F-4/A 1 lionf4a1.htm

As filed with the Securities and Exchange Commission on April 24, 2020

Registration No. 333- 237336

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________

Amendment No. 1

to  

Form F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

_______________

Lion Group Holding Ltd.

(Exact name of registrant as specified in its charter)

 

Cayman Islands   6211   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary standard industrial
classification code number)
  (I.R.S. Employer
Identification Number)

 

c/o Proficient Alpha Acquisition Corp.
40 Wall St., 29th Floor

New York, New York 10005
(917) 289-0932

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

c/o Cogency Global Inc.
122 East 42nd Street, 18th Floor
New York, NY 10168
(212) 947-7200

(Name, address, including zip code, and telephone number, including area code, of agent for service)

_______________

Copies to:

David Zhang, Esq.

Benjamin W. James, Esq.
Kirkland & Ellis International LLP
c/o 26/F, Gloucester Tower, The
Landmark

15 Queen’s Road Central

Hong Kong

 

Christian O. Nagler, Esq.

Kirkland & Ellis LLP

c/o 601 Lexington Avenue

New York, NY 10022

 

Nicholas Plowman, Esq.

Ogier

11/F Central Tower

28 Queen's Road Central

Central, Hong Kong

 

Barry I. Grossman, Esq.

Stuart Neuhauser, Esq.

Benjamin S. Reichel, Esq.

Ellenoff Grossman & Schole  LLP

1345 Avenue of the Americas
New York, New York 10105

(212) 370-1300

 

 

 

 

 

_______________

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the Business Combination contemplated by the Business Combination Agreement described in the included proxy statement/prospectus have been satisfied or waived.

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

 

 

CALCULATION OF REGISTRATION FEE

Title of each class of security to be registered   Amount to be
registered(1)
  Proposed
maximum
offering
price per
security(2)
  Proposed
maximum
aggregate
offering
price(2)
  Amount of
registration
fee
Class A Ordinary Shares(3)(7)(9)   11,892,000   $ 9.95   $ 118,325,400   $ 15,358.64  
Warrants(4)(7)   17,795,000   $ 0.08   $ 1,423,600   $ 184.79  
Class A Ordinary Shares issuable on exercise of Warrants(5)(7)(9)   17,795,000   $  (8)    $ (8)    $ 0  
Class A Ordinary Shares issuable on exchange of Rights(6)(7)(9)   1,150,000   $ 9.95   $ 11,442,500   $ 1,485.24  
Total   48,632,000          $ 131,191,500   $ 17,028.67 (10)

  ____________  

 

(1) All securities being registered will be issued by Lion Group Holding Ltd., a Cayman Islands exempted company (“Pubco”). In connection with the business combination described in the enclosed proxy statement/prospectus (“Business Combination”), (a) Lion MergerCo 1, Inc. (“Merger Sub”), a newly incorporated Delaware corporation and a wholly-owned subsidiary of Pubco, will be merged with Proficient Alpha Acquisition Corp., a publicly traded Nevada corporation (“Proficient”), and all of the outstanding common stock, warrants and rights of Proficient will be converted into securities of Pubco, and (b) the existing shareholders of Lion Financial Group Limited, a BVI business company incorporated under the laws of the British Virgin Islands (“Lion”), will exchange approximately 25% of the outstanding ordinary shares of Lion for Class A ordinary shares of Pubco (the “Class A Ordinary Shares”). The remaining outstanding ordinary shares of Lion will be exchanged into Class B ordinary shares of Pubco.
(2) Based on the market prices on March 18, 2020 of the common stock, warrants and rights of Proficient (the company to which the Registrant will succeed after the transactions described in this registration statement and the enclosed proxy statement/prospectus).
(3) Consists of Class A Ordinary Shares issuable in exchange for outstanding shares of common stock, par value $0.001 per share, of Proficient, including (i) 11,500,000 shares of common stock, which includes those shares included in outstanding Units of Proficient (“Units”), each Unit consisting of one share of common stock, one warrant to purchase one share of common stock and one right entitling the holder to receive one-tenth (1/10) of one share of common stock, (ii) 92,000 shares of common stock issued to the underwriters of Proficient’s initial public offering, and (iii) 300,000 shares of common stock issuable to Proficient’s officer and directors upon closing of the Business Combination. Upon the Business Combination described in this registration statement and the enclosed proxy statement/prospectus, all Units will be separated into their component securities, and all rights will be exchanged for Class A Ordinary Shares of Pubco.
(4) Consists of warrants issuable in exchange for outstanding warrants of Proficient, which includes (i) 11,500,000 warrants, which includes those warrants included in outstanding Units, (ii) 5,375,000 warrants purchased by the founders of Proficient (“Founders”) in a private placement simultaneously closed with Proficient’s initial public offering and (iii) 920,000 warrants issued to the underwriters of Proficient’s initial public offering.
(5) Consists of Class A Ordinary Shares issuable upon exercise of warrants. Each warrant will entitle the warrant holder to purchase one Class A Ordinary Share at a price of $11.50 per share (subject to adjustment).
(6) Consists of Class A Ordinary Shares issuable pursuant to the mandatory exchange of rights upon the closing of the Business Combination described in this registration statement and the enclosed proxy statement/prospectus, which includes those rights included in the outstanding Units of Proficient. The Registrant will not receive any consideration in connection with such exchange.
(7) Pursuant to Rule 416(a), there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.
(8) No separate registration fee required pursuant to Rule 457(g) under the Securities Act of 1933, as amended.
(9) All of the registrant’s Class A Ordinary Shares being offered hereby will be issued in the form of American depositary shares of the registrant (“Pubco ADSs”) and each will be evidenced by American depositary receipts. American depositary shares issuable upon deposit of the Class A Ordinary Shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No.333-          ). Each Pubco ADS represents one Class A Ordinary Share.
(10) Previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

PRELIMINARY PROXY STATEMENT
SUBJECT TO COMPLETION, DATED [ ], 2020

PROFICIENT ALPHA ACQUISITION CORP.
40 Wall St., 29th floor

New York, NY 10005

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ___________, 2020

 

TO THE STOCKHOLDERS OF PROFICIENT ALPHA ACQUISITION CORP.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Proficient Alpha Acquisition Corp., a Nevada corporation (“Proficient”), will be held at 10:00 a.m. Eastern Time, on ___________, 2020, at the offices of Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, 11th Floor, New York, NY 10105. You are cordially invited to attend the meeting, which will be held for the following purposes:

(1) to consider and vote upon a proposal to approve the Business Combination Agreement, dated as of March 10, 2020 (the “Business Combination Agreement”), by and among Proficient, Lion Group Holding Ltd., a Cayman Islands exempted company (“Pubco”), Lion MergerCo 1, Inc., a Delaware corporation and a wholly-owned subsidiary of Pubco (“Merger Sub”), Lion Financial Group Limited, a corporation organized under the laws of the British Virgin Islands (“Lion”), the shareholders of Lion (the “Sellers”) and the other parties thereto, which, among other things, provides for (a) the merger of Merger Sub with and into Proficient (the “Merger”), with Proficient surviving the Merger and the stockholders of Proficient becoming shareholders of Pubco, which will become a new public company, (b) immediately prior to the effectiveness of such Merger, the exchange of 100% of the outstanding ordinary shares of Lion by the Sellers for capital shares of Pubco, (c) adoption of Pubco’s amended and restated memorandum and articles of association, (d) adoption of Pubco’s equity incentive plan, which will provide that the total awards under such equity incentive plan will be a number of ordinary shares of Pubco equal to ten percent (10%) of the aggregate number of ordinary shares of Pubco outstanding immediately after the Merger, and (e) appointment of the members of the Pubco board of directors after the closing of the Merger, and to approve the Business Combination contemplated by such agreement — we refer to this proposal as the “Business Combination Proposal” and a copy of the Business Combination Agreement, the Pubco’s amended and restated memorandum and articles of association and the Pubco’s equity incentive plan are attached to the accompanying proxy statement/prospectus as Annexes A, B and C, respectively;
   
 (2)to approve, for purposes of complying with applicable Nasdaq Stock Market LLC listing rules, the issuance of more than 20% of Proficient’s issued and outstanding shares of common stock in financing transactions in connection with the proposed Business Combination — we refer to this as the “Share Issuance Proposal”; and
   
 (3)to consider and vote upon a proposal to adjourn the meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the meeting, Proficient is not authorized to consummate the Business Combination — we refer to this proposal as the “Adjournment Proposal.”

These items of business are described in the attached proxy statement/prospectus, which we encourage you to read in its entirety before voting. Only holders of record of Proficient common stock at the close of business on ___________, 2020 are entitled to notice of the meeting and to vote and have their votes counted at the meeting and any adjournments of the meeting.

After careful consideration, Proficient’s board of directors has determined that the Business Combination Proposal, the Share Issuance Proposal and the Adjournment Proposal are fair to and in the best interests of Proficient and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” the Business Combination Proposal, “FOR” the Share Issuance Proposal and “FOR” the Adjournment Proposal, if presented.

Under the Business Combination Agreement, the approval of the Business Combination Proposal is a condition to the consummation of the Business Combination. If the Business Combination Proposal is not approved by Proficient’s stockholders, the Business Combination will not be consummated. The approval of the Business Combination Proposal is a condition to the submission of the other proposals included herein for stockholder approval.

 

All Proficient stockholders are cordially invited to attend the meeting in person. To ensure your representation at the meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a stockholder of record of Proficient common stock, you may also cast your vote in person at the meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the meeting and vote in person, obtain a proxy from your broker or bank. If you do not vote or do not instruct your broker or bank how to vote, it will have no effect on the Business Combination Proposal or the Share Issuance Proposal.

A complete list of Proficient stockholders of record entitled to vote at the special meeting will be available for ten (10) days before the meeting at the principal executive offices of Proficient for inspection by stockholders during ordinary business hours for any purpose germane to the meeting.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

Thank you for your participation. We look forward to your continued support.

By Order of the Board of Directors

 

/s/ Kin Sze    

Kin Sze

Chief Executive Officer and Director

   
     

 

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS. TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT PROFICIENT CONVERT YOUR SHARES INTO CASH NO LATER THAN 5:00 P.M. EASTERN TIME ON ___________, 2020 (TWO (2) BUSINESS DAYS PRIOR TO THE SPECIAL MEETING OF STOCKHOLDERS) BY (A) DELIVERING A CONVERSION NOTICE TO PROFICIENT’S TRANSFER AGENT AND (B) TENDERING YOUR STOCK TO PROFICIENT’S TRANSFER AGENT. YOU MAY TENDER YOUR STOCK BY EITHER DELIVERING YOUR STOCK CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. WHETHER OR NOT, OR HOW, YOU VOTE ON THE BUSINESS COMBINATION PROPOSAL, WILL NOT AFFECT YOUR ELIGIBILITY FOR EXERCISING REDEMPTION RIGHTS. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE CONVERTED INTO CASH AT THIS TIME IN CONNECTION WITH THE BUSINESS COMBINATION. IF YOU HOLD THE SHARES IN “STREET NAME”, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “SPECIAL MEETING OF PROFICIENT STOCKHOLDERS — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.  

 

 The information in this proxy statement/prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commissions, of which this proxy statement/prospectus is a part, is declared effective. This proxy statement/prospectus does not constitute an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED ___________, 2020
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS OF

PROFICIENT ALPHA ACQUISITION CORP.

PROSPECTUS FOR UP TO 13,042,000 CLASS A ORDINARY SHARES, 17,795,000 WARRANTS AND 17,795,000 CLASS A ORDINARY SHARES ISSUABLE UPON EXERCISE OF WARRANTS OF LION GROUP HOLDING LTD.

The board of directors of Proficient Alpha Acquisition Corp., a Nevada corporation (“Proficient”) has unanimously approved the Business Combination Agreement, dated as of March 10, 2020 (the “Business Combination Agreement”), by and among Proficient, Lion Group Holding Ltd., a Cayman Islands exempted company (“Pubco”), Lion MergerCo 1, Inc., a Delaware corporation and a wholly-owned subsidiary of Pubco (“Merger Sub”), Lion Financial Group Limited, a corporation organized under the laws of the British Virgin Islands (“Lion”), the shareholders of Lion (the “Sellers”) and the other parties thereto, which, among other things, provides for (i) the merger of Merger Sub with and into Proficient (the “Merger”), with Proficient surviving the Merger and the security holders of Proficient becoming security holders of Pubco, (ii) immediately prior to the effectiveness of the Merger, the exchange of 100% of the outstanding ordinary shares of Lion by the Sellers for capital shares of Pubco (the “Share Exchange”, and together with the Merger and the other transactions contemplated by the Business Combination Agreement, the “Business Combination”) and (iii) the adoption of Pubco’s amended and restated memorandum and articles of association. As a result of and upon consummation of the Business Combination, each of Proficient and Lion will become a wholly-owned subsidiary of Pubco, as described in this proxy statement/prospectus and Pubco will become a new public company owned by the prior stockholders of Proficient and the prior shareholders of Lion.

Pursuant to the Business Combination Agreement, upon the consummation of the Business Combination (i) each outstanding share of common stock of Proficient will be converted into one Class A ordinary share (the “Class A Ordinary Share”) of Pubco, (ii) each outstanding warrant of Proficient (“Warrants”) will be converted into one warrant of Pubco that entitles the holder thereof to purchase one Class A Ordinary Share in lieu of one share of common stock of Proficient and otherwise upon substantially the same terms and conditions, and (iii) each outstanding right of Proficient (“Rights”) will be exchanged for one-tenth of one Class A Ordinary Share. Class A Ordinary Shares to be issued and issuable upon exercise of warrants and mandatory exchange of rights under this proxy statement/prospectus will be represented by Pubco ADSs, with each Pubco ADS representing one Class A Ordinary Share. Accordingly, this proxy statement/prospectus covers the issuance by Pubco of 13,042,000 Class A Ordinary Shares, 17,795,000 warrants and 17,795,000 Class A Ordinary Shares issuable upon exercise of warrants, represented by an aggregate of 30,837,000 Pubco ADSs.

As a result of the Business Combination, Pubco will become a new public company and each of Proficient and Lion will become a wholly-owned subsidiary of Pubco. The former security holders of Proficient and Lion will become security holders of Pubco. Certain Lion shareholders currently owning approximately 75% of the issued and outstanding ordinary shares of Lion will receive approximately 9,290,558 Class B ordinary shares of Pubco (“Class B Ordinary Shares”) entitling them to 10 votes per share, and the remaining issued and outstanding ordinary shares of Lion will be exchanged into approximately 2,992,041 Class A Ordinary Shares (“Class A Seller Shares”). The issuance of Class A Ordinary Shares and Class B Ordinary Shares to the Sellers will be made pursuant to the exemption from registration codified as Regulations S under the Securities Act. As a result of the Business Combination, assuming that no stockholders of Proficient elect to convert their shares of common stock underlying the units (“Units”) sold in Proficient’s initial public offering (“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; provided that 45% of the Pubco capital shares being issued to the Sellers will be placed into escrow (the “Escrow Shares”) (such shares shall be in the form of Class B Ordinary Shares), with 15% of such shares to be used to satisfy post-closing purchase price adjustments and indemnification claims and 30% of such shares subject to vesting upon Lion satisfying certain net income milestones. If 10,457,789 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 96% of the voting power of Pubco following the closing.

Proposals to approve the Business Combination Agreement and the other matters discussed in this proxy statement/prospectus will be presented at the special meeting of stockholders of Proficient scheduled to be held on __________, 2020.

Proficient’s Units, common stock, Warrants and Rights are currently listed on The Nasdaq Capital Market under the symbols “PAACU,” “PAAC,” “PAACW” and “PAACR,” respectively. Pubco will apply for listing, to be effective at the time of the Business Combination, of its Pubco ADSs and warrants on Nasdaq under the symbols, “LGHL” and “LGHLW,” respectively. Pubco will not have units or rights traded following consummation of the Business Combination.

 

Each of Proficient and Pubco is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to comply with certain reduced public company reporting requirements.

This proxy statement/prospectus provides you with detailed information about the Business Combination and other matters to be considered at the special meeting of stockholders of Proficient. We encourage you to carefully read this entire document and the documents incorporated by reference. You should also carefully consider the risk factors described in “Risk Factors.”

We are a “controlled company” under the Nasdaq Stock Market LLC listing rules, and may be exempt from certain corporate governance requirements, though we do not intend to rely on any such exemptions. See “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.” 

These securities have not been approved or disapproved by the Securities and Exchange Commission (the “SEC”) or any state securities commission nor has the SEC or any state securities commission passed upon the accuracy or adequacy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated __________, 2020, and is first being mailed to Proficient security holders on or about __________, 2020.

 

 

 

TABLE OF CONTENTS

    Page
FREQUENTLY USED TERMS   1
SUMMARY OF THE MATERIAL TERMS OF THE BUSINESS COMBINATION   4
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS   6
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS   15
SELECTED HISTORICAL FINANCIAL INFORMATION   22
SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS   28
RISK FACTORS   30
FORWARD-LOOKING STATEMENTS   59
SPECIAL MEETING OF STOCKHOLDERS OF PROFICIENT   61
THE BUSINESS COMBINATION PROPOSAL   65
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS   91
THE SHARE ISSUANCE PROPOSAL   100
THE ADJOURNMENT PROPOSAL   101
USE OF PROCEEDS   102
INFORMATION RELATED TO PUBCO   102
OTHER INFORMATION RELATED TO PROFICIENT   103
BUSINESS OF LION   114
LION’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   138
MANAGEMENT OF PUBCO FOLLOWING THE BUSINESS COMBINATION   151
EXECUTIVE COMPENSATION   155
BENEFICIAL OWNERSHIP OF SECURITIES   157
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS   158
DESCRIPTION OF PUBCO SECURITIES   162
DESCRIPTION OF PUBCO AMERICAN DEPOSITARY SHARES   164
APPRAISAL RIGHTS   172
STOCKHOLDER PROPOSALS   172
OTHER STOCKHOLDER COMMUNICATIONS   172
EXPERTS   172
LEGAL MATTERS   172
DELIVERY OF DOCUMENTS TO STOCKHOLDERS   172
WHERE YOU CAN FIND MORE INFORMATION   173
INDEX TO FINANCIAL STATEMENTS   F-1
ANNEXES    
Annex A: Business Combination Agreement, as amended   A-1
Annex B: Form of Amended and Restated Memorandum and Articles of Association of Lion Group Holding Ltd.   B-1
Annex C: 2020 Share Incentive Plan of Lion Group Holding Ltd.   C-1
Annex D: Form of Proxy for Special Meeting of Stockholders of Proficient Alpha Acquisition Corp.   D-1

i

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form F-4 filed with the SEC by Pubco (File No. 333-237336), constitutes a prospectus of Pubco under Section 5 of the U.S. Securities Act of 1933, as amended, or the Securities Act, with respect to the Class A Ordinary Shares to be issued to Proficient stockholders and holders of Rights, the warrants to acquire Class A Ordinary Shares to be issued to Proficient Warrant holders and the Class A Ordinary Shares underlying such warrants, if the Business Combination described herein is consummated. The Class A Ordinary Shares to be issued and issuable upon exercise of warrants and mandatory exchange of rights will be represented by Pubco ADSs, with each Pubco ADS representing one Class A Ordinary Share. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to the special meeting of stockholders of Proficient at which Proficient stockholders will be asked to consider and vote upon a proposal to approve the Business Combination by the approval and adoption of the Business Combination Agreement, among other matters.

INDUSTRY AND MARKET DATA

In this proxy statement/prospectus, Lion relies on and refers to industry data, information and statistics regarding the markets in which it competes from research as well as from publicly available information, industry and general publications and research and studies conducted by third parties such as data by iResearch. Lion has supplemented this information where necessary with its own internal estimates and information obtained from discussions with Lion customers, taking into account publicly available information about other industry participants and Lion management’s best view as to information that is not publicly available. This information appears in “Business of Lion” in this proxy statement/prospectus. Lion has taken such care as it considers reasonable in the extraction and reproduction of information from such data from third-party sources.

Industry publications, research, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this proxy statement/prospectus. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the forecasts or estimates from independent third parties and us.

iResearch report, data and information referenced herein (the “iResearch Materials”) are the copyrighted property of iResearch and its subsidiaries (“iResearch”). The iResearch Materials are from sources considered reliable; however, the accuracy and completeness thereof are not warranted, nor are the opinions and analyses published by iResearch representations of fact. The iResearch Materials speak as of the original publication date thereof and are subject to change without notice. iResearch and other trademarks appearing in the iResearch Materials are the property of iResearch or their respective owners.

The iResearch data used in the iResearch Materials is from a November 2019 study and has not been updated since then. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. The iResearch Materials speak as of the original publication date thereof (and not as of the date of this document). The information and opinions expressed in the iResearch Materials are subject to change without notice and iResearch has no duty or responsibility to update the iResearch Materials.

The iResearch Materials were commissioned by Lion and/or an affiliate of Lion.

ii

 

 

FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the term “Lion” refers to Lion Financial Group Limited, a corporation organized under the laws of the British Virgin Islands, and the term “Proficient” refers to Proficient Alpha Acquisition Corp., a Nevada corporation. “Pubco” refers to Lion Group Holding Ltd., a Cayman Islands exempted company.

In this document:

“$,” “USD,” “US$” and “U.S. dollar” each refers to the United States dollar.

“Adjournment Proposal” means a proposal to adjourn the Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Meeting, there are not sufficient votes to approve the Business Combination Proposal.

“ADRs” refers to the American depositary receipts that evidence Pubco ADSs;

“ADSs” and “Pubco ADSs” refer to Pubco’s American depositary shares, each of which represents one Class A Ordinary Share; 

“Amended and Restated Memorandum and Articles of Association” means the amended and restated memorandum and articles of association of Lion Group Holding Ltd. to be adopted prior to consummation of the Business Combination.

