Risk Factors

In evaluating the proposals to be presented at the Meeting, a stockholder should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors.” 

RISK FACTORS

Stockholders should carefully consider the following risk factors, together with all of the other information included in this proxy statement/prospectus, before they decide whether to vote or instruct their vote to be cast to approve the proposals described in this proxy statement/prospectus.

Risks Relating to the Business Combination

The fact that Lion is a private company and substantially all of its operations is conducted outside of the United States limits Proficient’s access to all information that may be relevant to the Business Combination. This may result in a business combination that is not as profitable as Proficient expects.

By definition, limited public information exists about private companies and companies that operate outside of the United States, and Proficient has been required to make decisions on whether to pursue the Business Combination on the basis of information that may be more limited than a similar company operating within the United States, which may result in a business combination with a company that is not as profitable as Proficient expected, if at all.

Proficient has a limited ability to assess the management of Lion’s business and, as a result, cannot assure you that Lion’s management has all the skills, experience, qualifications or abilities to manage a public company.

Proficient’s ability to assess Lion’s business and management may be limited due to a lack of time, resources or information. Proficient’s assessment of the capabilities of Lion’s management with respect to a public company, therefore, may prove to be incomplete or incorrect and Lion management may lack the skills, qualifications or abilities that Proficient believed Lion’s management had, and the operations and profitability of Pubco or Lion post-Business Combination could be negatively impacted. Accordingly, any stockholders who choose to remain shareholders following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to claim successfully that the reduction was due to the breach by Proficient’s officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy statement materials relating to the Business Combination contained an actionable material misstatement or material omission.

Lion operates in an industry sector which is outside of Proficient’s management’s area of expertise.

Although Proficient’s management has endeavored to evaluate the risks inherent in the Business Combination, there is no assurance that Proficient has adequately ascertained or assessed all of the significant risks of Lion’s business or industry. There is no assurance that an investment in securities in Proficient will not ultimately prove to be less favorable to investors than a direct investment, if an opportunity were available, in Lion. Proficient management’s expertise may not be directly applicable to the evaluation or operation of Lion’s business, and the information contained in this proxy statement/prospectus regarding the areas of Proficient management’s expertise would not be relevant to an understanding of Lion.

Proficient’s Sponsor, officers, directors and Initial Stockholders have agreed to vote their shares in favor of the Business Combination, regardless of how Proficient’s Public Stockholders vote.

In connection with the Business Combination, Proficient’s Sponsor, officers, directors and Initial Stockholders have agreed to vote their Founder Shares and all shares of common stock acquired by the Sponsor, officers, directors and the Initial Stockholders during or after its Initial Public Offering in favor of the Business Combination. Currently, Proficient’s Sponsor, officers, directors and the Initial Stockholders collectively own approximately 19.9% of the outstanding share of common stock of Proficient. Accordingly, it is more likely that the necessary stockholder approval will be received than would be the case if Proficient’s Sponsor, officers, directors and the Initial Stockholders agreed to vote their shares in accordance with the majority of the votes cast by Proficient’s Public Stockholders. 

Proficient may not be able to complete the Business Combination or any other business combination within the prescribed time frame, in which case Proficient would cease all operations except for the purpose of winding up and Proficient would redeem Proficient’s Public Shares and liquidate.

Proficient must complete an initial business combination by June 3, 2020 (or up until December 3, 2020 if Proficient extends the period of time to consummate a business combination by the full amount of time as further described in this proxy statement/prospectus). Proficient may not be able to consummate the Business Combination or any other business combination by such date. If Proficient has not completed any initial business combination by such date, it will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable) divided by the number of then issued and outstanding Public Shares, which Redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such Redemption, subject to the approval of Proficient remaining stockholders and board of directors, dissolve and liquidate, subject in each case to Proficient’s obligations under Nevada law to provide for claims of creditors and the requirements of other applicable law.

Proficient stockholders who do not redeem their shares of common stock of Proficient will experience immediate and material dilution upon closing of the Business Combination.

As a result of the Business Combination, assuming that no stockholders of Proficient elect to convert their Public Shares into cash in connection therewith as permitted by Proficient’s amended and restated articles of incorporation, the Sellers and the former Proficient stockholders will own approximately 44% and 56% of the economic value of the issued and outstanding shares of Pubco, respectively, and holders of the Class B Ordinary Shares collectively are expected to hold 86% of the voting power of Pubco following the closing. If 10,517,117 shares of Proficient common stock (the maximum number of shares of Proficient common stock that can be redeemed while still maintaining the $5,000,001 needed to consummate the Business Combination after payment of approximately $5 million of expenses in connection with the Business Combination) are converted into cash, such percentages will be approximately 70% and 30%, respectively, and holders of the Class B Ordinary Shares collectively are expected to hold 95% of the voting power of Pubco following the closing. As such, Proficient stockholders who do not redeem their shares of common stock of Proficient will experience immediate and material dilution upon closing of the Business Combination. 

Subsequent to Proficient’s completion of the Business Combination, Proficient may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price post-Business Combination, which could cause you to lose some or all of your investment.

Even though Proficient has conducted due diligence on Lion, it cannot assure you that this diligence will surface all material issues that may be present, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Proficient’s, Pubco’s or Lion’s control will not later arise. As a result of these factors, Proficient may be forced to later write-down or write-off assets, restructure Proficient’s operations, or incur impairment or other charges that could result in reporting losses. Even if Proficient’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with Proficient’s preliminary risk analysis. The fact that Proficient report charges of this nature could contribute to negative market perceptions about its securities post-Business Combination. Accordingly, any stockholders who choose to remain stockholders following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to claim successfully that the reduction was due to the breach by Proficient officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that this proxy statement/prospectus contained an actionable material misstatement or material omission.

The grant and future exercise of registration rights may adversely affect the market price of Proficient common stock and Pubco’s securities upon consummation of the Business Combination.

Pursuant to the existing registration rights agreement with Proficient’s Initial Stockholder, as well as the holders of the Private Placement Warrants and any Warrants the Sponsor, Initial Stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made to Proficient (and all underlying securities) (collectively, the “Initial Registration Rights Holders”), and the registration rights agreement to be entered into in connection with the Business Combination and which are described elsewhere in this proxy statement/prospectus, the Initial Registration Rights Holders and the Sellers can demand that Pubco register their registrable securities under certain circumstances and will also have piggyback registration rights for these securities in connection with certain registrations of securities that Pubco undertakes. Following the consummation of the Business Combination, Pubco intends to file and maintain an effective registration statement under the Securities Act covering such securities.

The registration of these securities will permit the public resale of such securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of Pubco’s ADSs post-Business Combination.

Sales of a substantial number of Pubco securities in the public market following the Business Combination could adversely affect the market price of Pubco ADSs.

2,875,000 Founder Shares and 5,375,000 warrants that Proficient’s Initial Stockholders currently hold will be exchangeable for Class A Ordinary Shares and warrants of Pubco and continue to be held by Proficient’s Initial Stockholders following the Business Combination. Such Pubco securities will be subject to a six-month lock up restriction following the Closing, subject to the possible early release of 50% of such shares in the event the closing price of Pubco ADSs exceeds $12.50 for 20 trading days during any 30 trading day period. Assuming the Initial Stockholders own the same number of shares at closing as they do on the date hereof, 2,875,000 Founder Shares will be placed in escrow and subject to forfeiture on certain terms and conditions. After the lock-up period expires, these Class A Ordinary Shares will become eligible for deposit with the depository against issuance of Pubco ADSs which will be eligible for future sale in the public market. In addition, Kin Sze, Proficient’s current Chief Executive Officer and certain directors of Proficient will be issued an aggregate of 300,000 Pubco ADSs, representing 300,000 Class A Ordinary Shares within 10 days following the Closing. Sales of a significant number of these Pubco ADSs in the public market, or the perception that such sales could occur, could reduce the market price of Pubco ADSs.

If the Adjournment Proposal is not approved, and an insufficient number of votes have been obtained to authorize the consummation of the Business Combination, Proficient’s board of directors will not have the ability to adjourn the Meeting to a later date in order to solicit further votes, and, therefore, the Business Combination will not be approved.

Proficient’s board of directors is seeking approval to adjourn the Meeting to a later date or dates if, at the Meeting, based upon the tabulated votes, there are insufficient votes to approve the consummation of the Business Combination. If the Adjournment Proposal is not approved, Proficient’s board will not have the ability to adjourn the Meeting to a later date and, therefore, will not have more time to solicit votes to approve the consummation of the Business Combination. In such event, the Business Combination would not be completed.

The IRS may not agree with the position that Pubco should be treated as a foreign corporation for U.S. federal income tax purposes following the Business Combination.

Although Pubco will be incorporated under the laws of the Cayman Islands, the IRS may assert that Pubco should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to section 7874 of the Code. For U.S. federal income tax purposes, a corporation is generally considered a tax resident in the jurisdiction of its organization or incorporation. Because Pubco will be incorporated under the laws of the Cayman Islands, Pubco would generally be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) for U.S. federal income tax purposes. Section 7874 provides an exception pursuant to which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. These rules are complex and require analysis of all relevant facts and circumstances, and there is limited guidance and significant uncertainties as to their application. If it were determined that Pubco should be taxed as a U.S. corporation for U.S. federal income tax purposes under section 7874, Pubco would be liable for U.S. federal income tax on its income like any other U.S. corporation and certain distributions made by Pubco to non-U.S. holders of Pubco securities would be subject to U.S. withholding tax. Taxation as a U.S. corporation could have a material adverse effect on Pubco’s financial position and results from operations.

As more fully described under “Material U.S. Federal Income Tax Considerations—Tax Treatment of Pubco—Tax Residence of Pubco for U.S. Federal Income Tax Purposes,” section 7874 is currently expected to apply in a manner such that Pubco should not be treated as a U.S. corporation for U.S. federal income tax purposes. However, holders are cautioned that the application of section 7874 to Pubco is extremely complex and the applicable Treasury regulations are subject to significant uncertainty and there is limited guidance regarding their application. Moreover, the application of section 7874 to the facts and circumstances of the proposed transaction are uncertain. In addition, there could be a future change in law under section 7874 of the Code, the Treasury Regulations promulgated thereunder or otherwise that could have an effect on the application of section 7874 to Pubco. No IRS ruling has been requested or will be obtained regarding the U.S. federal income tax consequences of the Business Combination or any other matter described in this prospectus/proxy statement. There can be no assurance that the IRS will not challenge the U.S. federal income tax treatment described above or that, if challenged, such treatment will be sustained by a court.

The Business Combination may be a taxable event for Proficient stockholders.

While it is expected that the Business Combination qualifies as a transaction described in section 351 of the Code (and, possibly, as a “reorganization” under section 368 of the Code), if, as discussed above, Pubco is respected as a non-U.S. corporation, under special rules contained in section 367(a) of the Code and the Treasury Regulations promulgated thereunder, it is expected that U.S. holders of shares of Proficient common stock will be required to recognize gain (but not loss) on their exchange of shares of Proficient common stock for Pubco ADSs and/or Class A Ordinary Shares in the Merger in an amount equal to the excess, if any, of the fair market value of Pubco ADSs and/or Class A Ordinary Shares received in the Merger over the U.S. holder's adjusted tax basis in the shares of Proficient common stock exchanged therefor. In addition, although the matter is not free from doubt, a U.S. holder may recognize gain with respect to its Proficient Rights or Proficient Warrants as a result of the Business Combination. For more information, see the section entitled “Material U.S. Federal Income Tax Considerations” of this document.

Pubco and/or its non-U.S. subsidiaries could be controlled foreign corporations, or CFCs, which could result in adverse U.S. federal income tax consequences.

