6-K
Lion Group Holding Ltd (LGHL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TORULE 13a-16 OR 15d-16UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of June 2021
Commission File Number: 001-39301
LION GROUP HOLDING LTD.
Not Applicable
(Translation of registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
Unit A-C, 33/FTower A, Billion Center1 Wang Kwong RoadKowloon BayHong Kong(Address of principal executive office)
Registrant’s phone number, including area code
+(852) 2820-9000
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Non-Reliance on Previously Issued Financial Statements or a RelatedAudit Report or Completed Interim Review.
On June 11, 2021, the Audit Committee of the Board of Directors (the “Audit Committee”) of Lion Group Holding Ltd. (the “Company”), in response to the statement released by the U.S. Securities and Exchange Commission (the “SEC”) with respect to the balance sheet classification and periodic measurement of certain contracts that may be settled in an entity’s stock, such as warrants, and after discussion with its independent registered public accounting firm, UHY LLP, its valuation firm and its legal advisors, concluded that the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020 included in our Annual Report on Form 20-F and the Company’s unaudited condensed consolidated financial statements for the six months ended June 30, 2020 included in our previously filed Current Report on Form 6-K for the period (collectively, the “Relevant Periods”) should be restated to reflect the impact of this guidance by the SEC and accordingly, should no longer be relied upon. Similarly, any previously furnished or filed reports, related earnings releases, investor presentations or similar communications of the Company describing the Company's financial results for the Relevant Periods should no longer be relied upon.
Background
On April 12, 2021, the SEC issued a statement (the “Statement”) on the accounting and reporting considerations for warrants issued by special purpose acquisition companies. The Statement referenced the guidance included in U.S. Generally Accepted Accounting Principles that entities must consider in determining whether to classify contracts that may be settled in its own stock, such as warrants, as equity or as an asset or liability.
After considering the Statement, the Company re-evaluated its historical accounting for its warrants and concluded it must amend the accounting treatment of the public warrants and private warrants (the “Public Warrants” and “Private Warrants”) issued in connection with the initial public offering of Proficient Alpha Acquisition Corp. (“PAAC”) and recorded to the Company’s consolidated financial statements as a result of the Company’s merger with PAAC, a SPAC and legal predecessor of the Company, and Lion Financial Group Limited on June 16, 2020 (the “Business Combination”). At that time, the Public and Private Warrants were presented within equity and did not impact any reporting periods prior to the Business Combination.
The Company has concluded that the Public and Private Warrants did not meet the conditions to be classified within equity under the Statement and should be presented as a liability and marked to fair value each reporting period. The Company intends to promptly file restated financial statements for the year ended December 31, 2020 on Form 20-F/A. The relevant unaudited interim financial information for six months ended June 30, 2020 will also be restated in the Form 20-F/A.
In light of the restatement discussed above, the Company has reassessed the effectiveness of its disclosure controls and procedures and internal controls over financial reporting as of December 31, 2020, and has concluded that its internal controls over financial reporting was not effective as of December 31, 2020 due to a material weakness in its internal controls related to the restatement, as described above, and concluded that its remediation plan relating to the restatement material weakness will be started to address this matter to improve the process and controls in the determination of the appropriate accounting and classification of our financial instruments and key agreements. As a result of the restatement, we expect to recognize incremental non-operating income of approximately $0.8 million. We expect that there will be no impact to our historically reported cash and cash equivalents, or cash flows from operating, investing or financing activities. All estimates contained in this report are subject to change as management completes the Form 20-F/A, and the Company’s independent registered public accounting firms has not audited or reviewed these estimates or ranges. An audit of annual financial statements could result in material changes to these ranges and estimates. Further details and remediation plans will be included in the Company’s Form 20-F/A.
The Company’s management and the Audit Committee have discussed the matters disclosed above with the Company’s independent registered public accounting firm, UHY LLP.
EXHIBIT INDEX
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: June 11, 2021 | LION GROUP HOLDING LTD. | |
|---|---|---|
| By: | /s/ Chunning Wang | |
| Name: | Chunning Wang | |
| Title: | Chief Executive Officer<br> and Director |
2
Exhibit 99.1
Lion Announces Response to SEC Guidance Issuedon April 12, 2021 Applicable to Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)
Hong Kong, June 11, 2021 /PRNewswire/ -- Lion Group Holding Ltd. (“Lion” or “the Company”) (NASDAQ: LGHL), operator of an all-in-one trading platform that offers a wide spectrum of products and services with a focus on Chinese investors, announced today in a Current Report on Form 6-K, that as a result of recently issued guidance provided by the Division of Corporate Finance of the Securities and Exchange Commission (the “SEC”) on April 12, 2021 for all SPAC-related companies regarding the classification of their warrants for accounting and reporting purposes (the “SEC Statement”), it will restate its previously issued consolidated financial statements included on the Form 20-F for the year ended December 31, 2020.
