and CFD trading industry, parts of our business rely on technologies developed or licensed by third parties, for example, we conduct our CFD trading business through a trading platform licensed from third parties. Any interruption in the third parties’ services, or deterioration in the third parties’ performance or quality could adversely affect our business operation. Moreover, we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all, which could materially impact our business and results of operations.
We may be subject to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions on us our external service providers.
Our platform collects, stores and processes certain personal and other sensitive data from our users. The massive data that we have processed and stored makes us or external service providers who host our servers a target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect the confidential information that we have access to, our security measures could be breached. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our platform could cause confidential information to be stolen and used for criminal purposes. As personally identifiable and other confidential information is increasingly subject to legislation and regulation in numerous jurisdictions, any inability to protect confidential information of our clients could result in additional cost and liability for us, damage our reputation, inhibit the use of our platform and harm our business.
We also face indirect technology, cybersecurity and operational risks relating to the third parties whom we work with to facilitate or enable our business activities. As a result of increasing consolidation and interdependence of technology systems, a technology failure, cyber-attack or other information or security breach that significantly compromises the systems of one entity could have a material impact on our counterparties. Any cyber-attack, computer virus, physical or electronic break-ins or similar disruptions of such third-party service providers could, among other things, adversely affect our ability to serve our users, and could even result in the misappropriation of funds of our investors and borrowers. If that were to occur, both we and third-party service providers could be held liable to clients who suffer losses from the misappropriation.
Security breaches or unauthorized access to confidential information could also expose us to risk relating to misappropriation of funds of our clients, which may subject us to liabilities, reduce the attractiveness of our marketplace and cause reputational harm and adversely impact our results of operations and financial condition.
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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 the possibility of actual, potential, or perceived conflicts of interest in the ordinary course of our business operations. Conflicts of interest may exist between (i) our different businesses; (ii) us and our clients; (iii) our clients; (iv) us and our employees; and (v) our clients and our employees. As we expand the scope of our business and client base, it is critical for us to be able to timely address potential conflicts of interest, including situations where two or more interests within our businesses naturally exist but are in competition or conflict. We have put in place internal control and risk management procedures that are designed to identify and address conflicts of interest. However, appropriately identifying and managing actual, potential, or perceived conflicts of interest is complex and difficult, and our reputation and our clients’ confidence in us could be damaged if we fail, or appears to fail, to deals appropriately with one or more actual, potential, or perceived conflicts of interest. It is possible that actual, potential, or perceived conflicts of interest could also give rise to client dissatisfaction, litigation, or regulatory enforcement actions. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation, which could materially and adversely affect our business in a number of ways, including a reluctance of some potential clients and counterparties to do business with us. Any of the foregoing could materially and adversely affect our reputation, business, financial condition, and results of operations.
We derived a substantial portion of revenue from a small number of key clients.
In 2023, 2024 and 2025, we derived a substantial portion of our revenue from a small number of key clients. There are inherent risks whenever a large percentage of revenues are concentrated with a limited number of clients. It is not possible for us to predict the future level of demand for our services that will be generated by these key clients. In addition, revenues from our larger clients have historically fluctuated and may continue to fluctuate based on their trading volume. If these key clients trade less frequently on our platform or suspend or terminate their relationship with us, our business and results of operation will be adversely affected. However, as the trading platform expands and following the Business Combination, we anticipate, but without assurance, that this concentration may possibly be decreasing in the future.
We face intense competition, and if we do not compete effectively, our results of operations and business prospects may be adversely affected.
We primarily compete in CFD trading market and online brokerage market, and both are highly competitive. We compete primarily on the basis of our proprietary trading platform, comprehensive client services, full brokerage licenses, innovative products and services, robust infrastructure and advanced technology, as well as brand equity. We face fierce competition from other online brokerage platforms, other investment and trading platforms as well as traditional brokerage and financial institutions. Our competitors may compete with us in a variety of ways, including (i) providing services that are similar to, or more attractive to clients than ours; (ii) providing products and services we do not offer; (iii) offering more aggressive rebates to gain market share and to promote other businesses; (iv) adapting at a faster rate to market conditions, new technologies and clients’ demands; (v) offering better, faster and more reliable technology; (vi) broadening their client base more cost effectively or faster and (vii) marketing, promoting and providing their services more effectively. Additionally, a current or potential competitor may acquire one or more of our existing competitors or form a strategic alliance with one or more of our competitors. When new competitors seek to enter our target market, or when existing market participants seek to increase their market share, they sometimes undercut the pricing or other terms prevalent in that market, which could adversely affect our market share or our ability to exploit new market opportunities.
Furthermore, since the CFD trading services are relatively new and evolving for PRC residents, our potential clients may not fully understand how our platform works and may not be able to fully appreciate the additional client protections and features that we have invested in and adopted on our platform as compared to others. Our pricing and terms could deteriorate if we fail to act to meet these competitive challenges. Furthermore, to the extent that our competitors are able to offer more attractive terms to our business partners, such business partners may choose to terminate their relationships with us. If we are unable to compete with such companies and meet the need for innovation in our industry, the demand for our marketplace could stagnate or substantially decline, we could experience reduced revenues and our marketplace could fail to achieve or maintain more widespread market acceptance, any of which could harm our business and results of operations.
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We may fail to implement new business lines, or introduce new products and services to our clients, or we may fail to successfully expand our business.
Our future success is dependent upon on our ability to implement new business lines and offer new products and services, to better respond to market changes and clients’ evolving needs. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. We may invest significant time and resources in developing and marketing new lines of business and/or new products and services. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. In addition, new service offerings may not be accepted by the market or be as profitable as we expect. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition.
In addition, our strategy to expand business operation and enter into new markets may subject us to additional risks. As we enter into markets that are new to us, we must tailor our services and business model to the unique circumstances of such countries and markets, which can be complex, difficult, costly and divert management and personnel resources. In addition, we may face competition in other countries from companies that may have more experience with operations in such countries or with global operations in general. To continue to expand our services internationally, we may have to comply with the regulatory controls of each country in which we conduct or intend to conduct business, the requirements of which may not be clearly defined. Even if we expand our businesses into new jurisdictions or areas, the expansion may not yield intended profitable results.
Fraud, misconduct or errors by our directors, officers, employees, agents and other third-party service providers could harm our business and reputation.
It is not always possible to identify and deter fraud, misconduct or errors by directors, employees, agents or external service providers, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses. Fraud or misconduct by any of these persons or entities may cause us to suffer significant reputational harm and financial loss or result in regulatory disciplinary actions. The potential harm to our reputation and to our business caused by such fraud or misconduct is impossible to quantify.
We are subject to a number of obligations and standards arising from our business. The violation of these obligations and standards by any of our directors, officers, employees, agents, clients, or other third parties could materially and adversely affect us and our investors. For example, we are required to properly handle confidential information. If our directors, officers, employees, agents, clients, or other third parties were to improperly use or disclose confidential information, we could suffer serious harm to our reputation, financial position, and existing and future business relationships. Although we have not identified any material fraud or misconduct by our directors, officers, employees, agents, clients, or other third parties since we commenced our current businesses in 2016, if any of these persons or entities were to engage in fraud or misconduct or were to be accused of such fraud or misconduct, our business and reputation could be materially and adversely affected.
A significant decrease in our liquidity could negatively affect our business and financial management as well as reduce client confidence in us.
Maintaining adequate liquidity is crucial to our business operations. We are subject to liquidity and capital adequacy requirements in Hong Kong, Cayman Islands, and Singapore. We meet our liquidity needs primarily through cash generated by operating activities and capital contribution, as well as cash provided by external financing. Fluctuations in client cash or deposit balances, as well as changes in regulatory treatment of client deposits or market conditions, may affect our ability to meet our liquidity needs. A reduction in our liquidity position could reduce our clients’ confidence, which could result in the loss of client trading accounts, or could cause us to fail to satisfy liquidity requirements of regulatory authorities. In addition, failure to meet regulatory capital guidelines can result in investigations and regulatory actions, which may lead to penalties, including reprimands, fines, limitations or prohibitions on our future business activities or suspension or revocation of our licenses or trading rights.
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In addition, our ability to satisfy our liquidity and capital needs may be affected by a variety of factors, some of which are beyond our control, including, macroeconomic and socio-political conditions, fluctuations in cash or deposit balances, increased capital requirements, changes in regulatory guidance or interpretations, or other regulatory changes. If cash generated by client trading activities and operating earnings is not sufficient for our liquidity needs, we may be forced to seek external financing. During periods of disruptions in the credit and capital markets, potential sources of external financing could be reduced, and borrowing costs could increase. Financing may not be available on acceptable terms, or at all, due to market conditions or disruptions in the credit markets. If we experience any significant decrease in our liquidity, our business, financial condition and results of operations could be adversely impacted.
We may not succeed in promoting and sustaining our brand.
We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing clients to our platform. This depends largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our marketplace. If any of our current marketing channels become less effective, if we are unable to continue to use any of these channels, if the cost of using these channels were to significantly increase or if we are not successful in generating new channels, we may not be able to attract new investors and borrowers in a cost-effective manner or convert potential investors and borrowers into active investors and borrowers on our marketplace.
Our efforts to build our brand may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. 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.
We face risks related to our know-your-customer, or KYC procedures when our clients provide outdated, inaccurate, false or misleading information.
Although we conduct KYC procedure before we approve our client’s account open request, our KYC procedure has some inherent limitations and we may not be able to spot our clients’ outdated, inaccurate, false or misleading information. Our KYC procedures include but not limited to (i) collecting the identification information of our client such as name, gender, email, nationality, date of birth, type of identity document, identity document number, tax identification number and wallet address; (ii) background check on whether the clients’ nationality fall within the scope of US sanction countries; (iii) monitoring our clients’ IP addresses, and etc. Our KYC procedures may not be effective if (i) we fail to identify any fake documents supplied by our clients; or (ii) our clients use a VPN router to circumvent our IP blacklist. We collect client information during the account opening and registration process and screens accounts against public databases or collaborates with external service providers to verify client identity and detecting risks. Although we require our clients to submit documents for proof of their identity and address for completing the account registration and to update such information from time to time, we face risks as the information provided by our clients may be outdated, inaccurate, false or misleading. We cannot fully confirm the accuracy, currency and completeness of such information beyond reasonable effort. For example, to reduce the risk of being subject to complex U.S. laws and regulations, we do not allow U.S. citizens or residents to open an account with us and we require our potential clients to provide their passports or identity cards before account opening. However, if a potential client only provides his PRC identity card, which is usually valid for 10 years or more, and misinforms us that he does not also possess a U.S. passport or permanent resident card, we might not be able to detect such misinformation. 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.
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We have established an IP blacklist to block the users from U.S. sanctioned countries and the U.S. We also collect client information during the account opening and registration process and screen accounts against public databases and collaborates with external service providers to verify client identity and detecting risks. We have two separate teams conduct our KYC procedure on new clients’ backgrounds and identify manually. We will reject all account applications if there is any U.S. exposure. For example, we will not allow U.S. citizens or residents to open an account with us and we will require our potential clients to provide copies of their passports or identity cards in connection with their account applications. Although we will require our clients to submit documents for proof of their identity for completing the account registration and to update such information from time to time, we face risks as the information provided by our clients may be outdated, inaccurate, false or misleading. We cannot fully confirm the accuracy, currency and completeness of such information beyond reasonable effort. As stated above, if a potential client only provides his or her PRC identity card, which is usually valid for 10 years or more, and misinforms us that he or she does not also possess a U.S. passport or permanent resident card, we might not be able to detect such misinformation. 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. Despite our efforts to exclude persons who reside in jurisdictions where we have no license or permit such as the United States, our provision of products and services to such clients could be in violation of the applicable laws and regulations in those jurisdictions, of which we may have no awareness until we are warned by the relevant supervising authorities. In addition, anonymous accounts are generally not allowed to be opened, heightened scrutiny measures are imposed on accounts opened on behalf of third parties and additional verification measures are conducted before we accept third party payments against the accounts of our clients. Furthermore, any security breaches, hacking, or other malicious activities could render the KYC procedures and/or IP blacklist vulnerable to manipulation and changes, thus, rendering them ineffective in achieving their initial objectives. To address the limitations of our KYC procedures and/or IP blacklist, we have implemented self-certification procedures and engage third-party vendors to verify the applications, including name and background checks. Applicants are required to submit copies of their ID or passport as part of our KYC process, which will be verified by the third-party vendors. We will only open an account for applicants whose KYC process have been cleared by our procedures, including those of the third-party vendors. 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.
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. In particular, following the listing on Nasdaq, as we become increasingly renown in the United States and worldwide, there is no assurance that we will be able to successfully identify and exclude all persons who resides in jurisdictions where we have no license or permit to operate, including the United States. If U.S. citizens and residents were to register on and begin using our platform, we may be subject to the scrutiny of U.S. regulatory agencies and required to comply with applicable laws and regulations in the United States, including the requirements to obtain relevant licenses and permits for providing our products to U.S. citizens and residents. We currently do not intend to apply for such licenses and permits in the United States, and if we determine to do so, there is no guarantee that we will successfully obtain such licenses in a timely fashion, or at all. We could be subject 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.
In addition, although we have strict internal policies for continuing KYC procedures after the activation of accounts and for issues such as anti-corruption, economic sanctions, anti-money laundering, export controls and securities fraud, we mainly rely on our continuing KYC procedures to ensure our compliance with relevant laws and regulations related to anti-corruption, economic sanctions, anti-money laundering, export controls and securities fraud. Although we have trainings for our employees in all of our departments, our KYC system and procedures cannot be foolproof. As the KYC system and procedures are conducted manually, they are subject to inherent limitations and errors in oversight, which could cause our compliance and other risk management strategies to be ineffective. Despite our efforts, any potential flaw in our KYC system or any misconduct in the KYC procedures by any of our employees may lead to our failure of compliance with such relevant laws and regulations, which will further subject us to certain legal or regulatory sanctions, fines or penalties, financial loss, or damage to reputation, and we may not be successful in deterring or identifying illegal activity.
Our clients may engage in fraudulent or illegal activities on our platform.
We have implemented stringent internal control policies, insider trading, anti-money laundering and other anti-fraud rules and mechanisms on our platform, for example, we cooperated with third party search system service provider to check if our clients are politically exposed persons or on certain sanction lists (including but not limited to the lists of money laundering, terrorist financing or other crimes). Nevertheless, we remain subject to the risk of fraudulent or illegal activities both on our platform and associated with our clients, funding and other business partners, and third parties handling client information. Our resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent fraudulent or illegal activities.
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Any misbehavior of or violation by our clients of applicable laws and regulations could lead to regulatory inquiries and investigations that involve it, which may affect our business operation and prospects. We might also incur higher costs than expected in order to take additional steps to reduce risks related to fraudulent and illegal activities. High-profile fraudulent or illegal activities, for example, money laundering, insider trading and securities fraud, could also lead to regulatory intervention, and may divert our management’s attention and cause us to incur additional regulatory and litigation expenses and costs. Although our client agreements require clients to acknowledge that they will observe all insider trading, money laundering and securities fraud laws and regulations in applicable jurisdictions and to assume liabilities for all restrictions, penalties and other responsibilities arising from conducts suspected to constitute insider trading, money laundering and/or, securities fraud, we cannot verify whether every transaction conducted by our clients is in compliance with such laws and regulations because our clients may circumvent our due diligence measures to commit insider trading and/or money laundering. Significant increases in fraudulent or illegal activities could negatively impact our brand and reputation, reduce the trading volume on our platform and therefore harm our operating and financial results.
In addition, we could also suffer serious harm to our reputation, financial condition, client relationships and even be subject to regulatory sanctions and significant legal liability, if any of our employees engage in illegal or suspicious activities or other misconduct. See “ Fraud, misconduct or errors by our directors, officers, employees, agents and other third-party service providers could harm our business and reputation.” Although we have not experienced any material business or reputational harm as a result of fraudulent or illegal activities in the past, we cannot rule out the possibility that any of the foregoing may occur, causing harm to our business or reputation in the future. If any of the foregoing were to occur, our results of operations and financial conditions could be materially and adversely affected.
Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.
Our business operations depend on the continued services of our senior management. While we provide a variety of attractive incentives to our management, we cannot assure you that we can continue to retain their services. Although there has been no departures of our senior management members in the past, we cannot assure you that our existing senior management members will not terminate their employment with us in the future. In addition, we do not have any key man insurance for our executive officers or key employees. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, there is no assurance that any member of our management team will not join one of our competitors or form a competing business. If any dispute arises between us and our current or former officers, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.
User growth and activity on mobile devices depend upon effective use of mobile operating system, networks and standards, over which we do not have control.
In April 2020, we launched our developed all-in-one Lion Brokers Pro app. There are substantial uncertainties associated with the app, including compatibility with mobile operating systems, and we cannot assure you we could operate successfully or as we expected. In addition, our future growth and our results of operations could suffer if we experience difficulties in the future in integrating our services into mobile devices or if problems arise with our relationships with providers of mobile operating systems or mobile app stores, or if we face increased costs to distribute or have users utilize our services on mobile devices. We are further dependent on the interoperability of providing our services on popular mobile operating systems that we do not control, such as iOS and Android, and any changes in such systems that degrade the accessibility of our services or give preferential treatment to competing products could adversely affect the usability of our services on mobile devices. In the event that it is more difficult for our users to access and utilize our services on their mobile devices, or if our users choose not to access or utilize our services on their mobile devices or to use mobile operating systems that do not offer access to our services, our user growth could be harmed and our business, financial condition and operating results may be adversely affected.
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We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. “Business — Intellectual Property.” Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages.
It is often difficult to maintain and enforce intellectual property rights. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. 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.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in Hong Kong, PRC, Singapore, Cayman Islands, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected. As the date of this annual report, the application for one of our trademarks is still pending. If we are unable to complete these registrations, we may not be able to prohibit unauthorized use or prevent other infringements of these trademarks.
We and our directors and officers may from time to time be subject to claims, controversies, lawsuits and legal proceedings.
We and our directors and officers may from time to time become subject to or involved in various claims, controversies, lawsuits, and legal proceedings. Claims, lawsuits, and litigations are subject to inherent uncertainties, and we are uncertain whether the foregoing claim would develop into a lawsuit. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources and divert management’s attention from our day-to-day operations, any of which could harm our business. Any settlements or judgments against us could have a material adverse impact on our financial condition, results of operations and cash flows. In addition, negative publicity regarding claims or judgments made against us may damage our reputation and may result in a material adverse impact on us.
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If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations, meet reporting obligations or prevent fraud. As a result, holders of our securities could lose confidence in our financial and other public reporting, which would harm our business and trading price of our securities.
Prior to the Business Combination, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm did not conduct an audit of our internal control over financial reporting.
Upon completion of this Business Combination, we became a public company and we are subject to the Sarbanes-Oxley Act of 2002, and the Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with annual report for the fiscal year ended December 31, 2020. A material weakness is a deficiency, or combination of deficiencies, in internal controls, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Following the issuance of SEC guidance relating to warrant accounting, on June 11, 2021, our management and our audit committee concluded that, it was appropriate to restate certain of our previously issued financial statements for the year ended December 31, 2020. As part of such process, we identified a material weakness in our internal controls over financial reporting, which has been remediated in 2021.
Although we have already implemented remedial measures to address the material weakness, the implementation of these measures may not fully address the deficiencies in our internal control over financial reporting, and we cannot conclude that we have been fully remedied. In the future, we may determine that we have additional control deficiencies, or our independent registered public accounting firm may disagree with our management assessment of the effectiveness of our internal controls. 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.
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. In addition, we have ceased to be an “emerging growth company” as such term is defined in the JOBS Act and do not qualify for the carve-out as defined by SEC’s Accelerated Filer and Large Accelerated Filer Definition, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting our own independent testing, may issue a report that is qualified if we are not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, the reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
Lion may not be able to obtain additional capital on favorable terms or at all.
Lion anticipates that our current cash, cash provided by operating activities and funds available through our current and anticipated bank loans and credit facilities will be sufficient to meet our current and anticipated needs for general corporate purposes. However, Lion needs to make continued investments in our crypto investment strategy, products development, hardware, software, IT systems, business expansion and to retain talents to remain competitive. Lion may need to raise funds through public or private financings, strategic relationships or other arrangements. There can be no assurance that such funding, will be available on terms acceptable to Lion, or at all. Furthermore, any equity financing will be dilutive to existing shareholders, and debt financing, if available, may involve restrictive covenants that may limit our operating flexibility with respect to certain business matters. If adequate capital is not available to Lion as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be significantly limited, which would adversely affect our business, financial condition and results of operations.
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We may be subject to litigation, arbitration or other legal proceeding risk.
We may be subject to arbitration claims and lawsuits in the ordinary course of our business. As of the date of this annual report, we are not a party to, and are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition or operations. Actions brought against us may result in settlements, awards, injunctions, fines, penalties and other results adverse to us. Predicting the outcome of such matters is inherently difficult, particularly where claims are brought on behalf of various classes of claimants or by a large number of claimants, when claimants seek substantial or unspecified damages or when investigations or legal proceedings are at an early stage. A substantial judgment, settlement, fine or penalty could be material to our operating results or cash flows for a particular period, depending on our results for that period, or could cause us significant reputational harm, which could harm our business prospects. In market downturns, the volume of legal claims and amount of damages sought in litigation and regulatory proceedings against securities brokerage companies have historically increased. The amounts involved in the trades we execute, together with rapid price movements in our currency pairs, can result in potentially large damage claims in any litigation resulting from such trades. Dissatisfied clients may make claims against us regarding the quality of trade execution, improperly settled trades, mismanagement or even fraud, and these claims may increase as our business expands.
In addition, even if we prevail in any litigation or enforcement proceedings against us, we could incur significant legal expenses defending against the claims, even those without merit. Moreover, because even claims without merit can damage our reputation or raise concerns among our clients, we may feel compelled to settle claims at significant cost. The initiation of any claim, proceeding or investigation against us, or an adverse resolution of any such matter could have a material adverse effect on our reputation, business, financial condition and results of operations and cash flows.
We may pursue acquisitions or joint ventures that could present unforeseen integration obstacles, incur unpredicted costs or may not enhance our business as we expected.
We may in the future pursue acquisitions and joint ventures as part of our growth strategy. Any future acquisition or joint venture may result in exposure to potential liabilities of the acquired companies, significant transaction costs and present new risks associated with entering additional markets or offering new products and integrating the acquired companies or newly established joint ventures. Potential liabilities may arise from deficiencies in due diligence findings and deficient past track record results.
Moreover, we may not have sufficient management, financial and other resources to integrate companies we acquire or to successfully operate joint ventures and we may be unable to profitably operate our expanded company structure. 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.
We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or Internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services on our marketplace. Moreover, besides COVID-19, our business could also be adversely affected by Ebola virus disease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, SARS or other epidemics.
Our headquarters are located in Singapore, where we leased one principal executive office. We also have offices in Hong Kong and Cayman Islands. In addition, some of our system hardware and back-up systems are hosted in leased facilities located in Hong Kong. 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.
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.
Our revenues depend substantially on our clients’ trading volume, which are influenced by the general trading activities in the market. Trading activities are directly influenced by a variety of factors beyond our control, including economic and political conditions, macro trends in business and finance, investors’ interest level in trading and legislative and regulatory changes in the jurisdictions where we operate. Any of these or other factors may cause trading activity levels in our industry to fluctuate and adversely affect our business and results of operations.
For example, from June 2019 to 2020, there had been large and frequent riots in Hong Kong following the forfeited extradition bill, many of which have been violent. The sustained riot caused a material adverse effect on Hong Kong’s economy and social order, which in turn negatively impacted on our insurance agency business as fewer Chinese clients had come to Hong Kong for insurance purchase. There can be no assurance that situation will not rise again in the future. Any future increase in tension or failure to restore public and social order by the Hong Kong government could adversely impact the security and stability of Hong Kong, in particular, Hong Kong’s financial market.
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Moreover, following the outbreak and spread of COVID-19 as well as the OPEC-Russia oil price war, on March 9, 2020, all three major U.S. trading indexes, Dow Jones Industrial Average, S&P 500 Index and the NASDAQ-100 dropped significantly, leading to a 15-minute circuit breaker that halted the trading. The circuit breaker was triggered several additional times during the days that followed, which led to multiple large declines in the trading indexes. Other stock markets in the rest of the world have also experienced similar falls in stock prices.
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. Russia’s military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the value of the Lion’s investments, even though the Lion does not have any direct exposure to Russia or the adjoining geographic regions. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described in this section.
The escalation of the U.S. and Israel’s military action on Iran in early 2026 have led to, and may lead to, heightened geopolitical tensions, disruptions in global supply chains, increased market volatility, and further economic uncertainty.
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.
The U.S. government has imposed, and has proposed to impose additional, new or higher tariffs on specified products imported from China to penalize China for what it characterizes as unfair trade practices. China has responded by imposing, and proposing to impose additional, new or higher tariffs on specified products imported from the U.S. Certain tariffs have already been adopted by both sides, and the two countries often meet to negotiate arrangements that would include the decreasing or removal of tariffs, but Lion cannot assure you that the negotiations will be successful in reducing tariffs or that other tariffs will not be imposed, even if an agreement will be reached. On February 4, 2025, the new administration in the U.S. government imposed new tariffs on certain imports from China. On March 4, 2025, the U.S. government raised such tariffs from 10% to 20% against China. In retaliation, on March 10, 2025, the Chinese government imposed new tariffs against the U.S. on U.S. farm exports. It is unclear whether any further tariffs will be implemented and how much economic effect the trade war will have on the U.S. and China.
Although we are not subject to any of those tariff measures, the proposed tariffs may adversely affect the economic growth in China, Hong Kong and other markets in which we operate, as well as the financial condition of our clients. With the potential decrease in the spending and investment power of our target clients, we cannot guarantee that there will be no negative impact on our operations. In addition, the current and future actions or escalations by either the U.S. or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our business, financial condition and results of operations, and we cannot provide any assurance as to whether such actions will occur or the form that they may take.
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.
We are a holding company incorporated in the Cayman Islands, and we may rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. 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. Any limitation on the ability of our Hong Kong subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. Shareholders of a Cayman company will not be subject to any income, withholding or capital gains taxes in the Cayman Islands with respect to their shares in the Cayman company and dividends received on those shares, nor will they be subject to any estate or inheritance taxes in the Cayman Islands. There are no exchange controls in the Cayman Islands. Under the Companies Act, a Cayman company may declare and pay a dividend to shareholders from time to time out of the profits or out of the share premium account, provided that the company shall be able to pay its debts as they fall due in the ordinary course of business.
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Risks Related to Doing Business in Jurisdictions We Operate
A downturn in the Hong Kong, China or global economy, and economic and political policies of China could materially and adversely affect our business and financial condition.
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. The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us.
Economic conditions in Hong Kong and China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy may affect potential clients’ confidence in financial market as a whole and have a negative impact on our business, results of operations and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.
The Hong Kong legal system embodies uncertainties which could limit the legal protections available to Lion.
Hong Kong is a Special Administrative Region of the PRC. Following British colonial rule from 1842 to 1997, China assumed sovereignty under the “one country, two systems” principle. The Hong Kong Special Administrative Region’s constitutional document, the Basic Law, ensures that the current political situation will remain in effect for 50 years. Hong Kong has enjoyed the freedom to function in a high degree of autonomy for its affairs, including currencies, immigration and custom, independent judiciary system and parliamentary system. On July 14, 2020, the United States signed an executive order to end the special status enjoyed by Hong Kong post-1997. As the autonomy currently enjoyed were compromised, it could potentially impact Hong Kong’s common law legal system and may in turn bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our business and operation. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our clients.
Hong Kong regulatory requirement of prior approval for transfer of shares in excess of certain threshold may restrict future takeovers and other transactions.
Section 132 of Securities and Futures Ordinance (Cap. 157 of the laws of Hong Kong) (the “SFO”) requires prior approval from the HKSFC for any company or individual to become a substantial shareholder of a HKSFC-licensed company in Hong Kong. Under the SFO, a person will be a “substantial shareholder” of a licensed company if he, either alone or with associates, has an interest in or is entitled to control the exercise of the voting power of more than 10% of the total number of issued shares of the licensed company, or exercises control of 35% or more of the voting power of a company that controls more than 10% of the voting power of the licensed company. Further, all potential parties who will be new substantial shareholder(s) of any HKSFC-licensed subsidiaries are required to seek prior approval from the HKSFC. 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.
Our subsidiaries that were previously HKSFC-licensed subsidiaries, namely Lion International Securities Group Limited, Lion Futures Limited and Lion Asset Management Limited, are no longer part of our corporate group. Lion Asset Management Limited was disposed of to a third party in June 2024, and Lion International Securities Group Limited and Lion Futures Limited were dissolved in December 2025. As of December 31, 2025, we do not have any subsidiaries which require and hold HKSFC licenses.
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Uncertainties with respect to the PRC legal system could adversely affect us.
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. PRC companies and variable interests entities are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited precedential value.
Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.
Changes in the policies, regulations, rules, and the enforcement of laws of the PRC government may be quick with little advance notice and could have a significant impact upon our ability to operate profitably in the PRC.
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. Accordingly, economic, political and legal developments in the PRC will affect our business, financial condition, results of operations and prospects. Policies, regulations, rules, and the enforcement of laws of the PRC government can have significant effects on economic conditions in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the PRC may be adversely affected by changes in policies by the PRC government, including changes in laws, regulations or their interpretation, particularly those dealing with the Internet, including censorship and other restriction on material which can be transmitted over the Internet, security, intellectual property, money laundering, taxation and other laws that affect our ability to operate our business in China.
The Chinese government may exercise significant oversight and discretion over the conduct of business in the PRC and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our securities.
Although our substantial operations are based in Singapore, Hong Kong and the Cayman Islands, we launched our apps in the app stores of China, most of our users are PRC citizens and we recently established a PRC subsidiary in Hangzhou, which may subject us to certain laws and regulations in China. The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to conduct our current business may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. 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.
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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. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over overseas securities offerings and other capital markets activities by, and overseas and/or foreign investment in, companies with operations in mainland China, including enhancing supervision over companies with operations in mainland China that are listed overseas using VIE structure, and that the PRC regulatory authorities could disallow the use of such VIE holding structure. We do not believe that we are directly subject to these regulatory actions or statements, as we do not currently have any VIE or contractual arrangements in mainland China. As of the date of this annual report, our substantial operation is based in Singapore, Hong Kong and the Cayman Islands. Further, we do not have any PRC operations as we disposed Lion Group (Hangzhou) Investment Limited to a third party in September 2023.
While our current corporate structure does not contain any VIEs and our group has no intention establishing any VIEs in the future, if in the future our group’s corporate structure were to contain a VIE, the PRC regulatory authorities could disallow the VIE structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or in extreme cases, become worthless. Moreover, the rules and regulations and the enforcement thereof in China can change quickly. The PRC regulatory authorities could change the rules, regulations and policies regarding foreign ownership in the industry in which we operate, which would likely result in material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of the securities to significantly decline, or become worthless.
As such, we could be subject to regulations by various political and regulatory entities, including various local and municipal agencies and government sub-divisions, and these regulations may be interpreted and applied inconsistently by different agencies or authorities. 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. |
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. Further, the promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably may impact the ability or the way we may conduct our business and could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our products or services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject it to additional liabilities. As such, our operations could be adversely affected, directly or indirectly, by existing or future PRC laws and regulations relating to its business or industry, which could result in a material adverse change in the value of our ADSs, potentially rendering it worthless. As a result, both you and us face uncertainty about future actions by the PRC government that could significantly affect our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless.
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The PRC government may intervene or influence our business operations at any time or may exert more control over offerings conducted overseas and foreign investment in China based issuers, which could result in a material change in our business operations or the value of our securities. 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 regulation also establishes more complex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.
Recent statements by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments in China-based issuers. The PRC has recently issued new rules that would require companies collecting or holding large amounts of data or critical data to undergo a cybersecurity review prior to listing in other nations, a move that would significantly tighten oversight over China based companies. In detail, in December 2021, the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services and network platform operators that carry out data processing activities that affect or may affect national security should be subject to the cybersecurity review. The Cybersecurity Review Measures further stipulates that network platform operators that possess personal information of more than one million users shall apply for cybersecurity review before seeking to list in a foreign stock exchange. Moreover, in November 2021, the CAC released the Administration Regulations on the Cyber Data Security (Draft for Comments), or the Draft Cyber Data Regulations. 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 addition, the Draft Cyber Data Regulations requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. 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.
Although the substantial operation of us is based in 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 such, we collect certain personal data from our customers in connection with our business and operations and we are subject to various regulatory requirements relating to the security and privacy of data in various jurisdictions. Neither the Cybersecurity Review Measures or the Draft Cyber Data Regulations had been issued or effective before our historic listing and the laws and regulations then effective as of our historic listing did not require any issuer to obtain pre-approval from CAC before listing at a foreign stock exchange. As of the date of this annual report, no detailed rules or implementation rules of the Cybersecurity Review Measures have been issued by any authority and both the Cybersecurity Review Measures and the Draft Cyber Data Regulations remain unclear as to whether relevant requirements will be applicable to companies that have already been listed in the United States, such as us, for our future offerings. As of the date of this annual report, we do not hold personal information of more than one million users and our business activities does not involve risk factors regarding national security as stipulated in the Cybersecurity Review Measures. We have not been informed by any government authorities that we are deemed as a critical information infrastructure operator, and we have not received any inquiry or notice of and is not currently subject to any proceedings initiated by the CAC. Based on the foregoing and management’s assessment, we believe that we are not required to apply for pre-approval from CAC before the issuance of the securities and we are not subject to mandatory application requirement for cybersecurity review. However, the exact definition, scope or criteria of “critical information infrastructure operators”, “network platform operators” and “risk factors regarding national security” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. Since our apps are available to download in the app stores of China and most of our users are PRC citizens, we cannot assure you that we would not be deemed by the authority as a critical information infrastructure operator or carrying out data processing activities that affect or may affect national security, which may subject us to order of clearance of cybersecurity review or other specific actions. We face uncertainties as to whether these additional procedures can be completed by us timely, or at all, which may subject us to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from the relevant application stores, and materially and adversely affect our business and results of operations. In addition, we may be subject to heightened regulatory scrutiny from PRC governmental authorities in the future. As there remains significant uncertainty in the interpretation and enforcement of the Data Security Law and the PIPL, we cannot assure you that we will comply with such regulations in all respects. 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.
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On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued the July 6 Opinion, to crack down on illegal activities in the securities market and promote the high-quality development of the capital markets, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. Since this document is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our future offerings.
The M&A Rules adopted by six PRC regulatory agencies requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. 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. 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. 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. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do.
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. As a supplement to the Overseas Listing Trial Measures, on February 24, 2023, the CSRC, together with other authorities, jointly revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, collectively with the Overseas Listing Trial Measures, the Overseas Listing Regulations, which will come into effect on March 31, 2023. 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. Based on our management’s assessment, we do not believe we will be subject to the filing and reporting requirement under the Overseas Listing Regulations since our business activities and management team do not meet either of the conditions. However, as the Overseas Listing Regulations were recently released and their interpretation and implementation remain uncertain.
If it is determined that any CSRC approval, filing, cybersecurity review or other governmental authorization is required for our previous and future offering, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies for failure to do so. These sanctions may include fines and penalties on operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from previous or future offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. Furthermore, the CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt our future offering before the settlement and delivery of the ordinary shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the ordinary shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur. And if our subsidiaries or the holding company were denied permission from PRC authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, which would materially affect the interest of the investors.
As of the date of this annual report, we have not received any inquiry or notice or any objection to any of our previous offerings from the CSRC, the CAC or any other PRC authorities that have jurisdiction over our operations in mainland China and Hong Kong. However, given the current regulatory environment in the PRC, there remain uncertainty regarding the interpretation and enforcement of PRC laws, which can change quickly with little advance notice subject to any future actions of the PRC authorities. Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future. 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.
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Risks Related to our ADSs and our Securities
The price of our ADSs may be volatile.
The price of our ADSs may due to a variety of factors, including but not limited to:
| ● | actual or anticipated fluctuations in our semi-annual and annual results and those of other public companies in the industry; |
| ● | changes in government regulation; |
| ● | mergers and strategic alliances in the financial services industry; |
| ● | market prices and conditions in the financial services market; |
| ● | announcements concerning us or our competitors; and |
| ● | the general state of the securities markets. |
These market and industry factors may materially reduce the market price of our ADSs, regardless of our operating performance. Volatility in the price of our ADSs may increase volatility in the price of our warrants.
We may be immediately delisted from Nasdaq if our share price stays below $1.00 for 30 consecutive trading days within one year of a reverse stock split.
Our Class A Ordinary Shares are listed on the Nasdaq Stock Market and are subject to Nasdaq’s continued listing requirements, including the obligation to maintain a minimum closing bid price of $1.00 per share. Under Nasdaq rules, if the closing bid price of our ordinary shares falls below $1.00 per share for 30 consecutive trading days, Nasdaq may initiate delisting proceedings.
Nasdaq has recently adopted enhanced rules applicable to companies that have effected a reverse stock split. If a company completes a reverse stock split and, at any time during the one-year period following the split, its share price closes below $1.00 per share for 30 consecutive trading days, Nasdaq may immediately determine to delist the securities without granting any compliance or cure period. As a result, we may not be eligible for the standard 180-day (or extended 360-day) compliance period that is otherwise available to companies that have not recently completed a reverse stock split. Although we would have the right to appeal Nasdaq’s delisting determination, there is no automatic stay of trading suspension during the appeal process, and our securities could be relegated to over-the-counter markets, which typically experience lower liquidity and greater price volatility.
On November 26, 2025, we effected a change in the ratio of our ADSs where the ratio, adjusting it to one (1) ADS representing thirty two thousand and five hundred (32,500) Class A Ordinary Shares of the Company. If our Class A Ordinary Shares trade below $1.00 per share for 30 consecutive trading days within one year following a reverse stock split, we may face immediate delisting from Nasdaq. Delisting would likely have a material adverse effect on the liquidity, marketability, and value of our ordinary shares and could significantly impair our ability to raise capital in the future.
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.
It is currently expected that securities research analysts will establish and publish their own periodic projections for our business. These projections may vary widely and may not accurately predict the results we actually achieve. Market price of our ADSs may decline if our actual results do not match the projections of these securities research analysts.
Similarly, if one or more of the analysts who write reports on us downgrades our ADSs or publishes inaccurate or unfavorable research about our business, price of our ADSs could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our ADSs price or trading volume could decline. While it is expected that research analyst coverage, if no analysts commence coverage of us, the trading price and volume for our ADSs could be adversely affected.
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We may issue additional Class A Ordinary Shares or other equity securities, from time to time, without your approval, which would dilute your ownership interests and may depress the market price of our ADSs.
We may issue additional Class A Ordinary Shares or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or our equity incentive plan, without shareholder approval, in a number of circumstances.
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. |
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.
Except as described in this annual report and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the underlying Class A Ordinary Shares evidenced by the ADSs on an individual basis. Under the deposit agreement, holders of ADSs must vote by giving voting instructions to the depositary, including instructions to give a discretionary proxy to a person designated by us. Upon receipt of such holder’s voting instructions, the depositary will vote the underlying Class A Ordinary Shares in accordance with these instructions. ADSs holders will not be able to directly exercise their right to vote with respect to the underlying Class A Ordinary Shares unless they withdraw the underlying Class A Ordinary Shares. Holders of ADSs may not receive voting materials in time to instruct the depositary to vote, and it is possible that holders of ADSs, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity 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.
A holder of our ADSs may only exercise the voting rights with respect to the underlying Class A Ordinary Shares in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions of a holder of ADSs in the manner set forth in the deposit agreement, the depositary will endeavor to vote the underlying Class A Ordinary Shares in accordance with these instructions. When a general meeting is convened, holders of ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to withdraw the Class A Ordinary Shares underlying the ADSs to allow them to cast their votes with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to ADSs holders in a timely manner, but we cannot assure such holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their shares. Furthermore, the depositary will not vote on any matter for which voting is conducted on a show of hands basis in accordance with our Amended and Restated Memorandum and Articles of Association and will not have an obligation to demand voting on a poll basis. The depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast, or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise their right to vote and may lack recourse if their equity shares are not voted as requested.
We and the depository are entitled to amend the deposit agreement and to change the rights of ADS holders under the terms of such agreement, and we may terminate the deposit agreement, without the prior consent of the ADS holders.
We and the depository are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement, without the prior consent of the ADS holders. We and the depositary may agree to amend the deposit agreement in any way we decide is necessary or advantageous to us. Amendments may reflect, among other things, operational changes in the ADS program, legal developments affecting ADSs or changes in the terms of our business relationship with the depositary. In the event that the terms of an amendment are disadvantageous to ADS holders, ADS holders will only receive 30 days’ advance notice of the amendment, and no prior consent of the ADS holders is required under the deposit agreement. Furthermore, we may decide to terminate the ADS facility at any time for any reason. For example, terminations may occur when we decide to list our ordinary shares on a non-U.S. securities exchange and determine not to continue to sponsor an ADS facility or when we become the subject of a takeover or a going-private transaction. If the ADS facility will terminate, ADS holders will receive at least 90 days’ prior notice, but no prior consent is required from them. 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.
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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.
The deposit agreement governing the ADSs representing our Class A Ordinary Shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim that they may have against us or the depositary arising out of or relating to our ordinary shares, our ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.
If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and our ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.
If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or our ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.
Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.
An ADSs holder’s right to participate in any future rights offerings may be limited, which may cause dilution to such holder’s holdings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to ADSs holders in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, the deposit agreement provides that the depositary will not make rights available to ADSs holders unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted 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. Accordingly, ADS holders may be unable to participate in our rights offerings and may experience dilution in their holdings. In addition, if the depositary is unable to sell rights that are not exercised or not distributed, or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case ADSs holders will receive no value for these rights.