If Pubco or any of its subsidiaries is a CFC for any taxable year, then any U.S. person who is a 10% U.S. Shareholder as to such CFC may be subject to adverse U.S. tax consequences. A U.S. person is a “10% U.S. Shareholder” with respect to a foreign corporation if such person owns directly, indirectly or constructively at least 10% of the voting power or value of stock of such corporation. If 10% U.S. Shareholders, in the aggregate, own more than 50% of the voting power or value of the stock of such corporation, the foreign corporation will be classified as a CFC. Additionally, as a result of changes introduced by the Tax Cuts and Jobs Act, even absent 10% U.S. Shareholders with downward direct or indirect interests in a foreign corporation, a U.S. subsidiary of Pubco alone may cause certain related foreign corporations to be treated as CFCs by reason of “downward attribution.” Given that Pubco will be 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 as to Pubco and its non-U.S. subsidiaries and whether Pubco or any of its non-U.S. subsidiaries is a CFC.

Please see the section entitled “Material U.S. Federal Income Tax Considerations—U.S. Holders—Controlled Foreign Corporation Rules” for a more detailed discussion with respect to these CFC issues. U.S. holders are urged to consult their tax advisors regarding the possible application of the CFC rules to holders of the Pubco Shares and Pubco Public Warrants.

Pubco may be a Passive Foreign Investment Company (“PFIC”), which could result in adverse U.S. federal income tax consequences to U.S. investors.

If Pubco or any of its subsidiaries is a PFIC for any taxable year, or portion thereof, that is included in the holding period of a beneficial owner of the shares of Pubco ADSs and/or Class A Ordinary Shares or Pubco warrants who or that is for U.S. federal income tax purposes (i) an individual who is a citizen or resident of the United States, (ii) 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, (iii) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source or (iv) 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 has authority to control all substantial decisions of the trust or (2) the trust has a valid election in place to be treated as a U.S. person (a “U.S. holder”), such U.S. holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Whether Pubco or any of its 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. Accordingly, we are unable to determine whether Pubco or any of its 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 Pubco or any of its subsidiaries will not be treated as a PFIC for any taxable year. Moreover, Pubco does not expect to provide a PFIC annual information statement for 2020 or going forward. Please see the section entitled “Material U.S. Federal Income Tax Considerations—U.S. Holders—Passive Foreign Investment Company Rules” for a more detailed discussion with respect to Pubco’s PFIC status. U.S. holders are urged to consult their tax advisors regarding the possible application of the PFIC rules to holders of the Pubco ADSs and/or Class A Ordinary Shares and Pubco warrants.

Lion may not be able to obtain or maintain all necessary licenses, permits and approvals relating to the Business Combination.

Some of the jurisdictions in which Lion’s subsidiaries hold material licenses, including the Cayman Islands and Hong Kong, require approval from local regulators before making certain changes to the shareholding structure and/or the underlying beneficial ownership of the entities that hold those licenses. This would require approval from CIMA prior to the completion of the proposed business combination and from the HKSFC prior to or shortly after the completion of this business combination. Receipt of all consents required by both CIMA and the HKSFC is a condition to closing the Business Combination. If Lion fails to complete the notification and application process and obtain the requisite approval from the relevant regulator in a timely fashion, Proficient may elect to waive these requirements in order to close the Business Combination. However, these regulators could impose sanctions against the license-holding subsidiaries, including but not limited to, fines and revocation of its licenses in those jurisdictions and/or potential criminal penalties against Lion’s officers, directors and principal shareholders. Lion is in the process of completing the required filings and applying for the requisite approvals in order to comply with these regulations, but it cannot be certain that the regulators will complete their review and issue approvals prior to the completion of this proposed business combination.

Risks Relating to Redemptions and Certain Outstanding Securities of Proficient

The ability of Proficient’s Public Stockholders to redeem their shares for cash may make Proficient’s financial condition unattractive to Lion, which may affect Lion’s ability to close the Business Combination.

Pursuant to the Business Combination Agreement, Proficient would need to have net tangible assets of at least $5,000,001 in the Trust Account after giving effect to the Redemption and any private placement investment as a closing condition to the Business Combination. Therefore, Proficient will need to reserve a portion of the cash in the Trust Account to meet such requirements, or, if such amounts are not available after taking into account all Redemptions, arrange for third party debt or equity financing. Raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. If too many Public Stockholders exercise their Redemption rights, Proficient would not be able to meet such closing condition and, as a result, would not be able to proceed with the Business Combination. In no event will Proficient redeem its Public Shares in an amount that would cause Proficient’s net tangible assets to be less than $5,000,001 upon consummation of the Business Combination, or any greater net tangible asset or cash requirement which may be contained in the agreement. Consequently, if accepting all properly submitted Redemption requests would cause Proficient’s net tangible assets to be less than $5,000,001, Proficient would not proceed with the Business Combination and may instead search for an alternate business combination.

The ability of Proficient’s Public Stockholders to exercise Redemption rights with respect to a large number of Proficient’s shares could increase the probability that the Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.

The Business Combination Agreement requires Proficient to have net tangible assets of at least $5,000,001 upon the Closing after taking into account any Redemptions and private placement investments, if any. Therefore the probability that the Business Combination will be unsuccessful is increased by the amount of stockholder Redemptions. If the Business Combination is unsuccessful and Proficient is not able to consummate another business combination before June 3, 2020 (or up until December 3, 2020 if Proficient extends the period of time to consummate a business combination by the full amount of time as further described in this proxy statement/prospectus), Proficient’s Public Stockholders will not receive their pro rata portion of the Trust Account until Proficient liquidates the Trust Account. If Proficient Public Stockholders are in need of immediate liquidity, they could attempt to sell their stock in the open market; however, at such time Proficient’s stock may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, Proficient Public Stockholders may suffer a material loss on their investment or lose the benefit of funds expected in connection with Proficient’s Redemption until Proficient liquidates or they are able to sell their stock in the open market.

You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your Public Shares, Warrants or Rights, potentially at a loss.

Proficient’s Public Stockholders will be entitled to receive funds from the Trust Account only upon the earlier to occur of: (i) Proficient’s completion of the Business Combination, and then only in connection with those shares of Proficient common stock that such stockholder properly elected to redeem, subject to the limitations described herein, and (ii) the Redemption of Proficient’s Public Shares if Proficient is unable to complete its business combination by June 3, 2020 (or up until December 3, 2020 if Proficient extends the period of time to consummate a business combination by the full amount of time as further described in this proxy statement/prospectus), subject to applicable law and as further described herein. In addition, if Proficient plans to redeem its Public Shares if Proficient is unable to complete a business combination by June 3, 2020 (or up until December 3, 2020 if Proficient extends the period of time to consummate a business combination by the full amount of time as further described in this proxy statement/prospectus), for any reason, compliance with NRS may require that Proficient submits a plan of dissolution to Proficient’s then-existing stockholders for approval prior to the distribution of the proceeds held in Proficient’s Trust Account. In that case, Public Stockholders may be forced to wait beyond June 3, 2020 (or up until December 3, 2020 if Proficient extends the period of time to consummate a business combination by the full amount of time as further described in this proxy statement/prospectus), before they receive funds from the Trust Account. In no other circumstances will a Public Stockholder have any right or interest of any kind in the Trust Account. Accordingly, to liquidate your investment, you may be forced to sell your Public Shares, Warrants or Rights, potentially at a loss.

If Proficient stockholders fail to properly demand Redemption rights, they will not be entitled to convert their shares of common stock of Proficient into a pro rata portion of the Trust Account.

Proficient stockholders holding Public Shares may demand that Proficient convert their shares into a pro rata portion of the Trust Account, calculated as of two business days prior to the anticipated consummation of the Business Combination. Proficient stockholders who seek to exercise this Redemption right must deliver their shares (either physically or electronically) to Proficient’s transfer agent prior to the vote at the Meeting. Any Proficient stockholder who fails to properly demand Redemption rights will not be entitled to convert his or her shares into a pro rata portion of the Trust Account for Redemption of his shares. See the section entitled “Special Meeting of Proficient Stockholders — Redemption Rights” for the procedures to be followed if you wish to convert your shares to cash.

Nasdaq may not list Pubco’s ADSs on its exchange, which could limit investors’ ability to make transactions in Pubco’s ADSs and subject Pubco to additional trading restrictions.

Pubco intends to apply to have its ADSs listed on Nasdaq upon consummation of the Business Combination. Pubco will be required to meet the initial listing requirements to be listed. Pubco may not be able to meet those initial listing requirements. Even if Pubco’s ADSs are so listed, Pubco may be unable to maintain the listing of its ADSs in the future.

If Pubco fails to meet the initial listing requirements and Nasdaq does not list its ADSs on its exchange, or if Pubco is unable to maintain the listing of its ADSs on Nasdaq, Pubco could face significant material adverse consequences, including:

Proficient’s current directors, executive officers and initial stockholders beneficially own shares of common stock of Proficient, Warrants and Rights that will be worthless, and have incurred reimbursable expenses that may not be reimbursed or repaid if the Business Combination is not approved. Such interests may have influenced their decision to approve the Business Combination with Lion.

Proficient’s officers, directors and initial stockholders and/or their affiliates beneficially own or have a pecuniary interest in Founder Shares and Private Placement Warrants that they purchased prior to, or simultaneously with, the Initial Public Offering. Proficient’s initial stockholders, executive officers and directors and their affiliates have no Redemption rights with respect to these securities in the event a business combination is not effected in the required time period. Therefore, if the Business Combination with Lion or another business combination is not approved within the required time period, such securities held by such persons will be worthless. Such securities had an aggregate market value of approximately $29.03 million based upon the closing prices of the shares and Warrants on Nasdaq on March 18, 2020. Furthermore, Proficient’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Proficient’s behalf, such as identifying and investigating possible business targets and business combinations. These expenses will be repaid upon completion of the Business Combination with Lion. However, if Proficient fails to consummate the Business Combination, they will not have any claim against the Trust Account for repayment or reimbursement. Accordingly, Proficient may not be able to repay or reimburse these amounts if the Business Combination is not completed. See the section entitled “The Business Combination Proposal — Interests of Proficient’s Directors and Officers in the Business Combination.”

These financial interests may have influenced the decision of Proficient’s directors to approve the Business Combination with Lion and to continue to pursue such Business Combination. In considering the recommendations of Proficient’s board of directors to vote for the Business Combination Proposal and other proposals, its stockholders should consider these interests.

Proficient’s Sponsor is liable to ensure that proceeds of the trust are not reduced by vendor claims in the event the Business Combination is not consummated. Such liability may have influenced their decision to approve the Business Combination with Lion.

If the Business Combination with Lion or another business combination is not consummated by Proficient within the required time period, Proficient’s Sponsor will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Proficient for services rendered or contracted for or products sold to Proficient, but only if such a vendor or target business has not executed a waiver agreement. If Proficient consummates a Business Combination, on the other hand, Proficient will be liable for all such claims. Neither Proficient nor the Sponsor have any reason to believe that the Sponsor will not be able to fulfill its indemnity obligations to Proficient. See the section entitled “Other Information Related to Proficient — Proficient’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information.

These personal obligations of the executive officers may have influenced Proficient’s board of director’s decision to approve the Business Combination with Lion and to continue to pursue such Business Combination. In considering the recommendations of Proficient’s board of directors to vote for the Business Combination Proposal and other proposals, Proficient’s stockholders should consider these interests.

The exercise of Proficient’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in Proficient’s stockholders’ best interest.

In the period leading up to the Closing of the Business Combination, events may occur that, pursuant to the Business Combination Agreement, would require Proficient to agree to amend the Business Combination Agreement, to consent to certain actions taken by Lion or to waive rights that Proficient is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of Lion’s business, a request by Lion to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on Lion’s business and would entitle Proficient to terminate the Business Combination Agreement. In any of such circumstances, it would be at Proficient’s discretion, acting through its board of directors, to grant its consent or waive those rights. The existence of the financial and personal interests of the directors described in the preceding risk factors may result in a conflict of interest on the part of one or more of the directors between what he, she or they may believe is best for Proficient and what he, she or they may believe is best for himself, herself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, Proficient does not believe there will be any changes or waivers that Proficient’s directors and officers would be likely to make after stockholder approval of the Business Combination Proposal has been obtained. While certain changes could be made without further stockholder approval, Proficient will circulate a new or amended proxy statement/prospectus and resolicit Proficient’s stockholders if changes to the terms of the transaction that would have a material impact on its stockholders are required prior to the vote on the Business Combination Proposal.