“broker non-vote” means the failure of a Proficient stockholder, who holds his or her shares in “street name” through a broker or other nominee, to give voting instructions to such broker or other nominee.

“Business Combination Agreement” means the Business Combination Agreement, dated as of March 10, 2020, as may be amended, by and among Proficient, Merger Sub, Pubco, Lion, the Sellers and the other parties thereto, and attached hereto as Annex A.

“Business Combination” or “Transactions” means the Merger and the Share Exchange, and other transactions contemplated by the Business Combination Agreement.

“Business Combination Proposal” means a proposal to approve the Business Combination Agreement and the Transactions.

“CFD” means a contract for differences, an agreement between an investor and a CFD broker to exchange the difference in the value of a financial product between the time the contract opens and closes.  

“Class A Ordinary Shares” means the Class A ordinary shares, par value $0.0001 per share, of Pubco.

“Class B Ordinary Shares” means the Class B ordinary shares, par value $0.0001 per share, of Pubco.

“Closing” means the closing of the Transactions.

“Code” means the Internal Revenue Code of 1986, as amended.

“Companies Law” means the Companies Law (2020 Revision) of the Cayman Islands, as may be amended from time to time.

“Constitutional Documents” means the formation documents of any of the entities listed herein, including the memorandum and articles of association, as they may be amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Founder Shares” means shares of Proficient common stock, 2,875,000 of which are currently outstanding and were issued to the Initial Stockholders prior to the Initial Public Offering of Proficient.

“HK$” or “Hong Kong dollars “means” the legal currency of Hong Kong.

“Initial Public Offering” means the initial public offering of Units of Proficient, consummated on June 3, 2019.

“Initial Stockholders” means the holders of Founder Shares.

“iResearch” means iResearch Consulting Group. 

 1 

 

“JOBS Act” means the Jumpstart Our Business Startups Act.

“Meeting” means the special meeting of stockholders of Proficient, to be held on __________, 2020 at 10:00 a.m. Eastern Time, at the offices of Ellenoff Grossman & Schole LLP, at 1345 Avenue of the Americas, 11th Floor, New York, New York 10105.

“Merger” means the merger of Merger Sub with Proficient, with Proficient surviving such merger, prior security holders of Proficient receiving securities of Pubco and Proficient becoming a wholly-owned subsidiary of Pubco.

“Merger Sub” means Lion MergerCo 1, Inc., a Cayman Islands exempted company.

“Nasdaq” means the Nasdaq Stock Market LLC.

“NRS” means the Nevada Revised Statutes.

“Ordinary Shares” means the ordinary shares, par value $0.0001 per share, of Pubco, including Class A Ordinary Shares and Class B Ordinary Shares, unless otherwise specified.

“Private Placement Warrants” means the Warrants owned by the Sponsor and issued by Proficient simultaneously with the consummation of the Initial Public Offering.

“Proficient” or “Purchaser” means Proficient Alpha Acquisition Corp., a Nevada corporation.

“proxy statement/prospectus” means the proxy statement/prospectus included in the Registration Statement on Form F-4 (Registration No. 333-237336) filed with the SEC.

“PRC” or “China” refers to the People’s Republic of China, excluding, for the purpose of this proxy statement/prospectus, Taiwan, Hong Kong and Macau.

“Pubco” means Lion Group Holding Ltd., a Cayman Islands exempted company.

“Public Stockholders” means the holders of Public Shares.

“Public Shares” means shares of common stock of Proficient issued as part of the Units sold in the Initial Public Offering.

“Public Warrants” means the Warrants included in the Units sold in the Initial Public Offering, each of which is exercisable for one share of common stock of Proficient, in accordance with its terms.

“Redemption” means the right of the holders of Proficient common stock to have their shares redeemed in accordance with the procedures set forth in this proxy statement/prospectus.

“Rights” means the rights included in the Units sold in the Initial Public Offering, each of which is exercisable for one-tenth (1/10) of one share of common stock of Proficient, in accordance with its terms.

“RMB” and “Renminbi” each refers to the legal currency of China. 

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“SEC” means the U.S. Securities and Exchange Commission.

“Sellers” means the shareholders of Lion named as seller parties to the Business Combination Agreement as of the effective date of this registration statement.

“Senior Management” and “Senior Managers” refer to those persons named as officers of Lion, and following the consummation of the Business Combination, of Pubco, in the section titled “Management of Pubco Following Business Combination”.

“Share Exchange” means the exchange of 100% of the ordinary shares of Lion for capital shares of Pubco.

“Share Issuance Proposal” means a proposal to approve, for purposes of complying with applicable Nasdaq Stock Market LLC listing rules, the issuance of more than 20% of Proficient’s issued and outstanding shares of common stock in financing transactions in connection with the Business Combination.

“Sponsor” means Complex Zenith Limited, a British Virgin Islands company controlled by Shih-Chung Chou, a director of Proficient. Shih-Chung Chou had served as the sponsor of Proficient since its Initial Public Offering until March 12, 2020, when he entered into an agreement with Complex Zenith Limited and assigned all of his equity interest in Proficient and his rights and obligations as a sponsor to Complex Zenith Limited. 

“Trust Account” means the trust account that holds a portion of the proceeds of the Initial Public Offering and the concurrent sale of the Private Placement Warrants.

“Units” means units issued in the Initial Public Offering, each consisting of one share of common stock of Proficient, one Warrant and one Right.

“U.S.” means the United States of America.

“U.S. GAAP” means United States generally accepted accounting principles.

“Warrant” means a warrant to purchase shares of common stock of Proficient issued in the Initial Public Offering and simultaneous private placements. Each Warrant entitles the holder thereof to purchase one share of common stock of Proficient at a price of $11.50 per share. 

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SUMMARY OF THE MATERIAL TERMS OF THE BUSINESS COMBINATION

 

This section describes the material provisions of the Business Combination Agreement (as defined below) but does not purport to describe all of the terms thereof.   The following summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement, a copy of which is attached hereto as Annex A. Proficient’s stockholders, warrant holders, rights holders and other interested parties are urged to read such agreement in its entirety. Unless otherwise defined herein, the capitalized terms used below are defined in the Business Combination Agreement. 

The parties to the Business Combination Agreement are Proficient Alpha Acquisition Corp. (“Proficient”), Lion MergerCo 1, Inc. (“Merger Sub”), Lion Group Holding Ltd. (“Pubco”), Lion Financial Group Limited (“Lion”), the shareholders of Lion named as Sellers therein (the “Sellers”), Shih-Chung Chou, in the capacity as the Purchaser Representative and Jian Wang and Legend Success Ventures Limited, in their capacity as the Seller Representatives. Pursuant to the Business Combination Agreement, (1) immediately following the consummation of the Share Exchange, Merger Sub will merge with and into Proficient, with Proficient surviving the merger, and each of the former security holders of Proficient receiving substantially identical securities of Pubco (the “Merger”) and (2) immediately prior to the Merger, the outstanding ordinary shares of Lion will be exchanged by the Sellers for Class A Ordinary Shares and Class B Ordinary Shares (the “Share Exchange” and together with the Merger and the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). See the section in this summary entitled “The Business Combination Proposal.

Lion is one of the few Chinese investor-focused trading platforms that offers a wide spectrum of products and services. Lion’s business lines include (i) CFD trading service, (ii) insurance brokerage service, (iii) futures brokerage service, (iv) securities brokerage service and (v) asset management service. Lion provides these services mainly through its all-in-one Lion Brokers Pro app, as well as through other apps, which are available on iOS, Android and PC Mac platforms. Lion’s clients are mostly well-educated and affluent Chinese investors residing both inside and outside the PRC, as well as institutional clients in Hong Kong that use Lion’s futures brokerage service. Lion’s trading platform allows users to trade more than 100 futures products on major futures exchanges worldwide. In addition, Lion’s clients may also use its platform to trade various derivative products, such as forex, commodities, futures, stock indices, exchange traded funds (ETFs), warrants and callable bull/bear contracts, on global exchanges or over-the-counter (OTC) markets. See the section entitled “Business of Lion.”

Under the Business Combination Agreement, upon the consummation of the Merger, each Unit shall be automatically detached and the holder thereof shall be deemed to hold one share of common stock of Proficient, one Warrant of Proficient, and one Right of Proficient. Each share of common stock of Proficient will be exchanged for one Class A Ordinary Share in the form of Pubco ADSs, except that Public Stockholders shall be entitled to elect instead to receive a pro rata portion of Proficient’s Trust Account, as provided in Proficient’s Constitutional Documents. Additionally, each outstanding Proficient Warrant will be exchanged for a warrant of Pubco that will entitle the holder to purchase one Class A Ordinary Share in the form of Pubco ADSs in lieu of one share of common stock of Proficient and otherwise on substantially the same terms and conditions as the Proficient Warrants.

Under the Business Combination Agreement, the Sellers will receive an aggregate number of Ordinary Shares (the “Exchange Shares”) with an aggregate value (the “Exchange Consideration”) equal to without duplication (i) $125,000,000, plus (or minus, if negative) (ii) Lion’s net working capital less a target net working capital of $815,000, minus (iii) the aggregate amount of any outstanding indebtedness, net of cash and cash equivalents, of Lion and its subsidiaries, and minus (iv) the amount of any unpaid transaction expenses of Lion, with each Pubco ordinary share to be issued to the Sellers valued at a price per share equal the price at which each share of Proficient common stock is redeemed pursuant to the redemption by Proficient of its public stockholders in connection with Proficient’s initial business combination, as required by its amended and restated articles of incorporation; provided that 45% of the Exchange Shares otherwise issuable to the Sellers at the Closing (the “Escrow Shares”) will be set aside in escrow, with 30% of the Exchange Shares set aside in an earnout escrow account until released upon the satisfaction of certain financial milestones and 15% of the Exchange Shares set aside in an indemnification escrow account to satisfy post-Closing purchase price adjustments and certain indemnification claims. For the purposes of illustration, assuming no redemptions and no transaction expenses and using line items from Lion’s financial statements for the fiscal year-ended December 31, 2019 to determine net working capital and indebtedness, net of cash and cash equivalents, the value of the Exchange Consideration would be $131,000,213. Consequently, using a redemption price of $10.177 per share (based on a recent trust account balance), 12,872,184 Exchange Shares would be issued to the Sellers, consisting of 3,135,664 Class A Ordinary Shares and 9,736,520 Class B Ordinary Shares. At the Closing a total of 3,861,655 Class B Ordinary Shares would be deposited into the earnout escrow account and held until vested and released upon the satisfaction of certain financial milestones or forfeited if the applicable milestones are not met. Additionally, a total of 1,930,828 Class B Ordinary Shares will be deposited into the indemnification escrow account to satisfy certain post-Closing indemnification claims and purchase price adjustments. For a more detailed discussion regarding the calculation of the number of Pubco shares to be received by holders of Lion securities in connection with the Business Combination, please see the section titled “The Business Combination Proposal — The Business Combination Agreement and Related Agreements.” Issuance of Pubco securities in connection with the Share Exchange with the Sellers is exempt from registration under the Securities Act in reliance upon Regulation S of the Securities Act because the Sellers are not U.S. persons and the issuance of the securities of Pubco to such persons would be extraterritorial and within the scope of the exemption from registration codified as Regulation S promulgated under the Securities Act.  

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Pursuant to the Business Combination Agreement, prior to the consummation of the Business Combination, the board of directors and shareholders of Pubco will amend and restate Pubco’s memorandum and articles of association. The Amended and Restated Memorandum and Articles of Association of Pubco differ from Proficient’s amended and restated articles of incorporation in multiple aspects, including: (i) the name of the new public entity will be “Lion Group Holding Ltd.” as opposed to “Proficient Alpha Acquisition Corp.”; (ii)  Pubco will have an authorized share capital of US$50,000 consisting of 500,000,000 shares with a nominal or par value of US$0.0001 each, comprising (a) 300,000,000 Class A Ordinary Shares; (b) 150,000,000 Class B Ordinary Shares; and (c) 50,000,000 preferred shares, as opposed to Proficient having 150,000,000 authorized shares of common stock and 1,000,000 authorized shares of preferred stock; (iii) Pubco’s corporate existence is perpetual as opposed to Proficient’s corporate existence terminating if a business combination is not consummated by Proficient within a specified period of time; and (iv) Pubco’s charter does not include the various provisions applicable only to special purpose acquisition corporations that Proficient’s amended and restated articles of incorporation contains.

In addition to voting on the Business Combination, the stockholders of Proficient will consider and vote upon the proposal to approve, for purposes of complying with applicable Nasdaq Stock Market LLC listing rules, the issuance of more than 20% of Proficient’s issued and outstanding shares of common stock in financing transactions in connection with the Business Combination — we refer to this proposal as the “Share Issuance Proposal.” See the section entitled “The Share Issuance Proposal.”

The Business Combination Agreement may be terminated under certain customary and limited circumstances at any time prior the Closing, including, among other reasons: (i) by mutual written consent of Proficient and Lion; (ii) by either Proficient or Lion if the Closing has not occurred on or prior to June 3, 2020 (subject to the right to extend such date by up to six months); (iii) by either Proficient or Lion if a governmental authority of competent jurisdiction shall have issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the Transactions, and such order or other action has become final and non-appealable; (iv) by Lion for Proficient’s uncured breach of the Business Combination Agreement, such that the related Closing condition would not be met; (v) by Proficient for the uncured breach of the Business Combination Agreement by Lion, Pubco, Merger Sub or any Sellers, such that the related Closing condition would not be met; (vi) by Proficient if there has been a “Material Adverse Effect” with respect to Lion since the date of the Business Combination Agreement which is uncured and continuing; or (vii) by either Proficient or Lion if Proficient holds its special meeting of stockholders to approve the Business Combination Agreement and the Transactions and such approval is not obtained. See the section entitled “The Business Combination Proposal — The Business Combination Agreement and Related Agreements — Termination.”

After the Business Combination, Pubco’s board of directors will consist of seven directors and they will be divided into two classes, namely Class I and Class II. Class I will consist initially of three directors, namely, Zhixiang Zhang, Shi-Chung Chou and Chi Fai Choi. Class II will consist initially of four directors, namely Jian Wang, Chunning Wang, Walter Cook and Chi-yang Chen. After the Merger, Chi Fai Choi, Walter Cook and Chi-yang Chen will be considered independent directors under the rules of Nasdaq. See the section entitled “Management of Pubco Following the Business Combination.”

Upon completion of the Business Combination, the current officers of Lion will remain officers of Lion and will become officers of Pubco, holding the equivalent positions as those held with Lion. These officers are Chunning Wang and Hua Luo. Each of these persons is currently an executive officer of Lion. See the section entitled “Management of Pubco Following the Business Combination.”

Recent Developments as to Lion’s Business

Lion began offering total return swap (TRS) trading services to clients in early 2020 and expects it to be a main growth driver this year. Lion has entered into International Swaps and Derivatives Association (ISDA) master agreements and related supplementary agreements with two of the top five swap traders in China. Lion is currently offering A-shares (shares that are denominated in Renminbi and traded in the SSE and SZSE) and Hong Kong stock basket linked TRS and plans to develop more products to satisfy its clients’ diversified trading and hedging needs. See “Business of Lion - Our Business Lines - Securities Brokerage Services”.

COVID-19 emerged in December 2019 and has spread over the entire world. In March 2020, the World Health Organization declared COVID-19 a pandemic. While Lion’s CFD trading business was not materially adversely impacted by COVID-19, its futures brokerage and insurance brokerage businesses have been significantly affected largely due to the travel restrictions imposed in Hong Kong. While Lion is closely monitoring the COVID-19 development, it is difficult to estimate the concrete financial impact caused by the COVID-19 outbreak, given the significant uncertainty surrounding the overall situation.   

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS 

  Q. Why am I receiving this proxy statement/prospectus?   A.    Proficient and Lion have agreed to a business combination under the terms of the Business Combination Agreement, dated as of March 10, 2020, that is described in this proxy statement/prospectus and to approve the Business Combination contemplated by the Business Combination Agreement. This agreement is referred to as the “Business Combination Agreement.” The Business Combination Agreement provides for, among other things, (a) the Merger of Merger Sub with Proficient, with Proficient surviving the Merger, and each of the current stockholders of Proficient receiving securities of Pubco, which we call the “Merger,” (b) the exchange of 100% of the ordinary shares of Lion by the Sellers for capital shares of Pubco, which we call the “Share Exchange,” and (c) the adoption of Pubco’s Amended and Restated Memorandum and Articles of Association, (d) adoption of Pubco’s equity incentive plan, which will provide that the total awards under such equity incentive plan will be a number of Ordinary Shares equal to ten percent (10%) of the aggregate number of Ordinary Shares immediately after the Merger, and (e) appointment of the members of the Pubco board of directors after the closing of the Merger. This proxy statement/prospectus and its annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.  
         
  Q. What is being voted on at the Meeting?   A.    Proficient’s stockholders are being asked to vote to approve the Business Combination Agreement and transactions contemplated thereby, including the Merger. See the section entitled “The Business Combination Proposal.”  
      In addition to the foregoing proposals, the stockholders are also asked to consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq Stock Market LLC listing rules, the issuance of more than 20% of Proficient’s issued and outstanding shares of common stock in financing transactions in connection with the proposed Business Combination. See the section entitled “The Share Issuance Proposal.”  
      The stockholders may also be asked to consider and vote upon a proposal to adjourn the Meeting to a later date or dates to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Meeting, Proficient would not have been authorized to consummate the Business Combination. See the section entitled “The Adjournment Proposal.”  
      Proficient will hold the Meeting to consider and vote upon these proposals. This proxy statement/prospectus contains important information about the proposed Business Combination and the other matters to be acted upon at the Meeting. Stockholders should read it carefully.  
     

The vote of stockholders is important. Stockholders are encouraged to vote as soon as possible after carefully reviewing this proxy statement/prospectus. 

 

 

 

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  Q. Why is Proficient proposing the Business Combination?  

A.    Proficient was incorporated to effect a merger, capital stock exchange, asset acquisition or other similar business combination with one or more businesses or entities.

Proficient completed its Initial Public Offering of Units on June 3, 2019, with each Unit consisting of one share of common stock, one Warrant to purchase one share of common stock at a price of $11.50 and one Right, each entitling the holder thereof to receive one—tenth (1/10) of one share of common stock of Proficient upon Proficient’s completion of its initial business combination, a sale of the Units subject to overallotment on June 3, 2019, as well as a private placement of Private Placement Warrants on June 4, 2019, raising total gross proceeds of $120,375,000. Since the Initial Public Offering, Proficient’s activity has been limited to the evaluation of business combination candidates.

 
      Proficient was permitted to choose a target business in any industry or geographic region that it felt provided its stockholders with the greatest opportunity to participate in a company with significant growth potential. Accordingly, it regularly analyzed investment opportunities that were in various sectors and geographic regions in an effort to locate the best potential business combination opportunity for its stockholders.  
      Lion is a Hong Kong-based diversified financial services company. Based on its due diligence investigations of Lion and the industry in which it operates, including the financial and other information provided by Lion in the course of their negotiations, Proficient believes that Lion has an appealing growth profile and a compelling valuation. As a result, Proficient believes that a business combination with Lion will provide Proficient stockholders with an opportunity to participate in a company with significant growth potential. See the section entitled “The Business Combination Proposal — Proficient’s Board of Directors’ Reasons for Approval of the Business Combination.”  
         
  Q. Why is Proficient providing stockholders with the opportunity to vote on the Business Combination?   A.   Under its amended and restated articles of incorporation, Proficient must provide all holders of its Public Shares with the opportunity to have their Public Shares redeemed upon the consummation of Proficient’s initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, Proficient has elected to provide its stockholders with the opportunity to have their Public Shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, Proficient is seeking to obtain the approval of its stockholders of the Business Combination Proposal in order to allow its Public Stockholders to effectuate Redemptions of their Public Shares in connection with the Closing of the Business Combination.  
         
  Q. Are the proposals conditioned on one another?  

A.    Unless the Business Combination Proposal is approved, the Share Issuance Proposal will not be presented to the stockholders of Proficient at the Meeting. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus. It is important for you to note that in the event that the Business Combination Proposal does not receive the requisite vote for approval, then Proficient will not consummate the Business Combination. If Proficient does not consummate the Business Combination and fails to 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 will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to its Public Stockholders.

 

 

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Q. What will happen in the Business Combination?

  A. At the Closing, Merger Sub will merge with Proficient, with Proficient surviving such Merger. Upon consummation of the Merger, Proficient will become a wholly-owned subsidiary of Pubco and security holders of Proficient securities will exchange their Proficient securities for securities of Pubco. In particular, (i) each outstanding share of Proficient common stock will be converted into one Class A Ordinary Share, (ii) each outstanding Warrant of Proficient will be converted into one warrant of Pubco that entitles the holder thereof to purchase one Class A Ordinary Share in lieu of one share of common stock of Proficient, and (iii) each outstanding Right of Proficient will be exchanged for one-tenth of a Class A Ordinary Share. Class A Ordinary Shares to be issued and issuable upon exercise of warrants and automatic conversion of rights in connection with this Merger will be represented by Pubco ADSs, with each ADS representing one Class A Ordinary Share. In connection with the Share Exchange, which will occur immediately before the Merger, certain Lion shareholders currently owning approximately 75% of the issued and outstanding ordinary shares of Lion will receive Class B Ordinary Shares entitling them to 10 votes per share and the remaining issued and outstanding ordinary shares of Lion will be exchanged into Class A Ordinary Shares, as a result of which, Lion will become a wholly-owned subsidiary of Pubco. The cash held in the Trust Account and the proceeds from any financing transactions in connection with the Business Combination will be used by Pubco for working capital and general corporate purposes following the consummation of the Business Combination. A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annex A. For Pubco’s organizational structure chart upon consummation of the Business Combination, please see “The Business Combination Agreement — Transaction and Organizational Structures Prior to and Following Consummation of the Business Combination.”  
         