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ADSs holders may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems necessary in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. 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.
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.
The depositary of the ADSs has agreed to pay ADSs holders the cash dividends or other distributions it or the custodian for the ADSs receives on our Class A Ordinary Shares or other deposited securities after deducting its fees and expenses in accordance with the deposit agreement. ADSs holders will receive these distributions in proportion to the number of the underlying Class A Ordinary Shares that their ADSs represent. However, the depositary is not responsible if it is unlawful or impracticable to make a distribution available to any ADSs holders. For example, it would be unlawful to make a distribution to a ADSs holder if it consists of securities that require registration under the Securities Act but such securities are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any ADSs holders if any government approval or registration is required for such distribution. We have no obligation to take any other action to permit the distribution of our ADSs, equity shares, rights or anything else to ADSs holders. This means that holders of our ADSs might not receive the distributions that we make on our Class A Ordinary Shares or any value for them at all if it is unlawful or impracticable for us to make them available to ADS holders.
The Warrants are speculative in nature and holders of our Warrants will not have any rights of common shareholders until such Warrants are exercised.
The Warrants do not confer any rights of common share ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire common shares at a fixed price.
Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act of 1933, as amended, or the Securities Act, or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act, or exempt 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. The depositary may, but is not required to, sell such undistributed rights to third parties in this situation. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.
We may or may not pay cash dividends in the foreseeable future.
Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, applicable law, regulations, restrictions, our results of operations, financial condition, cash requirements, contractual restrictions, our future projects and plans and other factors that the board of directors may deem relevant. In addition, our ability to pay dividends depends significantly on the extent to which we receive dividends from Lion and there can be no assurance that Lion will pay dividends. As a result, capital appreciation, if any, of our ADSs will be an investor’s sole source of gain for the foreseeable future.
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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.
Our corporate affairs is governed by our Amended and Restated Memorandum and Articles of Association, the Companies Act, and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by non-controlling shareholders and the fiduciary responsibilities of our directors to us law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. Your rights as a shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws from the United States and may provide significantly less protection to investors.
The courts of the Cayman Islands may not (i) recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any State and (ii) in original actions brought in the Cayman Islands, impose liabilities against us predicated upon the civil liability provisions of the securities laws of the United States or any State, so far as the liabilities imposed by those provisions are penal in nature. Subject to the foregoing, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive, given by a court of competent jurisdiction (The courts of the Cayman Islands will apply the rules of Cayman Islands private international law to determine whether the foreign court is a court of competent jurisdiction), and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and/or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
It may be difficult to enforce U.S. judgments against us.
Currently, one director is based in mainland China, and all or a substantial portion of their respective assets may be located outside the United States. As a result, it may be difficult for U.S. investors to effect service of process within the United States upon these persons. It may also be difficult for U.S. investors to enforce within the United States judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts in China would recognize or enforce judgments of U.S. courts obtained against these directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Therefore, it may be difficult to enforce U.S. judgments against these directors and officers. It is uncertain (i) whether and on what basis a PRC court would enforce judgment rendered by a court in the United States based upon the civil liability provisions of U.S. federal securities laws; and (ii) whether an investor will be able to bring an original action in a PRC court based on U.S. federal securities laws. As such, you may not be able to or may experience difficulties or incur additional costs in order to enforce judgments obtained in U.S. courts based upon the civil liability provisions of U.S. federal securities laws in mainland China or bring original actions in mainland China based on U.S. federal securities laws.
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Currently, three of the directors are based in Hong Kong. A judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court on that judgment for the amount due thereunder, and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment, among other things, is (1) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty) and (2) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained by fraud; (b) the proceedings in which the judgment was obtained were opposed to natural justice; (c) its enforcement or recognition would be contrary to the public policy of Hong Kong; (d) the court of the United States was not jurisdictionally competent; or (e) the judgment was in conflict with a prior Hong Kong judgment.
Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of United States courts of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United States. 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.
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.
Our currently effective Amended and Restated Memorandum and Articles of Association contain provisions that may discourage unsolicited takeover proposals that our shareholders may consider to be in their best interests. Among other provisions, the ability of our board of directors to issue preferred shares with preferences and voting rights determined by the board without shareholder approval may make it more difficult for our shareholders to remove incumbent management and accordingly discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Moreover, our board of directors is divided into two classes, namely Class I and Class II. Class I consist of two directors, and Class II consist of four directors. 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 ten thousand votes per share. Each Class B Ordinary Share is convertible into one Class A Ordinary Share at any time by the holder thereof, while Class A Ordinary Shares are not convertible into Class B Ordinary Shares under any circumstances. Upon any sale of Class B Ordinary Shares by a holder thereof to any person other than an affiliate of such holder, such Class B Ordinary Shares shall be automatically and immediately converted into the same number of Class A Ordinary Shares. Due to the disparate voting powers associated with our dual-class share structure, as of the date of this annual report, the Class B Ordinary Shares constitute 0.44% of our total issued and outstanding share capital, and 97.78% of the aggregate voting power of and total issued and outstanding share capital.
Other anti-takeover provisions in our Amended and Restated Memorandum and Articles of Association include the indemnification of our officers and directors, the requirement that directors may only be removed from our board of directors for cause and the requirement for a special resolution to amend provisions therein that affect shareholder rights. These provisions could also make it difficult for our shareholders to take certain actions and limit the price investors might be willing to pay for our securities.
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As a “foreign private issuer” under the rules and regulations of the SEC, we are permitted to, and will, file less or different information with the SEC than a company incorporated in the United States or otherwise subject to these rules, and will follow certain home-country corporate governance practices in lieu of certain Nasdaq requirements applicable to U.S. issuers.
As a “foreign private issuer” under the Exchange Act, we are exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations for U.S. and other issuers. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or within the same time frames as U.S. companies with securities registered under the Exchange Act. We are not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our securities.
In addition, as a “foreign private issuer”, we are permitted to follow certain home-country corporate governance practices in lieu of certain Nasdaq requirements. A foreign private issuer must disclose in its Annual Reports filed with the SEC each Nasdaq requirement with which it does not comply followed by a description of its applicable home country practice. We currently intend to follow some, but not all of the corporate governance requirements of Nasdaq. With respect to the corporate governance requirements we do follow, we cannot make any assurances that we will continue to follow such corporate governance requirements in the future, and may therefore in the future, rely on available Nasdaq exemptions that would allow us to follow our home country practice. Unlike the requirements of Nasdaq, we are not required to, under the corporate governance practice and requirements in the Cayman Islands, have our board consisting of a majority of independent directors, nor are we required to have a compensation committee or a nomination or corporate governance committee consisting entirely of independent directors, or have regularly executive sessions with only independent directors each year. Such Cayman Islands home country practices may afford less protection to holders of our securities. For additional information regarding the home country practices we follow in lieu of Nasdaq requirements, see “Corporate Governance Practices”.
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. If we lose our status as a foreign private issuer in the future, we will no longer be exempt from the rules described above and, among other things, will be required to file periodic reports and annual and quarterly financial statements as if we were a company incorporated in the United States. If this were to happen, we would likely incur substantial costs in fulfilling these additional regulatory requirements and our management would likely have to divert time and resources from other responsibilities to ensuring these additional regulatory requirements are fulfilled.
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.
As of the date of this annual report, Chunning Wang, our chairman of the board and chief executive officer holds approximately 96% 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. Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and will be permitted to elect to not comply with certain corporate governance requirements, including the requirement that a majority of the board of directors consist of independent directors, the requirement that the nominating and corporate governance committee is composed entirely of independent directors, and the requirement that the compensation committee is composed entirely of independent directors. We currently do not intend to rely on exemptions available to us.
Our controlling shareholders have substantial influence over and our interests may not be aligned with the interests of our other shareholders.
As of December 31, 2025, our chairman of the board and chief executive officer holds a total of 800,044,015 Class B Ordinary Shares, representing approximately 97% of our voting power total issued and outstanding share capital. Chunning Wang has substantial influence over our business, including decisions regarding mergers, consolidations, the sale of all or substantially all of our assets, election of directors, declaration of dividends and other significant corporate actions. As the controlling shareholders, Chunning Wang may take actions that are not in the best interests of our other shareholders. These actions may be taken in many cases even if they are opposed by our other shareholders. In addition, this concentration of ownership may discourage, delay or prevent a change in control which could deprive you of an opportunity to receive a premium for your securities as part of a sale of our company.
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Our ADSs and warrants may be delisted or prohibited from being traded “over-the-counter” under the Holding Foreign Companies Accountable Act (as amended by the Accelerating Holding Foreign Companies Accountable Act) if the PCAOB were unable to fully inspect the company’s auditor.
The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted into U.S. law on December 18, 2020. The HFCA Act states that if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit its securities from being traded on a national securities exchange or in the over-the-counter trading market in the U.S. 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. 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. On December 29, 2022, a legislation entitled the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCA Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the Holding Foreign Companies Accountable Act from three years to two. Whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. 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 has indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act if needed, without having to wait another year to reassess its determinations. 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.
Lack of access to PCAOB inspections prevents the PCAOB from fully evaluating audits and quality control procedures of the accounting firms headquartered in mainland China or Hong Kong. As a result, investors in companies using such auditors may be deprived of the benefits of such PCAOB inspections. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC, and PCAOB signed a Statement of Protocol, or the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. Pursuant to the Protocol, the PCAOB has independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. However, uncertainties still exist whether this new framework will be fully complied with. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022, and the PCAOB board vacated its previous determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. 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 has indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act if needed.
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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. If notwithstanding this new framework, the PCAOB was unable to fully inspect 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 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. Furthermore, there can be no assurance that the SEC, Nasdaq, or other regulatory authorities would not apply additional and more stringent criteria to the Company in connection with audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of the Company’s financial statements. 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 HTL International, LLC or another firm) at such future time.
Our current auditor, GGF CPA LTD (“GGF”), the independent registered public accounting firm that issues the audit report included in this annual report on Form 20-F, as a firm registered with the PCAOB (PCAOB ID:2729), is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. GGF, whose audit report is included in this report, is headquartered in Guangzhou, China. While our auditor is based in the PRC and is registered with PCAOB and subject to PCAOB inspection, in the event it is later determined that the PCAOB is unable to inspect or investigate completely the Company’s auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading of our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities exchange to delist the Company’s securities. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and resumed regular inspections in 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act, if needed.
Risks Related to Our Cryptocurrency Strategy and Holdings
A significant decrease in the market value of our BTC, HYPE, SOL, and SUI holdings could adversely affect our ability to satisfy our financial obligations.
As of December 31, 2025, our outstanding indebtedness was $24.3 million. As part of our cryptocurrency strategy, we expect to incur or continue to incur additional indebtedness and other fixed charges. For the year ended December 31, 2025, our operating business did not generate positive cash flow from operations. If our operating business does not generate cash flow in future periods sufficient to satisfy our financial obligations, including our debt and cash dividend obligations, we intend to fund our obligations using cash flow generated by equity or debt financings. Our ability to obtain equity or debt financing may in turn depend on, among other factors, the value of our cryptocurrency holdings, including Bitcoin (“BTC”), Hyperliquid (“HYPE”), Solana (“SOL”), and Sui (“SUI”), investor sentiment and the general public perception of BTC, HYPE, SOL, and SUI, our strategy and our value proposition. Accordingly, a significant decline in the market value of our BTC, HYPE, SOL, and SUI holdings or a negative shift in these other factors may create liquidity and credit risks, as such a decline or such shifts may adversely impact our ability to secure sufficient equity or debt financing to satisfy our financial obligations, including our debt and cash dividend obligations. These risks could materialize at times when BTC, HYPE, SOL, and SUI are trading below its carrying value on our most recent balance sheet or our cost basis. As BTC, HYPE, SOL, and SUI constitute the vast bulk of assets on our balance sheet, if we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell BTC, HYPE, SOL, and SUI to satisfy these obligations. Any such sale of BTC, HYPE, SOL, and SUI may have a material adverse effect on our operating results and financial condition, and could impair our ability to secure additional equity or debt financing in the future. Our inability to secure additional equity or debt financing in a timely manner, on favorable terms or at all, or to sell our BTC, HYPE, SOL, and SUI in amounts and at prices sufficient to satisfy our financial obligations, including our debt service and cash dividend obligations, could cause us to default under such obligations. Any default on our current or future indebtedness or preferred stock may have a material adverse effect on our financial condition.
Our token acquisition plan is subject to fluctuations in BTC, HYPE, SOL, and SUI prices, regulatory changes, delays in Facility closings, and broader economic factors.
Our token acquisition plan is subject to a variety of risks that may materially affect our ability to execute purchases, conversions, and strategic reallocations. The cryptocurrency market is inherently volatile, and BTC, HYPE, SOL, and SUI prices may fluctuate significantly due to shifts in investor sentiment, liquidity constraints, technological developments, and broader macroeconomic conditions. These fluctuations can impair our ability to acquire BTC, HYPE, SOL, and SUI tokens at favorable valuations or realize anticipated returns. In addition, the regulatory environment surrounding digital assets remains uncertain and continues to evolve. Actions by regulatory authorities, including the potential classification of certain tokens as securities by the SEC, could impose new compliance requirements, restrict trading activities, or limit access to specific markets, thereby increasing legal and operational costs and potentially delaying or preventing planned acquisitions. Our strategy also depends on timely access to capital through the Facility, any delays in closings or disruptions in funding availability may constrain our ability to act on market opportunities. Adverse macroeconomic developments, including inflationary pressures, interest rate changes, geopolitical instability, or tightening credit markets, may reduce investor appetite for digital assets and limit our financing options. If we are unable to access sufficient capital under the Facility or if token markets experience sustained downturns, we may be required to scale back acquisitions, delay conversions, or pivot to alternative assets. Such adjustments could negatively impact our growth trajectory, strategic objectives, and overall financial condition.
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Our staking program is subject to operational, market, and regulatory risks
Our staking program is subject to a range of operational, market, and regulatory risks that may adversely affect its performance and contribution to our financial results. Staking reward rates are inherently variable and may fluctuate due to protocol-level adjustments, validator competition, network participation dynamics, and broader market conditions. As a result, actual returns from staking may differ materially from projections and may decline without notice. Staking also involves technical and procedural risks, including the possibility of slashing events. Slashing occurs when validators fail to comply with network rules or engage in behavior deemed malicious or negligent, potentially resulting in the partial or total forfeiture of staked assets. Such events could lead to direct financial losses and reputational harm. Additionally, network congestion, latency, or other performance issues may disrupt staking operations, delay reward distributions, or increase transaction costs.
Regulatory developments represent a further source of uncertainty. Jurisdictions globally are actively evaluating the legal and tax treatment of staking activities. Should staking rewards be classified as securities or become subject to new tax regimes, we may face increased compliance obligations, reporting requirements, or tax liabilities. These changes could materially reduce the net economic benefit of staking and may necessitate adjustments to our operational structure or strategic approach.
Collectively, these risks may result in reduced staking yields, loss of staked assets, increased costs, or diminished program viability, any of which could negatively impact our financial condition, operating results, and strategic flexibility.
Our hedging strategy may not fully offset losses in extreme market conditions
While we have a hedging strategy to mitigate against exposure to BTC, HYPE, SOL, and SUI, such strategies may not fully offset losses in extreme market scenarios including a rapidly deteriorating market. Our hedging strategy involve the use of derivatives like futures and options on regulated exchanges to establish protective puts or collars, targeting 20-30% coverage of holdings.
In periods of heightened volatility, illiquidity, or systemic disruption, the effectiveness of our hedging instruments may be compromised. Derivative markets for cryptocurrency remain relatively nascent and may lack the depth, transparency, or regulatory oversight found in traditional financial markets. As a result, we may encounter pricing inefficiencies, execution delays, or counterparty risks that diminish the protective value of our hedging positions.
In addition, hedging strategies are subject to basis risk, where the possibility that the performance of the hedge does not precisely correlate with the underlying asset. In the case of BTC, HYPE, SOL, and SUI, market idiosyncrasies, protocol-specific developments, or unexpected regulatory actions may cause divergence between the hedged exposure and the actual market movement, resulting in residual losses.
While our hedging strategy is intended to reduce exposure to adverse price movements, it cannot eliminate risk entirely. In extreme scenarios, including sharp market corrections, liquidity crises, or regulatory shocks, our hedging strategies may prove insufficient, leading to material losses that could adversely affect our financial condition, operating results, and strategic flexibility.
Our cryptocurrency reserve strategy exposes us to various risks, including risks associated with BTC, HYPE, SOL, and SUI.
Our cryptocurrency strategy exposes us to various risks, including the following:
BTC, HYPE, SOL, and SUI are a highly volatile asset. The trading price of BTC, HYPE, SOL, and SUI significantly decreased during prior periods, and such declines may occur again in the future.
BTC, HYPE, SOL, and SUI do not pay interest or dividends. BTC, HYPE, SOL, and SUI do not pay interest or other returns and we can only generate cash from our BTC, HYPE, SOL, and SUI holdings if we sell our BTC, HYPE, SOL, and SUI or implement strategies to create income streams or otherwise generate cash by using our BTC, HYPE, SOL, and SUI holdings. Even if we pursue any such strategies, we may be unable to create income streams or otherwise generate cash from our BTC, HYPE, SOL, and SUI holdings, and any such strategies may subject us to additional risks.
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Our BTC, HYPE, SOL, and SUI holdings will significantly impact our financial results and the market price of our listed securities. Our HYPE, SOL, and SUI holdings are expected to significantly affect our financial results and if we continue to increase our overall holdings of BTC, HYPE, SOL, and SUI in the future, they will have an even greater impact on our financial results and the market price of our listed securities.
Our assets are concentrated in BTC, HYPE, SOL, and SUI. The vast majority of our assets are concentrated in our BTC, HYPE, SOL, and SUI holdings. The concentration of our assets in HYPE, SOL, and SUI limits our ability to mitigate risk that could otherwise be achieved by holding a more diversified portfolio of treasury assets.
We purchase BTC, HYPE, SOL, and SUI using primarily proceeds from equity and debt financings. Our ability to achieve the objectives of our BTC, HYPE, SOL, and SUI strategy depends in significant part on our ability to obtain equity and debt financing. If we are unable to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our BTC, HYPE, SOL, and SUI strategy.
Our cryptocurrency reserve strategy has not been tested over an extended period of time or under different market conditions. We are continually examining the risks and rewards of our strategy to acquire and hold BTC, HYPE, SOL, and SUI. This strategy has not been tested over an extended period of time or under different market conditions. For example, although we believe BTC, HYPE, SOL, and SUI, due to its limited supply, has the potential to serve as a hedge against inflation in the long term, the short-term price of BTC, HYPE, SOL, and SUI declined in recent periods during which the inflation rate increased. If BTC, HYPE, SOL, and SUI prices were to decrease or our BTC, HYPE, SOL, and SUI strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our listed securities would be materially adversely impacted.
We are subject to counterparty risks, including in particular risks relating to our custodians. Although we have implemented various measures that are designed to mitigate our counterparty risks, including by storing substantially all of the BTC, HYPE, SOL, and SUI we own in custody accounts at U.S.-based, institutional-grade custodians and negotiating contractual arrangements intended to establish that our property interest in custodially-held BTC, HYPE, SOL, and SUI is not subject to claims of our custodians’ creditors, applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts. If our custodially-held BTC, HYPE, SOL, and SUI were nevertheless considered to be the property of our custodians’ estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such BTC, HYPE, SOL, and SUI, or delaying or hindering our access to our BTC, HYPE, SOL, and SUI holdings, and this may ultimately result in the loss of the value related to some or all of such BTC, HYPE, SOL, and SUI, which could have a material adverse effect on our financial condition as well as the market price of our listed securities.
The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price, and use of BTC, HYPE, SOL, and SUI. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry have highlighted the counterparty risks applicable to owning and transacting in digital assets. Although these bankruptcies, closures, liquidations and other events have not resulted in any loss or misappropriation of our BTC, HYPE, SOL, and SUI, nor have such events adversely impacted our access to our BTC, HYPE, SOL, and SUI, they have, in the short-term, likely negatively impacted the adoption rate and use of BTC, HYPE, SOL, and SUI. Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further negatively impact the adoption rate, price, and use of BTC, HYPE, SOL, and SUI, limit the availability to us of financing collateralized by BTC, HYPE, SOL, and SUI, or create or expose additional counterparty risks. Changes in the accounting treatment of our BTC, HYPE, SOL, and SUI holdings could have significant accounting impacts, including increasing the volatility of our results.
We are exposed to risks related to BTC and the Bitcoin Blockchain
We are subject to risks associated with our holdings of BTC and our exposure to the Bitcoin blockchain. Although the Bitcoin network is widely regarded as decentralized, a significant portion of the total BTC supply is held by a small number of participants, including early adopters and large institutional holders. This concentration may, in certain market conditions, result in coordinated actions that could influence governance debates (such as proposed network upgrades), market liquidity, or token pricing, which could materially impact the value of our Bitcoin holdings, currently valued at approximately $8 million and representing 63% of our crypto asset treasury as of December 31, 2025.
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In addition, the Bitcoin blockchain’s transaction processing capacity is limited by its underlying protocol and block size constraints. During periods of elevated network activity, transaction fees may increase significantly and confirmation times may be delayed, potentially impeding our ability to efficiently move or convert our BTC holdings. Network congestion or temporary outages may also disrupt services provided by third-party custodians or trading venues, adversely affecting our ability to manage or liquidate our positions as needed.
As the regulatory environment for digital assets continues to evolve, Bitcoin may be subject to increased scrutiny or new requirements by regulatory authorities in various jurisdictions. Any imposition of trading, conversion, or custody restrictions could negatively affect the liquidity of BTC and impair our ability to monetize or convert our holdings, which could materially and adversely impact our financial condition and results of operations.
We are exposed to risks related to HYPE and the Hyperliquid Blockchain
We are subject to risks associated with our holdings of HYPE tokens and exposure to the Hyperliquid blockchain. The Hyperliquid network presents potential centralization risks, as approximately 78% of the HYPE token supply is held by early stakeholders and members of the founding team. This concentration may enable coordinated actions that influence governance outcomes, token pricing, or protocol upgrades, which could materially impact the value of our HYPE holdings, currently valued at approximately $7.09 million and representing 58.8% of our digital asset treasury.
In addition, Hyperliquid’s decentralized exchange infrastructure relies on a high-speed order book architecture that remains largely untested under extreme market conditions. In the event of elevated trading volumes—such as those exceeding 570.5 million daily transactions—network congestion or outages may occur, potentially disrupting staking rewards (currently estimated at 2.25% to 2.37% annualized) and transaction processing. These disruptions could adversely affect our staked HYPE position, which comprises approximately 95% of our total HYPE holdings.
As a recently launched blockchain, Hyperliquid may be subject to evolving regulatory scrutiny, particularly with respect to its perpetual futures offerings. Any determination by regulatory authorities that HYPE constitutes a security, or any imposition of trading restrictions, could negatively affect the liquidity of HYPE and impair our ability to monetize or convert our holdings.
We are exposed to risks related to SOL and the Solana Blockchain
We are subject to risks associated with our holdings of SOL tokens and exposure to the Solana blockchain. Solana has experienced multiple network outages, including in September 2021 and January 2022, attributable to its high-throughput architecture. While recent upgrades such as Fire Dancer aim to improve reliability, any future downtime could interrupt staking operations and transaction processing, adversely affecting our SOL holdings, which total approximately $1.46 million, with 80% currently staked and earning annualized rewards of 5% to 7%.
In addition, the rapid expansion of decentralized applications (dApps) within the Solana ecosystem increases the likelihood of smart contract vulnerabilities, which could result in exploits or bugs affecting associated DeFi platforms. Such events may indirectly impair the value of our SOL holdings through ecosystem-wide disruptions.
Solana’s inflationary tokenomics—currently estimated at approximately 8% annually, with a declining trajectory—may contribute to long-term value dilution. This inflation could negatively impact the sustainability of our staking strategy and the broader stability of Solana’s market capitalization, currently estimated at approximately $110 billion.
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We are exposed to risks related to SUI and the Sui Blockchain
We are subject to risks associated with our holdings of SUI tokens and exposure to the Sui blockchain. As a recently launched Layer 1 protocol that debuted in May 2023, Sui blockchain remains in early-stage development, and its Move-based architecture has yet to be proven at scale. Technical challenges or delays in protocol upgrades could impair transaction throughput and network reliability, adversely affecting our staking operations and the value of our SUI holdings, which total approximately $3.50 million, with 75% currently staked and earning annualized rewards of 2.1% to 5%.
The Sui ecosystem has also experienced security vulnerabilities, including the Cetus exploit in 2023. Future attacks or validator failures could result in slashing penalties or compromise staked assets, particularly given the network’s reliance on validator performance within a 10 billion token maximum supply framework.
In addition, Sui faces competitive pressure from more established Layer 1 blockchains such as Solana and Ethereum. Slower adoption or reduced developer and user engagement may negatively impact SUI demand, potentially eroding its market capitalization, currently estimated at approximately $11.45 billion, and diminishing the value of our treasury allocation.
BTC, HYPE, SOL, and SUI are highly volatile assets, and fluctuations in the price of BTC, HYPE, SOL, and SUI have in the past influenced and are likely to continue to influence our financial results and the market price of our listed securities.
BTC, HYPE, SOL, and SUI are highly volatile assets, and have demonstrated volatility over the past three years. BTC’s price declined from a high of over $68,000 in November 2021 to lows of around $16,000 by November 2022, before rebounding to above $40,000 in early 2024, representing substantial percentage swings within a relatively short period. BTC volatility remained high throughout 2024 and 2025, with BTC reaching new all-time highs above $120,000 in 2025 before experiencing sharp corrections of 20–30% within months. HYPE was launched in November 2024 at an initial price of $7.56 and rose sharply to a high of $57.30 by September 2025, representing a gain of over 650%. However, during early 2025, it experienced interim lows near $12.40. SOL declined to a low of $9.38 in December 2022 before surging to a peak of $294.87 in January 2022, demonstrating an increase of more than 3,000%, with annualized volatility exceeding 130% during this period. SUI, introduced in June 2023 at $0.94, fell to $0.37 by October 2023 before rebounding to $5.35 in January 2025, marking a gain of over 470% from its lowest point. These fluctuations were driven by macroeconomic conditions, token unlock events, speculative trading behavior, and liquidity constraints. Fluctuations in the price of BTC, HYPE, SOL, and SUI have in the past influenced and are likely to continue to influence our financial results and the market price of our listed securities.
Our financial results and the market price of our listed securities would be adversely affected, and our business and financial condition would be negatively impacted, if the price of BTC, HYPE, SOL, and SUI decreased substantially, including as a result of:
| ● | decreased user and investor confidence in cryptocurrency, including due to the various factors described herein; |
| ● | investment and trading activities, such as (i) trading activities of highly active retail and institutional users, speculators, miners and investors; (ii) actual or expected significant dispositions of BTC, HYPE, SOL, and SUI by large holders, including the expected liquidation of digital assets associated with entities that have filed for bankruptcy protection and the transfer and sale of BTC, HYPE, SOL, and SUI associated with significant hacks, seizures, or forfeitures; and (iii) actual or perceived manipulation of the spot or derivative markets for HYPE, SOL, and SUI or spot crypto exchange-traded products (“ETPs”); |
| ● | negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, BTC, HYPE, SOL, and SUI or the broader digital assets industry, for example, (i) public perception that cryptocurrency can be used as a vehicle to circumvent sanctions, including sanctions imposed on Russia or certain regions related to the ongoing conflict between Russia and Ukraine, or to fund criminal or terrorist activities, such as the purported use of digital assets by Hamas to fund its terrorist attack against Israel in October 2023; (ii) expected or pending civil, criminal, regulatory enforcement or other high profile actions against major participants in the BTC, HYPE, SOL, and SUI ecosystem, including the SEC’s enforcement actions against Coinbase, Inc. and Binance Holdings Ltd.; (iii) additional filings for bankruptcy protection or bankruptcy proceedings of major digital asset industry participants, such as the bankruptcy proceeding of FTX Trading and its affiliates; and (iv) the actual or perceived environmental impact of BTC, HYPE, SOL, and SUI and related activities, including environmental concerns raised by private individuals, governmental and non-governmental organizations, and other actors related to the energy resources consumed in the cryptocurrency mining process; |
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| ● | changes in consumer preferences and the perceived value or prospects of BTC, HYPE, SOL, and SUI; |
| ● | competition from other digital assets that exhibit better speed, security, scalability, or energy efficiency, that feature other more favored characteristics, that are backed by governments, including the U.S. government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets; |
| ● | a decrease in the price of other digital assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for BTC, HYPE, SOL, and SUI purchase and sale transactions, such as the crash of the stablecoin Terra USD in 2022, to the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of BTC, HYPE, SOL, and SUI or adversely affect investor confidence in digital assets generally; |
| ● | developments relating to the BTC, HYPE, SOL, and SUI protocol, including (i) changes to the BTC, HYPE, SOL, and SUI protocol that impact its security, speed, scalability, usability, or value, such as changes to the cryptographic security protocol underpinning the BTC, HYPE, SOL, and SUI blockchain, changes to the maximum number of BTC, HYPE, SOL, and SUI outstanding, changes to the mutability of transactions, changes relating to the size of blockchain blocks, and similar changes, (ii) failures to make upgrades to the BTC, HYPE, SOL, and SUI protocol to adapt to security, technological, legal or other challenges, and (iii) changes to the BTC, HYPE, SOL, and SUI protocol that introduce software bugs, security risks or other elements that adversely affect BTC, HYPE, SOL, and SUI; |
| ● | disruptions, failures, unavailability, or interruptions in service of trading venues for BTC, HYPE, SOL, and SUI, such as, for example, the announcement by the digital asset exchange FTX Trading that it would freeze withdrawals and transfers from its accounts and subsequent filing for bankruptcy protection and the SEC enforcement action brought against Binance Holdings Ltd., which initially sought to freeze all of its assets during the pendency of the enforcement action and has since resulted in Binance discontinuing all fiat deposits and withdrawals in the U.S.; |
| ● | the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, trading venues, lending platforms, investment funds, or other digital asset industry participants, such as the filing for bankruptcy protection by digital asset trading venues FTX Trading and BlockFi and digital asset lending platforms Celsius Network and Voyager Digital Holdings in 2022, the ordered liquidation of the digital asset investment fund Three Arrows Capital in 2022, the announced liquidation of Silvergate Bank in 2023, the government-mandated closure and sale of Signature Bank in 2023, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by the Nevada Department of Business and Industry in 2023, and the exit of Binance from the U.S. market as part of its settlement with the Department of Justice and other federal regulatory agencies; |
| ● | regulatory, legislative, enforcement and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality or public perception of BTC, HYPE, SOL, and SUI, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from operating in a manner that allows them to continue to deliver services to the digital assets industry; |
| ● | macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions, and fiat currency devaluations; |
| ● | developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography used by the BTC, HYPE, SOL, and SUI blockchain becoming insecure or ineffective; and |
| ● | changes in national and international economic and political conditions, including, without limitation, federal government policies, trade tariffs and trade disputes, the adverse impacts attributable to the current conflict between Russia and Ukraine and the economic sanctions adopted in response to the conflict, and the broadening of the Israel-Hamas conflict to other countries in the Middle East. |
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BTC, HYPE, SOL, and SUI and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty
BTC, HYPE, SOL, and SUI and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of BTC, HYPE, SOL, and SUI or the ability of individuals or institutions such as us to own or transfer BTC, HYPE, SOL, and SUI.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of BTC, HYPE, SOL, and SUI or the ability of individuals or institutions such as us to own or transfer BTC, HYPE, SOL, and SUI. For example, within the past several years:
| ● | President Trump signed an executive order instructing a working group comprised of representatives from key federal agencies to evaluate measures that can be taken to provide regulatory clarity and certainty built on technology-neutral regulations for individuals and firms involved in digital assets, including through well-defined jurisdictional regulatory boundaries; |
| ● | the European Union adopted Markets in Crypto Assets Regulation (“MiCA”), a comprehensive digital asset regulatory framework for the issuance and use of digital assets, like HYPE, SOL, and SUI; |
| ● | in June 2023, the SEC filed complaints against Binance Holdings Ltd. and Coinbase, Inc., and their respective affiliated entities, relating to, among other claims, that each party was operating as an unregistered securities exchange, broker, dealer, and clearing agency; |
| ● | in November 2023, the SEC filed a complaint against Payward Inc. and Payward Ventures Inc., together known as Kraken, alleging, among other claims, that Kraken’s crypto trading platform was operating as an unregistered securities exchange, broker, dealer, and clearing agency; |
| ● | in June 2023, the United Kingdom adopted and implemented the Financial Services and Markets Act 2023 (“FSMA 2023”), which regulates market activities in “cryptoassets”; and |
| ● | in November 2023, Binance Holdings Ltd. and its then chief executive officer reached a settlement with the U.S. Department of Justice, CFTC, the U.S. Department of Treasury’s Office of Foreign Asset Control, and the Financial Crimes Enforcement Network to resolve a multi-year investigation by the agencies and a civil suit brought by the CFTC, pursuant to which Binance Holdings Ltd. agreed to, among other things, pay $4.3 billion in penalties across the four agencies and to discontinue its operations in the United States. |
It is not possible to predict whether, or when, new laws will be enacted that change the legal framework governing digital assets or provide additional authorities to the SEC or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional laws or authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function, the willingness of financial and other institutions to continue to provide services to the digital assets industry, or how any new laws or regulations, or changes to existing laws or regulations, might impact the value of digital assets generally and BTC, HYPE, SOL, and SUI specifically. The consequences of any new law or regulation relating to digital assets and digital asset activities could adversely affect the market price of BTC, HYPE, SOL, and SUI, as well as our ability to hold or transact in HYPE, SOL, and SUI, and in turn adversely affect the market price of our listed securities.
Moreover, the risks of engaging in a BTC, HYPE, SOL, and SUI strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of BTC, HYPE, SOL, and SUI in particular, may also impact the price of BTC, HYPE, SOL, and SUI and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of BTC, HYPE, SOL, and SUI may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to BTC, HYPE, SOL, and SUI, institutional demand for BTC, HYPE, SOL, and SUI as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for BTC, HYPE, SOL, and SUI as a store of value or means of payment, and the availability and popularity of alternatives to BTC, HYPE, SOL, and SUI. Even if growth in BTC, HYPE, SOL, and SUI adoption occurs in the near or medium-term, there is no assurance that BTC, HYPE, SOL, and SUI usage will continue to grow over the long-term.
Because BTC, HYPE, SOL, and SUI have no physical existence beyond the record of transactions on the blockchain, a variety of technical factors related to the blockchain could also impact the price of BTC, HYPE, SOL, and SUI. The liquidity of BTC, HYPE, SOL, and SUI may also be reduced and damage to the public perception of BTC, HYPE, SOL, and SUI may occur, if financial institutions were to deny or limit banking services to businesses that hold BTC, HYPE, SOL, and SUI, provide BTC, HYPE, SOL, and SUI-related services or accept HYPE, SOL, and SUI as payment, which could also decrease the price of BTC, HYPE, SOL, and SUI. Actions by U.S. banking regulators, such as the issuance in February 2023 by Federal banking agencies of the “Interagency Liquidity Risk Statement,” which cautioned banks on contagion risks posed by providing services to digital assets customers, and similar actions, have in the past resulted in or contributed to reductions in access to banking services for bitcoin-related customers and service providers, or the willingness of traditional financial institution to participate in markets for digital assets. The liquidity of HYPE, SOL, and SUI may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for BTC, HYPE, SOL, and SUI and other digital assets.
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Our BTC, HYPE, SOL, and SUI strategy subjects us to enhanced regulatory oversight.
As noted above, several spot BTC, HYPE, SOL, and SUI ETPs have received approval from the SEC to list their shares on a U.S. national securities exchange with continuous share creation and redemption at net asset value.
In addition, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine. While we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our BTC, HYPE, SOL, and SUI through entities subject to anti-money laundering regulation and related compliance rules in the United States, if we are found to have purchased any of our BTC, HYPE, SOL, and SUI from bad actors that have used BTC, HYPE, SOL, and SUI to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in BTC, HYPE, SOL, and SUI by us may be restricted or prohibited.
We may incur indebtedness or enter into other financial instruments in the future that may be collateralized by our BTC, HYPE, SOL, and SUI holdings. We may also consider pursuing strategies to create income streams or otherwise generate funds using our BTC, HYPE, SOL, and SUI holdings. These types of BTC, HYPE, SOL, and SUI-related transactions are the subject of enhanced regulatory oversight. These and any other BTC, HYPE, SOL, and SUI-related transactions we may enter into, beyond simply acquiring and holding BTC, HYPE, SOL, and SUI, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations.
Additional laws, guidance and policies may be issued by domestic and foreign regulators following the filing for Chapter 11 bankruptcy protection by FTX, one of the world’s largest cryptocurrency exchanges, in November 2022. While the financial and regulatory fallout from FTX’s collapse did not directly impact our business, financial condition or corporate assets, the FTX collapse may have increased regulatory focus on the digital assets industry. Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting BTC, HYPE, SOL, and SUI, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in BTC, HYPE, SOL, and SUI.
Due to the unregulated nature and lack of transparency surrounding the operations of many BTC, HYPE, SOL, and SUI trading venues, BTC, HYPE, SOL, and SUI trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in BTC, HYPE, SOL, and SUI trading venues and adversely affect the value of our BTC, HYPE, SOL, and SUI.
BTC, HYPE, SOL, and SUI trading venues are relatively new and, in many cases, unregulated. Furthermore, there are many BTC, HYPE, SOL, and SUI trading venues which do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in BTC, HYPE, SOL, and SUI trading venues, including prominent exchanges that handle a significant volume of BTC, HYPE, SOL, and SUI trading and/or are subject to regulatory oversight, in the event one or more BTC, HYPE, SOL, and SUI trading venues cease or pause for a prolonged period the trading of BTC, HYPE, SOL, and SUI or other digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.
In 2019 there were reports claiming that 80-95% of BTC trading volume on trading venues was false or non-economic in nature, with specific focus on unregulated exchanges located outside of the United States. The SEC also alleged as part of its June 5, 2023 complaint against Binance Holdings Ltd. that Binance committed strategic and targeted “wash trading” through its affiliates to artificially inflate the volume of certain digital assets traded on its exchange. The SEC has also brought recent actions against individuals and digital asset market participants alleging that such persons artificially increased trading volumes in certain digital assets through wash trades, or repeated buying and selling of the same assets in fictitious transactions to manipulate their underlying trading price. Such reports and allegations may indicate that the BTC market is significantly smaller than expected and that the United States makes up a significantly larger percentage of the BTC market than is commonly understood. Any actual or perceived wash trading in the BTC market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of our BTC. Negative perception, a lack of stability in the broader cryptocurrency markets and the closure, temporary shutdown or operational disruption of BTC trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the BTC ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in BTC, HYPE, SOL, and SUI and the broader cryptocurrency ecosystem and greater volatility in the price of BTC. For example, in 2022, each of Celsius Network, Voyager Digital, Three Arrows Capital, FTX, and BlockFi filed for bankruptcy, following which the market prices of BTC and other digital assets significantly declined. In addition, in June 2023, the SEC announced enforcement actions against Coinbase, Inc., and Binance Holdings Ltd., two providers of large trading venues for digital assets, which similarly was followed by a decrease in the market price of BTC and other digital assets. These were followed in November 2023, by an SEC enforcement action against Payward Inc. and Payward Ventures Inc., together known as Kraken, another large trading venue for digital assets. As the price of our listed securities is affected by the value of our BTC, HYPE, SOL, and SUI holdings, the failure of a major participant in the HYPE, SOL, and SUI ecosystem could have a material adverse effect on the market price of our listed securities.
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The concentration of our BTC, HYPE, SOL, and SUI holdings enhances the risks inherent in our cryptocurrency strategy.
As of December 31, 2025, we held approximately 88 tokens of BTC, 182,167 tokens of HYPE, 6,831 tokens of SOL, and 2,865 tokens of SUI that were acquired at an aggregate purchase price of $17.12 million and we intend to purchase additional BTC, HYPE, SOL, and SUI and increase our overall holdings of BTC, HYPE, SOL, and SUI in the future. The concentration of our BTC, HYPE, SOL, and SUI holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our BTC, HYPE, SOL, and SUI strategy. The price of BTC experienced a significant decline in 2022, and this had, and any future significant declines in the price of BTC, HYPE, SOL, and SUI would have, a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.
The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of BTC, HYPE, SOL, and SUI and adversely affect our business.
As a result of our BTC, HYPE, SOL, and SUI strategy, our assets are concentrated in our BTC, HYPE, SOL, and SUI holdings. Accordingly, the emergence or growth of digital assets other than BTC, HYPE, SOL, and SUI may have a material adverse effect on our financial condition. As of December 31, 2025, BTC was the largest digital asset by market capitalization. However, there are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets that do not use proof-of-work mining like the Bitcoin network.
Other alternative digital assets that compete with BTC in certain ways include “stablecoins,” which are designed to maintain a constant price because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. Stablecoins have grown rapidly as an alternative to BTC and other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms. As of December 31, 2025, two of the eight largest digital assets by market capitalization were U.S. dollar-pegged stablecoins.
Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s CBDC project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, BTC and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of BTC to decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results.
We face risks relating to the custody of our BTC, HYPE, SOL, and SUI, including the loss or destruction of private keys required to access our BTC, HYPE, SOL, and SUI and cyberattacks or other data loss relating to our BTC, HYPE, SOL, and SUI.
