PRER14A 1 prer14a1017a3_futurefintech.htm AMENDMENT NO. 3 TO PRELIMINARY PROXY STATEMENT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

(Amendment No. 3)

 

Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

 

Filed by the Registrant   ☒

 

Filed by a Party other than the Registrant   ☐

 

Check the appropriate box:
   
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-12

 

Future FinTech Group Inc.
(Exact name of registrant as specified in its charter)

 

N/A
(Name of person(s) filing proxy statement, if other than the registrant)

 

Payment of Filing Fee (check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies: Ordinary Stock

 

  (2) Aggregate number of securities to which transaction applies: 12,139,536

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): $13.06

 

  (4) Proposed maximum aggregate value of transaction: $158,542,340.16

 

  (5) Total fee paid: $19,738.52

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid: $19,738.52

 

  (2) Form, Schedule or Registration Statement No.:

 

  (3) Filing Party:

 

  (4) Date Filed:

 

 

 

 

 

 

PRELIMINARY PROXY STATEMENT   DATED JANUARY 10, 2018

 

 

 

LETTER FROM THE CHIEF EXECUTIVE OFFICER

 

Dear Shareholder:

 

You are cordially invited to attend a special meeting of the shareholders of Future FinTech Group Inc., a Florida corporation (the “Company” or “Future FinTech”), which will be held at our principal executive offices, located at 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China, on Tuesday, March 13, 2018, at 10:00 A.M., local time.

 

The Notice of Special Meeting of Shareholders and Proxy Statement describe the formal business to be transacted at the special meeting. Our directors and officers will be present to respond to appropriate questions from shareholders. Shareholders may attend the special meeting in person or telephonically by dialing 1-866-395-5819 toll-free within the United States, 10-400 682 8609 toll-free within China, or 1-706-643-6986 outside the United States and China (toll charged). Shareholders attending telephonically should ask for the “Future FinTech Group Inc. 2018 Special Meeting of Shareholders / Conference ID 9198969”.  However, a shareholder must complete the attached proxy card or be present in person to vote at the meeting. Shareholders that participate in the meeting via teleconference will be on listen only mode and will not be able to ask questions or vote their shares using the teleconference line.  If you anticipate participating in the special meeting via teleconference and have questions, please provide such questions in advance to the Company’s external investor relations representative at david.rudnick@preceptir.com or 646-694-8538 and the Board will address them during the meeting.

 

Whether or not you plan to attend the meeting, please vote as soon as possible. You can vote by returning the proxy card in the enclosed postage-prepaid envelope. This will ensure that your shares will be represented and voted at the meeting, even if you do not attend. If you attend the meeting, you may revoke your proxy and personally cast your vote. Attendance at the meeting does not of itself revoke your proxy.

 

For a discussion of risk factors you should consider in evaluating the proposals set forth in this proxy statement that you are being asked to adopt, see “Risk Factors” beginning on page 15.

  

NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SKYPEOPLE BVI OR FULLMART ORDINARY SHARES TO BE DISTRIBUTED IN THE SPIN-OFFS OR DETERMINED IF THIS PROXY STATEMENT IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

  By Order of the Board of Directors,
   
  /s/ Hongke Xue
  Hongke Xue
  Chief Executive Officer
 

January ●, 2018

Xi’an, China

 

 

 

 

FUTURE FINTECH GROUP INC.

 

23F, China Development Bank Tower,

No. 2 Gaoxin 1st Road

Xi’an, Shaanxi, China 710075

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

To be Held Tuesday, March 13, 2018

 

NOTICE IS HEREBY GIVEN that a special meeting (the “Special Meeting”) of the shareholders of Future FinTech Group Inc., a Florida corporation (the “Company” or “Future FinTech”), will be held at our principal executive offices, located at 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China, on Tuesday, March 13, 2018, at 10:00 A.M., local time, for the following purposes, as set forth in the attached Proxy Statement:

 

(1) To approve the spin-off of the Company’s wholly-owned subsidiaries, SkyPeople Foods Holdings Limited (BVI) (“SkyPeople BVI”) and FullMart Holdings Limited (BVI) (“FullMart”), through a pro rata distribution of the ordinary shares of each of SkyPeople BVI and FullMart to holders of the Company’s common stock at the close of business on January 22, 2018, the record date (the “Spin-Offs”);
   
(2) To approve an amendment to the Second Amended and Restated Articles of Incorporation of Future FinTech, which would increase the amount of authorized shares of common stock, par value $0.001 per share, of Future FinTech from 8,333,333 to 60,000,000 (the “Amendment”);
   
(3) To adopt and approve the Future FinTech Group Inc. 2017 Omnibus Equity Plan;
   
(4) To approve the issuance of an aggregate 7,111,599 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to certain Creditor’s Rights Transfer Agreements between a wholly owned subsidiary of the Company and sellers of such creditor’s rights (the “Acquisition Share Issuances”);
   
(5) To approve the issuance of an aggregate 11,362,159 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to a Share Purchase Agreement between the Company and a certain investor (the “Placement Share Issuance”); and
   
(6) To approve a proposal to grant discretionary authority to the Company’s Chief Executive Officer to adjourn the Special Meeting for the purpose of soliciting additional proxies to approval Proposals 1 through 5.

 

The Board of Directors of the Company (the “Board of Directors” or the “Board”) and the Company’s management has fixed the close of business on January 22, 2018 as the record date for determining the shareholders entitled to notice of, and to vote at, the Special Meeting and any adjournment and postponements thereof (the “Record Date”).

 

After careful consideration, the Board of Directors recommends a vote IN FAVOR OF the Spin-Offs, a vote IN FAVOR OF the Amendment, a vote IN FAVOR OF the adoption of the Future FinTech Group Inc. 2017 Omnibus Equity Plan, a vote IN FAVOR OF the Acquisition Share Issuances, a vote IN FAVOR OF the Placement Share Issuance, and a vote IN FAVOR OF the grant of discretionary authority to the Company’s CEO to adjourn the Special Meeting.

 

Shareholders are cordially invited to attend the Special Meeting in person. Whether you plan to attend the Special Meeting or not, please complete, sign and date the enclosed Proxy Card and return it without delay in the enclosed postage-prepaid envelope. If you do attend the Special Meeting, you may withdraw your proxy and vote personally on each matter brought before the meeting. YOUR VOTE IS VERY IMPORTANT. 

 

By Order of the Board of Directors

 

  /s/ Hongke Xue
  Hongke Xue
  Chief Executive Officer
  January ●, 2018
  Xi’an, China

 

 

 

 

YOUR VOTE IS IMPORTANT

 

WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before the Special Meeting. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished to you by such bank, broker or other nominee, which is considered the shareholder of record, in order to vote. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. Your broker or other agent cannot vote on the Spin-Offs and other discretionary matters without your instructions.

 

If you are a shareholder of record and fail to return your proxy card to us or vote by ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a shareholder of record, voting in person by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain from the record holder a valid “legal” proxy issued in your name in order to vote in person at the Special Meeting.

 

We encourage you to read the accompanying proxy statement carefully and in its entirety, as well as the documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. If you have any questions concerning any of the proposals to be voted upon at the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact the Company’s Corporate Secretary at 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China, 710075, or call 86-29-81878277.

 

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

 

    By Order of the Board of Directors,
       
    Future FinTech Group Inc.
       
Date:

January ●, 2018

By: /s/ Hongke Xue
    Name:  Hongke Xue
    Title: Chief Executive Officer

 

 

 

 

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS 1
FORWARD-LOOKING STATEMENTS 8
SUMMARY 9
RISK FACTORS 15
THE SPECIAL MEETING 34
THE SPIN-OFFS 37
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION 44
DESCRIPTION OF SKYPEOPLE BVI SECURITIES 60
DESCRIPTION OF FULLMART SECURITIES 61
DESCRIPTION OF FUTURE FINTECH SECURITIES 64
INFORMATION WITH RESPECT TO SKYPEOPLE BVI AND FULLMART 64
OFFICERS AND DIRECTORS OF SKYPEOPLE BVI AND FULLMART AFTER THE SPIN-OFFS 65
PROPOSAL 1 – SPIN-OFFS OF SKYPEOPLE BVI AND FULLMART 66
PROPOSAL 2 – AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION 66
PROPOSAL 3 – FUTURE FINTECH GROUP INC. 2017 OMNIBUS EQUITY PLAN 66
PROPOSAL 4 – ISSUANCES OF COMMON STOCK IN CONNECTION WITH DEBT ACQUISITIONS 73
PROPOSAL 5 – ISSUANCE OF COMMON STOCK IN PRIVATE PLACEMENT 75
PROPOSAL 6 – GRANT OF DISCRETIONARY AUTHORITY TO ADJOURN MEETING 76

SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS OF FUTURE FINTECH GROUP INC.

76

COMPENSATION

80
OTHER MATTERS 81
LEGAL MATTERS 81
EXPERTS 81
WHERE YOU CAN FIND MORE INFORMATION 82
FINANCIAL STATEMENTS F-1

  

ANNEXES

 

Annex A Future FinTech Group Inc. 2017 Omnibus Equity Plan
Annex B Articles of Amendment to Second Amended and Restated Articles of Incorporation of Future FinTech Group, Inc.

 

EXHIBITS

 

Exhibit 1 Memorandum and Articles of Association of FullMart Holdings Limited, dated December 28, 2011
Exhibit 2 Memorandum and Articles of Association of SkyPeople Foods Holdings Limited, dated December 28, 2011
Exhibit 3 Creditor’s Rights Transfer Agreement by and between Hedentang Foods (China) Co., Ltd., and Shaanxi Chunlv Ecological Agriculture Co. Ltd., dated November 2, 2017.
Exhibit 4 Creditor’s Rights Transfer Agreement by and between Hedentang Foods (China) Co., Ltd., and Shaanxi Chunlv Ecological Agriculture Co. Ltd., dated November 2, 2017.
Exhibit 5 Creditor’s Rights Transfer Agreement by and between Hedentang Foods (China) Co., Ltd., and Shaanxi Boai Medical Technology Development Co., Ltd., dated November 2, 2017.
Exhibit 6 Creditor’s Rights Transfer Agreement by and between Hedentang Foods (China) Co., Ltd., and Shaanxi Fu Chen Venture Capital Management Co. Ltd., dated November 2, 2017.
Exhibit 7 Share Purchase Agreement by and between Future FinTech Group Inc. and Zeyao Xue, dated November 3, 2017.

 

 

 

 

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

 

The following are answers to some questions that you, as a shareholder of Future FinTech, may have regarding the Spin-Offs, the Amendment and the other matters being considered at the Special Meeting. We urge you to read carefully the remainder of this proxy statement because the information in this section does not provide all the information that might be important to you with respect to the Spin-Offs, the Amendment and the other matters being considered at the Special Meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this proxy statement.

 

Q: Why am I receiving this proxy statement?

 

A: The board of directors of Future FinTech is soliciting your proxy to vote at the Special Meeting because you owned shares of Future FinTech common stock at the close of business on January 22, 2018, the “Record Date” for the Special Meeting, and are therefore entitled to vote at the Special Meeting. This proxy statement, along with a proxy card or a voting instruction card, is being mailed to shareholders on or about January ●, 2018. Future FinTech has made these materials available to you on the Internet, and Future FinTech has delivered printed proxy materials to you or sent them to you by e-mail. This proxy statement summarizes the information that you need to know in order to cast your vote at the Special Meeting. You do not need to attend the Special Meeting in person to vote your shares of Future FinTech common stock.

 

Q: When and where will the Special Meeting be held?

 

A: The Special Meeting will be held at 10:00 a.m., local time, on Tuesday, March 13, 2018, at the Company’s offices at 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China, 710075.

 

Q: On what matters will I be voting?

 

A: Future FinTech’s shareholders are being asked to consider and vote upon the following proposals:

 

  (1) To approve the spin-off of the Company’s wholly-owned subsidiaries, SkyPeople Foods Holdings Limited (BVI) (“SkyPeople BVI”) and FullMart Holdings Limited (BVI) (“FullMart”), through a pro rata distribution of the ordinary shares of each SkyPeople BVI and FullMart to holders of the Company’s common stock at the close of business on January 22, 2018, the record date (the “SkyPeople BVI Spin-Off”);

 

  (2) To approve an amendment to the Second Amended and Restated Articles of Incorporation of Future FinTech, which would increase the amount of authorized shares of common stock, par value $0.001 per share, of Future FinTech from 8,333,333 to 60,000,000 (the “Amendment”);    

 

  (3) To adopt and approve the Future FinTech Group Inc. 2017 Omnibus Equity Plan;  

 

  (4) To approve the issuance of an aggregate 7,111,599 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to certain Creditor’s Rights Transfer Agreements between a wholly owned subsidiary of the Company and sellers of such creditor’s rights (the “Acquisition Share Issuances”);
     
  (5) To approve the issuance of an aggregate 11,362,159 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to a Share Purchase Agreement between the Company and a certain investor ( the “Placement Share Issuance”); and
     
  (6) To approve a proposal to grant discretionary authority to the Company’s Chief Executive Officer to adjourn the Special Meeting for the purpose of soliciting additional proxies to approval Proposals 1 through 5.

 

Future FinTech will hold the Special Meeting to consider and vote upon these proposals. This proxy statement contains important information about matters to be acted upon at the Special Meeting. Shareholders should read it carefully. The vote of shareholders is important.

 

 1 

 

 

In order to complete the Spin-Offs, Future FinTech shareholders must vote to approve the Spin-Offs, and all other requirements of the Company to complete the Spin-Offs must be fulfilled. In order to complete the Share Issuances, Future FinTech shareholders must vote to approve the Amendment and the Share Issuances, and all other requirements for the Company to complete the Share Issuances must be fulfilled.

 

Q: Why is Future FinTech proposing the Spin-Offs?

 

A:

Our Board is submitting the Spin-Offs to our shareholders for approval with the intent of restructuring the Company so that the Company’s management can better focus on the Company’s new business lines and growth strategies and so that SkyPeople BVI, FullMart and the Company can each access capital resources that are focused on their respective industries, operational needs and growth strategies.

 

The Company plans to spin-off the fruit juice, food and construction in progress—the traditional fruit juice businesses. After the completion of the Spin-Offs, Future FinTech will focus on our existing agriculture trading center, establish online sales of fruit juice and consumer products as well as financial technology businesses, and transition from a heavy assets manufacturing company to a light assets internet and financial technology company. Future FinTech has incorporated a new subsidiary to engage in asset management, which will have a particular focus on purchasing distressed assets and selling such assets, or alternatively securitizing them for sale. Future FinTech has acquired financial assets and plans to dispose of them all together, individually or in a repackaged form. We are also considering whether to securitize such financial assets and assets that we may acquire in the future from time to time for sale as securities in the PRC. Through a subsidiary, we have entered into a service contract for the development of our blockchain-based Global Shared Shopping Mall platform, which will enhance our existing e-commerce business and provide both direct and third-party sale services of our own products and those of third-party sellers. Additionally, the Company’s indirectly wholly owned subsidiary Hedetang Foods (China) Co. Ltd. is in the process of applying with the relevant Chinese government agencies to change its name to China Agricultural Silk-road Finance Leasing Co., Ltd. to provide project financing and leasing services for potential “one-belt and one-road projects” that Chinese government is currently promoting.

 

Our Board believes that the Spin-Offs will allow Future FinTech’s results of operations to not be as negatively affected by the adverse market conditions currently being experienced by the heavy asset and manufacturing operations of SkyPeople BVI and FullMart in China.  However, there is no assurance of the growth of any of the future operations of the Company, SkyPeople BVI or FullMart, or that SkyPeople BVI or FullMart will operate their respective businesses in a manner substantially similar to the current operations of the Company.

 

Q: What will Future FinTech shareholders receive if the Spin-Offs are completed?

 

A: If the Spin-Offs are completed, each Future FinTech shareholder will be entitled to receive a pro rata distribution of the ordinary shares of SkyPeople BVI and FullMart’s ordinary stock for each share of Future FinTech common stock they hold as of the Record Date, January 22, 2018.
   
  We do not intend to list the ordinary shares of SkyPeople BVI and FullMart on any exchange in the United States. Due to this, the liquidity of such shares will likely be lower than the current liquidity of Future FinTech’s common stock.

 

Q: What happens if I buy my shares after the Record Date?

 

A: Purchasers of Future FinTech common stock after the Record Date will not be entitled to receive ordinary shares of SkyPeople BVI or FullMart upon the completion of the Spin-Offs.

 

Q: What happens if I sell my shares after the Record Date, but before the Special Meeting?

 

A: The Record Date is earlier than the date of the Special Meeting. If you transfer your shares of the Company after the Record Date but before the Special Meeting, you will retain your right to vote at the Special Meeting, but will transfer ownership of the shares and will not hold an interest in the Company in respect of such shares after the Spin-Offs are completed.  However, you will still be entitled to receive the distribution of the ordinary shares of SkyPeople BVI and FullMart upon the completion of the Spin-Offs.

 

Q: Are there risks associated with the Spin-Offs that I should consider in deciding how to vote?

 

A: Yes. There are a number of risks related to the Spin-Offs that are discussed in this proxy statement. Please read with particular care the detailed description of the risks described in “Risk Factors” beginning on page 15 of this proxy statement.

 

Q. What happens if the Spin-Offs are not approved?

 

A. If the Spin-Offs are not approved, neither of the Spin-Offs will be consummated and the subsidiaries subject to the rejected Spin-Offs will remain wholly-owned subsidiaries of Future FinTech.

 

Q: How does Future FinTech’s board of directors recommend that I vote on the proposals to be voted upon at the Special Meeting?

 

A: The Future FinTech board of directors recommends that Future FinTech shareholders vote or give instruction to vote:

  

 2 

 

 

  FOR” the SkyPeople BVI and FullMart spin-off proposal;

 

  FOR” the amendment to Future FinTech’s Second Amended and Restated Articles of Incorporation to increase Future FinTech’s authorized shares of common stock from 8,333,333 to 60,000,000;
     
  FOR” the adoption of the Future FinTech Group Inc. 2017 Omnibus Equity Plan;
     
  FOR” the issuance of an aggregate 7,111,599 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to certain Creditor’s Rights Transfer Agreements between a wholly owned subsidiary of the Company and sellers of such creditor’s rights (the “Acquisition Share Issuances”);
     
  FOR” the issuance of an aggregate 11,362,159 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to a Share Purchase Agreement between the Company and a certain investor (the “Placement Share Issuance”); and
     
  FOR” the grant of discretionary authority to the Company’s Chief Executive Officer to adjourn the Special Meeting for the purpose of soliciting additional proxies to approval Proposals 1 through 5.

 

You should read “The Spin-Offs — Recommendation of Future FinTech’s Board of Directors and Reasons for the Spin-Offs” beginning on page 39 for a discussion of the factors that our board of directors considered in deciding to recommend the approval of the spin-off proposal.

 

Q: Do persons involved in the Spin-Offs have interests that may conflict with those as a Future FinTech shareholder generally?

 

A: In considering the recommendation of the Future FinTech board of directors to approve the Spin-Offs, Future FinTech shareholders should be aware that certain Future FinTech executive officers and directors may be deemed to have interests in the Spin-Offs that are different from, or in addition to, those of Future FinTech shareholders generally. These interests, which may create actual or potential conflicts of interest, are, to the extent material, described in the section entitled “Interests of Future FinTech’s Directors and Officers in the Spin-Offs” beginning on page 41.
   
  In particular, as of December 22, 2017, Mr. Zeyao Xue’s beneficial ownership of 45.2% of Future FinTech’s issued and outstanding common stock will give him the ability to almost control the outcome of matters submitted to shareholders for approval, including those proposals discussed herein. Assuming the completion of the Spin-Offs and the transactions contemplated by Proposals 4 and 5 and that the number of our issued and outstanding shares remains unchanged, Mr. Zeyao Xue will hold 57.9% of Future FinTech’s issued and outstanding common stock and and nearly controlling interests in SkyPeople BVI and FullMart, giving him the ability to control the outcome of matters submitted to the shareholders of such entities in the future, including the election of directors and any merger, consolidation, or sale of all or substantially all of their respective assets. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of their respective assets that other shareholders support, or conversely this concentrated control could result in the consummation of such a transaction that other shareholders do not support. This concentrated control could also discourage a potential investor from acquiring the ordinary shares of SkyPeople BVI or FullMart, or the common stock of Future FinTech, due to the limited voting power of such shares. As a shareholder, even a controlling shareholder, Mr. Zeyao Xue is entitled to vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of our shareholders generally.
   
Q: How do I vote?

 

A: After you have carefully read this proxy statement and have decided how you wish to vote your shares of Future FinTech common stock, please vote your shares promptly.

 

Shareholders of Record

 

If your shares of Future FinTech common stock are registered directly in your name with Future FinTech’s transfer agent, Continental Stock Transfer & Trust Company, you are the shareholder of record of those shares and these proxy materials have been mailed to you by the Company. You may vote your shares by mail or in person at the Special Meeting. Your vote authorizes Hongke Xue, Chief Executive Officer of the Company, and Hanjun Zhang, Interim Chief Financial Officer of the Company, as your proxy, with the power to appoint his substitute, to represent and vote your shares as you directed.

 

Beneficial Owners

 

If your shares of Future FinTech common stock are held in a stock brokerage account, by a bank, broker or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your bank, broker or nominee that is considered the holder of record of those shares. As the beneficial owner, you have the right to direct your bank, broker, trustee or nominee on how to vote your shares signing and returning a proxy card. Your bank, broker, trustee or nominee will send you instructions for voting your shares. Please note that you may not vote shares held in street name by returning a proxy card directly to Future FinTech or by voting in person at the Special Meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or nominee. Further, brokers, banks and nominees who hold shares of Future FinTech common stock on your behalf may not give a proxy to Future FinTech to vote those shares without specific instructions from you.

 

For a discussion of the rules regarding the voting of shares held by beneficial owners, please see the question below entitled “If I am a beneficial owner of shares of Future FinTech common stock, what happens if I don’t provide voting instructions? What is discretionary voting?”

 

 3 

 

 

Q: What vote is required to approve each proposal?

 

A: The approval of each of the proposals requires the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on that proposal.

 

Q: How many votes do I and others have?

 

A: You are entitled to one vote for each share of Future FinTech common stock that you held as of the Record Date. As of the close of business on the Record Date, there were ● outstanding shares of Future FinTech common stock.

 

Q: How will our directors and executive officers vote on the proposals at the Special Meeting?

 

A: As of the Record Date, the directors and executive officers of Future FinTech as a group owned and were entitled to vote ● shares of the common stock of the Company, representing approximately ●% of the outstanding shares of Future FinTech common stock on that date. Future FinTech expects that its directors and executive officers will vote their shares in favor of the each of the proposals to be presented at the Special Meeting, but none of the Company’s directors or executive officers has entered into any agreement obligating any of them to do so.

 

Q: How many shares must be present to hold the Special Meeting?

 

A: A majority of the shares of our common stock issued and outstanding and entitled to vote must be represented in person or by proxy at the meeting to establish a quorum. Both abstentions and broker non-votes (discussed further below) are counted as present for determining the presence of a quorum. Broker non-votes, however, are not counted as shares present and entitled to be voted with respect to the matter on which the broker has not voted. Thus, broker non-votes will not affect the outcome of any of the matters to be voted on at the Special Meeting. Generally, broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner and (2) the broker lacks discretionary voting power to vote such shares.

 

Q: If I am a beneficial owner of shares of Future FinTech common stock, what happens if I don’t provide voting instructions? What is discretionary voting?

 

A: If you are a beneficial owner and do not provide the shareholder of record with voting instructions, your shares may constitute “broker non-votes.” A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power and has not received instructions from the beneficial owner.

 

Under applicable regulations, if a broker holds shares on your behalf, and you do not instruct your broker how to vote those shares on a matter considered “routine,” the broker may generally vote your shares for you. A “broker non-vote” occurs when a broker has not received voting instructions from you on a “non-routine” matter, in which case the broker does not have authority to vote your shares with respect to such matter. Unless you provide voting instructions to a broker holding shares on your behalf, your broker may no longer use discretionary authority to vote your shares on any of the matters to be considered at the Special Meeting. Please vote your proxy so your vote can be counted.

   

Q: What will happen if I return my proxy card without indicating how to vote?

 

A: If you sign and return your proxy card without indicating how to vote on any particular proposal, the Future FinTech common stock represented by your proxy will be voted in favor of each such proposal. Proxy cards that are returned without a signature will not be counted as present at the Special Meeting and cannot be voted.

 

 4 

 

 

Q: Can I change my vote after I have returned a proxy or voting instruction card?

 

A: Yes. You can change your vote at any time before your proxy is voted at the Special Meeting. You can do this in one of four ways:

 

you can grant a new, valid proxy bearing a later date;

 

you can send a signed notice of revocation;

 

if you are a holder of record, you can attend the Special Meeting and vote in person, which will automatically cancel any proxy previously given, or you may revoke your proxy in person, but your attendance alone will not revoke any proxy that you have previously given; or

 

if your shares of Future FinTech common stock are held in an account with a broker, bank or other nominee, you must follow the instructions on the voting instruction card you received in order to change or revoke your instructions.

 

If you choose either of the first two methods, you must submit your notice of revocation or your new proxy to the Corporate Secretary of Future FinTech, as specified in this proxy statement, no later than the beginning of the Special Meeting. If your shares are held in street name by your broker, bank or nominee, you should contact them to change your vote.

 

Q: Do I need identification to attend the Special Meeting in person?

 

A: Yes. Please bring proper identification, together with proof that you are a record owner of shares of Future FinTech common stock. If your shares are held in street name, please bring acceptable proof of ownership, such as a letter from your broker or an account statement stating or showing that you beneficially owned shares of Future FinTech common stock on the record date. Acceptable proof of ownership is either (a) a letter from your broker stating that you beneficially owned Future FinTech stock on the Record Date or (b) an account statement showing that you beneficially owned Future FinTech stock on the Record Date.

 

Q: Are Future FinTech shareholders entitled to appraisal rights?

 

A: No. Future FinTech shareholders do not have appraisal rights in connection with the Spin-Offs under the Florida Business Corporation Act.

 

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

 

A: You may receive more than one set of voting materials for the Special Meeting, including multiple copies of this proxy statement, proxy cards and/or voting instruction forms. This can occur if you hold your shares of common stock in more than one brokerage account, if you hold shares directly as a record holder and also in street name, or otherwise through a nominee, and in certain other circumstances. If you receive more than one set of voting materials, each should be voted and/or returned separately in order to ensure that all of your shares of common stock are voted.

 

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Q: If I am a Future FinTech shareholder, should I send in my Future FinTech stock certificates with my proxy card?

 

A: No. Please DO NOT send your Future FinTech stock certificates with your proxy card.

 

After each of the Spin-Offs is completed, the transfer agent of SkyPeople BVI and FullMart will send you a letter of transmittal and, when applicable, your shares of SkyPeople BVI and FullMart

 

Q: Do you expect the Spin-Off to be taxable to Future FinTech shareholders?

  

A: Yes. The receipt of each of SkyPeople BVI and FullMart’s ordinary shares as a result of the Spin-Offs will be fully taxable. Please review carefully the information under “United States Federal Income Tax Consequences of the Spin-Offs” beginning on page 42 for a description of the material U.S. federal tax consequences of the Spin-Offs. The tax consequences to you will depend on your own situation. Please consult your tax advisors as to the specific tax consequences to you of the Spin-Offs, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws in light of your particular circumstances.

 

Q: When do you expect the Spin-Offs to be completed?

 

A: We are working to complete the Spin-Offs as quickly as possible, and we expect to complete all transactions in the second quarter of 2018. However, Future FinTech cannot assure you when or if either of the Spin-Offs will occur. The Spin-Offs are subject to shareholder approvals and other conditions, and it is possible that factors outside the control of Future FinTech could result in the Spin-Offs being completed at a later time, or not at all. There may be a substantial amount of time between the Special Meeting and the completion of the Spin-Offs.

 

Q: Whom should I call with questions about the Special Meeting, the Spin-Off or any of the other proposals to be presented at the Special Meeting?

 

A: Future FinTech shareholders should call the Corporate Secretary at 86-29-81878277 with any questions.

 

Q: What will the business of each of the spun-off companies be if the Spin-Offs are consummated?

 

A: Following the completion of the Spin-Offs, SkyPeople BVI and its subsidiaries will continue to engage in the manufacture and sale of fruit juice concentrates, fruit juice beverages and other fruit-related products in the People’s Republic of China and overseas markets. Following the completion of the Spin-Offs, FullMart and its subsidiary will continue to not have ongoing operations.

 

Q: What will the management of each of Future FinTech, SkyPeople BVI and FullMart be if the Spin-Offs are consummated?

 

A:

The officers and directors of Future FinTech will not be affected by the completion or non-completion of the Spin-Offs. Following the completion of the Spin-Offs, Mr. Yongke Xue will continue to be the sole director of SkyPeople BVI, and Mr. Fei Zhu will continue to be the sole director of FullMart. 

 

See “Officers and Directors of SkyPeople BVI and FullMart Following the Spin-Offs” for more information.

 

Q: What material negative factors did the Board of Future FinTech consider in connection with the Spin-Offs?

 

A:

By and large the Board of Future FinTech does not view the Spin-Offs as negative. Upon deliberation, the Board determined that the potential positive value of the successful completion of each of the Spin-Offs distinctly outweigh any negative factor. If the Spin-Offs are not approved by Future FinTech shareholders or if either of the Spin-Offs is not completed for any other reason, Future FinTech shareholders will not receive any distribution of the ordinary shares of SkyPeople BVI or FullMart, as applicable. Whether or not the Spin-Offs are completed, Future FinTech will remain an independent public company, its common stock will continue to be listed and traded on the NASDAQ Global Market, if eligible, and registered under the Exchange Act, and Future FinTech will continue to file periodic reports with the SEC. In addition, if the Spin-Offs are not completed, Future FinTech expects that management will operate the business in a manner similar to that in which it is being operated today and that Future FinTech’s shareholders will continue to be subject to the same risks and opportunities to which they are currently subject, including, without limitation, risks related to the highly competitive industry in which Future FinTech operates, the potential of NASDAQ delisting if it becomes unable to meet minimum listing requirements, and the adverse economic conditions it faces.

 

On December 1, 2017, we received written notice from NASDAQ stating that the Company is not in compliance with the requirement of the minimum Market Value of Publicly Held Shares (“MVPHS”) of $5,000,000 for continued listing on The NASDAQ Global Market, as set forth in NASDAQ Listing Rule 5450(b)(1)(C). The notice has no immediate effect on the listing of the Company’s common stock, and its common stock will continue to trade on The NASDAQ Global Market under the symbol “FTFT” at this time. In accordance with NASDAQ Listing Rule 5810(c)(3)(D), the Company has a grace period of 180 calendar days, or until May 30, 2018, to regain compliance with the minimum MVPHS requirement. To regain compliance, the minimum MVPHS of the Company’s common stock must meet or exceed $5,000,000 for at least ten consecutive business days during this 180-day grace period. If the Company does not regain compliance with the minimum MVPHS requirement by May 30, 2018, NASDAQ will provide written notification to the Company that its securities will be subject to delisting. Alternatively, the Company may consider applying to transfer the Company’s securities to The NASDAQ Capital Market which has a minimum MVPHS requirement of $1,000,000.

 

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The primary negative consequence of the Spin-Offs that Future FinTech’s Board considered was that the Spin-Offs could result in Future FinTech’s common stock moving from NASDAQ to the OTC Markets if Future FinTech’s stock price cannot continue to meet NASDAQ’s listing requirements and the lower relative liquidity of the ordinary stock of SkyPeople BVI and FullMart as compared to the common stock of Future FinTech.

 

If either of the Spin-Offs is not completed, Future FinTech’s Board will continue to evaluate and review the Company’s business operations, properties, dividend policy and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value.

 

Please read with particular care the detailed description of the risks described in “Risk Factors” beginning on page 15 of this proxy statement.

 

Q: How will I receive information about SkyPeople BVI and FullMart after the Spin-Offs are completed?

 

A: Each of SkyPeople BVI and FullMart will register a class of securities on Form 10 prior to the completion of the Spin-Offs.  As such, so long as those securities remain registered, SkyPeople BVI and FullMart will have periodic and reporting obligations under the Securities Exchange Act of 1934, as amended, and those reports will be available to the public from commercial document retrieval services and at the SEC’s website, www.sec.gov.

 

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FORWARD-LOOKING STATEMENTS

 

This proxy statement, including information incorporated by reference into this proxy statement, includes forward-looking statements regarding, among other things, Future FinTech’s plans, strategies and prospects, both business and financial. Although Future FinTech believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, Future FinTech cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under “Risk Factors” from time to time in Future FinTech’s filings with the SEC. Many of the forward-looking statements contained in this presentation may be identified by the use of forward-looking words such as “believe”, “expect”, “anticipate”, “should”, “planned”, “will”, “may”, “intend”, “estimated”, “aim”, “on track”, “target”, “opportunity”, “tentative”, “positioning”, “designed”, “create”, “predict”, “project”, “seek”, “would”, “could”, “continue”, “ongoing”, “upside”, “increases” and “potential”, among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this presentation are set forth in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:

 

the number and percentage of our public shareholders voting against the Spin-Offs, Issuance of Acquisition Shares and/or Private Placement Shares and the other proposals described herein;

   
the dilution of the shares held by existing shareholders due to the issuance of Acquisition Shares and Private Placement Shares;

 

the ability to maintain the listing of Future FinTech’s common stock on NASDAQ following the consummation of the Spin-Offs;

 

changes adversely affecting the businesses in which any of Future FinTech, SkyPeople BVI and FullMart are engaged;

 

management of growth;

 

general economic conditions;

 

business strategies and plans of Future FinTech, SkyPeople BVI and FullMart;

 

the result of future financing efforts; and

 

and the other factors summarized under the section entitled “Risk Factors”.