  Q. What conditions must be satisfied or waived to complete the Business Combination?   A.  There are a number of closing conditions to the Business Combination, including, but not limited to, the following: (i) the approval of the Business Combination Agreement, the adoption of Pubco’s Amended and Restated Memorandum and Articles of Association, the adoption of Pubco’s equity incentive plan and the appointment of the members of the Pubco board of directors after the closing of the Merger and other related matters by the requisite vote of Proficient’s shareholders; (ii) receipt by Lion of all consents required to be obtained from the SFC and CIMA in order to consummate the Transactions (the “Required Consents”); (iii) no law or order preventing or prohibiting the Transactions; (iv) no pending litigation to enjoin or restrict the consummation of the Closing; (v) Proficient having at least $5,000,001 in net tangible assets as of the Closing, after giving effect to the completion of the Redemption and any private placement financing; (vi) the effectiveness of the Registration Statement; (vii) adoption of Pubco of Pubco’s amended and restated memorandum and articles of association; (viii) receipt by Lion and Proficient of evidence reasonably satisfactory to each such party that Pubco qualifies as a foreign private issuer; and (ix) the Exchange Shares (including the Escrow Shares) shall have been approved for listing on Nasdaq, subject only to the official notice of issuance.  
      For a summary of all of the conditions that must be satisfied or waived prior to completion of the Business Combination, see the section entitled “The Business Combination Proposal — The Business Combination Agreement and Related Agreements.”  
         
 

Q. Did the Proficient board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

  A.    Proficient's board of directors obtained an independent third-party valuation from Grant Thornton, LLC, a major audit, tax and advisory firm (“Grant Thornton”) in connection with their determination to approve the Business Combination with Lion. In selecting Grant Thornton, the board of directors considered, among others, Grant Thornton’s qualifications, credentials, fees and estimated time of delivery. Pursuant to the terms of the engagement letter between Proficient and Grant Thornton, Proficient agreed to pay to Grant Thornton a fee based on the time and hourly rates of Grant Thornton’s staff. In addition, Proficient agreed to reimburse Grant Thornton for its reasonable out-of-pocket expenses. Upon delivery of the Valuation Report (as defined below), Proficient paid an aggregate of $19,960 to Grant Thornton. Aside from the services described above, there has been no material relationship between Proficient or its affiliates and Grant Thornton and its affiliates or unaffiliated representatives during the past two years, nor is any such relationship contemplated. Grant Thornton is an independent third party appraiser. For a summary of the Valuation Report issued by Grant Thornton, see the section entitled “Description of Valuation Report of Grant Thornton – Valuation Summary. The officers and directors of Proficient also have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, enabled them to make the necessary analyses and determinations regarding the Business Combination.  
         
  Q. How many votes do I have at the Meeting?   A.    Proficient stockholders are entitled to one vote at the Meeting for each share of common stock of Proficient held of record as of __________, 2020, the record date for the Meeting (the “Record Date”). As of the close of business on the Record Date, there were 14,467,000 shares of common stock of Proficient outstanding.  
         
  Q. What vote is required to approve the proposals presented at the Meeting?  

A.    The approval of each of the Business Combination Proposal, the Share Issuance Proposal and the Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of Proficient common stock entitled to vote and represented in person or by proxy at the Meeting. Assuming a quorum is established, a stockholder’s failure to vote by proxy or to vote in person at the Meeting will have no effect on the foregoing proposals. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, are not treated as votes cast and will have no effect on any of the proposals. Proficient’s Sponsor, directors and officers have agreed to vote their shares in favor of the Business Combination Proposal. As of the date of this proxy statement/prospectus, Proficient’s Sponsor, directors, officers and initial stockholders beneficially owned an aggregate of 2,875,000 shares of common stock of Proficient.

 

 

 

 

 

 

 

 

 

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Q. What constitutes a quorum at the Meeting?

  A.    Holders of a majority in voting power of Proficient common stock issued and outstanding and entitled to vote at the Meeting constitute a quorum. In the absence of a quorum, the chairman of the Meeting has the power to adjourn the Meeting. As of the Record Date, 7,233,501 shares of Proficient common stock would be required to achieve a quorum.  
         
 

Q. How do the insiders of Proficient intend to vote on the proposals?

  A.    Proficient’s Sponsor, officers, directors and other initial stockholders beneficially own and are entitled to vote an aggregate of approximately 19.9% of the outstanding shares of Proficient common stock. These parties have agreed to vote their securities in favor of the Business Combination Proposal. Proficient’s Sponsor, officers and directors have also indicated that they intend to vote their shares in favor of all other proposals being presented at the Meeting.  
         
  Q. Do I have Redemption rights?  

A.    Pursuant to Proficient’s amended and restated articles of incorporation, holders of Public Shares may elect to have their shares redeemed for cash at the applicable Redemption price per share calculated in accordance with Proficient’s charter. As of the date of this proxy statement/prospectus, based on funds in the Trust Account of approximately $117.03 million, this would have amounted to approximately $10.177 per share. If a holder exercises its Redemption rights, then such holder will be exchanging its shares of common stock of Proficient for cash. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands Redemption and delivers its shares (either physically or electronically) to Proficient’s transfer agent prior to the Meeting. See the section titled “Special Meeting of Stockholders of Proficient — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

 
         
  Q. Will how I vote affect my ability to exercise Redemption rights?   A.    No. You may exercise your Redemption rights whether or not you are a holder of Proficient common stock on the Record Date (so long as you are a holder at the time of exercise), or whether you are a holder and vote your common stock of Proficient on the Business Combination Proposal (for or against) or any other proposal described by this proxy statement/prospectus. As a result, the Business Combination Agreement can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.  

 

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  Q. How do I exercise my Redemption rights?  

A.    If you are a holder of Public Shares and wish to exercise your Redemption rights, you must demand that Proficient convert your shares into cash no later than 5:00 p.m. Eastern Time on __________, 2020 (two (2) business days prior to the vote on the Business Combination Proposal) by (A) submitting your request in writing to American Stock Transfer & Trust Company LLC, at the address listed at the end of this section and (B) delivering your stock to Proficient’s transfer agent physically or electronically using The Depository Trust Company’s DWAC (Deposit Withdrawal at Custodian) System. If you hold the shares in “street name”, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be converted into cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system.

 
      Any holder of Public Shares (whether or not they are a holder on the Record Date) will be entitled to demand that his shares be converted for a full pro rata portion of the amount then in the Trust Account (which was approximately $[ ] million, or approximately $[ ] per share, as of _________, 2020, the Record Date). Such amount, less any owed but unpaid taxes on the funds in the Trust Account, will be paid promptly upon consummation of the Business Combination. There are currently no owed but unpaid income taxes on the funds in the Trust Account. Your vote on any proposal will have no impact on the amount you will receive upon exercise of your Redemption rights.  
      Any request for Redemption, once made by a holder of Public Shares, may be withdrawn at any time up to the time the vote is taken with respect to the Business Combination Proposal at the Meeting. If you deliver your shares for Redemption to Proficient’s transfer agent and later decide prior to the Meeting not to elect conversion, you may request that Proficient’s transfer agent return the shares (physically or electronically). You may make such request by contacting Proficient’s transfer agent at the phone number or address listed at the end of this section.  
      Any corrected or changed proxy card or written demand of Redemption rights must be received by Proficient’s secretary prior to the vote taken on the Business Combination Proposal at the Meeting. No demand for Redemption will be honored unless the holder’s shares have been delivered (either physically or electronically) to Proficient’s transfer agent at least two (2) business days prior to the vote at the Meeting.  
     

If a holder of Public Shares properly makes a demand for Redemption as described above, then, if the Business Combination is consummated, Proficient will convert these shares into a pro rata portion of funds deposited in the Trust Account. If you exercise your Redemption rights, then you will be exchanging your shares of Proficient common stock for cash and will not be entitled to Pubco ADSs with respect to your shares of Proficient common stock upon consummation of the Business Combination. If the Business Combination is not approved or completed for any reason, then holders of Public Shares who elected to exercise their Redemption rights would not be entitled to convert their shares for the applicable pro rata share of the Trust Account. In such case, Proficient will promptly return any shares delivered by Public Stockholders and such holders may only share in the assets of the Trust Account upon the liquidation of Proficient. This may result in holders receiving less than they would have received if the Business Combination was completed and they exercised Redemption rights in connection therewith due to potential claims of creditors.

 
      If you are a holder of Public Shares and you exercise your Redemption rights, it will not result in the loss of any Proficient Warrants and Rights that you may hold. Your Warrants will become exercisable to purchase one Class A Ordinary Share in the form of ADSs in lieu of one share of Proficient common stock for a purchase price of $11.50 per share or $11.50 per ADS upon consummation of the Business Combination and your Rights will automatically be converted into one-tenth of a Class A Ordinary Share in the form of ADSs upon the consummation of the Business Combination.  

 10 

  Q. If I am a Warrant or Right holder, can I exercise Redemption rights with respect to my Warrants or Rights?  

A.    No. The holders of Warrants and Rights have no Redemption rights with respect to such securities.

 
         
 

Q. If I am a Unit holder, can I exercise Redemption rights with respect to my Units?

 

A.    No. Holders of outstanding Units must separate the underlying common stock, Warrants and Rights prior to exercising Redemption rights with respect to the Public Shares.

 

If you hold Units registered in your own name, you must deliver the certificate for such Units to American Stock Transfer & Trust Company, LLC, Proficient’s transfer agent, with written instructions to separate such Units into Public Shares, Rights and Warrants. This must be completed far enough in advance to permit the mailing of the Public Share certificates back to you so that you may then exercise your Redemption rights upon the separation of the Public Shares from the Units. See “How do I exercise my Redemption rights?” above. The address of American Stock Transfer & Trust Company, LLC is listed under the question “Who can help answer my questions?” below.

 

If a broker, dealer, commercial bank, trust company or other nominee holds your Units, you must instruct such nominee to separate your Units. Your nominee must send written instructions by facsimile to American Stock Transfer & Trust Company, LLC, Proficient’s transfer agent. Such written instructions must include the number of Units to be split and the nominee holding such Units. Your nominee must also initiate electronically, using DTC’s deposit withdrawal at custodian (DWAC) system, a withdrawal of the relevant Units and a deposit of an equal number of Public Shares, Rights and Warrants. This must be completed far enough in advance to permit your nominee to exercise your Redemption rights upon the separation of the Public Shares from the Units. While this is typically done electronically the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your Public Shares to be separated in a timely manner, you will likely not be able to exercise your Redemption rights. 

 
         
  Q. Do I have appraisal rights if I object to the proposed Business Combination?  

A.    No, neither Proficient stockholders nor its Unit holders, Warrant holders or Rights holders have appraisal rights in connection with the Business Combination under the NRS.

 
         
 

Q. I am a Proficient Warrant holder. Why am I receiving this proxy statement/prospectus?

 

A.    As a holder of Proficient Warrants, you will be entitled to purchase one Class A Ordinary Share in the form of Pubco ADSs in lieu of one share of Proficient common stock at a purchase price of $11.50 per share or $11.50 per ADS upon consummation of the Business Combination. This proxy statement/prospectus includes important information about Pubco and the business of Pubco and its subsidiaries following consummation of the Business Combination. Since holders of Proficient Warrants will become holders of warrants of Pubco and may become holders of Pubco ADSs upon consummation of the Business Combination, we urge you to read the information contained in this proxy statement/prospectus carefully.

 

 

 11 

  Q. What happens to the funds deposited in the Trust Account after consummation of the Business Combination?  

A.    Of the net proceeds of Proficient’s Initial Public Offering and simultaneous private placements, a total of $115,000,000 was placed in the Trust Account immediately following the Initial Public Offering. After consummation of the Business Combination, the funds in the Trust Account will be used by Purchaser to pay holders of the Public Shares who exercise Redemption rights, to pay fees and expenses incurred in connection with the Business Combination with Lion (including fees of an aggregate of up to $4.025 million to certain underwriters and finders in connection with the Business Combination), and to repay any loans owed by Proficient to Shih-Chung Chou, an affiliate of the Sponsor and a director of Proficient. Any remaining funds will be paid to Lion (or as otherwise designated in writing by Lion to Proficient prior to the Closing) and used for working capital and general corporate purposes of Pubco and/or Lion.

 
         
  Q. What happens if a substantial number of Public Stockholders vote in favor of the Business Combination Proposal and exercise their Redemption rights?  

A.    Unlike some other blank check companies which require Public Stockholders to vote against a business combination in order to exercise their Redemption rights, Proficient’s Public Stockholders may vote in favor of the Business Combination and exercise their Redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of Public Stockholders are substantially reduced as a result of Redemption by Public Stockholders. However, the Business Combination will not be consummated if, upon the consummation of the Business Combination, Proficient does not have at least $5,000,001 net tangible assets after giving effect to payment of amounts that Proficient will be required to pay to redeeming stockholders upon consummation of the Business Combination and the proceeds from any private placement investment. As a result, based on the current expected Proficient cash and expenses and liabilities at Closing, holders of no more than approximately 10,457,789 Public Shares of Proficient (or approximately 90.9% of the total outstanding Public Shares of Proficient) could seek Redemption of their shares without triggering Lion’s right to terminate the Business Combination Agreement. Also, with fewer public shares and Public Stockholders, the trading market for Pubco’s ADSs may be less liquid than the market for Proficient’s common stock were prior to the Merger and Pubco may not be able to meet the listing standards for Nasdaq or another national securities exchange. In addition, with fewer funds available from the Trust Account, the working capital infusion from the Trust Account into Lion’s business will be reduced.

 
         
  Q. What happens if the Business Combination is not consummated?  

A.    If Proficient does not 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 must redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to an amount then held in the Trust Account (currently anticipated to be approximately $10.177).

 
         
  Q. When do you expect the Business Combination to be completed?  

A.    It is currently anticipated that the Business Combination will be consummated promptly following the Meeting which is set for ____________, 2020; however, such meeting could be adjourned, as described above. For a description of the conditions for the completion of the Business Combination, see the section entitled “The Business Combination Agreement — Conditions to the Closing of the Business Combination.”

 
         
  Q. What do I need to do now?  

A.    Proficient urges you to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder and/or Warrant holder of Proficient. Stockholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.

 
         
  Q. How do I vote?   A.    If you are a holder of record of common stock of Proficient on the Record Date, you may vote in person at the Meeting or by submitting a proxy for the Meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the Meeting and vote in person, obtain a proxy from your broker, bank or nominee.  

  

 12 

  

  Q. If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?  

A.    As disclosed in this proxy statement/prospectus, your broker, bank or nominee cannot vote your shares on the Business Combination Proposal unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Your broker, bank or nominee can vote your shares on the Share Issuance Proposal without instructions.

 
         
  Q. May I change my vote after I have mailed my signed proxy card?  

A.    Yes. Stockholders may send a later-dated, signed proxy card to Proficient’s secretary at the address set forth below so that it is received by Proficient’s Chief Executive Officer prior to the vote at the Meeting or attend the Meeting in person and vote. Stockholders also may revoke their proxy by sending a notice of revocation to Proficient’s Chief Executive Officer, which must be received by Proficient’s Chief Executive Officer prior to the vote at the Meeting.

 
         
  Q. What happens if I fail to take any action with respect to the Meeting?  

A.    If you fail to take any action with respect to the Meeting and the Business Combination is approved by stockholders and consummated, you will become a stockholder and/or warrant holder of Pubco. If you fail to take any action with respect to the Meeting and the Business Combination is not approved, you will continue to be a stockholder and/or Warrant holder of Proficient.

 
         
  Q. What should I do with my shares and/or warrants certificates?  

A.    Proficient Warrant holders should not submit their Warrant certificates now and those stockholders who do not elect to have their Proficient shares converted into the pro rata share of the Trust Account should not submit their share certificates now. After the consummation of the Business Combination, Pubco’s transfer agent will send instructions to Proficient security holders regarding the exchange of their Proficient securities for Pubco securities. Proficient stockholders who exercise their Redemption rights must deliver their stock certificates to Proficient’s transfer agent (either physically or electronically) at least two (2) business days prior to the vote at the Meeting.

 
         
  Q. What should I do if I receive more than one set of voting materials?  

A.    Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your Proficient shares.

 

  

 13 

  

  Q. Who can help answer my questions?  

A.    If you have questions about the Business Combination or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact: 

 

 
     

Kin Sze
Proficient Alpha Acquisition Corp.
40 Wall St., 29th Floor

New York, New York 10005
Email: stephen@paac-us.com

 
      Or:  
     

Morrow Sodali LLC

470 West Avenue

Stamford CT 06902

Tel: (800) 662-5200 or banks and brokers can call at (203) 658-9400

Email: PAAC.info@morrowsodali.com

 
     

You may also obtain additional information about Proficient from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of Public Shares and you intend to seek Redemption of your shares, you will need to deliver your stock (either physically or electronically) to Proficient’s transfer agent at the address below at least two (2) business days prior to the vote at the Meeting. If you have questions regarding the certification of your position or delivery of your stock, please contact:

 
     

American Stock Transfer & Trust Company
6201 15th Avenue

Brooklyn, NY 11219
Attn: Felix Orihuela, Forihuela@astfinancial.com

 

 

 14 

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the Meeting, including the Business Combination Proposal, you should read this entire document carefully, including the Business Combination Agreement attached as Annex A to this proxy statement/prospectus. The Business Combination Agreement is the legal document that governs the Merger and Share Exchange and the other transactions that will be undertaken in connection with the Business Combination. It is also described in detail in this proxy statement/prospectus in the section entitled “Summary of the Material Terms of the Business Combination Agreement.”

The Parties

Proficient

Proficient Alpha Acquisition Corp. is a blank check company formed as a Nevada corporation for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. Proficient was incorporated under the laws of the State of Nevada on July 27, 2018.

On June 3, 2019, Proficient closed its Initial Public Offering of 10,000,000 Units, plus 1,500,000 additional Units pursuant to the full exercise of the over-allotment option by the underwriters, at a price of $10.00 per Unit, generating an aggregate amount of gross proceeds of $115,000,000. Sponsor owns 5,375,000 Warrants sold in a private placement by Proficient simultaneously with the closing of the Initial Public Offering at a price of $1.00 per Warrant, generating gross proceeds of $5,375,000 to Proficient.

Following the Initial Public Offering (including the exercise of the over-allotment option in full) and the simultaneous private placement, a total of $115,000,000 was deposited into the Trust Account and the remaining proceeds became available to be used as working capital to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. The Initial Public Offering was conducted pursuant to a registration statement on Form S-1 (Reg. No. 333-231084) that became effective on May 29, 2019. As of the date of this proxy statement/prospectus, there was approximately $117.03 million held in the Trust Account.

After consummation of the Business Combination, the funds in the Trust Account will be used by Proficient to pay holders of the Public Shares who exercise Redemption rights, to pay fees and expenses incurred in connection with the Business Combination with Lion (including fees of an aggregate of approximately $4.025 million to certain underwriters and finders in connection with the Business Combination), and to repay any loans owed by Proficient to Shih-Chung Chou, an affiliate of the Sponsor and a director of Proficient. Any remaining funds will be paid to Lion (or as otherwise designated in writing by Lion to Proficient prior to the Closing) and used for working capital and general corporate purposes of Pubco and/or Lion.

I-Bankers, in its role as investment banker to Proficient, has provided Proficient with advice and assistance in reviewing potential targets with which to consummate a business combination and arranging meetings with and preparing materials for investors in connection with the consummation of the Business Combination, as well as providing general advice with respect to special purpose acquisition company transactions.

Proficient Units, common stock, Warrants and Rights are listed on Nasdaq under the symbols “PAACU,” “PAAC,” “PAACW,” and “PAACR,” respectively.

The mailing address of Proficient’s principal executive office is 40 Wall St., 29th Floor, New York, New York 10005. After the consummation of the Business Combination, it will become a wholly-owned subsidiary of Pubco.

Pubco

Pubco was incorporated on February 11, 2020 solely for the purpose of effectuating the Business Combination described herein. Pubco was incorporated under the laws of the Cayman Islands as an exempted company. Pubco owns no material assets and does not operate any business.

Prior to the consummation of the Business Combination, the sole director and shareholder of Pubco is Jian Wang.

The mailing address of Pubco’s registered office is 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands. After the consummation of the Business Combination, its principal executive office will be that of Lion, located at Unit A-C, 33/F, Tower A, Billion Center, 1 Wang Kwong Road, Kowloon Bay, Hong Kong, and its telephone number is +852 2796 2900. 

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Lion

Lion is one of the few Chinese investor-focused trading platforms that offers a wide spectrum of products and services. Lion’s business lines include (i) CFD trading service, (ii) insurance brokerage service, (iii) futures brokerage service, (iv) securities brokerage service and (v) asset management service. Lion provides these services mainly through its all-in-one Lion Brokers Pro app, as well as through other apps, which are available on iOS, Android and PC platforms. Lion’s clients are mostly well-educated and affluent Chinese investors residing both inside and outside the PRC, as well as institutional clients in Hong Kong that use Lion’s futures brokerage service. Lion’s trading platform allows users to trade more than 100 futures products on major futures exchanges worldwide. In addition, Lion’s clients may also use its platform to trade various derivative products, such as forex, commodities, futures, stock indices, exchange traded funds (ETFs), warrants and callable bull/bear contracts, on global exchanges or over-the-counter (OTC) markets.

The mailing address of Lion’s principal executive office is Unit A-C, 33/F, Tower A, Billion Center, 1 Wang Kwong Road, Kowloon Bay, Hong Kong, and its telephone number is +852 2796 2900.

Merger Sub

Merger Sub was incorporated on February 18, 2020 solely for the purpose of effectuating the Business Combination described herein. Merger Sub was incorporated in the State of Nevada. Merger Sub owns no material assets and does not operate any business.

Prior to the consummation of the Business Combination, the sole director of Merger Sub is Jian Wang, and the sole stockholder of Merger Sub is Pubco.