We hold our BTC, HYPE, SOL, and SUI with regulated custodians that have duties to safeguard our private keys. Our custodial services contracts do not restrict our ability to reallocate our BTC, HYPE, SOL, and SUI among our custodians, and our BTC, HYPE, SOL, and SUI holdings may be concentrated with a single custodian from time to time. In light of the significant amount of BTC, HYPE, SOL, and SUI we hold, we continually seek to engage additional custodians to achieve a greater degree of diversification in the custody of our BTC, HYPE, SOL, and SUI as the extent of potential risk of loss is dependent, in part, on the degree of diversification. If there is a decrease in the availability of digital asset custodians that we believe can safely custody our BTC, HYPE, SOL, and SUI, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our BTC, HYPE, SOL, and SUI, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected.
Our use of custodians exposes us to the risk that the BTC, HYPE, SOL, and SUI our custodians hold on our behalf could be subject to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such BTC, HYPE, SOL, and SUI. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our BTC, HYPE, SOL, and SUI.
Regulatory change reclassifying cryptocurrency as a security could lead to our classification as an “investment company” under the Investment Company Act of 1940 and could adversely affect the market price of cryptocurrency and the market price of our listed securities.
Our assets are concentrated in our BTC, HYPE, SOL, and SUI holdings. A contrary determination by the SEC could lead to our classification as an “investment company” under the Investment Company Act of 1940, which would subject us to significant additional regulatory controls that could have a material adverse effect on our ability to execute on our BTC, HYPE, SOL, and SUI strategy, and our business and operations and may also require us to substantially change the manner in which we conduct our business.
In addition, if BTC, HYPE, SOL, and SUI are determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of BTC, HYPE, SOL, and SUI and in turn adversely affect the market price of our listed securities.
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We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, ETFs and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of or changes to our Treasury Reserve Policy or our BTC, HYPE, SOL, and SUI strategy, our use of leverage, the manner in which our BTC, HYPE, SOL, and SUI is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. For example, although a significant change to our Treasury Reserve Policy would require the approval of our board of directors, no shareholder or regulatory approval would be necessary. Consequently, our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our BTC, HYPE, SOL, and SUI holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding BTC, HYPE, SOL, and SUI.
Our BTC, HYPE, SOL, and SUI strategy exposes us to risk of non-performance by counterparties.
Our BTC, HYPE, SOL, and SUI strategy exposes us to the risk of non-performance by counterparties, whether contractual or otherwise. Risk of non-performance includes inability or refusal of a counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other reason. For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of BTC, HYPE, SOL, and SUI, a loss of the opportunity to generate funds, or other losses.
Our primary counterparty risk with respect to our BTC, HYPE, SOL, and SUI is custodian performance obligations under the various custody arrangements we have entered into. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Inc., Binance Holdings Ltd., and Kraken, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Although these bankruptcies, closures and liquidations have not resulted in any loss or misappropriation of our HYPE, SOL, and SUI, nor have such events adversely impacted our access to our HYPE, SOL, and SUI, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.
While all of our custodians are subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held BTC, HYPE, SOL, and SUI will not become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our BTC, HYPE, SOL, and SUI holdings, we would become subject to additional counterparty risks. Any significant non-performance by counterparties, including in particular the custodians with which we custody substantially all of our BTC, HYPE, SOL, and SUI, could have a material adverse effect on our business, prospects, financial condition, and operating results.
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. Prior to the Business Combination, Lion Group Holding Ltd. owned no material assets and did not operate any business. 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.
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. Lion International Securities Group Limited and Lion Futures Limited were dissolved in December 2025.
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In October 2014, BC Wealth Management Limited was incorporated in Hong Kong, through which we started to carry out our insurance brokerage business. It was sold to a third party in June 2024.
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.
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.
In July 2019, Lion International Financial (Singapore) Pte. Ltd. was incorporated in Singapore. 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. It was sold to a third party in June 2024.
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.
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. 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. As of the report date, both Royal Lion Investment Limited and Royal Lion Middle East DMCC are dormant. In June 2024, we disposed of 100% interest in Lion Fintech Group Limited, 70% interest in Royal Lion Investment Limited and 70% interest in Royal Lion Middle East DMCC.
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. 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.
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. 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.
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. It was disposed of in July 2024.
In February 2022, Lion Silver Capital Limited was incorporated under the laws of British Virgin Islands in which we hold 51% equity interest. It was disposed of in July 2024.
In November 2025, Lion Global Markets Trading Limited was incorporated under the laws of Cayman Islands as a wholly owned subsidiary of Lion Wealth Management Limited.
In June 2024, the Group sold its 100% interest in BC Wealth Management Limited (“BCWM”) to a third party, at a consideration of approximately $70,000 (HKD 550,000). In June 2024, the Group also sold its 51% interest in Lion Asset Management Limited (“LAML”) to another third party, at a consideration of approximately $140,000 (HKD 1,100,000). In December 2025, the Group sold Lion Futures Limited and Lion International Securities Group Limited for an aggregated consideration of $77 (HKD 600).
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.
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Our Current Corporate Structure in China
We sold our equity interests in Lion Group (Hangzhou) Investment Limited to a third party in September 2023. 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. 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.
Corporate Information
Our principal executive office is 10 Ubi Crescent, #06-51 (Office 12), Ubi Techpark, Singapore 408574, Lobby C. 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. 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. Currently, our business lines include (i) total return swap (TRS) trading business, (ii) contracts for difference (CFD) trading services, and (iii) Over-The-Counter (“OTC”) stock options trading business. In June 2024, the Group disposed of its insurance brokerage services. In 2025, the Group exited from its futures and securities brokerage services in Hong Kong markets. 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. Our clients are mostly well-educated and affluent Chinese investors residing both inside and outside the PRC (excluding the United States).
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”). 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 decreased significantly from 2023 to 2024, as our revenue decreased significantly from US$21.1 million to a loss of US$4.9 million, respectively. We had a loss before income taxes of US$27.6 million in 2024 as compared to a loss before income taxes of US$5.8 million in 2023.
Our financial performance improved from 2024 to 2025, as our revenue increased from a loss of US$4.9 million to an income of US$9.4 million, respectively. We had a loss before income taxes of US$5.0 million in 2025 as compared to a loss before income taxes of US$27.6 million in 2024.
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Our Strengths
We believe that the following strengths contribute to our success and differentiate us from our competitors:
We are well positioned in a fast-growing trillion-dollar segment with substantial growth potential.
We are one of the few Chinese investor-focused trading platforms that provide a wide spectrum of product and service offerings. We believe our fast-growing trillion-dollar segment has substantial growth potential in the near term. The individual investable financial assets in China were US$21.4 trillion in 2019 and are expected to reach US$50.6 trillion in 2027, according to Ipsos in April 2023. The percentage of financial assets allocated to overseas investment by high net worth individuals Chinese citizens was 20% of their total financial assets in 2022, and Ipsos projects that overseas investments by the high net worth individuals Chinese citizens will gradually rise above 30%. With our existing leadership in this segment, we are well positioned to capture the opportunities arising from this growth.
We will be providing superior user experience to our clients through our industry-leading Internet platform.
We provide services through an industry-leading Internet platform accessible through our all-in-one Lion Brokers Pro app and a variety of apps available on iOS, Android and PC platforms. Our Lion Brokers app will allow users to remotely open accounts with our Cayman Islands licensed subsidiary and conveniently trade in a wide variety of derivative products. Our Lion Brokers app is designed to be secure and easy to use and will provide a superior user experience through fast and reliable order execution.
We offer a diversified product portfolio for trading in global financial markets.
Our trading platform allows users to trade approximately 100 futures products on major futures exchanges worldwide (excluding the PRC), including the CME, SGX, HKFE and Eurex, as well as stocks listed on the NYSE, Nasdaq and the Hong Kong Stock Exchange, and PRC stocks listed on the SSE and SZSE that are eligible for Stock Connect. In addition, our customers may also use our platform to trade various derivative products, such as forex, commodities, futures, stock indices, ETFs, warrants and callable bull/bear contracts, on global exchanges or OTC markets.
We have an experienced management team supported by industry talents.
Our management team is led by our co-founder and chairman of the board, Mr. Chunning Wang, who has more than 15 years of experience in trading futures, securities and derivatives and dealing in interbank markets. Our core management team members have in aggregate more than 60 years of experience with conglomerates in the financial sector and fintech startups. Our management team is supported by a strong and talented team of experts in the financial and information technology industries. Our experienced management team and strong industry team enable us to drive innovation, improve our operational efficiency and expand our client base.
Our Strategies
We plan to implement the following strategies:
Strengthen our leading position in key markets and expand our demographic and geographic coverages in new markets.
We plan to strengthen our leading position in key markets, such as Greater China, by retaining active users, reactivating dormant accounts, obtaining new customers and enhancing service quality. We hope to increase our market share by penetrating into new geographic areas, such as Southeast Asia, though we currently have no specific plans to enter any new markets. We further intend to expand our user base from predominantly overseas Chinese to other ethnic groups through optimized digital marketing.
Enhance technological infrastructure and cybersecurity.
We expect to continue investing heavily in research and development to further improve our technology infrastructure and integrate different systems into our platform. Striving to provide our users with the most user-friendly interface and smooth transaction experience, we plan to optimize our trading system, increase system concurrent accesses, and enhance the system’s reliability and security. We also plan to expand the scope of cooperation with worldwide exchanges to provide our clients with more real-time, accurate and stable market quotation services. In addition, we plan to strengthen our cooperation with Microsoft Azure, making full use of the Microsoft Cloud infrastructure and security services and improve our system efficiency and cybersecurity.
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Drive product innovation and explore other complementary services.
We are offering A-share (shares that denominated in Renminbi and traded in the SSE and SZSE) and Hong Kong stock basket linked TRS to our clients since early 2020. See “— Our Business Lines — TRS Trading Business.” Based on our analysis of our clients’ trading behavior and feedback, we expect to develop new derivative products to meet their shifting demands. We may also explore other complementary services, including CRM equipment and data services, overseas investment consulting services, deep financial technology development, digital asset management, industry research services, and overseas mergers and acquisitions.
Execute our strategic treasury reserve business plan.
In June 2025, the Company launched a strategic treasury reserve business plan focused on acquiring and holding digital assets, primarily Bitcoin (BTC), Hyperliquid (HYPE), Solana (SOL), and Sui (SUI). These assets are safeguarded and staked with BitGo Trust Company under a dedicated custody agreement. Funding for acquisitions comes mainly from proceeds of a $24.4 million convertible debenture facility, with at least 75% allocated to digital assets and the remainder for general corporate purposes. Over the next twelve months, we plan to continue opportunistic and phased purchases of BTC, HYPE, SOL, and SUI, ultimately consolidating our reserve into HYPE as our anchor asset. All purchases are made with institutional-grade custody and are subject to market conditions, facility drawdowns, and compliance with ongoing covenants.
Our Business Lines
Our business lines include our (i) TRS trading business, (ii) CFD trading services, and (iii) Over-The-Counter (“OTC”) stock options trading business. In June 2024, the Group disposed of its insurance brokerage services. In 2025, the Group exited from its futures and securities brokerage services in Hong Kong markets. We provide these services through our all-in-one Lion Brokers Pro app and a variety of other apps available on iOS, Android and PC platforms. See “Our Technology.” Our relevant subsidiaries possess a full securities investment business license in the Cayman Islands as relevant to acting as a broker dealer and market maker and various types of licenses to conduct our business in Hong Kong. See “Licenses”.
CFD Trading Services
We began our CFD trading services in May 2019. Our trading platform allows users 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. Through our platform, users can buy and sell stock indices, including the Dow Jones Industrial Average, Hang Seng Index, Nikkei 225 and Standard & Poor’s 500, commodities, including gold, silver, copper, soy beans and crude oil (Brent and WTI), and 33 currency pairs, including EUR/USD, USD/JPY, GBP/USD and USD/CHF currency pairs. Our Cayman Islands subsidiary, Lion Brokers Limited, holds the CIMA Full Securities Investment Business License, which allows us to act as broker dealer and market maker in facilitating CFD trading in the Cayman Islands. All of our CFD trades are conducted on the platform of Lion Brokers Limited within the scope granted by the CIMA Full Securities Investment Business License.
For example in a forex trade in the spot market, a participant will simultaneously buy one currency and sell another, with the two currencies together referred to as a currency pair. The investor is speculating that one currency will appreciate in relation to the counter currency in the currency pair, and it will make a profit or suffer a loss depending on the difference between the exchange rates at which the investor opens and closes its position. In response to a request for a quotation, market makers will quote the bid and ask prices simultaneously and the client will decide whether to enter into a contract to buy (long) or sell (short) an asset at that price.
Our trading platform matches the client’s order request with the spot currency pairs offered by market makers. We do not normally intervene in the trade, other than to apply our mark-up, which is based on market conditions and risk exposure regardless of how a trade is executed or the client’s profitability. This same process is used when a client liquidates a position. Our platform processes the trade by applying a uniform spread to the mid-price calculated from the preferred data feed. Forex traders can also engage in customizable forward transactions or futures speculation prior to the expiration of currency futures contracts. In addition, traders can amplify their profits or losses by leveraging their trades, and we offer up to 100:1 leverage to certain of our clients. See “Risk Factors — Risks Related to Our Business and Industry — We may incur material trading losses from our market making activities.”
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The diagram below illustrates the order execution process for our CFD trading business:
We facilitate a client’s CFD trading in three different ways.
| 1. | If the trade of a client can be used to naturally hedge against and offset the trades of another client, we will act as a market maker to offer liquidity and pricing for both clients. This type of transactions allows us to generate predictable revenues from commissions (other than forex transactions, for which we typically do not charge any commissions) without assuming any risks caused by market fluctuations We expect to have more frequent naturally hedged trades in the future as our user base grows and the number of transactions transacted over our platform increases. |
| 2. | When an offsetting transaction from another client is not available, we may choose to act as a principal (i.e. market maker) to trade with the client. This type of transactions gives us the potential to generate significant revenues from trading profit if the market develops in favor of our position. Although we would assume risks caused by market fluctuations, our risk management system constantly monitors the market and limits our risk exposure. See “ Risk Management — Business Model Risk — Market Risk.” More than half of our CFD trades in 2024 were of this type. |
| 3. | When an offsetting transaction from another client is not available, we may also act as a broker in arranging trades between the client and third-party market makers. We maintain cooperative relationships with established market makers and exchange’s clearing members, including international wholesale forex trading partners, which give us access to a pool of potential liquidity and ensure that we are able to execute our clients’ desired trades at competitive rates while hedging our net positions and limiting our exposure. This type of transaction allows us to transfer the risks associated with riskier trades to established market makers that have greater risk tolerance, although we would incur additional costs charged by our cooperative market makers. |
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We generate CFD trading revenue from (i) commissions, (ii) bid/offer spreads, (iii) trading profit and (iv) difference in interest rates.
| i. | We charge commissions for all CFD transactions, except for forex transactions. The amount of 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 type of product traded, as well as discounts offered to different clients. For instance, our commission rates for stock indices, such as the Dow Jones Industrial Average and the Hang Seng Index, range from US$2.25 to US$50 per lot, while our commission rates for commodities, such as gold, soy beans and crude oil, range from US$3 to US$50 per lot. |
| ii. | We mark up the bid/offer spreads for CFD products on top of the prices offered by our clients, exchanges or third-party market makers, as the case may be. Our price mark-ups over the price offered by an exchange vary depending on the underlying product. |
| iii. | We act as a trading principal in certain derivative transactions by taking the position opposite to our clients. In such cases, we are exposed to changes in the value of the underlying product, and the clients’ losses are our gain. |
| iv. | We automatically roll-over currency positions each day and provide either a credit or debit for the interest rate difference between the two currencies in the pairs being held. The clients’ debits are our gains. |
Our total CFD products trading volume in the years ended December 31, 2023, 2024 and 2025 was 703,764 lots, 23,098 lots and 2 lots respectively. As of December 31, 2025, we had one CFD trading client, which was a retail investor.
TRS Trading Business
We also officially began offering total return swap (TRS) trading services to clients in July 2020 and expect it to a main growth driver in future years. We have entered into ISDA master agreements and related supplementary agreements with two of the top five swap traders in China. The top five swap traders in aggregate account for 89.4% of China’s swap trading in terms of addition of notional principal in 2021, according to Purple Tee. The top five swap traders are very selective in choosing business partners and have entered into ISDA master agreements with only a very limited number of companies.
We compiled and maintained a list of stock eligible for clients’ trading (called “Share Basket Report”). The list currently consists of the shares listed on Hong Kong Stock Exchange, shares listed on Shanghai Stock Exchange eligible for trading through northbound trading of Shanghai-Hong Kong Stock Connect and shares listed on Shen Zhen Stock Exchange eligible for trading through northbound trading of Shenzhen-Hong Kong Stock Connect as provided by the Hong Kong Exchanges and Clearing Limited from time to time (collectively “Stock Connect A Shares”). We selected certain eligible stock to include in the Share Basket Report based on certain criteria, such as market cap, daily average trading volume and financial performance etc.
When our clients placed an order for TRS trades on certain stock selected from the Share Basket Report, we placed the same order back-to-back with our TRS counterparties for execution. The clients are entitled for all the gains or losses and dividends arising from the underlying stock. We did not generate gains or losses from the clients’ trading positions. On the other hand, when the clients placed a trade order and made margin deposits with us, we provided them with leverage by borrowing funds from our counterparties. We charged our clients a higher interest rate and generated revenue from the interest spread.
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We serve as a broker in clients’ TRS trades and the trades are executed over the counter. We recognized the receivables arising from the TRS trading service in an amount generally equal to the market value of the shares in the line item of “Receivables from broker-dealers and clearing organizations”. On the liabilities side, net loans borrowed from TRS counterparties are included in the line item of “payables to broker-dealers and clearing organizations”, and clients’ margin deposits and holding gains and losses on the underlying stock are included in the line item of “Payables to customers”.
The total rate of return of a portfolio of the underlying assets on which a swap is based may exhibit substantial volatility and may be positive or negative in any given period. In the event that the total rate of return is negative and Lion is receiving the total rate of return of that portfolio of underlying assets in its part of a swap agreement, we would be required to make a payment to our counterparty in addition to that required on the other part of the swap agreement. We closely monitor the market value fluctuation of the underlying shares in our clients’ trades and set our market risk limit in accordance with our risk management policies, and require additional margin from our clients when the risk is above our market risk limit.
Below is a diagram illustrating the Company’s TRS trading business:
Our TRS trading volume in the years ended December 31, 2023, 2024 and 2025 was US$580 million, US$128 million, and US$ 17.5 million respectively. As of December 31, 2024 and 2025, we had 316 and 317 TRS trading clients, respectively all of which were retail investors.
OTC Stock Options Trading Services
We started to sell over-the-counter (“OTC”) call options in April 2021. Since the fourth quarter of 2023, this business increased rapidly. The call option gives the holder the right, but not the obligation, to buy the underlying security at a predetermined price (strike price or exercise price) within a specific timeframe, ranges from 2 weeks to 6 months. The stocks underlying the call options issued are predominantly China A-Shares, stocks that are denominated in Renminbi and traded in Shanghai and Shenzhen Stock Exchanges in PRC. We serve as the counterparty to our customers in OTC stock options transactions. There are cases that we purchases the same call options back-to-back from the third party option issuers for offsetting. Upon signing the contract, the customers are required to pay the option premium to us. The Group generated trading gains or losses from the call options, consisting of the changes in fair value associated with the call options we sold to customers as well as the offsetting call options we purchased from third party option issuers.
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The nominal value of OTC stock call options sold for the years ended December 31, 2023, 2024, and 2025 was $181.5 million, $2,388.4 million, and $2.9 million respectively. As of December 31, 2024 and 2025, we had 317 and 317 OTC stock option trading clients, respectively all of which were retail investors.
Futures Brokerage Services
We began our futures brokerage services in March 2017. Our trading platform allows users to trade approximately 100 futures products on major futures exchanges worldwide (excluding the PRC), including the CME, SGX, HKFE and Eurex. We cooperate with G. H. Financials (Hong Kong) Limited and INTL FCStone Limited, which are major service providers for global clearing solutions for exchange traded futures and options contracts, to execute and settle futures transactions. We charge commission fees to clients for trades made using our trading platform based on the number of contracts executed.
Our commission rate is US$1.20 - 40.00 per contract depending on the types of futures products, subject to various discounts that we offer. Our total number of executed futures contracts was 1,298,452 lots, 913,583 lots, and 246,159 lots in 2022, 2023, and 2024, respectively. Our futures brokerage service is primarily used by Chinese clients in Greater China and Southeast Asia, although it is available for users all over the world. As of December 31, 2023 and 2024, we had 188 and 202 futures trading accounts opened with our Hong Kong subsidiary, Lion Futures Limited, respectively most of which were retail investors.
Towards the end of December 2024, we decided to initiate our exit from the futures brokerage business. In 2025, we returned the HKSFC Type 2 License for Dealing in Futures Contracts and HKSFC Type 5 License for Advising on Futures Contracts to HKSFC and completely exited from the futures brokerage services in Hong Kong markets.
Securities Brokerage Services
We began our securities brokerage services in November 2017. Our trading platform allows users to trade stocks listed on the NYSE, Nasdaq and the HKSE, as well as PRC stocks listed on the SSE and SZSE that are eligible for Stock Connect. We charge commission fees to clients for trades made using our trading platform based on the transaction amount, subject to a minimum charge per transaction. To better serve the individual needs of our clients, we vary the commissions we charge based on the types of products or services, eligibility for discounts and other factors.
The table below summarizes the current pricing of our securities brokerage services for securities traded on different stock exchanges.
| Stock Exchanges on Which Securities are Traded | Our Pricing Terms | Other Fees and Expenses | ||
| Nasdaq and NYSE-Traded Stocks | Commissions: 0.2% of the transaction amount, subject to a minimum charge of US$20 per transaction | Applicable regulatory fees charged by SEC and transaction fees charged by other third-parties | ||
| HKEX-Traded Stocks | Commissions: 0.25% of the transaction amount, subject to a minimum charge of HK$100 (US $12.8) per transaction | Applicable transaction fees charged by HKEX, HKSFC, Computershare and stamp duty charged by the Hong Kong government | ||
| Shanghai-Hong Kong Stock Connect Stocks | Commissions: 0.01% of the transaction amount, subject to a minimum charge of RMB5 (US $0.7) per transaction | Applicable transaction fees charged by SSE, CSRC, Hong Kong and PRC clearing agencies, and stamp tax charged by the PRC government | ||
| Shenzhen-Hong Kong Stock Connect Stocks | Commission: 0.01% of the transaction amount, subject to a minimum charge of RMB5 (US$0.7) per transaction | Applicable transaction fees charged by SZSE, CRSC, Hong Kong and PRC clearing agencies, and stamp tax charged by the PRC government |
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Our securities brokerage service is primarily used by Chinese clients in Greater China and Southeast Asia, although it is available for users all over the world. As of December 31, 2023, there were 98 securities trading accounts opened on our platform, most of which were retail investors. In the second half of 2024, we returned to HKSFC the Type 1 License for Dealing in Securities, Type 4 License for Advising on Securities and Type 9 Asset Management possessed by Lion International Securities Group Limited and completed our exit from the securities brokerage services in Hong Kong markets
Insurance Brokerage Services
We also engage in insurance brokerage services mainly for high-net-worth Chinese individuals purchasing insurance policies in Hong Kong. We focus on critical illness insurance and life insurance products, while also offering various other insurance products such as health insurance, savings insurance, annuity and mandatory provident fund pension scheme. Our insurance company partners include renowned multinational insurance companies such as Prudential, AIA, Manulife, MassMutual, BOC Life and AXA. Our clients, who largely rely on offline channels, are now also able to compare various insurance products through our all-in-one Lion Brokers Pro app that launched in April 2020 and sign the insurance policies during face-to-face meetings with our insurance agents located in Hong Kong.
We receive commissions from the insurance companies based on a percentage of the premium paid by insurance purchasers. We source some of our clients from referral agents located in major Chinese cities and we pay them referral fees that are usually a negotiated percentage of the insurance premium.
We generated commission income of US$0.5 million, and US$1.2 million, and US$0.5 million in the same periods, respectively. Our insurance commission income has decreased over the past few years largely due to a significant decrease in PRC residents purchasing insurance policies in Hong Kong. This is caused by more stringent enforcement of foreign exchange controls in China, such as more cumbersome procedures for PRC residents to convert Renminbi into U.S. dollars or Hong Kong dollars to pay insurance premiums in Hong Kong and the imposition of daily limits on electronic payments.
In June 2024, we sold our 100% interest in in BC Wealth Management Limited (“BCWM”) to a third party and exited from insurance brokerage business.
Our Technology
We strive to provide our users with a user-friendly interface, a smooth transaction experience and reliable functionalities. Over the past few years, we outsourced our research and development to a dedicated information technology team in Hangzhou, China, which has made great efforts in building an integrated trading platform and enhancing user experience. We provide our services through this integrated Internet platform, which is accessible by mobile apps and desktop apps. The mobile apps are easy to use and preferred by most users, while the desktop apps are designed for professional investors who prefer working on a larger interface.
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User Interface
Mobile Apps
As of December 31, 2025, we had five mobile apps, including “Lion Brokers”, “MetaTrader”, “Lion International Transactions App 狮子国际交易宝” and “易星 Estar”, that allowed our users with different preferences to trade stocks, futures and CFDs in an efficient, secure, reliable and user-friendly manner. The table below sets forth our various apps and their respective products or service offerings and operating entities.
| Mobile App/Tool | Products/Services | Operating Entity | ||
| “Lion Broker Elite” | TRS (Total Return Swap) Trading / OTC Option Trading | Lion Brokers Limited | ||
| “Lion Brokers” | CFD (Futures and Derivatives) | Lion Brokers Limited | ||
| “MetaTrader” | CFD (Foreign Exchange) | Lion Brokers Limited | ||
| “Lion International Transactions App 狮子国际交易宝” | Securities | Lion International Securities Group Limited | ||
| “易星Estar” | Futures | Lion Futures Limited |
We have consolidated “Lion Brokers” and “MetaTrader” into an all-in-one Lion Brokers Pro app, which launched in April 2020, and allow users to remotely open accounts with our Cayman Islands licensed subsidiary and trade all of the products that are carried by our Hong Kong and Cayman licensed subsidiaries. The original mobile apps “Lion Brokers” and “MetaTrader” will gradually be phased out once most users transition to the new Lion Brokers Pro app, which is still being improved. The mobile apps “狮子国际交易宝” and “易星 Estar” will remain available for users who wish to maintain their securities and futures brokerage trading accounts in Hong Kong.
The modern and integrated interface of our all-in-one Lion Brokers Pro app will provide a straightforward and inviting user experience, that we believe will differentiate us from many other trading platforms whose interfaces are often cumbersome and disjointed. The user interface of our all-in-one Lion Brokers Pro app contains five major tabs: home, quotes, watchlists, trading and me.
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Home. The home tab (which is demonstrated in the graphic above) contains quick access to different products such as securities, futures, derivatives, funds and insurance, as well as popular functions such as account opening, fund deposit and rewards shopping mall. This tab also contains aggregated investment-related news feeds and educational sources for the users that are from our media partners, contributing authors and in-house editors.
Quotes. The quotes tab streams the current market information for various investment products, such as real-time prices and trading volume for stocks and futures, contract terms and deposit requirements for futures, bid and ask prices for currency derivatives, and net value of funds.
Watchlists. The watchlists tab contains real-time prices, historical prices, company profiles, business news and third-party analysis for the particular investment products that the users select.
Trading. The trading tab enables our clients to place orders fast and conveniently. Our clients can place several types of orders, such as conditional order, limited price order, market order, and follow bid/ask order. We also allow our clients to trade NYSE and NASDAQ-listed securities during pre-market and post-market hours.
Me. The me tab allows users to review and revise their personal information, manage their funds, access the account statements and communicate with client representatives.
Desktop Apps
We offer corresponding Windows versions of our mobile apps and are developing Mac-OS versions of these apps. These desktop apps allow professional users to view market information and trade stocks, futures and CFDs on larger screens.
Back End System
Our mobile apps and desktop apps all interact with our back end system, which is an integrated infrastructure supporting a wide variety of functions, including account opening and management, market updates, order routing, securities trading and risk management. Our back end system contains multiple servers designated for different usages, such as stock quotes, order placing and risk alerts. These servers are also connected with public and private cloud services such as Alibaba Cloud and Azure, as well as with external databases such as those of major stock exchanges. Our back-end system, which employs big data, high-speed instant cache and distributed ledger technologies, features the following advantages.
| ● | Extreme Speed Trading. We limit the system delay time of the trading process (from the receipt of order from the client to submission of the order) to within 10 milliseconds. Our system retrieves real-time data from external databases, including major stock exchanges, in a matter of milliseconds. This reduces end-to-end latency and provides our clients with a smooth and reliable transaction experience, and also gives our market making business a significant advantage over many of our competitors. |
| ● | High Concurrency. We are able to support millions of simultaneous online users and can process more than 10,000 transactions per second. With a modular architecture, our platform can easily expand as data storage requirements and client visits increase. |
| ● | Consistent Availability. We support 24-7 trading through our micro service infrastructure and distributed cluster deployment (virtually or geographically separated system). |
| ● | High Sensitivity. We monitor risks on a real time basis and respond to issues with client accounts promptly. We can stop trading gains or losses within seconds. |
| ● | High Security. We have designed our data security system in accordance with PRC National Information System Protection Standards. Our system can discover major security loopholes, resist sophisticated malicious attacks and protect against natural disasters, and it can also recover most functionalities after damage. We employ a distributed infrastructure as the foundation of our trading system, which includes a number of isolated servers with intensive security protocols. We maintain an advanced cyber security system to monitor and manage the traffic to our platform on a real-time basis. Our system is designed to automatically detect suspicious activities and automatically send an alert to our IT team. Our system also features strong encryption and two-factor authentication, in addition to disaster recovery and business continuity plans. |
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Our Blockchain Technology
We have ceased the operations of Lion NFT platform in the first quarter of 2023. Before we ceased the operation, our Lion NFT Platform was a decentralized marketplace for trading and exchange of NFTs, including the MetaWords. The NFT smart contracts are deployed on Binance Smart Chain (“BSC”), which is compatible with Ethereum. The smart contracts are based on the ERC721 and ERC1155 protocol, which contains the functions of selling and auction and adds the fee collection model. The Lion NFT Platform is connected with our KYC system, which allow us to verify the identity of the users before they trade in Lion NFT Platform.
Risk Management
Our business activities expose us to various risks, including regulatory environment risk, commercial risk, business model risk and operational risk. Risk management is critical to our business operations. We have put in place procedures and controls to identify, measure and manage each of these risks. We have established a risk management team, comprised of five members, which meets at least once every month to review our risk management status.
Regulatory Environment Risk
We operate in highly regulated industries across multiple jurisdictions. Regulatory environment risk is the risk that the regulatory environment in any of the jurisdictions in which we operate will change in a way that is materially detrimental to our business. We (in particular, Lion Brokers Limited) are regulated by the Cayman Islands Monetary Authorities (CIMA) in the Cayman Islands, the Hong Kong Securities and Futures Commission (HKSFC), the Hong Kong Insurance Authority and Hong Kong Customs and Excise Department in Hong Kong, and the Monetary Authority of Singapore. See “Compliance.”
Change of Regulations
The regulatory environment is constantly evolving, and different regulators may introduce new regulations or modify existing requirements. For instance, CIMA is contemplating to impose additional restrictions on market making activities and as a result, we may need to change our transactional procedures to comply with the new requirements. It is also possible that regulators will increase the capital and liquidity requirements or roll out other financial ratio requirements. The changing regulatory environment may subject us to heavier financial burden and cause adverse effects on our results of operations. We strive to maintain close relationships with regulators and actively seek conversation with them in an effort to keep abreast of impending regulatory developments.
Change of Tax Treatment
The evolving tax regimes in the various jurisdictions where we operate may change the basis on which we are taxed. We also face the risk of additional taxes, such as the financial transaction tax, which if imposed could severely impact the economics of trading. We may need to re-examine the various types of trades of our clients in order to cope with the tax-related risks.
Commercial Risk
We define commercial risk as the risk that our performance is affected by commercial factors, such as business strategies, market conditions, competition and supplier restrictions.
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Business Strategy Risk
We face the risk of failure to formulate or implement an appropriate business strategy. Our board is responsible for formulating our global business strategies, while our senior management is responsible for implementing such strategies. Our board evaluates macro-economic conditions in key jurisdictions, such as the United States, the PRC, the Cayman Islands, Hong Kong and Singapore and formulates strategic plans accordingly. Our senior management initiates strategic movement and convenes regularly to discuss the ongoing implementation of such strategies. For instance, considering stable political policies, economic growth and social environment, along with a low tax rate in Singapore, we relocated our headquarters to Singapore in March 2022. We carefully review the performance of each of our business lines and decide which segment or area we will continue to invest in. We also engage external consultants with proper expertise to assist with our strategic planning and market research.
Market Condition Risk
Our futures, securities and CFD products trading clients may be sensitive to adverse market conditions. Our ability to attract new clients and the willingness of our clients to trade partially depend on the level of trading opportunities that our clients perceive to be available to them in the markets. Our revenue stream could therefore be affected by market conditions.
We constantly monitor market conditions and our clients’ sensitivity towards the changing market conditions through a detailed review of daily revenue analysis reports, monthly financial information and other key performance indicators. When market conditions become adverse, our risk management team may call a meeting to discuss our strategies as necessary. We mitigate the market condition risk by regularly forecasting market developments and managing our financial performance.
Competition Risk
We mainly operate in the online futures and securities brokerage market and CFD trading market for global Chinese investors, which are both highly competitive and rapidly evolving. See “Competition.” We may lose our clients if there are new or existing competitors offering more attractive products, services or pricing. We pay close attention to our competitors’ activities and performance and ensure that our product offerings and pricing remain attractive to the clients.
Supplier Restriction Risk
Our business operations depend on a variety of services from third parties including banks, brokers, stock exchanges, information technology service providers and electronic payment service providers. For instance, in providing certain of our CFD trading services, we rely heavily on a small number of established third-party market makers. If any third party that we rely on ceases its cooperation with us, we may be unable to execute certain trades and our results of operations will be materially and adversely affected. We regularly interact with our suppliers and strive to maintain cooperative relationships with them. We also periodically review engagements with major suppliers to make sure the terms are satisfactory to both sides.
Business Model Risk
We define business model risk as the risk arising from the nature of our business and the way we conduct business. Our business model risk includes market risk, credit risk, liquidity risk and capital adequacy risk.
Market Risk
When we facilitate instant execution of client trades, we may be subject to market risk if the trade of one client cannot be naturally offset by the trade of another client, in which case we may act as a principal in trading with the client and take a position. We constantly monitor our exposure to the market against our pre-determined market risk limit. When our exposure exceeds the limit, we hedge our position to bring our exposure back to the limit. The market risk limit represents the maximum (long or short) net exposure we will hold without any hedging. In accordance with the methodology in our risk management policy, we set our market risk limit based on our risk appetite with reference to the expected liquidity and volatility of the underlying financial products, aiming to achieve an optimal balance among facilitating client’s trades, controlling our cost of hedging and maximizing our daily revenue.
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We may also be subject to residual market risk caused by market gaps, which may occur when a product price changes suddenly in a single large movement, often at the opening of a trading day, rather than in small incremental steps. In this situation, we may have difficulty adjusting our hedging in a timely manner and thereby incur a potential loss. We conduct regular scenario-based stress tests that analyze the impact of potential market gap events and take preventive actions to mitigate the impact caused by residual market risk.
Credit Risk
We have a credit risk management system in place to evaluate our credit risk. We regularly review our credit policies and set appropriate credit limits for our clients. In determining the credit limit of a particular client, we consider its investment pattern, the history of its daily closing positions, the types of products it has previously invested in and the security it has placed with us. We only allow a client to place purchase orders within its trading limit using cash deposited in its designated account with us. We require the client selling shares to provide necessary documents evidencing that the shares are deposited with a securities clearing and settlement system of a recognized securities exchange.
We set pre-trade quantity limits and price collars on individual orders. Our system will detect and reject orders that exceed the specified quantity limits or fall outside of the current acceptable price range. We also impose intra-day net long or short position limits on our clients to prevent their accumulated positions from exceeding the clearing company’s financially comfortable levels, as well as to halt potentially errant algorithms.
We also measure the pre-settlement credit exposure and the settlement risk of all our clients to manage our overall credit exposure. We take into account the number of clients with open positions, the products for which clients have open positions, the concentration of open positions on any given securities and other relevant factual circumstances. Whenever our overall pre-settlement credit exposure is unusually high on any given day, we investigate the causes and may reduce the limit on each client in order to control our overall credit exposure.
We have forced liquidation policies for our clients. For futures trading, we force clients to liquidate when their equity to occupied margin ratio falls below 80%; for CFD trading, we force clients to liquidate when their net worth to occupied margin ratio falls below 50%.
Liquidity Risk
We closely monitor our liquidity position. Our account department prepares a daily cash position summary and our directors and senior management review this summary to ensure that there are no cash flow mis-matches. We may arrange for credit facilities when necessary.
Capital Adequacy Risk
We operate in highly regulated industries across multiple jurisdictions including the Cayman Islands and Hong Kong. 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. We are required to at all times hold sufficient capital to meet regulatory requirements in all relevant jurisdictions. We assess our capital requirements through financial projections and stress tests frequently. We also check internal warning indicators and timely escalate potential capital inadequacy to our senior management for prompt preventive or remedial action.
Operational Risk
We define operational risk as the risk of loss resulted from operational matters, such as failure of technology systems, fraud, and human error. We regularly review our operations to ensure that our operational risk is properly managed.
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Technology Risk
Our electronic trading system applies various pre-order checks, such as a “fat finger” check that examines the notional value, per order quantity and price validation. Our system also checks order frequency, max net position on each instrument and max number of open orders per instrument, and automatically rejects orders if our preset limits are exceeded.
We have set up and implemented contingency plans to ensure business continuity during interruptive events. In case our main trading system is down, the control can be switched to the backup system almost instantaneously to continue trading and position monitoring. All of our electronic databases are backed up and kept in a virus-free environment.
People Risk
People risk is the risk of loss caused by employees, whether intentionally or negligently, such as employee fraud, error or omission, or involving employees, such as labor disputes, health and safety issues, and human resource practices. We strive to create an employee-friendly working environment to retain talents and impose procedural controls to prevent the violation of work ethics.
Recent Development of our Cryptocurrency Strategy
On June 18, 2025, the Company announced its launch of a layer-1s treasury strategy, anchored by Bitcoin (BTC), Hyperliquid (HYPE), Solana (SOL) and Sui (SUI).
Bitcoin (BTC), the first decentralized digital currency, was launched on January 3, 2009, when Satoshi Nakamoto mined the genesis block, introducing a peer-to-peer electronic cash system built on blockchain technology. BTC’s supply is strictly capped at 21 million coins, with approximately 19.9–20 million in circulation by 2025, following block reward halvings that reinforce its engineered scarcity. Unlike tokens with centralized governance or treasury management, BTC operates without a central authority, and network upgrades and changes are implemented through broad consensus among miners, node operators, developers, and users via the Bitcoin Improvement Proposal (BIP) process. As of 2025, Bitcoin’s market capitalization ranged between $1.35 trillion and $1.82 trillion, with daily spot trading volumes typically in the $30–40 billion range and overall volumes (including derivatives) often exceeding $90 billion per day. Bitcoin features a transparent, predictable issuance schedule, fixed supply, and decentralized governance, which together have supported its adoption as a strategic reserve asset by both public and private institutions.
Hyperliquid (HYPE), the native token of the Hyperliquid blockchain, was launched in November 2024, followed by the blockchain’s official launch in December 2024. The token began with a significant airdrop distributing 30% of its total supply to early users, followed by ongoing incentives to foster community engagement. The token has experienced rapid growth, driven by its role in a high-speed decentralized exchange (DEX). HYPE powers the Hyperliquid perpetual futures DEX, enabling low-cost, high-leverage trading with a fully on chain order book. Fees generated are reinvested into buybacks and liquidity incentives, supporting token value and ecosystem growth. It serves as a governance and utility token within the Hyperliquid ecosystem. As of May 27, 2025, HYPE has a market cap of approximately $12.73 billion. HYPE has a circulating supply of approximately 333.92 million tokens. It does not have a fixed maximum supply, with 70% of total supply allocated is for user incentives post-airdrop. HYPE has an average trading volume of around $570.5 million daily, with peaks exceeding this amount. Hyperliquid is governed by a community-driven model with tokenholder influence through fee reinvestment and buyback-and-burn mechanisms, though concerns about centralization (e.g., 78% stake control) have been noted. Hyperliquid’s specific governance details remain evolving and community-focused.
Solana (SOL) is the native token of the Solana blockchain, the token was launched with the Solana blockchain in March 2020. The token gained prominence during the 2021 bull run with a 17,101% increase, stabilizing as a top-tier cryptocurrency. Its lifecycle includes ongoing development with upgrades like the Fire Dancer validator client to enhance scalability. SOL facilitates transaction fees and staking on the Solana network, known for high throughput (up to 65,000 transactions per second) and low costs. It supports a broad ecosystem of decentralized applications (dApps), including DeFi and NFT platforms, and serves as a governance token for network decisions. As of recent estimates, SOL has a market cap of approximately $110 billion, fluctuating upon market conditions. SOL has a circulating supply of approximately 466 million tokens. It does not have a fixed maximum supply, with new tokens being minted through inflation (currently at around 8% annually, but decreasing over time). SOL has an average trading volume of around $2.5 billion daily, subject to market activity. Solana uses a delegated proof-of-stake (DPoS) model where validators and stakers influence network upgrades and parameters, with governance evolving through community proposals and validator voting.