 

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement. All forward-looking statements included herein attributable to any of Future FinTech, SkyPeople BVI, FullMart or any person acting on any party’s 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, Future FinTech, SkyPeople BVI and FullMart undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events.

 

Before a shareholder grants its proxy or instructs how its vote should be cast or vote on the proposals described herein, it should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement may adversely affect Future FinTech, SkyPeople BVI and FullMart.

 

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SUMMARY

 

This summary highlights selected information from this proxy statement 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 Special Meeting, including the Spin-Offs, you should read this entire document carefully, including the 2017 Future FinTech Equity Plan attached as Annex A and the Amendment attached as Annex B and the other exhibits attached hereto, including the Acquisition Agreements and Share Purchase Agreement.

References to “Future FinTech” are references to Future FinTech Group Inc. References to “SkyPeople BVI” are references to SkyPeople Foods Holdings Limited (BVI). References to “FullMart” are references to FullMart Holdings Limited (BVI). References to “we” or “our” and other first person references in this joint proxy statement refer to Future FinTech Group, SkyPeople BVI or FullMart, as the case may be, before completion of the transactions. References to the “transactions,” unless the context requires otherwise, mean the transactions contemplated by the Spin-Offs, taken as a whole. 

The Parties 

Future FinTech Group Inc. 

We are a holding company incorporated under the laws of the State of Florida. We have three direct wholly-owned subsidiaries: Belkin Foods Holdings Group Co., Ltd., (“Belkin”), a company incorporated under the laws of the British Virgin Island, FullMart Holding Limited (“FullMart”), a company organized under the laws of British Virgin Island, and SkyPeople Foods Holding Limited (“SkyPeople BVI”), company organized under the laws of British Virgin Island. SkyPeople BVI holds 100% of the equity interest of HeDeTang Holding (HK) Ltd. (“HeDeTang Holding (HK)”), a company organized under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), and HeDeTang Holding (HK) holds 73.42% of the equity interest of SkyPeople Juice Group Co., Ltd., (“SkyPeople (China)”), a company incorporated under the laws of the PRC. SkyPeople (China) has eleven subsidiaries, all limited liability companies organized under the laws of the PRC: (i) Shaanxi Qiyiwangguo Modern Organic Agriculture Co., Ltd. (“Shaanxi Qiyiwangguo”); (ii) Huludao Wonder Fruit Co., Ltd. (“Huludao Wonder”); (iii) Yingkou Trusty Fruits Co., Ltd. (“Yingkou”); (iv) Hedetang Foods Industry (Yidu) Co. Ltd. (“Food Industry Yidu”); (v) Shaanxi Heying Trading Co. Ltd (“Shaanxi Heying”); (vi) Hedetang Agricultural Plantation (Yidu) Co. Ltd. (“Agricultural Plantation Yidu”); (vii) Xi’an Hedetang Nutritious Food Research Institute Co., Ltd.. (“Hedetang Reseach”); and (viii) Xi’an Cornucopia International Co., Ltd. (“Xi’an Cornucopia”); (ix) Xi’an Hedetang E-commerce Co. Ltd. (“Hedetang E-commerce”), (x) Hedetang Foods Industry (Zhouzhi) Co. Ltd (“Foods Industry Zhouzhi”)and (xi) Hedetang Foods Industry (Jingyang) Co. Ltd. (“Foods Industry (Jingyang”); Shenzhen TianShunDa Equity Investment Fund Management Co., Ltd. (the “TSD”), a limited liability corporation registered in China, holds another 26.36% of the equity interest of SkyPoeple (China). HeDeTang Holdings (HK) also holds 100% of the equity interest of HeDeJiaChuan Holding Group Co. Ltd., (“HeDeJiaChuan Holding”), a company incorporated under the laws of the PRC, which holds 100% of HeDeJiaChuan Foods (Xi’an) Co. Ltd., (“HeDeJiaChuan Xi’an”), and Shenzhen Hedetang Industrial Co., Ltd. (“Shenzhen Hedetang”), both companies incorporated under the laws of the PRC. HeDeJiaChuan Xi’an” has three subsidiaries: (i) SkyPeople (Suizhong) Fruit and Vegetable Products Co., Ltd (“SkyPeople Suizhong”); (ii) HedeJiachuan Foods (Yichang) Co. Ltd (“Hedejiachuan Yichang”); and (iii) Shaanxi Guo Wei Mei Kiwi Deep Processing Co., Ltd. (“Guo Wei Mei”). 

FullMart holds 100% of equity interest of Hedejiachuan (HK) Holdings Limited (“Hedejiachuan HK”), a company organized under the laws of Hong Kong. In September 2017, Hedejiachuan (HK) transferred its wholly owned subsidiary Hedejiachuan Holding Group Co., Ltd., along with its two wholly owned subsidiaries, one 99.5% owned subsidiary, and one 96.67% owned subsidiary to HeDeTang Holding (HK) Ltd. The transferee is a subsidiary of Skypeople BVI. As a result of these transactions, all of FullMart’s operations were transferred to a subsidiary of SkyPeople BVI, and FullMart has no operational assets or businesses.

Belkin holds 100% of the equity interest of Future FinTech (Hong Kong) Limited (“Future FinTech HK”), a company organized under the laws of Hong Kong. Future FinTech HK holds 100% of the equity interest of Hedetang Foods (China) Ltd. (“Hedetang Foods (China)”), and Hedetang Foods (China) holds 90% of the equity interest of Hedetang Farm Products Trading Market (Mei County) Co., Ltd. (“Trading Market Mei County”), a company incorporated under the laws of the PRC. GlobalKey Supply Chain Limited (“GlobalKey Supply Chain”) holds the remaining 10% of the equity interest of Trading Market Mei County. Trading Market Mei County holds 100% of the equity interest of Shaanxi China Agricultural Silk Road Farm Products Trading Center Co., Ltd (“China Agricultural Trading Center”) and also holds 100% of the equity interest of GlobalKey Supply Chain.

SkyPeople Foods Holdings Limited (BVI) 

SkyPeople BVI is a wholly-owned subsidiary of Future FinTech organized under the laws of the British Virgin Islands on December 28, 2011. SkyPeople BVI holds 100% equity interest of HeDeTang Holding (HK). HeDeTang Holding (HK) holds 73.42% of the equity interest of SkyPeople (China). SkyPeople (China) has eleven subsidiaries, all limited liability companies organized under the laws of the PRC: (i) Shaanxi Qiyiwangg; (ii) Huludao Wonder; (iii) Yingkou; (iv) Food Industry Yidu; (v) Shaanxi Heying; (vi) Agricultural Plantation Yidu; (vii) Hedetang Reseach; and (viii) Xi’an Cornucopia;(ix) Hedetang E-commerce, (x) Foods Industry (Zhouzhi) and (xi) Foods Industry (Jingyang). TSD holds another 26.36% of the equity interest of SkyPoeple (China). HeDeTang Holdings (HK) also holds 100% of the equity interest of HeDeJiaChuan Holding, which holds 100% of HeDeJiaChuan Xi’an and Shenzhen Hedetang. HeDeJiaChuan Xi’an” has three subsidiaries: (i) SkyPeople Suizhong; (ii) Hedejiachuan Yichang; and (iii) Guo Wei Mei.

A class of securities of SkyPeople BVI will be registered on a Form 10 registration statement prior to the consummation of the Spin-Offs. 

FullMart Holdings Limited 

FullMart is a wholly-owned subsidiary of Future FinTech organized under the laws of the British Virgin Islands on December 28, 2011. FullMart holds 100% of equity interest of Hedejiachuan (HK) Holdings Limited (“Hedejiachuan HK”), a company organized under the laws of Hong Kong. In September 2017, Hedejiachuan (HK) transferred its wholly owned subsidiary Hedejiachuan Holding Group Co., Ltd., along with its two wholly owned subsidiaries, one 99.5% owned subsidiary, and one 96.67% owned subsidiary to HeDeTang Holding (HK) Ltd. The transferee is a subsidiary of Skypeople BVI. As a result of these transactions, all of FullMart’s operations were transferred to a subsidiary of SkyPeople BVI, and FullMart has no operational assets or businesses.

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A class of securities of FullMart will be registered on a Form 10 registration statement prior to the consummation of the Spin-Offs.

  

The Special Meeting

 

The Special Meeting will be held at 10:00 a.m., local time, on Tuesday, March 13, 2018, at the Company’s principal executive offices at 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China, 710075.

 

The Spin-Offs

 

Our board of directors has adopted resolutions approving a pro rata distribution of the issued and outstanding shares of SkyPeople BVI and FullMart by Future FinTech to its shareholders of record as of January 22, 2018 (the “Record Date”).

 

Upon completion of the Spin-Offs, all of the ordinary shares of each of SkyPeople BVI and FullMart will be directly held by the Future FinTech shareholders of record as of the Record Date. 

 

Future FinTech’s Operations Following the Spin-Offs

 

Following the completion of the Spin-Offs, the main business operations of Future FinTech will be focused on (i) the online sales of fruit juice products and beverages, and consumer and health-related products, through GlobalKey Supply Chain Limited (formerly known as Shaanxi Quangoutong E-Commerce Inc.) (“GlobalKey”); (ii) the operation of a supply chain, logistics and trading business for fruit juice products, foods and other consumer and agricultural products through Hedetang Farm Products Trading Market (Mei County) Co., Ltd., as described further below; (iii) bulk agricultural products spot trading business and financial technology businesses, including software development and information services for the financial leasing and project finance industries through intelligent investment advisory and blockchain technology; and (iv) related asset and equity investment management. We will use blockchain technology to develop its use in different business segments, including online sales and internet distribution businesses. We will also use the application blockchain technology in agricultural products trading, to facilitate financial payments and transactions, and intend to use both blockchain and artificial intelligence technologies to create new opportunities. We anticipate generating revenues from our finance leasing business, the acquisition and disposal of financial assets and the application of block-chain technology for online sales of products.

 

As previously reported, on April 3, 2013, SkyPeople (China) entered into an Investment Agreement (the “Agreement”) with the Managing Committee of Mei County National Kiwi Fruit Wholesale Trading Center (the “Committee”). The Committee has been authorized by the People’s Government of Mei County to be responsible for the construction and administration of the Mei County National Kiwi Fruit Wholesale Trading Center (the “Trading Center”). Contracts relating to the Trading Center were subsequently transferred to subsidiaries that will remain with Future FinTech following the completion of the Spin-Offs. Under the Agreement, the parties agreed to invest and establish a kiwi fruit comprehensive deep processing zone and kiwi fruit and fruit-related materials trading zone in Yangjia Village, Changxing Town of Mei County with a total planned area of total planned area of 286 mu (approximately 47 acres) (the “Project”). The Trading Center has begun operations, and in connection with the Project, our subsidiary Shaanxi Guoweimei Kiwi Deep Processing Co. Ltd. is currently building fruit juice production lines, a vegetable and fruit flash freeze facility, an R&D center and an office building. Although the schedule for completion could change, we plan to complete construction in the second quarter of 2018. We anticipate that these facilities and the Trading Center will support our supply chain, logistics and trading business for fruit juice projects, foods and other consumer and agricultural products.

 

The Company has been in discussions with blockchain software and system developers to establish a cooperation relationship, and, through a subsidiary, has entered into a services agreement for the development of our blockchain trading platform. Upon the completion of our blockchain platform, we anticipate that we, or our subsidiaries, will hold some of the products to be sold on the platform in inventory for direct sale, and third-parties will use our platform for sales of their own products. For example, GlobalKey has signed a license agreement with Shaanxi Entai-Biotechnology Co. Ltd. to serve as the sole global general distributor and operational platform for ‘IB-LIVE’, a product that aims to improve male sexual health. We will also continue to actively look for similar cooperation projects and further develop the supply chain business of fruit juices, foods and other consumer products to create more revenue for the Company. After the system is in operation, GlobalKey will become a comprehensive and shared e-commerce shopping platform.

 

Further, as described more fully in Proposal No. 4, the Company, through a subsidiary, has acquired creditor’s rights that it anticipates will provide capital for the development of its financial assets business. The Company is in the process of changing the name of Hedetang Foods (China) Co., Ltd. to China Agricultural Silk-Road Finance Leasing Co., Ltd. The change first needs the approval of State Administration for Industry and Commerce of the People’s Republic of China, then it needs to go through the procedures with Shaanxi Provincial Administration for Industry and Commerce, and finally it needs to make appropriate filings with the Shaanxi Provincial Department of Commerce. In addition, China Agricultural Silk-Road Finance Leasing Co., Ltd. must have registered capital for no less than 10 million US dollars as a financial leasing company. At present, the name “China Agricultural Silk-road Finance Leasing Co., Ltd.” has been approved by the China National Industry and Commerce Bureau and the Company is going through the required procedures with Shaanxi Administration for Industry and Commerce.

 

After it completes the purchase of financial assets with shareholders’ approval, China Agricultural Silk-road Finance Leasing Co., Ltd. will sell these existing financial assets to collect proceeds that we anticipate will be in the amount of approximately $30 to $35 million. After our block-chain based Global Shared Shopping Mall begins operations, it will generate sales and revenue as well as bring businesses onto its platform. We anticipate that such businesses will be potential investors or customers for our finance leasing business. We also plan to issue certain finance leasing funds to raise money. Under the banking rules in China, the finance leasing company can have a borrowing ratio of 5 to 10 times of its capital in industry to raise money, which could also provide us with necessary funds. To better control risk, we will focus on the companies with good credit on the Global Shared Shopping Mall and its upstream and downstream suppliers as our potential clients.

 

The finance leasing company will also engage in block-chain and online finance leasing businesses, the acquisition and disposal of financial assets and securitized assets, as well as the provision of support services to Global Shared Shopping Mall. We are also exploring the area to use block-chain to manage the disposal, transfer, trading and securitization of distressed assets.

 

We believe the Measures of Supervision and Administration of Finance Leasing Enterprises by Ministry of Commerce in September 2013 will apply to this line of business.

 

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Pre-Spin-Offs Structure

 

 

Post-Spin-Offs Structure of Future FinTech

 

 

 

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Abandonment of the Spin-Offs and Expenses Related to the Spin-Offs

 

In the event that the Future FinTech’s shareholders do not approve the Spin-Offs, the Spin-Offs shall not be consummated by the Company and shall be abandoned. We anticipate that the fees and expenses related to the Spin-Offs, including professional fees, shall be approximately $80,000 in aggregate.

 

Recommendation to Shareholders

 

After careful consideration, the Board of Directors recommends a vote IN FAVOR OF the Spin-Offs, a vote IN FAVOR OF the amendment to Future FinTech’s Second Amended and Restated Articles of Incorporation to increase its authorized shares of common stock from 8,333,333 to 60,000,000, a vote IN FAVOR OF the adoption of the Future FinTech Group Inc. 2017 Omnibus Equity Plan, a vote IN FAVOR OF the issuance of shares in connection with the debt acquisitions, a vote IN FAVOR OF the issuance of shares in a private placement, and a vote IN FAVOR OF the grant of discretionary authority to the Company’s CEO to adjourn the Special Meeting.

 

Interests of Future FinTech’s Directors and Officers in the Spin-Offs

 

As of the Record Date, the directors and executive officers of Future FinTech as a group owned and were entitled to vote ● shares of the common stock of the Company, representing approximately ●% of the outstanding shares of Future FinTech common stock on that date. Future FinTech expects that its directors and executive officers will vote their shares in favor of the Spin-Offs, in favor of the amendment to Future FinTech’s Second Amended and Restated Articles of Incorporation, in favor of the adoption of the Future FinTech Group Inc. 2017 Omnibus Equity Plan, in favor of the Acquisition Share Issuances, in favor of the Placement Share Issuance, and in favor of the grant of discretionary authority to the Company’s CEO to adjourn the meeting, but none of the Company’s directors or executive officers other has entered into any agreement obligating any of them to do so.

 

Besides the equity ownership of Future FinTech detailed above, the directors and executive officers of the Company do not have interests different than the other shareholders of Future FinTech.

 

Appraisal Rights

 

Future FinTech shareholders do not have appraisal rights in connection with the Spin-Offs under the Florida Business Corporation Act.

 

Material British Virgin Islands Tax Considerations

 

In the opinion of Maples and Calder (Hong Kong) LLP, under current British Virgin Islands law, we will not be subject to British Virgin Islands income tax as a result of the Spin-Offs and our shareholders who are not residents of the British Virgin Islands will not be subject to any British Virgin Islands income withholding or capital gains by reason of such transactions.

 

Material United States Federal Income Tax Considerations

 

The following discussion sets forth the material U.S. Federal income tax consequences to our shareholders of the distribution of the ordinary shares of SkyPeople BVI and FullMart to our shareholders.

 

This discussion is limited to shareholders who are U.S. Holders (as defined below) of our common stock who hold such stock as a capital asset for Federal income tax purposes. This discussion is based on the Tax Reform Act of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and the current administrative rules, practices and interpretations of law of the U.S. Internal Revenue Service (“IRS”), all as in effect on the date of this document, and all of which are subject to change, possibly with retroactive effect. This discussion does not address all aspects of Federal income taxation that may be important to particular holders in light of their individual investment circumstances. Unless specifically stated otherwise, this discussion does not apply to the following holders, even if they are U.S. Holders, all of whom may be subject to tax rules that differ significantly from those summarized below: (i) holders who may be subject to special tax rules, including, without limitation, partnerships (including any entity or arrangement treated as a partnership for Federal income tax purposes); (ii) dealers in securities or foreign currency, foreign persons, insurance companies, tax-exempt organizations, banks, financial institutions, and broker-dealers; and (iii) holders of warrants or other convertible securities entitling them to receive stock, holders who acquired common stock pursuant to the exercise of compensatory stock options or otherwise as compensation, or holders who hold common stock as part of a hedge, straddle, conversion, constructive sale or other integrated security transaction.

 

We have not sought, and will not seek, a ruling from the IRS regarding the Federal income tax consequences of these transactions. This discussion is based on varying interpretations that could result in U.S federal income tax consequences different from those described below. The following discussion does not address the tax consequences of this offering or the related share issuance under foreign, state, or local tax laws, or the alternative minimum tax provisions of the Code. Accordingly, each U.S. holder of common stock is urged to consult his, her or its (hereinafter, “his”) tax advisor with respect to the particular tax consequences of these transactions.

 

For purposes of this discussion, a “U.S. holder” is a holder who is for U.S. federal income tax purposes: (i) a citizen or resident of the U.S.; (ii) a corporation or other entity taxable as a corporation that is organized in or under the laws of the U.S., any state thereof or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income taxation, regardless of its source; or (iv) a trust, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust (or if the trust was in existence on August 20, 1996, and validly elected to continue to be treated as a U.S. trust).

 

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THIS IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE. THE U.S. FEDERAL INCOME TAX TREATMENT OF THESE TRANSACTIONS IS COMPLEX. ACCORDINGLY, EACH SHAREHOLDER WHO IS A U.S. HOLDER IS STRONGLY URGED TO CONSULT HIS OWN TAX ADVISER WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME, ESTATE AND OTHER TAX CONSEQUENCES OF THE TRANSACTIONS WITH SPECIFIC REFERENCE TO SUCH PERSON’S PARTICULAR FACTS AND CIRCUMSTANCES.

 

Distributions of Stock in SkyPeople BVI and FullMart

 

The distribution to our shareholders of interests in SkyPeople BVI and FullMart will be a taxable event to each shareholder. The value of the interests in the SkyPeople BVI and FullMart stock received by each shareholder will be applied first to reduce the shareholder’s basis in his stock in Future FinTech; any value of those interests in excess of the shareholder’s basis in Future FinTech stock will be a capital gain to the shareholder. Any capital gain will be long-term capital gain, taxable at favorable capital gains rates, if the shareholder has held his Future FinTech stock for more than a year at the time of the distribution; otherwise, any gain will be short-term capital gain taxable at ordinary income tax rates.

 

The foregoing discussion assumes that the Company does not, at the time of the distribution, have current or accumulated earnings and profits (“earnings and profits”). According to the books of the Company, the Company has no accumulated earnings and profits. If the Company has any current earnings and profits, then (i) the distribution of the interests in SkyPeople BVI and FullMart will be treated as a dividend distribution to each shareholder to the extent of the shareholder’s pro rata share of the Company’s current earnings and profits; and (ii) the value of the distribution, if any, in excess of the shareholder’s pro rata share of current earnings and profits will be treated in the manner described in the preceding paragraph.

 

If a shareholder’s basis in his Future FinTech stock is greater than the value of the interests in SkyPeople BVI and FullMart received by the shareholder, the shareholder will not recognize a capital loss.

 

The tax consequences of the distribution of the shares of SkyPeople BVI and FullMart are complex and not free from doubt. We have provided what we believe are the most likely consequences. Shareholders should consult their own tax advisors on the tax consequences of these transactions.

 

Net Investment Income Tax

 

The net investment income tax (the Medicare Tax on Unearned Income) – a tax of 3.8% on certain kinds of investment income – will apply to any portion of the distribution of the stock of SkyPeople BVI and FullMart that is treated as a dividend (see the discussion in the second paragraph of “Distributions of Stock in SkyPeople BVI and FullMart”, above).

 

The net investment income tax also appears to apply to any capital gain recognized by the shareholders on the distribution of SkyPeople BVI and FullMart stock to them (see the first paragraph of “Distributions of Stock in SkyPeople BVI and FullMart”, above) but the treatment of such capital gain under the net investment income rules is not entirely clear. Shareholders should consult their own tax advisors with respect to the applicability of the net investment income tax to such gains.

 

Company Tax Liability Due to the Spin-Off

 

The Company will recognize gain on the distribution of the SkyPeople BVI and FullMart interests to the shareholders if SkyPeople BVI or FullMart has a fair market value in excess of the Company’s adjusted basis in such entity. The value SkyPeople BVI or FullMart may exceed the Company’s adjusted basis in SkyPeople BVI or FullMart, as applicable. Any such gain would be added to the Company’s other income in determining the Company’s taxable income (taking into account the Company’s deductible expenses, credits, and allowable net operating loss carryforwards) and its tax liability, if any. The Company expects that any such gain would be offset by its other expenses and by its allowable net operating loss carryforwards, so that the Company would owe no tax as a result of these transactions, but there is no certainty that that would be the case.

 

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Information Reporting and Backup Withholding

 

Payments of proceeds from the distribution of SkyPeople BVI and FullMart to a shareholder may be subject to information reporting to the IRS and, possibly, U.S. federal backup withholding. Backup withholding will not apply if the shareholder furnishes a correct taxpayer identification number (certified on the IRS Form W-9) or otherwise establishes that he is exempt from backup withholding. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against the shareholder’s U.S. federal income tax liability. The shareholder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information. Since any backup withholding required in connection with the distribution of SkyPeople BVI and FullMart stock would in effect be a cash obligation imposed on the Company (since no withholdable cash is being distributed), the Company does not intend to distribute SkyPeople BVI or FullMart stock to any shareholder who has not provided the Company with a Form W-9 or otherwise established an exemption from backup withholding.

 

Regulatory Approvals Required for the Spin-Offs

 

The Spin-Offs are not subject to any additional federal or state regulatory requirement or approval, except for filings with the British Virgin Islands to effect the Spin-Offs.

 

Risk Factors

 

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

 

Conditions to Consummation of the Spin-Offs

 

The Company’s ability to consummate the Spin-Offs is conditioned upon, among other things, that:

 

each of the Spin-Offs having been duly approved, adopted and implemented by the Company’s shareholders by the requisite vote under the laws of Florida; and

 

the registration of a class of securities of each of SkyPeople BVI and FullMart on Form 10.

 

Post-Spin-Off Board of Directors and Executive Officers of SkyPeople BVI and FullMart

 

Following the completion of the Spin-Offs, Mr. Yongke Xue will continue to be the sole director of SkyPeople BVI, and Mr. Fei Zhu will continue to be the sole director of FullMart. 

 

Amendment to the Second Amended and Restated Articles of Incorporation of Future FinTech

 

The Company is asking you to approve the Amendment to the Second Amended and Restated Articles of Incorporation of Future FinTech (the “Amendment”), which would increase the amount of authorized shares of common stock, par value $0.001 per share (“Common Stock”), of Future FinTech from 8,333,333 to 60,000,000 shares. A copy of the Amendment is included as Annex B to this proxy statement.

 

Effects of the Increase in Authorized Shares of Common Stock

 

Potential uses of the additional authorized shares of Common Stock may include public or private offerings, conversions of convertible securities, issuance of stock or stock options to employees, acquisition transactions and other general corporate purposes. Increasing the authorized number of shares of the Common Stock will give us greater flexibility and will allow the Company to issue such shares, in most cases, without the expense or delay of seeking shareholder approval. The Company may issue shares of its Common Stock in connection with financing transactions and other corporate purposes which the Board of Directors believes will be in the best interest of the Company’s shareholders. The additional shares of Common Stock will have the same rights as the presently authorized shares, including the right to cast one vote per share of Common Stock. Although the authorization of additional shares will not, in itself, have any effect on the rights of any holder of our Common Stock, the future issuance of additional shares of Common Stock (other than by way of a stock split or dividend) would have the effect of diluting the voting rights, and could have the effect of diluting earnings per share and book value per share, of existing shareholders.

 

Dissenter’s Rights

 

Our shareholders have no right under the Florida Business Corporations Act, our Second Amended and Restated Articles of Incorporation or our Amended and Restated Bylaws to dissent from the provision adopted in the Amendment.

 

Conditions to the Issuance of Shares in Connection with the Debt Acquisition and in the Private Placement

 

The Company’s ability to issue shares of its Common Stock to consummate the Acquisition Share Issuances and Placement Share Issuance will be conditioned on receiving shareholder approval of the Amendment and the other conditions described in the agreements governing these shares issuances.

 

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RISK FACTORS

 

You should carefully consider the following risk factors, together with the other information contained in this proxy statement, including the factors discussed in Part I, Item 1A—Risk Factors in Future FinTech’s annual report on Form 10-K for the year ended December 31, 2016. The risks described below relate to the Spin-Offs, and are in addition to, and should be read in conjunction with, without limitation, the factors discussed in Part I, Item 1A—Risk Factors in Future FinTech’s annual report on Form 10-K for the year ended December 31, 2016. If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on each of Future FinTech’s, SkyPeople BVI’s and FullMart’s businesses, financial conditions or results of operations. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

 

Risks Related to the Spin-Offs

 

The Spin-Offs are subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis.

 

Completion of the Spin-Offs is subject to the completion of certain conditions that make the completion and timing of the transactions uncertain. The conditions include, among others, the issuance of additional shares of ordinary stock of each of SkyPeople BVI and FullMart to Future FinTech and the filing and effectiveness of Form 10 registration statements for each of SkyPeople BVI and FullMart. The completion of these conditions may be completed later than anticipated.

 

Failure to complete the Spin-Offs may negatively affect the share price and future business and financial results of Future FinTech.

 

In the event that we are unable to complete the Spin-Offs in a timely manner, Future FinTech’s ongoing business may be adversely affected. If the Spin-Offs are not completed at all, Future FinTech will be subject to a number of risks, including the following:

 

being required to pay costs and expenses relating to the Spin-Offs, such as legal and accounting fees, whether or not the transactions are completed; and
   
loss of time and resources committed by each of the management of each of Future FinTech, SkyPeople BVI and FullMart to matters relating to the Spin-Offs that could have been devoted to pursuing other beneficial opportunities.

 

If the Spin-Offs are not completed, the price of Future FinTech’s common stock may decline to the extent that the current market price reflects a market assumption that the transactions will be completed and that the related benefits will be realized.

 

Uncertainties associated with the Spin-Offs may cause employees to leave Future FinTech, SkyPeople BVI or FullMart and may otherwise affect the future business and operations of Future FinTech, SkyPeople BVI and FullMart.

 

The success of each of Future FinTech, SkyPeople BVI and FullMart after the Spin-Offs will depend in part upon their ability to retain their respective key employees. Prior to and following the Spin-Offs, current and prospective employees of each of Future FinTech, SkyPeople BVI and FullMart may experience uncertainty about their future roles and choose to pursue other opportunities, which could have an adverse effect on the applicable business. If key employees depart, the businesses and results of operations of the entities losing such key employees could be adversely affected.

 

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Results of operations and financial condition of Future FinTech, SkyPeople BVI and FullMart following the transactions may differ materially from the pro forma information presented in this proxy statement.

 

The pro forma financial information included in this proxy statement is derived from the historical audited and unaudited consolidated financial statements of Future FinTech, unaudited carve-out financial statements of SkyPeople BVI and FullMart, as well as from certain internal, unaudited financial statements. The preparation of this pro forma information is based upon available information and certain assumptions and estimates that we believe are reasonable. However, this pro forma information may be materially different from what the actual results of operations and financial conditions of Future FinTech, SkyPeople BVI and FullMart would have been had the transactions occurred during the periods presented or from what the results of operations and financial position of Future FinTech, SkyPeople BVI and FullMart will be after the completion of the proposed transactions. In particular, the assumptions used in preparing the pro forma financial information may not be realized, and other factors may affect the financial condition and results of operations of each of Future FinTech, SkyPeople BVI and FullMart following the transactions.

 

Additional Risks Related to Future FinTech After the Spin-Offs

 

We may not be able to effectively control and manage our growth, and a failure to do so could adversely affect our operations and financial condition.

 

Our revenue increased significantly from 2006 to 2010 and from 2012 to 2014, but decreased in 2015 and 2016. If our business and markets experience significant growth, we will need to expand our business to maintain our competitive position. We may face challenges in managing and financing expansion of our business, facilities and product offerings, including challenges relating to integration of acquired businesses and increased demands on our management team, employees and facilities. Failure to effectively deal with increased demands on us could interrupt or adversely affect our operations and cause production and service backlogs, longer product development time frames and administrative inefficiencies. Other challenges involved with expansion, acquisitions and operation include:

 

unanticipated costs;
   
the diversion of management’s attention from other business concerns;
   
potential adverse effects on existing business relationships with suppliers and customers;
   
obtaining sufficient working capital to support expansion;
   
expanding our product offerings and maintaining the high quality of our products;

 

continuing to fill customers’ orders on time;
   
maintaining adequate control of our expenses and accounting systems;
   
successfully integrating any future acquisitions; and
   
anticipating and adapting to changing conditions in the fruit juice, beverage industries and financial technology, whether from changes in government regulations, mergers and acquisitions involving our competitors, technological developments or other economic, competitive or market dynamics.

 

Even if we obtain benefits of expansion in the form of increased sales, there may be delay between the time when the expenses associated with an expansion or acquisition are incurred and the time when we recognize such benefits, which could negatively affect our earnings.

 

Our Common Stock is currently subject to delisting from the NASDAQ Global Market (“NASDAQ”) as we are not in compliance with NASDAQ’s continued listing requirements

 

On December 1, 2017, we received written notice from NASDAQ stating that the Company is not in compliance with the requirement of the minimum Market Value of Publicly Held Shares (“MVPHS”) of $5,000,000 for continued listing on The NASDAQ Global Market, as set forth in NASDAQ Listing Rule 5450(b)(1)(C). The notice has no immediate effect on the listing of the Company’s common stock, and its common stock will continue to trade on The NASDAQ Global Market under the symbol “FTFT” at this time. In accordance with NASDAQ Listing Rule 5810(c)(3)(D), the Company has a grace period of 180 calendar days, or until May 30, 2018, to regain compliance with the minimum MVPHS requirement. To regain compliance, the minimum MVPHS of the Company’s common stock must meet or exceed $5,000,000 for at least ten consecutive business days during this 180-day grace period. If the Company does not regain compliance with the minimum MVPHS requirement by May 30, 2018, NASDAQ will provide written notification to the Company that its securities will be subject to delisting. Alternatively, the Company may consider applying to transfer the Company’s securities to The NASDAQ Capital Market which has a minimum MVPHS requirement of $1,000,000.

 

We may engage in future acquisitions involving significant expenditures of cash, the incurrence of debt or the issuance of stock, all of which could have a materially adverse effect on our operating results.

 

As part of our business strategy, we review acquisition and strategic investment prospects that we believe would complement our current product offerings, augment our market coverage, enhance our technological capabilities or otherwise offer growth opportunities. From time to time, we review investments in new businesses and we expect to make investments in, and to acquire, businesses, products or technologies in the future. In the event of any future acquisitions, we may expend significant cash, incur substantial debt and/or issue equity securities and dilute the percentage ownership of current shareholders, all of which could have a material adverse effect on our operating results and the price of our stock. We cannot guarantee that we will be able to successfully integrate any businesses, products, technologies or personnel that we may acquire in the future, and our failure to do so could have a material adverse effect on our business, operating results and financial condition. 

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Our business and operations may be subject to disruption from work stoppages, terrorism or natural disasters.

 

Our operations may be subject to disruption for a variety of reasons, including work stoppages, acts of war, terrorism, pandemics, fire, earthquake, flooding or other natural disasters. If a major incident were to occur in either of the regions where our facilities or main offices are located, our facilities or offices or those of critical suppliers could be damaged or destroyed. Such a disruption could result in a reduction in available raw materials, the temporary or permanent loss of critical data, suspension of operations, delays in shipment of products and disruption of business generally, which would adversely affect our revenue and results of operations.

 

Our success depends substantially on the continued retention of certain key personnel and our ability to hire and retain qualified personnel in the future to support our growth.

 

If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. While we depend on the abilities and participation of our current management team generally, we rely particularly upon Mr. Hongke Xue, our chief executive officer (“CEO”); Mr. Yongke Xue, a member of the Company’s Board of Directors (the “Board”); and Mr. Hanjun Zheng, our interim chief financial officer (“CFO”). The loss of the services of Messrs. Hongke Xue, Yongke Xue or Hanjun Zheng for any reason could significantly adversely impact our business and results of operations. Competition for senior management and senior technology personnel in the PRC is intense and the pool of qualified candidates is very limited. Accordingly, we cannot guarantee that the services of our senior executives and other key personnel will continue to be available to us, or that we will be able to find a suitable replacement for them if they were to leave.