The mailing address of Merger Sub’s registered office is Kirkland & Ellis LLP, 601 Lexington Avenue, New York, NY 10022. After the consummation of the Business Combination, its principal executive office will be that of Lion, located at Unit A-C, 33/F, Tower A, Billion Center, 1 Wang Kwong Road, Kowloon Bay, Hong Kong and its telephone number is +852 2796 2900.

Sellers

Sellers are the holders of the Lion’s outstanding capital shares named in the Annex I to the Business Combination Agreement.

The Business Combination Proposal

On March 10, 2020, Proficient entered into the Business Combination Agreement with Pubco, Merger Sub, Lion, the Sellers and the other parties thereto. 

The Business Combination Agreement provides for a business combination transaction by means of (i) the Merger of Merger Sub with and into Proficient, with Proficient surviving and each of the former security holders of Proficient receiving securities of Pubco, with Pubco becoming a new public company and (ii) the exchange of 100% of the outstanding ordinary shares of Lion by Sellers for capital shares of Pubco. Certain Lion shareholders currently owning approximately 75% of the issued and outstanding ordinary shares of Lion will receive Class B Ordinary Shares entitling them to 10 votes per share and the remaining issued and outstanding ordinary shares of Lion will be exchanged into Class A Ordinary Shares.

Pursuant to the Business Combination Agreement, subject to the terms and conditions set forth therein, at the Closing of the Transactions contemplated by the Business Combination Agreement, Merger Sub will merge with and into Proficient, with Proficient continuing as the surviving entity and with holders of Proficient securities receiving substantially identical securities of Pubco, and immediately prior to the Merger, Pubco will acquire all of the issued and outstanding ordinary shares of Lion from the Sellers in exchange for capital shares of Pubco, with Lion becoming a wholly-owned subsidiary of Pubco.

The total consideration to be paid by Pubco to the Sellers for the purchased shares will be an aggregate number of Exchange Shares with an aggregate value equal to, without duplication (i) $125,000,000, plus (or minus, if negative) (ii) Lion’s net working capital less a target net working capital of $815,000, minus (iii) the aggregate amount of any outstanding indebtedness, net of cash and cash equivalents, of Lion and its subsidiaries, and minus (iv) the amount of any unpaid transaction expenses of Lion, with each Pubco ordinary share to be issued to the Sellers valued at a price per share equal the price at which each share of Proficient common stock is redeemed pursuant to the redemption by Proficient of its public stockholders in connection with Proficient’s initial business combination, as required by its amended and restated articles of incorporation; except that 30% of the Exchange Shares otherwise issuable to the Sellers at the Closing will be set aside in escrow until released upon the satisfaction of certain financial milestones and 15% of the Exchange Shares otherwise issuable to the Sellers at the Closing will be set aside in escrow to satisfy post Closing purchase price adjustments and indemnification claims. For a detailed discussion on calculation of the number of Pubco shares to be received by holders of Lion securities in connection with the Business Combination, please see the section titled “The Business Combination Proposal — The Business Combination Agreement and Related Agreements.”

In addition to the approval of the Business Combination Proposal, unless waived by the parties to the Business Combination Agreement, in accordance with applicable law, the Closing of the Business Combination is subject to a number of conditions set forth in the Business Combination Agreement including, among others, receipt of the requisite stockholder approval contemplated by this proxy statement/prospectus. For more information about the closing conditions to the Business Combination, see the section titled “Business Combination Proposal — Conditions to Closing of the Business Combination.”

Pursuant to the Business Combination Agreement, prior to the consummation of the Business Combination, the board of directors and shareholders of Pubco will amend and restate Pubco’s memorandum and articles of association. The Amended and Restated Memorandum and Articles of Association will differ from Proficient’s amended and restated articles of incorporation in multiple aspects, including: (i) the name of the new public entity will be “Lion Group Holding Ltd.” as opposed to “Proficient Alpha Acquisition Corp.”; (ii) Pubco will have an authorized share capital of US$50,000 consisting of 500,000,000 shares with a nominal or par value of US$0.0001 each, comprising (a) 300,000,000 Class A Ordinary Shares; (b) 150,000,000 Class B Ordinary Shares; and (c) 50,000,000 preferred shares, as opposed to Proficient having 150,000,000 authorized shares of common stock and 1,000,000 authorized shares of preferred stock; (iii) Pubco’s corporate existence is perpetual as opposed to Proficient’s corporate existence terminating if a business combination is not consummated by Proficient within a specified period of time; and (iv) Pubco’s charter does not include the various provisions applicable only to special purpose acquisition corporations that Proficient’s amended and restated articles of incorporation contains. For more information about Pubco’s Amended and Restated Memorandum and Articles of Association, please see the section entitled “The Business Combination Proposal — Pubco’s Amended and Restated Memorandum and Articles of Association.” 

 16 

The Share Issuance Proposal

Nasdaq listing rules require that its listed companies obtain stockholder approval for issuances of securities in excess of 20% of its issued and outstanding voting stock prior to the issuance. In connection with the approval of the Business Combination Proposal, Proficient’s stockholders will be asked to consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of securities in excess of 20% of Proficient’s issued and outstanding shares of common stock. Please see the section entitled “The Share Issuance Proposal.”

The Adjournment Proposal

If, based on the tabulated vote, there are not sufficient votes at the time of the Meeting to authorize Proficient to consummate the Business Combination (because the Business Combination Proposal is not approved or Proficient would have less than $5,000,001 of net tangible assets upon the Closing after taking into account the holders of the Public Shares that have properly elected to redeem their Public Shares), Proficient’s board of directors may submit a proposal to adjourn the Meeting to a later date or dates, if necessary, to permit further solicitation of proxies. Please see the section entitled “The Adjournment Proposal.”

Proficient Initial Stockholders

As of __________, 2020, the Record Date for the Meeting, Proficient’s Initial Stockholders, including its Sponsor, beneficially owned and are entitled to vote an aggregate of 2,875,000 Founder Shares that were issued prior to Proficient’s Initial Public Offering. The Founder Shares currently constitute approximately 19.9% of the outstanding shares of Proficient common stock.

In connection with the Initial Public Offering, each of Proficient’s Sponsor, officers, directors and Initial Stockholders agreed to vote the Founder Shares, as well as any shares of common stock acquired in the aftermarket, in favor of the Business Combination Proposal. Proficient’s Sponsor, officers, directors and Initial Stockholders have also indicated that they intend to vote their shares in favor of all other proposals being presented at the Meeting. The Founder Shares have no Redemption rights in the event of a business combination and will be worthless if no business combination is effected by Proficient. In connection with the Initial Public Offering, the Initial Stockholders entered into an escrow agreement pursuant to which their Founder Shares are held in escrow and may not be transferred (subject to limited exceptions) until with respect to 50% of the Founder Shares, the earlier of six months after the date of the consummation of an initial business combination and the date on which the closing price of Proficient’s common stock exceeds $12.50 per share for any 20 trading days within a 30-trading day period following the consummation of an initial business combination and, with respect to the remaining 50% of the Founder Shares, six months after the date of the consummation of an initial business combination, or earlier in each case if, subsequent to Proficient’s initial business combination, it consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property (which escrow arrangements will be transferred to Pubco at the Closing of the Business Combination).

Date, Time and Place of the Special Meeting of Stockholders of Proficient

The Meeting will be held at 10:00 a.m., Eastern time, on __________, 2020, at the offices of Ellenoff Grossman & Schole LLP, Proficient’s counsel, at 1345 Avenue of the Americas, 11th Floor, New York, NY 10105, to consider and vote upon the Business Combination Proposal, the Share Issuance Proposal and/or if necessary, the Adjournment Proposal to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Meeting, Proficient is not authorized to consummate the Business Combination.

Voting Power; Record Date

Stockholders will be entitled to vote or direct votes to be cast at the Meeting if they owned common stock of Proficient at the close of business on __________, 2020, which is the Record Date for the Meeting. Stockholders will have one vote for each share of Proficient common stock owned at the close of business on the Record Date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. Proficient Warrants and Rights do not have voting rights. On the Record Date, there were 14,467,000 shares of common stock outstanding, of which 11,500,000 were Public Shares with the rest being held by the Proficient Initial Stockholders and I-Bankers Securities, Inc. (“I-Bankers”), the underwriter in Proficient’s Initial Public Offering. 

 17 

Quorum and Vote of Proficient Stockholders

A quorum of Proficient stockholders is necessary to hold a valid meeting. A quorum will be present at the Proficient meeting if the holders of a majority of the outstanding shares entitled to vote at the Meeting are represented in person or by proxy. Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, are not treated as votes cast and will have no effect on any of the proposals. The Proficient Initial Stockholders hold approximately 19.9% of the outstanding shares of Proficient common stock. Such shares, as well as any shares of common stock acquired in the aftermarket by the Initial Stockholders, will be voted in favor of the proposals presented at the Meeting. The proposals presented at the Meeting will require the following votes:

   • Pursuant to Proficient’s amended and restated articles of incorporation, the approval of the Business Combination Proposal will require the affirmative vote of the holders of a majority of the then outstanding shares of Proficient common stock present and entitled to vote at the Meeting. There are currently 14,467,000 shares of Proficient common stock outstanding, of which 11,500,000 are Public Shares.
     
   • The approval of the Share Issuance Proposal will require the affirmative vote of the holders of a majority of the then outstanding shares of Proficient common stock present and entitled to vote at the Meeting.
     
   • The approval of the Adjournment Proposal will require the affirmative vote of the holders of a majority of the then outstanding shares of Proficient common stock present and entitled to vote at the Meeting.

Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, are not treated as votes cast and will have no effect on the Business Combination Proposal, the Share Issuance Proposal and the Adjournment Proposal (if presented).

In addition, if the Business Combination Proposal is not approved, the other proposals (other than the Adjournment Proposal) will not be presented to the stockholders for a vote.

Redemption Rights

Pursuant to Proficient’s amended and restated articles of incorporation, a holder of Public Shares may demand that Proficient convert such shares into cash if the Business Combination is consummated. Holders of Public Shares (whether or not they are holders on the Record Date) will be entitled to receive cash for these shares only if they demand that Proficient convert their shares into cash no later than 5:00 p.m. Eastern Time on __________, 2020 (two (2) business days prior to the vote at the Meeting) by (A) by submitting their request in writing to American Stock Transfer & Trust Company and (B) delivering their stock to Proficient’s transfer agent physically or electronically using the Depository Trust Company’s DWAC (Deposit Withdrawal at Custodian) System. If the Business Combination is not completed, these shares will not be converted into cash at this time in connection with the Business Combination. In such case, Proficient will promptly return any shares delivered by public holders for Redemption and such holders may only share in the assets of the Trust Account upon the liquidation of Proficient. This may result in holders receiving less than they would have received if the Business Combination was completed and they had exercised their Redemption rights in connection therewith due to potential claims of creditors. If a holder of Public Shares properly demands Redemption, Proficient will convert each Public Share into a full pro rata portion of the Trust Account, calculated as of two business days prior to the anticipated consummation of the Business Combination. As of _________, 2020, the Record Date, this would amount to approximately $[ ] per share. If a holder of Public Shares exercises its Redemption rights, then it will be exchanging its shares of Proficient common stock for cash and will no longer own the shares. See the section entitled “Special Meeting of Stockholders of Proficient — Redemption Rights” for a detailed description of the procedures to be followed if you wish to convert your shares into cash.

The Business Combination will not be consummated if Proficient will have net tangible assets of less than $5,000,001 after taking into account holders that have properly demanded Redemption of their Public Shares, upon the consummation of the Business Combination, into cash and the proceeds of any private placement.

Holders of Proficient Warrants and Rights will not have Redemption rights with respect to such securities. 

 18 

Appraisal Rights

Proficient stockholders (including the Initial Stockholder) and holders of other Proficient securities do not have appraisal rights in connection with the Business Combination under the NRS.

Proxy Solicitation

Proxies may be solicited by mail, telephone or in person. Proficient has engaged Morrow Sodali LLC (“Proxy Solicitor”) to assist in the solicitation of proxies.

If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the Meeting. A stockholder may also change its vote by submitting a later-dated proxy as described in the section entitled “Special Meeting of Stockholders of Proficient — Revoking Your Proxy.”

Interests of Proficient’s Directors and Officers in the Business Combination

When you consider the recommendation of Proficient’s board of directors in favor of approval of the Business Combination Proposal, you should keep in mind that Proficient’s Initial Stockholders, including its directors and executive officers, have interests in such proposal that are different from, or in addition to, your interests as a stockholder, Warrant holder or Rights holder. These interests include, among other things: 

  •  If the Business Combination with Lion or another business combination is not consummated 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 for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, the 2,875,000 Founder Shares held by Proficient’s Initial Stockholders, including its directors and officers, which were acquired for an aggregate purchase price of $575,000 prior to Proficient’s Initial Public Offering, would be worthless because Proficient’s Initial Stockholders are not entitled to participate in any Redemption or distribution with respect to such shares. Such shares had an aggregate market value of approximately $28.6 million based upon the closing price of $9.95 per share on Nasdaq on March 18, 2020.
     
  Proficient’s Sponsor owns an aggregate of 5,375,000 Private Placement Warrants, which were issued simultaneously with the consummation of the Initial Public Offering and over-allotment option. Such Warrants had an aggregate market value of $0.43 million based upon the closing price of $0.08 per Warrant on Nasdaq on March 18, 2020.
     
  •  Certain officers and directors of Proficient will be issued 300,000 Pubco ADSs, representing 300,000 Class A Ordinary Shares after the Closing of the Business Combination.
     
  •  If Proficient is unable to complete a business combination within the required time period, the 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.
     
  Proficient’s Initial Stockholders, including its 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. However, if Proficient fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, Proficient may not be able to reimburse these expenses if the Business Combination with Lion or another business combination is not completed 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). As of the date of this proxy statement/prospectus, there is $100.00 of unpaid reimbursable expenses.
     
  Shih-Chung Chou, an affiliate of the Sponsor and a director of Proficient, has committed to Proficient to loan up to $800,000 to Proficient in the event that Proficient’s cash held outside of its Trust Account is less than $150,000. As of the date of this proxy statement/prospectus, there is no amount of loans outstanding.

There are no finder’s fees payable in connection with the Business Combination.

 19 

 

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, the Proficient Initial Stockholders, or Lion’s shareholder 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 common stock of Proficient or vote their shares in favor of the Business Combination Proposal. The Proficient Initial Stockholders, or Lion’s shareholder and/or their respective affiliates anticipate that they may identify the stockholders with whom the Proficient Initial Stockholders, or Lion’s shareholder and/or their respective affiliates may pursue privately negotiated purchases by either the stockholders contacting Proficient directly or by Proficient’s receipt of redemption requests submitted by stockholders following the mailing of this proxy statement/prospectus. To the extent that the Proficient Initial Stockholders, or Lion’s shareholder and/or their respective affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to vote against the business combination. The Proficient Initial Stockholders, or Lion’s shareholder and/or their respective affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws. Any purchases by the Proficient Initial Stockholders, or Lion’s shareholder and/or their respective affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. The Proficient Initial Stockholders, or Lion’s shareholder and/or their respective affiliates will not make purchases of any shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act

The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that the stockholders of Proficient approve the Business Combination Proposal, when it appears that such requirements would otherwise not be met. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of the shares, including the granting of put options and the transfer to such investors or holders of shares or Warrants owned by the Proficient Initial Stockholders for nominal value.

Entering into any such arrangements may have a depressive effect on Proficient’s common stock. For example, as a result of these arrangements, an investor or holder may have 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.

If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the Business Combination Proposal and other proposals to be presented at the Meeting and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it more likely that Proficient will have in excess of the required amount of net assets available to consummate the Business Combination as described above.

As of the date of this proxy statement/prospectus, there have been no such discussions and no agreements to such effect have been entered into with any such investor or holder. Proficient will file a Current Report on Form 8-K to disclose any arrangements entered into or significant purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or the satisfaction of any closing conditions. Any such report will include descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.

Recommendation to Stockholders

Proficient’s board of directors has determined that the Business Combination Proposal and the other proposals to be presented at the Meeting are fair to and in the best interest of Proficient’s stockholders and unanimously recommends that its stockholders vote “FOR” the Business Combination Proposal, “FOR” the Share Issuance Proposal, and, if presented, “FOR” the Adjournment Proposal.

Conditions to the Closing of the Business Combination

 

The obligations of the parties to consummate the Transactions are subject to various conditions, including the following mutual conditions of the parties unless waived: (i) the approval of the Business Combination Agreement and the transactions contemplated thereby, the adoption of Pubco’s amended and restated the memorandum and articles of association, the adoption and approval of a new equity incentive plan for Pubco, the appointment of the members of the Pubco’s board of directors after the Closing and other related matters by the requisite vote of Proficient’s shareholders; (ii) receipt by Lion of all Required Consents; (iii) no law or order preventing or prohibiting the Transactions; (iv) no pending litigation to enjoin or restrict the consummation of the Closing; (v) Proficient having at least $5,000,001 in net tangible assets as of the Closing, after giving effect to the completion of the Redemption and any private placement financing; (vi) the effectiveness of the Registration Statement; (vii) adoption by the shareholder of Pubco of Pubco’s amended and restated memorandum and articles of association; (viii) receipt by Lion and Proficient of evidence reasonably satisfactory to each such party that Pubco qualifies as a foreign private issuer; and (ix) the Exchange Shares (including the Indemnity Escrow Shares and the Earnout Escrow Shares) shall have been approved for listing on Nasdaq, subject only to the official notice of issuance.

 

In addition, unless waived by Lion, the obligations of Lion, Pubco, Merger Sub and the Sellers to consummate the Transactions are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (i) the representations and warranties of Proficient being true and correct as of the date of the Business Combination Agreement and as of the Closing (subject to materiality or Material Adverse Effect qualifications); (ii) Proficient having performed in all material respects its obligations and complied in all material respects with its covenants and agreements under the Business Combination Agreement required to be performed or complied with by it on or prior the date of the Closing; (iii) absence of any Material Adverse Effect with respect to Proficient since the date of the Business Combination Agreement which is continuing and uncured; (iv) receipt by Sellers of the Seller Registration Rights Agreement duly executed by Pubco; (v) receipt by Lion and Pubco of the First Amendment to Registration Rights Agreement (the “Founder Registration Rights Agreement Amendment”), pursuant to which Proficient, Pubco, the Founders and the other parties to Proficient’s Registration Rights Agreement that was entered into by Proficient at the time of its IPO (the “Founder Registration Rights Agreement”), shall have amended the Founder Registration Rights Agreement , to among other matters, include Pubco as a party and to make it apply to the Pubco securities to be received in connection with the Merger by Proficient’s stockholders who are parties to the Founder Registration Rights Agreement; (vi) the election or appointment of members to Pubco’s post-closing board of directors designated by Lion and the independent directors.

 

Unless waived by Proficient, the obligations of Proficient, to consummate the Transactions are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (i) the representations and warranties of Lion, Pubco and the Sellers being true and correct as of the date of the Business Combination Agreement and as of the Closing (subject to materiality or Material Adverse Effect qualifications); (ii) Lion, Pubco, Merger Sub and the Sellers having performed in all material respects the respective obligations and complied in all material respects with their respective covenants and agreements under the Business Combination Agreement required to be performed or complied with on or prior the date of the Closing; (iii) absence of any Material Adverse Effect with respect to Lion or Pubco since the date of the Business Combination Agreement which is continuing and uncured; (iv) receipt by Proficient of employment agreements, effective as of the Closing between Jian Wang, Chunning Wang and Hua Luo, respectively, and Pubco, duly executed by the parties thereto; (v) receipt by Proficient of the Founders Registration Rights Agreement Amendment, each executed by Pubco; (vi) receipt by Proficient of share certificates and other documents evidencing the transfer of the Purchased Shares to Pubco; (vii) receipt by Proficient of the evidence of the termination of any outstanding options, warrants or other convertible securities of Lion (if any), without any consideration or liability therefor; and (viii) the election or appointment of members to Pubco’s post-closing board of directors designated by Proficient and the independent directors.

 

 20 

  

Anticipated Accounting Treatment

The Business Combination will be accounted for as a reverse merger in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, Proficient will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the following factors: (i) Lion’s existing operations will comprise the ongoing operations of the combined company, (ii) Lion’s senior management will comprise the senior management of the combined company, and (iii) the former owners and management of Lion will have control of the board of directors after the Business Combination by virtue of being able to appoint a majority of the directors of the combined company. In accordance with guidance applicable to these circumstances, the Business Combination will be treated as the equivalent of Lion issuing shares for the net assets of Proficient, accompanied by a recapitalization. The net assets of Proficient will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Lion.

Regulatory Matters

The Business Combination Agreement and the Transactions contemplated by the Business Combination Agreement are subject to approval by the Cayman Island Monetary Authority (“CIMA”), the application for which was submitted on December 24, 2019, and approval by the Securities and Futures Commission of Hong Kong, the application of which was submitted on March 5, 2020. Except as described in this proxy statement/prospectus, the Business Combination Agreement and the Transactions contemplated by the Business Combination Agreement are not subject to any additional federal or state regulatory requirement or approval, except for filings with the Registrar of Companies of the Cayman Islands and the Secretary of State of the State of Nevada necessary to effectuate the transactions contemplated by the Business Combination Agreement.

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.” 

 21 

 

SELECTED HISTORICAL FINANCIAL INFORMATION

Proficient

Proficient is providing the following selected historical financial information to assist you in your analysis of the financial aspects of the Business Combination.

Proficient’s balance sheet data as of December 31, 2019 and statement of operations data for the three months ended December 31, 2019 are derived from Proficient’s unaudited financial statements included elsewhere in this proxy statement/prospectus. Proficient’s balance sheet data as of September 30, 2019 and statement of operations data for the fiscal year ended September 30, 2019 are derived from Proficient’s audited financial statements included elsewhere in this proxy statement/prospectus. The financial statements of Proficient are stated in US dollars (US$).