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Sui (SUI) is the native token of the Sui blockchain, the token was launched with the Sui blockchain in May 2023. The token was developed from Meta’s Diem project, and has grown steadily since, with resilience shown post-Cetus exploit, supported by institutional interest and ecosystem expansion. SUI powers transactions, staking, and governance on the Sui network, which leverages the Move programming language for secure smart contracts. It supports DeFi, gaming, and data storage applications, with a focus on high throughput and low latency, aiming to compete with established Layer 1 blockchains. As of May 27, 2025, SUI has a market cap of approximately$11.45 billion. SUI has a circulating supply of approximately 3.34 billion tokens. It has a fixed maximum supply of 10 billion tokens, with a gradual release schedule. SUI has an average trading volume of around $846 million daily, subject to market activity. Sui employs a DPoS system with validator nodes elected by stakers, supplemented by a top-down approach with grants and partnerships to drive ecosystem growth, balancing community and institutional input.
The Company has partnered with BitGo Trust Company, Inc. (“BitGo”) to safeguard and stake the Company’s assets. BitGo is chartered under § 51A-6A-1(12A) of the South Dakota Banking Law and regulated by the South Dakota Division of Banking. On June 20, 2025, The Company (as Pledgor) entered into an Account Control Agreement (the “Custody Agreement”) with BitGo (as the Custodian), BitGo Prime LLC (as the Delegate) and the Selling Securityholder (as the Secured Party).
In addition, BitGo provides custodial services to the Company for our BTC, HYPE, SOL, and SUI holdings, where the Company’s digital assets are held in the custodial account that is maintained solely in the Company’s name and treated as a “securities account” under Article 8 of the UCC, that is segregated from BitGo’s own property and BitGo’s other clients’ assets. Fiat currency, if any, is held in omnibus accounts for customer benefit. Access to the Company’s custodial account is restricted to authorized Company personnel (via UI for instructions) and BitGo or the Delegate employees for operational purposes. Subcontractors of BitGo may assist but are bound by confidentiality, with no unauthorized access permitted without consent or legal mandate. BitGo verifies asset existence through blockchain monitoring and quarterly account statements via the UI, with a 45-day objection period. We may request from BitGo for confirmations regarding audits or regulatory compliance. Pursuant to the Custody Agreement, BitGo maintains commercially reasonable insurance for fully custodial assets where BitGo controls keys (including the Company’s token holdings), with insurance covering theft, employee dishonesty, or physical damage, though not market losses, client errors, or force majeure.
As of the date of this annual report, the Company held digital assets consisting of approximately 88 tokens of BTC, 194,727 tokens of HYPE, 11,002 tokens of SOL, 2,865 tokens of SUI, 21 tokens of BNB and USDT of $1,035,276 that were acquired at an aggregate purchase price of $17.62 million. The primary source of capital for our acquisitions of digital assets is the net proceeds from the convertible debenture facility entered into with Selling Securityholder pursuant to the Purchase Agreement. The Facility provides for the issuance of the June 2025 Convertible Debenture, with flexible drawdowns to support our treasury initiative.
Our Clients and Users
Our Trading Platform
Our clients are mostly well-educated and affluent Chinese investors living in or outside the PRC. These individuals are usually sophisticated investors with relatively high risk tolerance.
We have experienced significant growth in the number of clients in the past few years. Our total revenue-generating client accounts increased from 1,722 as of December 31, 2017 to 2,172 as of December 31, 2025. As of December 31, 2025, we had 2,172 active revenue-generating accounts in total, including 1,538 accounts for CFD trading, 317 accounts for TRS trading, and 317 accounts for OTC options trading.
Our Lion NFT Platform
We have ceased the operations of Lion NFT platform in the first quarter of 2023. Before we ceased the operation, the Lion NFT platform had 198 verified users.
Marketing
To attract clients, we conduct marketing mainly through search engines, social media, app stores and third-party websites. These various online resources detect potential clients and display our logo, name, hyperlink to our website and QR code for our apps. For these services, we contract with advertisement placement agencies and pay them on a monthly or quarterly basis. We may also use traditional marketing channels, such as participating industry exhibits organized by industry associations or media in large Chinese population centers including Shanghai, Shenzhen and Taipei.
Client Services
Our client service team strives to respond to our clients’ inquiries promptly in accordance with our procedures. If any of our staff member receives a complaint, whether oral or in writing, from the client or other third parties, the staff member must immediately notify our compliance with details of the complaint. When possible, our compliance officer will respond to the complainant on the same day as the complaint is made, and then explore with staff members the validity of and reasons for the complaint. In each case, we will respond to the complaint with a clear explanation and take all appropriate steps to remedy the situation.
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Intellectual Property
We rely on a combination of trademarks, software copyrights and trade secrets, as well as confidentiality procedures and contractual provisions with our employees and others, to protect our intellectual properties. As of December 31, 2025, we had obtained one trademark in Singapore and one in Hong Kong, and acquired 11 copyrights related to our trading software programs. Our intellectual properties are essential for us to establish our brand recognition, enhance our reputation and distinguish our services from the competitors in the market. As our brand name becomes increasingly recognized among the general public, we will further enhance the protection of our intellectual properties.
Competition
Our Trading Platform
We mainly operate in the online CFD trading market and the futures and securities brokerage market and for global Chinese investors, which are both highly competitive and rapidly evolving. Our primary competitors are CMC Markets, IG, Forex.com and Interactive Broker in the CFD trading market, and Tiger Securities and Futu Holdings Ltd in the online futures and securities brokerage market for global Chinese investors. Although some of our competitors may have greater financial resources or a larger client base than we do, we believe that our full service licenses, strong brand name, diverse service offerings, efficient trade execution, smooth capital flows and advanced technology infrastructure together make us one of the top performers in this market.
Our Lion NFT Platform
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. The deployment at BSC charges a lower gas fee for our users when compared to other NFT projects deployed at Ethereum.
Employees
We had a total of 10 employees in Hong Kong and Singapore as of December 31, 2025. 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.
Facilities
Our headquarters are located in Singapore, where we leased one principal executive office. We also have offices in Hong Kong and the Cayman Islands. All of our offices are leased from independent third parties. As of December 31, 2025, our leased office space was 2,589 square feet in aggregate, including 1,753 square feet in Hong Kong, 800 square feet in Singapore and 36 square feet in the Cayman Islands. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
Seasonality
While seasonal fluctuations are not likely to affect our business in the future, historically, we have experienced fluctuations based on trading volume of our key clients, see “Item 3. Key Information –D. Risk Factor – We derived a substantial portion of revenue from a small number of key clients.” Our revenue also depend substantially on our client’s trading volume, which are influenced by the general trading activities of the market, see “Item 3. Key Information –D. Risk Factor – 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.”
Insurance
We maintain business interruption insurance for equipment and data processing devices, professional indemnity insurance and directors’ and officers’ liability insurance. We also maintain proper insurances required by the Securities Investment Business Act (SIBA) of the Cayman Islands and the regulations promulgated under the SIBA. Our directors consider that the insurance policies we carry are adequate for our business operations and in line with customary industry practice.
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Licenses
We must obtain various licenses to conduct our business. The table below sets forth the licenses we possess as of December 31, 2025.
| Jurisdiction | License Type | Entity Name | ||
| Cayman Islands | CIMA Full Securities Investment Business License(1) (as relevant to broker dealer and market maker) |
Lion Brokers Limited |
| (1) | Only includes regulatory permissions to act as a “broker dealer” and “market maker”. |
Compliance
We operate in highly-regulated industries and must comply with all applicable regulatory requirements in the jurisdictions in which we operate. We (in particular Lion Brokers Limited) are regulated by the CIMA in the Cayman Islands. We (in particular Lion Brokers Limited) must submit annual audit reports to the CIMA and HKSFC and are subject to their periodic inspections. We have not been subject to any other administrative penalty or fine that, individually or in the aggregate, in the opinion of our management, would be reasonably expected to have a material adverse effect on our results of operations or financial condition. In June 2024, BC Wealth Management Limited and Lion Asset Management Limited were sold to third parties. As a result, we are no longer regulated by the Hong Kong Insurance Authority and Hong Kong Customs and Excise Department in Hong Kong.
In late 2024, we returned Type 1 License for Dealing in Securities, Type 4 License for Advising on Securities and Type 9 Asset Management to HKSFC; in 2025, we returned Type 2 License for Dealing in Futures Contracts and Type 5 License for Advising on Futures Contracts to HKSFC. As a result, we are no longer regulated by HKSFC.
In 2025, we cancelled the Capital Markets Service License (“CMS License”) issued by the Monetary Authority of Singapore (“MAS”). As a result, we are no longer regulated by MAS.
While our directors are ultimately responsible for supervising our compliance, our compliance officer is responsible for continually monitoring our compliance status and implementing compliance policies. We maintain a compliance manual, which contains detailed procedures for corporate government, know-your-client (KYC), trade execution, records keeping, anti-money laundering (AML), and risk management, among others. We provide training to our employees and require them to strictly adhere to our compliance manual. We have also adopted specific compliance measures for KYC, asset protection, insurance, and back office and accounting.
KYC
We employ various measures to ascertain the identity and understand the background of each of our prospective clients before establishing business relationships with them. These measures include, among others, checking potential clients, passports or identity cards, maintaining a robust file management system in which client files are retained and corresponding reference numbers and relevant details are recorded to the extent practicable, interviewing prospective clients personally as appropriate and needed and verifying the identities of the directors or partners of our prospective institutional clients. To reduce the risk of being subject to complex U.S. laws and regulations, we do not allow U.S. citizens or residents to open an account with us. We have two separate teams conduct our KYC procedure on new clients’ backgrounds and identify manually and will reject all account applications if there is any U.S. exposure. However, our KYC procedures may not be able to effectively identify all U.S. citizens and residents at all time. See “Risk Factors — Risks Related to Our Business and Industry — We face risks related to our know-your-customer, or KYC procedures when our clients provide outdated, inaccurate, false or misleading information.” In addition, anonymous accounts are generally not allowed to be opened, heightened scrutiny measures are imposed on accounts opened on behalf of third parties and additional verification measures are conducted before we accept third party payments against the accounts of our clients. Besides that, we have explicitly excluded the U.S. market and the U.S. residents from our scope of business and services at the application of CIMA Full Securities Investment Business License with the CIMA. We shall reapply the CIMA Full Securities Investment Business License with the CIMA provided that we have any change in our business scope.
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We also use the GRADA Platform to facilitate our AML compliance process. The GRADA Platform was developed by Global Risk and Data Authority Ltd. and is a simple online solution for financial service providers to address complex issues relating to AML and other global compliance and regulatory initiatives. The GRADA platform integrates with third party confirmation service providers to crosscheck and ensure the authenticity of the documentation provided, and we ask our clients to upload their information and relevant materials onto the GRADA platform for verification and validation. The GRADA Platform will then assess the risk level of the prospective clients opening an account with us and sort them into high-risk, medium-risk or low-risk clients based on the information in their database. The applications from prospective clients in the low-risk or medium-risk categories will be approved automatically, while additional procedures, including human intervention, will be carried out before applications from prospective clients in the high-risk category can be approved.
Asset Protection
We have comprehensive procedures in place to properly safeguard our clients’ assets that are in our possession. For example, we arrange for a custodian to manage our clients’ assets in segregated accounts, and strict guidelines are required to be followed every time a client’s money flows into or out of the segregated accounts. Such transactions take place in a manner that is in accordance with the authority and the specific instructions our clients give us. We will not deploy a client’s money in any way that will be deemed unconscionable, and we are prohibited from paying any client’s money to any of our officers, employees or related parties.
Back Office and Accounting
We reconcile all account balances of our general ledger accounting system to those on the stockbroker management system, perform procedures to ensure the total amount from all pay-in slips match with the total amount deposited into the bank and clear any errors identified on a daily basis. Our senior staff members also conduct regular reconciliation of our internal records to those kept by other third parties, such as clearing houses and our counterparties, to identify and resolve any possible accounting issues.
Data Privacy
We collect certain personal data from our customers in connection with our business and operations and may be subject to data privacy laws in various jurisdictions such as the Cayman Islands, Hong Kong and the PRC. The relevant data privacy laws may require the data owner to consent to the data collection and agree to its usage. When a customer registers an account on our online portal, they are required to confirm that they have read and agreed to the terms and conditions of the portal, including the terms set out in our data privacy statement. Our data privacy statement states that the personal data being collected can be used for purposes of data analysis and supporting us to develop and to improve our products. We believe that we are in compliance with all relevant laws and regulations in all material respects with respect to data privacy.
Legal Proceedings
As the date of this annual report, we are not a party to, and we are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition or operations.
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Regulations
We are subject to laws and regulations in the jurisdictions where we conduct our business. The following is a summary of certain rules and regulations that significantly affect our current business activities.
Cayman Islands
Securities Investment Business Act (2020) of the Cayman Islands (as amended from time to time, SIBA)
Lion Brokers Limited (LBL), an exempted company incorporated under the laws of the Cayman Islands, conducts market-making and broker dealer activities in relation to securities including contracts for differences. As such activities constitute “securities investment businesses” in particular, dealing in securities under SIBA, LBL is subject to the licensing requirements under SIBA and on 23 August 2018 LBL received from the CIMA a full license to conduct broker dealer and market maker businesses. LBL must submit an annual renewal fee for the licenses (US$9,756.10 for broker-dealer and US$9,756.10 for market maker) by 15 January of each year.
A licensed company is subject to various requirements in SIBA, the regulations promulgated under SIBA and any statement of guidance issued by CIMA (or such other Cayman Islands competent authority) as relevant to financial services business and any condition that may be placed on the SIBA license at the time the entity is licensed by CIMA.
Among other things, any issue or transfer of shares or any change to the underlying beneficial owners of a licensed company must receive CIMA’s prior approval. However, CIMA may exempt from this requirement a licensed company whose shares are publicly traded on a recognized securities exchange, subject to certain conditions.
A licensee must have its accounts audited annually or at such other time as CIMA may require by an auditor approved by CIMA. Within 6 months of the end of a licensee’s financial year, the licensee must submit its audited accounts for the financial year to CIMA along with a certificate of compliance with provisions of SIBA and any regulations made under SIBA and the Monetary Authority Act (2020 Revision) of the Cayman Islands, signed by the licensee or a director of the licensee (if it is a company). A person who signs such certificate knowing or believing that such certificate is false commits an offence and is liable on summary conviction to a fine of US$ 6,097.56 and such person (a) may have his/her license or the license held by the company of which he/she is a director revoked; and (b) may not be granted a further license, nor be permitted to be a director of a licensed company.
A licensed company cannot change its auditor without CIMA’s prior written approval and the licensed company shall explain the circumstances giving rise to such change prior to such approval being given.
A licensed company must have at least 2 natural directors. No change of directors or senior officers can be made without CIMA’s prior written approval. Any director or senior officer convicted in any country of an offence involving dishonesty must be removed upon conviction.
A licensed company cannot open a subsidiary, branch, agency or representative office outside the Cayman Islands or change its name without CIMA’s prior written approval. A licensed company must notify CIMA immediately of any change of its business address.
A licensed company must separately account for the funds and property of each client and its own funds and property.
Under the Securities Investment Business (Conduct of Business) Regulations, 2003 promulgated under SIBA (the Conduct Regulations), a licensed company must, among other things, comply with the following requirements.
General
Maintenance of insurance. A licensed company must at all times maintain insurance to cover professional indemnity, professional liability of senior officers and corporate secretaries and business interruption. Details of the insurance must be filed with CIMA before renewal of the license.
Disclosure of regulator. A licensed company must disclose the fact that it is regulated by CIMA in all correspondence, advertisements and other documents relating to its securities investment business.
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Conduct of senior officers and employees. Each senior officer and employee of a licensed company must enter into a written undertaking to observe the relevant requirements in the Conduct Regulations relating to dealing with their own account.
Gifts. A licensed company must establish and maintain compliance procedures designed to ensure that no senior officer accepts any gift or inducement that is likely to conflict with his/her duties to any client.
Record keeping. A licensed company must maintain sufficient records in relation to advertisements, clients, senior officers and employees, the company itself and securities investment business transactions for at least 5 years from the relevant date.
Notification. A licensed company must notify CIMA immediately in writing of any matter material to CIMA’s supervision of the company including and not limited to a petition for winding up, investigation by other regulatory authorities and fraud involving a senior officer.
Advertising
The contents and format of the advertisement directed at private clients (i.e. persons who are not a licensed company’s market counterparties or professional clients) must comply with certain specific requirements as stipulated in the Conduct Regulations. A “professional client” is defined under the Conduct Regulations to include (a) a public authority; (b) a securities investment business intermediary; (c) a person regulated by CIMA or a recognised regulatory authority of another jurisdiction; (d) a person (other than individuals) with total assets of not less than US$4,878,049; (e) an unregulated mutual fund; (f) a person whose securities are listed on recognised securities exchanges; or (g) a private client classified as a professional client under the Conduct Regulations (e.g. certain high net worth individuals or sophisticated persons whom a licensee may classify as professional clients if certain conditions are met including the client’s informed consent to being so classified). A “market counterparty” means (a) a government; (b) a central bank or other national monetary authority; (c) a supranational; (d) a state investment or public debt management body; or (e) a professional client where classified as a market counterparty under the relevant provisions of the Conduct Regulations.
Standards for Dealing with Clients
Required standards. A licensed company must act in accordance with the standards stipulated in the Conduct Regulations, including high standards of market conduct, integrity and fair dealing, due skill, care and diligence in providing any service, timely and sufficient disclosure, the duty to treat clients fairly in conflict of interests and the duty to take reasonable steps to ensure that, in relation to a private client, any investment strategy recommended to or executed for the client is suitable (except for execution-only services).
Classification of clients. The classification of an individual as a professional client and the classification of a professional client as a market counterparty is subject to certain conditions as set out in the Conduct Regulations. Classifications relating to professional client and market counterparty must be reviewed at least annually to ensure that the classifications remain appropriate.
Lending to private clients. A licensed company should not knowingly lend money to private clients unless certain conditions are met (e.g. assessment of client’s financial standing and client consent).
Client agreement. A licensed company must have a written agreement with each client, which shall include certain items stipulated in the Conduct Regulations (e.g. nature of services, fee calculation and handling of client money etc.). The agreement relating to a contingent liability investment for a private client and the agreement for discretionary portfolio management shall include additional items (e.g. minimum margin or extent of discretion, as applicable).
Contract note. After each transaction, a licensed company must send the client a contract note (unless the client has requested in writing that it should not be issued) with essential features of the transaction.
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Complaints procedure. A licensed company must have an effective system to handle complaints, under which the relevant records (including a central register) are kept and all complaints are responded to within 14 days.
Access to records. During the statutory period during which a licensed company must keep records, a licensed company shall make available to any client within a reasonable period of time upon request the relevant records relating to that client which a licensed company has sent or is required to send to that client under the regulations and correspondence received from that client.
Periodic statements. If it manages a portfolio for a client, a licensed company shall provide the client with a written statement, (i) annually at the request of the client unless (iii) applies; (ii) quarterly unless (i) or (iii) applies; or (iii) monthly if the portfolio has an uncovered position in a contingent liability investment. The statement must contain adequate information on the value and composition of the portfolio as at the end of the period covered by the statement.
Client Asset and Money
Records relating to collateral. If a licensed company has exercised the right to treat collateral assets as its own, it must maintain adequate records to enable it to meet any future obligations including the return of equivalent assets to the client.
Custody of assets. Where client assets are held by a custodian, a licensed company shall ensure that the custodian’s records clearly show that the assets belong to the client. A licensed company must effect appropriate registration or recording of legal title to client assets and ensure that the arrangements for physical custody of documents of title are appropriate to the value and risk of loss of the assets.
Stock lending. A licensed company shall not engage in stock lending with or for a private client or professional client unless the activity is covered in the appropriate client agreement.
Reconciliation. A licensed company shall perform a reconciliation every five weeks or every six months with CIMA’s permission of its records of client assets which are not in its physical custody, with statements from the custodians of such assets.
Further reconciliation. A licensed company shall, every six months, carry out a count of all client assets it physically holds and a reconciliation with its records of such holdings; and a reconciliation between its records of holdings of client assets and the records of the location of such holdings. The reconciliation shall be performed by the total count method or another method approved by CIMA.
Correction of discrepancies. A licensed company shall promptly correct any discrepancies revealed by reconciliations or provide unreconciled shortfall for which there are reasonable grounds for including that the licensed company is responsible.
Client statements. A licensed company shall as often as necessary or on at least one date during its financial year and not less than 6 months after the previous statement date, provide all active clients within 5 weeks of the date as at which the statement is made with a statement listing all clients assets for which a licensed company is responsible. Such statement shall identify separately assets registered in the client’s name; identify separately client assets being used as collateral; show the market value of the collateral as at that date; and in respect of a private client, base the statement on either the trade date or the settlement date and notify the client which basis has been used. The statement should include client money unless a licensed company provides this information in a separate statement within 1 month.
Client bank accounts. A licensed company, upon receipt of client money, shall either pay it into a client bank account as soon as possible and in any event no later than the next business day or pay it out properly. A licensed company shall take reasonable steps to confirm that the banks used for client bank accounts remain appropriate no less than once a year.
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Holding client money with group company. If a licensed company holds client money with a bank that is a group company, it shall disclose such fact and the name of the bank to the client. If the client does not want this arrangement, a licensed company must either deposit the client money with another bank or return the money to the client.
Transfer client money to a securities investment business intermediary. This is allowed for the purpose of a transaction through that intermediary or meeting a collateral obligation, provided that in the case of a private client a licensed company must notify the client.
Confirmation from banks. A licensed company shall ensure that the approved bank at which client money is held confirms in the custody agreement or otherwise in writing that such money is held by a licensed company as trustee and that the bank shall not combine any money in such account with any other account of the licensed company or exercise any lien or similar right against a client bank account in respect of any debt owed by the licensed company.
Reconciliation of client money balances. A licensed company shall at least once every 5 weeks perform reconciliation on (i) the balance on each client bank account recorded by the licensed company with the balance on that account recorded by the relevant bank; (ii) the balance, currency by currency, on each client transaction account with intermediaries recorded by the licensed company with the balance as recorded by the relevant intermediaries; and (iii) its records of collateral received from clients within 10 business days of the date to which the reconciliation relates. The licensed company shall correct any discrepancy and cover any shortfall.
Under the Securities Investment Business (Financial Requirements and Standards) Regulations, 2003 promulgated under SIBA (the Financial Regulations), a licensed company must, among other things, comply with the following requirements.
Adequate financial resources. A licensed company must maintain adequate financial resources to meet its securities investment business commitments and to withstand the risks to which its business is subject.
Reporting currency. A licensed company’s reporting currency shall be CI$ or US$ unless otherwise approved by CIMA.
Accounting records, internal systems and controls, risk management. A licensed company must maintain adequate and current accounting records and maintain internal systems and controls and risk management processes that are adequate for the size, nature and complexity of its activities. The company must also maintain accounting records which provide accounting information for any period during the 5 years immediately preceding the date on which it was first granted the licences.
Reconciliations. A licensed company shall perform reconciliations (i) every 5 weeks on all balances with banks or building societies; (ii) every 5 weeks on all balances and positions with intermediaries; and (iii) once every business day on its own margin accounts with intermediaries. The Company shall correct any differences.
Financial reporting. A licensed company must submit to CIMA an opinion from the auditor on its internal controls at the same time as audited accounts are submitted. The company must also submit (if a broker-dealer) a monthly report and (in all other cases) a quarterly report on a CIMA-mandated form within 15 business days of the end of the relevant month or quarter, as applicable. The company must also submit to CIMA an annual reconciliation between the balance sheet figures on the annual audited accounts and the monthly or quarterly reports prepared at the same date, and an explanation of any differences, when it submits the audited accounts.
Financial resources requirements. A licensed company shall at all times maintain financial resources in excess of its financial resources requirement (base requirements for broker-dealers and market makers being the greater of ¼ of relevant annual expenditure and US$121,951).
Transactions affecting financial resources. CIMA’s written consent is required before a licensed company can reduce or change the nature of its issued capital, or the rights and obligations of shareholders, or enter into any agreement to sell or merge the whole or part of its business to or with a third party. The company must report to CIMA its acquisition of 10% or more of the voting shares of another company.
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In addition, a licensee under SIBA is also subject to CIMA’s rules, statement of guidance, regulatory policies and regulatory procedures governing the licensees’ activities including the licensing, business conduct of the licensee, prudential standards and reporting (in particular, Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation Financing).
CIMA is responsible for supervision and enforcement in relation to SIBA. If at any time it appears to CIMA that a licensee has failed to comply with any requirement under SIBA, any regulation made under SIBA, any guidance note or regulatory condition, CIMA may by written notice direct the licensee to ensure that the requirement is complied with within such period and on such terms and conditions as CIMA may specify and the licensee must comply with the notice.
If CIMA knows or has reasonable ground to believe that a licensee (a) is or appears likely to become unable to meet its obligations as they fall due; (b) is carrying on business fraudulently or otherwise in a manner detrimental to the public interest, to the interest of its clients or creditors; (c) has contravened any provision of SIBA or any regulations made under SIBA, or of the Anti-Money Laundering Regulations of the Cayman Islands (Revised) (the AML Regulations); (d) has failed to comply with a condition of its license; (e) has not conducted the direction and management of its business in a fit and proper manner, or has senior officers, managers or persons who have acquired ownership or control who are not fit and proper persons; or (f) has failed to comply with any lawful direction from CIMA, CIMA may take a broad range of enforcement actions including and not limited to: (i) revoking the license; (ii) imposing conditions or further conditions on the license or amending or revoking such conditions; (iii) applying to the court for an order which is necessary to protect the interests of the clients or creditors of the licensee including an injunction or restitution or disgorgement order; (iv) publishing the breach by the licensee in official publications; (v) at the expense of the licensee, requiring that an auditor’s report be submitted to CIMA on the licensee’s AML systems and procedures for compliance with the AML Regulations; (vi) requiring the substitution of any director or officer of the licensee, or the divestment of ownership or control; (vii) at the expense of the licensee, appointing a person to advise the licensee on the proper conduct of its affairs and to report to CIMA thereon; (viii) at the expense of the licensee, appointing a person to assume control of the licensee’s affairs who shall have all the powers necessary to administer the affairs of the licensee including the power to terminate the securities investment business of the licensee; (ix) in the case of a reasonable belief that the licensee has materially contravened the AML Regulations, reporting the same to the Director of Public Prosecutions; or (x) requiring such action to be taken by the licensee as CIMA reasonably believes necessary for dealing with the circumstances set out in (a) to (f) of this paragraph.
In addition, CIMA may cancel a license if the licensee has ceased, or wishes to cease, to carry on securities investment business, or has not commenced business within one year of the date of the grant of the license.
Hong Kong
Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Chapter 615 of the Laws of Hong Kong) (“AMLO”)
Among other things, the AMLO imposes requirements relating to client due diligence and maintenance of records of specific financial institutions and empowers competent authorities to supervise compliance with the requirements under the AMLO. In addition, the competent authorities are empowered to (1) ensure that proper safeguards exist to prevent contravention of specified provisions in the AMLO and (2) mitigate money laundering and terrorist financing risks.
Drug Trafficking (Recovery of Proceeds) Ordinance (Chapter 405 of the Laws of Hong Kong) (“DTROP”)
Among other things, the DTROP empowers competent authorities to investigate assets suspected to be derived from drug trafficking activities, the freezing of assets on arrest and the confiscation of the proceeds from drug trafficking activities. It is an offense under the DTROP if a person deals with any property knowing or having reasonable grounds to believe it to be the proceeds from drug trafficking. The DTROP requires a person to report to an authorized officer if he/she knows or suspects that any property (directly or indirectly) is the proceeds from drug trafficking or is intended to be used or was used in connection with drug trafficking, and failure to make such disclosure constitutes an offense under the DTROP.
Organized and Serious Crimes Ordinance (Chapter 455 of the Laws of Hong Kong) (“OSCO”)
Among other things, the OSCO empowers officers of the Hong Kong Police Force and the Hong Kong Customs & Excise Department to investigate organized crime and triad activities, and gives the courts jurisdiction to confiscate the proceeds of organized and serious crimes, to issue restraint orders and charging orders in relation to the property of defendants of specified offences. The OSCO extends the money laundering offense to cover the proceeds from all indictable offences in addition to drug trafficking.
United Nations (Anti-terrorism Measures) Ordinance (Chapter 575 of the Laws of Hong Kong) (“UNATMO”)
Among other things, the UNATMO provides that it would be a criminal offense to: (1) provide or collect funds (by any means, directly or indirectly) with the intention or knowledge that the funds will be used to commit, in whole or in part, one or more terrorist acts; or (2) make any funds or financial (or related) services available, directly or indirectly, to or for the benefit of a person knowing that, or being reckless as to whether, such person is a terrorist or terrorist associate. The UNATMO also requires a person to report his knowledge or suspicion of terrorist property to an authorized officer, and failure to make such disclosure constitutes an offense under the UNATMO.
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| C. | Organizational Structure |
The following diagram illustrates our corporate structure as of the date of this annual report.
| D. | Property, Plants and equipment |
Our headquarters are located in Singapore. We also maintained offices in Hong Kong, where we leased one office and one technology support office. We also have offices in the Cayman Islands. All of our offices are leased from independent third parties. As of December 31, 2025, our leased office space was 2,589 square feet in aggregate, including 1,753 square feet in Hong Kong, 800 square feet in Singapore and 36 square feet in the Cayman Islands. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and the related notes included in this annual report. This annual report contains forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties that could cause actual results to differ materially from those contained in or implied by any forward-looking statements.
| A. | Operating Results |
Overview
We are one of the few Chinese investor-focused trading platforms that offer a wide spectrum of products and services. Currently, our business lines include (i) total return swap (TRS) trading business, (ii) contracts for difference (CFD) trading services, and (iii) Over-The-Counter (“OTC”) stock options trading business. 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. Our clients are mostly well-educated and affluent Chinese investors residing both inside and outside the PRC (excluding the United States).
Our trading platform allows users to trade more than 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, the “Stock Connect”). 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.
Factors Affecting Our Performance
We believe that our results of operations are affected by the following factors.
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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. Our results of operations are directly affected by the demand for such services of our existing and potential clients, which are predominantly Chinese investors living both in and outside of China. Their demand for our services arises from the progressive increases of their investable assets and willingness to allocate more of these assets into global financial markets.
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. Since the first half of 2020, global market reacted to a series of unpredictability such as COVID-19, oil price, and heightened trade and geopolitical tensions with fluctuation and volatility, repeatedly triggering market wide circuit breaker. Recently, eruptions of regional tensions, such as the ongoing military conflict involving Ukraine and Russia, and the Israel-Iran war 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.
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. We generated a substantial portion of our revenue from a small number of key clients and revenues from our larger clients have historically fluctuated and may continue to fluctuate based on their trading volume. Our total revenue-generating client accounts decreased from 2,443 as of December 31, 2023 to 2,380 as of December 31, 2024, and further to 2,172 as of December 31, 2025, due to the decline in policy renewal clients in insurance business and CFD trading customers, and cessation of futures and securities brokerage business.
If we can effectively attract new users, retain existing users particularly larger users and engage our users to more frequently trade larger transactions on our platform, our transaction volumes and revenues will grow along with the expansion of our user base. We believe our branding and marketing efforts contribute to customer retention and engagement, and that our ability to cross sell products to our clients also helps drive the growth of our revenue.
Product and service offerings and user experience
Our ability to remain competitive in the industry largely depends on the diversity of our product and service offerings and the user experience provided through our desktop and mobile applications. We began our CFD trading services in May 2019, and we generated a significant portion of our revenues through it since then, which by its nature requires constant product monitoring, innovation and development.
We officially began offering total return swap (TRS) trading services to customers in July 2020, currently offering A-shares (shares that are denominated in Renminbi and traded in the Shanghai Stock Exchange and Shenzhen Stock Exchange) and Hong Kong stock basket linked TRS, which provides international investors seeking to invest in China stock market with higher leverage compared with buying A-share stocks directly. 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. From the fourth quarter of 2023 to the second quarter of 2024, OTC stock options trading business grew rapidly in both the number of option contracts executed and the total nominal value. The stocks underlying the call options we issued to the customers are predominantly China A-Shares, stocks that are denominated in Renminbi and traded in Shanghai and Shenzhen Stock Exchanges in PRC. We serve as the counterparty to our customers in OTC stock options transactions, and we may purchase the same call options back-to-back from the third party option issuers for offsetting. We generated trading gains or losses from the written call options.
As our client base diversifies, the needs for new products and services will further intensify. We strive to continually develop new products and services to keep up with customer demand and industry trends.
Effectiveness of cost control measures
Our results of operations depend on our ability to manage our costs and 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. For us to maintain and expand our profitability, we must make sure that our commission expenses remain at a reasonable or reduced level while our own commissions and fees stay at comparable or higher rates. This will depend on going market rates and our ability to successfully negotiate with our partners. We believe that as our user base and our platform continue to grow, that we will have greater leverage in dealing with our business partners, allowing us to negotiate improved commission rates and interest rates.
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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. 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. From 2024 to 2025, the Group returned its various trading licenses to HKSFC and MAS. As of December 31, 2025, the Group is subject to the regulations of CIMA solely. Certain changes could further cause us to change our business model or transactional processes to comply with these new requirements. We may also be subject to new taxes or cumbersome reporting obligations, which will bring heavier financial burden to us. If we fail to comply with any of the applicable regulations, we may be subject to monetary penalties, which would also affect our results of operations. Further, if we expand into new markets such as Southeast Asia, our operations in those markets will be subject to local regulations which could also prove burdensome. 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, 2025, 2024 and 2023
Revenues (Losses)
Our revenues consist of commissions, trading gains (losses), interest income, interest income and others. The following table sets forth the breakdown of our revenues by nature in dollar amount and as percentages of total revenues for the periods indicated.
| Years ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Commissions | 2,583 | 0.0 | 1,239,621 | (25.3 | ) | 7,023,813 | 33.2 | |||||||||||||||||
| Trading gains/(losses) | 785,370 | 8.4 | (32,526,874 | ) | 668.4 | 10,479,504 | 49.8 | |||||||||||||||||
| Interest income | 173,414 | 1.8 | 692,963 | (14.2 | ) | 2,424,676 | 11.5 | |||||||||||||||||
| Staking reward from digital assets | 45,294 | 0.5 | - | - | - | - | ||||||||||||||||||
| Other income | 8,383,990 | 89.3 | 25,728,209 | (528.9 | ) | 1,163,251 | 5.5 | |||||||||||||||||
| Total | 9,390,651 | 100.0 | (4,866,081 | ) | 100.0 | 21,091,244 | 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. We received commissions from the insurance companies based on a percentage of the premium paid by insurance purchasers. In June 2024, the Group disposed of its insurance brokerage services. In 2025, the Group exited from its futures and securities brokerage services in Hong Kong markets. Unlike commissions from insurance brokerage services, we charge securities brokerage commissions and market making commissions based on amount of transaction volume, or the number of shares, lots of contracts executed in each order, which generally vary in accordance with the type of products or services we offer, eligibility for discounts and other factors. See “Business — Our Business Lines”.
Trading gains/(losses)
Trading gains, offset by losses, are derived as showed in the following table. The line of CFD trading gains/(losses) is derived from (i) our managed flow portfolio trading positions where we act as counterparty to our clients’ trades from our CFD trading services, and (ii) our dealing bid/offer spreads on our clients’ CFD transactions. The line of TRS trading gains/(losses) is derived from our proprietary TRS trading activities on our own accounts. The line of OTC stock options trading gains/(losses) is derived from the written call options where we act as the counterparty to our customers as well as from the back-to-back offsetting orders purchased with third party option issuers. The line of Other trading gains/(losses) is derived from exchange traded stock.
| Years ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| CFD trading (losses)/gains | (11 | ) | 0.0 | 396,765 | (1.2 | ) | 16,204,480 | 154.6 | ||||||||||||||||
| TRS trading gains/(losses) | 770,878 | 98.1 | (672,460 | ) | 2.1 | (5,076,247 | ) | (48.4 | ) | |||||||||||||||
| OTC stock option trading gains/(losses) | 8,277 | 1.1 | (32,259,164 | ) | 99.2 | (798,725 | ) | (7.6 | ) | |||||||||||||||
| Other trading gains | 6,226 | 0.8 | 7,985 | (0.1 | ) | 149,996 | 1.4 | |||||||||||||||||
| Total | 785,370 | 100.0 | (32,526,874 | ) | 100.0 | 10,479,504 | 100.0 | |||||||||||||||||
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Interest income
Interest income primarily consists 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.
Other income
Other income primarily includes gain from extinguishment of liabilities 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. In 2025, the Group completely exited from its futures and securities brokerage services in Hong Kong markets. The following table sets forth the breakdown of our revenues by business lines in amounts and as percentages of total revenues for the periods indicated.
| Years ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| CFD trading services | 321 | 0.0 | 521,860 | (10.7 | ) | 19,326,140 | 91.6 | |||||||||||||||||
| TRS trading services | 923,482 | 9.8 | 9,140 | (0.1 | ) | (2,342,395 | ) | (11.1 | ) | |||||||||||||||
| OTC stock options trading | 8,089,636 | 86.2 | (7,978,722 | ) | 164.0 | (798,725 | ) | (3.6 | ) | |||||||||||||||
| Futures and securities brokerage services | - | - | 653,340 | (13.5 | ) | 2,570,495 | 12.1 | |||||||||||||||||
| Others | 377,212 | 4.0 | 1,928,301 | (39.7 | ) | 2,335,729 | 11.0 | |||||||||||||||||
| Total | 9,390,651 | 100.0 | (4,866,081 | ) | 100.0 | 21,091,244 | 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. It primarily consists of (i) commissions we charge our clients based on amount of transaction volume, or the number of shares, lots of contracts executed in each order, which generally vary in accordance with the type of products we offer, eligibility for discounts and other factors, (ii) dealing bid/offer spreads on our clients’ CFD transactions, (iii) trading gains/(losses) derived from our managed flow portfolio trading positions where we act as counterparty to our clients’ trades, and (iv) interest rate difference between currency pairs we hold resulting from our rolling over forex positions. See “Business — Our Business Lines — CFD Trading Services.”
TRS trading services income
We officially began offering total return swap (TRS) trading services to customers in July 2020. Revenue generated from TRS trading services includes (i) trading gains/(losses) from our proprietary TRS trading activities; (ii) interest income earned on loans provided to TRS trading customers and (iii) commissions, order processing charges and other income resulting from TRS trading services.
OTC stock options trading service
We serve as the counterparty to our customers in OTC stock call options transactions, and we may purchase the same call options back-to-back from the third party option issuers for offsetting. OTC stock options trading income (loss) consisting of the changes in fair value associated with the call options we sold to customers as well as the offsetting call options we purchased from third party option issuers. In addition, it also included the gain from extinguishment of liabilities due to certain customers of OTC stock options service for the years ended December 31, 2025 and 2024.
Others
Others include the staking reward from digital assets, revenue generated from insurance brokerage services, payment service charges, foreign currency exchange gain and interests earned on short-term loans we extend to unrelated third parties and bank deposit etc.
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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, | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Commission and fees expenses | 1,938 | 0.0 | 955,819 | (19.6 | ) | 3,418,398 | 16.2 | |||||||||||||||||
| Custodian and other fees for digital assets | 196,211 | 2.1 | - | - | - | - | ||||||||||||||||||
| Compensation expenses | 1,659,252 | 17.7 | 3,264,093 | (67.0 | ) | 4,099,852 | 19.4 | |||||||||||||||||
| Communication and technology expenses | 1,548,701 | 16.5 | 3,390,517 | (69.6 | ) | 3,059,462 | 14.5 | |||||||||||||||||
| General and administrative expenses | 603,217 | 6.4 | 878,494 | (18.0 | ) | 1,432,148 | 6.7 | |||||||||||||||||
| Professional fees | 1,794,262 | 19.1 | 4,451,834 | (91.7 | ) | 3,407,365 | 16.1 | |||||||||||||||||
| Services fees | 578,037 | 6.2 | 1,888,700 | (38.8 | ) | 2,352,832 | 11.1 | |||||||||||||||||
| Research and development | - | - | - | - | 7,115 | - | ||||||||||||||||||
| Interest expense | 2,130,850 | 22.7 | 821,932 | (16.8 | ) | 2,413,102 | 11.4 | |||||||||||||||||
| Occupancy expenses | 154,836 | 1.6 | 747,750 | (15.3 | ) | 870,254 | 4.5 | |||||||||||||||||
| Marketing | 77,834 | 0.8 | 3,598,849 | (73.9 | ) | 4,196,795 | 19.8 | |||||||||||||||||
| Depreciation | 2,391,204 | 25.5 | 2,435,712 | (50.4 | ) | 1,795,011 | 8.5 | |||||||||||||||||
| Change in fair value of digital assets | 3,118,099 | 33.2 | - | - | - | - | ||||||||||||||||||
| Investment loss on digital assets | 312,659 | 3.3 | - | - | - | - | ||||||||||||||||||
| Change in fair value of warrant liabilities | (123,188 | ) | (1.3 | ) | 13,501 | (0.2 | ) | (565,313 | ) | (2.6 | ) | |||||||||||||
| Other expenses | (85,987 | ) | (0.9 | ) | 240,378 | (4.9 | ) | 430,214 | 2.0 | |||||||||||||||
| Total | 14,357,925 | 152.9 | 22,687,579 | (466.2 | ) | 26,917,235 | 127.6 | |||||||||||||||||
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.
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.
Communication and technology expenses
Our communication and technology expenses primarily consist of subscription fees and system fees we paid to stock exchanges and third parties trading system vendors, to subscribe for trading systems, market data and news, as well as bandwidth fees and other expenses relating to the telecommunication infrastructure.
General and administrative expenses
Our general and administrative expenses mainly consist of license and registration fees, insurance expenses, utility expenses, travel expenses and bank charges.
Professional fees
Our professional fees primarily consist of service fees for legal, accounting, consulting, and other professional services which are needed during the ordinary course of our business operation.
Service fees
Our service fees primarily consist of service fees charged by independent contractors and outside consultants we hired in our normal business course and one-off special incentive scheme awarded to them.
Research and development
Research and development expenses consist primarily of designing, coding, project management, and other IT services related to developing and enhancing our Metaverse project.