 

Our ecommerce business depends on the continued use of the Internet and the adequacy of the Internet infrastructure.

 

Our ecommerce business depends upon the widespread use of the Internet and ecommerce. Factors which could reduce the widespread use of the Internet for ecommerce include actual or perceived lack of security of information or privacy protection, cyberattacks or other disruptions or damage to the Internet or to users’ computers, significant increases in the costs of transportation of goods, and taxation and governmental regulation.

 

Our business depends on our Website, network infrastructure and transaction-processing systems.

 

Our ecommerce business is completely dependent on our infrastructure. Any system interruption that results in the unavailability of our Website or reduced performance of our transaction systems could reduce our ability to conduct our business. We use internally and externally developed systems for our Website and our transaction processing systems. We expect to experience system interruptions due to software failure. We may also experience temporary capacity constraints due to sharply increased traffic during sales or other promotions and during the holiday shopping season. Capacity constraints can cause system disruptions, slower response times, delayed page presentation, degradation in levels of customer service and other problems. We may also experience difficulties with our infrastructure upgrades. Any future difficulties with our transaction processing systems or difficulties upgrading, expanding or integrating aspects of our systems may cause system disruptions, slower response times, and degradation in levels of customer service, additional expense, impaired quality and speed of order fulfillment or other problems.

 

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If the location where all of our computer and communications hardware is located is compromised, our business, prospects, financial condition and results of operations could be harmed. If we suffer an interruption or degradation of services at the location for any reason, our business could be harmed. Our success, and in particular, our ability to successfully receive and fulfill orders and provide high-quality customer service, largely depends on the efficient and uninterrupted operation of our computer and communications systems. These limitations could have an adverse effect on our conversion rate and sales. Our disaster recovery plan may be inadequate, and we do not carry business interruption insurance to compensate us for the losses that could occur. Despite our implementation of network security measures, our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, the occurrence of any of which could lead to interruptions, delays, loss of critical data or the inability to accept and fulfill customer orders. The occurrence of any of the foregoing risks could harm our business.

 

Our platform requires frequent updates on pricing from our vendors. If these updates are inaccurate or do not occur, there could be a negative influence on our business.

 

We update the prices of products listed on our site frequently through a third party vendor. If we are unable to obtain, or are not provided updated pricing information from our third party vendor, or if we fail to act on information provided by our third party vendor, then it could cause us to remedy the pricing difference to complete the transaction, or source the product from an alternative vendor at their price.

 

We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks and to respond to cyber incidents.

 

Our ecommerce business is entirely dependent on the secure operation of our website and systems as well as the operation of the Internet generally. Our business involves the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk of loss or misuse of this information, litigation, and potential liability. A number of large Internet companies have suffered security breaches, some of which have involved intentional attacks. From time to time we and many other Internet businesses also may be subject to a denial of service attacks wherein attackers attempt to block customers’ access to our Website. If we are unable to avert a denial of service attack for any significant period, we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.

 

Cyberattacks may target us, our customers, our suppliers, banks, payment processors, ecommerce in general or the communication infrastructure on which we depend. If an actual or perceived attack or breach of our security occurs, customer and/or supplier perception of the effectiveness of our security measures could be harmed and we could lose customers, suppliers or both. Actual or anticipated attacks and risks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third party experts and consultants. A person who is able to circumvent our security measures might be able to misappropriate our or our users’ proprietary information, cause interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business. Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

 

The relative lack of public company experience of our management team may put us at a competitive disadvantage.

 

Our management team lacks prior public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002, (“Sarbanes-Oxley”). Our senior management does not have significant experience managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may be unable to implement programs and policies in an effective and timely manner or that adequately respond to the increased legal, regulatory and reporting requirements associated with being a publicly traded company. Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect on our business and stock price.

 

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As a public company, we are obligated to maintain effective internal controls over financial reporting. Our internal controls may be determined not to be effective, which may adversely affect investor confidence in us and, as a result, decrease the value of our Common Stock.

 

The PRC has not adopted management and financial reporting concepts and practices similar to those in the United States. We may have difficulty in hiring and retaining a sufficient number of qualified finance and management employees to work in the PRC. As a result of these factors, we may experience difficulty in establishing and maintaining accounting and financial controls, collecting financial data, budgeting, managing our funds and preparing financial statements, books of account and corporate records and instituting business practices that meet investors’ expectations in the United States.

 

Rules adopted by the SEC, or the Commission, pursuant to Sarbanes-Oxley Section 404 require annual assessment of our internal controls over financial reporting. This requirement first applied to our annual report on Form 10-K for the fiscal year ended December 31, 2008. The standards that must be met for management to assess the internal controls over financial reporting as effective are relatively new and complex, and they require significant documentation, testing and possible remediation to meet the detailed standards. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting as we have done previously, we will be unable to assert that our internal controls are effective. If we continue to be unable to conclude that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which could harm our business and cause the price of our stock to decline.

 

We may need additional capital to fund our future operations and, if it is not available when needed, we may need to reduce our planned development and marketing efforts, which may reduce our sales revenue.

 

We believe that our existing working capital and cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional capital. The development and marketing of new products and the expansion of distribution channels and associated support personnel require a significant commitment of resources. In addition, if the markets for our products develop more slowly than anticipated, or if we fail to establish significant market share and achieve sufficient net revenues, we may continue to consume significant amounts of capital. As a result, we could be required to raise additional capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution of the shares held by existing shareholders. If additional funds are raised through the issuance of debt securities, such securities may provide the holders certain rights, preferences, and privileges senior to those of common shareholders, and the terms of such debt could impose restrictions on our operations. We cannot guarantee that additional capital, if required, will be available on acceptable terms, or at all. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned product development and marketing efforts, which could harm our business, financial condition and operating results.

 

If our costs and demands upon management increase disproportionately to the growth of our business and revenue as a result of complying with the laws and regulations affecting public companies, our operating results could be harmed.

 

As a public company, we do and will continue to incur significant legal, accounting, investor relations and other expenses, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with current corporate governance requirements, including requirements under Section 404 and other provisions of Sarbanes-Oxley, as well as rules implemented by the SEC and the stock exchange on which our Common Stock is traded. The expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically over the past several years. These rules and regulations have increased our legal and financial compliance costs substantially and make some activities more time consuming and costly. If our costs and demands upon management increase disproportionately to the growth of our business and revenue, our operating results could be harmed.

 

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There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition and operating results.

 

The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities and related reserves, revenue, expenses and income. Estimates, judgments and assumptions are inherently subject to change in the future, and any such changes could result in corresponding changes to the amounts of assets, liabilities, revenue, expenses and income. Any such changes could have a material adverse effect on our business, financial condition and operating results.

 

Risks Related to the Industry of SkyPeople BVI and FullMart

 

Revenue and profitability of each of SkyPeople BVI and FullMart are heavily dependent on prevailing prices for our products and raw materials, and if we are unable to effectively offset cost increases by adjusting the pricing of our products, our margins and operating income may decrease.

 

As a producer of commodities, our revenue, gross margins and cash flows from operations are substantially dependent on the prevailing prices we receive for our products and the cost of our raw materials, neither of which we control. The factors influencing the sales price of concentrated fruit juice include the supply price of fresh fruit, supply and demand of our products in international and domestic markets and competition in the fruit juice industry.

 

The price of our principal raw materials, fresh fruit, is subject to market volatility as a result of numerous factors including, but not limited to, general economic conditions, governmental regulations, weather, transportation delays and other uncertainties that are beyond our control. Due to such market volatility, we generally do not, nor do we expect to, have long-term contracts with our fresh fruit suppliers. Other significant raw materials used in our business include packing barrels, pectic enzyme, amylase and auxiliary materials such as coal, electricity and water. Prices for these items may be volatile as well and we may experience shortages in these items from time to time. As a result, we cannot guarantee that the necessary raw materials to produce our products will continue to be available to us at prices currently in effect or acceptable to us. In the event raw material prices increase materially, we may not be able to adjust our product prices, especially in the short term, to recover such cost increases. If we are not able to effectively offset these cost increases by adjusting the price of our products, our margins will decrease and earnings will suffer accordingly.

 

We sell our products primarily through distributors and delays in delivery or poor handling by distributors may affect our sales and damage our reputation.

 

We primarily sell our products through our distributors and rely on these distributors for the distribution of our products. These distributors are not obligated to continue to sell our products. Any disruptions in our relationships with our distributors could cause interruption to the supply of our products to retailers, which would harm our revenue and results of operations. In addition, delivery disruptions may occur for various reasons beyond our control, including poor handling by distributors or third party transport operators, transportation bottlenecks, natural disasters and labor strikes, and could lead to delayed or lost deliveries. Some of our products are perishable and poor handling by distributors and third party transport operators could also result in damage to our products that would make them unfit for sale. If our products are not delivered to retailers on time, or are delivered damaged, we may have to pay compensation, we could lose business and our reputation could be harmed. 

 

If we are unable to gain market acceptance or significant market share for the new products we introduce, our results of operations and profitability could be adversely impacted.

 

Our future business and financial performance depends, in part, on our ability to successfully respond to consumer preferences by introducing new products and improving existing products. We cannot guarantee that we will be able to gain market acceptance or significant market share for our new products. Consumer preferences change, and any new products that we introduce may fail to meet the particular tastes or requirements of consumers, or may be unable to replace their existing preferences. Our failure to anticipate, identify or react to these particular tastes or changes could result in reduced demand for our products, which could in turn cause us to be unable to recover our development, production and marketing costs, thereby leading to a decline in our profitability.

 

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The development and introduction of new products is key to our expansion strategy. We incur significant development and marketing costs in connection with the introduction of new products. Successfully launching and selling new products puts pressure on our sales and marketing resources, and we may fail to invest sufficient funds in order to market and sell a new product effectively. If we are not successful in marketing and selling new products, our results of operations could be materially adversely affected.

 

Economic conditions have had and may continue to have an adverse effect on consumer spending on our products.

 

Certain areas of the worldwide economy have not yet fully recovered from a recession, which has reduced discretionary income of consumers. The adverse effect of a sustained international economic downturn, including sustained periods of decreased consumer spending, high unemployment levels, declining consumer or business confidence and continued volatility and disruption in the credit and capital markets, will likely result in reduced demand for our products as consumers turn to less expensive substitute goods or forego certain purchases altogether. To the extent the international economic downturn continues or worsens, we could experience a reduction in sales volume. If we are unable to reduce our operating costs and expenses proportionately, many of which are fixed, our results of operations would be adversely affected.

 

Concerns over food safety and public health may affect our operations by increasing our costs and negatively impacting demand for our products.

 

We could be adversely affected by diminishing confidence in the safety and quality of certain food products or ingredients. As a result, we may elect or be required to incur additional costs aimed at increasing consumer confidence in the safety of our products. For example, a crisis in the PRC over melamine contaminated milk in 2008 has adversely impacted Chinese food exports since October 2008, as reported by the Chinese General Administration of Customs, although most foods exported from the PRC were not significantly affected by the melamine contamination. In addition, our concentrated fruit juices exported to foreign countries must comply with quality standards in those countries. Our success depends on our ability to maintain the quality of our existing and new products. Product quality issues, real or imagined, or allegations of product contamination, even if false or unfounded, could tarnish the image of our brands and may cause consumers to choose other products.

 

We may engage in future acquisitions involving significant expenditures of cash, the incurrence of debt or the issuance of stock, all of which could have a materially adverse effect on our operating results.

 

As part of our business strategy, we review acquisition and strategic investment prospects that we believe would complement our current product offerings, augment our market coverage, enhance our technological capabilities or otherwise offer growth opportunities. From time to time, we review investments in new businesses and we expect to make investments in, and to acquire, businesses, products or technologies in the future. In the event of any future acquisitions, we may expend significant cash, incur substantial debt and/or issue equity securities and dilute the percentage ownership of current shareholders, all of which could have a material adverse effect on our operating results and the price of our stock. We cannot guarantee that we will be able to successfully integrate any businesses, products, technologies or personnel that we may acquire in the future, and our failure to do so could have a material adverse effect on our business, operating results and financial condition.

 

We require various licenses and permits to operate our business, and the loss of or failure to renew any or all of these licenses and permits could materially adversely affect our business.

 

In accordance with PRC laws and regulations, we have been required to maintain various licenses and permits in order to operate our business at the relevant manufacturing facilities including, without limitation, industrial product production permits. We are required to comply with applicable hygiene and food safety standards in relation to our production processes. Our premises and transportation vehicles are subject to regular inspections by the regulatory authorities for compliance with the Detailed Rules for Administration and Supervision of Quality and Safety in Food Producing and Processing Enterprises. Failure to pass these inspections, or the loss of or failure to renew our licenses and permits, could require us to temporarily or permanently suspend some or all of our production activities, which could disrupt our operations and adversely affect our business.

 

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Governmental regulations affecting the import or export of products could negatively affect our revenue.

 

The United States and various other governments have imposed controls, export license requirements and restrictions on the export of some of our products. Governmental regulation of exports, or our failure to obtain required export approval for our products, could harm our international sales and adversely affect our revenue and profits. In addition, failure to comply with such regulations could result in penalties, costs and restrictions on export privileges. Additionally, the new U.S. presidential administration has indicated that it may seek changes to or withdraw the United States from various international treaties and trade arrangements. Uncertainty regarding policies affecting global trade may make it difficult for our management to accurately forecast our business, and increases in the duties, tariffs and other charges imposed on our products by the United States or other countries in which on our products are sold, or other restraints on international trade, could negatively affect our business and the results of our operations.

 

We do not presently maintain product liability insurance, and our property and equipment insurance does not cover the full value of our property and equipment, which leaves us with exposure in the event of loss or damage to our properties or claims filed against us.

 

We currently do not carry any product liability or other similar insurance. Product liability claims and lawsuits in the PRC generally are still rare, unlike in some other countries. Product liability exposures and litigation, however, could become more commonplace in the PRC. Moreover, we have product liability exposure in countries in which we sell our products, such as the United States, where product liability claims are more prevalent. As we expand our international sales, our liability exposure will increase.

 

We may be required from time to time to recall products entirely or from specific copackers, markets or batches. Although historically we have not had any recall of our products, we cannot guarantee that circumstances or incidents will not occur that will require us to recall our products. We do not maintain recall insurance. In the event we experience product liability claims or a product recall, our business operations and financial condition could be materially adversely affected.

 

Our business and operations may be subject to disruption from work stoppages, terrorism or natural disasters.

 

Our operations may be subject to disruption for a variety of reasons, including work stoppages, acts of war, terrorism, pandemics, fire, earthquake, flooding or other natural disasters. If a major incident were to occur in either of the regions where our facilities or main offices are located, our facilities or offices or those of critical suppliers could be damaged or destroyed. Such a disruption could result in a reduction in available raw materials, the temporary or permanent loss of critical data, suspension of operations, delays in shipment of products and disruption of business generally, which would adversely affect our revenue and results of operations.

 

Risks Related to the Business and Operations of SkyPeople BVI

 

Weather and other environmental factors affect our raw material supply and a reduction in the quality or quantity of our fresh fruit supplies may have material adverse consequences on our financial results.

 

Our business may be adversely affected by weather and environmental factors beyond our control, such as adverse weather conditions during the growing or squeezing seasons. A significant reduction in the quantity or quality of fresh fruit harvested resulting from adverse weather conditions, disease or other factors could result in increased per unit processing costs and decreased production, with adverse financial consequences to us.

 

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Because we experience seasonal fluctuations in our sales, our quarterly results will fluctuate and our annual performance will depend largely on results from our first and fourth quarters.

 

Our business is highly seasonal, reflecting the harvest season of our primary source fruits from July or August of a year to April the following year. Typically, a substantial portion of our revenue is earned during our first and fourth quarters. We generally experience lower revenue during our second and third quarters. Generally, sales in the first and fourth quarters accounted for approximately 65% to 72% of our revenue of the whole year. If sales in our first and fourth quarters are lower than expected, our operating results would be adversely affected and it would have a disproportionately large impact on our annual operating results.

 

We face increasing competition from both domestic and foreign companies, and any failure by us to compete effectively could adversely affect our results of operations.

 

The juice beverage industry is highly competitive, and we expect it to continue to become even more competitive as new producers enter the market and price pressures escalate. Our ability to compete in the industry depends, to a significant extent, on our ability to distinguish our products from those of our competitors by providing high quality products at reasonable prices that appeal to consumers’ tastes and preferences. There are currently a number of well-established companies producing products that compete directly with ours. Some of our competitors may have been in business longer than we have, may have substantially greater financial and other resources than we have and may be better established in their markets. We anticipate that our competitors will continue to improve their products and introduce new products with competitive price and performance characteristics.

 

We cannot guarantee that our current or potential competitors will not provide products comparable or superior to those we provide or adapt more quickly than we do to evolving industry trends or changing market requirements. It is also possible that there will be significant consolidation in the juice beverage industry among our competitors, and alliances may develop among competitors. These alliances may rapidly acquire significant market share, and some of our distributors may commence production of products similar to those we sell to them. Increased competition may result in price reductions, reduced margins and loss of market share, any of which could materially adversely affect our profit margins. We cannot guarantee that we will be able to compete effectively against current and future competitors. Aggressive marketing or pricing by our competitors or the entrance of new competitors into our markets could have a material adverse effect on our business, results of operations and financial condition.

 

The relative lack of public company experience of our management team may put us at a competitive disadvantage.

 

Our management team lacks prior public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002, (“Sarbanes-Oxley”). Our senior management does not have significant experience managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may be unable to implement programs and policies in an effective and timely manner or that adequately respond to the increased legal, regulatory and reporting requirements associated with being a publicly traded company. Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect on our business and stock price.

 

We may need additional capital to fund our future operations and, if it is not available when needed, we may need to reduce our planned development and marketing efforts, which may reduce our sales revenue.

 

We believe that our existing working capital and cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional capital. The development and marketing of new products and the expansion of distribution channels and associated support personnel require a significant commitment of resources. In addition, if the markets for our products develop more slowly than anticipated, or if we fail to establish significant market share and achieve sufficient net revenues, we may continue to consume significant amounts of capital. As a result, we could be required to raise additional capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution of the shares held by existing shareholders. If additional funds are raised through the issuance of debt securities, such securities may provide the holders certain rights, preferences, and privileges senior to those of common shareholders, and the terms of such debt could impose restrictions on our operations. We cannot guarantee that additional capital, if required, will be available on acceptable terms, or at all. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned product development and marketing efforts, which could harm our business, financial condition and operating results.

 

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

 

Our success depends, in part, on our ability to protect our proprietary technologies. We hold 21 patents in the PRC covering our fruit processing technology. The process of seeking patent protection can be lengthy and expensive and we cannot guarantee that our existing or future issued patents will be sufficient to provide us with meaningful protection or commercial advantages. We also cannot guarantee that our current or potential competitors do not have, and will not obtain, patents that will prevent, limit or interfere with our ability to make or sell our products in the PRC or other countries.

 

The implementation and enforcement of PRC intellectual property laws historically have not been vigorous or consistent. Accordingly, intellectual property rights and confidentiality protections in the PRC are not as effective as those in the United States and other countries. We may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation will require significant expenditures of cash and management efforts and could harm our business, financial condition and results of operations. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, competitive position, business prospects and reputation.

 

Intellectual property infringement claims may adversely impact our results of operations.

 

As we develop and introduce new products, we may be increasingly subject to claims of infringement of another party’s intellectual property. If a claim for infringement is brought against us, such claim may require us to modify our products, cease selling certain products or engage in litigation to determine the validity and scope of such claims. Any of these events may harm our business and results of operations.

 

We are subject to the risk of increased income taxes, which could harm our business, financial condition and operating results.

 

We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by tax authorities and to possible changes in law, which may have retroactive effect. We currently operate through Pacific, a wholly-owned subsidiary organized under the laws of Vanuatu and SkyPeople (China), a 73.42% owned subsidiary of HeDeTang Holdings (HK) Ltd. organized under the laws of the PRC, and we maintain manufacturing operations in the PRC. Any of these jurisdictions could assert tax claims against us. We cannot determine in advance the extent to which some jurisdictions may require us to pay taxes or make payments in lieu of taxes. If we become subject to additional taxes in any jurisdiction, such tax treatment could materially and adversely affect our business, financial condition and operating results.

 

Risks Related to the Business and Operations of FullMart

 

The relative lack of public company experience of our management team may put us at a competitive disadvantage.

 

Our management team lacks prior public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002, (“Sarbanes-Oxley”). Our senior management does not have significant experience managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may be unable to implement programs and policies in an effective and timely manner or that adequately respond to the increased legal, regulatory and reporting requirements associated with being a publicly traded company. Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect on our business and stock price.

 

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We may need additional capital to fund our future operations and, if it is not available when needed, we may need to reduce our planned development and marketing efforts, which may reduce our sales revenue.

 

We believe that our existing working capital and cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional capital. The development and marketing of new products and the expansion of distribution channels and associated support personnel require a significant commitment of resources. In addition, if the markets for our products develop more slowly than anticipated, or if we fail to establish significant market share and achieve sufficient net revenues, we may continue to consume significant amounts of capital. As a result, we could be required to raise additional capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution of the shares held by existing shareholders. If additional funds are raised through the issuance of debt securities, such securities may provide the holders certain rights, preferences, and privileges senior to those of common shareholders, and the terms of such debt could impose restrictions on our operations. We cannot guarantee that additional capital, if required, will be available on acceptable terms, or at all. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned product development and marketing efforts, which could harm our business, financial condition and operating results.

 

Risks Related to the Ordinary Shares of SkyPeople BVI and FullMart

 

Zeyao Xue will have control over key decision making as a result of his control of a substantial amount of our voting stock.

 

Zeyao Xue, the son of a member of the Board of Directors, indirectly and beneficially owns all of the equity interest in Fancylight Limited (“Fancylight”), and also serves as the sole director of Fancylight. As of December 22, 2017, Fancylight directly and indirectly owned 2,337,155 shares, or 45.2%, of our outstanding common stock. Mr. Zeyao Xue’s beneficial ownership of 45.2% of Future FinTech’s issued and outstanding common stock will almost give him the ability to control the outcome of matters submitted to shareholders for approval, including those proposals discussed herein. Assuming the completion of the Spin-Offs and the transactions contemplated by Proposals 4 and 5 and the number of our issued and outstanding shares remains unchanged, Mr. Zeyao Xue will hold 57.9% of Future FinTech’s issued and outstanding common stock and nearly controlling interests in SkyPeople BVI and FullMart, giving him the ability to control the outcome of matters submitted to the shareholders of such entities in the future, including the election of directors and any merger, consolidation, or sale of all or substantially all of their respective assets. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of their respective assets that other shareholders support, or conversely this concentrated control could result in the consummation of such a transaction that other shareholders do not support. This concentrated control could also discourage a potential investor from acquiring the ordinary shares of SkyPeople BVI or FullMart, or the common stock of Future FinTech, due to the limited voting power of such shares. As a shareholder, even a controlling shareholder, Mr. Zeyao Xue is entitled to vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of our shareholders generally. 

 

There is currently no trading market for the securities of SkyPeople BVI and FullMart and an established trading market may not develop.

 

The securities of SkyPeople BVI and FullMart are not currently listed or quoted on any national securities exchange or national quotation system. SkyPeople BVI anticipates registering the securities of a subsidiary on a securities exchange in the PRC, but there can be no assurance that such a listing will be completed or that, if completed, we will be able to maintain such listing. We do not currently intend to list the ordinary shares of SkyPeople BVI or FullMart on any exchange in the United States. Due to this, the liquidity of such shares will likely be lower than the current liquidity of Future FinTech’s common stock.

 

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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under British Virgin Islands law.

 

Each of SkyPeople BVI and FullMart is a company incorporated under British Virgin Islands’ laws. Their corporate affairs are governed by their respective amended and restated memorandums and articles of association, and British Virgin Islands’ law. Shareholders’ rights to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under British Virgin Islands’ law are largely governed by British Virgin Islands’ common law. It is derived in part from comparatively limited judicial precedent in the British Virgin Islands and from England’s common law. English court decisions, however, are not binding on a British Virgin Islands’ court.

 

Our shareholders’ rights and our directors’ fiduciary responsibilities under British Virgin Islands law are not as clearly established as they would be under the statutes or case law in most U.S. jurisdictions. In particular, the British Virgin Islands has a less developed body of securities laws than the U.S. Many U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the British Virgin Islands. In addition, British Virgin Islands companies may not have standing to initiate a shareholder derivative action in U.S. federal courts.

 

The British Virgin Islands’ courts are also not likely:

 

1. to recognize or enforce against us judgments of courts of the U.S. based on civil liability provisions of U.S. securities laws; and

 

2. to impose liabilities against us, in original actions brought in the British Virgin Islands, based on civil liability provisions of U.S. securities laws that are penal in nature.

 

Based on the above, shareholders may have more difficulty in protecting their interests against actions taken by management, members of the Board of Directors or controlling shareholders than they would as public shareholders of a company incorporated in the U.S.

 

Risks Related to Doing Business in China

 

Each of the Company, SkyPeople BVI and FullMart will maintain operations in China.

 

Inflation in the PRC could negatively affect our profitability and growth.

 

The rapid growth of China’s economy has been uneven among economic sectors and geographic regions of the country. China’s economy grew at an annual rate of 6.7% in 2016, as measured by the year-over-year change in gross domestic product, or GDP, according to the National Bureau of Statistics of China. Rapid economic growth can lead to growth in the money supply and rising inflation. The inflation rate in China was approximately 2.0% in 2016, as reported by National Bureau of Statistics, and is expected to increase. If prices for our products and services fail to rise at a rate sufficient to compensate for the increased costs of supplies, such as raw materials, due to inflation, it may have an adverse effect on our profitability.

 

Furthermore, in order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for property, plant and equipment and restrictions on state bank lending. The implementation of such policies may impede future economic growth. The People’s Bank of China has effected increases in interest rates in response to inflationary concerns in the China’s economy. If the central bank again raises interest rates from current levels, economic activity in China could further slow and, in turn, materially increase our costs and reduce demand for our products and services.

 

We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business.

 

We conduct substantially all of our operations and generate most of our revenue in the PRC. Accordingly, economic, political and legal developments in the PRC will significantly affect our business, financial condition, results of operations and prospects. The PRC economy is in transition from a planned economy to a market oriented economy subject to plans adopted by the government that set national economic development goals. Policies of the PRC government can have significant effects on economic conditions in the PRC. While we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and that business development in the PRC will continue to follow market forces, we cannot guarantee that this will be the case. Our interests may be adversely affected by changes in policies by the PRC government, including:

 

●  changes in laws, regulations or their interpretation;

 

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confiscatory taxation;
   
restrictions on currency conversion, imports or sources of supplies;
   
expropriation or nationalization of private enterprises; and
   
the allocation of resources.

 

Although the PRC government has been pursuing economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC through the allocation of resources, controlling payments of foreign currency, setting monetary policy and imposing policies that impact particular industries in different ways. We cannot guarantee that the PRC government will continue to pursue policies favoring a market oriented economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.

 

The original incorporation of SkyPeople (China) as a joint stock company in 2001 did not obtain all required approvals from the PRC government authorities pursuant to the relevant PRC law effective at the time, and we may be subject to various penalties under the law retroactively.

 

The original incorporation of SkyPeople (China) (under the original name of Xi’an Zhonglv Ecology Science and Technology Industry Co., Ltd.) as a joint stock company in 2001 was approved by the Xi’an Municipal People’s Government. However, according to the applicable PRC Company Law that was in force in 2001, the incorporation of SkyPeople (China) as a joint stock company shall be subject to the approval by the government authority of Shaanxi Province. Pursuant to the PRC Company Law which was in force in 2001, if company stocks is arbitrarily issued without obtaining the approval of the relevant competent authorities stipulated under the law, the parties concerned may be ordered to cease the issuance of the stock, refund the raised capital and the interests accrued therefrom, and may be subject to a fine of no less than one percent but no more than five percent of the amount of the raised capital. As such, SkyPeople (China) may be subject to any or all of the foregoing penalties as provided under the PRC Company Law effective in 2001 should the relevant government authorities choose to enforce the law retroactively.

 

However, we believe that the regulatory authorities may consider the following factors as mitigating factors if such authorities choose to enforce the applicable laws:

 

(i) the incorporation of SkyPeople (China) obtained the approval by the Xi’an local government. As  general practice in approval procedures, the applicants may only be able to first approach the Xi’an local government authority in order to acquire the approval by a higher level government authority, and would generally rely on the Xi’an local government to then submit the application to a higher level authority for its final approval; and

 

(ii) the trend of the PRC Company Law is to deregulate the approvals on the incorporation of joint stock companies in China. In particular, the current PRC Company Law, effective since January 1, 2006, has eliminated the relevant approval requirement relating to the incorporation of joint stock companies. Instead, the current PRC Company Law merely requires a registration with the competent Administration for Industry and Commerce in connection with the incorporation of joint stock companies in the PRC as long as the stock is not issued to the public.

 

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In addition, if needed in the future, we may make efforts to seek a written confirmation from the Shaanxi Provencal People’s Government regarding its ratification of the original incorporation of SkyPeople (China) as a joint stock company.

 

Our current manufacturing operations are subject to various environmental protection laws and regulations issued by the central and local governmental authorities, and we cannot guarantee that we have fully complied with all such laws and regulations. In addition, changes in the existing laws and regulations or additional or stricter laws and regulations on environmental protection in the PRC may cause us to incur significant capital expenditures, and we cannot guarantee that we will be able to comply with any such laws and regulations.

 

We carry out our business in an industry that is subject to PRC environmental protection laws and regulations. These laws and regulations require enterprises engaged in manufacturing and construction that may cause environmental waste to adopt effective measures to control and properly dispose of waste gases, waste water, industrial waste, dust and other environmental waste materials, as well as fee payments from producers discharging waste substances. Fines may be levied against producers causing pollution.  Although we have made efforts to comply with such laws and regulations, we cannot guarantee that we have fully complied with all such laws and regulations. Except for Yingkou, all of our operating facilities hold a Pollution Emission Permit. The failure of complying with such laws or regulations may subject us to various administrative penalties such as fines. If the circumstances of the breach are serious, the central government of the PRC, including all governmental subdivisions, has the discretion to cease or close any operations failing to comply with such laws or regulations. There can also be no assurance that the PRC government will not change the existing laws or regulations or impose additional or stricter laws or regulations, compliance with which may cause us to incur significant capital expenditure, which we may be unable to pass on to our customers through higher prices for our products. In addition, we cannot guarantee that we will be able to comply with any such laws and regulations.

 

Changes in existing PRC food hygiene and safety laws may cause us to incur additional costs to comply with the more stringent laws and regulations, which could have an adverse impact on our financial position.

 

Manufacturers within the PRC beverage industry are subject to compliance with PRC food hygiene laws and regulations. These food hygiene and safety laws require all enterprises engaged in the production of juice and other beverages to obtain a food production license for each of their production facilities. They also set out hygiene and safety standards with respect to food and food additives, packaging and containers, information to be disclosed on packaging as well as hygiene requirements for food production and sites, facilities and equipment used for the transportation and sale of food. Failure to comply with PRC food hygiene and safety laws may result in fines, suspension of operations, loss of business licenses and, in more extreme cases, criminal proceedings against an enterprise and its management. Although we comply with current food hygiene laws, in the event that the PRC government increases the stringency of such laws, our production and distribution costs may increase, which could adversely impact our financial position.

 

We benefit from various forms of government subsidies and grants, the withdrawal of which could affect our operations.

 

Certain of our subsidiaries have received government subsidies from local governments. We recognized $0.03 million and $1.2 million in government subsidies for fiscal years 2016 and 2015, respectively. Past government grants or subsidies are not indicative of what we will obtain in the future. We cannot guarantee that we will continue to be eligible for government grants or other forms of government support. In the event that we are no longer eligible for grants, subsidies or other government support, our business and financial condition could be adversely affected.

 

PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may harm our business.

 

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. We are considered foreign persons or foreign funded enterprises under PRC laws and, as a result, we are required to comply with PRC laws and regulations related to foreign persons and foreign funded enterprises. These laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.

 

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Each of Future FinTech, SkyPeople BVI and FullMart could be restricted from paying dividends to shareholders due to PRC laws and other contractual requirements.

 

Each of Future FinTech, SkyPeople BVI and FullMart is a holding company incorporated outside of China and does not have any assets or conduct any business operations other than our investments in our subsidiaries and affiliates.  As a result of our holding company structure, we rely entirely on dividend payments from our operating subsidiaries.  PRC accounting standards and regulations currently permit payment of dividends only out of accumulated profits, a portion of which is required to be set aside for certain reserve funds.  Furthermore, if our operating subsidiaries incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments.  Although we do not intend to pay dividends in the future, our inability to receive all of the revenue from our operating subsidiaries’ operations may provide an additional obstacle to our ability to pay dividends if we so decide in the future.

 

Governmental control of currency conversion may affect the value of shareholder investments.

 

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC.  RMB is currently not a freely convertible currency.  Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to satisfy foreign currency obligations.  Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval by complying with certain procedural requirements.  Approval from appropriate governmental authorities, however, is required where RMB is to be converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.  In addition, the PRC government could restrict access to foreign currencies for current account transactions in the future.  If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay certain of our expenses as they come due.

 

The fluctuation of the RMB may harm shareholder investments.

 

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions.  Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue and financial condition.  For example, to the extent that we need to convert U.S. dollars we receive from an offering of our securities into RMB for our operations, appreciation of the RMB against the U.S. dollar would diminish the value of the proceeds of the offering and could harm our business, financial condition and results of operations.  Conversely, if we decide to convert our RMB into U.S. dollars for business purposes and the U.S. dollar appreciates against the RMB, the U.S. dollar equivalent of the RMB we convert would be reduced.  In addition, the depreciation of significant U.S. dollar denominated assets could result in a charge to our income statement and a reduction in the value of these assets.