The information in this section is only a summary and should be read in conjunction with each of Proficient’s financial statements and related notes and “Other Information Related to Proficient — Proficient’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere herein. The historical results included below and elsewhere in this proxy statement/prospectus are not indicative of the future performance of Proficient.

Balance Sheets
 
   As of September 30,  As of December 31,
   2018  2019  2019
         (Unaudited)
ASSETS               
Current assets:               
Cash and cash equivalents  302,362   $1,078,708   $1,690,632 
Escrow deposit   —      800,000    —   
Other assets   —      105,219    77,049 
Total current assets   302,362    1,983,927    1,767,681 
Government securities held in Trust Account   —      115,925,644    116,428,920 
                
TOTAL ASSETS  $302,362   $117,909,571   $118,196,601 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY               
Current liabilities:               
Accrued expenses  19,333   $38,344   $66,985 
Accrued expenses - related party   21,323    19,074    76,684 
Tax payable   —      19,343    59,499 
Total current liabilities   40,656    76,761    203,168 
                
COMMITMENTS AND CONTINGENCIES               
Common stock subject to redemption   —      97,301,671    112,993,432 
                
STOCKHOLDERS’ (DEFICIT) EQUITY               
Preferred stock   —      —      —   
Common stock   2,875    4,737    3,168 
Additional paid in capital   554,347    20,449,027    4,762,168 
Subscription receivable   (182,500)   —      —   
Retained earnings   (113,016)   77,375    234,665 
Total stockholders’ (deficit) equity   261,706    20,531,139    5,000,001 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY  $302,362   $117,909,571   $118,196,601 

 22 

 

Statements of Operations
          
   Year ended  Three months ended
   September 30  December 31
   2019  2018  2019
      (Unaudited)  (Unaudited)
Expenses               
Audit fee  38,545   8,000   10,000 
Officers compensation   266,185    71,667    64,333 
Legal fees   95,000    25,000    126,302 
General and administrative   316,278    433    107,814 
Total expenses   716,008    105,100    308,449 
                
Other income               
Interest income   98    —      2,619 
Unrealized gain from the trust account   925,644    —      503,276 
Total other income   925,742    —      505,895 
                
Income (loss) before income taxes   209,734    (105,100)   197,446 
Income tax expense   19,343    —      40,156 
                
Net income (loss)  $190,391   $(105,100)  $157,290 

 

 23 

 

Statements of Cash Flows
       
   Year ended  Three months ended
   September 30  December 31
   2019  2018  2019
      (Unaudited)  (Unaudited)
Cash flows from operating activities:               
Net income (loss)  $190,391   $(105,100)  $157,290 
Adjustments to reconcile net income (loss) to net cash               
provided by (used in) operating activities:               
Common stock issued for service   13,333    3,334    3,333 
Changes in operating assets and liabilities:               
Prepaid expenses   (105,000)   —      28,170 
Other receivable   (219)   —      —   
Accrued expenses   19,011    (11,000)   63,064 
Accrued expenses - related parties   (2,249)   (15,668)   23,187 
Tax payable   19,343    —      40,156 
Net cash provided by (used in) operating activities   134,610    (128,434)   315,200 
                
Cash flows from investing activities:               
Escrow deposit   (800,000)   —      800,000 
Investment of government securities held in Trust Account   (115,925,644)   —      (503,276)
Net cash (used in) investing activities   (116,725,644)   —      296,724 
                
Cash flows from financing activities:               
Proceeds from sale of private warrants   5,375,000    —      —   
Proceeds from sale of Units, net of offering expenses   111,809,880    —      —   
Collection of subscription receivable   182,500    166,250    —   
Net cash provided by financing activities   117,367,380    166,250    —   
                
Net increase/(decrease) in cash and cash equivalents   776,346    37,816    611,924 
                
Cash and cash equivalents at the beginning of the period   302,362    302,362    1,078,708 
                
Cash and cash equivalents at the end of the period  $1,078,708   $340,178   $1,690,632 

  

 24 

Lion

The following table sets forth selected historical financial information derived from Lion’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2018 and 2019, each of which is included elsewhere in this proxy statement/prospectus. Such financial information should be read in conjunction with the audited financial statements and related notes included elsewhere in this proxy statement/prospectus.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should carefully read the following selected financial information in conjunction with the section entitled “Lion’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Lion’s financial statements and the related notes contained elsewhere in this proxy statement/prospectus.

Consolidated Statements of Profit and Loss

   
 

Year ended December 31,

 

2017

2018

2019

 

US$

%

US$

%

US$

%

             
Revenues            
CFD trading services —   —   —   —   12,843,574 69.3
Insurance brokerage services 9,623,359 97.3 5,378,679 81.8 2,648,141 14.3
Futures brokerage and securities brokerage services 268,252 2.7 2,066,354 31.5 2,215,867 12.0
Others —   —   (876,770) (13.3) 819,268 4.4
Total revenues

9,891,611

100.0

6,568,263

100.0

18,526,850

100.0

             
Expenses            
Commission expenses (8,221,372) (83.0) (5,471,602) (83.3) (3,355,205) (18.1)
Compensation expenses (1,211,785) (12.3) (1,639,288) (25.0) (2,430,636) 13.1)
Communication and technology expenses (144,156) (1.5) (588,353) (9.0) (823,433) (4.4)
Professional fees (59,038) (0.6) (227,998) (3.5) (761,238) (4.1)
Interest expenses (36,665) (0.3) (118) - (731,812) (4.0)
General and administrative expenses (272,682) (2.8) (539,773) (8.2) (692,648) (3.7)
Occupancy expenses (502,120) (5.1) (548,331) (8.3) (591,936) (3.2)
Other expenses (75,512) (0.8) (297,674) (4.5)

(859,118)

(4.6)

Total expenses

(10,523,330)

(106.4)

(9,313,137)

(141.8)

(10,246,026)

(55.3)

(Loss)/income before income taxes

(631,719)

(6.4)

(2,744,874)

(41.8)

8,280,824

44.7

Income tax expenses (102,936) (1.0) (26,334) (0.4) (64,472) (0.3)
Net (loss)/income

(734,655)

(7.4)

(2,771,208)

(42.2)

8,216,352

44.4

Other comprehensive income (loss)            
Foreign currency translation adjustment (95,125) (1.0) (24,749) (0.4) 75,637 0.4
Comprehensive (loss)/income

(829,780)

(8.4)

(2,795,957)

(42.6)

8,291,989

44.8

 

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Consolidated Statements of Financial Positions

         
    As of December 31,
    2017   2018   2019
             
Assets            
Cash and cash equivalents   2,337,161     3,116,209     6,388,978  
Restricted cash     619,970       3,991,949       2,192,201  
Securities owned, at fair value     —         1,107,233       180,201  
Derivative, at fair value     —         —         194,110  
Receivables from broker-dealers and clearing organizations     25,588       842,045       20,409  
Receivables from broker-dealers and clearing organizations - client accounts     907,568       5,566,745       1,664,552  
Commissions receivables     344,230       157,004       88,560  
Short-term loans receivable     —         —         1,637,310  
Other receivables     645,048       —         —    
Prepaids and deposits     268,987       470,707       676,355  
Fixed assets, net     76,121       105,964       73,688  
Intangible asset     63,980       63,847       67,964  
Other assets     131,122       251,058       233,343  
Deferred taxes                 677  
Total assets   5,419,775     15,672,761     13,418,348  
                         
Liabilities                        
Payables to broker-dealer and clearing organizations   8,625     —       —    
Payables to clients     1,518,026       9,551,219       3,853,693  
Commissions payable     468,668       125,668       29,439  
Dividends payable     -           385,901  
Other payables     196,609       205,519       417,445  
Short-term borrowings     —         —         1,412,570  
Short-term borrowings from related party                 128,415  
Derivative, at fair value     —         20,287       —    
Tax payable     76,276       —         —    
Deferred taxes     1,778       1,150       —    
Total liabilities   2,269,982     9,903,843     6,227,463  
                         

 

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Consolidated Statements of Cash Flows

     
    Year ended December 31,
    2017   2018   2019
             
Net cash provided by (used in) operating activities   $ 448,961     $ (1,176,853 )   $ 7,976,995  
Net cash used in investing activities     (203,361 )     (62,586 )     (27,254,283 )
Net cash provided by financing activities     839,843       5,415,082       20,664,343  
Effect of exchange rate changes on cash     (95,125 )     (24,616 )     85,966  
Net increase in cash and restricted cash     990,318       4,151,027       1,473,021  
Cash and restricted cash at beginning of year     1,966,813       2,957,131       7,108,158  
Cash and restricted cash at end of year     2,957,131       7,108,158       8,581,179  

 

 27 

 

SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

Proficient is providing the following selected unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the transactions.

The following selected unaudited pro forma condensed combined statement of financial positions combines the unaudited historical balance sheet of Proficient as of December 31, 2019, and the audited consolidated historical balance sheet of Lion as of December 31, 2019, giving effect to the transactions as if they had been consummated as of December 31, 2019.

The following selected unaudited pro forma condensed combined statement of profit or loss for the three months ended December 31, 2019 combines the unaudited condensed consolidated statement of comprehensive income of Lion for the three months ended December 31, 2019, and the unaudited statement of operations of Proficient for the three months ended December 31, 2019, giving effect to the transactions as if they had occurred as of the earliest period presented.

The following selected unaudited pro forma condensed combined statement of profit or loss for the twelve months ended September 30, 2019 combines the audited consolidated statement of comprehensive income of Lion for the twelve months ended December 31, 2019 with the audited statement of operations of Proficient for the twelve months ended September 30, 2019, giving effect to the transactions as if they had occurred as of the earliest period presented.

The unaudited pro forma combined financial information has been prepared based upon the following two scenarios.

•        Scenario 1 – Assuming no redemptions for cash: This presentation assumes that no Proficient stockholders exercise redemption rights with respect to their common stock upon consummation of the Transactions; and

•        Scenario 2 – Assuming redemptions of 10,457,789 shares of Proficient common stock for cash: This presentation assumes that Proficient stockholders exercise their redemption rights with respect to a maximum of 10,457,789 shares of common stock upon consummation of the Transactions at a redemption price of approximately $10.177 per share. The maximum redemption amount is derived from a minimum of $5,000,001 in net tangible assets and $5,000,000 of cash required to pay Proficient’s transaction expenses, after giving effect to the payments to redeeming stockholders.

The historical financial information has been adjusted to give effect to the expected events that are related and/or directly attributable to the transactions, are factually supportable and are expected to have a continuing impact on the combined results. The adjustments presented in the selected unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the transactions.

The historical financial information of Proficient was derived from the historical audited financial statements of Proficient for the fiscal year ended September 30, 2019 and the historical unaudited financial statements of Proficient for the three months ended December 31, 2019, which are included elsewhere in this proxy statement/prospectus.

The historical financial information of Lion was derived from the historical audited consolidated financial statements of Lion for the year ended December 31, 2019, included elsewhere in this proxy statement/prospectus, and the historical unaudited consolidated financial statements of Lion for the three months ended December 31, 2019 (not included elsewhere in this proxy statement/prospectus).

This information should be read together with Proficient’s and Lion’s financial statements and related notes, “Other Information Related to Proficient — Proficient’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Lion’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this proxy statement/prospectus.

The selected unaudited pro forma condensed combined financial information is presented for illustrative purposes only. Such information is only a summary and should be read in conjunction with the section titled “Unaudited Pro Forma Condensed Combined Financial Information.” The financial results may have been different had the companies always been combined. You should not rely on the selected unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience.

 

 

 

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Selected Unaudited Pro Forma Financial Information

            Pro Forma Combined   Pro Forma Combined
            Scenario 1   Scenario 2
            Assuming no   Assuming maximum
    Lion
(Consolidated)
  Proficient   redemption of shares   redemption of shares
                 
Balance Sheet Data - As of December 31, 2019                                
                                 
Total current assets     13,418,348       1,767,681       125,614,949       19,186,029  
Total assets     13,418,348       118,196,601       125,614,949       19,186,029  
Total current liabilities     6,227,463       203,168       6,378,224       6,378,224  
Total liabilities     6,227,463       203,168       6,378,224       6,378,224  
Total stockholders’ equity     7,190,885       5,000,001       119,236,725       12,807,805  
                                 
Statement of Operations Data - Three Months Ended December 31, 2019                                
                                 
Revenue     5,834,995       —         5,834,995       5,834,995  
Net income     2,906,877       157,290       2,844,320       2,844,320  
net (losses) income per share - basic     —         (0.06 )     0.10       0.16  
net (losses) income per share - diluted     —         (0.06 )     0.06       0.08  
                                 
Statement of Operations Data - Twelve Months Ended September 30, 2019                                
                                 
Revenue     18,526,850       —         18,526,850       18,526,850  
Net income     8,216,352       190,391       7,767,049       7,767,049  
net (losses) income per share - basic     —         (0.17 )     0.27       0.42  
net (losses) income per share - diluted     —         (0.17 )     0.17       0.21  

  

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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. 

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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 10,457,789 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 96% 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.

 

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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.

 

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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.

 

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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.

 

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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:

  a limited availability of market quotations for its ADSs;
     
  a less liquid market for its ADSs;
     
  a limited amount of news and analyst coverage for Pubco; and
     
  a decreased ability to issue additional securities or obtain additional financing in the future.
     

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.

 

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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. 

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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, quarter to quarter earnings 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 profitably as investors expect, the market price of Pubco securities post-Business Combination 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 post-Business Combination and increase fluctuations in its quarterly earnings. These factors include certain of the risks discussed herein, operating results of other companies in the same industry, changes in financial estimates or recommendations of securities analysts post-Business Combination, 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, 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 .

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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 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.

 

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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 10,457,789 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 96% 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’s 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. 

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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 10,457,789 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 96% 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.

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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:

  actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in the industry;
  mergers and strategic alliances in the financial services industry;
  market prices and conditions in the financial services market;
  changes in government regulation;
  potential or actual military conflicts or acts of terrorism;
  the failure of securities analysts to publish research about Pubco, or shortfalls in Pubco’s operating results compared to levels forecast by securities analysts;
  announcements concerning us or Lion’s competitors; and
  the general state of the securities markets.
     

 

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:

  Pubco’s existing shareholders’ proportionate ownership interest and your holdings of ADSs in Pubco will decrease;
  the amount of cash available per share, including for payment of dividends in the future, may decrease;
  the relative voting strength of each previously outstanding Ordinary share may be diminished; and
  the market price of Pubco’s ADSs may decline.

 

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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.   

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ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing 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.

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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. 

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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. 

 

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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.

 

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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, primarily currency pairs. 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. In the event that Lion no longer has access to the prices and levels of liquidity that it currently has, Lion may be unable to provide competitive forex trading services, which will materially adversely affect its CFD trading business, financial conditions and results of operations.

Among the various CFD products, currency pair are the predominant category of products traded on Lion’s platform by trading volume. Given the level of Lion’s clients trading volume, 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 to 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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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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. 

 

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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 OperationsInternal 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.

 

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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.

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.

Lion’s business could also be adversely affected by the novel coronavirus (COVID-19), Ebola virus disease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, SARS or other epidemics. For example, the recent outbreak of COVID-19 spread rapidly throughout China and to over 100 countries throughout the world, such as Italy, Iran and South Korea in particular. 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. 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. In addition, if the outbreak persists or escalates worldwide, the global economy may be severely harmed and disrupted, which could adversely affect Lion’s results of operations.

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.

 

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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.

 

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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.

 

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FORWARD-LOOKING STATEMENTS

Proficient believes that some of the information in this proxy statement/prospectus constitutes forward-looking statements. You can identify these statements by forward-looking words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,” “estimate,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully because they:

  discuss future expectations;
     
  contain projections of future results of operations or financial condition; or
     
  state other “forward-looking” information.
     

Proficient believes it is important to communicate its expectations to its security holders. However, there may be events in the future that Proficient is not able to predict accurately or over which it has no control. The risk factors and cautionary language discussed in this proxy statement/prospectus provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by Proficient or Lion in such forward-looking statements, including among other things:

  the number and percentage of its Public Stockholders voting against the Business Combination Proposal and/or seeking Redemption;
     
  the occurrence of any event, change or other circumstances that could give rise to the termination of the Business Combination Agreement;
     
  Pubco’s ability to maintain the listing of its securities on Nasdaq following the Business Combination;
     
  changes adversely affecting the business in which Lion is engaged;
     
  management of growth;
     
  general economic conditions;
     
  Lion’s business strategy and plans; and
     
  the result of future financing efforts.

Pubco and Lion believe that some of the information in this proxy statement/prospectus contains “forward-looking statements”. Forward-looking statements can be identified by words such as: “forecast,” “anticipate,” “intend,” “plan,” “target,” “seek,” “believe,” “project,” “estimate,” “expect,” “future,” “likely,” “outlook,” “will” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward looking statements include projected financial information. Examples of forward-looking statements include, among others, statements we make regarding:

  Lion’s mission, goals and strategies;
     
  Lion’s future business development, financial conditions and results of operations;
     
  the trends in, expected growth and the market size of the online trading and other financial services industry, both in Hong Kong and globally;
     
  expected changes in Lion’s revenues, costs or expenditures;
     
  Lion’s expectations regarding demand for and market acceptance of its products and services;
     
  Lion’s expectations regarding its relationships with clients and third-party business partners;
     
  competition in Lion’s industry;
     
  relevant regulations in jurisdictions which Lion operates;
     
  general economic and business conditions in the markets Lion has businesses;

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Such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the businesses of Lion and Pubco after completion of the proposed Business Combination are neither historical facts nor assurances of future performance. Instead, they are based only on Lion’s and/or Pubco’s current beliefs, expectations and assumptions regarding the future of the business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions that are subject to risks and uncertainties. The risk factors and cautionary language discussed in this proxy statement/prospectus provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by Proficient, Lion, or Pubco in such forward-looking statements, including among other things:

  Lion operates in a heavily regulated industry, and are subject to extensive and evolving regulatory requirements in the jurisdictions in which it operates.
     
  Lion had incurred net losses in the past, and Lion may incur losses again 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.
     
  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.
     
  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’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 is dependent on wholesale forex trading partners to continually provide it with forex market liquidity. In the event that Lion no longer has access to the prices and levels of liquidity that it currently has, Lion may be unable to provide competitive forex trading services, which will materially adversely affect its CFD trading business, financial conditions and results of operations.
     
  Lion cannot guarantee the profitability of its clients’ investments or ensure that its clients will make rational investment judgements.

Before a stockholder grants its proxy or instructs how its vote should be cast on the Business Combination Proposal, the Share Issuance Proposal or the Adjournment Proposal, it should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement/prospectus may adversely affect Proficient, Pubco and/or Lion.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus.

All forward-looking statements included herein attributable to any of Proficient, Lion, Pubco or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, Proficient, Lion, and Pubco undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

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SPECIAL MEETING OF STOCKHOLDERS OF PROFICIENT

General

Proficient is furnishing this proxy statement/prospectus to Proficient’s stockholders as part of the solicitation of proxies by Proficient’s board of directors for use at the Meeting to be held on __________, 2020, and at any adjournment thereof. This proxy statement/prospectus provides Proficient’s stockholders with information they need to know to be able to vote or instruct their vote to be cast at the Meeting.

Date, Time and Place

The Meeting will be held on ___________, 2020 at 10:00 a.m., Eastern Time, at the offices of Ellenoff Grossman & Schole LLP, Proficient’s counsel, at 1345 Avenue of the Americas, 11th Floor, New York, New York 10105.

Purpose of the Special Meeting of Stockholders of Proficient

At the Meeting, Proficient is asking holders of shares of Proficient common stock to:

  consider and vote upon a proposal to adopt the Business Combination Agreement and approve the Business Combination contemplated by the Business Combination Agreement (The Business Combination Proposal);
     
  consider and vote upon a proposal to approve issuances of 20% or more of Proficient’s common stock in connection with financing related to the proposed Business Combination (The Share Issuance Proposal); and
     
  consider and vote upon a proposal to adjourn the Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that, based upon the tabulated votes at the time of the Meeting, Proficient would not have been authorized to consummate the Business Combination (The Adjournment Proposal).

Recommendation of Proficient Board of Directors

Proficient’s board of directors has unanimously determined that the Business Combination Proposal is fair to and in the best interests of Proficient and its stockholders; has unanimously approved the Business Combination Proposal; and unanimously recommends that stockholders vote “FOR” the Business Combination Proposal, “FOR” the Share Issuance Proposal and “FOR” an Adjournment Proposal if one is presented to the Meeting.

Record Date; Outstanding Shares; Stockholders Entitled to Vote

Proficient has fixed the close of business on _________, 2020, as the “Record Date” for determining Proficient stockholders entitled to notice of and to attend and vote at the Meeting. As of the close of business on the Record Date, there were 14,467,000 shares of Proficient common stock outstanding and entitled to vote. Each share of Proficient common stock is entitled to one vote per share at the Meeting.

Pursuant to agreements with Proficient, the 2,875,000 Founder Shares held by the Initial Stockholders and any shares of Proficient common stock acquired in the aftermarket by such stockholders, will be voted in favor of the Business Combination Proposal. Such holders have indicated they intend to vote their shares in favor of the other proposals presented at the Meeting.

Quorum

The presence, in person or by proxy, of the holders of a majority of all the outstanding shares of Proficient common stock entitled to vote constitutes a quorum at the Meeting.

Abstentions and Broker Non-Votes

Proxies that are marked “abstain” and proxies relating to “street name” shares that are returned to Proficient but marked by brokers as “not voted” will be treated as shares present for purposes of determining the presence of a quorum on all matters. The latter will not be treated as shares entitled to vote on the matter as to which authority to vote is withheld from the broker. If a stockholder does not give the broker voting instructions, under applicable self-regulatory organization rules, its broker may not vote its shares on “non-routine” proposals, such as the Business Combination Proposal. However, a broker may vote its shares on “routine” proposals such as the Share Issuance Proposal.

Abstentions and broker non-votes, while considered present for the purposes of establishing a quorum, are not treated as votes cast and will have no effect on any of the proposals.

 

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Vote Required

The approval of the Business Combination Proposal, the Share Issuance Proposal and the Adjournment Proposal (if presented) will require the affirmative vote by the holders of a majority of the shares of Proficient common stock present and entitled to vote at the Meeting.

Voting Your Shares

Each share of Proficient common stock that you own in your name entitles you to one vote. Your proxy card shows the number of shares of Proficient common stock that you own. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

There are two ways to vote your shares of Proficient common stock at the Meeting:

You Can Vote By Signing and Returning the Enclosed Proxy Card.    If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted as recommended by Proficient’s board “FOR” the Business Combination Proposal, the Share Issuance Proposal and the Adjournment Proposal, if presented. Votes received after a matter has been voted upon at the Meeting will not be counted.

You Can Attend the Meeting and Vote in Person.    You will receive a ballot when you arrive. However, if your shares are held in the name of your broker, bank or another nominee, you must get a proxy from the broker, bank or other nominee. That is the only way Proficient can be sure that the broker, bank or nominee has not already voted your shares.

If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. If you wish to attend the Meeting and vote in person and your shares are held in “street name,” you must obtain a legal proxy from your broker, bank or nominee. That is the only way Proficient can be sure that the broker, bank or nominee has not already voted your shares.

Stock Ownership of and Voting by Proficient Directors, Officers and Initial Stockholders

Current directors, officers and Initial Stockholders of Proficient beneficially own an aggregate of 2,875,000 shares of Proficient common stock. Each current director and officer have agreed to vote their shares of Proficient common stock in favor of the Business Combination Proposal.

Revoking Your Proxy

If you are a stockholder and you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

  you may send another proxy card with a later date;
     
  you may notify Proficient’s secretary, in writing before the Meeting that you have revoked your proxy; or
     
  you may attend the Meeting, revoke your proxy, and vote in person, as indicated above.
     

Who Can Answer Your Questions About Voting Your Shares

If you are a stockholder and have any questions about how to vote or direct a vote in respect of your shares of Proficient common stock, you may call Kin Sze of Proficient at +1 917-289-0932 or Morrow Sodali LLC, Proficient’s Proxy Solicitor, at (800) 662-5200 or banks and brokers can call at (203) 658-9400.

 

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Redemption Rights

Holders of Public Shares may seek to convert their shares, regardless of whether or not they are holders on the Record Date or whether or how they vote at the Meeting, but no later than 5:00 p.m. Eastern Time on __________, 2020 (two (2) business days prior to the Meeting). Any stockholder holding Public Shares may demand that Proficient convert such shares into a full pro rata portion of the Trust Account (which was approximately $[ ] per share as of _______, 2020, the Record Date), calculated as of two business days prior to the anticipated consummation of the Business Combination. If a holder properly seeks Redemption as described in this section and the Business Combination is consummated, Proficient will convert these shares into a pro rata portion of funds deposited in the Trust Account and the holder will no longer own these shares following the Business Combination.

Proficient’s Sponsor, officers and directors will not have Redemption rights with respect to any shares of Proficient common stock owned by them, directly or indirectly.

Proficient stockholders who seek to convert their Public Shares are required to (A) either (i) check the box on their proxy card, or (ii) submit their request in writing to American Stock Transfer & Trust Company, Proficient’s transfer agent and (B) deliver their stock, either physically or electronically using The Depository Trust Company’s DWAC System, to Proficient’s transfer agent no later than 5:00 p.m. Eastern Time on __________, 2020 (two (2) business days prior to the Meeting). If you hold the shares in “street name”, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be converted into cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system.

Any request to convert such shares, once made, may be withdrawn at any time up to the vote on the Business Combination Proposal. Furthermore, if a holder of a Public Share delivered its certificate in connection with an election of its Redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that the transfer agent return the certificate (physically or electronically).

If the Business Combination is not approved or completed for any reason, then Proficient’s Public Stockholders who elected to exercise their Redemption rights will not be entitled to convert their shares into a pro rata portion of the cash in the Trust Account, as applicable. Proficient will thereafter promptly return any shares delivered by Public Stockholders. In such case, holders may only share in the assets of the Trust Account upon the liquidation of Proficient. This may result in holders receiving less than they would have received if the Business Combination was completed and they had exercised Redemption rights in connection therewith due to potential claims of creditors. If Proficient would be left with less than $5,000,001 of net tangible assets as a result of the holders of Public Shares properly demanding Redemption of their shares, Proficient will not be able to consummate the Business Combination.

The closing price of the shares of Proficient common stock on the Record Date was $[ ]. The cash held in the Trust Account on such date was approximately $[ ] million (approximately $[ ] per Public Share). Prior to exercising Redemption rights, stockholders should verify the market price of the shares of Proficient common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their Redemption rights if the market price per share is higher than the Redemption price. Proficient cannot assure its stockholders that they will be able to sell their shares of Proficient common stock in the open market, even if the market price per share is higher than the Redemption price stated above, as there may not be sufficient liquidity in its securities when its stockholders wish to sell their shares.

If a holder of Public Shares exercises its Redemption rights, then it will be exchanging its shares of Proficient common stock for cash and will no longer own those shares. You will be entitled to receive cash for these shares only if you properly demand Redemption and deliver your stock certificate (either physically or electronically) to Proficient’s transfer agent prior to the vote at the Meeting, and the Business Combination is consummated.

If a holder of Public Shares exercises its Redemption rights, it will not result in the loss of any Proficient Warrants and Rights that it may hold and, upon consummation of the Business Combination, each Warrant will become exercisable to purchase one Class A Ordinary Share, which can be exchanged for Pubco ADSs, in lieu of one share of Proficient common stock for a purchase price of $11.50 and each Right will automatically be converted into one-tenth of a Class A Ordinary Share in the form of Pubco ADSs.

 

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Appraisal Rights

Proficient stockholders (including the Initial Stockholder) and holders of other Proficient securities do not have appraisal rights in connection with the Business Combination under the NRS.

Proxy Solicitation Costs

Proficient is soliciting proxies on behalf of its board of directors. This solicitation is being made by mail but also may be made by telephone or in person. Proficient and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Proficient will bear the cost of the solicitation.

Proficient has hired Proxy Solicitor to assist in the proxy solicitation process.

Proficient will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. Proficient will reimburse them for their reasonable expenses.

 

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THE BUSINESS COMBINATION PROPOSAL

General

Holders of shares of Proficient common stock are being asked to approve and adopt the Business Combination Agreement and the transactions contemplated thereby, including the Business Combination. Proficient stockholders should read carefully this proxy statement/prospectus in its entirety for more detailed information concerning the Business Combination Agreement, which is attached as Annex A to this proxy statement/prospectus. Please see the section entitled “— The Business Combination Agreement and Related Agreements” below, for additional information and a summary of certain terms of the Business Combination Agreement. You are urged to read carefully the Business Combination Agreement in its entirety before voting on this proposal.

Because Proficient is holding a stockholder vote on the Business Combination, Proficient may consummate the Business Combination only if it is approved by the affirmative vote of the holders of a majority of the issued and outstanding shares of Proficient common stock as of the Record Date for the Meeting.

The Business Combination Agreement and Related Agreements

The subsections that follow this subsection describe the material provisions of the Business Combination Agreement, but do not purport to describe all of the terms of the Business Combination Agreement. The following summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement, a copy of which is attached as Annex A hereto. Stockholders and other interested parties are urged to read the Business Combination Agreement carefully and in its entirety (and, if appropriate, with the advice of financial advisor and legal counsel) because it is the primary legal document that governs the Business Combination.

The Business Combination Agreement contains representations, warranties and covenants that the respective parties made to each other as of the date of the Business Combination Agreement or other specific dates, which could be updated prior to the Closing of the Business Combination. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Business Combination Agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in important part by the disclosure schedules attached thereto which are not filed publicly and which are subject to a contractual standard of materiality that may be different from that generally applicable to stockholders. The disclosure schedules were used for the purpose of allocating risk among the parties rather than establishing matters as facts. We do not believe that the disclosure schedules contain information that is material to an investment decision.

 

General Description of the Business Combination Agreement

 

On March 10, 2020, Proficient entered into a Business Combination with Lion, Pubco, Merger Sub, Shih-Chung Chou, an individual, in the capacity as the Purchaser Representative thereunder, Jian Wang and Legend Success Ventures Limited, each, in the capacity as a Seller Representative thereunder, and each of the holders of Lion’s outstanding capital shares (the “Sellers”).

 

Pursuant to the Business Combination Agreement, subject to the terms and conditions set forth therein, at the Closing, (a) immediately following the consummation of the Share Exchange (described below), Merger Sub will merge with and into Proficient, with Proficient continuing as the surviving entity, and with holders of Proficient securities receiving substantially identical securities of Pubco, and (b) immediately prior to the Merger, Pubco will acquire all of the issued and outstanding ordinary shares of Lion (the “Purchased Shares”) from the Sellers in exchange for Ordinary Shares, with Lion becoming a wholly-owned subsidiary of Pubco, (the “Share Exchange”, and together with the Merger and the other transactions contemplated by the Business Combination Agreement, the “Transactions”).

 

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Exchange Consideration

 

The total Exchange Consideration to be paid by Pubco to the Sellers for the Purchased Shares shall be an aggregate number of Exchange Shares with an aggregate value equal to, without duplication (i) $125,000,000, plus (or minus, if negative) (ii) Lion’s net working capital less a target net working capital of $815,000, minus (iii) the aggregate amount of any outstanding indebtedness, net of cash and cash equivalents, of Lion and its subsidiaries, and minus (iv) the amount of any unpaid transaction expenses of Lion, with each Pubco ordinary share to be issued to the Sellers valued at a price per share equal to the price at which each share of Proficient common stock is redeemed (the “Redemption Price”) pursuant to the redemption by Proficient of its public stockholders in connection with Proficient’s initial business combination, as required by its amended and restated articles of incorporation (the “Redemption”). Jian Wang, the Chairman of Lion (the “Main Seller”), and Legend Success Ventures Limited (collectively, the “Class B Sellers”), shall each receive solely Class B Ordinary Shares (the “Class B Exchange Shares”) and all of the other Sellers (the “Class A Sellers”) shall receive solely Class A Ordinary Shares (the “Class A Exchange Shares”). The Class A Ordinary Shares and the Class B Ordinary Shares will be identical in rights, except that the Class B Ordinary Shares will (i) entitle the holder to 10 votes per share and (ii) be convertible, at the election of the holder, into Class A Ordinary Shares on a one-to-one basis.

 

The Exchange Consideration is subject to adjustment after the Closing based on final confirmation of the net working capital, the outstanding indebtedness of Lion and its subsidiaries net of cash and cash equivalents, and any unpaid transaction expenses of Lion, as of the Closing Date. If the finally determined number of Exchange Shares is (i) greater than the estimated number of Exchange Shares, Pubco will issue an additional number of Class A Ordinary Shares and Class B Ordinary Shares equal to such difference to the Sellers, subject to a maximum amount equal to the amount of Indemnity Escrow Property (defined below) at such time or (ii) less than the estimated number of Exchange Shares, Pubco will cause the Escrow Agent (as defined below) to release from escrow a number of Indemnity Escrow Shares equal to such difference to Pubco, subject to a maximum amount equal to the Indemnity Escrow Property at such time.

 

Escrow Accounts

 

Indemnity Escrow

 

The parties agreed that at or prior to the Closing, Pubco, the Seller Representatives and American Stock Transfer & Trust Company, LLC, as escrow agent (the “Escrow Agent”) will enter into an escrow agreement, effective as of the Closing, in form and substance reasonably satisfactory to Proficient and Lion (the “Escrow Agreement”), pursuant to which Pubco will deliver to the Escrow Agent a number of Class B Exchange Shares (each valued at the Redemption Price) equal to 15% of the estimated Exchange Consideration otherwise issuable to the Sellers at the Closing (such Class B Exchange Shares, together with any equity securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted the “Indemnity Escrow Shares”) to be held, along with any dividends, distributions or income thereon (together with the Indemnity Escrow Shares, the “Indemnity Escrow Property”) in a segregated account (the “Indemnity Escrow Account”) and disbursed in accordance with the Business Combination Agreement and the Escrow Agreement. The indemnity Escrow Shares will be held in the Indemnity Escrow Account for a period of 24 months after the Closing and shall be the sole and exclusive source of payment for any post-Closing purchase price adjustment and for any post-closing indemnification claims (other than certain fraud claims and breaches of Lion and the Sellers’ fundamental representations, as discussed below); provided that half of the Indemnity Escrow Property will be released to the Class B Sellers on the 12-month anniversary of the Closing. Within three business days of the 24-month anniversary of the Closing, all remaining Indemnity Escrow Property will be released to the Class B Sellers in accordance with the Business Combination Agreement. However, an amount of Indemnity Escrow Property equal to the value of any pending and unresolved claims will remain in the Indemnity Escrow Account until finally resolved.

 

Earnout Escrow

 

Additionally, at the Closing, Pubco will deliver to the Escrow Agent a number of Class B Exchange Shares (each valued at the Redemption Price) equal to thirty percent (30%) of the estimated Exchange Consideration otherwise issuable to the Sellers at the Closing (such Class B Exchange Shares, together with any equity securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted the “Earnout Escrow Shares” and together with the Indemnity Escrow Shares, the “Escrow Shares”) to be held, along with any dividends, distributions or income thereon (together with the Earnout Escrow Shares, the “Earnout Escrow Property”) in a segregated account (the “Earnout Escrow Account”) and disbursed in accordance with the Business Combination Agreement and the Escrow Agreement.

 

In the event that the net income for the calendar year ended December 31, 2021 (the “2021 Net Income”), as set forth in Pubco’s audited financial statements, is equal to or greater than $19,000,000 (the “First Net Income Target”), then, the Class B Sellers’ rights to 50% of the Earnout Escrow Property (the “First Half Earnout Property”) shall vest and shall no longer be subject to forfeiture. If the 2021 Net Income is less than the First Net Income Target, but is equal to or greater than $9,500,000, then the Class B Sellers’ rights to 50% of the First Half Earnout Property shall vest and shall no longer be subject to forfeiture. In all other cases, the First Half Earnout Property will be forfeited.

 

In the event that the net income for the calendar year ended December 31, 2022 (the “2022 Net Income”), as set forth in Pubco’s audited financial statements, is equal to or greater than $21,850,000 (the “Second Net Income Target”), then the Class B Sellers’ rights to the remaining Earnout Escrow Property (after giving effect to any forfeitures for the 2021 calendar year, the “Second Half Earnout Property”) shall vest and shall no longer be subject to forfeiture. If the 2022 Net Income is less than the Second Net Income Target, but is equal to or greater than $10,925,000, then the Class B Sellers’ rights to 50% of the Second Half Earnout Property shall vest and shall no longer be subject to forfeiture. In all other cases, the Second Half Earnout Property will be forfeited.

 

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Representations and Warranties

 

The Business Combination Agreement contains a number of representations and warranties made by Proficient, Lion and Pubco as of the date of such agreement or other specific dates solely for the benefit of certain of the parties to the Business Combination Agreement, which in certain cases are subject to specified exceptions and materiality, Material Adverse Effect, knowledge and other qualifications contained in the Business Combination Agreement or in information provided pursuant to certain disclosure schedules to the Business Combination Agreement. “Material Adverse Effect” as used in the Business Combination Agreement means with respect to any specified person or entity, any fact, event, occurrence, change or effect that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, assets, liabilities, results of operations, prospects or condition (financial or otherwise) of such person or entity and its subsidiaries, taken as a whole, or the ability of such person or entity or any of its subsidiaries on a timely basis to consummate the transactions contemplated by the Business Combination Agreement, subject to certain customary exceptions.

 

In the Business Combination Agreement, Lion made certain customary representations and warranties to Proficient, including among others, related to the following: (1) corporate matters, including due organization, existence and good standing; (2) authority and binding effect relating to execution and delivery of the Business Combination Agreement and other ancillary documents; (3) capitalization; (4) subsidiaries; (5) governmental approvals; (6) non-contravention; (7) financial statements; (8) absence of certain changes; (9) compliance with laws; (10) permits; (11) litigation; (12) material contracts; (13) intellectual property; (14) taxes and tax returns; (15) real property; (16) personal property; (17) title to and sufficiency of assets; (18) employee matters; (19) benefit plans; (20) environmental matters; (21) transactions with related persons; (22) insurance; (23) customers and suppliers; (24) business practices; (25) Investment Company Act of 1940 (“Investment Company Act”); (26) finders and brokers; (27) information supplied and (28) independent investigation. Additionally, Pubco made certain customary representations and warranties to Proficient with respect to Pubco and Merger Sub, including representations and warranties related to the following: (1) corporate matters, including due organization, existence and good standing; (2) authority and binding effect relating to execution and delivery of the Business Combination Agreement and other ancillary documents; (3) governmental approvals; (4) non-contravention; (5) capitalization; (6) title and ownership of the Pubco shares to be issued to the Sellers; (7) Pubco and Merger Sub activities; (8) finders and brokers; (9) Investment Company Act; (10) information supplied; and (11) independent investigation.

 

In the Business Combination Agreement, Proficient made certain customary representations and warranties to Lion and the Sellers, including among others, related to the following: (1) corporate matters, including due organization, existence and good standing; (2) authority and binding effect relative to execution and delivery of the Business Combination Agreement and other ancillary documents; (3) governmental approvals; (4) non-contravention; (5) capitalization; (6) SEC filings ,financial statements and internal controls; (7) absence of certain changes; (8) compliance with laws; (9) litigation, orders and permits; (10) taxes and returns; (11) employees and employee benefit plans; (12) properties; (13) material contracts; (14) transactions with affiliates; (15) Investment Company Act and the JOBS Act; (16) finders and brokers; (17) business practices; (18) insurance; (19) trust account and (20) independent investigation.

 

 

In the Business Combination Agreement, each Seller made customary representations and warranties to Proficient, including among others, related to the following: (1) organization and good standing; (2) authority and binding effect relating to execution and delivery of the Business Combination Agreement and other ancillary documents; (3) ownership of the Purchased Shares; (4) governmental approvals; (5) non-contravention; (6) litigation; (7) investment representations; (8) finders and brokers; (9) information supplied and (10) independent investigation.

 

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Covenants of the Parties

 

Each party agreed in the Business Combination Agreement to use its commercially reasonable efforts to effect the Closing. The Business Combination Agreement also contains certain customary covenants by each of the parties during the period between the signing of the Business Combination Agreement and the earlier of the Closing or the termination of the Business Combination Agreement in accordance with its terms (the “Interim Period”), including covenants regarding: (1) the provision of access to their properties, books and personnel; (2) the operation of their respective businesses in the ordinary course of business; (3) Proficient’s public filing obligations and Lion’s obligation to deliver interim financial statements; (4) no solicitation of, or entering into, any alternative competing transactions; (5) no insider trading; (6) notifications of certain breaches, consent requirements or other matters; (7) efforts to consummate the Closing and obtain third party and regulatory approvals; (8) further assurance; (9) public announcements; (10) confidentiality; (11) indemnification of directors and officers after the Closing; (12) use of trust proceeds after the Closing; and (13) efforts to conduct a private placement, backstop or redemption waiver arrangements, if sought.

 

The parties also agreed to take all necessary actions to cause Pubco’s board of directors immediately after the Closing to consist of a classified board of seven directors, a majority of which will be independent. Two directors (at least one being independent director) will be designated by Proficient prior to the Closing and four directors (at least two being independent directors) will be designated by Lion prior to the Closing. A fourth independent director will be mutually agreed upon by Proficient and Lion prior to the closing. Pubco’s board will be classified into two classes of directors, each serving alternating two-year terms (with Proficient’s designees initially serving until the second annual meeting of Pubco shareholders after the Closing).

Proficient and Pubco also agreed to jointly prepare, and Pubco shall file with the SEC, a registration statement on Form F-4 (as amended, the “Registration Statement”) in connection with the registration under the Securities Act of 1933, as amended (the “Securities Act”) of the issuance of securities of Pubco to the holders of the Proficient securities and containing a proxy statement/prospectus for the purpose of soliciting proxies from the stockholders of Proficient for the matters relating to the Transactions to be acted on at the special meeting of the stockholders of Proficient and providing such stockholders with an opportunity to participate in the Redemption.

 

Survival and Indemnification

 

All of representations and warranties of Lion and the Sellers shall survive the Closing for 24 months, other than representations and warranties regarding financial projections and the information supplied by Lion and Sellers for inclusion in a Form 8-K or any other report or filing with a governmental authority including the SEC, which do not survive the Closing. The representations and warranties of Proficient do not survive the Closing.

 

All covenants, obligations and agreements of Lion, any Seller or any Seller Representative contained in the Business Combination Agreement (x) that are required to be performed prior to or at the Closing, shall survive until the second anniversary of the date of the Closing, and (y) that are required to the performed after the Closing, shall survive the Closing and continue until fully performed in accordance with their terms.

 

The covenants and agreements of Proficient and the Purchaser Representative shall not survive the Closing, except those covenants and agreements to be performed after the Closing which covenants and agreement shall survive the Closing and continue until fully performed in accordance with their terms.

 

The Class B Sellers, severally and not jointly, will provide indemnification for any breach of any representations and warranties or covenants of Lion or the Sellers, with such indemnification being on a pro rata basis between the Class B Sellers based on their Lion shareholding as of the Closing, subject to certain limitations including the following.

 

Indemnification claims by Proficient are subject to a threshold equal to 0.5% of the Exchange Consideration in aggregate losses before any indemnification claim is paid, but after the threshold is reached, all indemnification claims shall be paid from the first dollar of losses. The maximum aggregate amount of indemnification payments which the Class B Sellers will be obligated to pay (other than with respect to certain fraud claims with respect to the transactions under the Business Combination Agreement or breaches of by Lion or the Sellers of certain fundamental representations) is capped at an amount equal to the 15% of the Exchange Consideration. Fraud claims with respect to the transactions under the Business Combination Agreement or breaches of by Lion or the Sellers of their fundamental representations are payable by the Main Seller up to a maximum aggregate amount equal to the Exchange Consideration received by the Main Seller.

 

Any indemnification claims against the Class B Sellers shall first be applied against the Indemnity Escrow Shares (pro rata among the Class B Exchange Shares) and then against any other Indemnity Escrow Property before the Main Seller shall be required to make any out-of-pocket payment for indemnification.

 

Stockholders of Proficient (or following the Closing, Pubco) are not third party beneficiaries of the Business Combination Agreement and are not entitled to bring any claim against any Seller pursuant to the Business Combination Agreement.

 

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Conditions to Closing

 

The obligations of the parties to consummate the Transactions are subject to various conditions, including the following mutual conditions of the parties unless waived: (i) the approval of the Business Combination Agreement and the transactions contemplated thereby, the adoption of Pubco’s amended and restated the memorandum and articles of association (if such a vote is required by the federal securities laws), the adoption and approval of a new equity incentive plan for Pubco, the appointment of the members of the Pubco’s board of directors after the Closing and other related matters by the requisite vote of Proficient’s stockholders; (ii) receipt by Lion of all Required Consents; (iii) expiration of any waiting period under applicable, antitrust laws; (iv) no law or order preventing or prohibiting the Transactions; (v) no pending litigation to enjoin or restrict the consummation of the Closing; (vi) Proficient having at least $5,000,001 in net tangible assets as of the Closing, after giving effect to the completion of the Redemption and any private placement financing; (vii) the effectiveness of the Registration Statement; (viii) amendment by the shareholder of Pubco of Pubco’s amended and restated memorandum and articles of association; (ix) receipt by Lion and Proficient of evidence reasonably satisfactory to each such party that Pubco qualifies as a foreign private issuer; and (x) the Exchange Shares (including the Escrow Shares) shall have been approved for listing on Nasdaq, subject only to the official notice of issuance.

 

In addition, unless waived by Lion, the obligations of Lion, Pubco, Merger Sub and the Sellers to consummate the Transactions are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (i) the representations and warranties of Proficient being true and correct as of the date of the Business Combination Agreement and as of the Closing (subject to materiality or Material Adverse Effect qualifications); (ii) Proficient having performed in all material respects its obligations and complied in all material respects with its covenants and agreements under the Business Combination Agreement required to be performed or complied with by it on or prior the date of the Closing; (iii) absence of any Material Adverse Effect with respect to Proficient since the date of the Business Combination Agreement which is continuing and uncured; (iv) receipt by Sellers of the Seller Registration Rights Agreement, duly executed by Pubco, providing customary registration rights to the Sellers with respect to the portion of the Exchange Shares delivered to the Sellers at the Closing and any Escrow Shares that are released from escrow to the Sellers; (v) receipt by Lion and Pubco of the Founder Registration Rights Agreement Amendment, pursuant to which the Founder Registration Rights Agreement shall have been amended, to among other matters, include Pubco as a party and to make it apply to the Pubco securities to be received in connection with the Merger by Proficient’s stockholders who are parties to the Founder Registration Rights Agreement; and (vi) the election or appointment of members to Pubco’s post-closing board of directors of the independent director and the directors designated by Lion.

 

Unless waived by Proficient, the obligations of Proficient, to consummate the Transactions are subject to the satisfaction of the following Closing conditions, in addition to customary certificates and other closing deliveries: (i) the representations and warranties of Lion, Pubco and the Sellers being true and correct as of the date of the Business Combination Agreement and as of the Closing (subject to materiality or Material Adverse Effect qualifications); (ii) Lion, Pubco, Merger Sub and the Sellers having performed in all material respects the respective obligations and complied in all material respects with their respective covenants and agreements under the Business Combination Agreement required to be performed or complied with on or prior the date of the Closing; (iii) absence of any Material Adverse Effect with respect to Lion or Pubco since the date of the Business Combination Agreement which is continuing and uncured; (iv) receipt by Proficient of employment agreements, effective as of the Closing, between Jian Wang, Chunning Wang and Hua Luo, respectively, and Pubco duly executed by the parties thereto; (v) receipt by Proficient of the Founders Registration Rights Agreement Amendment, each executed by Pubco; (vi) receipt by Proficient of share certificates and other documents evidencing the transfer of the Purchased Shares to Pubco; (vii) receipt by Proficient of the evidence of the termination of any outstanding options, warrants or other convertible securities of Lion (if any); and (viii) the election or appointment of members to Pubco’s post-closing board of directors of the independent director and the directors designated by Proficient.

 

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Termination

 

The Business Combination Agreement may be terminated at any time prior the Closing by either Proficient or Lion if the Closing has not occurred on or prior to June 3, 2020 (the “Outside Date”); provided that if Proficient, at its election, either makes a three month automatic extension (the “Automatic Extension”) or receives stockholder approval for a charter amendment to extend the term it has to consummate a business combination (“Charter Extension”), limited in either case to a maximum of two extensions in total, Proficient can extend the Outside Date by three months in the case of the Automatic Extension or in the case of a Charter Extension the shorter of three months and the period ending on the last day for Proficient to consummate a business combination pursuant to the Charter Extension. If Proficient has extended the Outside Date by an Automatic Extension or a Charter Extension and the parties are waiting solely to obtain the Required Consents and the Sellers and Lion have otherwise complied with their obligations under the Business Combination Agreement in all material respects, Lion can also extend the Outside Date for the shorter of one month and the period ending on the last day for Proficient to consummate a business combination pursuant to such extension. A party is not entitled to terminate the Business Combination Agreement, if the failure of the Closing to occur by such date was caused by or the result of a breach of the Business Combination Agreement by such party (or with respect to Lion, the Sellers, Pubco or Merger Sub).

 

The Business Combination Agreement may also be terminated under certain other customary and limited circumstances prior the Closing, including, among other reasons: (i) by mutual written consent of Proficient and Lion; (ii) by either Proficient or Lion if a governmental authority of competent jurisdiction has issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the Transactions, and such order or other action has become final and non-appealable; (iii) by Lion for Proficient’s uncured breach of the Business Combination Agreement if the breach would result in the failure of the related Closing condition; (iv) by Proficient for the uncured breach of the Business Combination Agreement by Lion, Pubco, Merger Sub or any Seller if the breach would result in the failure of the related Closing condition; (v) by Proficient if there has been a Material Adverse Effect with respect to Lion since the date of the Business Combination Agreement which is uncured and continuing; or (vi) by either Proficient or Lion if Proficient holds a special meeting of its stockholders to approve the Business Combination Agreement and the Transactions and such approval is not obtained.

 

If the Business Combination Agreement is terminated, all obligations of the parties under the Business Combination Agreement (except for certain obligations related to public announcements, confidentiality, fees and expenses, trust account waiver, termination and general provisions) will terminate, and no party to the Business Combination Agreement will have any further liability to any other party thereto except for liability for certain fraud claims or for willful breach of the Business Combination Agreement prior to the termination.

 

In the event the Business Combination Agreement is terminated by Proficient as a result of a material breach by Lion, Pubco, Merger Sub or any Seller (other than as a result Lion and Sellers not using commercially reasonable efforts to obtain the Required Consents or failure to provide notification of certain material events, in which case, Proficient shall still be entitled to seek damages), Lion will pay Proficient a termination fee of $2.3 million plus expenses, as liquidated damages.

 

Trust Account Waiver, Non-Recourse and Releases

 

Lion, Pubco, Merger Sub and each of the Sellers have agreed that they and their affiliates will not have any right, title, interest or claim of any kind in or to any monies in Proficient’s trust account held for its public stockholders, and have agreed not to, and waived any right to, make any claim against the trust account (including any distributions therefrom directly or indirectly to Proficient’s stockholders).

 

The parties agreed that all claims or actions that may be based upon, arise out of or relate to the Business Combination Agreement or any of the ancillary documents may only be made against the parties to the Business Combination Agreement and not against any of their past present or future directors, officers, employees, members, managers, partners affiliates, agents, attorneys or representatives.

 

Each Seller, on behalf of itself and its affiliates that own shares of such Seller, provided a general release of Lion and its subsidiaries, effective as of the Closing, other than its rights under the Business Combination Agreement and ancillary documents and certain other customary exceptions.

Shih-Chung Chou, an affiliate of Proficient’s Sponsor, on behalf of itself and its affiliates, provided a general release of Proficient, effective as of the Closing, other than its rights under the Business Combination Agreement and ancillary documents and certain other customary exceptions. 

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Governing Law

 

The Business Combination Agreement is governed by Delaware law, except that the Merger and the internal affairs of Proficient will be governed by the law of Nevada. The Court of Chancery of Delaware will have exclusive jurisdiction; provided that if it does not have subject matter jurisdiction for any reason then federal or state courts in Delaware will have jurisdiction. 

Related Agreements

 

Lock-Up Agreements

Simultaneously with the execution of the Business Combination Agreement, each Class B Seller entered into a lock-up agreement (each a “Lock-Up Agreement”) with regard to the Exchange Shares to be received by such Class B Seller. In such Lock-Up Agreement, each Class B Seller agreed that such Seller will not, during the period commencing from the Closing and ending on the earlier of the six month anniversary of the Closing (or if earlier, the date on which Pubco consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Pubco’s shareholders having the right to exchange their equity holdings in Pubco for cash, securities or other property) ( the “Lock-Up Period”) (i) lend, offer, pledge (except as provided below), hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of such Class B Seller’s Exchange Shares, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such Class B Seller’s Exchange Shares, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii). Each holder also agreed that the Escrow Shares will continue to be subject to such transfer restrictions until they are released from the Escrow Account. However, each Class B Seller is allowed to transfer any of its Exchange Shares (other than the Escrow Shares while they are held in the Escrow Account ) by gift, will or intestate succession or to any immediate family member (or related trust), trustor or trust beneficiary, as a distribution to equity holders upon liquidation or to an affiliate or pursuant to a court order or settlement agreement in divorce; provided in each such case that the transferee thereof agrees to be bound by the restrictions set forth in the Lock-Up Agreement. The Class B Sellers are also permitted to pledge their shares during the Lock-Up period so long as the pledgee agrees not to exercise its remedies with respect to the Exchange Shares during the Lock-Up Period.

Non-Competition Agreements

Simultaneously with the execution of the Business Combination Agreement, each of Jian Wang and Chunning Wang (each a “Restricted Person”) entered into a non-competition and non-solicitation agreement in favor of Pubco, Proficient and Lion and their respective present and future affiliates, successors and direct and indirect subsidiaries (collectively, the “Covered Parties”). Under each Non-Competition Agreement, for a period of three (3) years after the Closing (such period, the “Restricted Period”), each Restricted Person has agreed that he will not and will not permit his affiliates to, without Pubco’s prior written consent, directly or indirectly engage in the business of providing contract-for-difference trading service, insurance brokerage service, futures brokerage service, securities brokerage service and asset management service based in the Cayman Islands and Hong Kong (the “Business”) (other than through a Covered Party) or own, manage, finance or control, or become engaged or serve as an officer, director, member, partner, employee, agent, consultant, advisor or representative of, a business or entity (other than a Covered Party) that engages in the Business anywhere in the Cayman Islands, the British Virgin Islands, Hong Kong, Singapore, and People’s Republic of China or in any other markets in which the Covered Parties are engaged in the Business as of the date of the Closing or during the Restricted Period. However, such Restricted Person and his affiliates will be permitted under its Non-Competition Agreement to own passive investments of less than 3% of the total issued and outstanding equity interests of a competitor that is publicly traded, so long as such Restricted Person and his affiliates and immediate family members are not directly or indirectly involved in the management or control of such competitor. Under each Non-Competition Agreement, the Restricted Person party thereto and his affiliates will also be subject to certain non-solicitation and non-interference obligations during the Restricted Period with respect to the Covered Parties’ respective (i) employees, consultants and independent contractors, (ii) customers or clients, and (iii) vendors, suppliers, distributors, agents or other service providers. Each such Restricted Person will also be subject to non-disparagement provisions regarding the Covered Parties and confidentiality obligations with respect to the confidential information of the Covered Parties.

Seller Registration Rights Agreement

At the Closing, Pubco and the Sellers shall enter into the Seller Registration Rights Agreement. Under the Seller Registration Rights Agreement, the Sellers shall have registration rights that will obligate Pubco to register for resale under the Securities Act all or any portion of their Class A Exchange Shares, the Class A Ordinary Shares issuable upon the excise of the Class B Exchange Shares (including, any shares held as Escrow Shares pursuant to the Escrow Agreement and any additional Exchange Shares (which with respect to the Class B Exchange Shares shall include only the underlying Class A Ordinary Shares) issued as a result of the post-Closing purchase price adjustment) (together with any warrants, capital shares or other securities issued as a dividend or distribution with respect thereto or in exchange therefor, the “ Registrable Securities ”), except that Registrable Securities that are subject to transfer restrictions in the Lock-Up Agreements may not be requested to be registered or registered until the end of the Lock-Up Period and the Escrow Shares may not be requested to be registered or registered while they are held in the Escrow Account in accordance with the Escrow Agreement. Sellers holding a majority-in-interest of the Registrable Securities (based on the number of shares and not voting rights and excluding Escrow Shares held under the Escrow Agreement) will be entitled under the Registration Rights Agreement to make a written demand for registration under the Securities Act of all or part of the their Registrable Securities, and other Sellers holding Registrable Securities will be entitled to join in such demand registration. Subject to certain exceptions, if any time after the Closing, Pubco proposes to file a registration statement under the Securities Act with respect to its securities, under the Seller Registration Rights Agreement, Pubco shall give notice to the Sellers holding Registrable Securities as to the proposed filing and offer them an opportunity to register the sale of such number of Registrable Securities as requested by them in writing, subject to customary cut-backs. In addition, subject to certain exceptions, Sellers holding Registrable Securities will be entitled under the Seller Registration Rights Agreement to request in writing that Pubco register the resale of any or all of such Registrable Securities on Form S-3 or F-3 and any similar short-form registration that may be available at such time. Under the Seller Registration Rights Agreement, Pubco will indemnify the holders of Registrable Securities and certain persons or entities related to them, such as their officers, directors, employees, agents and representatives, against any losses or damages resulting from any untrue statement or omission of a material fact in any registration statement or prospectus pursuant to which they sell Registrable Securities, unless such liability arose from their misstatement or omission, and the holders of Registrable Securities, including Registrable Securities in any registration statement or prospectus, will agree to indemnify Pubco and certain persons or entities related to Pubco, such as its officers and directors and underwriters, against all losses caused by their misstatements or omissions in those documents.

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Founders Registration Rights Agreement Amendment

At the Closing, Proficient, Pubco, the Founders and the other parties thereto shall enter into the Founder Registration Rights Agreement Amendment. Under the Founder Registration Rights Agreement, the Founder Registration Rights Agreement will be amended to, among other things, add Pubco as a party and to reflect the issuance of Pubco’s ordinary shares and warrants pursuant to the Business Combination Agreement, and to reconcile with the provisions of the Sellers Registration Rights Agreement, including making the registration rights of the Sellers and the Founders pari passu with respect to any underwriting cut-backs.

Amended Pubco Charter

Pubco will amend and restate its charter as of the Closing to provide for a more customary public company charter and set forth the rights of the Class B Ordinary Shares.

After the Business Combination, Pubco’s board of directors will consist of seven directors and they will be divided into two classes, namely Class I and Class II. Class I will consist initially of three directors, namely, Zhixiang Zhang, Shi-Chung Chou and Chi Fai Choi. Class II will consist initially of four directors, namely Jian Wang, Chunning Wang, Walter Cook and Chi-yang Chen. After the Merger, Chi Fai Choi, Walter Cook and Chi-yang Chen will be considered independent directors under the rules of Nasdaq. See the section entitled “Management of Pubco Following the Business Combination.”

Upon completion of the Business Combination, the current officers of Lion will remain officers of Lion and will become officers of Pubco, holding the equivalent positions as those held with Lion. These officers are Chunning Wang, Hua Luo and Sze Hau Lee. Each of these persons is currently an executive officer of Lion. See the section entitled “Management of Pubco Following the Business Combination.”

 

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Transaction and Organizational Structures Prior to and Following Consummation of the Business Combination

The following diagram illustrates the transaction structure of the Business Combination and organizational structures of the parties thereto prior to the consummation of the Business Combination and as of March 31, 2020.

 

Lion and its Subsidiaries in BVI

 

Lion Financial Group Limited is an active company and its principal business activity is investment holding.
     
  Lion Wealth Management Limited is an active company and its principal business activity is investment holding.

 

Lion’s Subsidiaries in Hong Kong

 

  Lion International Securities Group Limited is an active company and its principal business activity is dealing in securities and advising on securities.
     
  Lion Futures Limited is an active company and its principal business activity is dealing in futures and advising on futures.
     
  Lion Asset Management Limited is an active company and its principal business activity is advising on securities and provision of asset management services.
     
  Lion Foreign Exchange Limited is a dormant company and its principal business activity is money service operation.
     
  BC Wealth Management Limited is an active company and its principal business activity is provision of insurance brokerage services.

Lion’s Subsidiaries in the Cayman Islands

 

  Lion Group Holding Ltd. is an active company and it is intended to be the publicly listed entity upon the consummation of the Business Combination.
     
  Lion Investment Fund SPC is a dormant company and it is an investment fund.
     
  Lion Brokers Limited is an active company and its principal business activity is securities brokerage and dealing and market marking.

  

Lion’s Subsidiaries in Singapore

 

  Lion International Financial (Singapore) Pte. Ltd. is a dormant company and its principal business activity is securities brokerage and dealing and market marking.

  

Lion’s Subsidiaries in Delaware

 

  Lion MergerCo 1, Inc is an active company and it is a special purpose vehicle established to facilitate the Business Combination.

 

 

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The following diagram illustrates Pubco’s organizational structure following the consummation of the Business Combination.

 

  

 

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Charter Documents of Pubco Following the Business Combination

Pursuant to the Business Combination Agreement, upon the Closing of the Business Combination, Pubco’s memorandum and articles of association will be amended and restated promptly to:

  reflect necessary changes and to be consistent with the proposed amended charter (for a full description of the proposed amendments to the charter see “The Business Combination Proposal — Pubco’s Amended and Restated Memorandum and Articles of Association”); and
     
  make certain other changes that Pubco’s board of directors deems appropriate for a public company.

Headquarters; Stock Symbols

After completion of the transactions contemplated by the Business Combination Agreement:

  the corporate headquarters and principal executive offices of Pubco will be located at Unit A-C, 33/F, Tower A, Billion Center, 1 Wang Kwong Road, Kowloon Bay, Hong Kong, which are Lion’s current corporate headquarters; and
     
  if Pubco’s applications for listing are approved, Pubco’s ADSs and warrants will be traded on Nasdaq under the symbols “LGHL” and “LGHLW”, respectively.

Background of the Business Combination

 

The following is a discussion of Proficient’s formation, the background of Proficient’s previous attempts at a business combination, its negotiations with and evaluation of Lion, the Business Combination Agreement and related matters.

 

On June 3, 2018, Proficient closed its Initial Public Offering of 11,500,000 Units, with each Unit consisting of one ordinary share, one Warrant to acquire one ordinary share at a price of $11.50 and one Right entitling the holder thereof to received one-tenth (1/10) of one ordinary share. Each unit was sold at an offering price of $10.00, generating total gross proceeds of $115,000,000. Simultaneously with the consummation of the Initial Public Offering and the exercise of the underwriters’ over-allotment option, Proficient consummated the private sale of an aggregate of 5,375,000 units to its Sponsor at $1.00 per unit for an aggregate purchase price of $5,375,000.

Promptly following its Initial Public Offering, Proficient commenced searching of potential target businesses with the objective of consummating a business combination. Proficient sought out potential target businesses based on internal research and through the networks of relationships of Proficient’s management, Board of Directors, founders and with professional service providers (lawyers, accountants, consultants, finders and investment bankers). Proficient educated these parties on its structure as a special purpose acquisition company and its criteria for an acquisition. Proficient also responded to inquiries from investment bankers or other similar professionals who represented companies engaged in a sale or financing process. On a regular basis, Proficient’s directors were updated with respect to the status of the Business Combination search. Input received from Proficient’s directors was material to its management’s evaluation of a potential business combination.

From the closing of Proficient’s initial public offering through the signing of the Business Combination Agreement with Lion in March 2020, representatives of Proficient contacted and were contacted by a number of individuals and entities with respect to business combination opportunities and engaged with several possible target businesses in discussions with respect to potential transactions. In all, representatives of Proficient have evaluated over 100 potential transactions from a wide range of industry segments including, but not limited to, financial services, fintech, media, payment, medical, health care, e-commerce, agriculture, real estate, digital marketing, gaming, telecommunications, education, software, financial, engineering and technology.

The following is not intended to be a complete list of all opportunities initially evaluated or explored or discussions held by Proficient but sets forth the significant discussions and steps that Proficient took to reaching a Business Combination Agreement with Lion.

 

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On October 24, 2019, one of the business partners of Proficient’s representative met with a representative of Lion to commence initial discussions on opportunity of business combination with Proficient, at which time they agreed to have a follow-up meeting in November with Proficient management.

On November 12, 2019, initial discussion was held with team members from Lion for transaction proposal, potential capital raise in connection with the closing of the merger and an estimated timeline and responsibilities checklist.

On November 18, 2019, Proficient and Lion entered into a non-disclosure agreement.

