Future FinTech Group Inc. (FTFT)(“Future FinTech”, “FTFT” or “the Company”), a financial technology company and integrated producer of fruit-related products, today announced that on July 31, 2019, Chain Cloud Mall Network and Technology (Tianjin) Co., Ltd., (the “CCM Tianjin”), a wholly-owned subsidiary of the Company, Chain Cloud Mall E-commerce (Tianjin) Co., Ltd., a limited liability company incorporated under the laws of the China (the “E-commerce Tianjin“), Mr. Zeyao Xue and Mr. Kai Xu, citizens of China and shareholders of E-commerce Tianjin, entered into the following agreements, or collectively, the “Variable Interest Entity Agreements or VIE Agreements,” pursuant to which CCM Tianjin has contractual rights to control and operate the business of E-commerce Tianjin (the “VIE”).
Pursuant to Chinese law and regulations, a foreign-owned enterprise cannot apply for and hold a license for operation of certain e-commerce businesses, the category of business which the Company plans to expand in China. CCM Tianjin is an indirectly wholly foreign-owned enterprise of the Company. In order to comply with the Chinese law and regulations, CCM Tianjin agreed to provide E-commerce Tianjin Exclusive Operation and Use Rights Authorization to operate and use the Chain Cloud Mall System owned by CCM Tianjin. E-commerce Tianjin was incorporated by Mr. Zeyao Xue and Mr. Kai Xu solely for the purpose to hold the operation license of the Chain Cloud Mall System. Mr. Zeyao Xue is a major shareholder of the Company and son of Mr. Yongke Xue, our Chairman and Chief Executive Officer. Mr. Kai Xu is the Chief Operating Officer of the Company.
As a result of the above contractual arrangements, CCM Tianjin has substantial control over E-commerce Tianjin’s daily operations and financial affairs, election of its senior executives and all matters requiring shareholder approval. Furthermore, as the primary beneficiary of E-commerce Tianjin, the Company, via CCM Tianjin, is entitled to consolidate the financial results of E-commerce Tianjin in its own consolidated financial statements.
“Setting up the VIE structure is a key step of our Chain Cloud Mall development plan. As CCM continues to grow, we are looking to expand operations to telecom value-added services and online culture products business in China, which requires licenses such as Internet Content Provider (ICP) and Permit for Cyber Culture Business Operations. As such licenses will be granted to foreign owned companies, setting up the VIE structure allows us to gain access to the target market,” said Mr. Yongke Xue, Chief Executive Officer and Chairman of Future Fintech.