 

PRC regulations relating to mergers and the establishment of offshore special purpose companies by PRC residents, if applied to us, may limit our ability to operate our business as we see fit.

 

On August 8, 2006, six Chinese regulatory agencies, namely, MOFCOM, the State Assets Supervision and Administration Commission, the State Administration for Taxation (“SAT”), SAIC, the Securities Regulatory Commission (“CSRC”) and the State Administration of Foreign Exchange (“SAFE”), jointly promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, generally referred to as the 2006 M&A Rules, which became effective on September 8, 2006. The 2006 M&A Rules, among other things, govern the approval process by which an offshore investor may participate in an acquisition of assets or equity interests of a Chinese domestic company. Depending on the structure of the transaction, the 2006 M&A Rules require the transaction parties to make a series of applications to the government agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, including appraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction. Under certain circumstances, government approvals will have expiration dates by which a transaction must be completed and reported to the government agencies. Compliance with the 2006 M&A Rules will be more time consuming and expensive than in the past, and the government can exert more control over the combination of two businesses under the 2006 M&A Rules. As a result of any potential application of the 2006 M&A Rules, our ability to engage in business combination transactions in the PRC has become significantly more complicated, time consuming and expensive, and we may not be able to negotiate a transaction that is acceptable to us or sufficiently protective of our interests in a transaction.

 

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In October 2005, SAFE issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside the PRC, generally referred to as Circular 75. Circular 75 requires Chinese residents to register with an applicable branch of SAFE before establishing or acquiring control over an offshore special purpose company for the purpose of engaging in an equity financing outside of the PRC that is supported by domestic Chinese assets originally held by those residents. Following the issuance of Circular 75, SAFE issued internal implementing guidelines for Circular 75 in June 2007. These implementing guidelines, known as Notice 106, effectively expanded the reach of Circular 75 by:

 

purporting to regulate the establishment or acquisition of control by Chinese residents of offshore entities which merely acquire “control” over domestic companies or assets, even in the absence of legal ownership;
   
adding requirements relating to the source of the Chinese resident’s funds used to establish or acquire the offshore entity;
   
regulating the use of existing offshore entities for offshore financings;
   
purporting to regulate situations in which an offshore entity establishes a new subsidiary in the PRC or acquires an unrelated company or unrelated assets in the PRC;
   
making the domestic affiliate of the offshore entity responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use of proceeds; and
   
requiring that the registrant establish that all foreign exchange transactions undertaken by the offshore entity and its affiliates were in compliance with applicable laws and regulations.

 

No assurance can be given that our shareholders who are the residents as defined in Circular 75 and who own or owned our shares have fully complied with, and will continue to comply with, all applicable registration and approval requirements of Circular 75 in connection with their equity interests in us and our acquisition of equity interests in our PRC based subsidiaries by virtue of the Company’s acquisition of Pacific. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us following the Pacific acquisition, we cannot predict how it will affect our business operations or future strategies. For example, the ability of our present and prospective PRC subsidiaries to conduct foreign exchange activities, such as the remittance of dividends and foreign currency denominated borrowings, may be subject to compliance with Circular 75 by our Chinese resident beneficial holders. In addition, such Chinese residents may not always be able to complete the necessary registration procedures required by Circular 75. We have little control over our present or prospective direct or indirect shareholders /beneficial owners or the outcome of such registration procedures. If our Chinese shareholders/beneficial owners or the Chinese shareholders/beneficial owners of the target companies we acquired in the past or will acquire in the future fail to comply with Circular 75 and related regulations, and if SAFE requires it, they may be subject to fines or legal sanctions, and Chinese authorities could restrict our investment activities in the PRC, limit our subsidiaries’ ability to make distributions or pay dividends, or affect the ownership structure, which could adversely affect business and prospects.

 

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In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. In addition, SAFE promulgated Notice on Issues concerning Further Clarifying and Regulating the Foreign Exchange Administration under Some Capital Accounts, or Circular 45, on November 9, 2011 to clarify the application of SAFE Circular 142. Under SAFE Circular 142 and Circular 45, RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may not be changed without SAFE’s approval, and such RMB capital may not, in any case, be used to repay RMB loans whose proceeds were not used. Furthermore, SAFE promulgated Notice on Issues Concerning Strengthening Administration of Foreign Exchange Services in November 2010, which tightens the regulation over settlement of net proceeds from overseas offerings, such as our initial public offering, and requires, among other things, the authenticity of settlement of net proceeds from offshore offerings to be closely examined and the net proceeds to be settled in the manner described in our prospectus or otherwise approved by our board of directors. Violations of these SAFE regulations may result in severe monetary or other penalties, including confiscation of earnings derived from such violation activities, a fine of up to 30% of the RMB funds converted from the foreign invested funds or in the case of a severe violation, a fine ranging from 30% to 100% of the RMB funds converted from the foreign-invested funds.

 

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not previously possible. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by the SAFE or its local branches over direct investment by foreign investors in the PRC will be conducted by way of registration, and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

 

Under the Circular of the SAFE on Further Improving and Adjusting the Policies for Foreign Exchange Administration under Capital Accounts promulgated by the SAFE on January 10, 2014 and effective from February 10, 2014, administration over the outflow of the profits by domestic institutions has been further simplified. In principle, a bank is no longer required to examine transaction documents when handling the outflow of profits of no more than the equivalent of $50,000 by a domestic institution. When handling the outflow of profits exceeding the equivalent of $50,000, the bank, in principle, is no longer required to examine the financial audit report and capital verification report of the domestic institution, provided that it must examine, according to the principle of transaction authenticity, the profit distribution resolution of the board of directors, or the profit distribution resolution of the partners, relating to this profit outflow and the original copy of its tax record-filing form. After each profit outflow, the bank must affix its seal to and endorsements on the original copy of the relevant tax record-filing form to indicate the actual amount of the profit outflow and the date of the outflow.

 

On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19, which became effective on June 1, 2015. According to SAFE Circular 19, the foreign exchange capital of foreign-invested enterprises may be settled on a discretionary basis, meaning that the foreign exchange capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau, or the book-entry registration of monetary contribution by the banks, can be settled at the banks based on the actual operational needs of the foreign-invested enterprise. The proportion of such discretionary settlement is temporarily determined as 100%. The RMB converted from the foreign exchange capital will be kept in a designated account, and if a foreign-invested enterprise needs to make further payment from such account, it still must provide supporting documents and go through the review process with the banks.

 

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Furthermore, SAFE Circular 19 stipulates that the use of capital by foreign-invested enterprises must adhere to the principles of authenticity and self-use within the business scope of enterprises. The capital of a foreign-invested enterprise and capital in RMB obtained by the foreign-invested enterprise from foreign exchange settlement must not be used for the following purposes:

 

(1) directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations;

 

(2) directly or indirectly used for investment in securities, unless otherwise provided by relevant laws and regulations;

 

(3) directly or indirectly used for granting the entrusted loans in RMB, unless permitted by the scope of business, repaying the inter-enterprise borrowing, including advances by the third party, or repaying the bank loans in RMB that have been sub-lent to the third party; and/or

 

(4) paying the expenses related to the purchase of real estate that is not for self-use, except for the foreign-invested real estate enterprises.

 

On June 19, 2016, SAFE promulgated the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, which took effect on the same day. Compared to Circular 19, Circular 16 provides that discretionary foreign exchange settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted foreign listing proceeds, and the corresponding Renminbi obtained from foreign exchange settlement are not restricted to extending loans to related parties or repaying the inter-company loans, including advances by third parties. However, since Circular 16 came into effect recently, there are substantial uncertainties with respect to its interpretation and implementation in practice.

 

On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3, which took effect on the same day. Circular 3 sets out various measures with the following key contents:

 

(1)relaxing the policy restriction on foreign exchange inflow to further enhance trade and investment facilitation, including (a) expanding the scope of foreign exchange settlement for domestic foreign exchange loans, (b) allowing the capital repatriation for offshore financing against domestic guarantee, (c) facilitating the centralized management of foreign exchange funds of multinational companies, and (d) allowing the offshore institutions within pilot free trade zones to settle foreign exchange in domestic foreign exchange accounts; and

 

(2)tightening genuineness and compliance verification of cross-border transactions and cross-border capital flow, including (a) improving the statistics of current account foreign currency earnings deposited offshore, (b) requiring banks to verify board resolutions, tax filing forms, and audited financial statements before wiring foreign invested enterprises’ foreign exchange distribution above $50,000, (c) strengthening genuineness and compliance verification of foreign direct investments and (d) implementing full scale management of offshore loans in Renminbi and foreign currencies by requiring the total amount of offshore loans be no higher than 30% of the onshore lender’s equity shown on its audited financial statements of the last year.

 

Our PRC subsidiaries’ distributions to the offshore parent and their carrying out cross-border foreign exchange activities are subject to the various SAFE registration requirements described above.

 

Our acquisition of SkyPeople (China) could constitute a Round-trip Investment under the 2006 M&A Rules.

 

Prior to obtaining the MOFCOM approval on September 3, 2007 and Xi’an Administration of Industry and Commerce (“AIC”) approval on October 18, 2007, and prior to the full payment of the purchase price by Pacific for 99% of SkyPeople (China)’s capital stock, SkyPeople (China) was a PRC business some of whose shareholders were PRC individuals including Hongke Xue, chairman of SkyPeople (China). When Pacific was incorporated on November 30, 2006 and when the SkyPeople (China) acquisition was approved, none of the shareholders of Pacific were PRC citizens. Immediately after the consummation of the share exchange, shareholders of Pacific became our shareholders, including Fancylight, our controlling shareholder. To incentivize Mr. Hongke Xue in connection with the continuous development of SkyPeople (China)’s business, a call option agreement was entered into between Fancylight and Mr. Hongke Xue on February 25, 2008 pursuant to which Mr. Xue had the opportunity to acquire a majority of our Common Stock held by Fancylight. Mr. Xue and Fancylight also entered into a voting trust agreement pursuant to which Mr. Xue has the right to vote such shares on Fancylight’s behalf.

 

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The PRC regulatory authorities may take the view that the SkyPeople (China) acquisition, the share exchange transaction and the call option and voting trust arrangements are part of an overall series of arrangements which constitute a round-trip investment regulated by the 2006 M&A Rules, because at the end of these transactions the same PRC individual who controlled SkyPeople (China) became the effective controlling party of a foreign entity that acquired ownership of SkyPeople (China). The PRC regulatory authorities may also take the view that the approval of the SkyPeople (China) acquisition by the MOFCOM and the registration of such acquisition with the AIC in Xi’an AIC may not be evidence that the SkyPeople (China) acquisition has been properly approved because the relevant parties did not fully disclose to the MOFCOM or AIC the overall restructuring arrangements. If the PRC regulatory authorities take the view that the SkyPeople (China) acquisition constitutes a round-trip investment under the 2006 M&A Rules, we cannot guarantee that we will be able to obtain the required MOFCOM approval.

 

If the PRC regulatory authorities take the view that the SkyPeople (China) acquisition constitutes a round-trip investment without MOFCOM approval on such round-trip investment, they could invalidate our acquisition and ownership of SkyPeople (China).

 

Additionally, the 2006 M&A Rules also purport to require that an offshore special purpose vehicle (“SPV”) formed for listing purposes and controlled directly or indirectly by PRC companies or individuals shall obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. However, the application of this PRC regulation remains unclear, with no consensus currently existing regarding the scope and applicability of the CSRC approval requirement. Given that we established our PRC subsidiaries by means of direct investments, we believe that these regulations do not require an application to be submitted to the CSRC for the approval of the listing and trading of our stock on the NASDQ Global Market, unless we are clearly required to do so by subsequently promulgated rules of the CSRC. If the CSRC or another PRC regulatory agency subsequently determines that CSRC approval was required for the offerings, we may need to apply for a remedial approval from the CSRC and may be subject to certain administrative punishments or other sanctions from these regulatory agencies. The regulatory agencies may take actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our stock.

 

We believe that if this takes place, we may be able to find a way to reestablish control of our operating subsidiaries’ business operations through a series of contractual arrangements rather than an outright purchase of our operating subsidiaries. But we cannot guarantee that such contractual arrangements will be protected by PRC law or that we can receive as complete or effective economic benefit and overall control of our operating subsidiaries’ business than if we had direct ownership of our operating subsidiaries. In addition, we cannot guarantee that such contractual arrangements can be successfully implemented under PRC law. If we cannot obtain approval from MOFCOM and/or CSRC if required by the PRC regulatory authorities to do so, and if we cannot put in place or enforce relevant contractual arrangements as an alternative and equivalent means of control of our operating subsidiaries, our business and financial performance will be materially adversely affected.

 

Because our principal assets are located outside of the United States, it may be difficult for investors to use U.S. securities laws to enforce their rights against us, our officers and directors or to enforce judgments of United States courts against us or them in the PRC.

 

All of our present officers and directors reside outside of the United States. In addition, our operating subsidiaries are located in the PRC and substantially all of its assets are located outside of the United States. Therefore, it may be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the U.S. securities laws against us in the courts of either the United States or the PRC and, even if civil judgments are obtained in courts of the United States, to enforce such judgments in the PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against us or our officers and directors of criminal penalties under the U.S. Federal securities laws or otherwise.

 

The issuances of the Acquisition Shares and Placement Shares, or other dilution of our equity, could depress the market price of our Common Stock.

 

Sales of our Common Stock, preferred stock, warrants, debt securities or any combination of the foregoing in the public market, or the perception that such sales could occur, could negatively affect the price of our Common Stock. We have a number of institutional and individual shareholders that own significant blocks of our Common Stock. If one or more of these shareholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of our Common Stock could be negatively affected.

 

In addition, the issuance of additional shares of our Common Stock, securities convertible into or exercisable for our Common Stock, other equity-linked securities, including preferred stock or warrants, debt securities or any combination of the securities pursuant to this prospectus will dilute the ownership interest of holders of our Common Stock and could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity securities.

 

We may need to seek additional capital. If this additional financing is obtained through the issuance of equity securities, debt convertible into equity or options or warrants to acquire equity securities, our existing shareholders could experience significant dilution upon the issuance, conversion or exercise of such securities.

 

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THE SPECIAL MEETING

 

Date, Time and Place of the Special Meeting

 

The special meeting of the shareholders of Future FinTech (the “Special Meeting”) will be held at 10:00 a.m., local time, on Tuesday, March 13, 2018, at the Company’s principal executive offices at 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China, 710075.

 

Matters to be Voted Upon at the Special Meeting

 

At the Special Meeting, Future FinTech is asking its shareholders as of the record date of January 22, 2018 (the “Record Date”) to consider and vote upon proposals:

 

(1) To approve the spin-off of the Company’s wholly-owned subsidiaries, SkyPeople Foods Holdings Limited (BVI) (“SkyPeople BVI”) and FullMart Holdings Limited (BVI) (“FullMart”), through a pro rata distribution of the ordinary shares of each of SkyPeople BVI and FullMart to holders of the Company’s common stock at the close of business on January 22, 2018, the record date (the “Spin-Offs”);
   
(2) To approve an amendment to the Second Amended and Restated Articles of Incorporation of Future FinTech, which would increase the amount of authorized shares of common stock, par value $0.001 per share, of Future FinTech from 8,333,333 to 60,000,000 (the “Amendment”);
   
(3) To adopt and approve the Future FinTech Group Inc. 2017 Omnibus Equity Plan;
   

(4)

To approve the issuance of an aggregate 7,111,599 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to certain Creditor’s Rights Transfer Agreements between a wholly owned subsidiary of the Company and sellers of such creditor’s rights (the “Acquisition Share Issuances”);

   
(5) To approve the issuance of an aggregate 11,362,159 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to a Share Purchase Agreement between the Company and a certain investor (the “Placement Share Issuance”); and
   
(6) To approve a proposal to grant discretionary authority to the Company’s Chief Executive Officer to adjourn the Special Meeting for the purpose of soliciting additional proxies to approval Proposals 1 through 5.

 

Record Date; Shares Entitled to Vote; Quorum

 

Shareholders will be entitled to vote or direct votes to be cast at the Special Meeting if they owned shares of Future FinTech common stock on the Record Date. Shareholders will have one vote for each share of Future FinTech 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. On the Record Date, there were approximately ● shares of Future FinTech common stock outstanding.

 

A quorum of Future FinTech shareholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the outstanding shares entitled to vote at the meeting are represented in person or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.

 

Vote Required; Abstentions and Broker Non-Votes

 

The approval of each of the proposals require the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on that proposal. Abstentions and broker non-votes will have the same effect as a vote “against” each of the proposals.

 

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Shares Held by Future FinTech’s Directors and Executive Officers

 

As of the Record Date, the directors and executive officers of Future FinTech as a group owned and were entitled to vote shares of the common stock of the Company, representing approximately % of the outstanding shares of Future FinTech common stock on that date. Future FinTech expects that its directors and executive officers will vote their shares in favor of each of the proposals, but none of the Company’s directors or executive officers has entered into any agreement obligating any of them to do so.

 

Voting of Proxies

 

If your shares are registered in your name with our transfer agent, Continental Stock Transfer & Trust Company, you may cause your shares to be voted by returning a signed proxy card, or you may vote in person at the Special Meeting. Based on your proxy cards, the proxy holders will vote your shares according to your directions.

 

If you plan to attend the Special Meeting and wish to vote in person, you will be given a ballot at the meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

 

Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the shareholder. In the event that properly executed proxies do not contain voting instructions for any given proposal, the Future FinTech common stock represented by such proxies will be voted in favor of each such proposal.

 

If your shares are held in “street name” through a broker, bank or other nominee, you may vote through your broker, bank or other nominee by completing and returning the voting form provided by your broker, bank or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form or do not attend the Special Meeting and vote in person with a proxy from your broker, bank or other nominee, it will have the same effect as if you voted “AGAINST” the proposals presented for a vote.

 

Revocability of Proxies

 

If you are a shareholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

Signing another proxy card with a later date and returning it to us prior to the Special Meeting; or

 

Attending the Special Meeting and voting in person.

 

Please note that to be effective, your new proxy card, internet or telephonic voting instructions or written notice of revocation must be received by us prior to the Special Meeting. If you have submitted a proxy, your appearance at the Special Meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.

 

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a valid “legal” proxy from your bank, broker or other nominee. Any adjournment, recess or postponement of the Special Meeting for the purpose of soliciting additional proxies will allow Future FinTech shareholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, recessed or postponed.

 

Board of Directors’ Recommendation

 

After careful consideration, the Company’s board of directors recommends that you vote or give instruction to vote:

 

  FOR” the SkyPeople BVI and FullMart spin-offs proposal;
     
  FOR” the amendment to Future FinTech’s Second Amended and Restated Articles of Incorporation to increase Future FinTech’s authorized shares of common stock from 8,333,333 to 60,000,000;

 

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  FOR” the adoption of the Future FinTech Group Inc. 2017 Omnibus Equity Plan;
     
 

FOR” the issuance of an aggregate 7,111,599 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to certain Creditor’s Rights Transfer Agreements between a wholly owned subsidiary of the Company and sellers of such creditor’s rights (the “Acquisition Share Issuances”);
     
 

 

FOR” the issuance of an aggregate 11,362,159 shares of Future FinTech’s common stock, par value $0.001 per share, pursuant to a Share Purchase Agreement between the Company and a certain investor (the “Placement Share Issuance”); and
     
  FOR” the grant of discretionary authority to the Company’s Chief Executive Officer to adjourn the Special Meeting for the purpose of soliciting additional proxies to approval Proposals 1 through 5.

 

Solicitation of Proxies

 

The expense of soliciting proxies in the enclosed form will be borne by Future FinTech. Proxies may also be solicited by some of our directors, officers and employees, personally or by telephone, facsimile, e-mail or other means of communication. No additional compensation will be paid for such services.

 

Anticipated Date of Completion of the Spin-Offs

 

Assuming timely satisfaction of necessary pre-conditions, including the approval by our shareholders of the proposals to approve the Spin-Offs, we anticipate that the Spin-Offs will be completed in the second quarter of 2018. However, Future FinTech cannot assure you when or if either of the Spin-Offs will occur. The Spin-Offs are subject to shareholder approvals and other conditions, and it is possible that factors outside the control of Future FinTech could result in the Spin-Offs being completed at a later time, or not at all. There may be a substantial amount of time between the Special Meeting and the completion of the Spin-Offs.

 

Householding of Special Meeting Materials

 

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy materials with respect to two or more shareholders sharing the same address by delivering a single set of proxy materials. This process, which is commonly referred to as “householding,” potentially results in extra convenience for shareholders and cost savings for companies. The Company has adopted the SEC-approved “householding” procedure.

 

Upon written or oral request, the Company will deliver promptly a separate copy of the Notice of Special Meeting of Shareholders this Proxy Statement and the 2016 Annual Report on Form 10-K to any shareholder at a shared address to which the Company delivered a single copy of any of these documents. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate set of proxy materials, you may:

 

Send a written request to the Company’s Corporate Secretary at 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China, 710075, or call 86-29-81878277 if you are a shareholder of record; or

 

Notify your broker, if you hold your common shares under street name.

 

If you are receiving more than one copy of the proxy materials at a single address and would like to participate in householding, please contact the Company using the mailing address and phone number above. Shareholders who hold shares in street name may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.

   

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THE SPIN-OFFS

 

Parties Involved in the Spin-Offs

 

Future FinTech Group Inc.

 

We are a holding company incorporated under the laws of the State of Florida. We have three direct wholly-owned subsidiaries: Belkin Foods Holdings Group Co., Ltd., (“Belkin”), a company incorporated under the laws of the British Virgin Island, FullMart Holding Limited (“FullMart”), a company organized under the laws of British Virgin Island, and SkyPeople Foods Holding Limited (“SkyPeople BVI”), company organized under the laws of British Virgin Island. SkyPeople BVI holds 100% of the equity interest of HeDeTang Holding (HK) Ltd. (“HeDeTang Holding (HK)”), a company organized under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), and HeDeTang Holding (HK) holds 73.42% of the equity interest of SkyPeople Juice Group Co., Ltd., (“SkyPeople (China)”), a company incorporated under the laws of the PRC. SkyPeople (China) has eleven subsidiaries, all limited liability companies organized under the laws of the PRC: (i) Shaanxi Qiyiwangguo Modern Organic Agriculture Co., Ltd. (“Shaanxi Qiyiwangguo”); (ii) Huludao Wonder Fruit Co., Ltd. (“Huludao Wonder”); (iii) Yingkou Trusty Fruits Co., Ltd. (“Yingkou”); (iv) Hedetang Foods Industry (Yidu) Co. Ltd. (“Food Industry Yidu”); (v) Shaanxi Heying Trading Co. Ltd (“Shaanxi Heying”); (vi) Hedetang Agricultural Plantation (Yidu) Co. Ltd. (“Agricultural Plantation Yidu”); (vii) Xi’an Hedetang Nutritious Food Research Institute Co., Ltd.. (“Hedetang Reseach”); and (viii) Xi’an Cornucopia International Co., Ltd. (“Xi’an Cornucopia”); (ix) Xi’an Hedetang E-commerce Co. Ltd. (“Hedetang E-commerce”), (x) Hedetang Foods Industry (Zhouzhi) Co. Ltd (“Foods Industry Zhouzhi”)and (xi) Hedetang Foods Industry (Jingyang) Co. Ltd. (“Foods Industry (Jingyang”); Shenzhen TianShunDa Equity Investment Fund Management Co., Ltd. (the “TSD”), a limited liability corporation registered in China, holds another 26.36% of the equity interest of SkyPoeple (China). HeDeTang Holdings (HK) also holds 100% of the equity interest of HeDeJiaChuan Holding Group Co. Ltd., (“HeDeJiaChuan Holding”), a company incorporated under the laws of the PRC, which holds 100% of HeDeJiaChuan Foods (Xi’an) Co. Ltd., (“HeDeJiaChuan Xi’an”), and Shenzhen Hedetang Industrial Co., Ltd. (“Shenzhen Hedetang”), both companies incorporated under the laws of the PRC. HeDeJiaChuan Xi’an” has three subsidiaries: (i) SkyPeople (Suizhong) Fruit and Vegetable Products Co., Ltd (“SkyPeople Suizhong”); (ii) HedeJiachuan Foods (Yichang) Co. Ltd (“Hedejiachuan Yichang”); and (iii) Shaanxi Guo Wei Mei Kiwi Deep Processing Co., Ltd. (“Guo Wei Mei”).

 

FullMart holds 100% of equity interest of Hedejiachuan (HK) Holdings Limited (“Hedejiachuan HK”), a company organized under the laws of Hong Kong. In September 2017, Hedejiachuan (HK) transferred its wholly owned subsidiary Hedejiachuan Holding Group Co., Ltd., along with its two wholly owned subsidiaries, one 99.5% owned subsidiary, and one 96.67% owned subsidiary to HeDeTang Holding (HK) Ltd. The transferee is a subsidiary of Skypeople BVI. As a result of these transactions, all of FullMart’s operations were transferred to a subsidiary of SkyPeople BVI, and FullMart has no operational assets or businesses.

 

Future FinTech HK holds 100% of the equity interest of Hedetang Foods (China) Ltd. (“Hedetang Foods (China)”), and Hedetang Foods (China) holds 90% of the equity interest of Hedetang Farm Products Trading Market (Mei County) Co., Ltd. (“Trading Market Mei County”), a company incorporated under the laws of the PRC. GlobalKey Supply Chain Limited (“GlobalKey Supply Chain”) holds the remaining 10% of the equity interest of Trading Market Mei County. Trading Market Mei County holds 100% of the equity interest of Shaanxi China Agricultural Silk Road Farm Products Trading Center Co., Ltd. (“China Agricultural Trading Center”) and also holds 100% of the equity interest of GlobalKey Supply Chain.

 

SkyPeople Foods Holdings Limited (BVI)

 

SkyPeople BVI is a wholly-owned subsidiary of Future FinTech organized under the laws of the British Virgin Islands on December 28, 2011. SkyPeople BVI holds 100% equity interest of HeDeTang Holding (HK). HeDeTang Holding (HK) holds 73.42% of the equity interest of SkyPeople (China). SkyPeople (China) has eleven subsidiaries, all limited liability companies organized under the laws of the PRC: (i) Shaanxi Qiyiwangg; (ii) Huludao Wonder; (iii) Yingkou; (iv) Food Industry Yidu; (v) Shaanxi Heying ; (vi) Agricultural Plantation Yidu; (vii) Hedetang Reseach; and (viii) Xi’an Cornucopia;(ix) Hedetang E-commerce, (x) Foods Industry (Zhouzhi) and (xi) Foods Industry (Jingyang). TSD holds another 26.36% of the equity interest of SkyPoeple (China). HeDeTang Holdings (HK) also holds 100% of the equity interest of HeDeJiaChuan Holding, which holds 100% of HeDeJiaChuan Xi’an and Shenzhen Hedetang. HeDeJiaChuan Xi’an” has three subsidiaries: (i) SkyPeople Suizhong; (ii) Hedejiachuan Yichang; and (iii) Guo Wei Mei.

 

A class of securities of SkyPeople BVI will be registered on a Form 10 registration statement prior to the consummation of the spin-off.

 

FullMart Holdings Limited

 

FullMart is a wholly-owned subsidiary of Future FinTech organized under the laws of the British Virgin Islands on December 28, 2011. FullMart holds 100% of equity interest of Hedejiachuan (HK) Holdings Limited (“Hedejiachuan HK”), a company organized under the laws of Hong Kong. In September 2017, Hedejiachuan (HK) transferred its wholly owned subsidiary Hedejiachuan Holding Group Co., Ltd., along with its two wholly owned subsidiaries, one 99.5% owned subsidiary, and one 96.67% owned subsidiary to HeDeTang Holding (HK) Ltd. The transferee is a subsidiary of Skypeople BVI. As a result of these transactions, all of FullMart’s operations were transferred to a subsidiary of SkyPeople BVI, and FullMart has no operational assets or businesses.

 

A class of securities of FullMart will be registered on a Form 10 registration statement prior to the consummation of the spin-off.

 

Effects of the Spin-Offs

 

Upon completion of the Spin-Offs, all of the ordinary shares of each of SkyPeople BVI and FullMart will be directly held by the Future FinTech shareholders of record as of the Record Date.  We anticipate that one of the subsidiaries of SkyPeople (China) will explore a public listing in the PRC, but there can be no guarantee that such a listing will occur.

 

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Effect on Future FinTech if the Spin-Offs are Not Completed

 

If the Spin-Offs are not approved by Future FinTech shareholders or if either of the Spin-Offs is not completed for any other reason, Future FinTech shareholders will not receive a distribution of the ordinary shares of SkyPeople BVI or FullMart, as applicable. Instead, Future FinTech will retain ownership of the ordinary shares of SkyPeople BVI or FullMart, as applicable. Whether or not the Spin-Offs are completed, the common stock of Future FinTech will continue to be listed and traded on NASDAQ (assuming the Company can continue to meet all of NASDAQ’s continued listing standards) and registered under the Exchange Act and Future FinTech will continue to file periodic reports with the SEC. In addition, if the Spin-Offs are not completed, Future FinTech expects that management will operate the business in a manner similar to that in which it is being operated today and that Future FinTech’s shareholders will continue to be subject to the same risks and opportunities to which they are currently subject, including, without limitation, risks related to the highly competitive industry in which Future FinTech operates and adverse economic conditions.

 

If either of the Spin-Offs are not completed, Future FinTech’s Board will continue to evaluate and review the Company’s business operations, properties, dividend policy and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value.

 

Background of the Spin-Offs

 

The following is a brief discussion of the background of the deliberations that led to our Board of Directors’ approval of the Spin-Offs.

 

During the preceding 6 months, Future FinTech considered several options for maximizing shareholder value. Among others, the following options were considered, and in some cases executed, by our Board of Directors:

 

The Company has considered and taken certain actions to expand our planting bases through purchasing or leasing plantations to directly reach up-stream supply chains to secure raw material and reduce price fluctuations for such materials. For example, we leased orchards in Yidu and Mei County. Due to many of the factors described below, this plan has not been as successful as our Board had anticipated.

 

The Company has also considered and taken certain actions to develop food products trading by forming a trading company in Hong Kong in 2016, SkyPeople International Trading (HK) Limited. This subsidiary is currently known as Future FinTech (HongKong) Limited. In addition, the Company planned to change its name to Future Foods Holdings Inc. to reflect its expansion to food export business in the event that such business became successful. This plan was not successful, however, due to foreign exchange controls in China that make the payment and settlement of cross-border trading difficult and cumbersome.

 

The Company was in discussion with a Chinese company in the Company’s industry in 2016 for the purpose of exploring an acquisition. The potential acquisition failed for many reasons, mainly because, in the Board’s opinion, the Company was substantially undervalued in the U.S. capital market given that we are in a traditional business. The low valuation negatively affected the Company’s brand value and future business development and impeded our ability to complete the acquisition.

 

Some of the above options and others considered by the Board continued to rely on the development of our current heavy asset business, which has been weighed down due to increases in the costs of labor and raw materials, stricter environmental regulation and enforcement and the difficulties experienced by manufacturing companies in obtaining financing. For environmental reasons, the Chinese government is currently forcing manufacturing factories to convert from coal power to natural gas. However, our current facilities are in remote rural areas without access to natural gas pipelines, making such a conversion costly and impractical. As such, some of our factories have been unable to continue normal levels of production. Further, due to the rapid increase in property values, much of banks’ capital liquidity has been tied up in real estate, and it is difficult for manufacturing companies receive loans from the banks. Our Board did not expect that such alternative options would avoid these negative market influences. Therefore, the Company determined it would not improve its financial condition and operating results to stay within the current scope of its manufacturing business in China, and the Board concluded that a move to internet, financing and technology areas, which are experiencing rapid growth and development in China, will generate higher values for our shareholders.

 

Future FinTech’s management believes that the Spin-Offs will allow the Company’s management to better focus on the Company’s new business lines and growth strategies and SkyPeople BVI, FullMart and the Company will each have greater access capital resources that are focused on their respective industries, operational needs and growth strategies.

 

The Company plans to spin-off the fruit juice, food and construction in progress—the traditional fruit juice businesses. After the completion of the Spin-Offs, Future FinTech will focus on our existing agriculture trading center, establish online sales of fruit juice and consumer products as well as financial technology businesses, and transition from a heavy assets manufacturing company to a light assets internet and financial technology company. Future FinTech has incorporated a new subsidiary to engage in asset management, which will have a particular focus on purchasing distressed assets and selling such assets, or alternatively securitizing them for sale. Future FinTech has acquired financial assets and plans to dispose of them all together, individually or in a repackaged form. We are also considering whether to securitize such financial assets and assets that we may acquire in the future from time to time for sale as securities in the PRC. Through a subsidiary, we have entered into a service contract for the development of our blockchain-based Global Shared Shopping Mall platform, which will enhance our existing e-commerce business and provide both direct and third-party sale services of our own products and those of third-party sellers. Additionally, the Company’s indirectly wholly owned subsidiary Hedetang Foods (China) Co. Ltd. is in the process of applying with the relevant Chinese government agencies to change its name to China Agricultural Silk-road Finance Leasing Co., Ltd. to provide project financing and leasing services for potential “one-belt and one-road projects” that Chinese government is currently promoting.

 

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The Spin-Offs would also allow Future FinTech to be free from the challenging market conditions affecting the manufacturing businesses of SkyPeople BVI and FullMart, including, for example, increased costs of raw materials, lower fruit juice prices, required upgrades of environmental protection devises for existing manufacturing facilities to meet heightened environmental standards, government-mandated interruptions in production due to pollution regulation and increased regulatory requirements for construction projects, all of which have adversely affected the financial results of Future FinTech and slowed the growth and development of its operations that are not dependent on heavy assets. At the same time, Future FinTech shareholders will still be able to participate in the ongoing businesses of SkyPeople BVI and FullMart through their ownership of those entities without being burdened by the expenses related to additional NASDAQ listings.