On November 27, 2019, Proficient’s management met with members of senior management of Lion in Lion’s Hong Kong office. A presentation on Proficient was given, including an illustration of a potential merger transaction. Lion gave a presentation on Lion’s business and operations and answer related questions.

On November 28, 2019, Proficient and Lion management further discussed merger structures generally.

On December 4, 2019, Lion discussed with Proficient the preliminary valuation basis.

From December 5 to December 12, 2019, Lion and Proficient, together with Ellenoff Grossman & Schole LLP (“EGS”), Proficient’s counsel, continued to negotiate the terms of a non-binding letter of intent (“LOI”) and on December 17, 2019, Proficient and Lion executed the LOI.

On December 18, 2019, Proficient started searching for professional firms for legal due diligence and valuation services.

On January 6, 2020, Proficient and EGS had a kick off conference with Lion and Lion’s legal advisor, Kirkland & Ellis LLP (“K&E”).

On January 17, 2020, Proficient engaged Grant Thornton for valuation services, Hankun for Hong Kong companies legal due diligence service and Harneys for BVI and Caymans Island companies legal due diligence services. On January 20, 2020, the valuation and respective due diligent work commenced.

From January to March 2020, multiple telephone conferences between the parties and their respective counsels were conducted as negotiations for the terms of the definitive agreements continued and Lion’s financial statements, valuation report and due diligence reports were being prepared and finalized.

On January 30, 2020, Proficient had a call with I-Bankers to discuss the Lion business model in the context of the financial services industry sector, as well as U.S. investor interest in Lion.

On February 8, 2020, Lion met with I-Bankers in San Francisco. I-Bankers and Proficient had several discussions throughout February 2020 regarding the business combination with Lion.

On February 29 and March 2, 2020, Proficient circulated Lion’s company background information for the Proficient’s Board of Directors to review. On March 4, 2020, Proficient’s Board of Directors had a conference call with I-Bankers to discuss the merger opportunity.

On March 5, 2020, Grant Thornton completed the final draft of valuation report.

On March 9, 2020, the Business Combination Agreement was unanimously approved by Proficient’s Board of Directors at a meeting of the Board of Directors.

On March 10, 2020, the parties executed the Business Combination Agreement.

The parties have continued and expect to continue regular discussions regarding the execution and timing of the Business Combination.

 

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Proficient’s Board of Directors’ Reasons for Approval of the Business Combination

Proficient’ Board of Directors listened to and reviewed the materials provided by the Proficient management team. The members of Proficient’ Board of Directors had in-depth discussion by emails, conference calls and during meetings of the Board of Directors in order to determine that the consideration to be paid to Lion was reasonable and that the Business Combination was in the best interests of Proficient’ stockholders.

The materials provided to the Board was obtained from due diligence that the independent third parties and Proficient’ management team conducted of Lion that included: 

Lion’s 2017/2018 audited and September 30, 2019 reviewed financial statements;
Lion’s material contracts;
Business review commissioned by Lion;
Rick factors review commissioned by Lion;
Due diligence reports prepared by Hankun and Harneys;
Valuation report prepared by Grant Thornton;
Business Combination Agreement (with a summary drafted by EGS);
Transaction structure; and
Lion’s company background, shareholder structure and organization chart.

The discussion carried out by Proficient Board included the following qualitative and quantitative evaluations made by the Proficient management team regarding Lion in order to enable its Board of Directors to ascertain the reasonableness of the consideration being paid:

 

Evaluation Criteria   Evaluation of Lion by Proficient Management
A high-quality senior management team   Lion’s management team has extensive industry experience, solid understanding of business operations, and in-depth knowledge of industry trends and customer needs.
Success of new business  model and good growth potential   Lion became profitable in 2019 after launch of CFD business, and since early 2020 has expanded into the TRS business by signing ISDAs with CICC and GTJA that may significantly increase revenue and profit.
Competitive advantages   Lion’s headquarters are located in Hong Kong, one of the top financial center in the world. Lion’s subsidiaries have financial services licenses to operate in Hong Kong and Cayman.
    Lion’s online and mobile registration and transaction platform provide comprehensive interface to the customers while reduce operational cost. Besides traditional financial products and services, Lion also provide OTC derivatives as hedging tools which have increasing demand in Asia.
An attractive valuation   Lion’s valuation expectations are at an attractive discount to the valuation done by Grant Thornton.
Use of proceeds   Lion has reasonable expectations relating to the use of the funds it will receive in the Business Combination, with a significant portion of the funds earmarked for its ongoing expansion plans in CFD and TRS business. For details, see “Use of Proceeds”.

The tables below summarize the key financial data and quantitative analysis Proficient management presented to the Board in support of its evaluation that Lion’s valuation expectations are at an attractive discount to the fair value from the valuation report.

Lion Historical Financials & Projections

In connection with Proficient’ review of the Business Combination, Lion provided Proficient management with historical financials and certain projections regarding future financial performance. Such information is provided below. The projections were based on internal Lion estimates, which have not been examined by Lion’s auditors, and may not be consistent with actual performance. No assurance can be given that any of the projections set forth below will prove to be accurate, or that the growth described, or any growth, will be able to be achieved. The following information is provided solely for the convenience of the reader.

 

   Actuals  Projections
   2019(1)  2020E  2021E
(dollars in thousands)               
Revenue  $18,542   $55,388   $73,958 
                
Gross profit  $15,484   $33,513   $44,917 
Gross profit Margin   84%   61%   61%
                
Net profit  $8,587   $23,763   $31,755 
Net profit Margin   46%   43%   43%
____________

(1)      Unaudited

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Lion’s Due Diligence and Valuation

In addition to the valuation analysis done by Grant Thornton, Proficient’ management and its legal advisors conducted interviews of Lion’s management members. Proficient and its legal advisors also reviewed legal, accounting and other materials in the data room set up for the transaction and analyzed issues and risks discovered in this process.

Proficient’ management and the members of its Board of Directors have long and diverse experience in both operational management and investment and financial management and analysis and, in its opinion, was suitably qualified to conduct the due diligence and other investigations and analyses required in connection with Proficient’ search for a merger partner. A detailed description of the experience of Proficient’ Board of Directors is included in the section of this proxy statement/prospectus entitled “Other Information Related to Proficient — Directors and Executive Officers.”

The Proficient’s Board of Directors determined that the consideration being paid in the Business Combination, the amount of which was negotiated at arms-length, was fair to and in the best interests of Proficient and its stockholders and appropriately reflected Lion’s value. The Board of Directors based this conclusion on (i) a comparison of (i) the $253 million enterprise value of Lion from the valuation report done by Grant Thornton; (ii) a review of revenue projections provided by Lion by reviewing key business contract terms and key assumptions supporting the projection, and (iii) a range of qualitative and quantitative factors such as Lion’s market position, management experience, geographic foothold, and future growth opportunities. Such comparison supported the fairness of Proficient’ valuation of Lion.

Based on information provided by Proficient’s management and Grant Thornton as well as information collected in its own diligence of Lion, the Proficient’s Board of Directors concluded that the Business Combination Agreement with Lion was in the best interests of Proficient’s stockholders. The Proficient’s Board of Directors considered a wide variety of factors in connection with its evaluation of the Business Combination. In light of the complexity of those factors, the Proficient’s Board of Directors did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its decision. In addition, individual members of the Proficient’s Board of Directors may have given different weight to different factors.

Lion’s Risk Factors Consideration

The Proficient’s Board of Directors also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

   
Macroeconomic risks.    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.
   
Heavily regulated industry. 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. Local regulations may change from time to time.
   
Material trading losses from market making activities. As a market maker, Lion attempts to derive a profit from the difference between the prices at which it buys and sells CFD products, primarily currency pairs. Since these activities involve the purchase or sale of CFD products for its own account, Lion may incur trading losses.
   
Interest rate risk. Fluctuations in interest rates may negatively affect Lion’s interest income.
   
Liquidity risk. 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.
   
Operation risk. 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 may be subject to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions on it or its external service providers.

 

  Sustainable profitable results. Lion had incurred net losses in the past. Although the new CFD business model showed initial success, it only has a short operation history and may not be sustainable. Lion may incur losses again in the future.

Revenue concentration. Lion derives a substantial portion of revenue from a small number of key clients.
Other Risks.    Various other risks associated with the business of Lion, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement/prospectus.

Proficient’s Board of Directors concluded that the potential benefits that it and its stockholders expected to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Transactions. The Board of Directors also noted that the Proficient stockholders would have a substantial economic interest in the combined company (depending on the level of Redemption). Accordingly, the Board of Directors unanimously determined that the Business Combination Agreement and the Transactions contemplated therein, were advisable, fair to, and in the best interests of Proficient and its stockholders.

 

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Satisfaction of 80% Test

It is a requirement under Proficient’s amended and restated articles of incorporation that any business acquired by Proficient have a fair market value equal to at least 80% of the balance of the funds in the Trust Account at the time of the execution of a definitive agreement for an initial Business Combination.

As of March 10, 2020, the date of the execution of the Business Combination Agreement, the balance of the funds in the Trust Account was approximately $117 million and 80% thereof represents approximately $93.6 million. In reaching its conclusion on the 80% asset test, Proficient’s board of directors used as a fair market value for Lion of $253 million enterprise value provided in the valuation report for Lion by Grant Thornton (the “Valuation Report”), which is before giving any affect for the Merger and was implied based on the terms of the Business Combination agreed to by parties in negotiating the Business Combination Agreement. The Valuation Report considered factors such as revenue projections provided by Lion and a range of qualitative and quantitative factors such as Lion’s market position, management experience, geographic foothold, and future growth opportunities. Such Valuation Report supported the fairness of Proficient’ valuation of Lion.

The Proficient board of directors believes that because of the financial skills and background of its directors, it was qualified to conclude that the acquisition of Lion met the 80% requirement. Based on the fact that the $253 million fair market value of Lion as described above, is in excess of the threshold of approximately $93.6 million, representing 80% of the balance of the funds in the Trust Account, the Proficient board determined that the fair market value of Lion was substantially in excess of 80% of the funds in the Trust Account and that the 80% test was met.

Description of Valuation Report of Grant Thornton

In selecting Grant Thornton, the board of directors considered, among others, Grant Thornton’s qualifications, credentials, fees and estimated time of delivery. Pursuant to the terms of the engagement letter between Proficient and Grant Thornton, Proficient agreed to pay to Grant Thornton a fee based on the time and hourly rates of Grant Thornton’s staff. In addition, Proficient agreed to reimburse Grant Thornton for its reasonable out-of-pocket expenses. Upon delivery of the Valuation Report, Proficient paid an aggregate of $19,960 to Grant Thornton. Aside from the services described above, there has been no material relationship between Proficient or its affiliates and Grant Thornton and its affiliates or unaffiliated representatives during the past two years, nor is any such relationship contemplated.

Valuation Summary:

Grant Thornton has performed no services, as appraisers or in any other capacity, regarding the business or property that is the subject of its Valuation Report, within a three-year period immediately preceding acceptance of its engagement by Proficient. Grant Thornton’s compensation for completing the Valuation Report is fee-based and is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of Proficient, the outcome of its valuation, the amount of the value conclusion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the appraisal.

Grant Thornton used the income approach and market approach to estimate the fair value of equity of Lion as of February 12, 2020. In the income approach, an economic benefit stream of the asset under analysis is selected, based on historical or forecasted cash flow.  This selected benefit stream is then discounted to present value with an appropriate risk-adjusted discount rate. Market approach involves identifying and selecting publicly traded companies with financial and operating characteristics similar to the company being valued.  Once companies are identified, valuation multiples can be synthesized, adjusted for comparability, and then applied to the subject company's economic basis to estimate the value of its equity or invested capital. In the end, Grant Thornton weighted two valuation approaches to estimate the equity value of Lion to be $253 million.

Interests of Proficient’s Directors and Officers in the Business Combination 

In considering the recommendation of the board of directors of Proficient to vote in favor of approval of the Business Combination Proposal, the Share Issuance Proposal and the Adjournment Proposal, stockholders should keep in mind that Proficient’s Initial Stockholders, including its directors and executive officers, have interests in such proposals that are different from, or in addition to, those of Proficient stockholders generally. In particular:

If the Business Combination with Lion or another business combination is not consummated 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 for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, the 2,875,000 Founder Shares held by Proficient’s Initial Stockholders, including its directors and officers, which were acquired for an aggregate purchase price of $575,000 prior to Proficient’s Initial Public Offering, would be worthless because Proficient’s Initial Stockholders are not entitled to participate in any Redemption or distribution with respect to such shares. Such shares had an aggregate market value of $28.6 million based upon the closing price of $9.95 per share on Nasdaq on March 18, 2020.
   
 Proficient’s Sponsor owns an aggregate of 5,375,000 Private Placement Warrants issued by Proficient for an aggregate price of $5,375,000 (or $1.00 per Warrant). This issuance took place on a private placement basis simultaneously with the consummation of the Initial Public Offering and over-allotment option. Such Warrants had an aggregate market value of $0.43 million based upon the closing price of $0.08 per Warrant on Nasdaq on March 18, 2020. The Sponsor waived the right to participate in any Redemption or liquidation distribution with respect to such Private Placement Warrants. Accordingly, the Proficient shares of common stock underlying the Private Placement Warrants will become worthless if Proficient does not consummate 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) (as will the Proficient Warrants and Rights held by Public Stockholders).
   
  Certain officers and directors of Proficient will be issued 300,000 Pubco ADSs, representing 300,000 Class A Ordinary Shares, after the Closing of the Business Combination.
   
 If Proficient is unable to complete a business combination within the required time period, the 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.
   
 Proficient’s Initial Stockholders, including its 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. However, if Proficient fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, Proficient may not be able to reimburse these expenses if the Business Combination with Lion or another business combination is not completed 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).
   
 Shih-Chung Chou, an affiliate of the Sponsor and a director of Proficient, has committed to Proficient to loan up to $800,000 to Proficient in the event that Proficient’s cash held outside of its Trust Account is less than $150,000. As of the date of this proxy statement/prospectus, there is an aggregate of $[     ] principal amount of loans outstanding.

There are no finder’s fees payable in connection with the Business Combination.

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Recommendation of Proficient’s Board of Directors

After careful consideration of the matters described above, particularly Lion’s historical performance, potential for growth, the experience of Lion’s management, Lion’s competitive positioning, its customer relationships, and technical skills, Proficient’s board determined unanimously that each of the Business Combination Proposal, the Share Issuance Proposal and the Adjournment Proposal, if presented, Proficient’s board of directors has approved and declared advisable and unanimously recommend that you vote or give instructions to vote “FOR” each of these proposals.

The foregoing discussion of the information and factors considered by the Proficient board of directors is not meant to be exhaustive but includes the material information and factors considered by the Proficient board of directors.

Pubco’s Amended and Restated Memorandum and Articles of Association

Pursuant to the Business Combination Agreement, prior to the consummation of the Business Combination, the board of directors and shareholders of Pubco will amend and restate Pubco’s memorandum and articles of association. Pubco’s Amended and Restated Memorandum and Articles of Association will reflect the following material differences from Proficient’s current amended and restated articles of incorporation: 

     
  the name of the new public entity will be “Lion Group Holding Ltd.” as opposed to “Proficient Alpha Acquisition Corp.”;
     
  Pubco will have an authorized share capital of US$50,000 consisting of 500,000,000 shares with a nominal or par value of US$0.0001 each, comprising (a) 300,000,000 Class A Ordinary Shares; (b) 150,000,000 Class B Ordinary Shares; and (c) 50,000,000 preferred shares;
     
  Pubco’s corporate existence is perpetual as opposed to Proficient’s corporate existence terminating if a Business Combination is not consummated by Proficient within a specified period of time; and
     
  Pubco’s charter does not include the various provisions applicable only to special purpose acquisition corporations that Proficient’s amended and restated articles of incorporation contains.
     

As noted above, the provisions of Article Sixth of Proficient’s amended and restated articles of incorporation will not be included in Pubco’s Amended and Restated Memorandum and Articles of Association. The provisions of Article Sixth that are proposed to be deleted, by the terms of the preamble (which will also be deleted), apply only during the period that will terminate upon the consummation of the Business Combination:

  Section A requires that Proficient submit such Business Combination to its stockholders for approval pursuant to the proxy rules promulgated under the Exchange Act.
     
  Section B provides that Proficient may consummate a Business Combination that is submitted to its stockholders for approval only if a majority of the then issued and outstanding shares of common stock present and entitled to vote at the Meeting to approve such Business Combination are voted for the approval of such Business Combination.
     
  Section C specifies the procedures for exercising Redemption rights with respect to Public Shares.
     
  Section D relates to certain tender offer procedures in connection with a Business Combination.
     
  Section E prohibits Proficient from consummating a Business Combination unless Proficient has net tangible assets of at least $5,000,001 upon consummation of such Business Combination.
     
  Section F provides that, if a Business Combination is not consummated 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 purposes of winding up, redeeming 100% of the Public Shares for cash and, subject to approval of Proficient’s then stockholders and Proficient’s board of directors, dissolving and liquidating.
     
  Section G provides when holders of Public Shares are entitled to receive distributions from the Trust Account.
     
  Section H prohibits a business combination prior to the initial Business Combination.
     
  Section I prohibits Proficient from issuing any shares of common stock, any securities convertible into common stock, or any securities which participate in or are otherwise entitled in any manner to any of the proceeds in the Trust Account or which vote as a class with the common stock on a Business Combination, prior to the consummation of a Business Combination.
     
  Section J relates to the classification of directors.

  

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The preamble and Article Sixth (other than Section J providing for a classified board) relate to the operation of Proficient as a blank check company prior to the consummation of its initial business combination and would not be applicable to Pubco after consummation of the Merger. Accordingly, they would serve no further purpose.

Certain provisions in the Amended and Restated Memorandum and Articles of Association of Pubco, such as the super majority voting requirements for amendments thereto described above, may discourage unsolicited takeover proposals that Pubco’s shareholders may consider to be in their best interest and may make the removal of Pubco’s incumbent management more difficult.

Other anti-takeover provisions under the Amended and Restated Memorandum and Articles of Association of Pubco include:

  Undesignated Preferred Shares. Pubco’s board of directors will have the ability to designate and issue preferred shares with voting or other rights or preferences that could deter hostile takeovers or delay changes in its control or management.
     
  Directors Removed Only for Cause. Pubco’s Amended and Restated Memorandum and Articles of Association will provide that shareholders may remove directors only for cause.

For discussions on risks associated with the above anti-takeover provisions, please see “Risk Factors — 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.”

Comparison of Corporate Governance and Shareholder Rights

Pubco is an exempted company incorporated under the Companies Law (Revised) of the Cayman Islands (the “Companies Law”). Cayman Islands law and Pubco’s Amended and Restated Memorandum and Articles of Association (the “Amended Articles”) will govern the rights of its shareholders. The Companies Law differs in some material respects from laws generally applicable to United States corporations and their shareholders. In addition, the amended and restated memorandum and articles of association will differ in certain material respects from the certificate of incorporation and bylaws of Proficient. As a result, when you become a shareholder of Pubco, your rights will differ in some regards as compared to when you were a shareholder of Proficient.

Below is a summary chart outlining important similarities and differences in the corporate governance and shareholder rights associated with each of Proficient and Pubco according to applicable law and/or the organizational documents of Proficient and Pubco. You also should review the amended and restated memorandum and articles of association of Pubco (as it will be amended and restated immediately prior to the Business Combination), as well as the Nevada corporate law and corporate laws of the Cayman Islands, including the Companies Law, to understand how these laws apply to Proficient and Pubco.

Provision

Proficient

(A Nevada Corporation)

Pubco

(An Exempted Company

under Cayman Islands Law)

Applicable legislation

Nevada Revised Statutes (“NRS”)

 

The Companies Law

Capital Stock/Shares

 

Proficient is authorized to issue 151,000,000 shares, consisting of 150,000,000 shares of common stock, par value $0.001 per share and 1,000,000 shares of preferred stock, par value $0.001 per share. The current amended and restated articles of incorporation provides that holders of shares of common stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of the common stock are entitled to vote.

 

 

Pubco has 500,000,000 authorized shares with a par value of US$0.0001 each, comprising (a) 300,000,000 Class A Ordinary Shares; (b) 150,000,000 Class B Ordinary Shares; and (c) 50,000,000 preferred 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.

Special Vote Required for Combinations with Interested Stockholders/Shareholders

 

Except as set forth in the constitutional documents, a corporation may not engage in a business combination with an interested stockholder for a period of two years after the time of the transaction in which the person became an interested stockholder unless certain statutory requirements are satisfied.

 

 

 

No similar provisions
Appraisal Rights Generally a stockholder of a publicly traded corporation does not have appraisal rights in connection with a merger.

Subject to certain statutory limitations, minority shareholders that dissent from a merger are entitled to be paid the fair market value of their shares, which if necessary may ultimately be determined by the court.

 

Special Stockholder/Shareholder Meetings Stockholder approval of mergers and amendments of constitutional documents require a majority of outstanding shares; most other stockholder approvals require a majority of those present and voting, provided a quorum is present.

Shareholder approval of mergers or consolidations and amendments of constitutional documents require the approval of not less than two-thirds of the shares present and voting at a meeting of shareholders is required.

 

Quorum

Except as provided otherwise in the constitutional documents, quorum is a majority of the voting power of all outstanding shares of capital stock of entitled to vote. If any specified business is to be voted on by a class or series of stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum.

 

Except as otherwise provided by the Pubco’s Amended Articles, one or more shareholders holding at least a majority of the paid up voting share capital of Pubco present in person or by proxy and entitled to vote at the general meeting shall form a quorum.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Provision

Proficient

(A Nevada Corporation)

Pubco

(An Exempted Company

under Cayman Islands Law)

Stockholder/Shareholder Consent to Action Without Meeting

 

Stockholder action may be approved by written resolution in lieu of a meeting of outstanding stock entitled to vote on such matters having not less than the minimum number of votes that would be necessary to authorize such action at a meeting.