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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.
Depreciation
Our depreciation primarily consists of the depreciation of copyrighted trading software programs and other miscellaneous depreciation of office furniture and computers.
Marketing expenses
Our marketing expenses mainly consist of expenses spent in branding, and promoting our business.
Change in fair value of digital assets
Change in fair value of digital assets represents mark-to-market fair value adjustments to the digital assets on hand. For the year ended December 31, 2025, we had digital assets, including USDT, BTC, HYPE, SOL and SUI.
Investment loss on digital assets
Investment loss on digital assets represents loss incurred on USDT futures in which we use USDT as margin and settlement.
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.
Taxation
Cayman Islands and British Virgin Islands
Under the current laws of the Cayman Islands and British Virgin Islands, we are not subject to tax on income or capital gains. Neither Cayman Islands nor British Virgin Islands withholding tax will be imposed upon payments of dividends from Lion to its shareholders.
Hong Kong
Our wholly-owned Hong Kong subsidiaries are subject to Hong Kong profit tax on their activities conducted in Hong Kong. Effective for tax years ending on or after December 31, 2018, the applicable tax rate was 8.25% on the first HK$2 million (US$0.3 million) of assessable profits and 16.5% on any assessable profits above that threshold. In addition, the 8.25% tax rate can only be utilized by one entity in a controlled group, whereas all other entities in the controlled group utilize the 16.5% tax rate. Dividends from our Hong Kong subsidiaries to Lion are exempt from Hong Kong withholding tax.
Singapore
Our wholly-owned Singapore subsidiary is subject to a corporate tax rate of 17.0%. It has not generated revenue yet since establishment.
United States
Our wholly-owned U.S. subsidiary is subject to a federal tax rate of 21.0%. It has been dormant since we acquired it in June 2020.
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Results of Operations for the Years Ended December 31, 2025, 2024, and 2023
The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our revenues for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. Our limited operating history makes it difficult to predict our future operating results. We believe that the period-to-period comparison of operating results should not be relied upon as being indicative of our future performance.
| Years ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| CFD trading services | 321 | 0.0 | 521,860 | (10.7 | ) | 19,326,140 | 91.6 | |||||||||||||||||
| TRS trading services | 923,482 | 9.8 | 9,140 | (0.1 | ) | (2,342,395 | ) | (11.1 | ) | |||||||||||||||
| OTC stock options trading | 8,089,636 | 86.2 | (7,978,722 | ) | 164.0 | (798,725 | ) | (3.6 | ) | |||||||||||||||
| Futures and securities brokerage services | - | - | 653,340 | (13.5 | ) | 2,570,495 | 12.1 | |||||||||||||||||
| Others | 377,212 | 4.0 | 1,928,301 | (39.7 | ) | 2,335,729 | 11.0 | |||||||||||||||||
| Total revenues | 9,390,651 | 100.0 | (4,866,081 | ) | 100.0 | 21,091,244 | 100.0 | |||||||||||||||||
| Expenses | ||||||||||||||||||||||||
| Commission and fees expenses | (1,938 | ) | (0.0 | ) | (955,819 | ) | 19.6 | (3,418,398 | ) | (16.2 | ) | |||||||||||||
| Custodian and other fees for digital assets | (196,211 | ) | (2.1 | ) | - | - | - | - | ||||||||||||||||
| Compensation expenses | (1,659,252 | ) | (17.7 | ) | (3,264,093 | ) | 67.0 | (4,099,852 | ) | (19.4 | ) | |||||||||||||
| Communication and technology expenses | (1,548,701 | ) | (16.5 | ) | (3,390,517 | ) | 69.6 | (3,059,462 | ) | (14.5 | ) | |||||||||||||
| General and administrative expenses | (603,217 | ) | (6.4 | ) | (878,494 | ) | 18.0 | (1,432,148 | ) | (6.7 | ) | |||||||||||||
| Professional fees | (1,794,262 | ) | (19.1 | ) | (4,451,834 | ) | 91.7 | (3,407,365 | ) | (16.1 | ) | |||||||||||||
| Service fees | (578,037 | ) | (6.2 | ) | (1,888,700 | ) | 38.8 | (2,352,832 | ) | (11.1 | ) | |||||||||||||
| Research and development | - | - | - | - | (7,115 | ) | - | |||||||||||||||||
| Interest expenses | (2,130,850 | ) | (22.7 | ) | (821,932 | ) | 16.8 | (2,413,102 | ) | (11.4 | ) | |||||||||||||
| Occupancy expenses | (154,836 | ) | (1.6 | ) | (747,750 | ) | 15.3 | (870,254 | ) | (4.5 | ) | |||||||||||||
| Marketing | (77,834 | ) | (0.8 | ) | (3,598,849 | ) | 73.9 | (4,196,795 | ) | (19.8 | ) | |||||||||||||
| Depreciation | (2,391,204 | ) | (25.5 | ) | (2,435,712 | ) | 50.4 | (1,795,011 | ) | (8.5 | ) | |||||||||||||
| Change in fair value of digital assets | (3,118,099 | ) | (33.2 | ) | - | - | - | - | ||||||||||||||||
| Investment loss on digital assets | (312,659 | ) | (3.3 | ) | - | - | - | - | ||||||||||||||||
| Change in fair value of warrant liabilities | 123,188 | 1.3 | (13,501 | ) | 0.2 | 565,313 | 2.6 | |||||||||||||||||
| Other expenses | 85,987 | 0.9 | (240,378 | ) | 4.9 | (430,214 | ) | (2.0 | ) | |||||||||||||||
| Total expenses | (14,357,925 | ) | (152.9 | ) | (22,687,579 | ) | 466.2 | (26,917,235 | ) | (127.6 | ) | |||||||||||||
| (Loss)/income before income taxes | (4,967,274 | ) | (52.9 | ) | (27,553,660 | ) | 566.2 | (5,825,991 | ) | (27.6 | ) | |||||||||||||
| Income tax expenses | (1,002 | ) | (0.0 | ) | (1,245 | ) | 0.0 | (1,058 | ) | (0.0 | ) | |||||||||||||
| Net loss | (4,968,276 | ) | (52.9 | ) | (27,554,905 | ) | 566.2 | (5,827,049 | ) | (27.6 | ) | |||||||||||||
| Non-controlling interests | ||||||||||||||||||||||||
| Net (loss) attributable to non-controlling interests | (11,541 | ) | (0.1 | ) | (105,409 | ) | 2.2 | (568,041 | ) | (2.7 | ) | |||||||||||||
| Net loss attributable to LGHL | (4,956,735 | ) | (52.8 | ) | (27,449,496 | ) | 564.0 | (5,259,008 | ) | (24.9 | ) | |||||||||||||
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Year ended December 31, 2025 Compared to Year ended December 31, 2024
Revenues
Our total revenues changed from a loss of US$(4.9)million for the year ended December 31, 2024 to an income of US$9.4 million for the year ended December 31, 2025, primarily due to the change of US$33.3 million from the trading losses to trading income in OTC Stock Options trading services and decrease of US$ 17.3 million in other income.
Our total revenue-generating client accounts decreased from 2,380 as of December 31, 2024 to 2,172 as of December 31, 2025. The decrease in 2025 was primarily due to the cessation of futures brokerage business. As of December 31, 2025, the total 2,172 active revenue-generating accounts included 1,538 accounts for CFD trading, 317 accounts for TRS trading and 317 accounts for OTC stock options trading. As of December 31, 2024, the total 2,380 active revenue-generating accounts included 202 accounts for futures trading, 1,545 accounts for CFD trading, 316 accounts for TRS trading and 317 accounts for OTC stock options trading.
CFD Trading Services Income. Historically, we derived 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 high volatility historically. Revenue generated from CFD trading services decreased by US$0.5 million from US$0.5 million for the year ended December 31, 2024 to US$321 for the year ended December 31, 2025. The decrease in CFD trading activities from key clients was primarily because we have shifted focus to TRS trading in 2025.
TRS Trading Services Income. Revenue generated from TRS trading services increased by US$0.9 million from US$9,140 for the year ended December 31, 2024 to US$0.9 million in the same period of 2025, due to the trading income from our proprietary TRS trading activities as a result of a remarkable comeback in China’s stock markets during the year ended December 31, 2025.
OTC Stock Options Trading Loss. OTC stock options income (loss) consisting of the changes in fair value of the call options we sold to customers as well as the offsetting call options we purchased from third party option issuers, changed from a loss of US$8.0 million in 2024 to an income of US$8.1 million in 2025. The trading loss from OTC stock options was primarily cause by high market volatility in July and August 2024. For the year ended December 31, 2025, OTC stock options trading income primarily consisted a gain of US$8.1 million from extinguishment of liabilities as a result of Debt to Equity Agreements under which additional shares were issued to further settle payables owed to certain customer. For the year ended December 31, 2024, OTC stock options trading loss consisted of a US$32.3 million decline in fair value of the call options sold to customers, partially offset by a gain of US$24.3 million from extinguishment of liabilities as a result of Debt to Equity Agreements under which shares were issued to settle payables owed to customer creditors. The nominal value of OTC stock call options sold decreased from US$2,388 million in 2024 to US$2.9 million in 2025.
Futures and Securities Brokerage Income. Revenues from futures and securities brokerage services decreased from US$0.7 million in 2024 to nil in 2025. Futures brokerage trading volume in the number of executed futures contracts decreased from 246,159 lots in 2024 to nil in 2025. The decrease was a result of the Group’s completely existing from the brokerage service in Hong Kong markets, the businesses conducted under Hong Kong SFC’s licenses, since these businesses did not generate profits in the past few years.
Others. Other income decreased by US$1.5 million from US$1.9 million in 2024, to US$0.4 million in 2025. The decrease in other income was primarily attributed to the decrease in payment service charge and decrease in insurance brokerage commission as the Group disposed of its insurance brokerage services in June 2024.
Expenses
Our total expenses decreased by US$8.3 million, or 36.6% from US$22.7 million for the year ended December 31, 2024 to US$14.4 million for the year ended December 31, 2025, which was primarily due to a decrease in commission expenses, compensation and service fees, communication and technology expenses, professional expenses, service fees and marketing expenses, partially offset by a decrease in fair value in digital assets.
Commission and Fees Expenses. Our commission expenses decreased by US$1.0 million from US$1.0 million in 2024 to US$1,938 in 2025 which was in line with a decrease in commission and service fees from US$1.2 million in 2024 to $2,583 in 2025.
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Compensation Expenses. Our compensation expenses decreased by US$1.6 million, or 49.2% from US$3.3 million in 2024 to US$1.7 million in 2025, which was primarily due to the decrease in the headcount resulting from the disposal of subsidiaries.
Communication and Technology Expenses. Our communication and technology expenses decreased by US$1.9 million, or 54.3% from US$3.4 million in 2024 to US$1.5 million in 2025, which was primarily due to the higher expenditure incurred in the year of 2024 for investment in technology such as enhancing the integration of AI application with OTC options and developing intelligent trading algorithms, and the launch of multi-currency trading account services etc.
Professional Fees. Our professional fees decreased by US$2.7 million, or 59.7% from US$4.5 million in 2024 to US$1.8 million in 2025, which was primarily due to that the Company engaged an industry professional team to provide operations, transaction processing, risk management, customer management and other services surrounding its OTC options business in the year of 2024.
Services Fees. Our services fees for independent contractors and consultants decreased by US$1.3 million, or 69.4% from US$1.9 million in 2024 to US$0.6 million in 2025, due to a decreased number of contracted service providers for CFD and TRS trading business.
Marketing Expenses. Marketing expenses decreased by US$3.5 million, or 97.8% from US$3.6 million in 2024 to US$0.1 million in 2025, which was primarily because we adopted cost conservation strategy and reduced expenditure on marketing campaigns.
Change in fair value of digital assets. The Company purchased and held digital assets for the year ended December 31, 2025. The Company measured digital assets at fair value. For the year ended December 31, 2025, the Company recorded a decrease in fair value of digital assets of $3.1 million.
Investment loss on digital assets. The Company used USDT as margins and settlement in futures transactions. For the year ended December 31, 2025, the Company incurred loss of $0.3 million in futures transactions.
Income Tax Expenses
Our income tax expenses kept stable at US$1,002 and US$1,245 for the years ended December 31, 2025 and 2024, respectively.
Net loss
As a result of the foregoing, we had net loss of US$5.0 million and $27.6 million for the years ended December 31, 2025 and 2024, respectively.
Net loss attributable to LGHL
After allocating net loss to non-controlling interest, net loss attributable to parent company was US$5.0 and US$27.4 million for the years ended December 31, 2025 and 2024, respectively.
Year ended December 31, 2024 Compared to Year ended December 31, 2023
Revenues
Our total revenues decreased by US$26.0 million from an income of US$21.1 million for the year ended December 31, 2023 to a loss of US$(4.9) million for the year ended December 31, 2024, primarily due to the decrease in CFD trading service revenue and the trading losses in OTC Stock Options trading services.
Our total revenue-generating client accounts increased from 1,722 as of December 31, 2017 to 5,261 as of December 31, 2021, and decreased to 4,526 as of December 31, 2022 and 2,443 as of December 31, 2023, and further decreased to 2,380 as of December 31, 2024. The decrease in 2024 was primarily due to the decline in policy renewal clients in insurance business and in securities brokerage services. The Group disposed of its insurance brokerage services and ceased its securities brokerage services in 2024. As of December 31, 2024, the total 2,380 active revenue-generating accounts included 202 accounts for futures trading, 1,545 accounts for CFD trading, 316 accounts for TRS trading and 317 accounts for OTC stock options trading. And as of December 31, 2023, the total 2,443 active revenue-generating accounts included 188 accounts for futures trading, 98 accounts for securities trading, 1,547 accounts for CFD trading, 348 accounts for TRS trading, 37 accounts for OTC stock options trading and 262 accounts for insurance products.
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CFD Trading Services Income. Historically, we derived 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 high volatility historically. Revenue generated from CFD trading services decreased by US$18.8 million from US$19.3 million for the year ended December 31, 2023 to US$0.5 million for the year ended December 31, 2024, primarily attributable to a decrease of US$15.8 million in trading gains and a decrease of US$3.0 million in commission income. In 2024, there was a significant decrease in trading activities from key clients. In the meantime, the Group shifted its focus to OTC options trading in 2024, which combined led to the significant decrease in both market making commission income and CFD trading gains.
TRS Trading Services Income. Revenue generated from TRS trading services increased by US$2.4 million from a loss of US$(2.3) million in 2023 to an income of US$9,140 in 2024, due to the trading losses from our proprietary TRS trading activities decreased by US$4.4 million, partially offset by a decrease of US$1.5 million in interest income earned on loans provided to TRS trading customers and a decrease of US$0.5 million in commission and other income. China’s stock markets experienced a protracted slump from 2021 to September 2024. After a brief rally, momentum faded and equities have slowly trended lower since October 2024. The decrease in interest income was largely attributable to the decline in the daily average balance of the loans that TRS trading customers borrowed. This decline reflected dampened customer sentiment toward China’s stock markets, evident in reduced trading volumes and smaller position sizes.
OTC Stock Options Trading Loss. We started to sell OTC stock call options in 2021 and from the fourth quarter of 2023 to the third quarter of 2024, OTC stock options trading business grew rapidly. OTC stock options loss consisting of the changes in fair value of the call options we sold to customers as well as the offsetting call options we purchased from third party option issuers, increased from a loss of US$0.8 million in 2023 to a loss of US$8.0 million in 2024. In July and August 2024, we observed the high market volatility and promptly recalibrated our trading strategy. Although our existing positions still led to considerable trading losses, the strategic adjustment helped mitigate further potential losses, which could have been even more substantial during the China’s market rally in early fall of 2024. For the year ended December 31, 2024, OTC stock options trading loss consisted of a US$32.3 million decline in fair value of the call options sold to customers, partially offset by a gain of US$24.3 million from extinguishment of liabilities as a result of Debt to Equity Agreements under which shares were issued to settle payables owed to customer creditors. The nominal value of OTC stock call options sold increased from US$181.5 million in 2023 to US$2,388 million in 2024.
Futures and Securities Brokerage Income. Revenues from futures and securities brokerage services decreased from US$2.6 million in 2023 to US$0.7 million in 2024. Futures brokerage trading volume in the number of executed futures contracts decreased from 913,583 lots in 2023 to 246,159 lots in 2024. The decrease was a result of the Group’s retreating from the brokerage service in Hong Kong markets, the businesses conducted under Hong Kong SFC’s licenses, since these businesses did not generate profits in the past few years.
Others. Other income decreased by US$0.4 million from US$2.3 million in 2023, to US$1.9 million in 2024. The decrease in other income was primarily attributed to the decrease in insurance brokerage commission of US$0.7 million, as the Group disposed of its insurance brokerage services in June 2024.
Expenses
Our total expenses decreased by 15.7% from US$26.9 million in 2023 to US$22.7 million in 2024, primarily due to a decrease in commission expenses, interest expenses, compensation and service fees, and marketing expenses, partially offset by increases in professional fees and depreciation.
Commission and Fees Expenses. Our commission expenses decreased by US$2.4 million from US$3.4 million in 2023 to US$1.0 million in 2024, primarily due to a decrease of US$0.5 million in our insurance brokerage commission expenses, a decrease of US$1.2 million in our futures brokerage commission expenses and a decrease of US$0.7 million in our TRS trading commission expenses.
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Compensation Expenses. Our compensation expenses decreased by 20.4% from US$4.1 million in 2023 to US$3.3 million in 2024, primarily due to the decrease in the headcount and the discretionary bonus paid out in the second half of 2023.
Communication and Technology Expenses. Our communication and technology expenses of US$3.4 million in 2024, increased from US$3.1 million in prior year, primarily due to the increased investment in technology such as enhancing the integration of AI application with OTC options and developing intelligent trading algorithms, and the launch of multi-currency trading account services etc.
General and Administrative Expenses. Our general and administrative expenses decreased by 38.7% to US$0.9 million from US$1.4 million in the prior year period, primarily resulting from the cost control measures.
Professional Fees. Our professional fees increased from US$3.4 million in 2023 to US$4.5million in 2024, primarily due to that the Company engaged an industry professional team to provide operations, transaction processing, risk management, customer management and other services surrounding its OTC options business.
Services Fees. Our services fees for independent contractors and consultants decreased by 19.7% from US$2.4 million in 2023 to US$1.9 million in 2024, due to a decreased number of contracted service providers for CFD and TRS trading business.
Interest Expenses. Our interest expenses decreased to US$0.8 million in 2024 from US$2.4 million in 2023 mainly attributable to a decrease in the interest we paid for loans borrowed from our TRS trading business partners.
Occupancy Expenses. Our occupancy expenses were US$0.8 million in 2024, remaining comparable to the prior year.
Marketing Expenses. Marketing expenses decreased by 14.2% from US$4.2 million in 2023 to US$3.6 million in 2024, mainly due to a decrease in marketing expenses incurred in the second half of 2024.
Depreciation. Our depreciation expenses increased by 35.7% from US$1.8 million in 2023 to US$2.4 million in 2024, mainly attributable to newly added software in November 2023.
Change in fair value of warrant liabilities. The loss from the change in fair value of the outstanding Public and Private Warrants in 2024 was US$0.01 million, compared to a gain of US$0.6 million in 2023.
Other Expenses. Other expenses decreased from US$430,000 for the year ended December 31, 2023 to US$240,000 for the year ended December 31, 2024.
Income Tax Expenses
Our income tax expenses remained at US$1,000 in 2024.
Net loss
As a result of the foregoing, we had net loss of US$27.6 million in 2024 compared to a net loss of US$5.8 million in 2023.
Net loss attributable to LGHL
After allocating net loss to non-controlling interest, net loss attributable to parent company was US$27.4 million in 2024, compared to US$5.3 million in 2023.
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| B. | 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, 2025 and 2024, we had cash and cash equivalents (excluding cash held on behalf of clients) of US$20.1 million and US$16.9 million, respectively. Our cash and cash equivalents primarily consist of cash on hand and cash deposited with banks which are unrestricted for withdrawal or use. In addition, we also held digital assets of US$2.0 million and financial assets measured fair value of $1.9 million, both of which were highly liquid. We did not have available and unused external source of liquidity as of the years ended December 31, 2025, 2024, and 2023.
| As of Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Unrestricted cash | $ | 20,124,296 | $ | 16,934,202 | $ | 28,953,780 | ||||||
| Stable coins | 22 | - | - | |||||||||
| Digital assets | 1,951,506 | - | - | |||||||||
| Financial assets measured at fair value | 1,870,492 | - | - | |||||||||
| Securities owned, at fair value | 8,644 | 2,423 | 4,522,805 | |||||||||
| $ | 23,954,960 | $ | 16,936,625 | $ | 33,476,585 | |||||||
We have been able to meet our working capital needs in the past. Based on our current operating plan and financial condition including liquidity sources, we expect that our existing unrestricted cash and short-term investments and our anticipated cash flows from operations may not be sufficient to meet our anticipated working capital requirements and material cash requirements for the next 12 months. In the long term, our working capital needs will depend on many factors, including the rate of our business and revenue growth, the timing of our various expenditures and cash provided by and used in operating, investing and financing activities and capital expenditures.
We had recurring operating losses, the net loss was US$5.0 million for the year ended December 31, 2025 and the accumulative deficit was US$72.2 million as of December 31, 2025. We had negative cash flows of US$3.5 million generated from operating activities. Given these conditions, we conclude that there is substantial doubt about our ability to continue as a going concern within one year after the issuance date.
We will implement strategies and plans to grow our business and generate substantial revenue, and take further measures to control operating costs. To the extent our unrestricted cash, short-term investments and cash flow from operating activities are insufficient to satisfy its liquidity needs in accordance with our strategic plan in the future, we may decide to raise additional funds through the sale of equity or convertible debt securities, or obtain financial support and credit guarantee from the related parties. If additional funding is necessary or desirable, however, we may not be able to effect an equity financing, debt financing or financial support from related parties in amounts or on terms acceptable to us or at all. If we are unable to raise additional capital when needed, its results of operations and financial condition would be materially and adversely impacted.
The following table presents our cash and cash equivalents held in various currencies as of December 31, 2025 and 2024. We closely monitor our cash balance and future payments obligations by preparing monthly cash balance and fund requirement reports to provide a timely overview of our overall cash position and liquidity and risk control measurements. Such reports are reviewed by our chief financial officer and chief executive officer.
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| US$ | US$ | |||||||
| Held in USD | $ | 19,753,449 | $ | 16,444,189 | ||||
| Held in HKD | 240,987 | 240,281 | ||||||
| Held in RMB | 11,021 | 4,497 | ||||||
| Held in SGD and other currencies | 118,839 | 245,235 | ||||||
| Total cash and cash equivalents | $ | 20,124,296 | $ | 16,934,202 | ||||
As of December 31, 2025 and 2024, 0% and 0.03% of our cash and cash equivalents were held in China. See “Transfers of Cash from Our Subsidiaries to the Company” below for the ability of subsidiaries to transfer funds to the holding company.
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The following table sets forth a summary of our cash flows for the periods indicated:
| For the Years Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Net cash provided by (used in) operating activities | $ | (3,523,695 | ) | $ | (19,111,239 | ) | $ | 13,412,873 | ||||
| Net cash provided by (used in) investing activities | (21,631,403 | ) | (114,279 | ) | 1,416,000 | |||||||
| Net cash provided by financing activities | 28,027,716 | 5,490,040 | 1,659,010 | |||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash | 59,859 | 63,951 | 205,913 | |||||||||
| Net Change in Cash, Cash Equivalents, and Restricted Cash | 2,932,477 | (13,671,527 | ) | 16,693,796 | ||||||||
| Cash, Cash Equivalents, and Restricted Cash - Beginning of Year | 17,424,868 | 31,096,395 | 14,402,599 | |||||||||
| Cash, Cash Equivalents, and Restricted Cash - End of Year | $ | 20,357,345 | $ | 17,424,868 | $ | 31,096,395 | ||||||
Operating Activities
Net cash used in operating activities for the year ended December 31, 2025 was US$3.5 million, primarily attributable to our net losses of US$5.0 million, as adjusted by non-cash items of a gain from extinguishment of liabilities of US$8.1 million, a decrease in fair value of digital assets of US$3.1 million, amortization of debt discounts of US$2.1 million and depreciation expenses of US$2.4 million, and changes in operating assets and liabilities of an increase of US$0.6 million in prepaids, deposits and others, partially offset by an increase of non-current liabilities of US$2.7 million.
Net cash used in operating activities for the year ended December 31, 2024 was US$19.1 million, primarily attributable to our net losses of US$27.6 million, as adjusted by (i) a gain from extinguishment of liabilities of US$24.3 million, and (ii) a decrease of US$14.2 million in payables to broker-dealers and clearing organizations. These were partially offset by (i) share based compensation of US$1.3 million, and the depreciation expenses of US$2.4 million, (ii) a decrease of US$12.8 million in receivables from broker-dealers and clearing organizations, (iii) an increase of US$22.4 million in payables to customers, (iv) a decrease of US$4.5 million in securities owned and (v) an increase of US$2.5 million in accrued expenses and other payables.
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. These were partially offset by (i) a decrease of US$1.3 million in payables to customers and (ii) a decrease of US$9.9 million in payables to broker-dealers and clearing organizations.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2025 was US$21.6 million, primarily attributable to (i) purchase of digital assets of US$21.6 million and (ii) purchases of property and equipment of US$11,480.
Net cash used in investing activities for the year ended December 31, 2024 was US$114,000, attributable to net proceeds from sale of subsidiaries.
Net cash provided by investing activities for the year ended December 31, 2023 was US$1.4 million, primarily attributable to (i) proceeds of US$1.5 million received from the sale of the subsidiary in mainland China, (ii) collection of loans receivable of US$ 7.8 million, partially offset by the purchase of copyrighted trading software programs of UD$7.9 million.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2025 was US$28.0 million, primarily attributable to (i) net proceeds of US$25.2 million from convertible debenture, (ii) net proceeds of US$5.9 million from exercise of warrants and (iii) net proceeds of US$0.4 million from short-term borrowings, partially offset by repayment of short-term borrowings of US$3.5 million.
Net cash provided by financing activities for the year ended December 31, 2024 was US$5.5 million, primarily attributable to (i) net proceeds of US$2.3 million from convertible debenture and (ii) net proceeds of US$3.2 million from short-term borrowings.
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.
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Transfers of Cash from Our Subsidiaries to the Company
Lion Group Holding Ltd. was incorporated in Cayman Islands on February 11, 2020, to be the ultimate parent company of the Group upon the consummation of a business combination on June 16, 2020. As a holding company with no material operations of our own, we conduct our substantial operations through our subsidiaries in Hong Kong and the Cayman Islands and our apps are available to download 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. Lion Group Holding Ltd. is permitted under the laws of Cayman Islands to provide funding to our subsidiaries in Hong Kong and Cayman Islands through loans or capital contributions without restrictions on the amount of the funds. Lion Group Holding Ltd. can distribute earnings from its businesses, including subsidiaries, to the U.S. investors. Our operations in Hong Kong and the Cayman Islands were in loss position since the second half of 2020, and the Company has raised capital through financing transactions and provided funding to our operations in Hong Kong and the Cayman Islands.
Our operating subsidiaries are permitted under the laws of Hong Kong, Cayman Islands, Singapore, and British Virgin Islands, respectively, to provide funding to Lion Group Holding Ltd., the holding company incorporated in the Cayman Islands through dividend distributions, loans or advances. Our Group currently intends to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. 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.
In the past years, we conducted 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. Since Hong Kong is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, providing Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems”. We are dependent on our customers in the PRC, the laws and regulations of the PRC currently have restrictions on currency conversion, cross-border remittance and offshore investment for PRC citizens. See “Risk Factors — Risks Related to Our Business and Industry — 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.” for more information on the risk of PRC governmental control of currency conversion, cross-border remittance and offshore investment with respect to our operations. However, the laws and regulations of the PRC do not currently have any material impact on transfer of cash from the Company to our Cayman Islands and Hong Kong subsidiaries to or from Cayman Islands and Hong Kong subsidiaries to the Company and the investors in the U.S.. As a result, cash can be transferred freely between the Company and its operating subsidiaries, across borders, and to U.S. investors.
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. There is no further Cayman Islands statutory restriction on the amount of funds which may be distributed by us in the form of dividends.
The following are the aggregate transfers from its subsidiaries to the Company for the years ended December 31, 2025, 2024 and 2023:
| Years ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Subsidiaries | ||||||||||||
| Lion Broker Limited | $ | - | $ | 9,234,037 | $ | 12,365,221 | ||||||
| Lion Financial Group Limited | 2,451,718 | 962,616 | - | |||||||||
| Lion Wealth Management Ltd | 14 | 63,955 | - | |||||||||
| Lion Investment (HK) Limited | 128 | - | - | |||||||||
| Lion International Securities Group Limited | 24,399 | - | - | |||||||||
| Lion Workshop Limited | 385,754 | 638,896 | - | |||||||||
| Lion Wealth Limited | 4,966,246 | 134,611 | 1,971,385 | |||||||||
| BC Wealth Management Limited | - | 11,047 | - | |||||||||
| Total | $ | 7,828,307 | $ | 11,045,162 | $ | 14,336,606 | ||||||
For the years ended December 31, 2025, 2024 and 2023, 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. 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.
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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 exchange controls in Cayman Islands.
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.
Financing Arrangements
The following is a summary of our borrowings and redeemable securities as of December 31, 2025, 2024 and 2023, which were obtained for working capital purpose.
| As at December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Outstanding principal amount | US$ | US$ | US$ | |||||||||
| Short-term borrowings | $ | - | $ | 3,150,040 | $ | - | ||||||
| Minority shareholder loan | 109,982 | 109,941 | 110,000 | |||||||||
| September 2023 Convertible debenture (1) | - | - | 2,500,000 | |||||||||
| January 2024 Convertible debenture (1) | - | 50,000 | - | |||||||||
| August 2024 Convertible debenture (1) | - | 1,500,000 | - | |||||||||
| June 2025 Secured convertible debenture (1) | 10,900,000 | - | - | |||||||||
| July 2025 Secured convertible debenture (1) | 3,000,000 | - | - | |||||||||
| December 2025 Secured convertible debenture (1) | 10,400,000 | - | - | |||||||||
| $ | 24,409,982 | $ | 4,809,981 | $ | 2,610,000 | |||||||
| (1) | The securities are convertible into ADSs since the issuance at the holder’s election. |
Operating Lease Commitments
The following table sets forth our operating lease commitments as of December 31, 2025. Our lease obligations primarily comprise future aggregate minimum lease payments in respect of office premises under non-cancellable lease agreements.
| Payments Due by Period | ||||||||||||
| Short-term | ||||||||||||
| Total | less than 1 Year | Long-term over 1 year | ||||||||||
| Operating lease obligations | $ | 113,964 | $ | 62,162 | $ | 51,802 | ||||||
Capital Expenditures
Our capital expenditures are primarily incurred for purchase of property, equipment, purchase of digital assets and purchase of copyrighted trading software programs. Our capital expenditures were US$21.6 million, US$nil and US$7.8 million in the year ended December 31, 2025, 2024 and 2023, respectively. We will continue to make capital expenditures to meet the growth of our business when needed. We intend to fund our future capital expenditures with our existing cash balance and proceeds from debt or equity financing activities.
Other Commitments
On April 10, 2026, Lion Wealth Management Limited (“LWML”), our wholly owned subsidiary, entered into an exclusivity agreement (the “Exclusivity Agreement”) with Skyfame Realty (Holdings) Limited (In Liquidation) (“Skyfame”), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited (“HKEX”) under stock code 00059.HK whose trading has been suspended, and its joint provisional liquidators. Pursuant to the Exclusivity Agreement, LWML has a six-month exclusivity period to facilitate the implementation of a proposed restructuring of Skyfame to enable resumption of trading of Skyfame’s shares on HKEX. LWML agreed to provide Skyfame an aggregate unsecured credit facility of up to proximately US$3 million (HKD$ 23 million), intended to be utilized to cover all professional fees and expenses required for Skyfame to initiate its restructuring and resume trading.
Other than the above, we did not have any other significant commitments, long-term obligations, or guarantees as of the date of this annual report.
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| C. | Research and development, patents and licenses, etc. |
See “Item 4. Information on the Company — B. Business Overview”
| D. | 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, 2025 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.
| E. | Critical Accounting Estimates |
We prepare our financial statements in accordance with U.S. GAAP, which requires our management to make judgments, estimates and assumptions. We continually evaluate these judgments, estimates and assumptions based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and various assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements.
While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions. We believe that the following critical accounting estimates involve the most significant judgments used in the preparation of our financial statements.
Revenue Recognition
Revenue from contracts with customers include commission income from securities, futures and derivative brokerage services, CFD trading services, insurance brokerage services and crypto currency mining. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time, how to allocate transaction prices where multiple performance obligations are identified, when to recognize revenue based on the appropriate measure of progress under the contract, whether revenue should be presented gross or net of certain costs, and whether constraints on variable consideration including noncash consideration should be applied due to uncertain future events.
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. 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.
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. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and tax credits based on applicable tax rates. Deferred tax assets are reduced by a valuation allowance when management determines that it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax expenses or benefits are recognized in the consolidated financial statements for the changes in deferred tax liabilities or assets between years.
We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
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Valuation of convertible debentures
For the years ended December 31, 2025, 2024 and 2023, we entered into various securities purchase agreement to raise proceeds of $25.2 million, $2.3 million and $2.4 million in exchange for issuance of convertible debentures.
We classified the convertible debentures as liabilities under ASC 470 because it is a debt in its legal form. We determined that the conversion feature within the Notes meet the definition of embedded derivatives and we estimated a fair value of the derivative liability using the Binominal Tree Model at the date of issuance. The key factors used in Binominal Tree Model included risk-free interest rate, estimated volatility rate, dividend yield and bond yield.
For details of quantitative information regarding Level 3 fair value measurements inputs for our derivate liabilities at their measurement dates, please see Note 11 – Convertible Debentures to the consolidated financial statements.
Recently issued accounting pronouncements
A list of recently issued accounting pronouncements that are relevant to us is included in Note 2 of our consolidated financial statements included elsewhere herein.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| A. | 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 | ||
| Chunning Wang | 47 | Chairman of the Board, Chief Executive Officer (Class II) | ||
| Sze Hau Lee | 40 | Director, Chief Financial Officer (Class II) | ||
| Yan Zhang | 46 | Director and President (Class I) | ||
| Chi Fai Choi | 48 | Independent Director (Class I) | ||
| Anthony Lau Hoi Ho | 40 | Independent Director (Class II) | ||
| Tak Wing Lo | 39 | Independent Director (Class II) |
Chunning Wang is our Chairman of the Board and Chief Executive Officer. Mr. Wang joined Lion in May 2019 and has been responsible for Lion’s fund raising activities. Prior to joining Lion, Mr. Wang held positions of chief executive officer, director and vice chairman of the board at Carnival Group International Holdings Limited (0996.HK), one of China’s leading operators of large-scale integrated tourism, hospitality and retail attractions, from 2017 to 2019. Mr. Wang has more than a decade of experience in the banking industry. From 2016 to 2017, Mr. Wang served as an assistant chief executive officer at Hengfeng Bank Co., Ltd. (Shanghai branch), where he was responsible for corporate business. Previously, Mr. Wang worked at China Minsheng Banking Corporation Limited for around six years, where he started as a product manager in the bank’s head office in the PRC in 2006, and later ended up serving as a general manger in the bank’s Hong Kong branch in 2015, primarily responsible for the bank’s overseas mergers and acquisition and other large-scale projects. Mr. Wang received his bachelor’s degree in Industrial Foreign Trade from International Business School of Hunan University in 2000, and obtained a master’s degree in management from The Faculty of Commerce and Business Administration of The University of British Columbia in 2005.
Sze Hau Lee is director and 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 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. He worked as a manager of syndicated finance department at China Minsheng Banking Corporation Hong Kong Branch from February 2017 September 2017, a vice president of structured and leveraged finance department in Hengfeng Bank Shanghai Branch from April 2016 to February 2017, an assistant manager of structured and leveraged finance department in China Minsheng Banking Corporation Hong Kong Branch from January 2014 to April 2016. He had been primarily responsible for the origination, structure and execution of syndicated facilities as well as financing arrangements in mega transactions. Mr. Lee started his first few years of career in accounting firms. He worked as a senior associate in Ernst & Young from October 2012 to December 2013. Before that, he worked in PricewaterhouseCoopers for approximately five years, where he started as an associate in September 2007 and left in October 2012 as a senior associate. Mr. Lee received his bachelor’s degree in professional accountancy from The Chinese University of Hong Kong in August 2007. He is a member of Hong Kong Institute of Certified Public Accountants since 2011 and also a member of the Institute of Chartered Accountants in England and Wales since January 2022.
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Yan Zhang serves on our board and is our President. From July 2020 to April 2021, Ms. Zhang conducted her own financial consulting services for her own clients from July 2020 to April 2021. From September 2009 to June 2020, Ms. Zhang served as a manager, senior manager, and subsequently, principal of UHY Advisors NY, Inc., with her last role being a principal. From 2004 to 2007, Ms. Zhang served as a senior accountant of PricewaterhouseCoopers LLP in Beijing, China. Ms. Zhang received her bachelor’s degree and master’s degree both in Economics from Central University of Finance and Economics in Beijing China, and obtained a second master’s degree in information assurance from The State University of New York at Albany in June 2009. Ms. Zhang has been a member of The New York State Society of Certified Public Accountants since November 2010 and also a member of the New York Institute of Internal Auditors since September 2011.
Chi Fai Choi is our independent director. Mr. Choi has served as the investment management department consultant of OCI International Holdings Limited (0329.HK), an investment holding company principally engaged in securities trading and investments, trading of wines and provision of financial advisory services in the PRC, since November 2018. Mr. Choi is responsible for fund raising for general corporate purposes, setting up fund, and originating new potential investment opportunities to the company. Prior to that, Mr. Choi served as an executive director of Rentian Technology Holdings Limited (0885.HK), a Hong Kong-based investment holding company principally engaged in Internet of Things (IoT) businesses, from March 2015 to December 2017, the chief investment officer of Carnival Group International Holdings Limited (0996.HK) from May 2012 to March 2018, an independent non-executive director of Energy International Investments Holdings Limited (0353.HK) from July 2011 to July 2014, an associate director of CCB International Asset Management Limited (“CCBIAM”) from November 2007 to May 2012. CCBIAM is ultimately controlled by China Construction Bank Corporation (0939.HK and CH.601939). From September 2000 to October 2007, Mr. Choi was a senior officer of Hutchison Whampoa Limited and a senior accountant of Ernst & Young. Mr. Choi received his bachelor’s degree of business administration in accounting from The Hong Kong University of Science and Technology in August 2000. 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. 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. 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. 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. 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. 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.
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| B. | Compensation |
Executive Officer and Director Compensation
Our policies with respect to the compensation of our executive officers following the Business Combination are administered by our board of directors in consultation with our compensation committee (as described above). We intend to be competitive with other similarly situated companies in the industry. Our compensation committee will be charged with performing an annual review of our executive officers’ cash compensation and equity holdings to determine whether they provide adequate incentives and motivation to executive officers and whether they adequately compensate the executive officers relative to comparable officers in other companies.
For the fiscal year ended December 31, 2025, we paid an aggregate of US$0.49 million in cash and US$0.2 million in shares to our executive officers and directors, and an aggregate of US$70,000 in cash to our non-executive directors. For share incentive grants to our directors and executive officers, see “—2020 Share Incentive Plan”, “—2023 Share Incentive Plan”, “—2024 Share Incentive Plan” and ““—2025 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. 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. Each executive officer is employed for a continuous term, or a specified time period which will be automatically extended, unless either we or the executive officer gives prior notice to terminate such employment. We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including the commitment of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of a criminal offense other than one which in the opinion of the board does not affect the executive’s position, willful, disobedience of a lawful and reasonable order, misconduct being inconsistent with the due and faithful discharge of the executive officer’s material duties, fraud or dishonesty, or habitual neglect of his or her duties. An executive officer may terminate his or her employment at any time with a three- to six-month prior written notice.
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. Each executive officer has also agreed to disclose in confidence to us all inventions, intellectual and industry property rights and trade secrets which they made, discover, conceive, develop or reduce to practice during the executive officer’s employment with us and to assign to our company all of his or her associated titles, interests, patents, patent rights, copyrights, trade secret rights, trademarks, trademark rights, mask work rights and other intellectual property and rights anywhere in the world which the executive officer may solely or jointly conceive, invent, discover, reduce to practice, create, drive, develop or make, or cause to be conceived, invented, discovered, reduced to practice, created, driven, developed or made, during the period of the executive officer’s employment with us that are either related to our business, actual or demonstrably anticipated research or development or any of our products or services being developed, manufactured, marketed, sold, or are related to the scope of the employment or make use of our resources. In addition, all executive officers have agreed to be bound by non-competition and non-solicitation restrictions set forth in their agreements. Each executive officer has agreed to devote all his or her working time and attention to our business and use best efforts to develop our business and interests. Moreover, each executive officer has agreed not to, for a certain period following termination of his or her employment or expiration of the employment agreement: (i) carry on or be engaged, concerned or interested directly or indirectly whether as shareholder, director, employee, partner, agent or otherwise carry on any business in direct competition with us, (ii) solicit or entice away any of our customer, client, representative or agent, or (iii) employ, solicit or entice away or attempt to employ, solicit or entice away any of our officers, managers, consultants or employees.
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.
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2020 Share Incentive Plan
In connection with the consummation of the Business Combination, we adopted the 2020 Share Incentive Plan (“2020 Plan”). Under this Plan, up to 4,632,449 of our ordinary shares outstanding immediately after the Business Combination are available for Awards. Each vested RSU (as reported) entitles the participant of the Plan to receive one ADS, subject to adjustments for dividend payments. As of the date of this annual report, we have granted 3,936,504 deferred shares under this Plan, including 360,000 deferred shares granted to our executive officers and directors.