If Proficient is unable to complete the Business Combination with Lion or another business combination by June 3, 2020 (or up until December 3, 2020 if Proficient extends the period of time to consummate a business combination by the full amount of time as further described in this proxy statement/prospectus), Proficient will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding Public Shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against Proficient and, as a result, the proceeds held in the Trust Account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

Under the terms of Proficient’s amended and restated articles of incorporation, Proficient must complete the Business Combination with Lion or another business combination by June 3, 2020 (or up until December 3, 2020 if Proficient extends the period of time to consummate a business combination by the full amount of time as further described in this proxy statement/prospectus), or Proficient must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding Public Shares and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, third parties may bring claims against Proficient. Although Proficient has obtained waiver agreements from certain vendors and service providers it has engaged and owes money to, and the prospective target businesses it has negotiated with, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the Trust Account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the Trust Account could be subject to claims which could take priority over those of Proficient’s Public Stockholders. If Proficient is unable to complete a business combination within the required time period, the Sponsor has agreed they will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Proficient for services rendered or contracted for or products sold to Proficient, but only if such a vendor or prospective target business does not execute such a waiver. However, it may not be able to meet such obligation. Therefore, the per-share distribution from the Trust Account in such a situation may be less than $10.00 due to such claims.

Additionally, if Proficient is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, or if Proficient otherwise enters compulsory or court supervised liquidation, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of its stockholders. To the extent any bankruptcy claims deplete the Trust Account, Proficient may not be able to return to its Public Stockholders at least $10.00 per share.

Proficient’s stockholders may be held liable for claims by third parties against Proficient to the extent of distributions received by them.

If Proficient is unable to complete the Business Combination with Lion or another business combination within the required time period, Proficient will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares, which Redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such Redemption, subject to the approval of its remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under NRS to provide for claims of creditors and the requirements of other applicable law. Proficient cannot assure you that it will properly assess all claims that may be potentially brought against Proficient. As such, Proficient’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, Proficient cannot assure you that third parties will not seek to recover from its stockholders amounts owed to them by Proficient.

If Proficient is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/ creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by Proficient’s stockholders. Furthermore, because Proficient intends to distribute the proceeds held in the Trust Account to its Public Stockholders promptly after the expiration of the time period to complete a business combination, this may be viewed or interpreted as giving preference to its Public Stockholders over any potential creditors with respect to access to or distributions from its assets. Furthermore, Proficient’s board may be viewed as having breached their fiduciary duties to its creditors and/or may have acted in bad faith, and thereby exposing itself and the company to claims of punitive damages, by paying Public Stockholders from the Trust Account prior to addressing the claims of creditors. Proficient cannot assure you that claims will not be brought against it for these reasons.

Activities taken by existing Proficient stockholders to increase the likelihood of approval of the Business Combination Proposal and other proposals could have a depressive effect on the shares of Proficient common stock.

At any time prior to the Meeting, during a period when they are not then aware of any material nonpublic information regarding Proficient or its securities, Proficient’s Initial Stockholders, officers, directors, Lion or Lion’s shareholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Business Combination Proposal, or execute agreements to purchase such shares from such investors in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of Proficient common stock or vote their shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements to consummate the Business Combination where it appears that such requirements would otherwise not be met. Entering into any such arrangements may have a depressive effect on the shares of Proficient common stock. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares he owns, either prior to or immediately after the Meeting. 

Risks Relating to Pubco’s Business and Operations Following the Business Combination with Lion

The value of your investment in Pubco following consummation of the Business Combination will be subject to the significant risks affecting Pubco and Lion and inherent in the industry in which Lion operates. You should carefully consider the risks and uncertainties described below and other information included in this proxy statement/prospectus. If any of the events described below occur, the post-Business Combination business and financial results could be adversely affected in a material way. This could cause the trading price of Pubco’s ADSs to decline, perhaps significantly, and you therefore may lose all or part of your investment.

Following the consummation of the Business Combination, Pubco’s only significant asset will be its ownership of Lion and affiliates and such ownership may not be sufficient to pay dividends or make distributions or obtain loans to enable Pubco to pay any dividends on its Class A Ordinary Shares or satisfy other financial obligations.

Following the consummation of the Business Combination, Pubco will be a holding company and will not directly own any operating assets other than its ownership of interests in Lion. Pubco will depend on Lion for distributions, loans and other payments to generate the funds necessary to meet its financial obligations, including its expenses as a publicly traded company and to pay any dividends. The earnings from, or other available assets of, Lion may not be sufficient to make distributions or pay dividends, pay expenses or satisfy Pubco’s other financial obligations.

Fluctuations in operating results, earnings announcements and other factors, including incidents involving Lion’s customers and negative media coverage, may result in significant decreases in the price of Pubco securities post-Business Combination.

The stock markets experience volatility that is often unrelated to operating performance. These broad market fluctuations may adversely affect the trading price of Pubco securities post-Business Combination and, as a result, there may be significant volatility in the market price of Pubco securities post-Business Combination. If Lion is unable to operate as profitably as investors expect, the market price of Pubco securities will likely decline when it becomes apparent that the market expectations may not be realized. In addition to operating results, many economic and seasonal factors outside of Pubco’s or Lion’s control could have an adverse effect on the price of Pubco securities and increase fluctuations in its earnings. These factors include certain of the risks discussed herein, the impact of the Chinese New Year holiday, the operating results of other companies in the same industry, changes in financial estimates or recommendations of securities analysts, speculation in the press or investment community, negative media coverage or risk of proceedings or government investigation, the possible effects of war, terrorist and other hostilities, adverse weather conditions, pandemics such as COVID-19, changes in general conditions in the economy or the financial markets or other developments affecting the financial services industry.

Pubco will incur higher costs post-Business Combination as a result of being a public company.

Pubco will incur significant additional legal, accounting, insurance and other expenses, including costs associated with public company reporting requirements following completion of the Business Combination. Pubco will incur higher costs associated with complying with the requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and related rules implemented by the SEC and Nasdaq. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. Pubco expects these laws and regulations to increase its legal and financial compliance costs after the Business Combination and to render some activities more time-consuming and costly, although Pubco is currently unable to estimate these costs with any degree of certainty. Pubco may need to hire more employees post-Business Combination or engage outside consultants to comply with these requirements, which will increase its post-Business Combination costs and expenses. These laws and regulations could make it more difficult or costly for Pubco to obtain certain types of insurance, including director and officer liability insurance, and Pubco may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on Pubco’s board of directors, board committees or as executive officers. Furthermore, if Pubco is unable to satisfy its obligations as a public company, it could be subject to delisting of its ADSs and/or warrants, fines, sanctions and other regulatory action and potentially civil litigation.

The escrow provisions of the Business Combination Agreement and the Escrow Agreement may affect management decisions and incentives.

Under the Business Combination Agreement and the Escrow Agreement, 30% of the Exchange Shares that will be placed in escrow at Closing will be released to the Sellers in the event that Pubco meets certain net income targets for the calendar years 2021 and 2022 (the “Earnout Period”). As a result, Pubco management may focus on increasing the net income of Pubco and its subsidiaries, including Lion, for quarters within the Earnout Period. See “The Business Combination Proposal — The Business Combination Agreement and Related Agreements.” 

Pubco 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 the board of directors of Pubco and will depend on, among other things, applicable law, regulations, restrictions, Pubco’s and Lion’s respective results of operations, financial condition, cash requirements, contractual restrictions, Pubco’s and Lion’s future projects and plans and other factors that the board of directors may deem relevant. In addition, Pubco’s ability to pay dividends depends significantly on the extent to which it receives dividends from Lion and there can be no assurance that Lion will pay dividends. As a result, capital appreciation, if any, of Pubco’s ADSs will be an investor’s sole source of gain for the foreseeable future.

The exercise price of Pubco warrants can fluctuate under certain circumstances which, if triggered, can result in potentially material dilution of Pubco’s then existing stockholders.

Immediately following the Business Combination, there will be outstanding a total of 17,795,000 warrants to purchase one Class A Ordinary Share at an exercise price of $11.50. The price at which such Class A Ordinary Shares may be purchased upon exercise of the warrants may be adjusted in certain circumstances, including, but not limited to, when (i) Pubco undertakes certain share capitalizations, share splits, rights offerings or other similar events, or (ii) Pubco pays certain dividends or makes certain distributions in cash, securities or other assets to the holders of Class A Ordinary Shares on account of such Class A Ordinary Shares. These adjustments are intended to provide the investors in Pubco’s warrants with partial protection from the effects of actions that dilute their interests in Pubco on a fully-exercised basis. These provisions could result in substantial dilution to investors in Pubco’s Class A Ordinary Shares or Pubco ADSs.

Pubco is 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.

Pubco’s corporate affairs will be governed by its Amended and Restated Memorandum and Articles of Association, the Companies Law, 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 Pubco’s directors to Pubco under Cayman Islands 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 Pubco’s 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. In addition, some U.S. states, such as Delaware and Nevada, have different bodies of corporate law than the Cayman Islands.

Pubco has been advised by its Cayman Islands legal counsel, Ogier, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against Pubco 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, to impose liabilities against Pubco 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.

You will have limited ability to bring an action against Pubco or against its directors and officers, or to enforce a judgment against Pubco or them, because Pubco is incorporated in the Cayman Islands, because Pubco conducts all of its operations in Hong Kong and the Cayman Islands and because most of Pubco’s directors and officers will reside outside the United States.

Pubco is incorporated in the Cayman Islands and following the Business Combination, would initially conduct all of its operations through its subsidiary, Lion, in Hong Kong and the Cayman Islands. All of Pubco’s assets are located outside the United States. Most of Pubco’s officers and directors are expected to reside outside the United States and a substantial portion of the assets of those persons are located outside of the United States. As a result, it could be difficult or impossible for you to bring an action against Pubco or against these individuals in the United States in the event that you believe that your rights have been infringed under the applicable securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the Hong Kong could render you unable to enforce a judgment against Pubco’s assets or the assets of Pubco’s directors and officers.

Shareholders of Cayman Islands exempted companies such as Pubco have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders of these companies. Pubco’s directors have discretion under Cayman Islands law to determine whether or not, and under what conditions, Pubco’s corporate records could be inspected by Pubco’s shareholders, but are not obliged to make them available to Pubco’s shareholders. This could make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of all of the above, Pubco shareholders might 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 Pubco’s 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 Pubco’s securities and could entrench management.

Pubco’s Amended and Restated Memorandum and Articles of Association will contain provisions that may discourage unsolicited takeover proposals that shareholders of Pubco may consider to be in their best interests. Among other provisions, the ability of Pubco’s 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 Pubco’s shareholders to remove incumbent management and accordingly discourage transactions that otherwise could involve payment of a premium over prevailing market prices for Pubco’s securities.

Moreover, Pubco’s Amended and Restated Memorandum and Articles of Association provides that Pubco’s board of directors will be divided into two classes, namely Class I and Class II. Class I shall consist of three directors, and Class II shall consist of four directors. Directors assigned to Class I shall initially serve until the first annual general meeting of shareholders following the effectiveness of our articles upon completion of this offering, or the Articles Effectiveness Date. Directors assigned to Class II shall initially serve until the second annual general meeting of shareholders following the Articles Effectiveness Date.

Furthermore, Pubco is expected to have a dual-class share structure that Pubco’s ordinary shares will 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 10 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 Pubco’s dual-class share structure, the Class B Ordinary Shares will constitute approximately 44% of Pubco’s total issued and outstanding share capital, and approximately 86% of the aggregate voting power of Pubco’s total issued and outstanding share capital, immediately after the Closing of the Business Combination assuming no redemption of any outstanding Proficient common stock. If 10,517,117 shares of Proficient common stock (the maximum number of shares of Proficient common stock that can be redeemed while still maintaining the $5,000,001 needed to consummate the Business Combination after payment of approximately $5 million of expenses in connection with the Business Combination) are redeemed, the Class B Ordinary Shares will constitute approximately 70% of Pubco’s total issued and outstanding share capital, and approximately 95% of the aggregate voting power of Pubco’s total issued and outstanding share capital, immediately after the Closing of the Business Combination assuming no redemption of any outstanding Proficient common stock

Other anti-takeover provisions in Pubco’s Amended and Restated Memorandum and Articles of Association include the indemnification of Pubco’s officers and directors, the requirement that directors may only be removed from Pubco’s 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 Pubco shareholders to take certain actions and limit the price investors might be willing to pay for Pubco’s securities.