 

The Spin-Offs have been discussed at our Board meetings several times. On May 15, 2017, our management presented the reasons for spin-off and steps to be taken to complete the spin-off for the Board’s discussion.

 

On June 7, 2017, the company held another Board meeting to discuss the Spin-Offs. The Board concluded at that meeting that further consultation with legal counsel would be necessary and that the Spin-Offs would be subject to shareholder approval.

 

On August 29, 2017, the Board approved the Spin-Offs and the submission of the matter to the vote of the Company’s shareholders at the Company’s Special Meeting. 

 

Recommendation of Future FinTech’s Board of Directors and Reasons for the Spin-Offs

 

After careful consideration, the Company’s Board of Directors has determined that the Spin-Offs are fair to and in the best interests of the Company and its shareholders and unanimously recommends that you vote or give instruction to vote IN FAVOR of the Spin-Offs.

 

Reasons for the Spin-Offs

 

In evaluating the Spin-Offs and recommending that Future FinTech’s shareholders vote in favor of approval the Spin-Offs, Future FinTech’s Board of Directors, in consultation with Future FinTech’s senior management and outside legal counsel, considered numerous positive factors relating to the Spin-Offs, including the following material factors:

 

The Spin-Offs allow our shareholders to retain 100% ownership of Future FinTech’s current business, assets and liabilities.

 

Challenging market conditions affecting the businesses of SkyPeople BVI and FullMart, including, for example, increased costs of raw materials, low price for fruit juice products, heavy competition from online sellers and distributors, required upgrades of environmental protection devises for existing manufacturing facilities to meet heightened environmental standards, government-mandated interruptions in production due to pollution regulation and increased regulatory requirements for construction projects, have adversely affected the financial results of Future FinTech and slowed of its operations that are not dependent on the development and exploitation of heavy assets.
   
Following the completion of the Spin-Offs, Future FinTech, SkyPeople BVI and FullMart will each be able to focus on the strategic development of their respective businesses.
   
Each of Future FinTech, SkyPeople BVI and FullMart will have a better ability to attract capital focused on their respective industries, operational needs and growth strategies after the completion of the Spin-Offs.

 

The prospective risks to Future FinTech relating to the risks and uncertainties of maintaining its growth in the highly competitive market for juice products.

 

The Company’s Board of Directors concluded that the other strategic alternatives available to Future FinTech, such as continuing to operate its business as it currently does and pursuing its strategic plan and the possibility of growing its business through acquisitions and internal growth, were less attractive than the Spin-Offs to Future FinTech’s shareholders under the circumstances.

 

The fact that resolutions approving the Spin-Offs were unanimously approved by Future FinTech’s Board of Directors, which is comprised of a majority of independent directors.

 

In the course of reaching the determinations and decisions and making the recommendation described above, Future FinTech’s Board of Directors, in consultation with Future FinTech’s senior management and outside legal counsel, considered the risks and potentially negative factors relating to the Spin-Offs, including the following material factors:

 

The possibility that the share price of Future FinTech may decline so that we may not continue to meet NASDAQ’s listing requirements.

 

The possibility that the consummation of the Spin-Offs may be delayed or not occur at all, and the adverse impact such event would have on Future FinTech and its business as management continues to devote time and attention to effect the consummation.

 

The possible disruption to Future FinTech’s business that may result from announcement of the Spin-Offs and the resulting distraction of management’s attention from the day-to-day operations of its business.

 

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The potential negative effect of the pendency of the Spin-Offs on Future FinTech’s business, including uncertainty about the effect of the proposed Spin-Offs on the Company’s employees, customers and other parties, which may impair its ability to attract, retain and motivate key personnel, and could cause customers, suppliers and others to seek to change existing business relationships with Future FinTech.

 

The possibility that Future FinTech’s shareholders could commence litigation in connection with the Spin-Offs, whether due to the reduced liquidity of the ordinary shares of SkyPeople BVI and FullMart, or otherwise.
   
The possibility that Future FinTech will not be able to attract and maintain sufficiently skilled employees to develop and exploit the new line of business software and related technology.
   
The cost to Future FinTech of preparing for and consummating the Spin-Offs.

 

Future FinTech’s Board of Directors believed that, overall, the potential benefits of the Spin-Offs to Future FinTech’s shareholders outweighed the risks and uncertainties of the Spin-Offs.

 

Following the completion of the Spin-Offs, the main business operations of Future FinTech will be focused on (i) the online sales of fruit juice products and beverages, and consumer and health-related products, through GlobalKey Supply Chain Limited (formerly known as Shaanxi Quangoutong E-Commerce Inc.) (“GlobalKey”); (ii) the operation of a supply chain, logistics and trading business for fruit juice products, foods and other consumer and agricultural products through Hedetang Farm Products Trading Market (Mei County) Co., Ltd., as described further below; (iii) bulk agricultural products spot trading business and financial technology businesses, including software development and information services for the financial leasing and project finance industries through intelligent investment advisory and blockchain technology; and (iv) related asset and equity investment management. We will use blockchain technology to develop its use in different business segments, including online sales and internet distribution businesses. We will also use the application blockchain technology in agricultural products trading, to facilitate financial payments and transactions, and intend to use both blockchain and artificial intelligence technologies to create new opportunities. We anticipate generating revenues from our finance leasing business, the acquisition and disposal of financial assets and the application of block-chain technology for online sales of products.

 

As previously reported, on April 3, 2013, SkyPeople (China) entered into an Investment Agreement (the “Agreement”) with the Managing Committee of Mei County National Kiwi Fruit Wholesale Trading Center (the “Committee”). The Committee has been authorized by the People’s Government of Mei County to be responsible for the construction and administration of the Mei County National Kiwi Fruit Wholesale Trading Center (the “Trading Center”). Contracts relating to the Trading Center were subsequently transferred to subsidiaries that will remain with Future FinTech following the completion of the Spin-Offs.

 

Under the Agreement, the parties agreed to invest and establish a kiwi fruit comprehensive deep processing zone and kiwi fruit and fruit-related materials trading zone in Yangjia Village, Changxing Town of Mei County with a total planned area of total planned area of 286 mu (approximately 47 acres) (the “Project”). The Trading Center has begun operations, and in connection with the Project, our subsidiary Shaanxi Guoweimei Kiwi Deep Processing Co. Ltd. is currently building fruit juice production lines, a vegetable and fruit flash freeze facility, an R&D center and an office building. Although the schedule for completion could change, we plan to complete construction in the second quarter of 2018. We anticipate that these facilities and the Trading Center will support our supply chain, logistics and trading business for fruit juice projects, foods and other consumer and agricultural products.

 

The Company has been in discussions with blockchain software and system developers to establish a cooperation relationship, and, through a subsidiary, has entered into a services agreement for the development of our blockchain trading platform. Upon the completion of our blockchain platform, we anticipate that we, or our subsidiaries, will hold some of the products to be sold on the platform in inventory for direct sale, and third-parties will use our platform for sales of their own products. For example, GlobalKey has signed a license agreement with Shaanxi Entai-Biotechnology Co. Ltd. to serve as the sole global general distributor and operational platform for ‘IB-LIVE’, a product that aims to improve male sexual health. We will also continue to actively look for similar cooperation projects and further develop the supply chain business of fruit juices, foods and other consumer products to create more revenue for the Company. After the system is in operation, GlobalKey will become a comprehensive and shared e-commerce shopping platform.

 

Further, as described more fully in Proposal No. 4, the Company, through a subsidiary, has acquired creditor’s rights that it anticipates will provide capital for the development of its financial assets business. The Company is in the process of changing the name of Hedetang Foods (China) Co., Ltd. to China Agricultural Silk-Road Finance Leasing Co., Ltd. The change first needs the approval of State Administration for Industry and Commerce of the People’s Republic of China, then it needs to go through the procedures with Shaanxi Provincial Administration for Industry and Commerce, and finally it needs to make appropriate filings with the Shaanxi Provincial Department of Commerce. In addition, China Agricultural Silk-Road Finance Leasing Co., Ltd. must have registered capital for no less than 10 million US dollars as a financial leasing company. At present, the name “China Agricultural Silk-road Finance Leasing Co., Ltd.” has been approved by the China National Industry and Commerce Bureau and the Company is going through the required procedures with Shaanxi Administration for Industry and Commerce.

 

After it completes the purchase of financial assets with shareholders’ approval, China Agricultural Silk-road Finance Leasing Co., Ltd. will sell these existing financial assets to collect proceeds that we anticipate will be in the amount of approximately $30 to $35 million. After our block-chain based Global Shared Shopping Mall begins operations, it will generate sales and revenue as well as bring businesses onto its platform. We anticipate that such businesses will be potential investors or customers for our finance leasing business. We also plan to issue certain finance leasing funds to raise money. Under the banking rules in China, the finance leasing company can have a borrowing ratio of 5 to 10 times of its capital in industry to raise money, which could also provide us with necessary funds. To better control risk, we will focus on the companies with good credit on the Global Shared Shopping Mall and its upstream and downstream suppliers as our potential clients.

  

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The finance leasing company will also engage in block-chain and online finance leasing businesses, the acquisition and disposal of financial assets and securitized assets, as well as the provision of support services to Global Shared Shopping Mall. We are also exploring the area to use block-chain to manage the disposal, transfer, trading and securitization of distressed assets.

 

We believe the Measures of Supervision and Administration of Finance Leasing Enterprises by Ministry of Commerce in September 2013 will apply to this line of business.

 

After the completion of the Spin-Offs, SkyPeople BVI will continue fruit juice, beverage and fruit related food manufacturing and traditional sales through distributors. Immediately following the Spin-Offs, the Company does not currently foresee FullMart having an operational business. However, the Company is exploring commercial opportunities for FullMart. Because the Company’s new lines of technology-related businesses are distinct from the ongoing operations of SkyPeople BVI and FullMart, and involve separate assets, contracts and growth strategies, our Board concluded that the Spin-Offs would aid in the development of the respective operations of Future FinTech, SkyPeople BVI and FullMart.

 

Interests of Future FinTech’s Directors and Officers in the Spin-Offs

 

As of the Record Date, the directors and executive officers of Future FinTech as a group owned and were entitled to vote ● shares of the common stock of the Company, representing approximately ●% of the outstanding shares of Future FinTech common stock on that date. Future FinTech expects that its directors and executive officers will vote their shares in favor of the Spin-Offs, in favor of the amendment to Future FinTech’s Second Amended and Restated Articles of Incorporation, in favor of the adoption of the Future FinTech Group Inc. 2017 Omnibus Equity Plan, in favor of the Acquisition Share Issuances, in favor of the Placement Share Issuance, and in favor of the grant of discretionary authority to the Company’s CEO to adjourn the meeting, but none of the Company’s directors or executive officers other has entered into any agreement obligating any of them to do so.

 

Besides the equity ownership of Future FinTech detailed above and herein, the directors and executive officers of the Company do not have interests different than the other shareholders of Future FinTech in relation to the Spin-Offs.

 

Based on our issued and outstanding shares as of December 22, 2017, Zeyao Xue’s beneficial ownership of 45.2% of Future FinTech’s issued and outstanding common stock will give him the ability to almost control the outcome of matters submitted to shareholders for approval, including those proposals discussed herein. Assuming the completion of the Spin-Offs and the transactions contemplated by Proposals 4 and 5  and the number of our issued and outstanding shares remains unchanged, Mr. Zeyao Xue will hold 57.9% of Future FinTech’s issued and nearly controlling interests in SkyPeople BVI and FullMart, giving him the ability to control the outcome of matters submitted to the shareholders of such entities in the future, including the election of directors and any merger, consolidation, or sale of all or substantially all of their respective assets. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of their respective assets that other shareholders support, or conversely this concentrated control could result in the consummation of such a transaction that other shareholders do not support. This concentrated control could also discourage a potential investor from acquiring the ordinary shares of SkyPeople BVI or FullMart, or the common stock of Future FinTech, due to the limited voting power of such shares. As a shareholder, even a controlling shareholder, Mr. Zeyao Xue is entitled to vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of our shareholders generally.

 

Completion and Effective Time of the Spin-Offs

 

We are working to complete the Spin-Offs as quickly as possible, and we expect to complete the Spin-Offs in the second quarter of 2018. However, Future FinTech cannot assure you when or if either of the Spin-Offs will occur. The Spin-Offs are subject to shareholder approvals and other conditions, and it is possible that factors outside the control of Future FinTech could result in the Spin-Offs being completed at a later time, or not at all. There may be a substantial amount of time between the Special Meeting and the completion of the Spin-Offs.

 

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Appraisal Rights

 

Future FinTech shareholders do not have appraisal rights in connection with the Spin-Offs under the Florida Business Corporation Act.

 

Accounting Treatment

 

Future FinTech prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). There will be no change in ownership or control of the Future FinTech’s businesses following the completion of the Spin-Offs, and therefore the Spin-Offs constitute a reorganization of companies under common control, and will be accounted for in a manner similar to a pooling of interests.

 

British Virgin Islands Tax Consequences of the Spin-Offs

 

In the opinion of Maples and Calder (Hong Kong) LLP, under current British Virgin Islands law, we will not be subject to British Virgin Islands income tax as a result of the Spin-Offs and our shareholders who are not residents of the British Virgin Islands will not be subject to any British Virgin Islands income withholding or capital gains by reason of such transactions.

 

United States Federal Income Tax Consequences of the Spin-Offs

 

The following discussion sets forth the material U.S. Federal income tax consequences to our shareholders of the distribution of the ordinary shares of SkyPeople BVI and FullMart to our shareholders.

 

This discussion is limited to shareholders who are U.S. Holders (as defined below) of our common stock who hold such stock as a capital asset for Federal income tax purposes. This discussion is based on the Tax Reform Act of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and the current administrative rules, practices and interpretations of law of the U.S. Internal Revenue Service (“IRS”), all as in effect on the date of this document, and all of which are subject to change, possibly with retroactive effect. This discussion does not address all aspects of Federal income taxation that may be important to particular holders in light of their individual investment circumstances. Unless specifically stated otherwise, this discussion does not apply to the following holders, even if they are U.S. Holders, all of whom may be subject to tax rules that differ significantly from those summarized below: (i) holders who may be subject to special tax rules, including, without limitation, partnerships (including any entity or arrangement treated as a partnership for Federal income tax purposes); (ii) dealers in securities or foreign currency, foreign persons, insurance companies, tax-exempt organizations, banks, financial institutions, and broker-dealers; and (iii) holders of warrants or other convertible securities entitling them to receive stock, holders who acquired common stock pursuant to the exercise of compensatory stock options or otherwise as compensation, or holders who hold common stock as part of a hedge, straddle, conversion, constructive sale or other integrated security transaction.

 

We have not sought, and will not seek, a ruling from the IRS regarding the Federal income tax consequences of these transactions. This discussion is based on varying interpretations that could result in U.S federal income tax consequences different from those described below. The following discussion does not address the tax consequences of this offering or the related share issuance under foreign, state, or local tax laws, or the alternative minimum tax provisions of the Code. Accordingly, each U.S. holder of common stock is urged to consult his, her or its (hereinafter, “his”) tax advisor with respect to the particular tax consequences of these transactions.

 

For purposes of this discussion, a “U.S. holder” is a holder who is for U.S. federal income tax purposes: (i) a citizen or resident of the U.S.; (ii) a corporation or other entity taxable as a corporation that is organized in or under the laws of the U.S., any state thereof or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income taxation, regardless of its source; or (iv) a trust, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust (or if the trust was in existence on August 20, 1996, and validly elected to continue to be treated as a U.S. trust).

 

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THIS IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE. THE U.S. FEDERAL INCOME TAX TREATMENT OF THESE TRANSACTIONS IS COMPLEX. ACCORDINGLY, EACH SHAREHOLDER WHO IS A U.S. HOLDER IS STRONGLY URGED TO CONSULT HIS OWN TAX ADVISER WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME, ESTATE AND OTHER TAX CONSEQUENCES OF THE TRANSACTIONS WITH SPECIFIC REFERENCE TO SUCH PERSON’S PARTICULAR FACTS AND CIRCUMSTANCES.

 

Distributions of Stock in SkyPeople BVI and FullMart

 

The distribution to our shareholders of interests in SkyPeople BVI and FullMart will be a taxable event to each shareholder. The value of the interests in the SkyPeople BVI and FullMart stock received by each shareholder will be applied first to reduce the shareholder’s basis in his/her stock in Future FinTech; any value of those interests in excess of the shareholder’s basis in Future FinTech stock will be a capital gain to the shareholder. Any capital gain will be long-term capital gain, taxable at favorable capital gains rates, if the shareholder has held his Future FinTech stock for more than a year at the time of the distribution; otherwise, any gain will be short-term capital gain taxable at ordinary income tax rates.

 

The foregoing discussion assumes that the Company does not, at the time of the distribution, have current or accumulated earnings and profits (“earnings and profits”). According to the books of the Company, the Company has no accumulated earnings and profits. If the Company has any current earnings and profits, then (i) the distribution of the interests in SkyPeople BVI and FullMart will be treated as a dividend distribution to each shareholder to the extent of the shareholder’s pro rata share of the Company’s current earnings and profits; and (ii) the value of the distribution, if any, in excess of the shareholder’s pro rata share of current earnings and profits will be treated in the manner described in the preceding paragraph.

 

If a shareholder’s basis in his/her Future FinTech stock is greater than the value of the interests in SkyPeople BVI and FullMart received by the shareholder, the shareholder will not recognize a capital loss.

 

The tax consequences of the distribution of the shares of SkyPeople BVI and FullMart are complex and not free from doubt. We have provided what we believe are the most likely consequences. Shareholders should consult their own tax advisors on the tax consequences of these transactions.

 

Net Investment Income Tax

 

The net investment income tax (the Medicare Tax on Unearned Income) – a tax of 3.8% on certain kinds of investment income – will apply to any portion of the distribution of the stock of SkyPeople BVI and FullMart that is treated as a dividend (see the discussion in the second paragraph of “Distributions of Stock in SkyPeople BVI and FullMart”, above).

 

The net investment income tax also appears to apply to any capital gain recognized by the shareholders on the distribution of SkyPeople BVI and FullMart stock to them (see the first paragraph of “Distributions of Stock in SkyPeople BVI and FullMart”, above) but the treatment of such capital gain under the net investment income rules is not entirely clear. Shareholders should consult their own tax advisors with respect to the applicability of the net investment income tax to such gains.

 

Company Tax Liability Due to the Spin-Off

 

The Company will recognize gain on the distribution of the SkyPeople BVI and FullMart interests to the shareholders if SkyPeople BVI or FullMart has a fair market value in excess of the Company’s adjusted basis in such entity. The value SkyPeople BVI or FullMart may exceed the Company’s adjusted basis in SkyPeople BVI or FullMart, as applicable. Any such gain would be added to the Company’s other income in determining the Company’s taxable income (taking into account the Company’s deductible expenses, credits, and allowable net operating loss carryforwards) and its tax liability, if any. The Company expects that any such gain would be offset by its other expenses and by its allowable net operating loss carryforwards, so that the Company would owe no tax as a result of these transactions, but there is no certainty that that would be the case.

 

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Information Reporting and Backup Withholding

 

Payments of proceeds from the distribution of SkyPeople BVI and FullMart to a shareholder may be subject to information reporting to the IRS and, possibly, U.S. federal backup withholding. Backup withholding will not apply if the shareholder furnishes a correct taxpayer identification number (certified on the IRS Form W-9) or otherwise establishes that he is exempt from backup withholding. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against the shareholder’s U.S. federal income tax liability. The shareholder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information. Since any backup withholding required in connection with the distribution of SkyPeople BVI and FullMart stock would in effect be a cash obligation imposed on the Company (since no withholdable cash is being distributed), the Company does not intend to distribute SkyPeople BVI or FullMart stock to any shareholder who has not provided the Company with a Form W-9 or otherwise established an exemption from backup withholding.

 

Regulatory Approvals Required for the Spin-Offs

 

The Spin-Offs are not subject to any additional federal or state regulatory requirement or approval, except for filings with the British Virgin Islands to effect the Spin-Offs.

 

Legal Matters

 

Future FinTech and its subsidiaries are sometimes subject to other legal proceedings and claims that arise in the ordinary course of its business. While the amount of ultimate liability with respect to such actions is not expected to materially affect the Company’s results of operations, cash flows or financial position, any litigation resulting from any such legal proceedings or claims could be time consuming and injure our reputation.

 

The validity of the ordinary shares of SkyPeople BVI and FullMart to be issued in the Spin-Offs will be passed upon by Maples and Calder (Hong Kong) LLP prior to the completion of the Spin-Offs.

  

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

FUTURE FINTECH GROUP INC.

 

The following unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of Future FinTech Group Inc. (the “Company”). The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the spin-off of the Company’s wholly-owned subsidiary of SkyPeople Foods Holdings Limited (“SkyPeople BVI”) and its subsidiaries – Hedetang Holding (HK) Ltd. (“Hedetang Holding (HK)”), SkyPeople Juice Group Co. Ltd. PRC (“SkyPeople (China)”), Xi’an Cornucopia International Co. Ltd. (“Xi’an Cornucopia”), Xi’an Hedetang Fruit Juice Beverages Co. Ltd. (“Xi’an Holding Juice Beverages”), Yingkou Trusty Fruit Juice Co. Ltd. (“Yingkou”), Huludao Wonder Fruit Co. Ltd. (“Huludao Wonder”), Hedetang Agriculture Plantation (Yidu) (“Agriculture Plantation (Yidu)”), Hedetang Foods Industry (Yidu) Co. Ltd. (“Foods Industry (Yidu)”), Shaanxi Qiyiwangguo Organic Agriculture Co. Ltd. (“Shaanxi Qiyiwangguo”), Shaanxi Heying Trading Co. Ltd. (“Shaanxi Heying”), Xi’an Hedetang E-commerce Co. Ltd. (“Hedetang E-commerce”), Hedetang Foods Industry (Zhouzhi) Co. Ltd. (“Foods Industry (Zhouzhi)”), Hedetang Foods Industry (Jingyang) Co. Ltd. (“Foods Industry (Jingyang)”), and the Company’s wholly-owned subsidiary, FullMart Holding Limited (“FullMart”), and its subsidiaries - Hedetang Holding (Asia-Pacific) Ltd. (“Hedetang Holding (Asia-Pacific)”), HeDeJiaChuan Holding Group Co. Ltd. (“HeDeJiaChuan Holding”), HeDeJiaChuan Foods (Xi’an) Co. Ltd. (“HeDeJiaChuan Foods (Xi’an)”), SkyPeople (Suizhong) Fruit and Vegetable Products Co. Ltd. (“SkyPeople Suizhong”), HeDeJiaChuan Foods (Yichang) Co. Ltd. (“HeDeJiaChuan Yichang”), Shaanxi Guo Wei Mei Kiwi Deep Processing Co. Ltd. (“Guo Wei Mei”).

 

 44 

 

 

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 reflects the pro forma effect as if the spin-off of SkyPeople BVI and FullMart had been consummated on that date. The unaudited pro forma condensed consolidated statements of operations of the Company for the year ended December 31, 2016 and nine months ended September 30, 2017 included the Company’s historical statements of operations, adjusted to reflect the pro forma effect as if disposition of SkyPeople BVI and FullMart had been consummated on January 1, 2016 and 2017 (the first day of the Company’s 2016 and 2017 fiscal year), respectively. The historical consolidated financial statements referred to above for the Company were included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016. The accompanying unaudited pro forma condensed consolidated financial information and the historical consolidated financial information presented herein should be read in conjunction with the historical consolidated financial statements and notes thereto for the Company.

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the Spin-Offs, (b) are factually supportable and (c) with respect to the statements of operations, have a continuing impact on consolidated results of the Company. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated financial information does not reflect the tax consequences in any jurisdictions attributable to the Spin-Offs and it does not reflect future events that may occur after the sale, including potential general and administrative cost savings. The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred if the disposition of SkyPeople BVI and FullMart had occurred on January 1, 2016 and 2017, respectively, nor is it necessarily indicative of the Company’s future operating results. The pro forma adjustments are subject to change and are based upon currently available information.

 

 45 

 

 

Future FinTech Group Inc.

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET

AS AT SEPTEMBER 30, 2017

  

   Future   Pro Forma     
   FinTech   Adjustment   Pro Forma 
             
ASSETS            
             
CURRENT ASSETS            
Cash and cash equivalents   41,065    -    41,065 
Restricted cash   -    -    - 
Accounts receivable   3,517,946    -    3,517,946 
Other receivables   25,142    -    25,142 
Inventories   3,917    -    3,917 
Deferred tax assets   -    -(a)   - 
Advances to suppliers and other current assets   3,905,104    -    3,905,104 
TOTAL CURRENT ASSETS   7,493,174    -    7,493,174 
                
Property, plant and equipment, net   14,832,532    -    14,832,532 
Land use right, net   5,818,144    -    5,818,144 
Long term assets   2,378,494    -    2,378,494 
Deposits        -      
Investment in subsidaries   41,007,400    -    41,007,400 
Related party receivables   2,111    -    2,111 
TOTAL ASSETS   71,531,855    -    71,531,855 
                
LIABILITIES               
                
CURRENT LIABILITIES               
Accounts payable   5,593,151    -    5,593,151 
Accrued expenses   4,391,474    80,000(b)   4,471,474 
Income tax payable   -    -(a)   - 
Advances from customers   183,646    -    183,646 
Related party payable   13,534,898    -    13,534,898 
Short-term bank loans        -      
TOTAL CURRENT LIABILITIES   23,703,169    80,000    23,783,169 
                
NON-CURRENT LIABILITIES               
Obligations under capital leases   -    -    - 
               
TOTAL NON-CURRENT LIABILITIES   -    -    - 
                
TOTAL LIABILITIES   23,703,169    80,000    23,783,169 
                
STOCKHOLDER’ EQUITY               
                
Series B Preferred stock   (405)   -(c)     
Common stock   9,137,254    (9,132,081)(c)   5,173 
Additional paid-in capital   36,305,553    9,132,081(c)   45,437,634 
Retained earnings   (5,204,266)   (80,000)(b)   (5,284,266)
Accumulated other comprehensive income   (3,357)   -    (3,357)
Total stockholders’ equity   40,234,779    (80,000)   40,155,184 
Non-controlling interests   -    -    - 
TOTAL STOCKHOLDERS’ EQUITY   40,234,779    (80,000)   40,155,184 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   63,937,948    -    63,938,353 

 

46 

 

 

Future FinTech Group Inc.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME / (LOSS)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

 

   Future   Pro Forma     
  FinTech   Adjustment   Pro Forma 
             
Revenue   16,355    -    16,355 
Cost of goods sold   13,303    -    13,303 
Gross profit   3,052    -    3,052 
                
Operating Expenses        -    - 
General and administrative expenses   801,189    80,000(b)   881,189 
Selling expenses        -    - 
Total operating expenses   801,189    80,000    881,189 
         -    - 
Income (loss) from operations   (798,137)   (80,000)   (878,137)
              - 
Other (expenses) income             - 
Interest income   -    -    - 
Subsidy income   -    -    - 
Interest expenses   (54)   -    (54)
Consulting fee related to capital lease   -    -    - 
Total other expenses   (54)   -    (54)
         -    - 
Income(loss) from Continuing Operations before Income Tax   (798,191)   -    (798,191)
Income tax provision   -    -    - 
Income (loss) from Continuing Operations before Minority Interest   (798,191)   (80,000)   (878,191)
                
Less: Net income attributable to non-controlling interests   -    -    - 
         -    - 
Income from Continuing Operations   (798,191)   (80,000)   (878,191)
                
Discontinued Operations        -      
Income from discontinued operations        -      
NET INCOME (LOSS)   (798,191)   (80,000)   (878,191)
         -      
Other comprehensive income, net of income tax               
Foreign currency translation   -    -    - 
Comprehensive income   (798,191)   (80,000)   (878,191)
Comprehensive (income) expense attributable to non-controlling interests   -    -    - 
COMPREHENSIVE INCOME(LOSS)   (798,191)   (80,000)   (878,191)
                
Earnings per share:               
Basic earnings (loss) per share from continued operation   (0.18)   (0.02)   (0.19)
Basic earnings (loss) per share from discontinued operation   -    -    - 
    (0.18)   (0.02)   (0.19)
Diluted Earnings per share:               
Diluted earnings (loss) per share from continued operation   (0.17)   (0.02)   (0.19)
Diluted earnings (loss) per share from discontinued operation   -    -    - 
    (0.17)   (0.02)   (0.19)
Weighted average number of shares outstanding               
Basic and diluted   4,537,240    4,537,240    4,537,240 
Diluted   4,599,740    4,599,740    4,599,740 

 

47 

 

 

Future FinTech Group Inc.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME / (LOSS)

FOR THE YEAR ENDED DECEMBER 31, 2016

 

   Future   Pro Forma     
   FinTech   Adjustment   Pro Forma 
             
Revenue   -    -    - 
Cost of goods sold   -    -    - 
Gross profit   -    -    - 
                
Operating Expenses        -    - 
General and administrative expenses   756,990    80,000(b)   836,990 
Selling expenses   340    -    340 
Total operating expenses   757,330    80,000    837,330 
         -    - 
Income (loss) from operations   (757,330)   (80,000)   (837,330)
              - 
Other (expenses) income             - 
Interest income   -    -    - 
Subsidy income   -    -    - 
Interest expenses   -    -    - 
Consulting fee related to capital lease   -    -    - 
Total other expenses   -    -    - 
         -    - 
Income(loss) from Continuing Operations before Income Tax   (757,330)   -    (757,330)
Income tax provision   -    -    - 
Income (loss) from Continuing Operations before Minority Interest   (757,330)   (80,000)   (837,330)
                
Less: Net income attributable to non-controlling interests   -    -    - 
         -    - 
Income from Continuing Operations   (757,330)   (80,000)   (837,330)
                
Discontinued Operations   -    -    - 
Income from discontinued operations        -    - 
NET INCOME (LOSS)   (757,330)   (80,000)   (837,330)
         -    - 
Other comprehensive income, net of income tax             - 
Foreign currency translation   -    -    - 
Comprehensive income   (757,330)   (80,000)   (837,330)
Comprehensive (income) expense attributable to non-controlling interests   -    -    - 
COMPREHENSIVE INCOME(LOSS)   (757,330)   (80,000)   (837,330)
              - 
Earnings per share:             - 
Basic and diluted earnings per share from continued operation   (0.19)   (0.02)   (0.21)
Basic and diluted earnings per share from discontinued operation   -    -    - 
    (0.19)        (0.19)
Weighted average number of shares outstanding             - 
Basic and diluted   3,933,999    3,933,999    3,933,999 

 

48 

 

 

FUTURE FINTECH GROUP INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1: Description of Transaction and Basis of Presentation

 

Future Fintech Group Inc. (“the Company”) is a holding company incorporated under the laws of the State of Florida. After the spinoff, it will have one direct wholly-owned subsidiary: Belkin Foods Holdings Group Co., Ltd., (“Belkin”). a company incorporated under the laws of the British Virgin Islands.

 

Belkin holds 100% of the equity interest of Future FinTech (HongKong) Limited (“FinTech HK”), a company organized under the laws of Hong Kong. FinTech HK holds 100% of the equity interest of Hedetang Foods (China) Ltd. (“Hedetang Foods (China)”), and Hedetang Foods (China) holds 90% of the equity interest of Hedetang Farm Products Trading Market (Mei County) Co., Ltd. (“Trading Market Mei County”), a company incorporated under the laws of the PRC. GlobalKey Supply Chain Limited (“GlobalKey Supply Chain”) holds the remaining 10% of the equity interest of Trading Market Mei County. Trading Market Mei County holds 100% of the equity interest of Shaanxi China Agricultural Silk Road Farm Products Trading Center Co., Ltd. and 100% of the equity interest of GlobalKey Supply Chain.

 

Belkin was acquired on May 18, 2016.

 

FintTech HK, formerly known as Future World Trading (Hong Kong) and SkyPeople International Trading (HK) Limited, was established on July 27, 2016. It mainly engages in the import and export of food products.

 

The Company acquired Hedetang Foods China on May 18, 2016 through the acquisition of Belking. The scope of business of Hedetang Foods China includes wholesale and retail of foods and beverages; import and export trade of fruit, vegetables, dried fruit; packaging; logistics and distribution; online sales; and business management consulting services.

 

Trading Market Mei County., formerly known as SkyPeople Juice Group (Mei County) Kiwi Fruit and Farm Products Trading Market Co., Ltd., was established on April 19, 2013. Its scope of business includes preliminary processing of agricultural and subsidiary products, establishment of trading market for agriculture products, and similar activities.

 

Shaanxi China Agricultural Silk Road Farm Products Trading Center Co., Ltd., formerly know as Hedetang Agricultural Plantations (Mei County) Co., Ltd., was established on September 2nd, 2016. Its scope of business includes the planting, acquisition and sales of vegetables, fruits, flowers, Chinese herbal medicine, farm products; fresh fruit picking; research, training and promotion of planting and breeding technology, development and training of E-commerce and online sales of agricultural and sideline products.

 

GlobalKey Supply Chain Limited., formerly known as Shaanxi Quangoutong E-commerce Inc., was acquired on May 27, 2017. Its main business scope includes computer hardware and software equipment, electronic products and communication equipment, computer network engineering design, business information consultation and investment management. On July 4, 2017, it changed its name to GlobalKey Supply Chain Limited.

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of the Company, which were included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016.

 

Note 2: Adjustments to the pro forma condensed financial statement.