The following paragraphs summarize the terms of the Plan:
Plan administration. 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.
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. 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. 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. 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.
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. Each vested RSU (as reported) entitles the participant of the 2023 Plan to receive one ADS, subject to adjustments for dividend payments. As of December 31, 2023, we have granted 32,000,000 deferred shares under this Plan to our executive officers and directors. In November 2024, the remaining 1,818,770 shares under 2023 Plan were granted and issued to one executive director. As of December 31, 2024, a total of nil shares under the 2024 Plan remained available for future awards.
The following paragraphs summarize the terms of the Plan:
Plan administration. 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.
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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. 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. 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. 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.
2024 Share Incentive Plan
On May 20, 2024, we adopted the Company’s 2024 Equity Incentive Plan (the “2024 Plan”). Under this Plan, up to 47,137,935 of our ordinary shares outstanding are available for Awards. On the same date, the Board and the Audit Committee approved that a total of 20,000,000 Class B ordinary shares were granted to certain employees and vested immediately. On May 21, 2024, a total of 18,500,000 Class B ordinary shares were issued to the employees. In November 2024, the remaining 27,137,935 shares under the 2024 Plan were granted and issued to one executive director. As of December 31, 2024, a total of nil shares under the 2024 Plan remained available for future awards.
The following paragraphs summarize the terms of the Plan:
Plan administration. 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.
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. 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. 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. 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.
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2025 Share Incentive Plan
On September 3, 2025 we adopted the Company’s 2025 Equity Incentive Plan (the “2025 Plan”). Under this Plan, up to 1,492,312,340 of our ordinary shares outstanding are available for Awards. The 2025 Plan will continue in effect for a term of ten years. Apart from the foregoing, the terms of the 2025 Plan is substantially the same as the 2024 Plan. As of December 31, 2025, a total of 746,156,170 shares under the 2025 Plan remained available for future awards.
| C. | Board Practices |
Our board of directors are divided into two classes, namely Class I and Class II. Class I consists of three directors, and Class II consists of four directors. Directors assigned to Class I shall initially serve until the first annual general meeting of shareholders following the effectiveness of our first Amended and Restated Memorandum of Articles of Association. Directors assigned to Class II shall initially serve until the second annual general meeting of shareholders following the effectiveness of our first Amended and Restated Memorandum of Articles of Association.
Committees of the Board of Directors
As of the date of this annual report, we have three committees, namely, audit committee, compensation committee and nominating and corporate governance committee. 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. All of the directors satisfy the “independence” requirement of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market and meets the independence standards under Rule 10A-3 under the Exchange Act. Our audit committee is responsible for, among other things, appointing, retaining, setting compensation of, and supervising our independent accountants, reviewing the results and scope of the audit and other accounting related services and reviewing our accounting practices and systems of internal accounting and disclosure controls.
The audit committee will at all times be composed exclusively of “independent directors,” as defined for audit committee members under the Nasdaq listing standards and the rules and regulations of the SEC, who are “financially literate,” as defined under Nasdaq’s listing standards. Nasdaq’s listing standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. In addition, we are required to certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication. Chi Fai Choi serves as a financial expert on our audit committee.
Compensation Committee
Our compensation committee consists of Anthony Lau Hoi Ho, Tak Wing Lo, Chunning Wang and Chi Fai Choi, and is chaired by Chunning Wang. Anthony Lau Hoi Ho, Tak Wing Lo and Chi Fai Choi satisfy the “independence requirement” of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market and meets the independence standards under Rule 10A-3 under the Exchange Act. As a foreign private issuer, we have elected to not have our compensation committee consist of entirely independent directors. The compensation committee is responsible for reviewing and approving compensation paid to our officers and directors and to administer our incentive compensation plans, including authority to make and modify awards under such plans. 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.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Anthony Lau Hoi Ho, Tak Wing Lo , Chunning Wang and Chi Fai Choi, and is chaired by Chunning Wang. Anthony Lau Hoi Ho, Tak Wing Lo, and Chi Fai Choi satisfy the “independence requirement” of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market and meets the independence standards under Rule 10A-3 under the Exchange Act. As a foreign private issuer, we have elected to not have our nominating and corporate governance committee consist of entirely independent directors. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.
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Code of Ethics
Our board of directors adopted a code of ethics and business conduct that applies to all of our executive officers, directors and employees. The code of ethics and business conduct codifies the business and ethical principles that will govern all aspects of our business.
Corporate Governance Practices
As a Cayman Islands exempted company listed on the Nasdaq Capital Market, we are subject to Nasdaq corporate governance listing standards. However, Rule 5615(a)(3) of The Listing Rules of the Nasdaq Stock Market (the “Nasdaq Rules”) permits foreign private issuers like us to follow certain home country corporate governance practices in lieu of certain provisions of the Rule 5600 Series of the Nasdaq Rules. A foreign private issuer that elects to follow a home country practice instead of such provisions, must disclose in its annual reports each requirement that it does not follow and describe the home country practice followed by it.
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. In this regard we have elected to adopt the practices of our home country, the Cayman Islands, which practices which do not require independent directors to meet regularly in executive sessions separate from the full board of directors. |
| ● | Nomination of Directors. 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. We follow Cayman Islands practice which does not require us to have a formal written charter or board resolution addressing the director nominations process. |
| ● | Composition of Board. Rule 5605(b)(1) of the Nasdaq Rules requires a Nasdaq listed company to have a majority of the board be independent. In this regard we have elected to adopt the practices of our home country, the Cayman Islands, which practices do not require a majority independent board. |
| ● | Composition of Committees. Rule 5605(d)(2) of the Nasdaq Rules requires a Nasdaq listed company to have a compensation committee composed solely of independent directors to determine or recommend the compensation of the executive officers of the company. In this regard we have elected to adopt the practices of our home country, the Cayman Islands, which practices do not require that any of the members of a company’s compensation committee be independent directors. |
| ● | Shareholder Approval. Rule 5635(c) requires shareholder approval for certain issuances of securities. 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. |
| D. | Employees |
We had a total of 10 employees in Hong Kong and Singapore as of December 31, 2025. 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.
The following table sets forth the number of our employees by function as of December 31, 2025:
| Sales and Marketing | 1 | |||
| Operation | 1 | |||
| General and Administration | 3 | |||
| Finance and Accounting | 3 | |||
| Management | 2 | |||
| Total | 10 |
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Our success depends on our ability to attract, retain and motivate qualified employees. We offer employees competitive salaries, performance-based cash bonuses and other incentives. We believe that we maintain a good working relationship with our employees, and we have not experienced any material labor disputes. None of our employees are represented by labor unions.
We typically enter into standard confidentiality and employment agreements with our employees. These contracts include a standard non-compete covenant that prohibits the employee from competing with us, directly or indirectly, during his or her employment as well as certain period of time after employment is terminated.
| E. | Share Ownership |
The following table sets forth information regarding the beneficial ownership based on a total number of 151,658,568,130 ordinary shares outstanding as of the date of December 31, 2025, including 150,847,024,115 Class A Ordinary Shares and 811,544,015 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. |
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant, or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
| 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 | ||||||||||||||||
| Chunning Wang(1) | * | 800,044,015 | 0.53 | % | 96.78 | % | ||||||||||
| Chi Fai Choi | * | — | * | |||||||||||||
| Anthony Lau Hoi Ho | * | — | * | |||||||||||||
| Yan Zhang | * | 4,500,000 | 0.00 | % | 0.54 | % | ||||||||||
| Tak Wing Lo | * | — | * | |||||||||||||
| Sze Hau Lee | * | 4,500,000 | 0.00 | % | 0.54 | % | ||||||||||
| All executive officers and directors as a group | 205,000 | 809,044,015 | 0.53 | % | 97.86 | % | ||||||||||
| Five Percent or Greater Shareholders | ||||||||||||||||
| Legend Success Ventures Limited(1) | * | 1,931,140 | 0.00 | % | 0.23 | % | ||||||||||
| * | Beneficially owns less than 1% of our Class A Ordinary Shares |
| (1) | Includes 1,931,140 Class B Ordinary Shares held by Legend Success Ventures Limited. Mr. Chunning Wang, the sole shareholder and sole director of Legend Success Ventures Limited, may be deemed to beneficially own shares held by Legend Success Ventures Limited and has sole voting and dispositive control over such securities. |
| (2) | Each Class B Ordinary Share is entitled to 10,000 votes per share as of December 31, 2025. |
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
| A. | Major Shareholders |
See “Item 6. Directors, Senior Management and Employees— Beneficial Ownership of Securities.”
| B. | Related Party Transactions |
Transaction with Minority Shareholder
In October 2021, Lion Wealth Management Limited (“LWML”), one of our subsidiaries and Dawa Future Graphic Technology Co., Ltd (“DAWA”) formed Lion Metaverse Limited (“LML”), to develop the Group’s new Metaverse project “Lion World”. LWML and DAWA each hold 50% of equity interest in LML. As of December 31, 2025 and 2024, LML recorded payable to DAWA for research and development expenses in the amount of approximately $800,000each.
Transaction with Management
During the years ended December 31, 2025 and 2024, our Chief Executive Office (“CEO”) registered a TRS trading account with the Group and became a customer of our TRS trading service. As of December 31, 2025 and 2024, we had extended margin financing totaling approximately $219,000 and $330,000, respectively, to the CEO and the underlying securities held in the account had a fair value of approximately $217,000 and $324,000, resulting in a net receivable of $1,700 and $6,000 due from the CEO, respectively. This receivable balance was recorded under “Prepaid expenses, deposits and other current assets” in the consolidated balance sheets. During the years ended December 31, 2025 and 2024, we recognized approximately $22,000 and $29,000, respectively in interest income from margin financing provided for the CEO’s TRS trading activities. This amount has been recorded in the consolidated financial statements as interest income. This transaction was conducted with terms and conditions consistent with those that would be provided to unrelated parties in normal market conditions. All margin financing activities with the CEO were executed at prevailing market rates, with no preferential terms granted to either party.
Transaction with Other Related Party
During the year ended December 31, 2025, an affiliate of our CEO registered a TRS trading account with the Group and became a customer of our TRS trading service. For the year ended December 31, 2025, the related party made deposits of approximately $644,000 to the TRS trading account and earned income of 76,000. As of December 31, 2025, we had balance of approximately $720,000 due to the related party which was recorded in the account of “payables to customers” on the consolidated balance sheets.
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. 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.
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.
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ITEM 8. FINANCIAL INFORMATION
| A. | Consolidated Statements and Other Financial Information |
We have appended consolidated financial statements filed as part of this annual report.
Legal Proceedings
As the date of this annual report, we are not a party to, and we are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition or operations.
Dividend
We did not pay any dividends to our shareholders in 2025 and 2024. We are able to distribute earnings from our operating subsidiaries, to the parent company and U.S. investors and settle amounts owed, although we currently do not have any dividend policy.
| B. | Significant Changes |
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
ITEM 9. THE OFFER AND LISTING
| A. | Offering and Listing Details. |
See “C. Markets.”
| B. | Plan of Distribution |
Not applicable.
| C. | Markets |
Our ADSs and 2019 Warrants are listed on the NASDAQ under the symbols “LGHL” and “LGHLW”, respectively.
| D. | Selling Shareholders |
Not applicable.
| E. | Dilution |
Not applicable.
| F. | Expenses of the Issue |
Not applicable.
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ITEM 10. ADDITIONAL INFORMATION
| A. | Share Capital |
Not applicable.
| B. | Memorandum and Articles of Association |
We incorporate by reference into this annual report the description of our Amended and Restated Memorandum and Articles of Association contained in our Form F-3 filed with the Registrar on August 22, 2025, as amended by the shareholders’ approval in the Company’s annual meeting of shareholders held on September 29, 2025 contained in our Form 6-K filed with the Registrar on October 1, 2025 (the “Articles”). The following are material provisions of our currently effective Amended and Restated Memorandum and Articles of Association, as well as the Companies Act (as amended) of the Cayman Islands (the “Companies Act”) insofar as they relate to the material terms of our ordinary shares.
Capitalized terms not defined in this section shall have the meanings given to them in the Articles.
Register And Company Purpose
Lion Group Holding Ltd. is a company incorporated in the Cayman Islands, with its principal executive office at 10 Ubi Crescent, #06-51 (Office 12), Ubi Techpark, Singapore 408574, Lobby C, and its registered office at 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands.
The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by any law as provided by Section 7(4) of the Companies Act.
Summary Of Provisions Relating To Certain Powers And Interests Of Directors
Our Directors may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with their offices of Directors for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested, be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established. A Director, notwithstanding his interest, may be counted in the quorum present at any meeting of the Directors whereat he or any other Director is appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he may vote on any such appointment or arrangement.
Our Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, or to otherwise provide for a security interest to be taken in such undertaking, property or uncalled capital, and to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.
A retiring Director shall be eligible for re-election and shall continue to act as a Director throughout the meeting at which he retires.
Other than being of legal age, there are no age limit restrictions for directors and they are not required to own any shares in the Company.
The remuneration of the directors may be determined by the Directors or by Ordinary Resolution.
Shares, Share rights
Subject to the Articles, all Shares for the time being unissued shall be under the control of the Directors who may issue, allot and dispose of the same to such Persons, in such manner, on such terms and having such rights and being subject to such restrictions as they may from time to time determine and grant options with respect to such Shares and issue warrants or similar instruments with respect thereto and, for such purposes, the Directors may reserve an appropriate number of Shares for the time being unissued. The Directors, or the Shareholders by Ordinary Resolution, may authorize the division of Shares into any number of Classes and sub-classes and the different Classes and sub-classes shall be authorized, established and designated (or re-designated as the case may be) and the variations in the relative rights (including, without limitation, voting, dividend and redemption rights), restrictions, preferences, privileges and payment obligations as between the different Classes (if any) may be fixed and determined by the Directors or the Shareholders by Ordinary Resolution.
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Subject to the provisions of the Companies Act, the rules of Nasdaq, the Articles and to any special rights conferred on the holders of any Shares or Class of Shares, any Share in the Company (whether forming part of the present capital or not) may be issued with or have attached thereto such rights or restrictions whether in regard to dividend, voting, return of capital or otherwise as the Board may determine, including without limitation on terms that they may be, or at the option of the Company or the holder are, liable to be redeemed on such terms and in such manner, including out of capital, as the Board may deem fit. Shares and other securities of the Company may be issued by the Directors with such preferred, deferred or other special rights, restrictions or privileges whether in regard to voting, distributions, a return of capital, or otherwise and in such classes and series, if any, as the Directors may determine.
Subject to the Companies Act and the rules of the Nasdaq, any preferred Shares may be issued or converted into Shares that, at a designated date or at the option of the Company or the holder if so authorized by its Articles of Association, are liable to be redeemed on such terms and in such manner as the Members before the issue or conversion may by Ordinary Resolution of the Members determine. Where the Company purchases for redemption a redeemable Share, purchases not made through the market or by tender shall be limited to a maximum price as may from time to time be determined by the Board, either generally or with regard to specific purchases. If purchases are by tender, tenders shall comply with applicable laws and the rules of Nasdaq.
Subject to Article 12, the Memorandum of Association and any special resolution of the Members to the contrary and without prejudice to any special rights conferred thereby on the holders of any other Shares or Class of Shares, Class A Ordinary Shares and Class B Ordinary Shares shall carry equal rights and rank pari passu with one another in all respects other than the following:
(a) As regards to conversion
| (i) | Subject to the provisions hereof and to compliance with all fiscal and other laws and regulations applicable thereto, including the Companies Act, a holder of Class B Ordinary Shares shall have the Conversion Right in respect of each Class B Ordinary Share in its holding. For the avoidance of doubt, a holder of Class A Ordinary Shares shall have no rights to convert Class A Ordinary Shares into Class B Ordinary Shares under any circumstances. |
| (ii) | Each Class B Ordinary Share shall be converted at the option of the holder, at any time after issue and without the payment of any additional sum, into such Conversion Number of fully paid Class A Ordinary Shares calculated at the Conversion Rate. Such conversion shall take effect on the Conversion Date. A Conversion Notice shall not be effective if it is not accompanied by the share certificates in respect of the relevant Class B Ordinary Shares and/or such other evidence (if any) as the Directors may reasonably require to prove the title of the person exercising such right (or, if such certificates have been lost or destroyed, such evidence of title and such indemnity as the Directors may reasonably require). Any and all taxes and stamp, issue and registration duties (if any) arising on conversion shall be borne by the holder of Class B Ordinary Shares requesting conversion. |
| (iii) | On the Conversion Date, every Class B Ordinary Share converted shall automatically be re-designated and re-classified as the applicable Conversion Number of Class A Ordinary Shares with such rights and restrictions attached thereto and shall rank pari passu in all respects with the Class A Ordinary Shares then in issue and the Company shall enter or procure the entry of the name of the relevant holder of converted Class B Ordinary Shares as the holder of the corresponding number of Class A Ordinary Shares resulting from the conversion of the Class B Ordinary Shares in, and make any other necessary and consequential changes to, the Register of Members and shall procure that certificates in respect of the relevant Class A Ordinary Shares, together with a new certificate for any unconverted Class B Ordinary Shares comprised in the certificate(s) surrendered by the holder of the Class B Ordinary Shares, are issued to the holders thereof. |
| (iv) | Until such time as the Class B Ordinary Shares have been converted into Class A Ordinary Shares, the Company shall: |
(b) As regards Voting Rights
Holders of Ordinary Shares have the right to receive notice of, attend, speak and vote at general meetings of the Company. Holders of shares of Class A Ordinary Shares and Class B Ordinary Shares shall, at all times, vote together as a single class on all matters submitted to a vote for Members’ consent. Each Class A Ordinary Share shall be entitled to one (1) vote on all matters subject to the vote at general meetings of the Company. Each Class B Ordinary Share shall be entitled to ten thousand (10,000) votes on all matters subject to the vote at general meetings of the Company.
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(c) As regards Transfer
Upon any sale, transfer, assignment or disposition of Class B Ordinary Shares by a holder thereof to any person or entity which is not an Affiliate of such holder, such Class B Ordinary Shares validly transferred to the new holder shall be automatically and immediately converted into such Conversion Number of Class A Ordinary Shares calculated based on the Conversion Rate.
Shareholders
The Board is authorised to establish a Shareholder rights plan including approving the execution of any document relating to the adoption and/or implementation of a rights plan. A rights plan may be in such form and may be subject to such terms and conditions as the Board shall determine in its absolute discretion. The Board is authorised to grant rights to subscribe for Shares of the Company in accordance with a rights plan, and may in accordance with a rights plan, exercise any power under such rights plan (including a power relating to the issuance, redemption or exchange of rights or shares) on a basis that excludes one or more members, including a member who has acquired or may acquire a significant interest in or control of the Company subject to applicable law.
Call on Shares
The Directors may from time to time make calls upon the Shareholders in respect of any moneys unpaid on their Shares, and each Shareholder shall (subject to receiving at least fourteen days’ notice specifying the time or times of payment) pay to the Company at the time or times so specified the amount called on such Shares. The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof. The provisions of these Articles as to the liability of joint holders and as to payment of interest shall apply in the case of non-payment of any sum which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the amount of the Share, or by way of premium, as if the same had become payable by virtue of a call duly made and notified. The Directors may make arrangements on the issue of partly paid Shares for a difference between the Shareholders, or the particular Shares, in the amount of calls to be paid and in the times of payment. The Directors may, if they think fit, receive from any Shareholder willing to advance the same all or any part of the moneys uncalled and unpaid upon any partly paid Shares held by him, and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest at such rate (not exceeding without the sanction of an Ordinary Resolution, eight percent per annum) as may be agreed upon between the Shareholder paying the sum in advance and the Directors.
Forfeiture Of Shares
If a Shareholder fails to pay any call or instalment of a call in respect of any Shares on the day appointed for payment, the Directors may, at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. The notice shall name a further day (not earlier than the expiration of fourteen days from the date of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed the Shares in respect of which the call was made will be liable to be forfeited. If the requirements of any such notice as aforesaid are not complied with, any Share in respect of which the notice has been given may at any time thereafter, before the payment required by notice has been made, be forfeited by a resolution of the Directors to that effect. A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the Directors think fit. A Person whose Shares have been forfeited shall cease to be a Shareholder in respect of the forfeited Shares, but shall, notwithstanding, remain liable to pay to the Company all moneys which at the date of forfeiture were payable by him to the Company in respect of the Shares forfeited, but his liability shall cease if and when the Company receives payment in full of the amount unpaid on the Shares forfeited. A statutory declaration in writing that the declarant is a Director, and that a Share has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts in the declaration as against all Persons claiming to be entitled to the Share. The Company may receive the consideration, if any, given for a Share on any sale or disposition thereof pursuant to the provisions of these Articles as to forfeiture and may execute a transfer of the Share in favour of the Person to whom the Share is sold or disposed of and that Person shall be registered as the holder of the Share, and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the disposition or sale. The provisions on forfeiture shall apply in the case of non-payment of any sum which by the terms of issue of a Share becomes due and payable, whether on account of the amount of the Share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified.
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Transfer Of Shares
The instrument of transfer of any Share shall be in any usual or common form or such other form as the Directors may determine and be executed by or on behalf of the transferor and if in respect of a nil or partly paid up Share, or if so required by the Directors, shall also be executed on behalf of the transferee and shall be accompanied by the certificate (if any) of the Shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. The transferor shall be deemed to remain a Shareholder until the name of the transferee is entered in the Register in respect of the relevant Shares. Subject to the terms of issue thereof, the Directors may determine to decline to register any transfer of Shares without assigning any reason therefor. The registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine. All instruments of transfer that are registered shall be retained by the Company, but any instrument of transfer that the Directors decline to register shall (except in any case of fraud) be returned to the Person depositing the same.
Transmission Of Shares
The legal personal representative of a deceased sole holder of a Share shall be the only Person recognized by the Company as having any title to the Share. In the case of a Share registered in the name of two or more holders, the survivors or survivor, or the legal personal representatives of the deceased holder of the Share, shall be the only Person recognized by the Company as having any title to the Share. Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Shareholder shall upon such evidence being produced as may from time to time be required by the Directors, have the right either to be registered as a Shareholder in respect of the Share or, instead of being registered himself, to make such transfer of the Share as the deceased or bankrupt Person could have made; but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the Share by the deceased or bankrupt Person before the death or bankruptcy. A Person becoming entitled to a Share by reason of the death or bankruptcy of a Shareholder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered Shareholder, except that he shall not, before being registered as a Shareholder in respect of the Share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company.
Alteration Of Share Capital
The Company may from time to time by Ordinary Resolution increase the share capital by such sum, to be divided into Shares of such Classes and amount, as the resolution shall prescribe, including to: consolidate and divide all or any of its share capital into Shares of a larger amount than its existing Shares; convert all or any of its paid up Shares into stock and reconvert that stock into paid up Shares of any denomination; subdivide its existing Shares, or any of them into Shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the Share from which the reduced Share is derived; and cancel any Shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any Person and diminish the amount of its share capital by the amount of the Shares so cancelled. The Company may by Special Resolution reduce its share capital and any capital redemption reserve in any manner authorized by law.
Redemption, Purchase And Surrender Of Shares
Subject to the Companies Act, the Company may issue Shares on terms that they are to be redeemed or are liable to be redeemed at the option of the Company or the Shareholder on such terms and in such manner as the Directors may determine; purchase its own Shares (including any redeemable Shares) on such terms and in such manner as the Directors may determine and agree with the Shareholder; make a payment in respect of the redemption or purchase of its own Shares in any manner authorized by the Companies Act, including out of its capital; and accept the surrender for no consideration of any paid up Share (including any redeemable Share) on such terms and in such manner as the Directors may determine.
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Any Share in respect of which notice of redemption has been given shall not be entitled to participate in the profits of the Company in respect of the period after the date specified as the date of redemption in the notice of redemption. The redemption, purchase or surrender of any Share shall not be deemed to give rise to the redemption, purchase or surrender of any other Share.
The Directors may when making payments in respect of redemption or purchase of Shares, if authorised by the terms of issue of the Shares being redeemed or purchased or with the agreement of the holder of such Shares, make such payment either in cash or in specie including, without limitation, interests in a special purpose vehicle holding assets of the Company or holding entitlement to the proceeds of assets held by the Company or in a liquidating structure.
Limitation On Owning Securities
There are no limitations imposed by the Articles in respect of the rights of non-residents or foreign persons to purchase, own or sell securities issued by the Company.
Dividends
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law, our articles of association and the common law of the Cayman Islands.
Rights In A Liquidation
If the Company shall be wound up the liquidator shall apply the assets of the Company in such manner and order as he thinks fit in satisfaction of creditors’ claims. The liquidator may, with the sanction of an Ordinary Resolution divide amongst the Shareholders in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Shareholders or different Classes of Shareholders. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Shareholders as the liquidator, with the like sanction shall think fit, but so that no Shareholder shall be compelled to accept any assets whereon there is any liability.
Voting Rights
The Board of Directors shall be divided into two classes: Class I and Class II. Class I shall consist of three (3) directors. Class II shall consist of four (4) directors. The term of office of Class I shall expire at the first annual meeting of Members following the effectiveness of these Articles; and the term of office of Class II shall expire at the second annual meeting of Members following the effectiveness of these Articles. Directors may be added to the Board of Directors between annual meetings of Members by reason of an increase in the authorized number of directors belonging to the relevant class as approved by an Ordinary Resolution. Commencing at the first annual general meeting of Members following the effectiveness of these Articles, and at each second annual general meeting thereafter, Class I directors elected to succeed those directors whose terms expire thereat shall be elected for a term of office to expire at the second succeeding annual general meeting after their election. Commencing at the second annual general meeting of Members following the effectiveness of these Articles, and at each second annual general meeting thereafter, Class II directors elected to succeed those directors whose terms expire thereat shall be elected for a term of office to expire at the second succeeding annual general meeting after their election.
Holders of Ordinary Shares have the right to receive notice of, attend, speak and vote at general meetings of the Company. Except as required by applicable law and subject to these Articles, holders of Class A Ordinary Shares and Class B Ordinary Shares (if applicable) shall at all times vote together as one class on all matters submitted to a vote of the Shareholders. On a poll votes may be given either personally or by proxy.
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Subject to any special rights or restrictions as to voting at the time, at any general meeting on a show of hands:
| (i) | every Member holding Class A Ordinary Shares present in person (or being a corporation, is present by a duly authorized representative), or by proxy shall have one vote for every fully paid Class A Ordinary Share of which he is the holder and on a poll every Member present in person or by proxy or, in the case of a Member being a corporation, by its duly authorized representative shall have one vote for every fully paid Class A Ordinary Share of which he is the holder; and |
| (ii) | every Member holding Class B Ordinary Shares present in person (or being a corporation, is present by a duly authorized representative), or by proxy shall have 10,000 votes for every fully paid Class B Ordinary Share of which he is the holder and on a poll every Member present in person or by proxy or, in the case of a Member being a corporation, by its duly authorized representative shall have 10,000 votes for every fully paid Class B Ordinary Share of which he is the holder. |
Amendments To The Articles
Subject to the Companies Act, the Company may at any time and from time to time by Special Resolution alter or amend these Articles in whole or in part.
Provisions Restricting Change In Control Of Our Company
The Board is authorised to exercise the powers under Article 16 (Shareholder Rights Plan) of the Articles for any purpose that the Board, in its discretion, deems reasonable and appropriate, including to ensure that any process which may result in an acquisition of a significant interest or change of control of the Company is conducted in an orderly manner and that any potential acquisition of a significant interest or change of control of the Company which would be unlikely to treat all members of the Company fairly and in a similar manner would be prevented.
| C. | Material Contracts |
We have not entered into any material contracts other than in the ordinary course of business and other than those described in “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. | 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. 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.
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Material U.S. 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”). 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. |
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. 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. 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. 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. 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. 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.
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.
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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. 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). 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. 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. 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.
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”). 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.
In the Business Combination, we indirectly acquired all of Lion Group North America Corp. (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.
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.
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. 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. 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. 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. 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.
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Limitation on the Use of Lion Group North America Corp.’s U.S. 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. 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. 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. 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.
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. 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”). 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. 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. Holders of shares of our Securities should consult with their independent tax advisors regarding the potential application of section 7874 to the Business Combination.
U.S. Holders
This section applies to you if you are a U.S. holder. 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. |
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.
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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. 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. 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. For purposes of the PFIC income test and asset test described above, if we own, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, we will be treated as if we (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation.
Whether we or any of our subsidiaries is treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty. Among other factors, fluctuations in the market price of our Securities and how, and how quickly, we use liquid assets and cash obtained in the Business Combination may influence whether we or any of our subsidiaries is treated as a PFIC. Accordingly, we are unable to determine whether we or any of our subsidiaries will be treated as a PFIC for the taxable year of the Business Combination or for future taxable years, and there can be no assurance that we or any of our subsidiaries will not be treated as a PFIC for any taxable year. Moreover, we do not expect to provide a PFIC annual information statement for 2020 or going forward.
If we or any of our subsidiaries were to be treated as a PFIC, U.S. holders holding our Securities could be subject to certain adverse U.S. federal income tax consequences with respect to gain realized on a taxable disposition of such shares and certain distributions received on such shares. Certain elections (including a mark-to-market election) may be available to U.S. holders to mitigate some of the adverse tax consequences resulting from PFIC treatment. U.S. holders should consult their tax advisers regarding the application of the PFIC rules to their investment in our Securities.
Controlled Foreign Corporation Rules
Special rules would apply if we or any of our non-U.S. subsidiaries is classified as a “controlled foreign corporation,” or CFC, for U.S. federal income tax purposes. A foreign corporation will generally be classified as a CFC if more than 50% of its outstanding shares, measured by reference to voting power or value, are owned (directly, indirectly or constructively under section 318 of the Code) by “10% U.S. Shareholders.” For this purpose, a “10% U.S. Shareholder” is any U.S. person that owns directly, indirectly or by attribution, 10% or more of the voting power of the issued and outstanding stock of such foreign corporation. Additionally, as a result of changes introduced by the Tax Cuts and Jobs Act, even absent 10% U.S. Shareholders with direct or indirect interests in a foreign corporation, a U.S. subsidiary of ours alone may cause certain related foreign corporations to be treated as CFCs by reason of “downward attribution.” Given that we are publicly held, the constructive ownership rules under section 318 of the Code may make it difficult to determine whether any U.S. person is a 10% U.S. Shareholder of ours and our non-U.S. subsidiaries and whether we or any of our non-U.S. subsidiaries is a CFC. Because we include one or more U.S. subsidiaries (e.g., Proficient), our non-U.S. subsidiaries could be treated as CFCs (regardless of whether we are treated as a CFC), depending on our structure after the Business Combination.
If we or any of our non-U.S. subsidiaries were to be classified as a CFC, a 10% U.S. Shareholder must report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property held by CFCs, regardless whether any distributions are made. In addition, gain on the sale of the CFC stock by a 10% U.S. Shareholder (during the period that the corporation is a CFC and thereafter for a five-year period) would be classified in whole or in part as a dividend, to the extent of certain of the CFC’s earnings and profits. An individual that is a 10% U.S. Shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a 10% U.S. Shareholder that is a U.S. corporation. Failure to comply with these reporting and tax paying obligations may subject a 10% U.S. Shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether we or any of our non-U.S. subsidiaries is treated as a CFC or whether any investor is treated as a 10% U.S. Shareholder with respect to any such CFC or furnish to any 10% U.S. Shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult its tax advisors regarding the potential application of these rules to an investment in our Securities.
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Taxation of Distributions
A U.S. holder generally will be required to include in gross income as dividends the amount of any cash distribution paid on our Securities. A cash distribution on such shares generally will be treated as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such dividends paid by us will be taxable to a corporate U.S. holder at regular rates and will not be eligible for the dividends-received deduction generally allowed to domestic corporations in respect of dividends received from other domestic corporations.
Distributions in excess of such earnings and profits generally will be applied against and reduce the U.S. holder’s basis in its shares (but not below zero) and any excess, will be treated as gain from the sale or exchange of such shares as described below under “—U.S. Holders—Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Our Securities.”
Dividends will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally constitute passive category income.
The rules governing the foreign tax credit are complex and the outcome of their application depends in large part on the U.S. holder’s individual facts and circumstances. Accordingly, U.S. holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
With respect to non-corporate U.S. holders, under tax laws currently in effect and subject to the PFIC rules discussed above, dividends may be subject to the lower applicable long-term capital gains tax rate (See “Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Our Securities” below) if our Securities are readily tradeable on an established securities market in the United States and certain other requirements are met.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Our Securities
Upon a sale or other taxable disposition of our Securities and subject to the PFIC rules discussed above, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder’s adjusted tax basis in our Securities.
Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period for our Securities so disposed of exceeds one year. Long-term capital gains recognized by non-corporate U.S. holders will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Generally, the amount of gain or loss recognized by a U.S. holder is an amount equal to the difference between (i) the sum of the amount of cash and the fair market value of any property received in such disposition and (ii) the U.S. holder’s adjusted tax basis in our Securities so disposed of. A U.S. holder’s adjusted tax basis in our Securities generally will equal the U.S. holder’s acquisition cost of such share.
Tax Reporting
Individuals and certain domestic entities that are U.S. holders will be required to report information with respect to such U.S. holder’s investment in “specified foreign financial assets” on IRS Form 8938, subject to certain exceptions. An interest in us constitutes a specified foreign financial asset for these purposes. Persons who are required to report specified foreign financial assets and fail to do so may be subject to substantial penalties. U.S. holders are urged to consult with their tax advisors regarding the foreign financial asset reporting obligations and their application to our Securities.
Non-U.S. Holders
This section applies to you if you are a Non-U.S. holder. A “Non-U.S. holder” is a beneficial owner (other than a partnership or entity treated as a partnership for U.S. federal income tax purposes) of our Securities who or that is not a U.S. holder, including:
| ● | a non-resident alien individual, other than certain former citizens and residents of the United States subject to U.S. tax as expatriates; |
| ● | a foreign corporation; or |
| ● | a foreign estate or trust; |
but generally does not include an individual who is treated as present in the United States for 183 days or more in the taxable year of disposition. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of the sale or other disposition of our securities.
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Assuming that we are not treated as a domestic corporation under the rules discussed above or otherwise, dividends (including constructive dividends) paid or deemed paid to a Non-U.S. holder in respect to our shares generally will not be subject to U.S. federal income tax, unless the dividends are effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains in the United States). In addition, a Non-U.S. holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our Securities unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains in the United States). In addition, special rules may apply to a non-U.S. holder that is an individual who was present in the United States for 183 days or more in the taxable year of such disposition and certain other requirements are met. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of the sale or other disposition of our securities.
Dividends and gains that are effectively connected with the Non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to U.S. federal income tax at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder and, in the case of a Non-U.S. holder that is a corporation for U.S. federal income tax purposes, also may be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.
Reporting and Backup Withholding
Dividend payments with respect to our Securities and proceeds from the sale, exchange or redemption of our Securities may be subject to information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. holder who furnishes a correct taxpayer identification number and makes other required certifications, or who is otherwise exempt from backup withholding and establishes such exempt status. A Non-U.S. holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly-executed applicable IRS Form W-8 or by otherwise establishing an exemption.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. holder’s U.S. federal income tax liability, and a holder generally may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.
Foreign Account Tax Compliance Act
In certain circumstances, legislation commonly known as the Foreign Account Tax Compliance Act, which is referred to herein as FATCA, imposes a withholding tax of 30% on U.S.-source interest and dividend income received by certain non-U.S. financial institutions (including investment funds), unless such institution (i) enters into, and complies with, an agreement with the IRS to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons or by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (ii) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. authorities. Similarly, U.S.-source interest and dividends received by a holder that is a non-financial non-U.S. entity that does not qualify under certain exemptions will generally be subject to withholding at a tax rate of 30%, unless such entity either (i) certifies that such entity does not have any “substantial United States owners” or (ii) provides certain information regarding the entity’s “substantial United States owners,” which the payor will generally be required to provide to the IRS. The IRS has issued proposed regulations (on which taxpayers may rely until final regulations are issued) that would generally not apply these withholding requirements to gross proceeds from asset dispositions. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which the shares of our Securities are held will affect the determination of whether such withholding is required. Holders should consult their tax advisors regarding the possible implications of the FATCA rules in their particular situations.
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Material Cayman Tax Considerations
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our ordinary shares and ADSs will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares or the ADSs, nor will gains derived from the disposal of our ordinary shares or the ADSs be subject to Cayman Islands income or corporation tax.
| F. | Dividends and Paying Agents |
Not Applicable.
| G. | Statement by Experts |
Not Applicable.
| H. | Documents on Display |
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year, which is December 31. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1 -800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
We will furnish Deutsche Bank Trust Company Americas, the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.
In accordance with Nasdaq Stock Market Rule 5250(d), we will post this annual report on our website https://ir.liongrouphl.com/#/FinancialReports. In addition, we will provide hardcopies of our annual report to shareholders, including ADS holders, free of charge upon request.
| I. | Subsidiary Information |
Not applicable.
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
When we facilitate instant execution of client trades, we may be subject to market risk if the trade of one client cannot be naturally offset by the trade of another client, in which case we may act as a principal in trading with the client and take a position. We constantly monitor our exposure to the market against our pre-determined market risk limit. When our exposure exceeds the limit, we hedge our position to bring our exposure back to the limit. The market risk limit represents the maximum (long or short) net exposure we will hold without any hedging. In accordance with the methodology in our risk management policy, we set our market risk limit based on our risk appetite with reference to the expected liquidity and volatility of the underlying financial products, aiming to achieve an optimal balance among facilitating client’s trades, controlling our cost of hedging and maximizing our daily revenue.
We may also be subject to residual market risk caused by market gaps, which may occur when a product price changes suddenly in a single large movement, often at the opening of a trading day, rather than in small incremental steps. In this situation, we may have difficulty adjusting our hedging in a timely manner and thereby incur a potential loss. We conduct regular scenario-based stress tests that analyze the impact of potential market gap events and take preventive actions to mitigate the impact caused by residual market risk.
Credit Risk
We have a credit risk management system in place to evaluate our credit risk. We regularly review our credit policies and set appropriate credit limits for our clients. In determining the credit limit of a particular client, we consider its investment pattern, the history of its daily closing positions, the types of products it has previously invested in and the security it has placed with us. We only allow a client to place purchase orders within its trading limit using cash deposited in its designated account with us. We require the client selling shares to provide necessary documents evidencing that the shares are deposited with a securities clearing and settlement system of a recognized securities exchange.
We set pre-trade quantity limits and price collars on individual orders. Our system will detect and reject orders that exceed the specified quantity limits or fall outside of the current acceptable price range. We also impose intra-day net long or short position limits on our clients to prevent their accumulated positions from exceeding the clearing company’s financially comfortable levels, as well as to halt potentially errant algorithms.
We also measure the pre-settlement credit exposure and the settlement risk of all our clients to manage our overall credit exposure. We take into account the number of clients with open positions, the products for which clients have open positions, the concentration of open positions on any given securities and other relevant factual circumstances. Whenever our overall pre-settlement credit exposure is unusually high on any given day, we investigate the causes and may reduce the limit on each client in order to control our overall credit exposure. We have forced liquidation policies for our clients. For futures trading, we force clients to liquidate when their equity to occupied margin ratio falls below 80%; for CFD trading, we force clients to liquidate when their net worth to occupied margin ratio falls below 50%.
Liquidity Risk
We closely monitor our liquidity position. Our account department prepares a daily cash position summary and our directors and senior management review this summary to ensure that there are no cash flow mis-matches. We may arrange for credit facilities when necessary.
Capital Adequacy Risk
We operate in highly regulated industries across multiple jurisdictions including the Cayman Islands and Hong Kong. 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. We are required to at all times hold sufficient capital to meet regulatory requirements in all relevant jurisdictions. We assess our capital requirements through financial projections and stress tests frequently. We also check internal warning indicators and timely escalate potential capital inadequacy to our senior management for prompt preventive or remedial action.
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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| A. | Debt Securities |
Not Applicable.
| B. | Warrants and Rights |
Not Applicable.
| C. | Other Securities |
Not applicable.
| D. | American Depositary Shares |
Fees and Charges Our ADS holders May Have to Pay
As an ADS holder, you will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of your ADSs):
| Person depositing or withdrawing Class A ordinary shares or ADS holders must pay: |
For: | ||
| $0.05 (or less) per ADSs (or portion of ADSs) | ● | Issuance of ADSs, including issuances resulting from a distribution of Class A ordinary shares or rights or other property | |
| ● | Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates | ||
| $0.05 (or less) per ADS | ● | Any cash distribution to ADS holders | |
| A fee equivalent to the fee that would be payable if securities distributed to you had been Class A ordinary shares and the Class A ordinary shares had been deposited for issuance of ADSs | ● | Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders | |
| $0.03 (or less) per ADS per calendar year | ● | Depositary services | |
| Registration or transfer fees | ● | Transfer and registration of Class A ordinary shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw Class A ordinary shares | |
| Expenses of the depositary | ● | Cable and facsimile transmissions (when expressly provided in the deposit agreement) | |
| ● | Converting foreign currency to U.S. dollars | ||
| Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or Class A ordinary shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes | ● | As necessary | |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | ● | As necessary | |
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The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date.
The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion of distributable property to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary banks.
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.
The depositary may make payments to us or reimburse us for certain costs and expenses, by making available a portion of the ADS fees collected in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable, or which become payable, on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register or transfer your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to you any net proceeds, or send to you any property, remaining after it has paid the taxes. You agree to indemnify us, the depositary, the custodian and each of our and their respective agents, directors, employees and affiliates for, and hold each of them harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any refund of taxes, reduced rate of withholding at source or other tax benefit obtained for you. Your obligations under this paragraph shall survive any transfer of ADRs, any surrender of ADRs and withdrawal of deposited securities or the termination of the deposit agreement.
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PART II.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Material Modifications to the Rights of Security Holders
See “Item 10. Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of the rights of securities holders, which remain unchanged.
On January 13, each Class B Ordinary Share shall be entitled to one hundred (100) votes from twenty five (25) votes on all matters subject to the vote at general meetings of the Company.
Use of Proceeds
Not Applicable.
ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this annual report.
Based upon that evaluation, our management has concluded that, as of December 31, 2025, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15 (f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, our management including our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of internal control over financial reporting as of December 31, 2025 using the criteria set forth in the report “Internal Control— Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2025.
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Attestation Report of the Independent Registered Public Accounting Firm
Because we are a non-accelerated filer, this annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Other than as described above, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
ITEM 16. [RESERVED]
ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Chi Fai Choi, independent director and member of our audit committee, is an audit committee financial expert.
ITEM 16.B. CODE OF ETHICS
Our board of directors has adopted a code of ethics that applies to all of the directors, officers and employees of us and our subsidiaries, whether they work for us on a full-time, part-time, consultative, or temporary basis. Certain provisions of the code apply specifically to our chief executive officer, chief financial officer, senior finance officer, controller, senior vice presidents, vice presidents and any other persons who perform similar functions for us. We have posted a copy of our code of business conduct and ethics on our website at https://ir.liongrouphl.com/#/CorporateGovernance
ITEM 16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by the categories specified below in connection with certain professional services rendered by UHY LLP and HTL International, LLC, our former independent registered public accounting firm, and GGF CPA LTD, our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our auditors during the periods indicated below.
| 2024 | 2025 | |||||||
| USD | USD | |||||||
| Audit fees(1) | ||||||||
| HTL International, LLC | 160,000 | - | ||||||
| GGF CPA LTD | - | 140,000 | ||||||
| Audit related fees(2) | ||||||||
| UHY LLP | 25,000 | 73,000 | ||||||
| HTL International, LLC | 60,000 | - | ||||||
| GGF CPA LTD | - | 63,300 | ||||||
| Tax fees(3) | ||||||||
| UHY LLP | 6,163 | - | ||||||
Notes:
| (1) | Audit Fees. Audit fees mean the aggregate fees for each of the fiscal periods listed for professional services rendered by our principal auditors for the audit of our annual consolidated financial statements and assistance with and review of documents filed with the SEC. |
| (2) | Audit-related Fees. Audit-related fees mean the aggregate fees for professional services rendered by our principal auditors for the assurance and related services, which were not included under Audit Fees above. |
| (3) | Tax Fees. Tax fees mean fees incurred from professional services related to tax compliance. |
The policy of our audit committee is to pre-approve all audit and non-audit services provided by UHY LLP, HTL International, LLC or GGF CPA LTD, including audit services and audit-related services as described above.
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ITEM 16.D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On January 27, 2025, the audit committee of the board of directors of the Company resolved to release HTL International, LLC as the Company’s independent registered public accounting firm, effective January 27, 2025.
During the most recent fiscal years and through the subsequent interim period preceding the release, HTL International, LLC has neither provided any adverse opinion or qualifications on the Company’s financial statements nor had a disagreement with the Company since their engagement on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements that, if not resolved to HTL International, LLC’s satisfaction, would have caused HTL International, LLC to make reference to the subject matter thereof in its reports for such fiscal years and interim period.
During the most recent fiscal years and through the subsequent interim period preceding the release, there was no “reportable event” within the meaning of Item 16F(a)(1)(v) of Form 20-F.
HTL International, LLC has provided a letter to us, dated January 31, 2025 and addressed to the SEC, which is attached hereto as Exhibit 16.1 and is hereby incorporated herein by reference.
On January 27, 2025 and on November 26, 2025, the Company has engaged GGF CPA LTD as its independent registered public accounting firm to audit the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2024 and 2025, respectively. The decision to engage GGF CPA LTD as the Company’s independent registered public accounting firm was approved by the board of directors of the Company.
During the most recent fiscal years and through the date of this report, the Company has not consulted with GGF CPA LTD regarding any of the following:
| 1. | the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; |
| 2. | the type of audit opinion that might be rendered on the Company’s financial statements by GGF CPA LTD, in either case where written or oral advice provided by GGF CPA LTD would be an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issues; or |
| 3. | any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K). |
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ITEM 16.G. CORPORATE GOVERNANCE
As a Cayman Islands exempted company listed on the Nasdaq Capital Market, we are subject to Nasdaq corporate governance listing standards. However, Rule 5615(a)(3) of The Listing Rules of the Nasdaq Stock Market (the “Nasdaq Rules”) permits foreign private issuers like us to follow certain home country corporate governance practices in lieu of certain provisions of the Rule 5600 Series of the Nasdaq Rules. A foreign private issuer that elects to follow a home country practice instead of such provisions, must disclose in its annual reports each requirement that it does not follow and describe the home country practice followed by it. 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. In this regard we have elected to adopt the practices of our home country, the Cayman Islands, which practices which do not require independent directors to meet regularly in executive sessions separate from the full board of directors. |
| ● | Nomination of Directors. 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. We follow Cayman Islands practice which does not require us to have a formal written charter addressing the director nominations process. |
| ● | Composition of Board. Rule 5605(b)(1) of the Nasdaq Rules requires a Nasdaq listed company to have a majority of the board be independent. In this regard we have elected to adopt the practices of our home country, the Cayman Islands, which practices do not require a majority independent board. |
| ● | Composition of Committees. Rule 5605(d)(2) of the Nasdaq Rules requires a Nasdaq listed company to have a compensation committee composed solely of independent directors to determine or recommend the compensation of the executive officers of the company. In this regard we have elected to adopt the practices of our home country, the Cayman Islands, which practices do not require that any of the members of a company’s compensation committee be independent directors. |
| ● | Shareholder Approval. Rule 5635(c) requires shareholder approval for certain issuances of securities. 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, preferred shares, warrants and convertible notes. |
ITEM 16.H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
The Company has
ITEM 16K. CYBERSECURITY
Risk Management and Strategy
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We conduct risk assessments to identify cybersecurity threats annually as well as in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats. These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to mitigate identified risks; reasonably address any identified gaps in existing safeguards; and monitor the effectiveness of our safeguards. We devote resources and designate high-level personnel, including our dedicated IT Director who reports to our Chief Executive Officer (“CEO”), to manage the risk assessment and mitigation process. Our IT Director works closely with a team of cybersecurity professionals with extensive experience and expertise in cybersecurity threat assessments and detection, incident response and mitigation.
As part of our overall risk management system, we assess our safeguards in collaboration with various functional teams, including Information Security, Information Technology, and train our employees on these safeguards. Personnel at all levels and teams are required to receive periodic security awareness training to ensure that they understand our cybersecurity policies and their roles in protecting our information systems or any information residing therein.
We have a set of company-wide policies and procedures concerning cybersecurity matters that include security risk assessment, identity and access control, vendor security and network security. There are other policies related to cybersecurity involving employees’ use of company equipment and resources, remote work and workplace security and safety. These policies are reviewed periodically and approved by appropriate members of management.
We engage assessors, consultants, auditors, or
other third parties in connection with our risk assessment processes. These service providers assist us to design and implement our cybersecurity
policies and procedures, as well as to monitor and test our safeguards. These services include Web Application Penetration Testing, Infrastructure
security testing, consultant engagements, incident response preparedness, and vendor security review. We require each
Governance
One of the key functions of our board of directors
is informed oversight of our risk management process, including risks from cybersecurity threats. Our board of directors is responsible
for oversight of our risk management framework, which is designed to monitor and manage strategic and operational risks.
Our IT Director has more than 25 years of information technology expertise and is responsible to identify, assess and manage our material risks from cybersecurity threats. Our IT Director started his career as a system engineer and has held various leadership positions at Thomson Reuters, Cartridge Express Pte Ltd and Tianda Group Limited . He received a bachelor degree in Computer Science from University of Ulster.
Our IT Director oversees our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above. The processes by which our IT Director is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents include the following: tabletop exercises, vulnerability management programs, internal & external security risk assessments, threat modeling processes of new services, third party security risk functions, incident response processes, phishing awareness programs, and additional control validation services.
Our IT Director reports to our CEO ad hoc or at least annually regarding the company’s cybersecurity risks and activities, including the implementation and operation of preventative controls and the detection, any recent cybersecurity incidents, and mitigation and remediation responses. The CEO reports to the Board of Directors and Audit Committee on key cybersecurity risk management topics, as appropriate.
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PART III.
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements of Lion Group Holding Ltd. and its subsidiaries are included at the end of this annual report.
ITEM 19. EXHIBITS
Exhibit
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| * | Filed with this Annual Report on Form 20-F |
| ** | Furnished with this Annual Report on From 20-F |
130
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| Lion Group Holding Ltd. | |||
| By: | /s/ Chunning Wang | ||
| Name: | Chunning Wang | ||
| Title: | Director and Chief Executive Officer | ||
| Date: April 30, 2026 | |||
131
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Shareholders of Lion Group Holding Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Lion Group Holding Ltd. (the “Company”) and its subsidiaries (the “Group”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial positions of the Group as of December 31, 2025 and 2024 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Existence and Rights to Digital Assets
As described in Note 6 to the consolidated financial statements, as of December 31, 2025, the Company recorded digital assets with a fair value of approximately $15.2 million, which were held in third-party custody accounts.
We identified the evaluation of the existence of and the Company’s rights to its digital assets as a critical audit matter due to the nature and extent of audit effort required to address the matter, which includes a significant involvement of more experienced engagement team members. Subjective auditor judgment was required in determining the nature and extent of audit procedures and the sufficiency of audit evidence obtained to test the digital assets recognized by the Company.
The following are the primary procedures we performed to address this critical audit matter: we evaluated the design of certain internal controls over the existence of the Company’s investment in digital assets and the Company’s rights over its investment in digital assets; we reviewed the custodial agreements to obtain understanding of the Company’s rights and obligations in relation to the digital assets held in custody; we evaluated the reliability of the third-party custodians including reviewing the SOC reports of the custodians; we performed the reconciliation of digital assets per the Company’s records to the custodial service ledgers and the public blockchain, and obtained confirmation of the Company’s investment in digital assets held with the third-party custodians as of December 31, 2025, and compared the results of the confirmations to the Company’s records; we also requested that management transfer a specified units of digital assets between custodians and subsequently withdraw the digital assets to an entity-controlled bank account, and verified the transfers and withdrawal by agreeing the units and account information per the transferring custodian, receiving custodian, and withdrawal records to the Company’s bank statements records; we also assessed the sufficiency of audit evidence obtained by evaluating the cumulative results of the audit procedures.
| /s/ GGF CPA LTD | |
| We have served as the Company’s auditor since 2025. | |
| Guangzhou, the People’s Republic of China | |
| April 30, 2026 | |
PCAOB ID # 2729
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Shareholders of Lion Group Holding Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Lion Group Holding Ltd. (the “Company”) and its subsidiaries (the “Group”) as of December 31, 2023, and the related consolidated statement of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial positions of the Group as of December 31, 2023 and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor from 2023 to 2025.
April 30, 2024
PCAOB ID #
F-3
LION GROUP HOLDING LTD.
CONSOLIDATED BALANCE SHEETS
(In U.S. dollar except for share and per share data)
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash-bank balances held on behalf of customers | ||||||||
| Stable coins | ||||||||
| Digital assets | ||||||||
| Financial assets measured at fair value | ||||||||
| Securities owned, at fair value | ||||||||
| Receivables from broker-dealers and clearing organizations | ||||||||
| Prepaids, deposits and others | ||||||||
| Total current assets | ||||||||
| Non-current Assets | ||||||||
| Digital assets, non-current | ||||||||
| Property and equipment, net | ||||||||
| Long-term investment | ||||||||
| Right-of-use assets | ||||||||
| Other assets | ||||||||
| Total non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity | ||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Payables to customers | $ | $ | ||||||
| Payables to broker-dealers and clearing organizations | ||||||||
| Accrued expenses and other payables | ||||||||
| Short-term borrowings | ||||||||
| Lease liability – current | ||||||||
| Total current liabilities | ||||||||
| Non-current Liabilities | ||||||||
| Convertible debentures | ||||||||
| Obligation to deliver digital assets | ||||||||
| Lease liability – noncurrent | ||||||||
| Other current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Preferred shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Subscription receivable | ( | ) | ||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive losses | ( | ) | ( | ) | ||||
| Total LGHL shareholders’ equity | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-4
LION GROUP HOLDING LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE
LOSS
(In U.S. dollar except for share and per share data)
| For the Years Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Revenues (losses) | ||||||||||||
| Commissions fees income | $ | $ | $ | |||||||||
| Interest income | ||||||||||||
| Trading gains (loss) | ( | ) | ||||||||||
| Staking reward from digital assets | ||||||||||||
| Other income | ||||||||||||
| ( | ) | |||||||||||
| Expenses and others | ||||||||||||
| Commissions and fees | ||||||||||||
| Custodian and other fees for digital assets | ||||||||||||
| Compensation and benefits | ||||||||||||
| Occupancy | ||||||||||||
| Communication and technology | ||||||||||||
| General and administrative | ||||||||||||
| Professional fees | ||||||||||||
| Services fees | ||||||||||||
| Interest | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Marketing | ||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||
| Change in fair value of digital assets | ||||||||||||
| Investment loss on digital assets | ||||||||||||
| Other operating (income) expenses, net | ( | ) | ||||||||||
| Total expenses | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Less: net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ||||||
| Net loss attributable to LGHL | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Deemed dividend on the effect of the down round features | ( | ) | ( | ) | ( | ) | ||||||
| Deemed dividend on the effect of the warrant modification | ( | ) | ( | ) | ||||||||
| Net loss attributable to LGHL ordinary shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Loss per share for both Class A and Class B ordinary shares - basic and diluted (i) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Loss per ADS - basic and diluted (i) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Weighted average Class A ordinary shares outstanding - basic and diluted (i) | ||||||||||||
| Weighted average Class B ordinary shares outstanding - basic and diluted (i) | ||||||||||||
| (i) |
The accompanying notes are an integral part of the consolidated financial statements.
F-5
LION GROUP HOLDING LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in U.S. dollar)
| For the Years Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Net loss | $ | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income | ||||||||||||
| Foreign currency translation adjustment | ||||||||||||
| Comprehensive loss | ( | ) | ( | ) | $ | ( | ) | |||||
| Comprehensive loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ||||||
| Comprehensive loss attributable to LGHL ordinary shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of the consolidated financial statements.
F-6
LION GROUP HOLDING LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In U.S. dollar except for share and per share data)
| Class A | Class B | Additional | Accumulated Other | Non- | ||||||||||||||||||||||||||||||||||||
| Ordinary Shares (i) | Ordinary Shares (i) | Subscription | Paid in | Accumulated | Comprehensive | Controlling | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Receivable | Capital | Deficit | Loss | Interest | Total | |||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Conversion of August 2022 Convertible Debenture and the payment of make-whole interest by shares | - | - | - | |||||||||||||||||||||||||||||||||||||
| Conversion of December 2022 Convertible Debenture and the payment of make-whole interest by shares | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of Warrants H in consideration for the investor to purchase September 2023 Convertible Debenture | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Issuance of Class A ordinary shares as a result of the partial exercise of Warrants E | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of Class B ordinary shares in connection with 2023 Share Incentive Plan | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net contributions from noncontrolling shareholder | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Conversion of September 2023 Convertible Debenture and the payment of make-whole interest by shares | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of Warrants I in consideration for the investor to purchase January 2024 Convertible Debenture | - | - | ||||||||||||||||||||||||||||||||||||||
| Conversion of January 2024 Convertible Debenture and the payment of make-whole interest by shares | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of Warrants J in connection with August 2024 Convertible Debenture | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Issuance of Class B ordinary shares in connection with 2023 Share Incentive Plan | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of Class B ordinary shares in connection with 2024 Share Incentive Plan | - | |||||||||||||||||||||||||||||||||||||||
| Conversion from Class B to Class A ordinary shares | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of Class A Ordinary Shares in connection with extinguishment of liabilities | - | ( | ) | - | - | |||||||||||||||||||||||||||||||||||
| Deconsolidation of subsidiaries | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||
| Reclassification of subscription receivable in connection with extinguishment of liabilities | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Conversion of January 2024 Convertible Debenture and the payment of make-whole interest by shares | - | |||||||||||||||||||||||||||||||||||||||
| Conversion of August 2024 Convertible Debenture and the payment of make-whole interest by shares | - | |||||||||||||||||||||||||||||||||||||||
| Conversion of January 2025 Convertible Debenture and the payment of make-whole interest by shares | - | - | - | |||||||||||||||||||||||||||||||||||||
| Conversion of May 2025 Convertible Debenture and the payment of make-whole interest by shares | - | ( | ) | - | - | |||||||||||||||||||||||||||||||||||
| Partial conversion of June 2025 Convertible Debenture and the payment of make-whole interest by shares | - | ( | ) | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of Class A Ordinary Shares as a result of the partial exercise of Warrants E | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of Warrants K in consideration for the investor to purchase January 2025 Convertible Debenture | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuance of Warrants L in consideration for the investor to purchase May 2025 Convertible Debenture | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuance of Class A Ordinary Shares in connection with extinguishment of liabilities in 2025 | - | ( | ) | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of Class A Ordinary Shares in connection with share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||
| Acquisition of non-controlling interests | - | - | ( | ) | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-7
LION GROUP HOLDING LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollar)
| For the Years Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to cash (used in) provided by operating activities: | ||||||||||||
| Stock based compensation expense(1) | ||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||
| Change in fair value of option liability | ||||||||||||
| Change in fair value of embedded derivative liability and amortization of debt discounts | ||||||||||||
| Amortization of right-of-use assets | ||||||||||||
| Share of equity gain on investment in an equity investee | ( | ) | ||||||||||
| Impairment of right-of-use assets due to early termination | ||||||||||||
| Change in fair value of digital assets | ||||||||||||
| Investment loss on digital assets | ||||||||||||
| Gain on sale of crypto currencies | ( | ) | ||||||||||
| Loss (gain) on sale of subsidiaries | ( | ) | ( | ) | ||||||||
| Amortization of debt discounts | ||||||||||||
| Depreciation | ||||||||||||
| Loss from disposal of property and equipment | ||||||||||||
| Gain on extinguishment of liabilities | ( | ) | ( | ) | ||||||||
| (Increase) decrease in operating assets | ||||||||||||
| Stable coins | ( | ) | ||||||||||
| Digital assets | ||||||||||||
| Securities owned | ( | ) | ||||||||||
| Receivables from broker-dealers and clearing organizations | ( | ) | ||||||||||
| Derivative assets, at fair value | ( | ) | ||||||||||
| Prepaids, deposits and others | ( | ) | ( | ) | ||||||||
| Increase (decrease) in operating liabilities | ||||||||||||
| Payables to customers | ( | ) | ( | ) | ||||||||
| Payables to broker-dealers and clearing organizations | ( | ) | ( | ) | ||||||||
| Derivative liabilities, at fair value | ( | ) | ||||||||||
| Accrued expenses and other payables | ( | ) | ||||||||||
| Other non-current liabilities | ||||||||||||
| Lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ( | ) | ||||||||
| Cash Flows from Investing Activities | ||||||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||||||
| Purchases of digital assets | ( | ) | ||||||||||
| Net proceeds from sale of subsidiaries | ( | ) | ||||||||||
| Collection of short term loan | ||||||||||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||||||
| Cash Flows from Financing Activities | ||||||||||||
| Proceeds from issuance of convertible debenture, net of costs | ||||||||||||
| Proceeds from the partial exercise of Warrants E | ||||||||||||
| Net contributions from noncontrolling shareholder | ( | ) | ||||||||||
| Repayment to director | ( | ) | ||||||||||
| Proceeds from short-term borrowings | ||||||||||||
| Repayment of short-term borrowings | ( | ) | ( | ) | ||||||||
| Net cash provided by financing activities | ||||||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash | ||||||||||||
| Net Change in Cash, Cash Equivalents, and Restricted Cash | ( | ) | ||||||||||
| Cash, Cash Equivalents, and Restricted Cash - Beginning of Year | ||||||||||||
| Cash, Cash Equivalents, and Restricted Cash - End of Year | $ | $ | $ | |||||||||
| Noncash Investing and Financing Activities | ||||||||||||
| Increase in payable for Property and equipment | $ | $ | $ | |||||||||
| Conversion of crypto currencies to USDT | $ | $ | $ | |||||||||
| Conversion of Debenture into ordinary shares | $ | $ | $ | |||||||||
| Embedded derivative liabilities (make-whole interest feature) | $ | $ | $ | |||||||||
| Share issuances in exchange for a decrease in embedded derivative liability | $ | $ | $ | |||||||||
| Issuance of Warrants H | $ | $ | $ | |||||||||
| Conversion of September 2023 Convertible Debenture and the payment of make-whole interest by shares | $ | $ | $ | |||||||||
| Conversion of January 2024 Convertible Debenture and the payment of make-whole interest by shares | $ | $ | $ | |||||||||
| Issuance of Warrants I in consideration for the investor to purchase January 2024 Convertible Debenture | $ | $ | $ | |||||||||
| Conversion from Class B to Class A ordinary shares | $ | $ | $ | |||||||||
| Issuance of Warrants J in connection with August 2024 Convertible Debenture | $ | $ | $ | |||||||||
| Issuance of Class A Ordinary Shares in connection with extinguishment of liabilities | $ | $ | $ | |||||||||
| Lease liabilities arising from obtaining right-of-use assets | $ | $ | $ | |||||||||
| Increase in other receivables from sale of subsidiaries | $ | $ | $ | |||||||||
| Issuance of Warrants K in consideration for the investor to purchase January 2025 Convertible Debenture | $ | $ | $ | |||||||||
| Issuance of Warrants L in consideration for the investor to purchase May 2025 Convertible Debenture | $ | $ | $ | |||||||||
| Conversion of August 2024 Convertible Debenture and the payment of make-whole interest by shares | $ | $ | $ | |||||||||
| Conversion of January 2025 Convertible Debenture and the payment of make-whole interest by shares | $ | $ | $ | |||||||||
| Conversion of May 2025 Convertible Debenture and the payment of make-whole interest by shares | $ | $ | $ | |||||||||
| Partial conversion of June 2025 Convertible Debenture and the payment of make-whole interest by shares | $ | $ | $ | |||||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||
| Cash paid for interest | $ | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | $ | |||||||||
| (1) |
The accompanying notes are an integral part of the consolidated financial statements.
F-8
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Organization and Principal Activities
Lion Group Holding Ltd. (the “Company”, “Lion” or “LGHL”) is a company with limited liability registered as an exempted company in the Cayman Islands.
The Company and its subsidiaries (collectively
referred to as the “Group”) provide securities, futures and derivatives brokerage services, insurance brokerage services,
total return swap trading services, and market maker trading services. As a result of the consummation of a business combination (the
“Closing”) with Proficient Alpha Acquisition Corp., a Nevada corporation (“PAAC”) which was accounted for as a
reverse recapitalization, the Company’s ordinary shares and warrants started to be traded on the NASDAQ Capital Market under the
ticker symbols LGHL and LGHLW, respectively on June 17, 2020. Each American Depositary Shares (“ADSs”) of the Company represented
On July 13, 2023, March 26, 2025 and November
26, 2025, the ADS ratio was changed from one (1) ADS representing one (1) Share to one (1) ADS representing fifty (
On September 29, 2025, the Company’s 2025
Annual Meeting of Shareholders (the “Annual Meeting”) approved the increase of the Company’s authorized share capital
from US$
The number of ADSs and the price per ADS prior to the ratio change events herein have been retrospectively adjusted for its effect.
Principal Activities
The Group earns income and fees from the following streams:
| (a) | Fees and commissions. The Group earns fees and commissions from securities, futures and derivatives brokerage services (including commissions and fees related to total return swap (“TRS”) trading business and contract for difference (“CFD”) trading services when the Group acts as a market maker). |
| (b) | Trading (losses) gains. Trading (losses) gains consist of realized and unrealized losses or gains derived from (i) managed portfolio trading positions where the Group acts as counterparty to customers’ trades, and (ii) marking up the bid/offer spreads on customers’ CFD transactions, and (iii) trading losses or gains from proprietary TRS trading activities. |
| (c) | Interest income. Interest income primarily consist of interests earned on bank deposits and short-term loans the Group extends to unrelated third parties, interest rate difference between currency pairs the Group hold resulting from rolling over currency positions and interest earned from loans provided to TRS trading customers, which are recorded on an accrual basis. Interest income is recognized as it accrues using the effective interest method. |
| (d) | Other income. Other income primarily consists of the dividends income, transaction fee, advisory service fee, government subsidy and other miscellaneous charges from customers etc. |
F-9
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Organization and Principal Activities (cont.)
The Group’s trading customers consist of corporate clients, individual traders and retail investors primarily located in the People’s Republic of China (“PRC”) and Southeast Asia, although its trading platform allows it to serve customers worldwide. The Group also generated commission revenues by providing insurance brokerage services to high-net-worth individuals primarily located in the PRC.
During the second half of 2024, the Group returned Type 1 License for Dealing in Securities, Type 4 License for Advising on Securities and Type 9 Asset Management to Hong Kong Securities and Futures Commission (“HKSFC”). In the beginning of 2025, the Group withdrew the trading member of Singapore Exchange Derivative Trading Limited (“SGX DT”). Subsequently in 2025, the Group cancelled the Capital Markets Service License (“CMS License”) issued by the Monetary Authority of Singapore and returned the license Type 2 License for Dealing in Futures Contracts and Type 5 License for Advising on Futures Contracts to HKSFC.
As of December 31, 2025, the Company, through a subsidiary, possesses the full license issued by Cayman Islands Monetary Authority (“CIMA”) to carry out securities investment business including Broker Dealer and Market Maker.
Since July 2025, the Group has collaborated with Autonomous Holdings (“Autonomous”), a leading digital asset investment platform known for its innovative products and solutions, and Galaxy Digital Holdings Ltd. (NASDAQ/TSX: GLXY) (“Galaxy Digital”) to advance digital asset treasury strategies. This initiative positions the Group as a cutting-edge digital asset company, leveraging institutional-grade expertise to enhance shareholder value. As part of this collaboration, Autonomous acts as a strategic advisor for the Group’s digital asset treasury allocation process. Additionally, Galaxy Digital facilitates trading and execution, providing access and liquidity through its institutional-grade global markets platform. The treasury strategy aims to target high-potential blockchain ecosystems, primarily Hyperliquid (HYPE), thereby gaining exposure to next-generation DeFi, scalability, and Web3 infrastructure.
Setup of a subsidiary
On November 28, 2025, the Company setup a wholly owned subsidiary, Lion Global Markets Trading Limited, under the laws of Cayman Island.
Deconsolidation of subsidiaries
On June 12, 2024, the Group sold its
Such disposals or dissolution did not represent
a strategic shift that has or will have a major effect on the operations and financial results. In accordance with ASC 810-10-40, Deconsolidation
of a Subsidiary, the Group derecognized the net assets and noncontrolling interests associated with the above entities as of
sale date, and recognized a gain of approximately $
In the first half of 2024, the Group disposed
of its
F-10
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Organization and Principal Activities (cont.)
Details of the Company’s subsidiaries as of December 31, 2025 are as follows:
| Company name | Date of Incorporation or acquisition | Place of incorporation or establishment | Ownership interest | Principal activities | ||||
| Lion Financial Group Limited | ||||||||
| Lion Wealth Management Limited | ||||||||
| Lion Investment (Hong Kong) Limited (F/K/A Lion Foreign Exchange Limited) | ||||||||
| Lion Wealth Limited (“LWL”) | ||||||||
| Lion Brokers Limited | ||||||||
| Lion International Financial (Singapore) Pte. LTD. | ||||||||
| Lion Group North America Corp. (F/K/A Proficient Alpha Acquisition Corp.) | ||||||||
| Lion Workshop Ltd. (F/K/A Skyline Legend Ltd.) | ||||||||
| Lion NFT Limited | ||||||||
| Flying Lion Limited | ||||||||
| Aquarius Sponsor Ltd. | ||||||||
| Aquarius II Sponsor Ltd. | ||||||||
| Aquarius I Acquisition Corp. | ||||||||
| Aquarius II Acquisition Corp. | ||||||||
| Lion Metaverse Limited | ||||||||
| Lion Global Markets Trading Limited | |
F-11
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies
Basis of Presentation
These consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and have been prepared in accordance with the regulations of the Securities and Exchange Commission (“SEC”).
Going Concern
In assessing the Company’s liquidity, the
Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs
are to meet its working capital requirements, operating expenses and capital expenditure obligations. The Company’s management has
considered whether there is substantial doubt about its ability to continue as a going concern due to (1) the net loss of approximately
$
Management has determined there is substantial doubt about its ability to continue as a going concern. Management will implement strategies and plans to grow the Group’s business and generate substantial revenue, and take further measures to control operating costs. Management is trying to alleviate the going concern risk through the following sources:
| ● | Equity financing to support its working capital; |
| ● | Other available sources of financing (including debt) from banks and other financial institutions; and |
| ● | Financial support and credit guarantee commitments from the Company’s related parties. |
Based on the above considerations, management is of the opinion that the Company will probably not have sufficient funds to meet its working capital requirements if the Company is unable to obtain additional financing. There is no assurance that the Company will be successful in implementing the foregoing plans or that additional financing will be available to the Company on commercially reasonable terms, or at all.
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of such uncertainties.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, and its subsidiaries in which it has a controlling financial interest. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in consolidation. The Group consolidates the loss of the subsidiaries and subtracts the net loss that is attributable to the non-controlling interest holders in calculating the net income (loss) that is attributable to the Group.
F-12
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Translation of Foreign Currencies
The functional currency is the U.S. dollar for the Group’s Cayman Island operations, Singapore dollars for Singapore entity, and the Hong Kong dollar for all other Group operations. The Group’s reporting currency is the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated at year-end exchange rates, income statement accounts are translated at average rates of exchange for the year and equity is translated at historical exchange rates. Any translation gains or losses are recorded in other comprehensive income (loss). Gains or losses resulting from foreign currency transactions are included in net loss.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements as well as the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Current Expected Credit Losses
On January 1, 2023, the Group adopted FASB ASC Topic 326 – “Financial Instruments – Credit Losses” (“ASC Topic 326”) which replaces the incurred loss methodology with the current expected credit loss (“CECL”) methodology. The guidance applies to financial assets measured at amortized cost, held-to-maturity debt securities and off-balance sheet credit exposures. For on-balance sheet assets, an allowance must be recognized at the origination or purchase of in-scope assets and represents the expected credit losses over the contractual life of those assets.
The Group adopted ASC Topic 326 using the modified retrospective approach for all in-scope assets, which did not result in an adjustment to the opening balance in accumulated deficits. The impact to the current period is not material since the Group’s in-scope assets are primarily receivables from broker-dealers and clearing organizations, the management considers that these receivables have a low risk of default and the counterparties have a strong capacity to meet their contractual obligation.
An allowance for credit losses on other financial assets, including receivables from clients, other receivable and various deposits due from vendors which were included in prepaids, deposits and others and other assets, is estimated based on the aging of these financial assets, as well as the consideration of current economic conditions and reasonable and supportable forecasts. The settlement periods of commissions receivable are usually short and within one month, the credit risk arising from receivables from clients is considered low. Other receivables and the deposits with various vendors were not material to the consolidated financial statements taken as a whole and historically the Group has not recorded an allowance for credit losses on their deposits. As a result, the allowance for credit losses for other financial assets were immaterial for current period.
Cash and Cash Equivalents
Cash and cash equivalents consist of deposits with banks and all highly liquid investments, with maturities of three months or less, that are not segregated and deposited for regulatory purposes. The Group does not have any cash equivalents as of December 31, 2025 and 2024.
The Group maintains its cash in bank deposit accounts which at times may exceed insured limits. The Group has not experienced any losses in such accounts. The Group has one bank account with U.S. bank subject to FDIC insurance and its balance is immaterial. Management believes that the Group is not exposed to any significant credit risk on cash and cash equivalents.
F-13
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Restricted Cash — Bank Balances Held on Behalf of Customers
The Group maintains segregated trust accounts with licensed banks or payment platforms to hold customer funds in accordance with the relevant legislation. The Group has classified customer funds as bank balances held on behalf of customers with a corresponding payables to customers in the liabilities section of the consolidated balance sheets.
Securities Owned and Derivatives
The Group’s proprietary trading securities transactions are recorded on the trade date, as if they had settled.
Securities, futures and derivative positions are recorded at fair value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”).
Receivables
Receivables arise from the business of dealing in investment securities, futures and derivatives and include the amounts due on brokerage transactions on a trade-date basis. Broker-dealers require balances to be placed with them in order to cover the positions taken by its customers. Clearing organizations receivables typically represent proceeds receivable on trades that have yet to settle and are usually collected within two days.
Stable Coins
Stable coins represented USD Coin (“USDC”), which are accounted for as a financial instrument that can be redeemed one USDC for one U.S. dollar on demand from the issuer. While not accounted for as cash or cash equivalents, we treat our stable coin holdings as a liquidity resource.
Digital Assets
For the year ended December 31, 2025, the Group purchased USD Tether (“USDT”), Bitcoin (“BTC”), Hyperliquid (“HYPE”), Solana (“SOL”) and Sui (“SUI”) from open market. As of December 31, 2025, digital assets (primarily include USDT, BTC, HYPE, SOL and SUI) are initially recorded at cost in the accompanying consolidated balance sheets and subsequently remeasured at fair value at the end of each reporting period, with changes in fair value recognized in “changes in fair value on digital assets” in the consolidated statements of operations.
The Company adopted ASU 2023-08, which requires entities to measure certain cryptocurrencies at fair value, with changes in fair value recorded in net income in each reporting period. The Company’s digital assets are within the scope of ASU 2023-08. The Company adopted ASU 2023-08 for the year beginning on January 1, 2025. The adoption of ASU 2023-08 did not cause a material cumulative-effect adjustment to the opening balance of accumulated deficit.
ASC 820 defines “principal market” as the market with the greatest volume and level of activity for the asset or liability. The determination of the principal market (and, as a result, the market participants in the principal market) is made from the perspective of the reporting entity. The Company purchased and sold digital assets, including USDT, HYPE, SOL and SUI, on CoinDesk, which provides digital infrastructure for the Company to trade digital assets. CoinDesk is one of the most trusted sources by users, institutions, and media for comparing thousands of digital assets and is commonly cited by major news outlets. Further, CoinDesk calculates price for a digital asset by taking the volume weighted average of all market pair prices reported for the digital asset instead of price from one single exchange. Thus, the Company determined that CoinDesk is the principal market for the digital assets owned.
Purchases of digital assets by the Company are included within investing activities on the accompanying consolidated statements of cash flows. The changes of digital assets are included within investing activities in the accompanying consolidated statements of cash flows. The Company accounts for its gains or losses on disposition in accordance with the first-in first-out method of accounting.
F-14
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
The activities of the digital assets for the year
ended December 31, 2025 was disclosed in Note 6 – Digital Assets.
| BNB | ||||
| Digital assets at January 1, 2023 | $ | |||
| Realized gain on sale of crypto currencies | ||||
| Sale of crypto currencies | ( | ) | ||
| Digital assets at December 31, 2023(1) | $ | |||
| (1) | As of December 31, 2025 and 2024, the Company held 21 and 21 tokens of BNB. The balance was included in the line item “other assets” in the consolidated balance sheets as of December 31, 2025 and 2024. |
Prepaids, deposits and others
Prepaids,
deposits and other consists of prepaid services, insurance, commissions receivable, receivable due from customers as a result of the
Company’s make whole of customers’ losses from trading activities and others. Balances of prepaids, deposits and other were
$
Long-term Investment
For the year ended December 31, 2025, the Company invested to setup
and own
In accordance with ASC 323 “Investments - Equity Method and Joint Ventures”, the Company accounts for the investment using the equity method because the Company has significant influence but does not own a majority equity interest or otherwise have control over the equity investee.
Under the equity method, the Company initially
records its investment at cost. The Company’s share of the post-acquisition profits or losses of the equity investee is recognized
in the consolidated statements of operations and comprehensive loss, and its share of post-acquisition movements in accumulated other
comprehensive loss is recognized in other comprehensive loss. The Company records its share of the results of the equity investees on
a one-quarter-in-arrears basis. When the Company’s share of losses in the equity investee equals or exceeds its interest in the
equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees
on behalf of the equity investee. For the year ended December 31, 2025, the Company recorded share of equity income of $
The Company continually reviews its investment in the equity investee to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value. For the years ended December 31, 2025, 2024 and 2023, the Company did not record impairment loss against investment in an equity investee.
Property and Equipment
Furniture, equipment, software and leasehold improvements
are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis using estimated useful lives of to years
with salvage value of
Impairment of Long-lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment by comparing carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. For the years ended December 31, 2025, 2024 and 2023, the Company did not record impairment loss against long-lived assets.
F-15
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Payables
Payables arise from the business of dealing in investment securities, futures and derivatives. Payables to customers as presented in the consolidated balance sheets represent such payables related to the Group’s customer trading activities as well as cash balances held on behalf of customers.
The Group borrows loans from business partners at benchmark interest rate plus a fixed spread, and immediately lends to TRS trading service customers. Net loans borrowed from TRS business partners are included in the line item “payables to broker-dealers and clearing organizations”. As of December 31, 2025 and 2024, the balance of payables to broker-dealers and clearing organizations was primarily comprised of such net loans.
Revenue Recognition
See Note 3 for details.
Commissions and Fees
Commissions and fees related to securities, derivative and TRS trading transactions are recorded on a trade date basis. Commissions expense on insurance products are recognized on the closing date of a transaction as determined by the terms of the relevant contract and insurance policy.
Extinguishment of Liabilities
In accordance with ASC 405-20 Extinguishment
of Liabilities, the Group derecognizes a liability either when the debtor pays the creditor and is relieved of its obligation
for the liability, or when the debtor is legally released from being the primary obligator under the liability, either judicially or
by the creditor. On December 30, 2024, the Group entered into Debt to Equity Agreements with certain customers, under which
On December 31, 2025, the Group entered into the second Debt to Equity
Agreements with certain customers, under which
F-16
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Convertible Securities, Warrants and Derivative Instruments
The accounting treatment of warrants and convertible securities issued is determined pursuant to the guidance provided by ASC 470, Debt, ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging (“ASC 815”), as applicable. Each feature of freestanding financial instruments including, without limitation, any rights relating to subsequent dilutive issuances, equity sales, rights offerings, conversions, optional redemptions and dividends are assessed with determinations made regarding the proper classification in the Company’s consolidated financial statements.
The Group evaluates all of its equity-linked financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity and whether embedded derivative shall be bifurcated from the host instrument and separately accounted for as a derivative, is reassessed at the end of each reporting period. Derivative assets and liabilities are recorded at fair value at inception and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations.
Loss per Ordinary Share (“EPS”)
The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share”, which requires earnings per share for each class of stock (ordinary shares and participating securities) to be calculated using the two-class method. The two-class method is an allocation of earnings between the holders of ordinary shares and a company’s participating security holders. Under the two-class method, earnings for the reporting period are allocated between ordinary shareholders and other security holders based on their respective participation rights in undistributed earnings. As the Company’s two classes of ordinary shares have the same dividend rights, loss per share for each class of ordinary shares have the same results.
Basic loss per ordinary share is computed by dividing net income or loss available to ordinary shareholders by the weighted average number of ordinary shares issued and outstanding for the periods.
In accordance with ASC 260-10-45, the
For purposes of determining diluted loss per ordinary share, basic loss per ordinary share is further adjusted to include the effect of potential dilutive ordinary shares outstanding during the periods. Potential ordinary shares consist of the incremental ordinary shares upon exercise of warrants using the treasury stock method and upon conversion of convertible debt using the if-converted method.
F-17
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Loss per Ordinary Share (“EPS”) (cont.)
For the years ended December 31, 2025, 2024 and 2023, the following potential dilutive securities denominated in ordinary shares equivalents were excluded for the periods they were outstanding from the computation of diluted earnings loss per share because to do so would have been antidilutive. As a result, diluted loss per ordinary share is the same as basic loss per ordinary share for all periods presented.
| Years Ended December 31, | ||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||
| SPAC Warrants | Note 19 | |||||||||||||
| August 2020 PIPE Warrants | ||||||||||||||
| February 2021 Warrants | Note 12 | |||||||||||||
| December 2021 Warrants | Note 12 | |||||||||||||
| Series H Warrant | Note 11 | |||||||||||||
| Series I Warrant | Note 11 | |||||||||||||
| Series J Warrant | Note 11 | |||||||||||||
| Series K Warrant | Note 11 | |||||||||||||
| Series L Warrant | Note 11 | |||||||||||||
| September 2023 Convertible Debenture | Note 11 | |||||||||||||
| January 2024 Convertible Debenture | Note 11 | |||||||||||||
| August 2024 Convertible Debenture | Note 11 | |||||||||||||
| June 2025 Secured Convertible Debenture | Note 11 | |||||||||||||
| July 2025 Secured Convertible Debenture | Note 11 | |||||||||||||
| December 2025 Secured Convertible Debenture | Note 11 | |||||||||||||
Non-controlling Interests
Non-controlling interests are presented in the
consolidated balance sheets, separately from equity attributable to the shareholders of the Group. Income attributable to non-controlling
interests’ holders is presented on the consolidated statements of operations and the consolidated statements of comprehensive income
(loss) as an allocation of the total income for the periods between non-controlling interests holders and the shareholders of the Group.
Under ASC 810-10-15-10(a), Consolidation, all majority-owned subsidiaries (i.e., all companies in which a parent has a controlling financial
interest through direct or indirect ownership of a majority voting interest) must be consolidated unless control does not rest with
the majority owner. The Group owns
In March 2023, Silver Leaf Asset Management Co.,
Ltd. (“SLAMCo.”) made a cash contribution in the amount of $
On July 4, 2025, the Company acquired
F-18
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Reclassification
Certain prior periods amounts have been reclassified to be comparable to the current period presentation. The reclassification has no effect on previously reported net assets or net loss.
Stock-based Compensation
The Group applies ASC No. 718, “Compensation-Stock Compensation”, which requires that share-based payment transactions with employees and nonemployees, be measured based on the grant date fair value of the equity instrument and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period.
The fair value of the Group’s ordinary shares underlying stock-based awards based on the closing price of the Group’s shares as reported by Nasdaq on the date of grant. The Group values its stock options or warrants that have service vesting requirements or performance-based awards with or without market conditions using the Binomial Option Pricing Model.
Research and Development Expenses
Research and development expenses are expensed in the period when incurred. These costs primarily consist of designing, coding, project management, and other IT services related to developing and enhancing the project.
Income Taxes
The Company accounts for current and deferred income taxes in accordance with the authoritative guidance, which requires that the income tax impact is to be recognized in the period in which the law is enacted. Current income tax expense represents taxes paid or payable for the current period. Deferred tax assets and liabilities are recognized using enacted tax rates for the future tax impact of temporary differences between the financial statement and tax bases of recorded assets and liabilities. A valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized based on historical and projected future taxable income over the periods in which the temporary differences are expected to be recovered or settled on each jurisdiction.
In accordance with the authoritative guidance on accounting for uncertainty in income taxes, the Company recognizes liabilities for uncertain tax positions based on the two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. As of December 31, 2025, the Company has not uncertain tax positions recorded.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements.
The Company may be subject to potential examination by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
Leases
The Group reviews all relevant contracts to determine if the contract contains a lease at its inception date. A contract contains a lease if the contract conveys to the Group the right to control the use of an underlying asset for a period of time in exchange for consideration. If the Group determines that a contract contains a lease, it recognizes, in the consolidated balance sheets, a lease liability and a corresponding right-of-use asset on the commencement date of the lease. The lease liability is initially measured at the present value of the future lease payments over the lease term using the rate implicit in the lease or, if not readily determinable, the Group’s secured incremental borrowing rate. An operating lease right-of-use asset is initially measured at the value of the lease liability minus any lease incentives and initial direct costs incurred plus any prepaid rent.
F-19
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Each lease liability is measured using the Group’s
secured incremental borrowing rate. The Group’s leases have remaining terms of
The Group’s operating leases contain both lease components and non-lease components. Non-lease components are distinct elements of a contract that are not related to securing the use of the underlying assets, such as common area maintenance and other management costs. The Group elected to measure the lease liability by combining the lease and non-lease components as a single lease component. As such, the Group includes the fixed payments and any payments that depend on a rate or index that relate to the lease and non-lease components in the measurement of the lease liability. Some of the non-lease components are variable in nature and not based on an index or rate, and as a result, are not included in the measurement of the operating lease right-of-use assets or operating lease liability.
Operating lease expense is recognized on a straight-line basis over the lease term and is included in occupancy expenses in the Group’s consolidated statements of operations and comprehensive loss.
Recently adopted accounting standards
In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. Retrospective application is permitted. As an Emerging Growth Company (“EGC”),the Company is currently evaluating the potential impact of adopting this guidance on financial statements requirements and does not expect the adoption to have a material impact. The Company has adopted ASU 2023-09 for the year ended December 31, 2025 and the adoption did not have a significant impact on the Company’s consolidated financial statements.
On December 13, 2023, the FASB issued ASU 2023-08, which addresses the accounting and disclosure requirements for certain crypto assets. The new guidance requires entities to subsequently measure certain crypto assets at fair value, with changes in fair value recorded in net income in each reporting period. In addition, entities are required to provide additional disclosures about the holdings of certain crypto assets. For all entities, the ASU’s amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption is permitted. The Company has adopted ASU 2023-08 for the year ended December 31, 2025 and the adoption did not have a significant impact on the Company’s consolidated financial statements.
F-20
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Significant Accounting Policies (cont.)
Recent Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, which amends ASC 326-20 to provide a practical expedient for all entities which elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset in developing reasonable and supportable forecasts as part of estimating expected credit losses, and an accounting policy election for all entities, other than a public business entity, that elect the practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient and, if so, whether it has also applied the accounting policy election. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collections are evaluated. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. Entities should apply the new guidance prospectively. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In January 2025, the FASB issued ASU 2025-01, “Income Statement – Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40): Clarifying the Effective Date.” This pronouncement revises the effective date of ASU 2024-03 and clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Entities within the ASU’s scope are permitted to early adopt the accounting standard update. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense categories, such as employee compensation; depreciation; amortization, and other material components. The disaggregated information can be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
On November 26, 2024, the FASB issued ASU 2024-04, which amends ASC 470-202 to (i) remove from the subsections on induced conversion references to (1) conversion into “equity” and (2) “equity securities,” which clarifies that the guidance in these subsections could apply to conversions of convertible debt that settle in equity, cash (or other assets), or a combination thereof, (ii) clarify that to qualify for induced conversion accounting, an inducement offer must preserve the issuance of all of the consideration (in form and amount) issuable in accordance with the conversion privileges specified in the terms of the existing debt instrument, and (iii) equire that to qualify for induced conversion accounting, an instrument must contain a substantive conversion feature as of the date on which both the issuance offer and the inducement offer are accepted by the convertible debt holder. The amendments in ASU 2024-04 are effective for annual reporting periods beginning after December 15, 2025 (and interim reporting periods within those annual reporting periods). Early adoption is permitted as of the beginning of a reporting period if the entity has also adopted ASU 2020-06 for that period. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
Recently issued ASUs by the FASB, except for the ones mentioned above, have no material impact on the Company’s consolidated statements of operations and comprehensive loss or consolidated balance sheets.
F-21
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Revenue Recognition
Under ASC Topic 606 Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services is transferred to customers in exchange for an amount that reflects the consideration the Group expects to be entitled to and in return for transferring those goods or services.
Significant Judgments
Revenue from contracts with customers includes commission income from securities, futures and derivative brokerage, market making trading and insurance brokerage. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of progress under the contract; whether revenue should be presented gross or net of certain costs; and whether constraints on variable consideration should be applied due to uncertain future events.
Commissions and Fees
The Group earns fees and commissions from securities, futures and derivatives brokerage services (including commissions and fees related to TRS trading business and CFD trading services when the Group acts as a market maker). Each time a customer executes a securities, futures, derivative or CFD transaction, commissions and fees are earned. Commissions and related clearing fees and expenses are recorded on the trade date. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership are transferred to/from the customer. The Group charges securities brokerage commissions and market making commissions based on the amount of transaction volume, or the number of shares, lots of contracts executed in each order, which generally vary in accordance with the type of products or services the Group offers.
The Group also earns commission income arising from insurance brokerage services which are recognized at a point in time when the performance obligation has been satisfied by successfully referring an insurance client to an insurer in accordance with the relevant broker contract. The commission earned is equal to a percentage of the premium paid to the insurance provider.
The following table presents revenue from contracts with customers, in accordance with ASC Topic 606, by major source and geographic region:
| For the Years ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Insurance brokerage commissions | $ | $ | $ | |||||||||
| Securities brokerage commissions | ||||||||||||
| Market making commissions and fees | ||||||||||||
| Total revenue from contracts with customers | $ | $ | $ | |||||||||
| Hong Kong | $ | $ | $ | |||||||||
| Cayman Islands | ||||||||||||
| $ | $ | $ | ||||||||||
All of the Group’s revenues from contracts with customers are recognized at a point in time. As of December 31, 2025 and 2024, the Company had no contract liabilities.
F-22
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Revenue Recognition (cont.)
Trading Gains (Losses)
Trading gains and losses along with interest revenue fall within the scope of ASC Topic 825, Financial Instruments.
Trading gains (losses) consist of realized and
unrealized gains (losses) derived from (i) managed portfolio trading positions where the Group acts as counterparty to customers’
trades, and (ii) marking up the bid/offer spreads on customers’ CFD transactions, (iii) trading gains/(losses) from proprietary
TRS trading activities, and (iv) trading gains/(losses) from OTC stock option trading activities. Trading gains/(losses) is recorded
on a trade date basis.
| For the Years ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| CFD trading (losses) gains | $ | ( | ) | $ | $ | |||||||
| TRS trading gains (losses) | ( | ) | ( | ) | ||||||||
| OTC stock option trading gains (losses) | ( | ) | ( | ) | ||||||||
| Other trading gains | ||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||
The following table represents the effect of trading activities in the account of “trading gains (losses)” on the consolidated statements of operations and comprehensive loss:
| For the Years ended December 31, | ||||||||||||
| Type of Instrument | 2025 | 2024 | 2023 | |||||||||
| Foreign currency | $ | $ | $ | |||||||||
| Stock indices | ( | ) | ||||||||||
| Commodities | ( | ) | ( | ) | ||||||||
| Equities | ( | ) | ( | ) | ||||||||
| Total | $ | $ | ( | ) | $ | |||||||
The revenue related to each category includes realized and unrealized gains and losses on both derivative instruments and nonderivative instruments.
F-23
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Revenue Recognition (cont.)
Interest Income and Other
Interest income primarily consists of interests earned on bank deposits and short-term loans the Group extends to unrelated third parties, interest rate difference between currency pairs the Group hold resulting from rolling over currency positions and interest earned from loans provided to TRS trading customers, which are recorded on an accrual basis. Interest income is recognized as it accrues using the effective interest method.
Other income primarily consists of the gain on extinguishment of liabilities, dividends income, transaction fee, advisory service fee, government subsidy and other miscellaneous charges from customers etc.
Staking Reward from Digital Assets
For the year ended December 31, 2025, the Company generates revenue through staking rewards.
The Company staked its own digital assets validating nodes, including SOL and SUI on their respective block chains. Through the contracts with block chains, the Company provides digital assets to stake on a node for the purpose of validating transactions and adding blocks to a respective blockchain network. The Company’s enforceable right to compensation begins when, and lasts for as long as, the Company provides staking services to the block chains; the Company’s performance obligation extends over the contract term given its continuous provision of staking services. This period of time corresponds with the period of service for which the block chains determines compensation due to us. Given cancellation terms of the contract, and the Company’s customary business practice, the contract effectively provides the option to renew for successive contract terms daily.
The Company is entitled to terminate its contract with block chain at any time at its own discretion. In exchange for staking the digital assets and validating transactions on blockchain networks, the Company is entitled to all of the fixed digital asset award for running the Company’s own node, for successfully validating or adding a block to the blockchain.
The provision of validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The transaction consideration the Company receives - the digital asset awards - is a non-cash consideration, which the Company measures at fair value on the date received. The fair value of the digital asset award received is determined using the quoted price of the related cryptocurrency at the time of receipt. The satisfaction of the performance obligation for transaction verification services occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, revenue is recognized.
F-24
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 — Fair Value
Fair Value Hierarchy
FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:
| ● | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. |
| ● | Level 2 are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities either directly or indirectly. |
| ● | Level 3 inputs are unobservable inputs for the assets or liabilities. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
A description of the valuation techniques applied to the Group’s major categories of assets and liabilities measured at fair value on a recurring basis follows.
Financial assets measured at fair value are generally valued based on quoted prices derived from an index which is observable inputs from multiple exchanges, and they are categorized in level 2 of the fair value hierarchy
Exchange-traded equity securities and futures are generally valued based on quoted prices at the close of trading on the period end date. To the extent these securities and futures are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy; otherwise, they are categorized in level 2 or level 3 of the fair value hierarchy.
Public Warrants are classified as level 1 financial instruments, as their value is derived using quoted market prices as of the measurement date. Private Warrants are classified as level 2. As of December 31, 2024, Private Warrants are approximated by fair value of Public Warrants as their remaining life is less than six months. There were no outstanding Public Warrants as of December 31, 2025.
F-25
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 — Fair Value (cont.)
The following table presents the Group’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis at December 31, 2025 and 2024:
At December 31, 2025
| Quoted Prices | ||||||||||||||||
| in Active | ||||||||||||||||
| Markets for | Significant | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Assets | ||||||||||||||||
| Listed equity securities | $ | $ | $ | $ | ||||||||||||
| Stable coins | $ | |||||||||||||||
| Digital assets | ||||||||||||||||
| Financial assets measured at fair value | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities | ||||||||||||||||
| Embedded derivative liabilities (included in convertible debentures) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Obligation to deliver digital assets | ( | ) | ( | ) | ||||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||
At December 31, 2024
| Quoted Prices | ||||||||||||||||
| in Active | ||||||||||||||||
| Markets for | Significant | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Assets | ||||||||||||||||
| Listed equity securities | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities | ||||||||||||||||
| Embedded derivative liabilities | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Warrant liabilities | ( | ) | ( | ) | ( | ) | ||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||
There were no transfers between level 1, level 2, and level 3 during either year.
The carrying amounts of cash and cash equivalents, bank balances held on behalf of customers, receivables from broker-dealers and clearing organizations, other receivables, payables to customers, payables to broker-dealers and clearing organizations, other payables and short-term borrowings approximate their fair values because of their generally short maturities.
F-26
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 — Financial Assets Measured at Fair Value
For the year ended December 31, 2025, the Company invested USDT in futures contracts which were measured, transacted and settled in USDT. The investment was for trading purpose in the near term and was classified as financial assets measured at fair value.
For the year ended December 31, 2025, the Company incurred investment
loss of $
For the year ended December 31, 2025, the Company also pledged
Note 6 — Digital Assets
Digital assets consisted of the following:
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Digital assets, current | ||||||||
| HYPE | $ | $ | ||||||
| USDT | ||||||||
| SOL | ||||||||
| $ | $ | - | ||||||
| Digital assets, non-current | ||||||||
| BTC | $ | $ | ||||||
| HYPE | ||||||||
| SOL | ||||||||
| SUI | ||||||||
| $ | $ | - | ||||||
Digital assets, current
HYPE
For the year ended December 31, 2025, the Company
purchased
In addition, the Company pledged
The Company classified the HYPE as current assets as the Company held HYPE for trading purpose.
F-27
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 — Digital Assets (cont.)
The following table presents additional information about HYPE for the year ended December 31, 2025:
| For the Year Ended December 31, 2025 | ||||||||
| Quantity | Amount | |||||||
| Opening balance | $ | |||||||
| Purchases of HYPE | ||||||||
| Changes in fair value of HYPE | - | ( | ) | |||||
| Ending balance | $ | |||||||
USDT
The following table presents additional information about USDT for the year ended December 31, 2025:
| For the Year Ended December 31, 2025 | ||||||||
| Quantity | Amount | |||||||
| Opening balance | $ | |||||||
| Transfer from financial asset measured at fair value | ||||||||
| Investment income from pledge of HYPE | ||||||||
| Management fees paid in pledge of HYPE | ( | ) | ( | ) | ||||
| Ending balance | $ | |||||||
SOL
For the year ended December 31, 2025,
Digital assets, non-current
For the year ended December 31, 2025, the Group
purchased
For the year ended December 31, 2025, the Group
exchanged
For the year ended December 31, 2025, the Group
also earned staking reward from SOL and SUI in the amount of $
For the year ended December 31, 2025, the Company
recognized a decrease in fair value of digital assets of $
F-28
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 — Digital Assets (cont.)
Additional information about digital assets, non-current
The following table presents additional information about BTC for the year ended December 31, 2025:
| For the Year Ended December 31, 2025 | ||||||||
| Quantity | Amount | |||||||
| Opening balance | $ | |||||||
| Purchases of BTC | ||||||||
| Changes in fair value of BTC | - | ( | ) | |||||
| Ending balance | $ | |||||||
The following table presents additional information about HYPE for the year ended December 31, 2025:
| For the Year Ended December 31, 2025 | ||||||||
| Quantity | Amount | |||||||
| Opening balance | $ | |||||||
| Purchases of HYPE | ||||||||
| Exchange from SUI | ||||||||
| Changes in fair value of HYPE | - | ( | ) | |||||
| Ending balance | $ | |||||||
The following table presents additional information about SOL for the year ended December 31, 2025:
| For the Year Ended December 31, 2025 | ||||||||
| Quantity | Amount | |||||||
| Opening balance | $ | |||||||
| Purchases of SOL | ||||||||
| Staking reward | ||||||||
| Changes in fair value of SOL | - | ( | ) | |||||
| Ending balance | $ | |||||||
The following table presents additional information about SUI for the year ended December 31, 2025:
| For the Year Ended December 31, 2025 | ||||||||
| Quantity | Amount | |||||||
| Opening balance | $ | - | ||||||
| Purchases of SUI | ||||||||
| Staking reward | ||||||||
| Exchange into HYPE | ( | ) | ( | ) | ||||
| Exchange gain | - | |||||||
| Changes in fair value of SUI | - | ( | ) | |||||
| Ending balance | $ | |||||||
F-29
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 — Property and Equipment, Net
Property and equipment consisted of the following as of December 31, 2025 and 2024:
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Software | $ | $ | ||||||
| Leasehold improvement | ||||||||
| Office and equipment | ||||||||
| Total cost of Property and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense, was $
Note 8 — Short-term Borrowings
Short-term borrowings consisted of the following as of December 31, 2025 and 2024:
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Interest-free borrowings due to a third-party lender (a) | $ | $ | ||||||
| Short-term revolving loan due to a third-party lender (b) | ||||||||
| Short-term revolving loan due to a third-party lender (c) | ||||||||
| $ | $ | |||||||
| (a) |
| (b) |
| (c) |
In April 2025, the subsidiary of the Company borrowed
a short-term revolving loan in a principal of approximately $
F-30
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 — Obligation to Deliver Digital Assets
In connection with the issuance of June 2025,
July 2025 and December 2025 Secured Convertible Debentures, under June 2025 SPA (See Note 11), the Company entered into a Right to Receive
Tokens agreement on June 23, 2025 (“Right to Receive Tokens”), pursuant to which the counterparty of the Right to Receive
Tokens was entitled to receive from the Company, upon exercise of this Right to Receive Tokens at any time on or after the two-year anniversary
of the applicable closing in respect of June 2025 SPA,
Upon issuance of secured convertible debentures
on June 23, 2025, July 21, 2025 and December 5, 2025, an aggregate of $
The following table presents additional information about obligation to deliver digital assets for the year ended December 31, 2025:
| For the Year Ended December 31, | ||||
| 2025 | ||||
| Opening balance | $ | |||
| Initial recognition of obligation to deliver digital assets | ||||
| Changes in fair value of obligation to deliver digital assets | ( | ) | ||
| $ | ||||
Note 10 — Related Parties
During the year ended December 31, 2023, the Group made a repayment
to a director in the amount of approximately $
During the years ended December 31, 2025 and 2024,
the Company’s CEO registered a TRS trading account with the Group and became a customer of the Group’s TRS trading service.
As of December 31, 2025 and 2024, the Group had extended margin financing totaling approximately $
During the year ended December 31, 2025, an affiliate
of the Company’s CEO registered a TRS trading account with the Group and became a customer of our TRS trading service. For the year
ended December 31, 2025, the related party made deposits of approximately $
As of December 31, 2025 and 2024, LML recorded
payable to DAWA for research and development expenses in the amount of approximately $
F-31
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Convertible Debentures
The following represents a summary of all outstanding convertible debentures presented on a combined basis which combines embedded derivative liabilities and convertible debentures at period end.
| As of December 31, | ||||||||||
| Hybrid Instruments on a Combined Basis | Related SPA | 2025 | 2024 | |||||||
| January 2024 Convertible Debenture | $ | $ | ||||||||
| August 2024 Convertible Debenture | ||||||||||
| June 2025 Secured Convertible Debenture | ||||||||||
| July 2025 Secured Convertible Debenture | ||||||||||
| December 2025 Secured Convertible Debenture | ||||||||||
| $ | $ | |||||||||
August 2022, December 2022, September 2023 and January 2024 Convertible Debentures, under August 2022 SPA
On August 9, 2022, the Company entered into a
Securities Purchase Agreement (the “August 2022 SPA”) with ATW Opportunities Master Fund II, L.P. (the “Purchaser”),
pursuant to which the Company received net proceeds of $
The Company also granted the Purchaser the right
to purchase an additional $
On September 2, 2023, the Company entered into
a letter agreement (the “September 2023 Letter Agreement”) with the Purchaser, pursuant to which the Company issued a Series
H ADS Purchase Warrant (the “Series H Warrants”) to purchase up to
On January 23, 2024, the Company entered into
a letter agreement (the “January 2024 Letter Agreement”) with the Purchaser, pursuant to which the Company issued a Series
I ADS Purchase Warrant (the “Series I Warrants”) to purchase up to
F-32
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Convertible Debentures (cont.)
The Convertible Debentures issued under August
2022 SPA have the same terms, including
In accordance with ASC 815-15-25-1, the Interest
Make-Whole feature is an embedded derivative that should be bifurcated and accounted for separately. Upon issuance, the Company bifurcated
and recognized the embedded derivative liability for Interest Make-Whole feature at its fair value of approximately $
Debt discounts are amortized using the effective
interest rate method over the period from the issuance date through the stated maturity date. The Company recognized interest expense
aggregating approximately $
For the year ended December 31, 2023, the whole
August 2022 Convertible Debenture along with the Make-Whole interest of approximately $
For the year ended December 31, 2024, the whole
September 2023 Convertible Debenture along with the Make-Whole interest were fully converted into an aggregate of
For the year ended December 31, 2025, the remaining
January 2024 Convertible Debenture along with the Make-Whole interest was fully converted into an aggregate of
F-33
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Convertible Debentures (cont.)
August 2024, January 2025 and May 2025 Convertible Debentures, under August 2024 SPA
On August 9, 2024, the Company entered into a
Securities Purchase Agreement (the “August 2024 SPA”) with the same purchaser (the “Purchaser”), pursuant to which
the Company received net proceeds of $
On January 23, 2025, the Purchaser exercised its
subsequent closing right and purchased an additional debenture (the “January 2025 Convertible Debenture”) having a principal
balance of $
On May 23, 2025, the Purchaser exercised its subsequent
closing right and purchased an additional debenture (the “May 2025 Convertible Debenture”) having a principal balance of $
Except for the fixed conversion price, the debentures
issued under August 2024 SPA have the same terms, including
The detachable Series J, Series K and Series L
Warrants issued to the Purchaser are considered to be indexed to the Company’s own stock and classified in stockholders’ equity
and therefore they meet the scope exception prescribed in ASC 815-10-15. The fair value of Series J Warrants is estimated to be at
$
F-34
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Convertible Debentures (cont.)
In accordance with ASC 470-20, Debt with
Conversion and Other Options, the net proceeds were allocated to the base instrument of Convertible Debenture and the detachable warrants
on their relative fair value basis, in the amount of approximately $
Upon issuance, the Company bifurcated and recognized
the embedded derivative liability for Interest Make-Whole feature at its fair value of approximately $
Debt discounts are amortized using the effective
interest rate method over the period from the issuance date through the stated maturity date. The Company recognized interest expense
aggregating approximately $
As of December 31, 2024, the carrying amount of
the hybrid August 2024 Convertible Debenture was approximately $
For the year ended December 31, 2025, the whole
August 2024 Convertible Debenture along with the Make-Whole interest of approximately $
June 2025, July 2025 and December 2025 Secured Convertible Debentures, under June 2025 SPA
On June 17, 2025, the Company entered into a Securities
Purchase Agreement (the “June 2025 SPA”) with an institutional investor (the “Buyer”). Pursuant to the SPA, subject
to certain conditions precedent contained therein, the Company may sell to the Buyer up to an aggregate of $
F-35
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Convertible Debentures (cont.)
On July 21, 2025, pursuant to the terms of SPA,
the Company consummated its subsequent offering of an additional senior secured convertible debenture with the Buyer in the principal
amount of $
On December 3, 2025, the Company and the Buyer
entered into an Amendment No. 1 to June 2025 SPA, pursuant to which, among others, the Company and the Buyer agreed that for the third
subsequent closing staking, interest shall be accrued at any time the Company earns Tokens in respect of any purchased token (“Crypto
Rewards”), and the Buyer is entitled to
The debenture issued under June 2025 SPA have
the similar terms with previously issued convertible debentures. It has
Unlike the previously issued convertible debentures,
the debentures issued under June 2025 SPA will rank senior to all outstanding and future indebtedness of the Company and its subsidiaries
(subject to certain exceptions contained in the Debentures) and will be secured by a first priority perfected security interest in all
of the existing and future assets of the Company and its direct and indirect subsidiaries, including all of the capital stock of each
of the subsidiaries and the Tokens purchased with the proceeds of the Debentures, as evidenced by a security agreement (the “Security
and Pledge Agreement” or “S&PA”). All purchased Tokens are deposited with the custodian in the blocked custodial
control account and staked in accordance with the S&PA. In addition, the Company entered into a Right to Receive Tokens agreement
on June 23, 2025 (“Right to Receive Tokens”) which was amended for the third closing on December 5, 2025, pursuant to which
the Buyer is entitled to receive from the Company, upon exercise of this Right to Receive Tokens at any time on or after the two-year
anniversary of the applicable closing,
F-36
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Convertible Debentures (cont.)
Upon issuance and the closings on June 23, 2025,
July 31, 2025 and December 5, 2025, the Company accounted for obligation to deliver digital asset of , $
The Company then bifurcated and recognized the
embedded derivative liability for Interest Make-Whole feature at its fair value of approximately $
Debt discounts are amortized using the effective
interest rate method over the period from the issuance date through the stated maturity date. The Company recognized interest expense
aggregating approximately $
For the year ended December 31, 2025, the June
2025 Secured Convertible Debenture along with the Make-Whole interest were partially converted into an aggregate of
Note 12 — Convertible Preferred Shares and Attached Warrants
February 2021 Series A Convertible Preferred Shares and Warrants, under February 2021 SPA
On February 15, 2021, the Company entered
into a Securities Purchase Agreement (the “February 2021 SPA”) with one third party investor (the “Purchaser”),
pursuant to which the Company received $
F-37
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 — Convertible Preferred Shares and Attached Warrants (cont.)
The number of Series A Convertible Preferred
Shares is
Series A Convertible Preferred Shares are classified as equity and carried at the amount recorded at inception, without amortization. The discount to the redemption amount shall be recognized as a dividend upon redemption. As of December 31, 2022, Series A Preferred Shares along with accrued dividend have been fully converted into Class A ordinary shares.
The detachable February 2021 Warrants issued
to the holder are considered to be indexed to the Company’s own stock and classified in stockholders’ equity and therefore
they meet the scope exception prescribed in ASC 815-10-15.
| Series D | Series E | Series F | ||||||||||
| Expected term in years | ||||||||||||
| Stock price per ADS | $ | $ | $ | |||||||||
| Stock price per ADS (before ratio changes) | $ | $ | $ | |||||||||
| Expected dividend yield | % | % | % | |||||||||
| Volatility | % | % | % | |||||||||
| Risk-free interest Rate | % | % | % | |||||||||
| Initial fair value per share | $ | $ | $ | |||||||||
| Initial fair value per share (before ratio changes) | $ | $ | $ | |||||||||
F-38
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 — Convertible Preferred Shares and Attached Warrants (cont.)
In consideration of the transaction entered
into in December 2021 below, the investor agrees to waive the full ratchet anti-dilution provision and set the conversion price
and exercise prices as follows:
December 2021 Series B Convertible Preferred Shares and Warrants, under December 2021 SPA
On December 13, 2021, the Company entered
into a Securities Purchase Agreement (the “December 2021 SPA”) with the same third party investor (the “Purchaser”),
pursuant to which the Company received net proceeds of $
The number of Series B Convertible Preferred
Shares is
In accordance with applicable accounting standards, Series B Convertible Preferred Shares qualified as redeemable securities and are classified as mezzanine equity. The discounts are accreted over the period from the date of issuance to the date of the earliest redemption and the accretion is treated as a deemed dividend. As of December 31, 2022, Series B Preferred Shares along with accrued dividend have been fully converted into Class A ordinary shares.
The detachable December 2021 Warrants issued
to the holder are considered to be indexed to the Company’s own stock and classified in stockholders’ equity and therefore
they meet the scope exception prescribed in ASC 815-10-15. The fair value of December 2021 Warrants is estimated to be
at $
F-39
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 — Convertible Preferred Shares and Attached Warrants (cont.)
Further Changes to February 2021 and December 2021 Warrants
As part of consideration of entering into the
May 2022 SPA, the Company agreed to extend the February 2021 and December 2021 Warrants termination dates for two years. Pursuant to the
adoption of ASU 2021-04, the Company considered the guidance in in ASC 815-40-35-16 through ASC 815-40-35-18 regarding the modification
or exchange of a freestanding equity-classified written call option, and recognized the incremental fair value of the warrants aforementioned
as a debt discount or debt issuance cost in accordance with paragraph 815-40-35-17(b), in an amount of $
On January 3, 2023 in connection of the withdrawal
of registration statement on Form F-1, the Company entered into warrant extension letter to extend the termination dates of Series D/E/F/G
for another two years to February 18, 2030, February 18, 2027, February 18, 2030, and December 13, 2030, respectively. Pursuant to the
adoption of ASU 2021-04, in accordance with paragraph 815-40-35-17(d), the Company recognized the incremental fair value of the warrants
aforementioned as a dividend and a reduction to income available to ordinary shareholders in the basic EPS calculation for the year ended
December 31, 2023, in an amount of approximately $
On September 3, 2023, as a result of the issuance
of Series H Warrants in September 2023 (as discussed in Note 11), the exercise price of the Series D/E/F/G Warrants was further adjusted
to $
F-40
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 — Convertible Preferred Shares and Attached Warrants (cont.)
In September 2023, the Company received an aggregate
of net proceeds of approximately $
On January 23, 2024, as a result of the issuance
of Series I Warrants in January 2024 (as discussed in Note 11), the exercise price of the Series D/E/F/G Warrants was further adjusted
to $
On January 9, 2025, the Company entered into an
amendment to the Series E Warrant with the holder.
On May 23, 2025, as a result of the issuance of
Series L Warrants (as discussed in Note 11), the fixed exercise price of the Series D/E/F/G Warrants was further adjusted from $
For the year ended December 31, 2025, the Company
received an aggregate of net proceeds of approximately $
F-41
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 — Commitments and Contingencies
Contingencies
Occasionally, the Group is a party to certain
legal cases arising in the ordinary course of business. The Group accrues loss contingency associated with these matters when they become
probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
In the first half of 2024, a client (the “Plaintiff”) filed a statement of claim with the High Court of Hong Kong claiming
an amount of HK$
Note 14 — Stockholders’ Equity
Ordinary Shares and Preferred Shares
The Company was initially authorized to issue
(i)
As of June 16, 2020, subsequent to the Closing
of the business combination, there were
F-42
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Stockholders’ Equity (cont.)
The shareholders of Class A and Class B
ordinary shares have the same rights except for the voting and conversion rights.
As of December 31, 2025 and 2024, there was an
aggregate of
January 2021 Call Options
On January 6, 2021, the Company entered into a binding strategic cooperation framework agreement (the “Strategic Cooperation Agreement”) with Mr. Yao Yongjie (“Mr. Yao”) and engaged Mr. Yao as the chief technical adviser to provide technical advice and consultancy service in blockchain industry. The Company grants to Mr. Yao options (the “Call Options”) to subscribe for 6 million Class A ordinary shares at a price fixed at US$2 per Class A ordinary share. Within 24 months of the signing of the Strategic Cooperation Agreement, Mr. Yao may exercise the right to subscribe for such shares by tranches if the following conditions are met:
| (i) | if the closing price of the shares in the Company exceeds US$97,500 (US$ 3.00 before ratio changes) per ADS for 3 consecutive trading days, Mr. Yao may exercise 2 million call options; |
| (ii) | if the closing price of the shares in the Company exceeds US$162,500 (US$ 5.00 before ratio changes) per ADS for 3 consecutive trading days, Mr. Yao may exercise 2 million call options; |
| (iii) | if the closing price of the shares in the Company exceeds US$243,750 (US$ 7.50 before ratio changes) per ADS for 3 consecutive trading days, Mr. Yao may exercise 2 million call options. |
The Company estimated the fair value of the call
options at $
For the year ended December 31, 2021,
F-43
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 — Stock-Based Compensation
2020 Share Incentive Plan
In June 2020, in connection with the business
combination, the Company’s board approved the 2020 Share Incentive Plan (the “2020 Plan”) and reserved
2023 Share Incentive Plan
On October 6, 2023, the 2023 Annual Meeting approved
and adopted the Company’s 2023 Equity Incentive Plan (the “2023 Plan”), pursuant to which an aggregate of
In November 2024, an aggregate of
As of December 31, 2025 and 2024, no shares under the 2023 Plan remained available for future awards.
2024 Share Incentive Plan
On May 20, 2024, the Board of Directors approved
and adopted the Company’s 2024 Equity Incentive Plan (the “2024 Plan”), pursuant to which an aggregate of
F-44
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 — Stock-Based Compensation (cont.)
2025 Share Incentive Plan
On September 3, 2025, the Board of Directors approved
and adopted the Company’s 2025 Equity Incentive Plan (the “2025 Plan”), under which the maximum aggregate number of
Class A or Class B ordinary shares of the Company which may be issued pursuant to all awards is
The following table provides the details of the total share-based payments under 2023 Plan, 2024 Plan and 2025 Plan for the years ended December 31, 2025, 2024 and 2023, respectively.
| For the Years ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Compensation and benefits | $ | $ | $ | |||||||||
| Communication and technology | ||||||||||||
| Marketing | ||||||||||||
| Professional fees | ||||||||||||
| General and administrative | ||||||||||||
| Total | $ | $ | $ | |||||||||
As of December 31, 2025, the Group had no unrecognized compensation expense related to future services.
Note 16 — Income Taxes
The current and deferred portions of the income tax expense included in the consolidated statements of operations and comprehensive income (loss) as determined in accordance with ASC 740, Income Taxes, are as follows:
| For the Years ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Current | $ | $ | $ | |||||||||
| Deferred | ||||||||||||
| Total | $ | $ | $ | |||||||||
F-45
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 — Income Taxes (cont.)
We applied ASU 2023-09 on a prospective basis.
Accordingly, the disaggregation of rate reconciliation categories in the table below provide the disclosures required by ASU 2023-09 for
the year ended December 31, 2025.
| For the years ended December 31, 2025 | ||||||||
| Amount | % | |||||||
| Hong Kong | ||||||||
| Income benefit at applicable statutory rate (1) | $ | ( | ) | |||||
| Non-taxable income or non-deductible expenses | ( | ) | ||||||
| Utilisation of unrecognised tax losses | ( | ) | ||||||
| Foreign tax effects: | ||||||||
| Singapore | ||||||||
| Income tax benefit at applicable statutory rate | ( | ) | ||||||
| Statutory income tax rate differential | ( | ) | ||||||
| Non-taxable income or non-deductible expenses | ( | ) | ||||||
| Cayman Islands | ||||||||
| Income tax benefit at applicable statutory rate | ( | ) | ||||||
| Statutory income tax rate differential | ( | ) | ||||||
| Other foreign jurisdictions | ||||||||
| Income tax provision | $ | |||||||
Reconciliation of income tax expense for the years ended December 31, 2024 and 2023 was as followings:
| For the Years Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Income tax (benefit) expense at applicable statutory rate (1) | $ | ( |
) | $ | ( |
) | ||
| Nondeductible expenses | ||||||||
| Impact of foreign tax rate differential (2) | ( |
) | ||||||
| Current year change in valuation allowance | ( |
) | ||||||
| Other | ( |
) | ( |
) | ||||
| Prior year examination adjustment | ( |
) | ||||||
| Reported income taxes | $ | $ | ||||||
| (1) |
| (2) |
F-46
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 — Income Taxes (cont.)
Significant components of the Group’s deferred tax assets are presented below:
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred tax asset | ||||||||
| Net operating loss carryforwards | $ | $ | ||||||
| Lease liability | ||||||||
| Deferred tax assets, gross | ||||||||
| Deferred tax liability | ||||||||
| Operating lease right-of-use assets | ( | ) | ||||||
| Deferred tax assets net off against deferred tax liability | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
As of December 31, 2025, net operating loss carryforwards of the Company’s subsidiaries in Hong Kong can be carried forward without an expiration date. Management has applied a valuation allowance to the total amount of deferred tax assets based on the determination that it is more likely than not that the deferred tax asset will not be realized. This determination was based on the historic and estimated future profitability of the entities to which the deferred tax assets relate. The tax rules in Hong Kong do not allow the Group to file on a consolidated basis.
Note 17 —Lease
All of the Group’s leases are classified
as operating leases and primarily consist of real estate leases for corporate offices and other facilities. As of December 31, 2025 and
2024, the weighted-average remaining lease term on these leases is approximately
For the year ended December 31, 2025, the Group early terminated two
real estate leases for corporate offices and recorded impairment of right-of-use assets of $
The following table presents balances reported in the consolidated balance sheets related to the Group’s leases:
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Lease liability – current | $ | $ | ||||||
| Lease liability – noncurrent | ||||||||
| Lease liability | $ | $ | ||||||
For the years ended December 31, 2025, 2024 and
2023, the Group incurred operating lease expense of $
The following table reconciles the undiscounted cash flows of the Group’s leases as of December 31, 2025 to the present value of its operating lease payments:
| As of December 31, 2025 | ||||
| For the year ending December 31, | ||||
| 2026 | $ | |||
| 2027 | ||||
| Total undiscounted operating lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of operating lease liabilities | $ | |||
F-47
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18 — Segment Reporting
ASC 280, Disclosures about Segments of an Enterprise
and Related Information, establishes standards for reporting information about operating segments.
is determined as the CODM
of the Group. The Group has
| Futures | ||||||||||||||||||||||||
| and securities | OTC Stock | |||||||||||||||||||||||
| brokerage | CFD | TRS | option | |||||||||||||||||||||
| services | trading | trading | trading | Other | Total | |||||||||||||||||||
| Year ended December 31, 2025 | ||||||||||||||||||||||||
| Revenues (losses) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commissions and fees | ||||||||||||||||||||||||
| Custodian and other fees for digital assets | ||||||||||||||||||||||||
| Compensation and benefits | ||||||||||||||||||||||||
| Occupancy | ||||||||||||||||||||||||
| Communication and technology | ||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||
| Professional fees | ||||||||||||||||||||||||
| Service fees | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| Marketing | ||||||||||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||||||||||||||
| Change in fair value of digital assets | ||||||||||||||||||||||||
| Investment loss on digital assets | ||||||||||||||||||||||||
| Other operating (income) expenses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||
| Total segment assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
F-48
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18 — Segment Reporting (cont.)
| Futures | ||||||||||||||||||||||||
| and securities | OTC Stock | |||||||||||||||||||||||
| brokerage | CFD | TRS | option | |||||||||||||||||||||
| services | trading | trading | trading | Other | Total | |||||||||||||||||||
| Year ended December 31, 2024 | ||||||||||||||||||||||||
| Revenues (losses) | ( | ) | ( | ) | ||||||||||||||||||||
| Commissions and fees | ||||||||||||||||||||||||
| Compensation and benefits | ||||||||||||||||||||||||
| Occupancy | ||||||||||||||||||||||||
| Communication and technology | ||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||
| Professional fees | ||||||||||||||||||||||||
| Service fees | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| Marketing | ||||||||||||||||||||||||
| Change in fair value of warrant liabilities | ||||||||||||||||||||||||
| Other operating expenses | ||||||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Total segment assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Futures | ||||||||||||||||||||||||
| and securities | OTC Stock | |||||||||||||||||||||||
| brokerage | CFD | TRS | option | |||||||||||||||||||||
| services | trading | trading | trading | Other | Total | |||||||||||||||||||
| Year ended December 31, 2023 | ||||||||||||||||||||||||
| Revenues (losses) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||
| Commissions and fees | ||||||||||||||||||||||||
| Compensation and benefits | ||||||||||||||||||||||||
| Occupancy | ||||||||||||||||||||||||
| Communication and technology | ||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||
| Crypto currencies | ||||||||||||||||||||||||
| Professional fees | ||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||
| Service fees | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Marketing | ||||||||||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||||||||||||||
| Impairment of Property and equipment | ||||||||||||||||||||||||
| Impairment of cryptocurrencies | ||||||||||||||||||||||||
| Other operating expenses | ||||||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Total segment assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
F-49
LION GROUP HOLDING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19 — SPAC Warrants
PAAC’s warrants (collectively, the “SPAC
Warrants”), which include (i)
Note 20 — Subsequent Events
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. The Company has evaluated all events or transactions that occurred after December 31, 2025, up through April 30, 2026, the date the Company issued the consolidated financial statements and concluded that no other material subsequent events except for the disclosed below:
On November 8, 2024, the Company entered into
a Share Purchase Agreement (“Purchase Agreement”) with Amazon Capital Holding Limited (the “Purchaser”). Pursuant
to the Purchase Agreement, the Purchaser shall purchase from the Company within six months from the date of the Purchase Agreement (the
“First Closing”), the Company’s Class A ordinary shares for an aggregate purchase price of US$
Subsequently, an aggregate of approximately
On April 10, 2026, the Company, through Lion Wealth Management Limited, entered into an exclusivity agreement (the “Exclusivity Agreement”) with Skyfame Realty (Holdings) Limited (In Liquidation) (“Skyfame”), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited (“HKEX”) under stock code 00059.HK whose trading has been suspended, and its joint provisional liquidators. Pursuant to the Exclusivity Agreement, Lion Wealth Management Limited has a six-month exclusivity period to facilitate the implementation of a proposed restructuring of Skyfame to enable resumption of trading of Skyfame’s shares on HKEX.
As of the date of this report, the Company held the following digital assets.
| Quantity | ||||
| BTC | ||||
| HYPE | ||||
| SOL | ||||
| SUI | ||||
| BNB | ||||
| USDT | ||||
F-50