As a “foreign private issuer” under the rules and regulations of the SEC, Pubco is 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.

Pubco is, and will be after the consummation of the Transactions, considered a “foreign private issuer” under the Exchange Act and is therefore 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, Pubco is 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. Pubco is not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders. In addition, Pubco’s 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 Pubco’s securities. Accordingly, after the Business Combination, if you continue to hold Pubco’s securities, you may receive less or different information about Pubco than you currently receive about Proficient and Lion.

In addition, as a “foreign private issuer”, Pubco is 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. Pubco currently intends to follow some, but not all of the corporate governance requirements of Nasdaq. With respect to the corporate governance requirements of Pubco that it does follow, Pubco cannot make any assurances that it 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 Pubco to follow its home country practice. Unlike the requirements of Nasdaq, Pubco is not required to, under the corporate governance practice and requirements in the Cayman Islands, have its board consisting of a majority of independent directors, nor is Pubco 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 Pubco ADSs. For additional information regarding the home country practices Pubco intends to follow in lieu of Nasdaq requirements, see the section entitled “Management of Pubco Following the Business Combination — Corporate Governance Practices”.

Pubco would lose its status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of Pubco’s 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 Pubco’s directors or executive officers are U.S. citizens or residents; (ii) more than 50% of Pubco’s assets are located in the United States; or (iii) Pubco’s business is administered principally in the United States. If Pubco loses its status as a foreign private issuer in the future, it 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 it were a company incorporated in the United States. If this were to happen, Pubco would likely incur substantial costs in fulfilling these additional regulatory requirements and members of Pubco’s management would likely have to divert time and resources from other responsibilities to ensuring these additional regulatory requirements are fulfilled. 

Pubco is an “emerging growth company,” and any decision on Pubco’s part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make its ADSs less attractive to investors.

Pubco is an “emerging growth company,” as defined in the JOBS Act and, for as long as it continues to be an emerging growth company, it may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies including, but not limited to: not being required to have its internal control over financial reporting audited by its independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act for a specified time period; reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements; and exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and to obtain stockholder approval of any golden parachute payments not previously approved. It may take advantage of these provisions for up to five years or such earlier time that it is no longer an “emerging growth company.” Pubco will remain an “emerging growth company” for up to five years, although, it would cease to be an “emerging growth company” upon the earliest of: the first fiscal year following the fifth anniversary of the consummation of this offering; the first fiscal year after its annual gross revenue is $1.07 billion or more; the date on which it has, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or the date on which it is deemed to be a “large accelerated filer” as defined in the Exchange Act. To the extent Pubco takes advantage of any of these reduced reporting burdens in this proxy statement/prospectus or in future filings, the information that it provides to its security holders may be different than you might get from other public companies in which you hold equity interests. Pubco cannot predict if investors will find its ADSs less attractive because it may rely on these exemptions. If some investors find Pubco’s ADSs less attractive as a result, there may be a less active trading market for its ADSs and its stock price may be more volatile.

Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Pubco is choosing to delay adoption of new or revised accounting standards accordingly.

Upon the consummation of the Business Combination, Pubco will be 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.

Upon the consummation of the Business Combination, Class B Sellers will hold approximately 86% of Pubco’s voting power assuming no redemption of any outstanding Proficient common stock. As a result, Pubco will be 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. Pubco currently does not intend to rely on exemptions available to it. 

Pubco’s controlling shareholder will have substantial influence over Pubco and its interests may not be aligned with the interests of Pubco’s other shareholders.

Upon Closing, Class B Sellers will hold a significant percentage of Pubco’s voting equity. Assuming no redemption of any outstanding Proficient common stock, Class B Sellers will own approximately 44% of the economic value of the issued and outstanding shares of Pubco and hold approximately 86% of the voting power of Pubco following the Closing. If 10,517,117 shares of Proficient common stock (the maximum number of shares of Proficient common stock that can be redeemed while still maintaining the $5,000,001 needed to consummate the Business Combination after payment of approximately $5 million of expenses in connection with the Business Combination) are redeemed, Class B Sellers will own approximately 70% of the economic value of the issued and outstanding shares of Pubco and hold 95% of the voting power of Pubco following the closing. Class B Sellers will have 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, Class B Sellers may take actions that are not in the best interests of Pubco’s other shareholders. These actions may be taken in many cases even if they are opposed by Pubco’s 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 ADSs as part of a sale of Pubco.

Risks Related to Pubco ADSs

An active trading market for Pubco ADSs may not develop, which would adversely affect the liquidity and price of Pubco ADSs.

Prior to the Business Combination, there has been no public market for Pubco’s Ordinary Shares or ADSs. The price of Pubco ADSs may vary significantly due to general market or economic conditions. Furthermore, an active trading market for the post-Business Combination Pubco securities may never develop or, if developed, it may not be sustained. If an active public market for Pubco ADS does not develop, the market price and liquidity of Pubco ADSs may be adversely affected. You may be unable to sell your securities unless a market can be established and sustained. In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class actions against that company. If Pubco were involved in a class action suit, it could divert the attention of senior management, and, if adversely determined, could have a material adverse effect on Pubco’s business, results of operations and financial condition.

The price of Pubco ADSs may be volatile.  

The price of Pubco ADSs may fluctuate due to a variety of factors, including but not limited to:

These market and industry factors may materially reduce the market price of Pubco ADSs, regardless of Pubco’s operating performance. Volatility in the price of Pubco ADSs may increase volatility in the price of Pubco warrants.

Reports published by analysts, including projections in those reports that differ from Pubco’s actual results, could adversely affect the price and trading volume of Pubco ADSs.

It is currently expected that securities research analysts will establish and publish their own periodic projections for Pubco’s business. These projections may vary widely and may not accurately predict the results Pubco actually achieve. Market price of ADSs may decline if Pubco’s actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on Pubco downgrades Pubco’s ADSs or publishes inaccurate or unfavorable research about Pubco’s business, price of Pubco’s ADSs could decline. If one or more of these analysts ceases coverage of Pubco or fails to publish reports on Pubco regularly, Pubco’s share price or trading volume could decline. While it is expected that research analyst coverage, if no analysts commence coverage of Pubco, the trading price and volume for Pubco’s ADSs could be adversely affected.

Pubco may issue additional Class A Ordinary Shares or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of Pubco’s ADSs.

Pubco 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 Pubco’s equity incentive plan, without shareholder approval, in a number of circumstances.

Pubco’s issuance of additional Class A Ordinary Shares or other equity securities of equal or senior rank would have the following effects:

Holders of the ADSs may not have the same voting rights as Pubco’s registered shareholders and might not receive voting materials in time to be able to exercise their right to vote.

Except as described in this proxy statement/prospectus and in the deposit agreement, holders of the 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 Pubco. Upon receipt of such holder’s voting instructions, the depositary will vote the underlying Class A Ordinary Shares in accordance with these instructions. Holders of ADSs 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 of holders of ADSs are limited by the terms of the deposit agreement, and holders of ADSs may not be able to exercise rights to direct how the Class A Ordinary Shares represented by ADSs are voted.

A holder of the 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. Pubco will make all reasonable efforts to cause the depositary to extend voting rights to holders of ADSs in a timely manner, but Pubco 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 Pubco’s 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.

Pubco 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 Pubco may terminate the deposit agreement, without the prior consent of the ADS holders.

Pubco 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. Pubco and the depositary may agree to amend the deposit agreement in any way it decides is necessary or advantageous to it. Amendments may reflect, among other things, operational changes in the ADS program, legal developments affecting ADSs or changes in the terms of Pubco’s 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 Pubco decides to list its ordinary shares on a non-U.S. securities exchange and determine not to continue to sponsor an ADS facility or when Pubco becomes 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 Pubco decides 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.  

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 Pubco’s 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 Pubco 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 Pubco’s 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, Pubco believes 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 Pubco 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 Pubco or the depositary in connection with matters arising under the deposit agreement or Pubco 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 Pubco 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 Pubco or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

A holder of ADSs right to participate in any future rights offerings may be limited, which may cause dilution to such holder’s holdings.

Pubco may, from time to time, distribute rights to its shareholders, including rights to acquire Pubco securities. However, Pubco cannot make rights available to holders of ADSs in the United States unless Pubco registers 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 holders of ADSs 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. Pubco is 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, Pubco may not be able to establish an exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to participate in Pubco’s 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 holders of ADSs will receive no value for these rights.

Holders of ADSs 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 Pubco’s books or the books of the depositary are closed, or at any time if Pubco 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.

Holders of ADSs might not receive distributions on Pubco’s equity shares, or any value for them at all, if it is unlawful or impracticable for Pubco to make them available to such holders.

The depositary of the ADSs has agreed to pay holders of ADSs the cash dividends or other distributions it or the custodian for the ADSs receives on Pubco’s Class A Ordinary Shares or other deposited securities after deducting its fees and expenses in accordance with the deposit agreement. Holders of ADSs 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 holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs 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 holders of ADSs if any government approval or registration is required for such distribution. Pubco has no obligation to take any other action to permit the distribution of the ADSs, equity shares, rights or anything else to holders of the ADSs. This means that holders of ADSs might not receive the distributions that Pubco makes on its Class A Ordinary Shares or any value for them at all if it is unlawful or impracticable for Pubco to make them available to you.

Risks Related to Lion’s Business and Industry

Lion operates in a heavily regulated industry, and are subject to extensive and evolving regulatory requirements in the jurisdictions in which it operates.

Lion operates in a highly-regulated industry and must comply with the applicable regulatory requirements in the jurisdictions it operates. Its major regulators include, Cayman Islands Monetary Authority (CIMA), Securities and Futures Commission of Hong Kong (HKSFC), the Hong Kong Insurance Authority (HKIA), and Hong Kong Customs and Excise Department (HKCED). These regulators and self-regulatory organizations govern Lion’s business operations in a variety of ways and conduct regular examinations of its business to monitor its compliance with applicable regulations. Among other things, Lion is subject to regulations with regard to (i) its sales practices, including its interaction with and solicitation of clients and its marketing activities; (ii) the custody, control and safeguarding of its clients’ assets; (iii) maintaining specified minimum amounts of capital and limiting withdrawals of funds from its regulated operating subsidiaries; (iv) submitting regular financial and other reports to regulators; (v) licensing for its operating subsidiaries and its employees; and (vi) the conduct of its 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 Lion’s existing practices violates any applicable laws and regulations. 

Compliance with these regulations is complicated, time consuming and expensive. Lion’s ability to comply with all applicable laws and regulations is largely dependent on its internal compliance system, as well as its ability to attract and retain qualified compliance personnel. While Lion maintains systems and procedures designed to ensure that it complies with applicable laws and regulations, Lion cannot assure you that it is able to prevent all possible violations. Non-compliance with applicable laws or regulations could result in sanctions being levied against Lion, 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 its 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 Lion’s business. 

In addition, Lion is subject to regular investigations, inquiries and inspections from the relevant regulatory bodies. For example, from time to time, Lion’s 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 Lion’s business conduct and compliance with relevant regulatory requirements and to assess and monitor, among other things, its financial soundness. Similarly, Lion’s 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 Lion. There also remains a risk that Lion may not be able to rectify its 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. Lion was inspected by both the HKSFC and CIMA during 2019, and both regulators identified certain areas in which its operations can improve. Lion is in the process of implementing these improvements and expects that it will be able to adopt a sufficient number of these changes in time to satisfy both regulators. However, if Lion is unable to make these changes it may be subject to fines or other disciplinary actions. If any such outcome occurs, there may be a material and adverse effect on its business, results of operations, financial conditions and prospects. 

Lion had incurred net losses in the past, and Lion may incur losses again in the future.

Lion had net losses of US$0.7 million and US$2.8 million in 2017 and 2018, respectively. Although Lion had net income of US$8.2 million in 2019, Lion cannot assure you that it will be able to continue to generate net income in the future. Lion anticipates that its operating cost and expenses will increase in the foreseeable future as Lion continues to grow its business, attract new clients, enhance its risk management capabilities and increase its brand recognition. These efforts may prove more costly than Lion currently anticipates, and Lion may not succeed in increasing its revenue sufficiently to offset these higher expenses. There are other external and internal factors that could negatively affect Lion’s financial condition. For example, the trading volume achieved on Lion’s platform may be lower than expected, which may lead to lower than expected revenues. Furthermore, Lion may adopt a new share incentive plans in the future, which will result in significant share-based compensation expenses to it. Lion generated 99.7%, 112.6% and 85.9% of its total revenues from commissions charged to its clients who trade on its platform in 2017, 2018 and 2019, respectively. Any material decrease in its commissions would have a substantial impact on its financial conditions. As a result of the foregoing and other factors, Lion may continue to incur net losses in the future. 

Lion may not be able to obtain or maintain all necessary licenses, permits and approvals and to make all necessary registrations and filings for its business activities in multiple jurisdictions and related to residents therein, especially in the PRC or otherwise relating to PRC residents. 

Lion operates in a heavily-regulated industry which requires various licenses, permits and approvals in different jurisdictions to conduct its businesses. Its clients include people who live in jurisdictions where it does not have licenses issued by the local regulatory bodies. It is possible that authorities in those jurisdictions may take the position that Lion is required to obtain licenses or otherwise comply with local laws and regulations in order to conduct its business with residents living in those jurisdictions. In any jurisdictions, if Lion fails to comply with the regulatory requirements, it may risk being disqualified for its existing businesses or being rejected for renewal of its 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 Lion may contemplate, it may not be able to obtain the relevant approvals for developing such new business if it fails to comply with the relevant regulations and regulatory requirements. As a result, Lion may fail to develop new business as planned, or it may fall behind its competitors in such businesses. 

Some of the jurisdictions in which Lion’s subsidiaries hold material licenses, including the Cayman Islands and Hong Kong, require approval from local regulators before making certain changes to the shareholding structure and/or the underlying beneficial ownership of the entities that hold those licenses. This would require approval from CIMA prior to the completion of the proposed business combination and from the HKSFC prior to or shortly after the completion of this business combination. If Lion fails to complete the notification and application process and obtain the requisite approval from the relevant regulator in a timely fashion, these regulators could impose sanctions against it, including but not limited to, fines and revocation of its licenses in those jurisdictions and/or potential criminal penalties against Lion’s officers, directors and principal shareholders. Lion is in the process of completing the required filings and applying for the requisite approvals in order to comply with these regulations, but it cannot be certain that the regulators will complete their review and issue approvals prior to the completion of this proposed business combination. If it appears that Lion will not be able obtain the required approvals prior to completion, Lion may choose to engage in internal restructurings in order to avoid violating these requirements, and Lion would undo such restructurings as soon as approval is obtained. However, in addition to the other risks and costs associated with restructuring, the regulators might deem such restructuring to be insufficient in complying with their requirements, in which case Lion may remain subject to the penalties discussed above. 

Lion does not hold any licenses or permits from any PRC regulatory bodies for its securities brokerage business. Currently, a large number of Lion’s clients are PRC residents and certain of the executive directors and other independent contractors of Lion are providing supporting services remotely from the PRC. The transactions on Lion’s trading platform are all conducted outside PRC and Lion’s current activities in China do not require a securities brokerage license, a making license or permit under existing PRC securities laws and regulations. However, 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. Lion cannot assure you that its current operating model will not be deemed as operating securities brokerage business in China, subjecting it to further inquiries or rectifications. If certain of its activities in China were deemed by PRC regulators to be providing securities brokerage services, investment consulting services or stock options brokerage business in China, Lion would be required to obtain the required licenses or permits from the relevant regulatory bodies, including the China Securities Regulatory Commission (CSRC). The failure to obtain such licenses or permits may subject it to regulatory actions and penalties, including fines, suspension of parts or all of its operations in the PRC, and temporary suspension or removal of its websites and mobile application in China. In such cases, its business, financial condition, results of operations and prospects may be materially and adversely affected. 

PRC governmental control of currency conversion, cross-border remittance and offshore investment could have a direct impact on the trading volume on Lion’s platform, and the PRC government could further tighten restrictions on converting Renminbi to foreign currencies and/or deems Lion’s practices to be in violation of PRC laws and regulations. 

A majority of Lion’s 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 Lion requires its clients to comply with the relevant rules and regulations in the agreements it enters into with them, Lion cannot assure you that its clients will follow the rules and regulations or the provisions in its agreements with Lion at all times. Lion does not handle the Renminbi cross-border currency conversion for its Chinese clients through any of its accounts or entities, and it does not require its clients to submit evidence of approval or registration with respect to the foreign currency used for offshore investments. Lion cannot assure you that its current operating model, which includes redirecting its clients to open accounts with third party service provider, will be not deemed as assisting with the currency conversion by SAFE. In such cases, Lion may face regulatory warnings, correction orders, condemnation and fines, and may not be able to conduct its current business in the future. In addition, any misbehavior or violation by its clients of applicable laws and regulations could lead to regulatory inquiries, investigations or penalties that involve Lion. 

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 its control and ability to anticipate, Lion 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 its clients, remove its account opening functions, or suspend its operations pending an investigation or indefinitely. In such cases, Lion may face regulatory warnings, correction orders, condemnation, fines and confiscation of income, and may not be able to conduct its current business in the future. Lion may also be subject to regular inspections from relevant authorities from time to time. If such situations occur, its 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 Lion’s platform could be restricted, which would significantly reduce the trading volume on its platform. As Lion’s revenues from brokerage commission and market making income depends heavily on the total trading volume facilitated on its platform, the occurrence of any of the above regulatory changes would have a material and adverse impact on its business, operating and financial results. 

Lion may be unable to retain existing clients or attract new clients, or it may fail to offer services to address the needs of its clients as they evolve.

Lion derives a significant portion of its revenues from its commissions based upon the trading volume or the number of relevant transaction contracts executed by its clients. The rapidly growing trading volume on Lion’s platform is primarily driven by the increasing number of its active clients. Its total revenue-generating clients grew 134.7% from 1,722 as of December 31, 2017 to 4,047 as of December 31, 2019. To further grow its business and expand its operation, Lion relies on continuous efforts in retaining existing clients and attracting new ones. 

Lion’s ability to retain existing clients is dependent upon multiple factors, some of which are beyond its control. Its clients may not continue to place trading orders or increase the level of their trading activities on its platform if Lion cannot match the prices offered by other market players or if Lion fails to deliver satisfactory services. Failure to deliver services in a timely manner at competitive prices and provide a satisfactory experience will cause its clients to lose confidence in Lion and use its platform less frequently or even stop using its platform altogether. Even if Lion is able to provide high-quality and satisfactory services on its platform in a timely manner and at favorable pricing terms, Lion cannot assure you that it will be able to retain existing clients, encourage repeat and increase trading transactions, in part due to reasons beyond its control, such as the personal financial situation of its clients or the deterioration of capital markets generally. Lion has taken efforts in attracting new clients and expanding its brand influence, and it plans to continue doing so to. However, these efforts may not be cost-effective and Lion cannot assure you that it will be able to grow its client base as it expects, which may in turn materially and adversely affect its business operations and prospects. 

Lion’s level of commission and fee rates may decline in the future. Any material reduction in its commission or fee rates could reduce its profitability.

Lion derives a significant portion of its revenues from commissions. Lion charges its clients commission for its insurance brokerage services, securities and future brokerage services and CFD trading services. Revenues generated from commission amounted to US$9.9 million, US$7.4 million and US$15.9 million in 2017, 2018 and 2019, respectively. Especially starting from May 2019, Lion began its CFD trading services, commission of which became the largest contributor of its total revenues in 2019. Lion may experience pressure on its commission or fee rates as a result of competition in the financial service industry and online brokerage industry. Some of Lion’s competitors offer a broader range of services to a larger client base and enjoy higher trading volumes than Lion does. Consequently, Lion’s competitors may be able to offer trading services at lower commissions or fee rates than Lion currently offers 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, Lion could lose both market share and revenues. Lion believes that any downward pressure on commission or fee rates would likely continue and intensify as it continues to develop its business and gain recognition in its markets. A decline in its commission or fee rates could lower its revenues, which would adversely affect its profitability. In addition, Lion’s competitors may offer other financial incentives Lion may not be able offer, such as rebates or discounts in order to induce trading in their systems, which may in turn materially and adversely affect Lion’s operating and financial results.

Lion cannot guarantee the profitability of its clients’ investments or ensure that its clients will make rational investment judgements.

Lion cannot guarantee the profitability of the investment made by clients on its trading platform. The profitability of its clients’ investments is directly affected by elements beyond Lion’s 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 Lion’s 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 Lion includes prominent risk warnings and disclaimers on its apps throughout the transaction process and, in accordance with relevant regulations, has 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 tests for any product is adequate.

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 Lion and/or may discontinue trading with Lion, which may have a material and adverse effect on Lion’s business and results of operation. Some clients who have suffered substantial losses on Lion’s platform may seek to recover their damages from Lion or bring lawsuits against Lion. These allegations against Lion, regardless of their veracity, may negatively affect Lion’s reputation and clients’ confidence with it. If Lion was 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, Lion may have to expend a significant amount of resources to investigate and/or defend itself, which could divert Lion’s management’s attention from the day-to-day operations. In addition, if any litigation or other legal proceeding to which Lion is a party is resolved adversely, Lion may be ordered to pay substantial amount of damages or compensation to the other party, which could adversely affect Lion’s business, financial condition and results of operations.

Lion may incur material trading losses from its market making activities.

A portion of Lion’s revenue is derived from its market making activities. When an offsetting transaction of CFD trading from another client is not available, Lion may choose to act as a principal (i.e. market maker) to trade with the client. As a market maker, Lion attempts to derive a profit from the difference between the prices at which it buys and sells CFD products. Since these activities involve the purchase or sale of CFD products for its own account, Lion may incur trading losses for a variety of reasons, including price changes in CFD products and lack of liquidity in CFD products in which Lion has positions. As Lion offers leveraged trading of up to 100:1 to certain of its forex trading clients, Lion’s risk exposure is greatly amplified. If Lion’s risk management system fails to identify or prevent high risk trades and the market develops in a way adverse to Lion’s position, Lion may incur significant losses in these trades. Lion may also incur losses due to inaccuracies in its proprietary pricing mechanism, or rate engine, which evaluates, monitors and assimilates market data and reevaluates its 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 Lion is able to sell or buy CFD products, or may limit or restrict its ability to either resell CFD products that it has purchased or repurchase CFD products that it has sold. 

Lion is dependent on wholesale forex trading partners to continually provide it with forex market liquidity. If Lion lost access to the prices and levels of liquidity that it currently has, Lion may be unable to provide competitive forex trading services, which would materially adversely affect its CFD trading business, financial conditions and results of operations.

Clients frequently trade currency pairs on Lion’s platform. In order to continually provide its market making services and to limit its own capital exposer, Lion maintains cooperative relationships with established market makers and leading international wholesale forex trading partners, which gives it access to a pool of potential liquidity. Through these relationships, Lion is able to execute its clients’ desired trades at competitive rates while hedging its net positions and limiting its exposure. The trading partners, although under contract with Lion, have no obligation to provide Lion with liquidity and may terminate Lion’s arrangements at any time. In the event that Lion no longer has access to the competitive wholesale forex pricing spreads and/or levels of liquidity that Lion currently has, Lion may be unable to provide competitive forex trading services, which will materially affect its business, financial conditions and results of operations. 

Failure to comply with regulatory capital requirements set by local regulatory authorities could materially and negatively affect Lion’s business operation and overall performance.

Lion’s 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 Lion’s business and financial position. For example, Lion’s Cayman Islands’ operating subsidiary, Lion Brokers Limited, licensed under the Securities Investment Business Law of the Cayman Islands (2020 Revision) (as amended, "SIBL"), is subject to the regulation of CIMA to maintain minimum regulatory capital. Similarly, Lion’s HKSFC-licensed operating subsidiaries, Lion International Securities Group Limited, Lion Futures Limited and Lion Capital Management Limited, are required under the Securities and Future Ordinance (Cap.571) (“SFO”) to maintain certain level of liquid capital. See “Lion’s Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Regulatory Capital Requirements.”

As of December 31, 2019, all of Lion’s operating subsidiaries were in compliance with their respective regulatory capital requirements. However, if any of Lion’s operating subsidiaries fail to remain well-capitalized for regulatory purposes, CIMA and HKSFC may take actions against them and their business operation, and Lion may face penalties, including limitations and prohibitions on its business activities or suspension or revocation of its licenses and trading rights. This could affect client confidence, Lion’s ability to grow, its costs of funds and professional insurance costs, its ability to pay dividends on ordinary shares, its ability to make acquisitions, and in turn, its business, results of operations and financial condition. 

Lion’s total return swap (TRS) trading services may not be successful, and Lion may not find adequate funding at reasonable costs to successfully operate its TRS trading business.

Lion began offering its TRS trading services in early 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 Lion is receiving the total rate of return of that portfolio of underlying assets in its part of a swap agreement, it 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 Lion to lose some of the anticipated benefit from the swap or otherwise reduce its return. 

Moreover, the growth and success of Lion’s TRS trading business depends on the availability of adequate funding to meet clients’ demand for loans on its platform. Lion derives the funding for its TRS trading business from a variety of sources, including commercial banks, other licensed financial institutions and other parties as well as financing generated from its 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 its clients, the funds available might be limited and its ability to provide TRS trading services to its clients to address their demand would be adversely impacted. In addition, as Lion strives to offer its clients services with competitive prices, it may attempt to further reduce its interest expenses from its funding partners. If Lion cannot continue to maintain its relationship with these funding partners and obtain adequate funding at reasonable costs, it may not be able to continue to offer or grow its TRS trading business.

Lion faces risks related to insurance brokerage business.

Lion operates its insurance brokerage business through its HKIA-licensed subsidiary, BC Wealth Management Limited. Lion’s revenues from insurance brokerage business amounted to US$9.6 million, US$5.4 million and US$2.6 million in 2017, 2018 and 2019, respectively, representing 97.0%, 81.8% and 14.3% of its total revenues during the same periods. There are various risks related to its insurance brokerage business. For instance, Lion may fail to introduce diversified insurance products and services to effectively address its clients’ needs. In addition, because the commission revenue Lion earns on the sale of insurance products is based on premium and commission rates set by insurance companies, any decrease in these premiums or commission rates, or increases in the referral fees it pays to its external referral sources, may have an adverse effect on its results of operation. Furthermore, Lion relies on various business partners to operate its insurance brokerage business. If Lion fails to maintain stable relationships with insurance companies and referral service providers, its business, results of operations, financial condition and business prospects could be materially and adversely affected. In addition, Lion’s insurance brokerage business is vulnerable to risks that are beyond its control. For example, Lion experienced significant decrease in revenues generated from insurance brokerage business in 2019 compared to 2017 and 2018, primarily due to the unrest in Hong Kong following the forfeited extradition bill in 2019, which negatively affected Lion’s clients’ confidence and interest in Hong Kong market. See “— Lion’s business is sensitive to general economic and political conditions and other factors beyond its control, and its results of operation are prone to significant and unpredictable fluctuations.”

Lion’s risk management policies and procedures may not be adequate and effective, which may expose it to unidentified or unexpected risks.

Lion’s business activities expose it to various risks, including regulatory environment risk, market condition risk, credit risk, liquidity risk, capital adequacy risk and operational risk. Lion has put in place procedures and controls to identify, measure and manage each of these risks. See “Business of Lion — Risk Management.” Lion is dependent on its risk management policies and procedures and adherence to such policies and procedures by its staff to manage the risks inherent in its business. Nonetheless, its policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating its risk exposure in all market environments or against all types of risks. Some of its 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 its 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 its models indicate. This could cause Lion to incur losses or cause its risk management strategies to be ineffective.

In addition, Lion may fail to update its risk management system as needed or as fast as the industry evolves, which may weaken its 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 it, which may not always be accurate, complete, up-to-date or properly evaluated. These may adversely affect Lion’s results of operations and financial conditions.

Fluctuations in exchange rates could have a material adverse effect on Lion’s results of operations.

The functional currency for Lion Brokers Limited, Lion’s Cayman Islands subsidiary, is U.S. dollars, whereas the functional currencies for Lion’s other operating subsidiaries are Hong Kong dollars. However, the financial statements Lion provides to you and files with the SEC are presented in U.S. dollars. Lion’s 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 Lion’s 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 Lion’s control, including, among other things, changes in Hong Kong’s or China’s political and economic conditions.

Lion’s reputation, or the reputation of its industry as a whole, may be harmed.

The reputation of Lion’s brand is critical to its business and competitiveness. If Lion fails, or is perceived to have failed, to deal with issues that may give rise to reputational risk, its 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 its business. Failure to appropriately address these issues could reduce clients’ confidence in Lion or increase client attrition rate, which may adversely affect Lion’s reputation and business. In addition, any malicious or negative allegation made by the media or other parties about the foregoing or other aspects of Lion, including its management, business, compliance with law, financial condition or prospects, whether with merit or not, could severely compromise its reputation and harm its 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 Lion’s reputation, regardless of whether it has engaged in any inappropriate activities. Moreover, negative publicity about Lion’s 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 Lion’s investors and borrowers, to comply with applicable laws and regulations or to otherwise meet required quality and service standards could harm Lion’s reputation. If any of the foregoing takes place, Lion’s business and results of operations could be materially and adversely affected.

Lion depends on the services of prime brokers and clearing agents to assist in providing it with access to liquidity in CFD trading. The loss of one or more of its prime brokerage relationships could lead to increased transaction costs and capital posting requirements, as well as having a negative impact on its ability to verify its open positions, collateral balances and trade confirmations.

Lion depends on the services of prime brokers to assist in providing it with access to liquidity through its CFD trading partners. Lion currently has established two prime brokerage relationships with major financial institutions, which act as central hubs through which Lion is able to deal with its existing CFD trading partners. In return for paying a transaction-based prime brokerage fee, Lion is able to aggregate its clients and its trading positions, thereby reducing its transaction costs and increasing the efficiency of the capital Lion is required to post as collateral in order to conduct its market making trading activities. Since Lion trades with its CFD trading partners through its prime brokers, they also serve as a third party check on Lion’s open positions, collateral balances and trade confirmations. If Lion was to lose one or more of its prime brokerage relationships, Lion could lose this source of third party verification of its trading activity, which could lead to an increased number of documentation errors. Although Lion has relationships with CFD trading partners who could provide clearing services as a back-up for its prime brokerage services, if Lion was to experience a disruption in prime brokerage services due to a financial, technical or other development adversely affecting any of its current prime brokers, Lion’s business could be materially adversely affected to the extent that it is 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, Lion might not be able to fully recover the assets it has deposited (and have deposited on behalf of its clients) with the prime broker or its unrealized profits since Lion will be among the prime broker’s unsecured creditors.

Lion relies 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 Lion’s business and harm its reputation.

Lion collaborates with a number of external service providers in providing services to its clients for technology, processing and supporting functions, including, other market makers to which Lion passes on certain orders, referring brokers Lion collaborates with for client acquisition, custody banks, securities exchanges, clearing agents and online payment service providers. Furthermore, external content providers provide Lion with financial information, market news, charts, option and stock quotes and other fundamental data that Lion offers to its clients.

These service providers face technical, operational and security risks of their own. Any significant failures by them, including improper use or disclosure of its 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 Lion’s trading activities, cause losses due to erroneous or delayed responses, harm Lion’s reputation or otherwise be disruptive to its 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, Lion 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 its risk management system. Such delays may result in negative balance in its clients’ account and a potential loss to it. Also, Lion has contracted with external payment service providers to facilitate its clients’ payment procedures for trading and transactions through its 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 Lion’s reputation, expose Lion to significant penalties and decrease Lion’s total revenues and profitability.

Furthermore, if Lion’s arrangements with any of these external service providers are terminated, Lion may not be able to find an alternative source to support it on a timely basis or on commercially reasonable terms. This could also have a material adverse effect on its business, financial condition and results of operations.

A failure in Lion’s information technology, or IT, systems could cause interruptions in its services, undermine the responsiveness of its services, disrupt its business, damage its reputation and cause losses.

Lion’s IT systems support all phases of its operations. If its systems fail to perform, Lion could experience disruptions in operations, slower response time or decreased client satisfaction. Lion must process, record and monitor a large number of transactions and its operations are highly dependent on the integrity of its technology systems and its ability to make timely enhancements and additions to its systems. System interruptions, errors or downtime can result from a variety of causes, including unexpected interruptions to the internet infrastructure, technological failures, changes to its systems, changes in client usage patterns, linkages with third-party systems and power failures. Lion’s 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 its key business partners and vendors, and other similar events.

It could take an extended period of time to restore full functionality to Lion’s IT systems or other operating systems in the event of an unforeseen occurrence, which could affect its ability to process and settle client transactions. Moreover, instances of fraud or other misconduct might also negatively impact its reputation and client confidence in Lion, in addition to any direct losses that might result from such instances. Despite Lion’s 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 Lion will not suffer unexpected losses, reputational damage or regulatory actions due to technology or other operational failures or errors, including those of its vendors or other third parties.

While Lion devotes substantial attention and resources to the reliability, capacity and scalability of its systems, extraordinary trading volume could cause its computer systems to operate at unacceptably slow speeds or even fail, affecting its 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. Lion is 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 Lion’s clients and for Lion itself, and subject it to claims from its clients for damages.

Lion currently maintains a disaster recovery and business continuity plan, which are intended to minimize service interruptions and secure data integrity, however, its plan may not work effectively during an emergency. IT system failures may lead to interruption of Lion’s operations, which in turn will prevent its clients from trading and hence significantly reduce client satisfaction and confidence in it, cause loss or reduce potential gain for its clients, or cause regulatory authorities’ investigation and penalization. Any such system failure could impair Lion’s reputation, damage its brand, subject it to claims and materially and adversely affect its business, financial condition, operating results or prospects.

Failure of third-party systems upon which Lion relies could adversely affect its business operation.

Due to the rapid pace of technological changes in online brokerage and CFD trading industry, parts of Lion’s business rely on technologies developed or licensed by third parties, for example, Lion conducts its 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 Lion’s business operation. Moreover, Lion 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 its business and results of operations.

Lion may be subject to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions on it or its external service providers.

Lion’s platform collects, stores and processes certain personal and other sensitive data from its users. The massive data that Lion has processed and stored makes it or external service providers who host its servers a target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While Lion has taken steps to protect the confidential information that Lion has access to, its 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, Lion may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to its 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 its clients could result in additional cost and liability for it, damage its reputation, inhibit the use of its platform and harm its business.

Lion also faces indirect technology, cybersecurity and operational risks relating to the third parties whom Lion work with to facilitate or enable its 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 its 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 its ability to serve its users, and could even result in the misappropriation of funds of its investors and borrowers. If that were to occur, both Lion 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 Lion to risk relating to misappropriation of funds of its clients, which may subject it to liabilities, reduce the attractiveness of its marketplace and cause reputational harm and adversely impact its results of operations and financial condition.

Lion may encounter potential conflicts of interest from time to time, and the failure to identify and address such conflicts of interest could adversely affect its business.

Lion faces the possibility of actual, potential, or perceived conflicts of interest in the ordinary course of its business operations. Conflicts of interest may exist between (i) Lion’s different businesses; (ii) Lion and Lion’s clients; (iii) Lion’s clients; (iv) Lion and Lion’s employees; and (v) Lion’s clients and Lion’s employees. As Lion expands the scope of its business and its client base, it is critical for Lion to be able to timely address potential conflicts of interest, including situations where two or more interests within its businesses naturally exist but are in competition or conflict. Lion has 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 Lion’s reputation and Lion’s clients’ confidence in it could be damaged if Lion fails, 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 Lion’s reputation, which could materially and adversely affect its business in a number of ways, including a reluctance of some potential clients and counterparties to do business with it. Any of the foregoing could materially and adversely affect Lion’s reputation, business, financial condition, and results of operations.

Lion derives a substantial portion of revenue from a small number of key clients.

In 2017, 2018 and 2019, Lion derived a substantial portion of its 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 Lion to predict the future level of demand for its services that will be generated by these key clients. In addition, revenues from Lion’s larger clients have historically fluctuated and may continue to fluctuate based on their trading volume. If these key clients trade less frequently on Lion’s platform or suspend or terminate their relationship with Lion, its business and results of operation will be adversely affected. However, as the trading platform expands and as a result of the Business Combination, Lion anticipates, but without assurance, that this concentration may possibly be decreasing in the future.

Lion faces intense competition, and if Lion does not compete effectively, its results of operations and business prospects may be adversely affected.

Lion primarily competes in CFD trading market and online brokerage market, and both are highly competitive. Lion competes primarily on the basis of its proprietary trading platform, comprehensive client services, full brokerage licenses, innovative products and services, robust infrastructure and advanced technology, as well as brand equity. Lion faces fierce competition from other online brokerage platforms, other investment and trading platforms as well as traditional brokerage and financial institutions. Lion’s competitors may compete with it 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 Lion does 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 Lion’s existing competitors or form a strategic alliance with one or more of its competitors. When new competitors seek to enter Lion’s 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 Lion’s market share or ability to exploit new market opportunities.

Furthermore, since the CFD trading services are relatively new and evolving for PRC residents, Lion’s potential clients may not fully understand how Lion’s platform works and may not be able to fully appreciate the additional client protections and features that Lion has invested in and adopted on its platform as compared to others. Lion’s pricing and terms could deteriorate if Lion fails to act to meet these competitive challenges. Furthermore, to the extent that Lion’s competitors are able to offer more attractive terms to its business partners, such business partners may choose to terminate their relationships with Lion. If Lion is unable to compete with such companies and meet the need for innovation in its industry, the demand for its marketplace could stagnate or substantially decline, Lion could experience reduced revenues and its marketplace could fail to achieve or maintain more widespread market acceptance, any of which could harm its business and results of operations.

Lion may fail to implement new business lines, or introduce new products and services to its clients, or Lion may fail to successfully expand its business.

Lion’s future success is dependent upon on its 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. Lion 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 Lion expects. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of Lion’s 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 its business, results of operations and financial condition.

In addition, Lion’s strategy to expand business operation and enter into new markets may subject it to additional risks. As Lion enters into markets that are new to it, Lion must tailor its 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, Lion 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 its services internationally, Lion may have to comply with the regulatory controls of each country in which Lion conducts or intends to conduct business, the requirements of which may not be clearly defined. Even if Lion expands its businesses into new jurisdictions or areas, the expansion may not yield intended profitable results.

Fraud, misconduct or errors by Lion’s directors, officers, employees, agents and other third-party service providers could harm its 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 Lion takes 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 Lion to suffer significant reputational harm and financial loss or result in regulatory disciplinary actions. The potential harm to its reputation and to its business caused by such fraud or misconduct is impossible to quantify.

Lion is subject to a number of obligations and standards arising from its business. The violation of these obligations and standards by any of its directors, officers, employees, agents, clients, or other third parties could materially and adversely affect it and its investors. For example, Lion is required to properly handle confidential information. If its directors, officers, employees, agents, clients, or other third parties were to improperly use or disclose confidential information, Lion could suffer serious harm to its reputation, financial position, and existing and future business relationships. Although Lion has not identified any material fraud or misconduct by its directors, officers, employees, agents, clients, or other third parties since Lion commenced its 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, Lion’s business and reputation could be materially and adversely affected.

A significant decrease in Lion’s liquidity could negatively affect its business and financial management as well as reduce client confidence in it.

Maintaining adequate liquidity is crucial to its business operations. Lion is subject to liquidity and capital adequacy requirements in Hong Kong and Cayman Islands. Lion meets its 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 Lion’s ability to meet its liquidity needs. A reduction in Lion’s liquidity position could reduce its clients’ confidence, which could result in the loss of client trading accounts, or could cause it 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 Lion’s future business activities or suspension or revocation of our licenses or trading rights.

In addition, Lion’s ability to satisfy its liquidity and capital needs may be affected by a variety of factors, some of which are beyond its 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 Lion’s liquidity needs, it 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 Lion experiences any significant decrease in its liquidity, its business, financial condition and results of operations could be adversely impacted.

Lion may not succeed in promoting and sustaining its brand.

Lion believes that developing and maintaining awareness of its brand effectively is critical to attracting new and retaining existing clients to its platform. This depends largely on the effectiveness of its marketing efforts and the success of the channels Lion uses to promote its marketplace. If any of its current marketing channels become less effective, if Lion is unable to continue to use any of these channels, if the cost of using these channels were to significantly increase or if Lion is not successful in generating new channels, Lion 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 its marketplace.

Lion’s efforts to build its 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 Lion fails to successfully promote and maintain its brand while incurring substantial expenses, its results of operations and financial condition would be adversely affected, which may impair its ability to grow its business.

Lion faces risks related to its know-your-customer, or KYC procedures when its clients provide outdated, inaccurate, false or misleading information.

Lion collects client information during the account opening and registration process and screens accounts against public databases or collaborates with external service providers for purpose of verifying client identity and detecting risks. Although Lion requires its 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, Lion faces risks as the information provided by its clients may be outdated, inaccurate, false or misleading. Lion 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, Lion does not allow U.S. citizens or residents to open an account with it and requires its 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 Lion that he does not also possess a U.S. passport or permanent resident card, Lion 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 Lion in a timely manner, Lion’s customer database might not be entirely accurate at all time. Despite Lion’s efforts to exclude persons who reside in jurisdictions where Lion has no license or permit such as the United States, its provision of products and services to such clients could be in violation of the applicable laws and regulations in those jurisdictions, of which Lion may have no awareness until Lion is warned by the relevant supervising authorities. Despite its safeguards, Lion 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 consummation of the Business Combination, as Lion becomes increasingly reknown in the United States and worldwide, there is no assurance that Lion will be able to successfully identify and exclude all persons who resides in jurisdictions where Lion has 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, Lion 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 its products to U.S. citizens and residents. Lion currently does not intend to apply for such licenses and permits in the United States, and if Lion determines to do so, there is no guarantee that Lion will successfully obtain such licenses in a timely fashion, or at all. Lion 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 its business, financial condition and results of operations.

In addition, although Lion has 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, Lion mainly relies on its continuing KYC procedures to ensure its compliance with relevant laws and regulations related to anti-corruption, economic sanctions, anti-money laundering, export controls and securities fraud. Although Lion has trainings for its employees in all of its departments, its KYC system and procedures cannot be foolproof. Any potential flaw in its KYC system or any misconduct in the KYC procedures by any of its employees may lead to its failure of compliance with such relevant laws and regulations, which will further subject Lion to certain legal or regulatory sanctions, fines or penalties, financial loss, or damage to reputation.

Lion’s clients may engage in fraudulent or illegal activities on its platform.

Lion has implemented stringent internal control policies, insider trading, anti-money laundering and other anti-fraud rules and mechanisms on its platform, for example, Lion cooperated with third party search system service provider to check if its 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, Lion remains subject to the risk of fraudulent or illegal activities both on its platform and associated with its clients, funding and other business partners, and third parties handling client information. Lion’s resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent fraudulent or illegal activities.

Any misbehavior of or violation by Lion’s clients of applicable laws and regulations could lead to regulatory inquiries and investigations that involve it, which may affect its business operation and prospects. Lion 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 its management’s attention and cause it to incur additional regulatory and litigation expenses and costs. Although Lion’s 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, Lion cannot verify whether every transaction conducted by its clients is in compliance with such laws and regulations because its clients may circumvent its due diligence measures to commit insider trading and/or money laundering. Significant increases in fraudulent or illegal activities could negatively impact its brand and reputation, reduce the trading volume on its platform and therefore harm its operating and financial results.

In addition, Lion could also suffer serious harm to its reputation, financial condition, client relationships and even be subject to regulatory sanctions and significant legal liability, if any of its employees engage in illegal or suspicious activities or other misconduct. See “ — Fraud, misconduct or errors by Lion’s directors, officers, employees, agents and other third-party service providers could harm its business and reputation.” Although Lion has not experienced any material business or reputational harm as a result of fraudulent or illegal activities in the past, Lion cannot rule out the possibility that any of the foregoing may occur, causing harm to its business or reputation in the future. If any of the foregoing were to occur, its results of operations and financial conditions could be materially and adversely affected.

Lion’s business depends on the continued efforts of its senior management, particularly its founder and controlling shareholder, Mr. Jian Wang. If one or more of its key executives were unable or unwilling to continue in their present positions, its business may be severely disrupted.

Lion’s business operations depend on the continued services of its senior management. While Lion provides a variety of attractive incentives to its management, Lion cannot assure you that Lion can continue to retain their services. Although there has been no departures of its senior management members in the past, Lion cannot assure you that its existing senior management members will not terminate their employment with it in the future. In addition, Lion does not have any key man insurance for its executive officers or key employees. If one or more of its key executives were unable or unwilling to continue in their present positions, Lion may not be able to replace them easily or at all, its future growth may be constrained, its business may be severely disrupted and its financial condition and results of operations may be materially and adversely affected, and Lion may incur additional expenses to recruit, train and retain qualified personnel. In addition, there is no assurance that any member of Lion’s management team will not join one of Lion’s competitors or form a competing business. If any dispute arises between it and its current or former officers, Lion may have to incur substantial costs and expenses in order to enforce such agreements in China or Lion 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 Lion does not have control.

As of the date of this proxy statement/prospectus, majority of Lion’s clients access its services through PC, however, Lion expects to see a growing number of its clients access its services through its mobile apps in the future. As new mobile devices and platforms are released, it is difficult to predict the problems Lion may encounter in developing applications for these new devices and platforms, and Lion may need to devote significant resources to the development, support and maintenance of such applications. In April 2020, Lion launched its newly developed all-in-one Lion Brokers Pro app. There are substantial uncertainties associated with the newly launched app, including compatibility with mobile operating systems, and Lion cannot assure you it could operate successfully or as Lion expected.

In addition, Lion’s future growth and its results of operations could suffer if Lion experiences difficulties in the future in integrating its services into mobile devices or if problems arise with its relationships with providers of mobile operating systems or mobile app stores, or if Lion faces increased costs to distribute or have users utilize its services on mobile devices. Lion is further dependent on the interoperability of providing its services on popular mobile operating systems that Lion does not control, such as iOS and Android, and any changes in such systems that degrade the accessibility of its services or give preferential treatment to competing products could adversely affect the usability of its services on mobile devices. In the event that it is more difficult for its users to access and utilize its services on their mobile devices, or if its users choose not to access or utilize its services on their mobile devices or to use mobile operating systems that do not offer access to its services, its user growth could be harmed and its business, financial condition and operating results may be adversely affected.

Lion may not be able to prevent others from unauthorized use of its intellectual property, which could harm its business and competitive position.

Lion regards its trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to its success, and Lion relies on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with its employees and others to protect its proprietary rights. See also “Business of Lion— Intellectual Property.” Despite these measures, any of Lion’s intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide Lion 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 Lion for any such breach. Accordingly, Lion may not be able to effectively protect its intellectual property rights or to enforce its contractual rights. Preventing any unauthorized use of its intellectual property is difficult and costly and the steps Lion takes may be inadequate to prevent the misappropriation of its intellectual property. In the event that Lion resorts to litigation to enforce its intellectual property rights, such litigation could result in substantial costs and a diversion of its managerial and financial resources. Lion can provide no assurance that it will prevail in such litigation. In addition, its trade secrets may be leaked or otherwise become available to, or be independently discovered by, its competitors. To the extent that its employees or consultants use intellectual property owned by others in their work for Lion, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing its intellectual property rights could have a material adverse effect on its business, financial condition and results of operations.

Lion may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt its business and operations.

