Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on March 16, 2020, Fortune Valley Treasures, Inc.
("FVTI"), along with Jiujiu Group Stock Co., Ltd., a Seychelles company and a
wholly-owned subsidiary of FVTI ("JJGS"), entered into an equity interest
transfer agreement (the "Original Agreement") with Valley Holdings Limited
("Valley Holdings"), a Hong Kong company, and Angel International Investment
Holdings Limited (the "Seller"), a 70% shareholder of Valley Holdings. Valley
Holdings owns approximately 88.44% of the equity interest of Valley Foods
Holdings (Guangzhou) Co., Ltd. ("Valley Food"), which is a limited liability
company incorporated in China and engaged in the business of food wholesale and
production and sale of food additives in China.
On January 6, 2021, the parties to the Original Agreement entered into an
agreement to terminate the Original Agreement upon mutual consent. There were no
termination penalties incurred by FVTI or JJGS.
On January 6, 2021, FVTI entered into a new equity interest transfer agreement
(the "Agreement") with DaXingHuaShang Investment (Hong Kong) Limited, a Hong
Kong company and a wholly-owned subsidiary of FVTI ("DILHK"), the Seller and
Valley Holdings.
Pursuant to the Agreement, JJGS agreed to purchase 70% of Valley Holdings'
equity interest (the "Equity Transfer") from the Seller in consideration of
shares of FVTI's common stock ("Issuable Shares") valued at $12 million (subject
to adjustments in the event of Valley Holdings' net profit is more than HK$5
million (approximately US$0.6 million) or less than HK$3 million (approximately
US$0.4 million) for the fiscal year ended December 31, 2020). According to the
Agreement, the total number of Issuable Shares will be determined based on
average of the closing prices of FVTI's common stock for the 30 business days
preceding the date of the Closing (as defined below).
The closing of the Equity Transfer (the "Closing") is intended to occur on or
before April 30, 2021 or such later date agreed upon in writing. The Closing is
subject to certain conditions, including, but not limited to, (a) completion of
due diligence review of Valley Holdings and its subsidiaries to the satisfaction
of DILHK, (b) completion of the initial draft of the audited consolidated
financial statements of Valley Holdings for the fiscal year ended December 31,
2019, (c) execution of non-competition agreements and confidentiality agreements
with the senior management members of Valley Holdings and its subsidiaries, and
(d) assignment to Valley Holdings all of the intellectual properties related to
the operations of Valley Holdings and its subsidiaries.
Pursuant to the Agreement, FVTI will issue the Issuable Shares to an escrow
account for the beneficiary of the Seller within 30 business days after the
later of the Closing. The Issuable Shares shall be released from the escrow
account to the Seller within 30 days upon independent registered accounting
firm's written confirmation that Valley Holdings' audited net profit is at least
HK$3 million (approximately US$0.4 million) for the fiscal year ended December
31, 2020.
To ensure the continuous operations of Valley Holdings and its subsidiaries, the
parties agreed that Valley Holdings and its subsidiaries will retain their
existing employees and will enter into non-competition and employment agreements
with all the management members of Valley Holdings and its subsidiaries. The
parties further agreed that Valley Holdings will not make any profit
distribution within two years after the execution of the Agreement. DILHK or the
Seller may terminate this Agreement in writing in the event that any closing
condition is not met before April 30, 2021.
Item 1.02 Termination of a Material Definitive Agreement.
The information as set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 1.02.
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