 

The unaudited pro forma condensed consolidated statements of operations reflect the Spin-off of the Company’s subsidiaries (SkyPeople BVI, and FullMart) as if the Spin-Off had been consummated on January 1, 2017 and 2016 (the first day of the Company’s 2016 and 2017 fiscal year), respectively. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 reflects such sale as if it had been consummated on that date.

 

(a)Reflect the adjustment to the deferred assets, which is allocated to SkyPeople BVI, and FullMart.
(b)Reflects attorney fee, accounting fee and SEC filing fee related with the spin-off transaction. All the attorney fee, accounting fee and SEC filing fee related with the spin-off transaction was changed to Future Fintech Group, Inc.
 (c)Reflects the reclassification of the Company’s preferred stock and common stock to additional paid in capital.

 

49 

 

 

SKYPEOPLE FOODS HOLDINGS LIMITED

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of SkyPeople Foods Holdings Limited (BVI) (“SkyPeople BVI”). The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the spin-off of SkyPeople BVI from Future FinTech Group Inc.

 

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 reflects the pro forma effect as if the spin-off of SkyPeople BVI had been consummated on that date. The unaudited pro forma condensed consolidated statements of operations of the SkyPeople BVI for the year ended December 31, 2016 and nine months ended September 30, 2017 included the Company’s historical statements of operations, adjusted to reflect the pro forma effect as if disposition of SkyPeople BVI had been consummated on January 1, 2016 and 2017 (the first day of the Company’s 2016 and 2017 fiscal year), respectively. The historical consolidated financial statements referred to above for the Company were included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016. The accompanying unaudited pro forma condensed consolidated financial information and the historical consolidated financial information presented herein should be read in conjunction with the historical consolidated financial statements and notes thereto for the Company.

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the Spin-off, (b) are factually supportable and (c) with respect to the statements of operations, have a continuing impact on consolidated results of the Company. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated financial information does not reflect the tax consequences in any jurisdictions attributable to the Spin-off and it does not reflect future events that may occur after the sale, including potential general and administrative cost savings. The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred if the disposition of SkyPeople BVI had occurred on January 1, 2016 and 2017, respectively, nor is it necessarily indicative of the Company’s future operating results. The pro forma adjustments are subject to change and are based upon currently available information. 

 

50 

 

 

SKYPEOPLE FOODS HOLDINGS LIMITED

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET

AS AT SEPTEMBER 30, 2017

 

   September 30,       September 30, 
  

2017

(unaudited)

   Pro forma
adjustment
  

2017

Pro forma

 
             
CURRENT ASSETS            
Cash and cash equivalents  $3,627,991              $3,627,991 
Accounts receivable   506,264         506,264 
Other receivables   31,028,264         31,028,264 
Inventories   4,231,598         4,231,598 
Deferred tax assets   3,566,442         3,566,442 
Advances to suppliers and other current assets   529,089         529,089 
TOTAL CURRENT ASSETS   43,489,648         43,489,648 
                
PROPERTY, PLANT AND EQUIPMENT, NET   70,518,678         70,518,678 
LAND USE RIGHT, NET   33,240,286         33,240,286 
DEPOSIT   50,508,802         50,508,802 
OTHER LONG TERM ASSETS   45,506,637         45,506,637 
Related party receivables   11,574,042         11,574,042 
TOTAL ASSETS  $254,838,093        $254,838,093 
                
LIABILITIES               
                
CURRENT LIABILITIES               
Accounts payable  $19,191,891        $19,191,891 
Accrued expenses   8,306,030         8,306,030 
Income tax payable   3,457,297         3,457,297 
Advances from customers   286,158         286,158 
Short-term bank loan   30,836,535         30,836,535 
TOTAL CURRENT LIABILITIES   62,077,911         62,077,911 
                
NON-CURRENT LIABILITIES               
Related party payables   8,003,369         8,003,369 
Long-term payables   17,241,412         17,241,412 
TOTAL NON-CURRENT LIABILITIES   25,244,781         25,244,781 
TOTAL LIABILITIES   87,322,692         87,322,692 
                
EQUITY               
                
SkyPeople Food Holdings Limited Stockholders’ equity               
Common stock, $0.002 par value; 25,000,000 shares authorized; 25,000,000 and 50,000 shares ($1.00 par value) issued and outstanding as of September 30, 2017 and December 31, 2016, respectively   50,000         50,000 
Additional paid-in capital   62,582,022         62,582,022 
Retained earning (loss)   96,555,530         96,555,530 
Accumulated other comprehensive loss   (30,278,422)        (30,278,422)
Total SkyPeople Food Holdings Limited stockholders’ equity   128,909,130         128,909,130 
Non-controlling interests   38,606,271         38,606,271 
TOTAL STOCKHOLDERS’ EQUITY   167,515,401         167,515,401 
TOTAL LIABILITIES AND EQUITY  $254,838,093        $254,838,093 

 

 51 

 

 

SKYPEOPLE FOODS HOLDINGS LIMITED

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME / (LOSS)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

 

   For the Nine Months Ended
September 30,
         
  

2017

(unaudited)

   Pro forma Adjustment   Pro forma 
Revenue  $10,163,061       $10,163,061 
Cost of goods sold   8,318,557                         8,318,557 
Gross profit   1,844,504         1,844,504 
                
Operating Expenses               
General and administrative expenses   13,429,355         13,429,355 
Selling expenses   743,890         743,890 
Total operating expenses   14,173,245         14,173,245 
                
Income from operations   (12,328,741)        (12,328,741)
                
Other income (expenses)               
    Interest income   2,031         2,031 
    Subsidy income   915,164         915,164 
    Interest expenses   (735,018)        (735,018)
    Other expenses (income)   2,192,478         2,192,478)
Total other income (expenses)   2,374,655         2,374,655)
                
                
Income from Continuing Operations before Income Tax   (9,954,086         (9,954,086)
Income tax provision   258,260         258,260 
Income from Continuing Operations before Minority Interest   (10,212,346)        (10,212,346)
                
Less: Net income attributable to non-controlling interests   (2,855,169)        (2,855,169 
                
Income loss from Continuing Operations   (13,067,515)        (13,067,515)
                
Discontinued Operations (Note 9)               
Loss from discontinued operations   (142,126)        (142,126 
NET INCOME (LOSS) ATTRIBUTABLE TO SKYPEOPLE FRUIT JUICE, INC. STOCKHOLDERS  $(13,209,641)  $    $(13,209,641)
                
Other comprehensive income (loss)               
Foreign currency translation adjustment  $22,513,004   $    $22,513,004 
Comprehensive income   12,158,532         12,158,532 
Comprehensive expense attributable to non-controlling interests   6,551,198         6,551,198 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SKYPEOPLE FRUIT JUICE, INC. STOCKHOLDERS  $18,709,730   $    $18,709,730 
Earnings per share:               
Basic and diluted earnings (loss) per share from continued operation  $(0.52   $    $(0.52)
Basic and diluted earnings (loss) per share from discontinued operation   (0.01         (0.01)
Basic and diluted earnings (loss) per share from net income   (0.53)        (0.53)
Weighted average number of shares outstanding               
Basic and diluted*   25,000,000         25,000,000 

 

 52 

 

 

SKYPEOPLE FOODS HOLDINGS LIMITED

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME / (LOSS)

FOR THE YEAR ENDED DECEMBER 31, 2016

 

   For the Year Ended
December 31,
         
   2016 (unaudited)   Pro forma Adjustment   Pro Forma 
Revenue  $34,407,423   $            $34,407,423 
Cost of goods sold   24,831,403         24,831,403 
Gross profit   9,576,019         9,576,019 
                
Operating Expenses               
General and administrative expenses   5,502,700         5,502,700 
Selling expenses   1,709,621         1,709,621 
Total operating expenses   7,212,321         7,212,321 
                
Income from operations   2,363,699         2,363,699 
                
Other income (expenses)               
    Interest income   158,730         158,730 
    Subsidy income   16,738         16,738 
    Interest expenses   (1,925,626)        (1,925,626)
    Consulting fee related to capital lease   94,413         94,413 
Total other income (expenses)   (1,655,746)        (1,655,746)
                
                
Income from Continuing Operations before Income Tax   707,953         707,953 
Income tax provision   1,601,967         1,601,967 
Income from Continuing Operations before Minority Interest   (894,014)        (894,014)
                
Less: Net income attributable to non-controlling interests   (578,360)        (578,360)
                
Income loss from Continuing Operations   (1,472,374)        (1,472,374)
                
Discontinued Operations (Note 10)               
Loss from discontinued operations   (4,785,516)        (4,785,516)
NET INCOME (LOSS) ATTRIBUTABLE TO SKYPEOPLE FRUIT JUICE, INC. STOCKHOLDERS   (6,257,890)        (6,257,890)
                
Other comprehensive income (loss)               
Foreign currency translation adjustment   (61,685,302)        (61,685,302)
Comprehensive income   (67,364,832)        (67,364,832)
Comprehensive expense attributable to non-controlling interests   24,967,619         24,967,619 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SKYPEOPLE FRUIT JUICE, INC. STOCKHOLDERS   (42,397,213)        (42,397,213)
Earnings per share:               
Basic and diluted earnings (loss) per share from continued operation   (29.45)        (29.45)
Basic and diluted earnings (loss) per share from discontinued operation   (95.71)        (95.71)
Basic and diluted earnings (loss) per share from net income   (125.6)        (125.6)
Weighted average number of shares outstanding               

 

 53 

 

 

SKYPEOPLE FOODS HOLDINGS LIMITED

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Description of Transaction and Basis of Presentation

 

SkyPeople Foods Holdings Limited (“SkyPeople BVI”) is a wholly-owned subsidiary of Future Fintech Group Inc., which was organized under the laws of British Virgin Island. SkyPeople BVI holds 100% equity interest of HeDeTang Holdings (HK) Ltd. (“HeDeTang Holdings (HK)”), a company organized under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), HeDeTang Holdings (HK) holds 73.42% of the equity interest of SkyPeople Juice Group Co., Ltd., (“SkyPeople (China)”), a company incorporated under the laws of the PRC. SkyPeople (China) has eleven subsidiaries, all limited liability companies organized under the laws of the PRC: (i) Shaanxi Qiyiwangguo Modern Organic Agriculture Co., Ltd. (“Shaanxi Qiyiwangguo”); (ii) Huludao Wonder Fruit Co., Ltd. (“Huludao Wonder”); (iii) Yingkou Trusty Fruits Co., Ltd. (“Yingkou”); (iv) Hedetang Foods Industry (Yidu) Co. Ltd. (“Food Industry Yidu”); (v) Shaanxi Heying Trading Co. Ltd (“Shaanxi Heying ”); (vi) Hedetang Agricultural Plantation (Yidu) Co. Ltd. (“Agricultural Plantation Yidu”); (vii) Xi’an Hedetang Nutritious Food Research Institute Co., Ltd.. (“Hedetang Reseach”); and (viii) Xi’an Cornucopia International Co., Ltd. (“Xi’an Cornucopia”);(ix) Xi’an Hedetang E-commerce Co. Ltd. (“Hedetang E-commerce”), (x) Hedetang Foods Industry (Zhouzhi) Co. Ltd and (xi) Hedetang Foods Industry (Jingyang) Co. Ltd . (“Foods Industry Zhouzhi”). Shenzhen TianShunDa Equity Investment Fund Management Co., Ltd. (the “TSD”), a limited liability corporation registered in China, holds another 26.36% of the equity interest of SkyPoeple (China). HeDeTang Holdings (HK) also holds 100% of the equity interest of HeDeJiaChuan Holding Group Co. Ltd., (“HeDeJiaChuan Holding”), a company incorporated under the laws of the PRC, which holds 100% of HeDeJiaChuan Foods (Xi’an) Co. Ltd., (“HeDeJiaChuan Xi’an”), and Shenzhen Hedetang Industrial Co., Ltd. (“Shenzhen Hedetang”), both companies incorporated under the laws of the PRC. HeDeJiaChuan Xi’an” has three subsidiaries: (i) SkyPeople (Suizhong) Fruit and Vegetable Products Co., Ltd (“SkyPeople Suizhong:); (ii) HedeJiachuan Foods (Yichang)Co. Ltd (“Hedejiachuan Yichang”); and (iii) Shaanxi Guo Wei Mei Kiwi Deep Processing Co., Ltd. (“Guo Wei Mei”).

 

HeDeTang Holdings (HK), formerly known as Peakwing Enterprise Ltd.., China Kiwi King Limited and SkyPeople Juice International Hong Kong (HK) Ltd., was established on August 21, 2007.

 

SkyPeople Juice Group Co., Ltd., formerly known as Shaanxi Tianren Organic Food Co. Ltd., was established on August 8, 2001,

 

Cornucopia was established on July 2, 2014. Its scope of business includes the retail and wholesale of pre-packaged food.

 

Xi’an Hedetang Nutritious Food Research Institute Co., Ltd., formerly known as Xi’an Hedetang, was established on March 31, 2014. Its scope of business includes the production and sales of fruit juice beverages.

 

The Company acquired Yingkou on November 25, 2009. Its scope of business mainly includes the manufacture of concentrated fruit juice.

 

The Company acquired Huludao on June 10, 2008. Its scope of business mainly includes the manufacture and sale of concentrated fruit juice and fruit juice beverages.

 

Hedetang Agricultural Plantations (Yidu) Co., Ltd., formerly known as Hedetang Fruit Juice Beverages (Yidu) Co., Ltd., was established on March 13, 2012. Its scope of business includes the planting, acquisition and sales of vegetables, fruits, flowers, farm products; fresh fruit picking; research, training and promotion of planting and breeding technology.

 

Hedetang Foods Industry (Yidu) Co., Ltd., formerly known as SkyPeople Juice Group Yidu Orange Products Co., Ltd., was established on March 13, 2012. Its scope of business includes deep processing and sales of oranges.

 

Xi’an Qinmei Food Co., Ltd., an entity not affiliated with the Company, owns the remaining 8.85% of the equity interest in Shaanxi Qiyiwangguo.

 

Shaanxi Heying Trading Co. Ltd was established on December 17, 2009. Its main business scope includes the sales of pre-packaged food, bulk food; import and export of goods and technology; food technology research and development; business management and consulting, corporate planning services.

 

Xi’an Hedetang E-Commerce Co., Ltd. was established on April 21, 2016. Its scope of business includes online sales of pre-packaged foods and bulk foods.

 

Hedetang Foods Industry (Zhouzhi) Co., Ltd. was established on November 29, 2016. Its scope of business includes production, processing and sales of kiwifruit wine, juice, puree and beverages; the storage and sales of fresh fruits; and import and export of a variety of products and technology.

 

HeDeJiaChuan (Hong Kong) Ltd., formerly known as SkyPeople Foods International Holdings (HK) Limited and Hedetang Holdings (Asia-Pacific) Ltd., which was first established on January 13, 2012.

 

Hedetang Holding, formerly known as Hedetang Holding Co., Ltd., was established on July 21, 2014. Its scope of business includes corporate investment consulting, corporate management consulting, corporate imagine design and corporative marketing planning. On June 14, 2017, it changed its name to Hedejiachuan Holding Group Co., Ltd.

 

 54 

 

 

FULLMART HOLDINGS LIMITED

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

HeDeJiaChuan Foods (Xi’an) Co., Ltd. was established on July 03, 2014, formerly known as Shaanxi Fruitee Fun Co., Ltd. and Hedetang Foods Industry (Xi’an) Co., Ltd. Its scope of business includes retail and wholesale of pre-packaged food.

 

Hedetang Foods Industry (Jingyang) Co., Ltd. was established on June 7, 2016. Its scope of business includes processing, storage and sales of farm products, fruits, tea and snacks; research and promotion of processing technology of organic agriculture, fruit industry and agricultural products.

 

SkyPeople (Suizhong) Fruit and Vegetable Products Co., Ltd. was established on April 26, 2012. Its scope of business includes the initial processing, quick-frozen and sales of agricultural products and related by-products.

 

Hedejiachuan Yichang, formerly known as Hedetang Farm Products Trading Market (Yidu) Co., Ltd., and Hedetang Foods Industry (Yichang) Co., Ltd, was established on March 23, 2016. Its scope of business includes construction, operation, and property management of a farm products trading market; e-commerce service of farm products; and construction and operation management of e-commerce information platform.

 

Shaanxi Guo Wei Mei Kiwi Deep Processing Co., Ltd. was established on April 19, 2013. Its scope of business includes producing kiwi fruit juice, kiwi puree, cider beverages, and similar products.

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of the Company, which were included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016. The unaudited pro forma condensed consolidated statements of operations reflect the Spin-off of the Company’s subsidiaries (SkyPeople BVI, and FullMart) as if the Spin-Off had been consummated on January 1, 2017 and 2016 (the first day of the Company’s 2016 and 2017 fiscal year), respectively. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 reflects such sale as if it had been consummated on that date.

 

The following unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of FullMart Holdings Limited (BVI) (“Fullmart”). The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the spin-off of FullMart from Future FinTech Group Inc.

 

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 reflects the pro forma effect as if the spin-off of FullMart had been consummated on that date. The unaudited pro forma condensed consolidated statements of operations of the FullMart for the year ended December 31, 2016 and nine months ended September 30, 2017 included the Company’s historical statements of operations, adjusted to reflect the pro forma effect as if disposition of FullMart had been consummated on January 1, 2016 and 2017 (the first day of the Company’s 2016 and 2017 fiscal year), respectively. The historical consolidated financial statements referred to above for the Company were included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016. The accompanying unaudited pro forma condensed consolidated financial information and the historical consolidated financial information presented herein should be read in conjunction with the historical consolidated financial statements and notes thereto for the Company.

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the Spin-off, (b) are factually supportable and (c) with respect to the statements of operations, have a continuing impact on consolidated results of the Company. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated financial information does not reflect the tax consequences in any jurisdictions attributable to the Spin-off and it does not reflect future events that may occur after the sale, including potential general and administrative cost savings. The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred if the disposition of FullMart had occurred on January 1, 2016 and 2017, respectively, nor is it necessarily indicative of the Company’s future operating results. The pro forma adjustments are subject to change and are based upon currently available information.

 

 55 

 

 

FULLMART HOLDINGS LIMITED
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET

AS AT SEPTEMBER 30, 2017

 

   September 30,       September 30, 
  

2017

(unaudited)

   Pro forma
adjustment
  

2017

Pro forma

 
             
Related party receivables   1,269                        1,269 
TOTAL ASSETS  $1,269        $1,269 
                
LIABILITIES               
                
NON-CURRENT LIABILITIES               
Related party payables   6,684         6,684 
TOTAL NON-CURRENT LIABILITIES   6,684         6,684 
TOTAL LIABILITIES   6,684         6,684 
                
EQUITY               
                
Fullmart Holdings Limited Stockholders’ equity               
Retained earning (loss)   (5,416)        (5,416)
Total Fullmart Holdings Limited stockholders’ equity   (5,416)        (5,416)
TOTAL LIABILITIES AND EQUITY   1,269         1,269 

 

 56 

 

 

FULLMART HOLDINGS LIMITED
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME / (LOSS)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

 

   For the Nine Months Ended
September 30,
         
  

2017

(unaudited)

   Pro forma Adjustment   Pro forma 
Operating Expenses                                 
General and administrative expenses   317         317 
Total operating expenses   317         317 
                
Loss from operations   (317)        (317)
Loss from before Income Tax   (317)        (317)
Income tax provision   -         - 
LOSS ATTRIBUTABLE TO FULLMART HOLDINGS LTD. STOCKHOLDERS   (317)        (317)

 

   For the Six Months Ended
June 30,
         
  

2017

(unaudited)

   Pro forma Adjustment   Pro forma 
Operating Expenses                              
General and administrative expenses   317         317 
Total operating expenses   317         317 
                
Loss from operations   (317)        (317)
Loss from before Income Tax   (317)        (317)
Income tax provision   -         - 
LOSS ATTRIBUTABLE TO FULLMART HOLDINGS LTD. STOCKHOLDERS   (317)        (317 

 

 57 

 

 

FULLMART HOLDINGS LIMITED

UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME / (LOSS)

FOR THE YEAR ENDED DECEMBER 31, 2016

 

   For the Year Ended December 31,         
   2016 (unaudited)   Pro forma Adjustment   Pro forma 
Operating Expenses                                   
General and administrative expenses   3,686         3,686 
Total operating expenses   3,686         3,686 
                
Loss from operations   (3,686)        (3,686)
Loss from before Income Tax   (3,686)        (3,686)
Income tax provision   -         - 
LOSS ATTRIBUTABLE TO FULLMART HOLDINGS LTD. STOCKHOLDERS   (3,686)        (3,686)

 

   For the Year Ended December 31,         
   2016 (unaudited)   Pro forma Adjustment   Pro forma 
Operating Expenses            
General and administrative expenses   3,686               3,686 
Total operating expenses   3,686         3,686 
                
Loss from operations   (3,686)        (3,686)
Loss from before Income Tax   (3,686)        (3,686)
Income tax provision   -         - 
LOSS ATTRIBUTABLE TO FULLMART HOLDINGS LTD. STOCKHOLDERS   (3,686)        (3,686)

 

 58 

 

 

FULLMART HOLDINGS LIMITED

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Description of Transaction and Basis of Presentation

 

FullMart, a company organized under the laws of British Virgin Island, holds 100% of equity interest of Hedejiachuan (HK) Holdings Limited (formerly known as SkyPeople Foods International Holdings (HK) Limited). It was first established on January 13, 2012.

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of the Company, which were included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and Annual Report on Form 10-K for the year ended December 31, 2016. The unaudited pro forma condensed consolidated statements of operations reflect the Spin-off of the Company’s subsidiaries (SkyPeople BVI, and FullMart) as if the Spin-Off had been consummated on January 1, 2017 and 2016 (the first day of the Company’s 2016 and 2017 fiscal year), respectively. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 reflects such sale as if it had been consummated on that date.

 

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DESCRIPTION OF SKYPEOPLE BVI SECURITIES

 

Future FinTech shareholders who receive shares of SkyPeople BVI in the Spin-Off will become shareholders of SkyPeople BVI. SkyPeople BVI is a corporation organized under the laws of the British Virgin Islands and is subject to the provisions of British Virgin Islands law. Given below is a summary of the material features of the SkyPeople BVI shares. This summary is not a complete discussion of the charter documents and other instruments of SkyPeople BVI that create the rights of its shareholders. You are urged to read carefully those documents and instruments, which are included as exhibits to this proxy statement.

 

General

 

SkyPeople BVI was incorporated in the British Virgin Islands (the “BVI”) as a BVI business company under the BVI Business Companies Act, 2004 (the “Act”) on December 28, 2011. The affairs of SkyPeople BVI are governed by its memorandum and articles of association, the Act and the common law of the BVI.

 

As of the date of this proxy statement, SkyPeople BVI is authorized to issue a maximum of 25,000,000 shares of a single class each with a par value of US$0.002. As of the date of this proxy statement, 25,000,000 shares in SkyPeople BVI are issued and outstanding, all of which are owned by Future FinTech. By amendment dated August 3, 2017, FullMart eliminated a clause in its memorandum that limited the number of shareholders to fifty.

 

The following are summaries of certain material provisions of the memorandum and articles of association of SkyPeople BVI currently in effect and the Act, insofar as they relate to the material terms of the shares in SkyPeople BVI.

 

Shares

 

All of the issued and outstanding shares in SkyPeople BVI are fully paid and non-assessable. The shares in SkyPeople BVI are issued in registered form, and are issued when registered in its register of members. SkyPeople BVI is not authorized to issue bearer shares. Shareholders of SkyPeople BVI who are non-residents of the BVI may freely hold and vote their shares.

 

Dividends

 

Subject to the Act and articles of association of SkyPeople BVI, the directors of SkyPeople BVI may resolve to declare and pay dividends at a time and of an amount they think fit if they are satisfied, on reasonable grounds, that immediately after the payment of the dividend, the value of SkyPeople BVI’s assets will exceed its liabilities and SkyPeople BVI is able to pay its debts as they fall due. Dividends may be pad in money, shares or other property. Under the memorandum of association of SkyPeople BVI, each share in SkyPeople BVI confers upon the shareholder the right to an equal share in any dividend paid by SkyPeople BVI.

 

Voting Rights

 

Under the memorandum of association of SkyPeople BVI, each share in SkyPeople BVI confers upon the shareholder the right to one vote at a meeting of the shareholders of SkyPeople BVI or on any resolution of shareholders. A “resolution of shareholders” is defined in the memorandum of association of SkyPeople BVI to mean a resolution approved at a duly convened and constituted meeting of the shareholders of SkyPeople BVI by the affirmative vote of a majority of in excess of 50 percent of the votes of the shares entitled to vote thereon which were present at the meeting and were voted, or a resolution consented to in writing by a majority of in excess of 50 percent of the votes of the shares entitled to vote thereon.

 

Meetings of Shareholders

 

Shareholders’ meeting may be convened by any director of SkyPeople BVI at such times and in such manner and places within or outside the BVI as the director considers necessary or desirable. The articles of association of SkyPeople BVI allow shareholders entitled to exercise 30 percent or more of the voting rights in respect of the matter for which the meeting is requested to requisition a meeting of the shareholders, in which case the directors are obliged to convene such meeting.

 

A quorum required for a meeting of the shareholders consists of one or more shareholders, present in person or by proxy, holding not less than 50 percent of the votes of the shares entitled to vote on the resolutions of shareholders to be considered at the meeting. Advance notice of not less than 7 days is required for the convening of a meeting of the shareholders.

 

Issue of Shares

 

Shares in SkyPeople BVI may be issued at such times, to such persons, for such consideration and on such terms as the directors of SkyPeople BVI may by resolution of directors determine. Shares may be issued in one or more series of shares as the directors of SkyPeople BVI may by resolution of directors determine from time to time. Holders of shares in SkyPeople BVI do not have pre-emptive rights.

 

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Transfer of Shares

 

SkyPeople BVI shall, on receipt of an instrument of transfer complying with the requirements set out in its articles of association, enter the name of the transferee of a share in its register of members unless the directors resolve to refuse or delay the registration of the transfer for reasons that shall be specified in a resolution of directors. The directors may not resolve to refuse or delay the transfer of a share unless the shareholder has failed to pay an amount due in respect of the share.

 

Liquidation

 

SkyPeople BVI may by resolution of shareholders or by resolution of directors appoint a voluntary liquidator for the voluntary liquidation of SkyPeople BVI in accordance with the Act. Under the memorandum of association of SkyPeople BVI, each share in SkyPeople BVI confers upon the shareholder the right to an equal share in the distribution of the surplus assets of SkyPeople BVI on its liquidation.

 

Calls on Shares and Forfeiture of Shares

 

The directors of SkyPeople BVI may from time to time make calls upon shareholders for any amount unpaid on their shares in a written notice served to such shareholders at least fourteen days prior to the specified time of payment. The shares in SkyPeople BVI that have been called upon and remain unpaid on the specified time are subject to forfeiture.

 

Repurchase, Redemption or Acquisition of Shares

 

According to the articles of association of SkyPeople BVI, SkyPeople BVI may purchase, redeem or otherwise acquire and hold its own shares save that it may not purchase, redeem or otherwise acquire its own shares without the consent of the shareholders whose shares are to be purchased, redeemed or otherwise acquired. SkyPeople BVI may only offer to purchase, redeem or otherwise acquire its own shares if the resolution of directors authorising the purchase, redemption or other acquisition contains a statement that the directors are satisfied, on reasonable grounds, that immediately after the acquisition the value of SkyPeople BVI’s assets will exceed its liabilities and SkyPeople BVI will be able to pay its debts as they fall due. Shares which have been repurchased, redeemed or otherwise acquired may be cancelled or held as treasury shares (except to the extent that such shares are in excess of 50 percent of the issued shares in which case they shall be cancelled).

 

Variation of Rights of Shares

 

If at any time the shares in SkyPeople BVI are divided into different classes, the rights attached to any class may only be varied, whether or not SkyPeople BVI is in liquidation, with the consent in writing of or by a resolution passed at a meeting by the holders of not less than 50 percent of the issued shares in that class.

 

The rights conferred upon the holders of the shares of any class in SkyPeople BVI shall not, unless otherwise expressly provided by the terms of the issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

 

Changes in the Number of Shares Authorized to Issue

 

SkyPeople BVI may amend its memorandum of association by resolution of shareholders or by resolution of directors (subject to certain restrictions) to change the maximum number of shares it is authorized to issue.

 

DESCRIPTION OF FULLMART SECURITIES

 

Future FinTech shareholders who receive shares of FullMart in the Spin-Off will become shareholders of FullMart. FullMart is a corporation organized under the laws of the British Virgin Islands and is subject to the provisions of British Virgin Islands law. Given below is a summary of the material features of the FullMart shares. This summary is not a complete discussion of the charter documents and other instruments of FullMart that create the rights of its shareholders. You are urged to read carefully those documents and instruments, which are included as exhibits to this proxy statement.

 

 61 

 

 

General

 

FullMart was incorporated in the British Virgin Islands (the “BVI”) as a BVI business company under the BVI Business Companies Act, 2004 (the “Act”) on December 28, 2011. The affairs of FullMart are governed by its memorandum and articles of association, the Act and the common law of the BVI.

 

As of the date of this proxy statement, FullMart is authorized to issue a maximum of 25,000,000 shares of a single class each with a par value of US$0.002. As of the date of this proxy statement, 25,000,000 shares in FullMart are issued and outstanding, all of which are owned by Future FinTech. By amendment dated August 3, 2017, FullMart eliminated a clause in its memorandum that limited the number of shareholders to fifty.

 

The following are summaries of certain material provisions of the memorandum and articles of association of FullMart currently in effect and the Act, insofar as they relate to the material terms of the shares in FullMart.

 

Shares

 

All of the issued and outstanding shares in FullMart are fully paid and non-assessable. The shares in FullMart are issued in registered form, and are issued when registered in its register of members. FullMart is not authorized to issue bearer shares. Shareholders of FullMart who are non-residents of the BVI may freely hold and vote their shares.

 

Dividends

 

Subject to the Act and articles of association of FullMart, the directors of FullMart may resolve to declare and pay dividends at a time and of an amount they think fit if they are satisfied, on reasonable grounds, that immediately after the payment of the dividend, the value of FullMart’s assets will exceed its liabilities and FullMart is able to pay its debts as they fall due. Dividends may be pad in money, shares or other property. Under the memorandum of association of FullMart, each share in FullMart confers upon the shareholder the right to an equal share in any dividend paid by FullMart.

 

Voting Rights

 

Under the memorandum of association of FullMart, each share in FullMart confers upon the shareholder the right to one vote at a meeting of the shareholders of FullMart or on any resolution of shareholders. A “resolution of shareholders” is defined in the memorandum of association of FullMart to mean a resolution approved at a duly convened and constituted meeting of the shareholders of FullMart by the affirmative vote of a majority of in excess of 50 percent of the votes of the shares entitled to vote thereon which were present at the meeting and were voted, or a resolution consented to in writing by a majority of in excess of 50 percent of the votes of the shares entitled to vote thereon.

 

Meetings of Shareholders

 

Shareholders’ meeting may be convened by any director of FullMart at such times and in such manner and places within or outside the BVI as the director considers necessary or desirable. The articles of association of FullMart allow shareholders entitled to exercise 30 percent or more of the voting rights in respect of the matter for which the meeting is requested to requisition a meeting of the shareholders, in which case the directors are obliged to convene such meeting.

 

A quorum required for a meeting of the shareholders consists of one or more shareholders, present in person or by proxy, holding not less than 50 percent of the votes of the shares entitled to vote on the resolutions of shareholders to be considered at the meeting. Advance notice of not less than 7 days is required for the convening of a meeting of the shareholders.

 

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Issue of Shares

 

Shares in FullMart may be issued at such times, to such persons, for such consideration and on such terms as the directors of FullMart may by resolution of directors determine. Shares may be issued in one or more series of shares as the directors of FullMart may by resolution of directors determine from time to time. Holders of shares in FullMart do not have pre-emptive rights.

 

Transfer of Shares

 

FullMart shall, on receipt of an instrument of transfer complying with the requirements set out in its articles of association, enter the name of the transferee of a share in its register of members unless the directors resolve to refuse or delay the registration of the transfer for reasons that shall be specified in a resolution of directors. The directors may not resolve to refuse or delay the transfer of a share unless the shareholder has failed to pay an amount due in respect of the share.

 

Liquidation

 

FullMart may by resolution of shareholders or by resolution of directors appoint a voluntary liquidator for the voluntary liquidation of FullMart in accordance with the Act. Under the memorandum of association of FullMart, each share in FullMart confers upon the shareholder the right to an equal share in the distribution of the surplus assets of FullMart on its liquidation.

 

Calls on Shares and Forfeiture of Shares

 

The directors of FullMart may from time to time make calls upon shareholders for any amount unpaid on their shares in a written notice served to such shareholders at least fourteen days prior to the specified time of payment. The shares in FullMart that have been called upon and remain unpaid on the specified time are subject to forfeiture.

 

Repurchase, Redemption or Acquisition of Shares

 

According to the articles of association of FullMart, FullMart may purchase, redeem or otherwise acquire and hold its own shares save that it may not purchase, redeem or otherwise acquire its own shares without the consent of the shareholders whose shares are to be purchased, redeemed or otherwise acquired. FullMart may only offer to purchase, redeem or otherwise acquire its own shares if the resolution of directors authorising the purchase, redemption or other acquisition contains a statement that the directors are satisfied, on reasonable grounds, that immediately after the acquisition the value of FullMart’s assets will exceed its liabilities and FullMart will be able to pay its debts as they fall due. Shares which have been repurchased, redeemed or otherwise acquired may be cancelled or held as treasury shares (except to the extent that such shares are in excess of 50 percent of the issued shares in which case they shall be cancelled).

 

Variation of Rights of Shares

 

If at any time the shares in FullMart are divided into different classes, the rights attached to any class may only be varied, whether or not FullMart is in liquidation, with the consent in writing of or by a resolution passed at a meeting by the holders of not less than 50 percent of the issued shares in that class.