The restatement pertains to the accounting treatment for public and private warrants (the “Public Warrants” and “Private Warrants”) issued in connection with the initial public offering of Proficient Alpha Acquisition Corp. (“PAAC”) and recorded to the Company’s consolidated financial statements as a result of the Company’s merger with PAAC, a SPAC and legal predecessor of the Company, and Lion Financial Group Limited on June 16, 2020 (the “Business Combination”).
Consistent with market practice among SPACs, the Company had been accounting for the Public and Private Warrants as equity. However, consistent with the recent SEC Statement, the Company intends to restate certain of its historical financial statements such that the Public and Private Warrants are accounted for as liabilities and marked-to-market each reporting period (the “restatement”). In general, under the mark-to-market accounting model, as the stock price increases, the fair value of the warrant liabilities increases, and the Company recognizes additional non-operating expense in its income statement – with the opposite effect when the stock price declines.
The Company does not anticipate the restatement to impact its previously communicated non-GAAP operating metrics for 2020.
As a result of the restatement and the decrease in the Company’s stock price over the applicable period, the Company expects to recognize incremental non-operating income of approximately $0.8 million for the period from June 16, 2020 through December 31, 2020. There will be no impact to the Company’s previously reported net cash flow.
The following provides additional detail regarding how the Company currently anticipates the restatement will impact its consolidated financial statements:
● Opening Balance Sheet Impacts — As of the date of the Business Combination (June 16, 2020), the fair value of the Public and Private Warrants will be reflected as warrant liabilities in the balance sheet with a corresponding offset in Additional paid-in-capital in equity.
● IncomeStatement Impacts — Subsequent to the close of the Business Combination, any change in the fair value of the Public and Private Warrants is recognized in the income statement below operating profit as “Change in fair value of warrant liabilities” with a corresponding amount recognized in the balance sheet. (In the Company’s case, this is recognized as warrant liabilities below current liabilities in the balance sheet).
● Balance Sheet Impacts — As is noted above, the balance of the warrant liabilities on the balance sheet reflects the fair value of the Warrants.
● Cash Flow Impacts — The impact of the changes in fair value of the Public and Private Warrants has no impact on net cash provided by (used for) operating activities.
● Statement of Equity Impacts — The impact to Additional paid-in-capital as of the opening balance sheet is highlighted above.
These estimates are subject to change as management completes the restatement, and the Company’s independent registered public accounting firm has not audited or reviewed these estimates. As a result, the expected financial impact described above is preliminary and subject to change.
Finally, as of today, the Company has approximately 11.5 million Public Warrants and 5.4 million Private Warrants outstanding. No Public or Private Warrants have been exercised or redeemed since originally issued.
About Lion
Lion Group Holding Ltd. (NASDAQ: LGHL) operates an all-in-one trading platform that offers a wide spectrum of products and services with a focus on Chinese investors. Through its state-of-the-art technology, Lion offers contract-for-difference (CFD) trading, insurance brokerage, futures brokerage, and securities brokerage on its platform, which can be accessed through applications available on the iOS, Android, Windows, and macOS systems. Lion’s customers are well-educated and affluent Chinese individual investors residing both inside and outside the PRC as well as institutional clients in Hong Kong. Additional information may be found at http://ir.liongrouphl.com.
Forward-Looking Statements
This press release contains, “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Lion’s actual results may differ from their expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “might” and “continues,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, Lion’s expectations with respect to future performance and anticipated financial impacts of the Business combination, the satisfaction of the closing conditions to the business combination and the timing of the completion of the business combination. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Most of these factors are outside the control of Lion and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the inability to maintain the listing of the post-acquisition company’s ADSs on NASDAQ following the business combination; (2) the risk that the business combination disrupts current plans and operations as a result of the announcement and consummation of the transactions described herein; (3) the inability to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably and retain its key employees; (4) costs related to the business combination; (5) changes in applicable laws or regulations; (6) the possibility that Lion may be adversely affected by other economic, business, and/or competitive factors; and (7) other risks and uncertainties to be identified in the proxy statement/prospectus relating to the business combination, including those under “Risk Factors” therein, and in other filings with the Securities and Exchange Commission (“SEC”) made by Lion. Lion cautions that the foregoing list of factors is not exclusive. Lion cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Lion does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, subject to applicable law.
Contacts
Lion Group Holding
Tel: +852 2820 9011
Email: [email protected]
ICR, LLC
William Zima
Tel: +1 203 682 8233
Email: [email protected]