Lion cannot be certain that its operations or any aspects of its 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. Lion 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 its products, services or other aspects of its business without its awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against Lion in Hong Kong, PRC, Singapore, Cayman Islands, the United States or other jurisdictions. If any third-party infringement claims are brought against it, Lion may be forced to divert management’s time and other resources from its business and operations to defend against these claims, regardless of their merits. If Lion were found to have violated the intellectual property rights of others, Lion may be subject to liability for its infringement activities or may be prohibited from using such intellectual property, and Lion may incur licensing fees or be forced to develop alternatives of its own. As a result, its business and results of operations may be materially and adversely affected. As the date of this proxy statement/prospectus, the application for one of its trademarks is still pending. If Lion is unable to complete these registrations, Lion may not be able to prohibit unauthorized use or prevent other infringements of these trademarks.

Lion and its directors and officers may from time to time be subject to claims, controversies, lawsuits and legal proceedings.

Lion and its 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 Lion is uncertain whether the foregoing claim would develop into a lawsuit. Lawsuits and litigations may cause it to incur defense costs, utilize a significant portion of its resources and divert management’s attention from its day-to-day operations, any of which could harm its business. Any settlements or judgments against it could have a material adverse impact on its financial condition, results of operations and cash flows. In addition, negative publicity regarding claims or judgments made against Lion may damage its reputation and may result in a material adverse impact on it. 

If Lion fails to implement and maintain an effective system of internal controls over financial reporting, it may be unable to accurately report its results of operations, meet reporting obligations or prevent fraud. As a result, Pubco’s security holders could lose confidence in its financial and other public reporting, which would harm its business and trading price of Pubco securities.

Prior to the Business Combination, Lion is a private company with limited accounting personnel and other resources with which to address its internal controls and procedures. Lion’s independent registered public accounting firm has not conducted an audit of its internal control over financial reporting. In the course of auditing consolidated financial statements, Lion’s independent registered public accounting firm and Lion had identified two material weaknesses in its internal controls. 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.

The two material weaknesses that have been identified relate to (i) lack of sufficient internal capabilities and resources with relevant experience, skills and knowledge in accounting and financial reporting under the requirements of U.S. GAAP and rules set forth by the SEC to prepare financial statements and related footnote disclosures in accordance with U.S. GAAP, and (ii) lack of proper and adequate closing procedures to record all the transactions Lion entered into and ensure the proper cut-off at period end. For details, see “Lion’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting.” Although Lion has begun to implement measures to address the material weaknesses, the implementation of these measures may not fully address the material weaknesses and deficiencies in its internal control over financial reporting, and it cannot conclude that it has been fully remedied. In the future Lion may determine that it has additional material weaknesses, or its independent registered public accounting firm may disagree with its management assessment of the effectiveness of its internal controls. Lion’s failure to correct the material weaknesses or failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in its financial statements and could also impair its ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis, which could cause investors to lose confidence in its reported financial information, which may result in volatility in and a decline in the market price of Pubco securities.

Furthermore, it is possible that, had Lion’s independent registered public accounting firm conducted an audit of its internal control over financial reporting, such accountant might have identified additional material weaknesses and deficiencies. Upon completion of this Business Combination, Lion will become a wholly owned subsidiary of Pubco. Pubco will be subject to the Sarbanes-Oxley Act of 2002, and the Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that the Pubco include a report from management on the effectiveness of its internal control over financial reporting in its annual report on Form 20-F beginning with annual report for the fiscal year ending December 31, 2020. In addition, once Lion ceases to be an “emerging growth company” as such term is defined in the JOBS Act, its independent registered public accounting firm must attest to and report on the effectiveness of its internal control over financial reporting. Lion’s management may conclude that its internal control over financial reporting is not effective. Moreover, even if Lion’s management concludes that its internal control over financial reporting is effective, Lion’s independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with Lion’s internal controls or the level at which Lion’s controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from Lion. In addition, the reporting obligations may place a significant strain on Lion’s management, operational and financial resources and systems for the foreseeable future. Lion may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing Lion’s internal control procedures, in order to satisfy the requirements of Section 404, Lion may identify other weaknesses and deficiencies in its internal control over financial reporting. In addition, if Lion fails to maintain the adequacy of its internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, it may not be able to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404. If Lion fails to achieve and maintain an effective internal control environment, it could suffer material misstatements in its financial statements and fail to meet its reporting obligations, which would likely cause you to lose confidence in its reported financial information. This could in turn limit its access to capital markets and harm its results of operations. Additionally, ineffective internal control over financial reporting could expose it to increased risk of fraud or misuse of corporate assets and subject it to potential delisting from the stock exchange on which it lists, regulatory investigations and civil or criminal sanctions. Lion may also be required to restate its financial statements from prior periods.

Lion may not be able to obtain additional capital on favorable terms or at all.

Lion anticipates that its current cash, cash provided by operating activities and funds available through its current and anticipated bank loans and credit facilities will be sufficient to meet its current and anticipated needs for general corporate purposes. However, Lion needs to make continued investments in 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 its operating flexibility with respect to certain business matters. If adequate capital is not available to Lion as required, its ability to fund its operations, take advantage of unanticipated opportunities, develop or enhance its infrastructure or respond to competitive pressures could be significantly limited, which would adversely affect its business, financial condition and results of operations.

Lion may be subject to litigation, arbitration or other legal proceeding risk.

Lion may be subject to arbitration claims and lawsuits in the ordinary course of its business. As of the date of this proxy statement/prospectus, Lion is not a party to, and Lion is not aware of any threat of, any legal proceeding that, in the opinion of its management, is likely to have a material adverse effect on its business, financial condition or operations. Actions brought against Lion may result in settlements, awards, injunctions, fines, penalties and other results adverse to it. 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 Lion’s operating results or cash flows for a particular period, depending on Lion’s results for that period, or could cause it significant reputational harm, which could harm its 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 Lion executes, together with rapid price movements in its currency pairs, can result in potentially large damage claims in any litigation resulting from such trades. Dissatisfied clients may make claims against Lion regarding the quality of trade execution, improperly settled trades, mismanagement or even fraud, and these claims may increase as Lion’s business expands.

In addition, even if Lion prevails in any litigation or enforcement proceedings against it, Lion could incur significant legal expenses defending against the claims, even those without merit. Moreover, because even claims without merit can damage its reputation or raise concerns among its clients, Lion may feel compelled to settle claims at significant cost. The initiation of any claim, proceeding or investigation against it, or an adverse resolution of any such matter could have a material adverse effect on its reputation, business, financial condition and results of operations and cash flows.

Lion may pursue acquisitions or joint ventures that could present unforeseen integration obstacles, incur unpredicted costs or may not enhance its business as Lion expected.

Lion may in the future pursue acquisitions and joint ventures as part of its 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, Lion may not have sufficient management, financial and other resources to integrate companies it acquires or to successfully operate joint ventures and Lion may be unable to profitably operate its expanded company structure. Additionally, any new business that Lion may acquire or joint ventures Lion may form, once integrated with its existing operations, may not produce expected or intended results.

A sustained outbreak of the COVID-19 pandemic could have a material adverse impact on Lion’s business, operating results and financial condition.

Since late December 2019, the outbreak of a novel strain of coronavirus, later named COVID-19, spread rapidly throughout China and later to the rest of the world. On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a “Public Health Emergency of International Concern (PHEIC),” and later on March 11, 2020 a global pandemic. The COVID-19 outbreak has led governments across the globe to impose a series of measures intended to contain its spread, including border closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings.

This outbreak of COVID-19 has caused companies like Lion and Lion’s business partners to implement temporary adjustments to work schedules and travel plans, mandating employees to work from home and collaborate remotely. As a result, Lion may have experienced lower efficiency and productivity, internally and externally, which may adversely affect its service quality. Moreover, Lion’s business depends on its employees and the continued services of these individuals. If any of Lion’s employees has contracted or is suspected of having contracted COVID-19, these employees will be required to be quarantined and they could pass it to other of Lion’s employees, potentially resulting in severe disruption to Lion’s business.

Furthermore, Lion’s results of operations have been severely affected by the COVID-19 outbreak. While Lion’s CFD trading business was not materially impacted by COVID-19, its futures brokerage and insurance brokerage businesses have been, largely due to travel restrictions preventing PRC residents from travelling to Hong Kong. More broadly, the COVID-19 outbreak threatens global economies and has caused significant market volatility and declines in general economic activities. This may have severely dampened the confidence in global markets of investors, including Lion’s clients, resulting in decreases in overall trading activities and restraint in their investment decisions.

Any future impact on Lion’s results of operations will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the spread or treat its impact, almost all of which are beyond Lion’s control. Given the general slowdown in economic conditions globally, volatility in the capital markets as well as the general negative impact of the COVID-19 outbreak on the insurance brokerage, securities and futures brokerage and overall financial service industry, Lion cannot assure you that it can launch new products and services in a timely manner or that it can maintain the growth rate it has experienced or projected. Because of the uncertainty surrounding it, the financial impact related to the COVID-19 outbreak and the response to it cannot be reasonably estimated at this time, but Lion’s financial condition and operating results for 2020 may be adversely affected.

Lion faces risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt its operations.

Lion is 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 its ability to provide products and services on its marketplace. Moreover, besides COVID-19, Lion’s business could also be adversely affected by Ebola virus disease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, SARS or other epidemics.

Lion’s headquarters are located in Hong Kong, where most of its directors and management and a majority of its employees currently reside. In addition, some of its system hardware and back-up systems are hosted in leased facilities located in Hong Kong. Consequently, Lion is highly susceptible to factors adversely affecting Hong Kong. If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Hong Kong, its operation may experience material disruptions, such as temporary closure of its offices and suspension of services, which may materially and adversely affect its business, financial condition and results of operations. 

Lion’s business is sensitive to general economic and political conditions and other factors beyond its control, and its results of operation are prone to significant and unpredictable fluctuations.

Lion’s revenues depend substantially on its 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 Lion’s 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 Lion operates. Any of these or other factors may cause trading activity levels in its industry to fluctuate and adversely affect its business and results of operations.

For example, since June 2019, there has been large and frequent riots in Hong Kong following the forfeited extradition bill, many of which have been violent. The sustained riot has already caused a material adverse effect on Hong Kong’s economy and social order, which in turn negatively impacted on Lion’s insurance agency business as fewer Chinese clients had come to Hong Kong for insurance purchase. There can be no assurance when these tensions will end or that situation will not escalate 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.

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. The volatility of global stock market may adversely affect Lion clients’ confidence and willingness in trading and/or investing in the financial market. As a result, Lion’s operating results may be subject to significant and unpredictable fluctuations.

The current trade war between the U.S. and China may dampen growth in China and other markets where the majority of its 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 October 11, 2019, the U.S. government announced that the two countries had reached a “Phase 1” agreement, which was signed on January 16, 2020. Nevertheless, it remains unclear how much economic relief from the trade war it will offer.

Although Lion is 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 Lion operates, as well as the financial condition of its clients. With the potential decrease in the spending and investment power of its target clients, Lion cannot guarantee that there will be no negative impact on its 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 its business, financial condition and results of operations, and Lion cannot provide any assurance as to whether such actions will occur or the form that they may take.

Risks Related to Doing Business in Jurisdictions in Which Lion Operates

A downturn in the Hong Kong, China or global economy, and economic and political policies of China could materially and adversely affect Lion’s business and financial condition.

A substantial part of Lion’s operations are located in Hong Kong. Accordingly, its 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 Lion.

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 Lion’s business, results of operations and financial condition. Additionally, continued turbulence in the international markets may adversely affect Lion’s 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. If the autonomy currently enjoyed were to be 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 Lion’s contractual rights. This could, in turn, materially and adversely affect Lion’s 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, Lion 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 preemption of local regulations by national laws. These uncertainties could limit the legal protections available to Lion, including its ability to enforce its agreements with its 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 the Lion’s HKSFC-licensed subsidiaries, which are Lion International Securities Group Limited, Lion Futures Limited and Lion Asset Management Limited, 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 Lion’s shareholders the opportunity to receive a premium for their shares as part of a future sale and may reduce the price of Lion’s shares upon the consummation of a future proposed business combination.