 

The rights conferred upon the holders of the shares of any class in FullMart shall not, unless otherwise expressly provided by the terms of the issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

 

Changes in the Number of Shares Authorized to Issue

 

FullMart may amend its memorandum of association by resolution of shareholders or by resolution of directors (subject to certain restrictions) to change the maximum number of shares it is authorized to issue.

 

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DESCRIPTION OF FUTURE FINTECH SECURITIES

 

Given below is a summary of the material features of Future FinTech’s securities. This summary is not a complete discussion of the certificate of incorporation and bylaws of Future FinTech that create the rights of its shareholders. You are urged to read carefully the certificate of incorporation and bylaws, which have been filed as exhibits to SEC reports filed by Future FinTech. Please see “Where You Can Find More Information” for information on how to obtain copies of those instruments.

 

General

 

The following description of common stock and preferred stock, together with the additional information we include in any applicable amendments hereto, summarizes the current material terms and provisions of our common stock and preferred stock. For the complete terms of our common stock and preferred stock, please refer to our Articles of Incorporation, as amended, which may be further amended from time to time, any certificates of designation for our preferred stock, and our amended and restated bylaws, as amended from time to time. The Florida Business Corporations Act may also affect the terms of these securities.

 

On March 10, 2016, the Company filed with the Florida Secretary of State’s office an amendment to its Articles of Incorporation. As a result of the Articles of Amendment, the Company authorized and approved an 1-for-8 reverse stock split of the Company’s authorized shares of common stock (“Common Stock”) from 66,666,666 shares to 8,333,333 shares, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). The common stock continues have a par value of $0.001. No changes were made to the number of authorized preferred shares of the Company, which remains as 10,000,000. The amendment to the Articles of Incorporation of the Company took effect on March 16, 2016. As of October 31, 2017, there were 5,173,187 shares of our common stock issued and outstanding and no shares of our preferred stock issued and outstanding. 

 

Common Stock

 

Holders of shares of our Common Stock are entitled to one vote for each share on all matters to be voted on by the shareholders.  Except if a greater plurality is required by the express requirements of law or our amended and restated articles of incorporation, the affirmative vote of a majority of the shares of voting stock represented at a meeting of shareholders at which there shall be a quorum present shall be required to authorize all matters to be voted upon by our shareholders.  According to our charter documents, holders of our Common Stock do not have preemptive rights and are not entitled to cumulative voting rights. There are no conversion or redemption rights or sinking funds provided for our shareholders.  Shares of our Common Stock share ratably in dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available for distribution as dividends.  In the event of our liquidation, dissolution or winding up, the holders of our Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities.  All of the outstanding shares of our Common Stock are fully paid and non-assessable.

 

Stock Transfer Agent

 

Our transfer agent is Continental Stock Transfer & Trust Company, 1 State Street, 30th Floor, New York, NY 10004, phone number (212) 509-4000.

 

INFORMATION WITH RESPECT TO SKYPEOPLE BVI AND FULLMART

 

Following the completion of the Spin-Offs, SkyPeople BVI and its subsidiaries will continue to engage in the manufacture and sale of fruit juice concentrates, fruit juice beverages and other fruit-related products in the People’s Republic of China and overseas markets.

 

Following the completion of the Spin-Offs, FullMart and its subsidiary will continue to not have ongoing operations.

 

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OFFICERS AND DIRECTORS OF SKYPEOLE BVI AND FULLMART
AFTER THE SPIN-OFFS

 

The following table sets forth information regarding SkyPeople BVI’s executive officer and director upon the completion of the Spin-Offs. The business address of the below-listed director and officer is 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China.

 

Name   Age   Position
Yongke Xue   51   Director

 

Yongke Xue has been the director of SkyPeople BVI since December 28, 2011. Mr. Xue served as the Chief Executive Officer of Future FinTech from February 2008 to February 2013, at which time he resigned from his positions as the Chief Executive Officer and Chairman of Future FinTech. Mr. Xue continues to be a director of Future FinTech. Mr. Xue was reappointed as the Chief Executive Officer on December 24, 2014. On September 2, 2016, Mr. Yongke Xue, resigned from his position as the Chief Executive Officer of the Company and Chairman of the Board of the Directors of the Company, but remained as a director. Mr. Yongke Xue has also served as the director of SkyPeople (China) since December 2005. Mr. Xue served as the general manager of Hede from December 2005 to June 2007. Prior to that, he served as the business director of the investment banking division of Hualong Securities Co., Ltd. from April 2001 to December 2005. He also acted as the vice general manager of Shaanxi Huaye Foods Co., Ltd. from July 1998 to March 2001. Mr. Xue graduated from Xi’an Jiaotong University with an MBA in 2000. Mr. Xue graduated with a Bachelor’s degree in Metal Material & Heat Treatment from National University of Defense Technology in July 1989.

 

The following table sets forth information regarding FullMart’s executive officer and director upon the completion of the Spin-Offs. The business address of the below-listed director and officer is 23F, China Development Bank Tower, No.2, Gaoxin 1st Road, Xi’an, Shaanxi, China.

 

Name   Age   Position
Fei Zhu   34   Director

 

Fei Zhu has been the director of FullMart since June 29, 2017, and the director of HeDeJiaChuan (Hong Kong) Holdings Limited since June 14, 2017. Mr. Zhu has significant experience in business management and large project management. He has served as the chairman of HeDeJiaChuan Holding Group Co, Ltd. and the general manager of Shaanxi Guo Wei Mei Kiwi Deep Processing Co., Ltd. from 2014 to present. Prior to that, Mr. Zhu served as the project manager of SkyPeople Juice Group Co., Ltd. Jingyang Branch from 2011 to 2014 and as the head of the engineering department of Shaanxi Xirui Real Estate Development Co., Ltd. from 2008 to 2011.  Mr. Zhu holds a Bachelor’s degree in Engineering Management from Zhengzhou University of Aeronautics.

 

Committees of the Board of Directors

 

Neither SkyPeople BVI nor FullMart anticipate having committees of their respective boards of directors.

 

Other Corporate Governance Matters

 

The corporate governance practices of each of SkyPeople BVI and FullMart will be in compliance with, and are not prohibited by, the laws of the British Virgin Islands. Therefore, we expect to be exempt from many of corporate governance practices of those entities organized under the laws of states of the United States.

 

Upon the closing of the transactions, the officers and directors of Future FinTech will continue in their current positions.

  

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PROPOSAL 1 - SPIN-OFFS OF SKYPEOPLE BVI AND FULLMART

 

The Company is asking you to approve the spin-off of the Company’s wholly-owned subsidiaries, SkyPeople Foods Holdings Limited (BVI) (“SkyPeople BVI”) and FullMart Holdings Limited (BVI) (“FullMart”), through a pro rata distribution of the ordinary shares of each of SkyPeople BVI and FullMart to holders of the Company’s common stock at the close of business on January 22, 2018, the record date.

 

Required Vote

Approval of the spin-off proposal requires a quorum to be present and an affirmative vote of a majority of our common stock voted at the Special Meeting. Adoption of the spin-off proposal is not conditioned upon the adoption of any of the other proposals.

FUTURE FINTECH’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUTURE FINTECH’S SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE SPIN-OFFS OF SKYPEOPLE BVI AND FULLMART. 

PROPOSAL 2 – AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION

The Company is asking you to approve the Amendment to the Second Amended and Restated Articles of Incorporation of Future FinTech, which would increase the amount of authorized shares of common stock, par value $0.001 per share (“Common Stock”), of Future FinTech from 8,333,333 to 60,000,000 shares. A copy of the Amendment is included as Annex B to this proxy statement. 

Effects of the Increase in Authorized Shares of Common Stock 

Potential uses of the additional authorized shares of Common Stock may include public or private offerings, conversions of convertible securities, issuance of stock or stock options to employees, acquisition transactions and other general corporate purposes. Increasing the authorized number of shares of the Common Stock will give us greater flexibility and will allow the Company to issue such shares, in most cases, without the expense or delay of seeking shareholder approval. The Company may issue shares of its Common Stock in connection with financing transactions and other corporate purposes which the Board of Directors believes will be in the best interest of the Company’s shareholders. The additional shares of Common Stock will have the same rights as the presently authorized shares, including the right to cast one vote per share of Common Stock. Although the authorization of additional shares will not, in itself, have any effect on the rights of any holder of our Common Stock, the future issuance of additional shares of Common Stock (other than by way of a stock split or dividend) would have the effect of diluting the voting rights, and could have the effect of diluting earnings per share and book value per share, of existing shareholders. 

Dissenter’s Rights 

Our shareholders have no right under the Florida Business Corporations Act, our Second Amended and Restated Articles of Incorporation or our Amended and Restated Bylaws to dissent from the provision adopted in the Amendment.  

Required Vote 

Approval of the Amendment requires a quorum to be present and an affirmative vote of a majority of our common stock voted at the Special Meeting. Adoption of the Amendment is not conditioned upon the adoption of any of the other proposals.

FUTURE FINTECH’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUTURE FINTECH’S SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE FUTURE FINTECH’S SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION.

PROPOSAL 3 – Future FinTech Group Inc. 2017 Omnibus Equity Plan

Background

Our shareholders are being asked to consider and vote on this proposal to approve the Future FinTech Group Inc. 2017 Omnibus Equity Plan (the “Equity Plan”). At its meeting on August 29, 2017, the Board of Directors of Future FinTech adopted the new Equity Plan, effective as of August 29, 2017, subject to shareholder approval. For several years prior to the adoption of the new Equity Plan, Future FinTech has maintained two other equity plans: (i) the SkyPeople Fruit Juice, Inc. Omnibus Equity Plan, effective on November 19, 2015 (the “2015 Plan”) and (ii) the SkyPeople Fruit Juice, Inc. Stock Incentive Plan, effective on July 11, 2011 (the “2011 Plan” and together with the 2015 Plan, the “Prior Plans”). Up to 2,000,000 and 1,000,000 pre-Reverse Stock Split shares of Common Stock may be issued pursuant to awards granted under the 2015 Plan and 2011 Plan, respectively. As of August 22, 2017, all shares of Common Stock available for issuance under the Prior Plans have been granted to employees, officers and directors of the Company.  

The Equity Plan’s purpose is to attract and retain high caliber employees, directors, consultants and independent contractors; motivate participants to achieve long-range goals; provide competitive incentive compensation opportunities, and align the participant’s interests with the interests of the shareholders by offering the participants compensation that is based on our common stock. 

The description of the Equity Plan below is a summary and is qualified in its entirety by reference to the provisions of the Equity Plan, which is attached as Annex A to this proxy statement.

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Recommendation of Board of Directors

 

The Board of Directors has approved and unanimously recommends that the shareholders vote “FOR” the proposal to approve the FUTURE FINTECH GROUP Inc. 2017 Omnibus Equity Plan.

 

Description of the Equity Plan

 

Administration. The Equity Plan requires that a committee of non-employee independent outside directors administer the Equity Plan. Currently, our Compensation Committee, which we refer to in this proposal as the Committee, administers the Equity Plan. Among other powers and duties, the Committee determines the employees who will be eligible to receive awards and establishes the terms and conditions of all awards. Unless prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate its authority and administrative duties under the Equity Plan.

 

Shares Subject to the Equity Plan. The shares issuable under the Equity Plan are shares of our common stock that are authorized but unissued or reacquired common stock, including shares repurchased by Future FinTech as treasury shares. The total aggregate shares of common stock authorized for issuance during the term of the Equity Plan is limited to 1,300,000 shares. The Committee must equitably adjust awards and the number of shares available under the Equity Plan in the event of a recapitalization, stock split, stock dividend, extraordinary cash dividend, split-up, spin-off, reclassification, combination or other exchange of shares. Subject to certain limitations, the shares of common stock allocable to the portion of awards granted under the Equity Plan that have not been delivered because they have been forfeited or cancelled or because they are a cash settlement award, or that have not been applied to pay the exercise price or taxes, may again be issued pursuant to new awards under the Equity Plan.

 

Types of Awards and Eligibility. There are six types of awards that may be made under the Equity Plan including incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock, unrestricted stock and restricted stock units (“RSUs”). Each award is subject to an award agreement approved by the Committee reflecting the terms and conditions of the award. For purposes of awards determined by reference to the fair market value of a share of our common stock, fair market value means the closing price of a share of our common stock on the relevant date, or if there are not sales on such date, on the next preceding day on which there are sales. Current and future U.S. and non-U.S. employees (including officers) and prospective employees as designated by the Committee may receive awards under the Equity Plan. As of October 16, 2017, approximately 266 individuals (consisting of 2 executive officers, three directors who are not executive officers, and approximately 261 employees who are not executive officers) are eligible to receive awards under the Equity Plan. The closing price of Future FinTech common stock on the NASDAQ Global Market was $1.77 per share as of October 16, 2017.

 

(1) Stock Options. ISOs are options to purchase our common stock that receive tax benefits if they meet the requirements under Section 422 of the Tax Reform Act of 1986, as amended (the “Code”), and NQSOs are options to purchase our common stock that do not meet those requirements.

 

Option Grant: Each option award must be evidenced by an award agreement specifying the option exercise price, the term of the option, the number of shares of our common stock subject to the option, and such other provisions as the Committee determines, and which are not inconsistent with the terms and provisions of the Equity Plan (which need not be the same for each award or for each recipient). The award agreement must also specify whether the option is to be treated as an ISO within the meaning of Code Section 422. Options not designated as ISOs are considered to be NQSOs. The Committee may, with the consent of affected participants, cancel outstanding options and grant new options to substitute the canceled option. The cancellation and grant need not be simultaneous.

 

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Exercise of Options: Options granted under the Equity Plan will be exercisable at such times set forth in an award agreement. The exercise price of each option granted under the Equity Plan will be at least 100% of the fair market value of a share of our common stock on the date of grant. The exercise price of each ISO granted under the Equity Plan to any individual who owns more than 10% of the voting power of our stock will be at least 110% of the fair market value of a share of our common stock on the date of grant. The fair market value of shares to which ISOs are exercisable for the first time by any individual during any one calendar year is limited to $100,000, and any ISOs that become exercisable in excess of that amount will be deemed NQSOs.

 

Payment of Exercise Price: The exercise price is payable in cash; by tendering shares of our common stock owned by the participant; by withholding shares that would be acquired on exercise; by broker-assisted cashless exercise; or by any other form of legal consideration acceptable by the Committee (so long as it does not result in deferral of compensation within the meaning of Code Section 409A). Options are subject to the conditions, restrictions and contingencies specified by the Committee.

 

Option Term: The maximum term of any option is ten years from the date of grant and, with respect to ISOs granted to an individual who owns 10% of the voting power of our stock, the maximum term is five years from the date of grant.

 

(2) Stock Appreciation Rights. Each SAR represents the right to receive a payment in an amount equal to the increase in the fair market value of a share of our common stock on the date the recipient exercises the award over the fair market value of a share of our common stock at the date the award is granted (the “base price”). The Committee will determine, in its sole discretion, the number of SARs granted to any individual under the Equity Plan and any terms and conditions pertaining to the awards.

 

SARs Grant: Each award of SARs will be evidenced by an award agreement that will specify the base price, the term of the SAR, and such other provisions as the Committee determines, and which are not inconsistent with the terms of the Equity Plan (which need not be the same for each award for each recipient).

 

Base Price of SAR: The base price of each SAR granted under the Equity Plan will be at least equal to the fair market value of a share of our common stock on the date of grant.

 

Settlement of SARs: SARs granted under the Equity Plan will be exercisable (“settled”) at such times set forth in an award agreement. Following exercise of a SAR, a participant is entitled to receive payment in an amount determined by multiplying: (a) the excess of the fair market value of a share on the date of exercise over the base price per share; by (b) the number of shares with respect to which the SAR is exercised. Payment to settle SARs may be in cash, shares of common stock, or a combination of cash and shares, as determined by the Committee. The Committee may provide a maximum dollar limit on the total payment due under a SAR.

 

SAR Term: The maximum term of any SAR is ten years from the date of grant.

 

(3) Unrestricted Stock. The Committee may, in its sole discretion, award unrestricted stock to any participant as a stock bonus or otherwise pursuant to which such participant may receive shares of stock free of restrictions or limitations.

 

(4) Restricted Stock and Restricted Stock Units. An award of restricted stock is a grant of shares of our common stock subject to restrictions specified by the Committee that generally lapse upon vesting. Each award of restricted stock or RSUs will be evidenced by an award agreement that specifies the period of restriction for restricted stock or the vesting period for RSUs, the number of shares of restricted stock or RSUs granted, and such other provisions as the Committee shall determine, and which shall not be inconsistent with the terms and provisions of the Equity Plan (which need not be the same for each award or for each recipient). Unless otherwise provided in the award agreement, a recipient of a restricted stock or RSU award has no shareholder rights, such as voting or cash dividend rights, until vesting of the RSU or restricted stock.

 

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Performance-Based Compensation. Awards granted under the Equity Plan may, in the Committee’s discretion, be designed to qualify as performance-based compensation under Code Section 162(m). In order for awards to constitute performance-based compensation under Code Section 162(m), the material terms of performance measures on which the goals are to be based must be disclosed to and subsequently approved by the shareholders prior to payment of the compensation. Awards intended to qualify for exemption as performance-based compensation must be granted by a committee of outside directors as defined in Code Section 162(m). Performance goals under the Equity Plan are based on performance measures, which may include any of the following: (i) earnings before all or any taxes (“EBT”); (ii) earnings before all or any of interest expense, taxes, depreciation and amortization (“EBITDA”); (iii) earnings before all or any of interest expense, taxes, depreciation, amortization and rent (“EBITDAR”); (iv) earnings before all or any of interest expense and taxes (“EBIT”); (v) net earnings; (vi) net income; (vii) operating income or margin; (viii) earnings per share; (ix) growth; (x) return on shareholders’ equity; (xi) capital expenditures; (xii) expenses and expense ratio management; (xiii) return on investment; (xiv) improvements in capital structure; (xv) profitability of an identifiable business unit or product; (xvi) profit margins; (xvii) stock price; (xviii) market share; (xvix) revenues; (xx) costs; (xxi) cash flow; (xxii) working capital; (xxiii) return on assets; (xxiv) economic value added; (xxv) industry indices; (xxvi) peer group performance; (xxvii) regulatory ratings; (xxviii) asset quality; (xxix) gross or net profit; (xxx) net sales; (xxxi) total shareholder return; (xxxii) sales (net or gross) measured by product line, territory, customers or other category; (xxxiii) earnings from continuing operations; (xxxiv) net worth; and (xxxv) levels of expense, receivables, cost or liability by category, operating unit or any other measures approved by the Committee. In addition, the performance goals may be calculated without regard to extraordinary items and may be based in whole or in part upon the performance of Future FinTech and/or one or more of its affiliates, one or more of its divisions or units or, in such a case, any combination of the foregoing, on a consolidated or nonconsolidated basis, and may be applied on an absolute basis or be relative to one or more peer group companies or indices, or any combination thereof. The performance goals must be established in writing by the Committee no more than 90 days after the commencement of the performance period, of, if less, the number of days that is equal to 25% of the relevant performance period. The Committee must certify attainment of these goals before any payout of the performance-based compensation.

 

Limitations on AwardsThe maximum number of shares (including options, SARs, RSUs, unrestricted stock and restricted stock) that may be awarded under the Equity Plan to any participant in any one calendar year is limited to 1,000,000 shares of our common stock. In addition, in any one calendar year, a participant may not receive a cash amount payable under the Equity Plan greater than $1,000,000 for any awards intended to constitute performance-based compensation under Code Section 162(m).

 

Vesting and ForfeitureThe Committee determines the time and conditions under which the award will vest or the period of time after which the restriction shall lapse as part of making an award. Vesting or the lapse of the period of restriction may, in the Committee’s discretion, be based solely upon continued employment or service for a specified period of time, or may be based upon the achievement of specific performance goals (individual, corporation or other basis), or both. Vesting means the time at which an option, SAR or RSU holder may exercise his or her award at the end of the period of restriction that applies to restricted stock. Vesting or lapse provisions need not be uniform among awards granted at the same time or to persons similarly-situated. Vesting and lapse requirements will be set forth in the applicable award agreement. The Committee, in its discretion, may accelerate vesting of any award at any time. Unless otherwise provided by the Committee, when a participant terminates employment or service with us, all unexercised or unvested awards are forfeited, and if the termination is without cause, all outstanding vested options and SARs will continue to be exercisable until the earlier of the expiration term or the date that is three months after such termination date.

 

Extension Exercise Period. The Committee, in its discretion, may extend the period of time for which an option or SAR is to remain exercisable following a termination of service, but in no event beyond the expiration of the option or SAR.

 

Prohibition on Repricing. Except as required or permitted pursuant to a corporate transaction (including, without limitation, any recapitalization or reorganization), in no event will an option or SAR be amended to reduce the exercise or base price or be canceled in exchange for cash, other awards or options or SARs with an exercise price or base price less than the exercise price of the original option or base price of the original SAR without shareholder approval.

 

Limits on Transfers of Awards/Beneficiary Designation. All awards are exercisable only by the participant during the participant’s lifetime, and are transferable only by will or by the laws of descent and distribution; provided, however, that the Committee may permit a transfer of an award, other than an ISO, to a family member of an individual, subject to such restrictions as the Committee may provide. Participants may designate a beneficiary or beneficiaries to receive their benefits under the Equity Plan if they die before receiving any or all of such benefit.

 

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Recapitalization. Upon a recapitalization, the Committee must adjust the number and kind of shares issuable and maximum limits for each type of award, adjust the number and kind of shares subject to outstanding awards, adjust the exercise or base price of outstanding options or SARs, and make any other equitable adjustments.

 

Reorganization. Upon a reorganization, the Committee may decide that awards will apply to securities of the resulting corporation (with appropriate adjustment as determined by the Committee), that some or all options and SARs will be immediately exercisable (to the extent permitted under federal or state securities laws), that some or all options and SARs will be immediately exercisable and terminate after at least 30 days’ notice to holders (to the extent permitted under federal or state securities laws), and/or that some or all awards of restricted stock or RSUs will become immediately fully vested.

 

Amendment and Termination. Our Board of Directors may amend, suspend or terminate the Equity Plan, without consent of shareholders or participants, provided, however, that amendments must be submitted to the shareholders for approval if shareholder approval is required by applicable law, and any amendment or termination that may adversely affect the rights of participants with outstanding awards requires the consent of such participants. The Committee may amend any award agreement, provided the amendment is not to re-price or constructively re-price any award.

 

Term. The Equity Plan is effective immediately upon the adoption by our Board of Directors, subject to shareholder approval, and will terminate on the earliest to occur of (i) the 10th anniversary of the Equity Plan’s effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issued as fully-vested shares. Options may be granted at any time on or after the date the Board of Directors adopt the Equity Plan, however, until the shareholders approve the Equity Plan, no options or SARs may be exercised, no restricted stock may be issued, and no award may be settled in stock. If shareholder approval is not obtained within 12 months after the adoption by our Board of Directors, all awards will be null and void.

 

U.S. Federal Income Tax Consequences

 

The following summary of the U.S. federal income tax consequences of awards under the Equity Plan is based on current U.S. federal income tax laws and regulations and is designed to provide a general understanding of the consequences as of the date of this proxy statement. Laws and regulations may change in the future and affect the income tax consequences of your award under the Equity Plan. In addition, the impact of the laws and regulations may vary based on your individual circumstances. This summary does not constitute tax advice and does not address taxation of your award under the laws of any municipality, state or foreign country. You are urged to consult your own tax advisor as to the specific tax impact of any award to you.

 

Incentive Stock Options. An employee participant will generally have no tax consequences when he or she receives the grant of an ISO. In most cases, an employee participant also will not have income tax consequences when he or she exercises an ISO. An employee participant may have income tax consequences when exercising an ISO if the aggregate fair market value of the shares of the common stock subject to the ISO that first become exercisable in any one calendar year exceeds $100,000. If this occurs, the excess shares (the number of shares the fair market value of which exceeds $100,000 in the year first exercisable) will be treated as though they are NQSOs instead of ISOs. Additionally, subject to certain exceptions for death or disability, if an employee participant exercises an ISO more than three months after termination of employment, the exercise of the option will be taxed as the exercise of a NQSO. Any shares recharacterized as NQSOs will have the tax consequences described below with respect to the exercise of NQSOs.

  

An employee participant recognizes income when selling or exchanging the shares acquired from the exercise of an ISO in the amount of the difference between the fair market value at the time of the sale or exchange and the exercise price the participant paid for those shares. This income will be taxed at the applicable capital gains rate if the sale or exchange occurs after the expiration of the requisite holding periods. Generally, the required holding periods expire two years after the date of grant of the ISO and one year after the date the common stock is acquired by the exercise of the ISO. Further, the amount by which the fair market value of a share of the common stock at the time of exercise of the ISO exceeds the exercise price will likely be included in determining a participant’s alternative minimum taxable income and may cause the participant to incur an alternative minimum tax liability in the year of exercise.

 

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If an employee participant disposes of the common stock acquired by exercising an ISO before the holding periods expire, the participant will recognize compensation income. The amount of income will equal the difference between the option exercise price and the lesser of (i) the fair market value of the shares on the date of exercise and (ii) the price at which the shares are sold. This amount will be taxed at ordinary income rates and be subject to employment taxes. If the sale price of the shares is greater than the fair market value on the date of exercise, the participant will recognize the difference as gain and will be taxed at the applicable capital gains rate. If the sale price of the shares is less than the exercise price, the participant will recognize a capital loss equal to the excess of the exercise price over the sale price.

 

Using shares acquired by exercising an ISO to pay the exercise price of another option (whether or not it is an ISO) will be considered a disposition of the shares for federal tax purposes. If this disposition occurs before the expiration of the required holding periods, the employee option-holder will have the same tax consequences as are described above in the preceding paragraph. If the option holder transfers any of these shares after holding them for the required holding periods or transfers shares acquired by exercising an NQSO or on the open market, he or she generally will not recognize any income upon exercise. Whether or not the transferred shares were acquired by exercising an ISO and regardless of how long the option holder has held those shares, the basis of the new shares received from the exercise will be calculated in two steps. In the first step, a number of new shares equal to the number of older shares tendered (in payment of the option’s exercise) is considered exchanged under Code Section 1036 and the related rulings; these new shares receive the same holding period and the same basis the option holder had in the old tendered shares, if any, plus the amount included in income from the deemed sale of the old shares and the amount of cash or other non-stock consideration paid for the new shares, if any. In the second step, the number of new shares received by the option holder in excess of the old tendered shares receives a basis of zero, and the option holder’s holding period with respect to such shares commences upon exercise.

 

There will be no tax consequences to Future FinTech when it grants an ISO or, generally, when an employee participant exercises an ISO. However, to the extent that an option holder recognizes ordinary income when he or she exercises, as described above, Future FinTech generally will have a tax deduction in the same amount and at the same time.

 

Nonqualified Stock Options. A participant generally has no income tax consequences from the grant of NQSOs. Generally, in the tax year when the participant exercises the NQSO, he or she recognizes ordinary income in the amount by which the fair market value of the shares at the time of exercise exceeds the exercise price for the shares, and that amount will be subject to employment taxes.

 

If a participant exercises a NQSO by paying the exercise price with previously acquired common stock, he or she will have federal income tax consequences (relative to the new shares received) in two steps. In the first step, a number of new shares equivalent to the number of older shares tendered (in payment of the NQSO exercised) is considered to have been exchanged in accordance with Code Section 1036 and related rulings, and no gain or loss is recognized. In the second step, with respect to the number of new shares acquired in excess of the number of old shares tendered, the participant recognizes income on those new shares equal to their fair market value less any non-stock consideration tendered. The new shares equal to the number of the old shares tendered will have the same basis the participant had in the old shares and the holding period with respect to the tendered older shares will apply to the new shares. The excess new shares received will have a basis equal to the amount of income recognized on exercise, increased by any non-stock consideration tendered. The holding period begins on the exercise of the option.

 

The gain, if any, realized at the later disposition of the common stock will either be short- or long-term capital gain, depending on the holding period.

 

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There will be no tax consequences to Future FinTech when granting a NQSO. Future FinTech generally will have a tax deduction in the same amount and at the same time as the ordinary income recognized by the participant.

 

Stock Appreciation Rights. Neither the participant nor Future FinTech has income tax consequences from the issuance of a SAR. The participant recognizes taxable income at the time the SAR is exercised in an amount equal to the amount by which the cash and/or the fair market value of the shares of the common stock received upon that exercise exceeds the base price. The income recognized on exercise of a SAR will be taxable at ordinary income tax rates and be subject to employment taxes. Future FinTech generally will be entitled to a tax deduction with respect to the exercise of a SAR in the same amount and at the same time as the ordinary income recognized by the participant.

 

Restricted Stock. A holder of restricted stock will not recognize income at the time of the award, unless he or she specifically makes an election to do so under Code Section 83(b) within thirty days of such award. Unless the holder has made such an election, he or she will realize ordinary income and be subject to employment taxes in an amount equal to the fair market value of the shares on the date the restrictions on the shares lapse, reduced by the amount, if any, he or she paid for such stock. Future FinTech will generally be entitled to a corresponding deduction in the same amount and at the same time as the holder recognizes ordinary income. Upon the otherwise taxable disposition of the shares awarded after ordinary income has been recognized, the holder will realize a capital gain or loss (which will be long-term or short-term depending upon how long the shares are held after the restrictions lapse).

 

If the holder made a timely election under Code Section 83(b), he or she will recognize ordinary income for the taxable year in which an award of restricted stock is received on an amount equal to the fair market value of the shares of restricted stock awarded for which the election is being made (even if the shares are subject to forfeiture). That income will be taxable at ordinary income tax rates and be subject to employment taxes. At the time of disposition of the shares, if such an election was made, the holder will recognize gain in an amount equal to the difference between the sales price and the fair market value of the shares at the time of the award. Such gain will be taxable at the applicable capital gains rate. Future FinTech will generally be entitled to a tax deduction in the same amount and at the same time as the ordinary income recognized by the participant.

 

Restricted Stock Units. A holder of RSUs generally will not recognize income at the time of the award. Upon delivery of the shares due upon settlement of an RSU, a holder will realize ordinary income and be subject to employment taxes in an amount equal to the fair market value of the shares distributed. Future FinTech will generally be entitled to a corresponding tax deduction in the same amount and at the same time as the holder recognizes income. When the holder later disposes of his or her shares, the difference between the amount realized on sale and the amount recognized by the holder upon settlement of the RSU will be a capital gain or loss (which will be long-term or short-term depending upon how long the shares are held).

 

Unrestricted Stock. Generally, the participant will, in the year that the unrestricted stock award is granted, recognize compensation taxable as ordinary income equal to the fair market value of the shares on the date of the award. Future FinTech normally will receive a corresponding deduction equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.

 

Limitation on Company Deductions. No federal income tax deduction is allowed for Future FinTech for any compensation paid to a “covered employee” in any taxable year of Future FinTech to the extent that his or her compensation exceeds $1,000,000. For this purpose, “covered employees” are generally the chief executive officer of Future FinTech and the three other most highly compensated officers of Future FinTech other than the principal financial officer for the taxable year, and the term “compensation” generally includes amounts includable in gross income as a result of the exercise of stock options or SARs, payments pursuant to performance shares or units, or the receipt of restricted or unrestricted stock. This deduction limitation, however, does not apply to compensation that is (1) commission-based compensation, (2) performance-based compensation, (3) compensation which would not be includable in an employee’s gross income, and (4) compensation payable under a written binding contract in existence on February 17, 1993, and not materially modified after that date. Awards under the Equity Plan that are made to participants who are “covered employees” may be designed by the Committee to meet the requirements of the performance-based compensation exception under Code Section 162(m). The Committee intends to administer the Equity Plan in a manner that maximizes Future FinTech’s tax deductions under Code Section 162(m). Shareholder approval of the Equity Plan is necessary for the performance-based compensation to meet the Code Section 162(m) exemption.

 

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Effect of Code Section 280G. Code Section 280G limits the deductibility of certain payments that are contingent upon a change of control if the total amount of such payments equals or exceeds three times the individual’s “base amount” (i.e., generally, annualized five-year W-2 compensation). If payment or settlement of an award is accelerated upon a change of control, a portion of such payment attributable to the value of the acceleration is considered a payment that is contingent upon a change of control. In addition, the affected individual must pay an excise tax (in addition to any income tax) equal to 20% of such amount.

 

Impact of Code Section 409A. Code Section 409A provides that all amounts deferred under a nonqualified deferred compensation plan are includible in a service provider’s gross income to the extent such amounts are not subject to a substantial risk of forfeiture, unless certain requirements are satisfied. If the requirements are not satisfied, in addition to current income inclusion, interest at the underpayment rate plus 1% will be imposed on the service provider’s underpayments that would have occurred had the deferred compensation been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation is not subject to a substantial risk of forfeiture. The amount required to be included in income is also subject to an additional 20% tax. While most awards under the Plan are anticipated to be exempt from the requirements of Code Section 409A, awards not exempt from Code Section 409A are intended to comply with Code Section 409A.

 

Other Information

 

Subject to the terms and provisions of the Equity Plan, the individuals that receive awards and the terms and conditions of such awards are determined at the discretion of the Committee. The Committee has not yet made any determination as to which eligible employees will receive awards under the Equity Plan in the future, or the value of awards to be made to any eligible individual, and therefore, it is not possible to determine for any persons or groups the benefits or amounts that will be received in the future under the Equity Plan.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE 
PROPOSAL TO APPROVE THE FUTURE FINTECH GROUP INC. 2017 OMNIBUS EQUITY PLAN.

 

PROPOSAL 4 – ISSUANCES OF COMMON STOCK IN CONNECTION WITH DEBT ACQUISITIONS

 

Background

 

The key terms of the agreements relating to the debt acquisitions are summarized below. Copies of the related agreements are attached as exhibits to this proxy, and you are encouraged to review the full text of such agreements. The descriptions set forth below are not complete and are qualified in their entirety by reference to the full text of the financing agreements filed herewith.

 

The Creditor’s Rights Transfer Agreements

 

On November 2, 2017, a wholly-owned indirect subsidiary of Future FinTech Group Inc. (the “Company” or “Future FinTech”), Hedetang Foods (China) Co., Ltd. (“Hedetang”), entered into a series of Creditor’s Rights Transfer Agreements (collectively, the “Acquisition Agreements”) with each of Shaanxi Chunlv Ecological Agriculture Co. Ltd., Shaanxi Boai Medical Technology Development Co., Ltd., and Shaanxi Fu Chen Venture Capital Management Co. Ltd. (collectively, the “Sellers”). Pursuant to the Acquisition Agreements, Hedetang agreed to purchase certain creditor’s rights of associated with companies located in the PRC for an aggregate purchase price of RMB 181,006,980 (approximately $27,344,096), of which RMB 108,604,188 (approximately $16,437,248.50) will be paid in cash and RMB 72,402,792 (approximately $10,937,638.50) will be paid in shares of common stock of the Company (the “Share Payment”) based on the average of the closing prices of Future FinTech’s common stock over the five trading days preceding the date of the Acquisition Agreements.

 

A summary of the Acquisition Agreements is as follows:

 

1) Shaanxi Chunlv Ecological Agriculture Co. Ltd. agreed to transfer all its credit rights of principal and interest owed by Xi’an Tongji Department Store Co., Ltd. to Hedetang. The book balance of the principal is RMB 23,625,000, the interest is RMB 38,281,900, and the total credit balance, including the principal and the interest is RMB 61,906,900, of which the RMB 19,757,800 credit is guaranteed by a third party company. According to No. (2017) 030 Appraisal Report from Shaanxi Delixin Asset Appraisal Co., Ltd. dated October 23, 2017, the amount for this debt that likely could be collected is RMB 50,210,400, which is 81.11% of the total debt. Hedetang agreed to purchase the creditor’s rights of this debt for RMB 30,126,240, which is 60% of the collectable amount according to the appraisal report.

 

2) Shaanxi Chunlv Ecological Agriculture Co. Ltd. agreed to transfer all its credit rights of principal and interest owed by Shaanxi Youyi Co., Ltd. to Hedetang. The book balance for the principal is RMB 45,345,000, the interest is RMB 71,224,300, and the total credit balance including the principal and the interest is RMB 116,569,300, all of which is guaranteed by a third party company. According to No. (2017) 031 Appraisal Report from Shaanxi Delixin Asset Appraisal Co., Ltd. dated October 23, 2017, the amount for this debt that likely could be collected is RMB 94,421,200, which is 81% of the total debt. Hedetang agrees to purchase the creditor’s rights of this debt for RMB 56,652,720, which is 60% of the collectable amount according to the appraisal report.

 

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3) Shaanxi Fu Chen Venture Capital Management Co., Ltd. agreed to transfer all its credit rights of principal and interest owed by State Owned Shaanxi No. 8 Cotton and Textile Mill to Hedetang. The book balance for the principal is RMB 72,370,000, the interest is RMB 138,037,700, and the total of credit including the principal and the interest is RMB 210,407,700, and there is no effective guarantee or pledged assets to secure this debt. According to No. (2017) 032 Appraisal Report from Shaanxi Delixin Asset Appraisal Co., Ltd. dated October 23, 2017, the amount for this debt that likely could be collected is RMB 140,973,200, which is 67% of the total debt. Hedetang agreed to purchase the creditor’s rights of this debt for RMB 84,583,920, which is 60% of the collectable amount according to the appraisal report.

 

4) Shaanxi Boai Medical Technology Development Co., Ltd. agreed to transfer all its credit rights of principal and interest owed by Xi’an Yanliang Economic Development Co., Ltd. to Hedetang. The book balance for the principal is RMB 6,350,000, the interest is RMB 9,834,300, and the total of credit including the principal and the interest is RMB 16,184,300, which is secured by certain land use rights. According to No. (2017) 033 Appraisal Report from Shaanxi Delixin Asset Appraisal Co., Ltd. dated October 23, 2017, the amount for this debt that likely could be collected is RMB 16,073,500, which is 99.32% of the total debt. Hedetang agreed to purchase the creditors rights of this debt for RMB 9,644,100, which is 60% of the collectable amount according to the appraisal report.

 

The Share Payment is contingent on Future FinTech receiving shareholder approval at the Special Meeting to increase its authorized common stock to 60,000,000 shares, as further described in Proposal 2 and the approval of Share Payment issuance under this Proposal 4. If Proposals 2 and 4 are not approved by the shareholders of Future FinTech, the parties have agreed to use other payment methods to pay the amount of RMB 72,402,792 in lieu of the Share Payment.

 

We are seeking shareholder approval to issue 7,111,599 shares of our common stock to satisfy the Share Payment and consummate the transactions contemplated by the Acquisition Agreements. If shareholder approval of the Share Payment is obtained at the Special Meeting, the Share Payment is expected to occur promptly after the Special Meeting.

 

THIS PROXY STATEMENT IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY OF OUR SECURITIES. THE SECURITIES REFERRED TO IN THIS PROXY STATEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD ABSENT SUCH REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.

 

The sales and issuances of the shares of our common stock to the Purchasers pursuant to the Acquisition Agreements are being made in reliance on the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

  

Board of Directors Recommendation

 

The Board of Directors believes the approval of this Proposal 4 by our shareholders is in the best interests of the Company and our shareholders. The Board of Directors believes that the consummation of the Acquisition Agreements will help the Company purchase the credit rights/debts at discounted prices and the Company would collect those debts or covert them to distressed debt securities and sell them later. Also, the acquisition of debts will significantly enhance the Company’s ability to develop and execute its current business plan, including the development of the Company’s financial asset management and securitization businesses. To the extent that the Company is unable to consummate the Agreements because this Proposal 4 is not approved, the Board of Directors believes that the Company might lose this valuable potential acquisition and expansion opportunity and may not be able to find comparable opportunities on as favorable terms.

 

Reason for Shareholder Approval

 

Our common stock is listed on The NASDAQ Global Market, and, as such, we are subject to the NASDAQ Marketplace Rules, including NASDAQ Listing Rule 5635. NASDAQ Listing Rule 5635(b) requires shareholder approval prior to the sale, issuance or potential issuance by the issuer of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance, in connection with a transaction other than a public offering for cash. If the Share Payment occurs, the total number of shares of our common stock sold pursuant to the Acquisition Agreements will exceed 20% of the total number of shares of our common stock issued and outstanding on the date on which the Acquisition Agreements were executed. As such, we are seeking shareholder approval for such transactions pursuant to NASDAQ Listing Rule 5635(a).

 

Overall Effect of the Proposal

 

If approved, this Proposal 4 would result in an increase by 7,111,599 shares in the number of shares of our common stock outstanding, and, as a result, current shareholders who are not participating in the Acquisition Agreements would own a smaller percentage of our outstanding common stock and, accordingly, a smaller percentage interest in the voting power, liquidation value and book value of our common stock. The sale or resale of any of our common stock issued pursuant to the Acquisition Agreements could cause the market price of our common stock to decline.

 

This approval would not limit our ability to engage in a public offering, as defined by NASDAQ, or to issue or sell a number of shares of our common stock (including shares issuable upon conversion or exercise of convertible debt, warrants or other securities exercisable for or convertible into our common stock) that is less than 20% of the outstanding shares on terms that might or might not be similar to those in this Proposal 4.

 

Vote Required

 

The affirmative vote of a majority of all of the votes present or represented and entitled to vote at the Special Meeting is required to approve this Proposal 4.

 

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FUTURE FINTECH’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUTURE FINTECH’S SHAREHOLDERS VOTE “FOR” THE SHARE ISSUANCES IN CONNECTION WITH THE DEBT ACQUISITIONS.

 

PROPOSAL 5 – ISSUANCES OF COMMON STOCK IN PRIVATE PLACEMENT

 

Background

 

The key terms of the private placement agreement are summarized below. A copy of the private placement agreement is attached as an exhibits to this proxy, and you are encouraged to review the full text of such agreement. The descriptions set forth below are not complete and are qualified in their entirety by reference to the full text of the financing agreements filed herewith.

 

The Share Purchase Agreement

 

In connection with the Acquisition Agreements and to provide funding for their consummation, on November 3, 2017, Future FinTech entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with Mr. Zeyao Xue (“Xue”) pursuant to which Future FinTech agreed to sell 11,362,159 shares of its common stock (the “Shares”) to Xue for an aggregate purchase price of $16,437,248.50 with the per share price for the Shares as the average closing price quoted on the NASDAQ Global Market for the common stock of the Company over the three (3) trading days prior to the date of the Share Purchase Agreement (the “Purchase Price”). Under the terms of the Share Purchase Agreement, the Purchase Price may be adjusted upward if, on the third business day following the later of (i) the public disclosure of the execution of the Acquisition Agreements and (ii) the Company’s filing of its Form 10-Q for the quarter ended September 30, 2017 (in each case, counting the date of disclosure as the first such day, provided that the applicable public disclosure is made prior to the close of trading on such date), the per share closing price of the Company’s common stock quoted on the NASDAQ Global Market (the “Disclosure Price”) is higher than the Purchase Price. In such case, the Purchase Price shall be adjusted to the Disclosure Price (the “Adjusted Price”), and Xue shall pay to the Future FinTech an amount equal to (x) the difference between the Purchase Price and the Adjusted Price (y) multiplied by the number of Shares (the “Additional Amount”). If the Disclosure Price is lower than Purchase Price, no adjustment of the Purchase Price shall be made. Xue currently beneficially owns 2,337,155 shares, or 45.2% of Future FinTech’s issued and outstanding common stock and Mr. Yongke Xue, a director of Future FinTech, is Xue’s father. The consummation of the Share Purchase Agreement is contingent on Future FinTech receiving shareholder approval at the Special Meeting to increase its authorized common stock to 60,000,000 shares, as further described in Proposal 2 and the approval of Shares issuance under this Proposal 5. If Proposals 2 and 5 are not approved by the shareholders of Future FinTech, the Share Purchase Agreement may not be consummated.

 

We are seeking shareholder approval to issue 11,362,159 shares of our common stock to consummate the Share Purchase Agreement (the “Placement Share Issuance”). If shareholder approval of the Placement Share Issuance is obtained at the Special Meeting, the Placement Share Issuance is expected to occur promptly after the Special Meeting.

 

THIS PROXY STATEMENT IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY OF OUR SECURITIES. THE SECURITIES REFERRED TO IN THIS PROXY STATEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD ABSENT SUCH REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.

 

The sale and issuance of the shares of our common stock to Xue pursuant to the Share Purchase Agreement is being made in reliance on the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

  

Board of Directors Recommendation

 

The Board of Directors believes the approval of this Proposal 5 by our shareholders is in the best interests of the Company and our shareholders. Most importantly, the Board of Directors believes that consummating the Share Purchase Agreement will allow the Company to have sufficient funds to consummate the Acquisition Agreements and will maintain Xue’s and his affiliates’ ability to participate in the Company’s future activities, if they so choose, and that Xue and his affiliates are a valuable potential source of future financing for the Company. To the extent that the Company is unable to consummate the Share Purchase Agreement because Proposal 5 is not approved, the Board of Directors believes that the Company may lose the valuable potential acquisitions described in the Acquisition Agreements and may not be able to find comparable opportunities on as favorable terms.

 

Reason for Shareholder Approval

 

Our common stock is listed on The NASDAQ Global Market, and, as such, we are subject to the NASDAQ Marketplace Rules, including NASDAQ Listing Rule 5635. NASDAQ Listing Rule 5635(d) requires shareholder approval prior to the sale, issuance or potential issuance by the issuer of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock, in connection with a transaction other than a public offering. If the Placement Share Issuance occurs, the total number of shares of our common stock sold pursuant to the Share Purchase Agreement will exceed 20% of the total number of shares of our common stock issued and outstanding on the date on which the Share Purchase Agreement was executed. As such, we are seeking shareholder approval for such transactions pursuant to NASDAQ Listing Rule 5635(d).

 

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Use of Proceeds

 

All proceeds from the consummation of the Share Purchase Agreement will be used to fund Hedentang’s obligations under the Acquisition Agreements.

 

Overall Effect of the Proposal

 

If approved, this Proposal 5 would result in an increase by 11,362,159 shares in the number of shares of our common stock outstanding, and, as a result, current shareholders who are not participating in the Share Purchase Agreement would own a smaller percentage of our outstanding common stock and, accordingly, a smaller percentage interest in the voting power, liquidation value and book value of our common stock. The sale or resale of any of our common stock issued pursuant to the Share Purchase Agreement could cause the market price of our common stock to decline.

 

This approval would not limit our ability to engage in a public offering, as defined by NASDAQ, or to issue or sell a number of shares of our common stock (including shares issuable upon conversion or exercise of convertible debt, warrants or other securities exercisable for or convertible into our common stock) that is less than 20% of the outstanding shares on terms that might or might not be similar to those in this Proposal 5.

 

Vote Required

 

The affirmative vote of a majority of all of the votes present or represented and entitled to vote at the Special Meeting is required to approve this Proposal 5.

 

FUTURE FINTECH’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUTURE FINTECH’S SHAREHOLDERS VOTE “FOR” THE PLACEMENT SHARE ISSUANCE.

 

PROPOSAL 6 – GRANT OF DISCRETIONARY AUTHORITY TO ADJOURN THE SPECIAL MEETING

 

Although it is not expected, the Special Meeting may be adjourned for the purpose of soliciting additional proxies. Any such adjournment of the Special Meeting may be made without notice, other than by the announcement made at the Special Meeting, by approval of the holders of a majority of the shares of our Common Stock present in person or by proxy and entitled to vote at the Special Meeting, whether or not a quorum exists. We are soliciting proxies to grant discretionary authority to the Company’s Chief Executive Officer to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies in favor of Proposals 1 through 5. The Chief Executive Officer will have the discretion to decide whether or not to use the authority granted to such person pursuant to this Proposal 6 to adjourn the Special Meeting.

 

Vote Required

 

The affirmative vote of a majority of all of the votes present or represented and entitled to vote at the Special Meeting is required to approve this Proposal 6.

 

FUTURE FINTECH’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUTURE FINTECH’S SHAREHOLDERS VOTE “FOR” THE GRANT OF DISCRETIONARY AUTHORITY TO ADJOURN THE SPECIAL MEETING.

 

SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS OF

FUTURE FINTECH GROUP INC.

 

The following table sets forth information concerning beneficial ownership of our Common Stock as of December 22, 2017 by:

 

each shareholder or group of affiliated shareholders who owns more than 5% of our Common Stock;

 

each of our named executive officers;

 

each of our directors; and

 

all of our directors and executive officers as a group.

 

The following table lists the number of shares and percentage of shares beneficially owned based on • shares of our Common Stock outstanding as of December 22, 2017.

 

Beneficial ownership is determined in accordance with the SEC rules, and generally includes voting power and/or investment power with respect to the securities held. Shares of Common Stock subject to options and warrants currently exercisable or exercisable within 60 days of December 22, 2017 or issuable upon conversion of convertible securities which are currently convertible or convertible within 60 days of December 22, 2017 are deemed outstanding and beneficially owned by the person holding those options, warrants or convertible securities for purposes of computing the number of shares and percentage of shares beneficially owned by that person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated in the footnotes to this table, and subject to applicable community property laws, the persons or entities named have sole voting and investment power with respect to all shares of our Common Stock shown as beneficially owned by them.

 

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Unless otherwise indicated in the footnotes, the principal address of each of the shareholders, named executive officers, and directors below is c/o Future FinTech Group Inc., 23F, China Development Bank Tower, No. 2 Gaoxin 1st Road, Xi’an, Shaanxi Province, PRC 710075.

 

   Shares Beneficially Owned 
Name of Beneficial Owner  Number   Percent 
Directors, Named Executive Officers and 5% Shareholders        
Yongke Xue (1)   2,337,155    45.2%
Hongke Xue        
Guolin Wang        
Hanjun Zheng        
Fuyou Li        
Johnson Lau        
All current directors and executive officers as a group (6 persons)   2,337,155    45.2%
Zeyao Xue (2)   2,337,155    45.2%
    2,337,155    45.2%

 

(1) Consists of (i) 665,200 shares owned by directly by SkyPeople International Holdings Group Limited (“SP International”), a Cayman Islands company, (ii) 1,488,570 shares owned directly by Golden Dawn International Limited, a British Virgin Islands company, (iii) 183,385 shares owned directly by China Tianren Organic Food Holding.  Each of SP International, Golden Dawn International Limited and China Tianren Organic Good Holding are indirect subsidiaries of V.X. Fortune Capital Limited, a British Virgin Islands company.  Yongke Xue is the sole director of each of (i) SP International and (ii) V.X. Fortune Capital Limited.
(2) Mr. Zeyao Xue, the son of Yongke Xue, holds all of the issued and outstanding capital stock of Fancylight Limited, which is the indirect owner of those shares held by SP International, Golden Dawn International Limited and China Tianren Organic Food Holding.  As such, Mr. Zeyao Xue shares beneficial ownership of his shares with Mr. Yongke Xue.

 

Potential Change in Control of the Company

 

On November 16, 2012, V.X. Fortune Capital Limited (“V.X.”), Vandi Investments Limited (“Vandi”), COFCO (Beijing) Agricultural Industrial Equity Investment Fund (“COFCO”) and Yongke Xue (the Company’s Chairman and Chief Executive Officer) entered into an Investment Agreement (“Investment Agreement”) pursuant to which V.X. (which is indirectly owned and controlled by Yongke Xue) issued a note(s) in the aggregate principal amount of $6,000,000 to Vandi and issued preferred shares to COFCO in exchange for $9,900,000. As reported by the Company on Form 8-K filed February 19, 2013, some portion of these proceeds were loaned to the Company’s wholly-owned subsidiary SkyPeople Juice Group Co., Ltd. In connection with the Investment Agreement, Golden Dawn and China Tianren (both indirectly wholly-owned and controlled by Yongke Xue) entered into a Share Charge Deed dated December 28, 2012 (“Vandi Share Charge Deed”) in favor of Vandi (the “Vandi Share Charge”) and a Share Charge Deed dated December 28, 2012 (“COFCO Share Charge Deed”) in favor of COFCO (the “COFCO Share Charge”, together with the Vandi Share Charge, the “Share Charges”, or each, a “Share Charge”). The Vandi Share Charge Deed and the COFCO Share Charge Deed (each, a “Share Charge Deed” and collectively, the “Share Charge Deeds”) are attached to the Schedules 13D/A filed January 4, 2013 as Exhibits 99.3 and 99.4, respectively, and are incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed March 31, 2015 as Exhibits 10.34 and 10.35, respectively.

 

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As reported on Schedule 13D/A filed January 4, 2013, as security for the payment and discharge of the obligations under the Investment Agreement, pursuant to the Share Charge Deeds, Golden Dawn and China Tianren charged 1,650,464 shares of Company Common Stock (collectively, the “Charged Shares”) as follows: (i) Golden Dawn charged 1,467,079 shares of the Company’s Common Stock in favor of Vandi and COFCO; and (ii) China Tianren charged 183,385 shares of the Company’s Common Stock in favor of Vandi and COFCO. Also, the Share Charge Deeds provide that Golden Dawn is required to execute and deliver a share charge with respect to an additional 21,492 shares of Company Common Stock in the aggregate (“Additional Shares”) (10,746 shares and 10,746 shares in favor of Vandi and COFCO, respectively) within 10 business days of the date of a written notice issued by the applicable Charge. The Company understands that these Additional Shares have not been charged and have not been the subject of any Enforcement Notice (as defined below) as of the date of this Proxy Statement.

  

Under the terms of the Share Charge Deeds, each Share Charge becomes enforceable following the delivery of a written notice, given by the Charge (Vandi or COFCO, as applicable) to the chargors (Golden Dawn and China Tianren) after the occurrence of a continuing event of default stating that the Share Charge has become enforceable (“Enforcement Notice”). Following the delivery of an Enforcement Notice to the chargors, among other powers and authorities described in the Share Charge Deeds, the Charge is entitled to exercise or direct the exercise of the voting and other rights attached to the Charged Shares as it sees fit and to hold or dispose of all or any part of the Charged Shares.

 

An Enforcement Notice under the COFCO Share Charge Deed was delivered by COFCO to Golden Dawn and China Tianren on December 30, 2014, describing certain events of default that occurred under the COFCO Share Charge Deed and related investment documents. Although events of default likewise occurred under the Vandi Share Charge Deed, Vandi has not yet delivered an Enforcement Notice. After delivery of the Enforcement Notice by COFCO, the parties named in Enforcement Notice have engaged in negotiations regarding the appropriate exercise of rights under the investment documents. The Company understands that Vandi and COFCO have yet to make a formal, definitive determination to acquire control of the Charged Shares. Accordingly, in the beneficial ownership table set forth above, the Company lists Yongke Xue as the beneficial owner of the Charged Shares by virtue of his indirect ownership and control of the Golden Dawn and China Tianren.

 

The Company believes that COFCO and Vandi intend to acquire ownership and control of the Charged Shares in accordance with the Share Charge Deeds, which would result in a change in ownership of 1,650,464 shares of Company Common Stock, representing approximately 31.9% of the issued and outstanding shares of Company Common Stock (COFCO would acquire control of 825,232 of the Charged Shares, representing 16% of the outstanding shares of Company Common Stock, and Vandi would acquire control of 825,232 of the Charged Shares, representing 16% of the outstanding shares of Company Common Stock). If the Additional Shares are charged and COFCO and Vandi acquire ownership and control of the Additional Shares under the terms of the applicable share charge documents, the aggregate shares acquired by COFCO and Vandi would increase from 31.9% to approximately 32.3%.

 

As reported on Schedule 13D/A filed on July 10, 2016, on that date Golden Dawn, SP International (together with Golden Dawn, the “Sellers”), Fortune Capital, Fancylight Limited (“Fancylight”), Yongke Xue (“Xue,” and collectively with Fortune Capital and Fancylight, the “Parent”), Future World Investment Holding Limited (the “Purchaser”) and Pei Lei (“Pei”), as the sole shareholder of the Purchaser, entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, the Purchaser agreed to purchase an aggregate of 256,356 shares of the Company’s common stock (the “Seller Shares”) from the Sellers for an aggregate base purchase price of US$5,352,721. The Agreement contains customary representations, warranties, and covenants by the Sellers, the Parent, and the Purchaser. Parent and the Sellers, on the one hand, and the Purchaser and Pei, on the other hand, agree to indemnify each other for material inaccuracies, breaches of representations and warranties, and material breaches of the Agreement. The consummation of the Agreement was contingent on the achievement of several conditions. Xue terminated the Stock Purchase Agreement in accordance with its terms due to the closing not being met, effective as of June 27, 2017.

 

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On March 10, 2016, the Company filed with the Florida Secretary of State’s office an amendment to its Articles of Incorporation. As a result of the Articles of Amendment, the Company authorized and approved an 1-for-8 reverse stock split of the Company’s authorized shares of common stock from 66,666,666 shares to 8,333,333 shares, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). The common stock continues have a par value of $0.001, and no changes were made to the number of authorized preferred shares of the Company, which remains as 10,000,000, none of which have been issued. The amendment to the Articles of Incorporation of the Company took effect on March 16, 2016. The share numbers in the above description have been adjusted to reflect the post-split amounts of shares.

 

Equity Compensation Plan

 

The following table sets forth information as of December 31, 2016, with respect to our equity compensation plans previously approved by shareholders and equity compensation plans not previously approved by shareholders.

 

    Equity Compensation Plan Information  
Plan Category   Number of securities to be issued upon exercise of outstanding options, warrants and rights     Weighted average exercise price of outstanding options, warrants and rights     Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))  
    (a)     (b)     I  
Equity compensation plans approved by shareholders (1)          N/A     $    N/A (2)     312,500  
Equity compensation plans not approved by shareholders      N/A     $ N/A        
Total       N/A     $ N/A       312,500  

 

(1) Consists of 500,000 shares remaining available for future issuance under the Stock Incentive Plan, which was approved by the Company’s shareholders at its annual meeting on August 18, 2011, and 2,000,000 shares remaining for future issuance under the SkyPeople Fruit Juice, Inc. Omnibus Equity Plan. All share amounts have been adjusted to reflect the Reverse Stock Split.
(2) The exercise price of options granted and stock appreciation rights under the Plan may be no less than the fair market value of the Company’s Stock on the date of grant. Because no options were outstanding under the plans as of December 31, 2016, the weighted-average exercise price is not available.

 

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COMPENSATION

 

Summary Compensation of Named Executive Officers

 

Our executive officers do not receive any compensation for serving as executive officers of Pacific or us. However, except for our former CEO, the remaining executive officers are compensated by and through SkyPeople (China). Our former CEO, Yongke Xue, has not received any compensation from us or any of our subsidiaries for his services in the past three years. The following table sets forth information concerning cash and non-cash compensation paid by SkyPeople (China) to our named executive officers for 2016 and 2015, respectively.

 

Name and Principal
Position
  Year
Ended
   Salary
($)
   Bonus
($)
   Stock Awards   Option Awards   Non-Equity Incentive Plan Compensation
($)
   Non-Qualified Deferred Compensation Earnings
($)
   All Other Compensation
($)
   Total
($)
 
Yongke Xue (1)   12/31/2016    -    -    -    -    -    -    -    - 
Yongke Xue (1)   12/31/2015    -    -    -    -    -    -    -    - 
                                              
Hongke Xue (1)   12/31/2016    -    -    -    -    -    -    -    - 
Hongke Xue (1)   12/31/2015    -    -    -    -    -    -    -    - 
                                              
Hanjun Zheng (2)   12/31/2016   $12,352    -    -    -    -    -    -   $11,662 
    12/31/2015   $11,721    -    -    -    -    -    -   $11,721 

 

(1) Mr. Yongke Xue resigned as CEO of the Company on February 18, 2013 and Mr. Hongke Xue was appointed as the CEO of the Company at the same time. Mr. Hongke Xue resigned as CEO on December 24, 2014, and Mr. Yongke Xue was reappointed as the CEO of the Company at the same time. Mr. Yongke Xue again resigned as CEO on September 2, 2016, and Mr. Hongke Xue was appointed to the same position at that time.
(2) Mr. Hanjun Zheng was appointed by the Board as Interim Chief Financial Officer on November 27, 2015.

 

Outstanding Equity Awards at December 31, 2016

 

The following table presents certain information concerning outstanding equity awards held by each of our named executive officers at December 31, 2016.

 

    Option Awards  
Name   Number of securities underlying unexercised options (#) exercisable    Number of securities underlying unexercised options (#) unexercisable    Equity incentive plan awards: number of securities underlying unexercised unearned options (#)    Option exercise price
($)
    Option expiration date 
Yongke Xue   -    -    -    -    - 
Hongke Xue   -    -    -    -    - 
Hanjun Zheng   -    -    -    -    - 

 

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Compensation of Directors

 

Our directors did not receive compensation for their service on the board of directors for 2006 and 2007. Starting in 2008, we began (i) paying each of our nonemployee directors residing in the United States an annual fee of $25,000, (ii) reimbursing our directors for actual, reasonable and customary expenses incurred in connection with the performance of their duties as board members and (iii) paying the chairman of our audit committee a fee of $25,000 for his or her service as chairman.

 

There was no change to the compensation to our directors in 2016. The following table sets forth information concerning cash and non-cash compensation paid by us to our directors during 2016.

 

Name  Fees Paid in Cash
($)
   Stock
Awards
   Option Awards   Non-Equity Incentive Plan Compensation
($)
   Non-Qualified Deferred Compensation Earnings
($)
   All Other Compensation ($)   Total
($)
 
Yongke Xue                            
Hongke Xue                            
Guolin Wang (1)  $8,850                       $8,850 
Fuyou Li (2)  $8,850                       $8,850 
Johnson Lau (3)  $25,000                       $25,000 

 

(1) On April 7, 2008, the Company’s Board of Directors appointed Mr. Guolin Wang as a member of the Board of Directors and a member of both the audit committee and compensation committee.  Mr. Wang is entitled to US$8,850 per annum as compensation for his services as a director of Future FinTech.
(2) On May 8, 2015, the Company’s Board of Directors appointed Mr. Fuyou Li as a member of the Board of Directors and a member of both the audit committee and compensation committee. Mr. Li is entitled for US$8,850 per annum as compensation for his service as director of Future FinTech.
(3) On December 23, 2014, the Board appointed Johnson Lau as a member of the Board of Directors of the Company and also the Chairman of audit and compensation committees of the Board. Mr. Lau is entitled for US$25,000 per annum as compensation for his services as the Chairman of the audit committee of Future FinTech.

 

OTHER MATTERS

 

As of the date of this proxy statement, the board of directors of Future FinTech knows of no matters that will be presented for consideration at the Special Meeting other than as described in this proxy statement. If any other matters properly come before the Special Meeting or any adjournments or postponements of the meeting and are voted upon, the enclosed proxy will confer discretionary authority on the individuals named as proxy to vote the shares represented by the proxy as to any other matters. The individuals named as proxies intend to vote in accordance with their best judgment as to any other matters.

 

LEGAL MATTERS

 

The validity of the shares of SkyPeople BVI and FullMart ordinary stock to be issued pursuant to the Spin-Offs will be passed upon by Maples and Calder (Hong Kong) LLP prior to the completion of the Spin-Offs. 

 

EXPERTS

 

The consolidated financial statements of Future FinTech set forth herein and also appearing in the Company’s Annual Report on Form 10-K for the years ended December 31, 2016 and December 31, 2015 have been audited by Wang Certified Public Accountant, P.C., independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements and Future FinTech’s management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2016 are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

  

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WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Exchange Act. You may read and copy any reports, statements or other information that we file with the Securities and Exchange Commission at the SEC’s public reference room at the following location: Station Place, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of those documents at prescribed rates by writing to the Public Reference Section of the SEC at that address. Please call the SEC at (800) SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at www.sec.gov. In addition, shareholders may obtain free copies of certain documents filed with the SEC by Future FinTech through the “SEC Filings” section of our website.

 

You may obtain any of the documents we file with the SEC, without charge, by requesting them in writing or by telephone from us at the following address:

 

Future FinTech Group Inc.

Attn: Corporate Secretary

23F, China Development Bank Tower, No.2, Gaoxin 1st Road

Xi’an, Shaanxi, China, 710075

86-29-81878277

 

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INDEX TO FINANCIAL INFORMATION

 

FUTURE FINTECH GROUP INC.  

INDEX TO FINANCIAL STATEMENTS

 

  Page
   
Report of Independent Registered Public Accounting Firm F-3
   
Consolidated Balance Sheets as at December 31, 2016 and 2015 F-4
   
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2016 and 2015 F-5

 

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2016 and 2015 F-6
   
Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015 F-7
   
Notes to Consolidated Financial Statements for the years ended December 31, 2016 and 2015 F-8

 

FUTURE FINTECH GROUP INC. 

INDEX TO UNAUDITED FINANCIAL STATEMENTS

 

  Page
   
Consolidated Balance Sheets as at September 30, 2017 (unaudited) and December 31, 2016 (audited) F-26
   
Unaudited Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016 F-27
   
Unaudited Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2017 and 2016 F-28
   
Notes to Unaudited Consolidated Financial Statements F-29

 

SKYPEOPLE FOODS HOLDING LIMITED

INDEX TO UNAUDITED FINANCIAL STATEMENTS

FISCAL YEARS ENDED DECEMBER 31, 2016 AND 2015

 

  Page
   
Unaudited Balance Sheets as at December 31, 2016 and 2015 F-44
   
Unaudited Statements of Operations for the fiscal years ended December 31, 2016 and 2015 F-45
   
Unaudited Statements of Cash Flows for the fiscal years ended December 31, 2016 and 2015 F-46
   
Unaudited Statements of Changes in Stockholders’ Equity F-47
   
Notes to Unaudited Financial Statements F-48

 

 F-1 

 

 

SKYPEOPLE FOODS HOLDING LIMITED

INDEX TO UNAUDITED FINANCIAL STATEMENTS

AS AT SEPTEMBER 30, 2017 AND 2016 AND

THE NINE MONTHS ENDED SEPTEMBER 30, 2017

 

  Page
   
Unaudited Balance Sheets as at September 30, 2017 and December 31, 2016 F-58
   
Unaudited Statements of Operations for the nine months ended September 30, 2017 and 2016 F-59
   
Unaudited Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 F-60
   
Notes to Unaudited Financial Statements F-61

 

FULLMART HOLDING LIMITED

INDEX TO UNAUDITED FINANCIAL STATEMENTS

FISCAL YEARS ENDED DECEMBER 31, 2016 AND 2015

 

  Page
   
Unaudited Balance Sheets as at December 31, 2016 and 2015 F-68
   
Unaudited Statements of Operations for the fiscal years ended December 31, 2016 and 2015 F-69
   
Unaudited Statements of Cash Flows for the fiscal years ended December 31, 2016 and 2015 F-70
   
Unaudited Statements of Changes in Stockholders’ Equity F-71
   
Notes to Unaudited Financial Statements F-72

 

FULLMART HOLDING LIMITED

INDEX TO UNAUDITED FINANCIAL STATEMENTS

AS AT SEPTEMBER 30, 2017 AND 2016 AND

THE NINE MONTHS ENDED SEPTEMBER 30, 2017

 

  Page
   
Unaudited Balance Sheets as at September 30, 2017 and December 31, 2016 F-81
   
Unaudited Statements of Operations for the nine months ended September 30, 2017 and 2016 F-82
   
Unaudited Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 F-83
   
Notes to Unaudited Financial Statements F-84

 

 F-2 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM