UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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BOQI INTERNATIONAL
MEDICAL INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate
box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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3)
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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):
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4)
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Proposed maximum aggregate value of transaction:
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5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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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.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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PRELIMINARY PROXY STATEMENT – SUBJECT
TO COMPLETION
BOQI INTERNATIONAL MEDICAL INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY [ ], 2021
To Our Stockholders:
You are invited to attend the Annual Meeting
of Stockholders (the “Annual Meeting”) of BOQI International Medical Inc. (the “Company”) on May [
], 2021 at 9:00 a.m.(local time) at the Yuzhou Hotel, 168 Yuzhou Road, Yuzhong District, Chongqing, P. R. China,
for the following purposes:
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1.
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To elect the seven nominees named in the accompanying proxy statement to serve as directors of the Company until the next annual meeting of stockholders and until their respective successors have been duly elected and qualified;
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2
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To approve an amendment to the Company’s Certificate of Incorporation to change the name of the Company to BIMI International Medical Inc.;
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3
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To
approve, in accordance with Nasdaq Marketplace Rule 5635, the issuance of shares of the Company’s common stock to be issued upon
the (i) conversion of $3.3 million of newly issued senior secured convertible notes sold to two institutional investors (the “Institutional
Investors”) on February 28, 2021; (ii) exercise of warrants to purchase of up to 760,000 shares of the Company’s common stock
issued to the Institutional Investors; and (iii) exercise of warrants to initially purchase 173,745 shares of the Company’s common
stock, subject to increase, issued to the placement agent for the private placement of the senior secured convertible notes
and warrants to the Institutional Investors;
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4
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To approve, in accordance with Nasdaq Marketplace Rule 5635, the issuance of 4,600,000 shares of the Company’s common stock to the seller of Chongqing Guanzan Technology Co., Ltd (or her designated assignee(s)), as payment of the balance of the post-closing consideration;
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5.
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To approve, on an advisory basis, the compensation of the Company’s executive officers named in the accompanying proxy statement;
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6.
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To ratify the appointment of Audit Alliance LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021; and
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7.
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To transact such other business as may properly be brought before the Annual Meeting and any adjournment or postponement thereof.
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Stockholders of record at the close of business
on [ ], 2021 shall be entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. A stockholder
list will be available at our corporate offices beginning May 3, 2021 during normal business hours for examination by any stockholder
registered on our stock ledger as of the record date for any purpose germane to the Annual Meeting.
Your vote is important. Please submit a proxy
as soon as possible so that your shares can be voted at the Annual Meeting.
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By Order of the Board of Directors
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Tiewei Song
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Chief Executive Officer and President
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Dalian, China
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[ ],
2021
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Whether or not you plan to attend the Annual
Meeting, we encourage you to vote and submit your proxy by telephone, via the Internet or by mail. For additional instructions, voting
by telephone or via the Internet, please refer to the proxy card. To vote and submit your proxy by mail, please complete, sign and date
the enclosed proxy card and return it in the enclosed envelope. If you hold your shares through an account with a brokerage firm, bank
or other nominee, please follow the instructions you receive from them to vote your shares.
IMPORTANT NOTICE REGARDING
THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY
[ ], 2021
The Company’s Proxy Statement and Annual
Report on Form 10-K for the year ended
December 31, 2020 are available at www.usbimi.com.
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION
WITH THE SOLICITATION OF PROXIES BY THE COMPANY, ON BEHALF OF THE BOARD OF DIRECTORS, FOR THE 2021 ANNUAL MEETING OF STOCKHOLDERS. YOU
CAN VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
How to Vote Your
Shares
YOUR VOTE IS IMPORTANT.
Your shares can be voted at the Annual Meeting only if you are represented by proxy, please take the time to vote your proxy.
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ATTEND IN PERSON THE COMPANY’S 2021 ANNUAL MEETING OF STOCKHOLDERS AND
VOTE
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO
ATTEND THE MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE OR VOTE VIA THE INTERNET OR BY TELEPHONE.
ANY STOCKHOLDER ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY CARD.
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD ON MAY
[ ], 2021 — THE PROXY STATEMENT AND THE 2020 ANNUAL REPORT TO STOCKHOLDERS ARE AVAILABLE AT HTTP: WWW.USBIMI.COM.
If not attending the
meeting and voting in person, stockholders of record, or “registered stockholders,” can vote by proxy in the following three
ways:
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By Telephone:
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Call the toll-free number indicated on the enclosed
proxy card and follow the recorded instructions.
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Via the Internet:
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Go to the website indicated on the enclosed proxy card and
follow the instructions provided.
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By Mail:
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Mark your vote, date, sign and return the enclosed proxy
card in the postage-paid return envelope provided.
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If your shares are held beneficially in “street”
name through a nominee such as a financial institution, brokerage firm, or other holder of record, your vote is controlled by that institution,
firm or holder. Your vote by proxy may also be cast by telephone or via the Internet, as well as by mail, if your financial institution
or brokerage firm offers such voting alternatives. Please follow the specific instructions provided by your nominee on your voting instruction
card.
Please note, that if your shares are held beneficially
through a bank, broker or other nominee and you wish to vote at the Annual Meeting, you must obtain a proxy issued in your name from
the record holder.
TABLE OF CONTENTS
BOQI INTERNATIONAL MEDICAL INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY [ ], 2021
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS
AND THE ANNUAL MEETING
Q:
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Why am I receiving these materials?
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A:
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We are providing these proxy materials to you in connection with the solicitation
of proxies by the Board of Directors of our company (the “Board”) for our 2021 Annual Meeting of Stockholders, which
will take place on May [ ], 2021. As a stockholder of record, you are invited to attend the Annual Meeting and are entitled and requested
to vote on the items of business described in this proxy statement. This proxy statement and accompanying proxy card (or voting instruction
card) are being sent on or about May 14, 2021 to all stockholders entitled to vote at the Annual Meeting.
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Q:
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When and where will the Annual Meeting be held?
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A:
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The Annual Meeting will be held on May [ ], 2021 at 9:00 a.m.
local time, at the Yuzhou Hotel, 168 Yuzhou Road, Yuzhong District, Chongqing, P. R. China.
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Q:
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How do I attend the Annual Meeting?
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Only stockholders of record on the record date of [ ], 2021 (the “Record Date”)
are entitled to notice of, and to attend or vote at, the Annual Meeting. If you plan to attend the meeting in person, please bring
the following:
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Photo identification.
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Acceptable proof of ownership if your shares are held in “street name.”
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Street name means your shares
are held of record by brokers, banks, or other institutions. See below for additional information.
Acceptable proof of ownership is
either (a) a letter from your broker confirming that you beneficially owned shares of our common stock on the Record Date or (b) an account
statement showing that you beneficially owned shares of our common stock on the Record Date. If your shares are held in street name,
you may attend the meeting with proof of ownership, but you may not vote your shares in person at the Annual Meeting unless you have
obtained a “legal proxy” or other evidence from your broker giving you the right to vote your shares at the Annual Meeting.
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What information is contained in this proxy statement?
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A:
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This proxy statement contains information regarding our corporate governance practices,
our Board, our named executive officers, the compensation of our directors and named executive officers, the proposals to be voted
on at the Annual Meeting and certain other required information.
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Q:
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How may I obtain the Company’s Annual Report on Form 10-K for the year
ended December 31, 2020?
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We have enclosed with this proxy statement a copy of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2020. Our Annual Report on Form 10-K can also be accessed through our website. We filed our
Annual Report on Form 10-K for the fiscal year ended December 31, 2020 with the Securities and Exchange Commission (“SEC”)
on March 31, 2021. We sometimes refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as our 2020
Annual Report.
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Q:
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What items of business will be voted on at the Annual Meeting?
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A:
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The items of business scheduled to be voted on at the Annual Meeting are:
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1.
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To elect the seven nominees
named in this proxy statement to serve as directors of the Company until the next annual meeting of stockholders and until their
respective successors have been duly elected and qualified;
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2.
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To approve an amendment
to the Company’s Certificate of Incorporation to change the name of the Company to BIMI International Medical Inc.;
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3.
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To approve the pending
issuance of the Additional Institutional Investor Securities
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4.
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To approve the pending issuance of the Guanzan
Final Payment Shares;
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5.
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To approve, on an advisory basis, the compensation of the Company’s executive officers named
in this proxy statement;
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6.
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To ratify the appointment
of Audit Alliance LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021;
and
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7.
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To transact such other
business as may properly be brought before the Annual Meeting and any adjournment or postponement thereof.
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How many votes must the nominees for director have to be elected?
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A:
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In order for a director to be elected at a meeting at which a quorum is present,
the director must receive the affirmative vote of a plurality of the shares voted. There is no cumulative voting for our directors
or otherwise.
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Q:
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What are the voting requirements to approve the other proposals?
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A:
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The affirmative vote of a majority of the shares cast in person or represented by
proxy at the Annual Meeting and entitled to vote on the matter is required to approve each of the voting proposals in this proxy
statement, other than Proposals One, Two, Three and Four. With respect to Proposal One, the seven director nominees receiving the
highest number of affirmative votes will be elected. With respect to Proposals Two, Three and Four, the affirmative vote of
a majority of shares outstanding is required to approve the each of such proposals.
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Q:
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How does the Board recommend that I vote?
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A:
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The Board recommends that you vote your shares “FOR” all seven of the
director nominees; FOR” the approval of the amendment to the Company’s Certificate of Incorporation to change the name
of the Company to BIMI International Medical Inc; “FOR” the approval of the issuances of the Additional Institutional
Investor Securities and the Guanzan Final Payment Shares for the purposes of Nasdaq Listing Rule 5635; “FOR” the approval,
on an advisory basis, of the compensation of the executive officers named in this proxy statement; and “FOR” the ratification
of the appointment of Audit Alliance LLP as our independent registered public accounting firm.
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If you return a properly completed proxy card, or
vote your shares by telephone or Internet, your shares of common stock will be voted on your behalf as you direct. If not otherwise specified,
the shares of common stock represented by the proxies will be voted in accordance with the Board’s recommendations.
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What shares may I vote?
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A:
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Each share of our common stock $0.001 par value issued and outstanding as of the
close of business on the Record Date is entitled to one vote on each of the matters to be voted upon at the Annual Meeting.
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You may vote all shares owned by you
as of the Record Date, including (a) shares held directly in your name as the stockholder of record and (b) shares held for you as the
beneficial owner through a broker, trustee or other nominee. We had [ ] shares of common stock issued and outstanding on the Record Date.
Q:
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What is the difference between being a stockholder of record and being the beneficial
owner of shares held in street name?
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A:
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A stockholder of record owns shares which are registered in his or her own name.
A beneficial owner owns shares which are held in street name through a third party, such as a broker. As summarized below, there
are some distinctions between a stockholder of record and a beneficial owner.
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Stockholder of Record
You are the stockholder of record of
any of your shares registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC with respect
to such shares, these proxy materials are being sent to you by the Company. As the stockholder of record, you have the right to grant
your voting proxy directly to Mr. Tiewei, the Company’s Chief Executive Officer, or such other person you wish to
designate, or to vote in person at the Annual Meeting. We have enclosed a proxy card for you to grant your voting proxy to Mr. Tiewei
Song.
Shares Beneficially Held in Street
Name
You are the beneficial owner of any
of your shares held in street name. With respect to such shares registered through a broker, these proxy materials, together with a voting
instruction card, are being forwarded to you by your broker. As the beneficial owner, you have the right to direct your broker how to
vote. You may use the voting instruction card provided by your broker for this purpose. Even if you have directed your broker how to
vote, you may also attend the Annual Meeting. However, you may not vote your shares in person at the Annual Meeting unless you obtain
a “legal proxy” or other evidence from your broker giving you the right to vote the shares at the Annual Meeting.
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Who is entitled to attend the Annual Meeting and what are the admission procedures?
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A:
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You are entitled to attend the Annual Meeting only if you were a stockholder as
of the close of business on the Record Date or if you hold a valid proxy for the Annual Meeting. A list of stockholders eligible
to vote at the Annual Meeting will be available for inspection at the Annual Meeting. If you are a beneficial holder, you will need
to provide proof of beneficial ownership as of the Record Date, such as a brokerage account statement showing that you owned shares
of the Company’s common stock as of the Record Date or the voting instruction card provided by your broker. The Annual Meeting
will begin promptly at 9:00 a.m., local time. You should be prepared to present photo identification for admittance. Check-in will
begin one-half hour prior to the meeting. Please allow ample time for the admission procedures.
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Q:
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May I vote my shares in person at the Annual Meeting?
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A:
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If you were a stockholder of record on the Record Date, you may vote your shares
in person at the Annual Meeting or through a proxy. If you decide to vote your shares in person, you do not need to present your
share certificate(s) at the Annual Meeting; your name will be on the list of stockholders eligible to vote. If you hold your shares
beneficially in street name, you may vote your shares in person at the Annual Meeting only if you obtain a legal proxy or other evidence
from your broker giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you
also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend
the Annual Meeting.
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Q:
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How can I vote my shares without attending the Annual Meeting?
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A:
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Whether you hold shares directly as the stockholder of record or beneficially in
street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you
may vote by submitting a proxy. If you hold shares beneficially in street name, you may vote by submitting voting instructions to
your broker. For directions on how to vote, please refer to the instructions on your proxy card or, for shares held beneficially
in street name, the voting instruction card provided by your broker.
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Stockholders of record may submit proxies
by completing, signing, dating, and mailing their proxy cards to the address provided on the proxy card. Stockholders who hold shares
beneficially in street name may vote by completing, signing, and dating the voting instruction cards provided and mailing them to the
address provided on the voting instruction card. The proxy card and voting instruction card also include directions as to how you may
submit your vote through the Internet. The voting instruction card may also include directions for alternative methods of submitting
your vote. We encourage you to vote early. If you choose to vote by mail, please allow sufficient time for your proxy or voting instruction
card to reach our vote tabulator prior to the Annual Meeting.
Q:
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Who will count the votes?
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A:
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Votes at the Annual Meeting will be counted by an inspector of election, who will
be appointed by the Board.
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Q:
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What is the effect of not voting?
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A:
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If you are a stockholder of record and you do not cast your vote, no votes will
be cast on your behalf on any of the items of business at the Annual Meeting. If you are a stockholder of record and you properly
sign and return your proxy card, your shares will be voted as you direct. If no instructions are indicated on such proxy card and
you are a stockholder of record, shares represented by the proxy will be voted in the manner recommended by the Board on all matters
presented in this proxy statement, namely “FOR” all seven of the director nominees; “FOR” the approval of
the amendment to the Company’s Certificate of Incorporation to change the name of the Company to BIMI International Medical
Inc; “FOR” the approval of the issuance of the Additional Institutional Investor Securities and the Guanzan Final Payment
Shares (as described below); “FOR” the approval, on an advisory basis, of the compensation of the executive officers
named in this proxy statement; and “FOR” the ratification of the appointment of Audit Alliance LLP as our
independent registered public accounting firm.
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Generally, broker non-votes occur when
shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because
the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those
shares.
A broker is entitled to vote shares
held for a beneficial owner on routine matters. The ratification of the appointment of Audit Alliance LLP as our independent registered
public accounting firm in Proposal Six is a routine matter; and, accordingly, a broker is entitled to vote shares held for a beneficial
owner on this proposal without instructions from such beneficial owner. On the other hand, absent instructions from a beneficial owner,
a broker is not entitled to vote shares held for such beneficial owner on non-routine matters. We believe that the election of directors
in Proposal One, the approval of the amendment to the Certificate of Incorporation in Proposal Two, approval of the issuance of the Company’s
securities in Proposals Three and Four, and the advisory vote on executive compensation in Proposal Five, are non-routine matters; and,
accordingly, brokers do not have authority to vote on such matters absent instructions from beneficial owners. Accordingly, if beneficial
owners desire not to have their shares voted by a broker in a certain manner, they should give instructions to their brokers as to how
to vote their shares.
Broker non-votes count for purposes
of determining whether a quorum is present.
Q:
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How many votes are required for the approval of the proposals to be voted upon,
and how will abstentions and broker non-votes be treated?
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Proposal
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Votes Required
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Effect of Votes Withheld / Abstentions
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Effect of
Broker
Non-Votes
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Proposal One: Election of Directors
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Plurality of the votes cast. This means that the seven nominees receiving the highest
number of affirmative “FOR” votes will be elected as directors.
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Votes withheld will have no effect.
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Broker non-votes will have no effect.
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Proposal Two: Approval of Amendment to Certificate of Incorporation
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Affirmative vote of the holders of a majority of the shares of common stock outstanding.
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Abstentions will have the effect of a vote
against the proposal.
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We do not expect any broker non-votes on this proposal.
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Proposal Three: Approval of the Issuance of Additional Institutional Investor
Securities to the Institutional Investors and the Placement Agent
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Affirmative vote of the holders of a majority of the shares of common stock outstanding.
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Abstentions will have the effect of a vote
against the proposal.
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We do not expect any broker non-votes on this proposal.
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Proposal Four: Approval of the Issuance of the Guanzan Final Payment Shares
to the Seller or Her Designee(s)
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Affirmative vote of the holders of a majority of the shares of common stock outstanding.
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Abstentions will have the effect of a vote
against the proposal.
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We do not expect any broker non-votes on this proposal.
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Proposal Five: Advisory Vote on Executive Compensation
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Affirmative vote of the holders of a majority in voting power of the shares of common
stock present in person or by proxy and entitled to vote thereon.
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Abstentions will have the effect of a vote against the proposal.
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Broker non-votes will have no effect.
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Proposal Six: Ratification of Appointment of Independent Registered Public Accounting
Firm
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Affirmative vote of the holders of a majority in voting power of the shares of common
stock present in person or by proxy and entitled to vote thereon.
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Abstentions will have the effect of a vote against the proposal.
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We do not expect to receive broker non-votes on this proposal.
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Q:
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Can I revoke my proxy or change my vote after I have voted?
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A:
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You may revoke your proxy and change your vote by voting again or by attending the
Annual Meeting and voting in person. Only your latest dated proxy card received at or prior to the Annual Meeting will be counted.
However, your attendance at the Annual Meeting will not have the effect of revoking your proxy unless you forward written notice
to the Corporate Secretary at BOQI International Medical Inc.’s offices, or you vote by ballot at the Annual Meeting. If you
are a beneficial owner, you will need to request a legal proxy from your broker and bring it with you to vote at the Annual Meeting.
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Q:
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How many votes are required to hold the Annual Meeting?
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A:
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The presence, in person or by proxy, of the holders of one-third of the shares of
our common stock outstanding and entitled to vote on the Record Date is necessary to hold the Annual Meeting and conduct business.
This is called a quorum. Abstentions and broker non-votes will be considered as present at the Annual Meeting for purposes of establishing
a quorum.
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Q:
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Who will bear the cost of soliciting votes for the Annual Meeting?
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A:
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The Company is making this solicitation and will pay the entire cost of preparing,
printing, assembling, mailing, and distributing these proxy materials. In addition to the use of the mails, proxies may be solicited
by personal interview, telephone, electronic mail, and facsimile by directors, officers, and regular employees of the Company. None
of the Company’s directors, officers or employees will receive any additional compensation for soliciting proxies on behalf
of the Board. The Company may also make arrangements with brokerage firms and other custodians, nominees, and fiduciaries for the
forwarding of soliciting material to the beneficial owners of common stock held of record by those owners. The Company will reimburse
those brokers, custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses incurred in connection with that
service.
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Q:
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Where can I find the voting results of the Annual Meeting?
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A:
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We intend to announce preliminary voting results at the Annual Meeting and will
disclose final voting results in a Current Report on Form 8-K that will be filed with the SEC not more than four business days following
the Annual Meeting.
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PROPOSAL ONE
ELECTION OF DIRECTORS
There are seven nominees for election to the
Company’s Board. The names of the persons who are nominees for director and their positions and offices with the Company are set
forth in the table below. Each director to be elected will hold office until the 2022 Annual Meeting of Stockholders and until his or
her successor is elected and has qualified, or until such director’s earlier death, resignation or removal.
Directors are elected by a plurality of the votes
present in person or represented by proxy and entitled to vote at the Annual Meeting. Shares represented by executed proxies will be
voted, if authorization to do so is not withheld, for the election of the seven nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election of a substitute nominee
as the Board may propose. Each of the nominees listed below has been nominated for and has agreed to stand for election and management
has no reason to believe that any nominee will be unable to serve.
The following table provides information regarding
each nominee to our Board:
Name
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Age
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Position
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Yongquan Bi
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44
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Chairman
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Tiewei Song
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49
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Director, Chief Executive Officer and President
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Xiaoping Wang
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|
41
|
|
Director Nominee and Chief Operating Officer
|
Mia Kuang Ching
|
|
55
|
|
Independent Director, Chair of Audit Committee
|
Ju Li
|
|
42
|
|
Independent Director, Chair of Nominating Committee
|
Fengsheng Tan
|
|
56
|
|
Independent Director, Chair of Compensation Committee
|
Jianxi Wang
|
|
68
|
|
Director Nominee
|
Yongquan Bi has been a director in the
Company since his election in May 2018 and has been the Company’s Chairman since February 2019. He was the Company’s CEO
from February 2019 to September 2019. He was the founder and has served as the Chairman of the Board of the Boqi Xinhai Group since 2009.
Boqi Xinhai Group operates in multiple industries including automobile and grocery stores. He also serves as a director of BIQI International
Holdings Corp., which is in the business of breeding, raising, and selling hogs for use in China’s pork production. In 2015, Mr.
Bi participated in the senior class of investment and financing of Chinese enterprises in Tsinghua University. Mr. Bi has more than 15
years of industry experience in the financial sector.
Tiewei Song was elected to the Board on
May 18, 2018. He was appointed as the Company’s CEO and President in October 2019. Mr. Song previously served as both the president
and director of Shenyang Langzi Investment Management Co., Ltd., an asset management consulting firm, which he has held since December
2012. From July 2008 to July 2013, Mr. Song was the chief representative of German Varengold Bank in China. From October 1999 to May
2008, Mr. Song was the executive director and president of Liaoning Jiachang Group. He also serves as a director of BIQI International
Holdings Corp. Mr. Song graduated from Peking University with bachelor’s and master’s degrees in mathematics.
Xiaoping Wang has been the Chief Operating
Officer of the Company since February 2020. He is supervising the Company’s retail pharmacy, wholesale pharmaceuticals and wholesale
medical devices segments. From July 2014 to January 2020, he served as the Supervisor of Chongqing Guanzan Technology Co., Ltd. and the
General Manager of Chongqing Shude Pharmaceutical Co., Ltd. From October 2004 to June 2014, he was the President of Sales and later the
President of National Sales at Fujian Hongcheng Bio-Medical Co., Ltd.. Mr. Wang graduated from Chongqing Pharmaceutical High Level Specialty
School and holds an MBA degree from Chongqing Normal University.
Mia Kuang Ching has served as a director
of the Company since August 2009 and is Chairman of the Audit Committee. Since October 2013 he has served as the Managing Director of
Le Yu Corporate Advisory Pte Ltd., a human resources consulting firm. From January 2012 to October 2013, he worked as an M&A consultant.
May 2001 until December 2, 2011 he was the managing partner of SBA Stone Forest Corporate Advisory (Shanghai) Co., Ltd. From 1997 to
2000, he was the Chief Accountant of Dalian Container Terminal, a joint venture formed by PSA Corporation of Singapore and the Port of
Dalian Authority. From 1994 to 1997, he was the Group Financial Controller of Fullmark Pte. Ltd., and responsible for operations in China,
Hong Kong, Malaysia and Vietnam and was in-charge of strategic investment, group financing and mergers and acquisitions. From 1992 to
1994 he was a Regional Accountant (South Europe) of Singapore Airlines. Mr. Ching graduated from the National University of Singapore
with a bachelor’s degree in accountancy.
Ju Li has served as a director of the
Company since January 2019. From January 2017 to present, Mr. Li has served as the General Manager of Oxxas GmbH, a clothing retailer,
responsible for the company’s daily operation, including creating the company’s business plans and promoting the company’s
business. From April 2015 to February 2017, Mr. Li was the general manager of Asia Pacific at Sensus Asset Management Co., Ltd. an asset
management firm. From March 2009 to February 2015, Mr. Li was the general manager of Asia Pacific at Varengold Bank. He has extensive
financial investment and enterprise management experience. Mr. Li holds a B.A. degree from the Bremen University of Applied Sciences,
Germany.
Fengsheng Tan has served as a director
of the Company since May 18, 2018. He has been a lawyer with Liaoing New Century law firm since February 2005. From January 1997 to January
2005 he was a lawyer with Liaoing Asia-Pacific Law Firm. Mr. Tan graduated from the law faculty of Liaoning University and has more than
20 years’ experience as a lawyer.
Jianxin Wang previously served as an independent
director of the Company from September 2009 through January 2019. Since January 2017, Mr. Wang has been the President of Sparkles International
Development Corp, a Virginia based consulting firm that he founded in June 1993. He was the General Manager of China Thermal Energy Investment
Corp., an Chinese urban energy supplier, from December 2013 to December, 2015, and the Vice President and director of the International
Fund at China’s Environment, a Washington D.C. based non-profit organization from January 2013 to December 2016. He served as the
General Manager of Gaoping Ronggao PV Solar Development Co., Ltd,, a Chinese manufacturer of PV solar energy cells, from September 2011
to December 2013. He was a Senior Advisor to China Development Bank from August 2010 to August 2012. . Mr. Wang received a M.S. degree
in Science from Florida State University in 1988 and a B.A degree in English from Beijing Foreign Studies University in 1983.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” ALL OF THE
NOMINEES IN PROPOSAL ONE
CORPORATE GOVERNANCE
Board Leadership
Structure
The Board considers and establishes the appropriate
leadership structure for the Company.
Independence of the Board of Directors
As required under the listing standards of the
Nasdaq Stock Market, a majority of the members of a listed company’s board of directors must qualify as “independent,”
as affirmatively determined by the board of directors. The Company’s Board consults with the Company’s counsel to ensure
that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition
of “independent,” including those set forth in pertinent listing standards of the Nasdaq Stock Market, as are in effect from
time to time.
We undertook a review of the independence of
our directors and, using the definitions and independence standards for directors provided in the rules of The NASDAQ Stock Market, considered
whether any director has a material relationship with us that could interfere with his or her ability to exercise independent judgment
in carrying out their responsibilities. As a result of this review, we determined that Mia Kuang Ching, Ju Li and Fengsheng Tan were
“independent directors” as defined under the rules of The NASDAQ Stock Market.
Committees of the Board of Directors
The Board has established three standing committees: an Audit Committee,
a Compensation Committee and a Nominating Committee. The members of each committee qualify as “independent” under the rules
and regulations of the SEC and the Nasdaq Stock Market.
Audit Committee
The current members of our audit committee are
Mia Kuang Ching (Chair), Ju Li and Fengsheng Tan, each of whom we believe satisfies the independence requirements of the Securities and
Exchange Commission. We believe Mr. Ching is qualified as an audit committee financial expert under the regulations of the SEC by
reason of his work experience. Our audit committee assists our Board in its oversight of:
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●
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The integrity of our financial statements;
|
|
●
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Our independent registered public accounting firm’s qualifications and independence;
and
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●
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The performance of our independent auditors.
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The Audit Committee’s charter is available
in the Company Governance Documents section of the Investor Relations section of the Company’s website at: www.usbimi.com.
Compensation Committee
The current members of our compensation committee
are Fengsheng Tan (Chair), Mia Kuang Ching and Ju Li. The Compensation Committee reviews and, as it deems appropriate, recommends to
the Board policies, practices and procedures relating to the compensation of the Company’s executive officers and other managerial
employees, including the determination, in its discretion, of the amount of annual bonuses, if any, for our executive officers and other
professionals. The Compensation Committee advises and consults with our senior executives as may be requested regarding managerial personnel
policies.
The Compensation Committee’s charter is
available in the Company Governance Documents section of the Investor Relations section of the Company’s website at: www.usbimi.com.
Nominating Committee
The current members of our nominating committee
are Ju Li (Chair), Mia Kuang Ching and Fengsheng Tan.
The Nominating Committee identifies and recommends
nominees to the Board and oversees compliance with our corporate governance guidelines. The Nominating Committee is responsible for assembling
for stockholder consideration a group of nominees that, taken together, have the experience, qualifications, attributes, and skills appropriate
for functioning effectively as a Board. The Nominating Committee reviews the composition of the Board in light of the Company’s
changing requirements, its assessment of the Board’s performance, and the inputs of stockholders and other key constituencies.
While the Nominating Committee has not adopted
specific minimum criteria for director nominees, the Committee looks for certain characteristics common to all board members, including
integrity, strong professional reputation and record of achievement, constructive and collegial personal attributes, and the ability
and commitment to devote sufficient time and energy to Board service.
In addition, the Nominating Committee seeks to
include on the Board a complementary mix of individuals with diverse backgrounds and skills that can help the Board to meet the broad
set of challenges that it confronts. These individual qualities can include matters like experience in the Company’s industry,
technical experience (for example, financial or technological expertise), experience gained in situations comparable to the Company’s,
leadership experience, and relevant geographical experience. The Committee does not assign specific weights to particular criteria and
no particular criterion is necessarily applicable to all prospective nominees.
The following is a brief description of the specific
experience and qualifications, attributes or skills of each director that led to the conclusion that such person should serve as a director
of the Company:
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●
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The Board believes that Mr. Bi’s diverse work experience, his education, and
his demonstrated leadership ability qualify him to serve as our Chairman.
|
|
●
|
Mr. Tiewei Song’s qualifications to serve on our Board include his experience
in capital raising and business management.
|
|
●
|
Mr. Mia Kuang Ching’s qualifications to serve on our Board include his years
of business experience and his familiarity with financial accounting matters.
|
|
●
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Mr. Ju Li’s qualifications to serve on our Board include his financial investment
and enterprise management experience.
|
|
●
|
Mr. Fengsheng Tan’s qualifications to serve on our Board include his legal
and corporate governance background.
|
The Nominating Committee will consider all bona
fide candidates for election to the Board and will consider any stockholder nominations pursuant to the same criteria, provided those
nominated are submitted in accordance with applicable law and within the time periods set forth herein for receipt of stockholder proposals
for the 2021 Annual Meeting of Stockholders. To date, the Company has not received any recommendations from stockholders for candidates
for inclusion in the committee’s slate of nominees.
The Nominating
Committee’s charter is available in the Company Governance Documents section of the Investor Relations section of the Company’s
website at: www.usbimi.com.
Meetings of the Board of Directors
The Board met seventeen (17) times during 2020
and acted four (4) times by unanimous written consent. All directors attended all the meetings of the Board held during 2020.
We expect that all of our directors will attend
the 2021 Annual Meeting of Stockholders. We do not maintain a formal policy regarding director attendance at our annual meeting of stockholders.
The Board’s Role in Risk Oversight
The Board has an active role, as a whole and
also at the committee level, in overseeing management of the Company’s risks. The Board regularly reviews information regarding
the Company’s credit, liquidity and operations, as well as the risks associated with each. The Compensation Committee is responsible
for overseeing the management of risks relating to the Company’s executive compensation arrangements. The Audit Committee oversees
management of financial risks. The Nominating Committee manages risks associated with the independence of the Board and potential conflicts
of interest of director nominees. While each committee is responsible for evaluating certain risks and overseeing the management of such
risks, the entire Board is regularly informed through committee reports about such risks.
Stockholder
Communications with the Board of Directors
The Company’s corporate governance policies
set forth a process by which stockholders and other interested third parties can send communications to the non-management members of
the Board. When stockholders or other interested third parties have concerns, they may make them known to the non-management directors
by communication to: tiantian@botijituan.com. All such correspondence is provided to the independent directors at, or prior to, the next
regular Board meeting.
Code of Business
Conduct and Ethics
The Company has adopted a Code of Business Conduct
and Ethics that applies to all officers, directors, employees, consultants and advisors. The Code of Business Conduct and Ethics is available
in the Company Governance Documents section of the Investor Relations section of the Company’s website at www.usbimi.com.
If the Company makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the
Code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
BOQI International Medical Inc. is a “smaller
reporting company” under the rules promulgated by the SEC and the Company complies with the disclosure requirements applicable
to smaller reporting companies. This executive compensation summary is not intended to meet the “Compensation Discussion and Analysis”
disclosure required of larger reporting companies.
We agreed to pay our Chief Executive Officer,
Mr. Tiewei Song, a salary of $500,000 each year starting in October 2019. We paid Mr. Song $0 and $28,992 in 2020 and 2019, respectively.
We paid our Chief Financial Officer, Jun Jia, a salary of RMB 240,000 (approximately $38,000) in 2020. We did not provide any compensation
to Mr. Xiaoping Wang, our Chief Operating Officer for the year ended December 31, 2020,
Employment Agreements, Termination of Employment
and Change-in-Control Arrangements
Except as described below, we currently have
no employment agreements with any of our executive officers, nor any compensatory plans or arrangements resulting from the resignation,
retirement or any other termination of any of our executive officers, from a change-in-control, or from a change in any executive officer’s
responsibilities following a change-in-control.
Agreement with Mr. Tiewei Song
The Company entered into an employment agreement
(the “Song Agreement”) with Mr. Tiewei Song dated October 1, 2019, under which Mr. Song will serve as our Chief Executive
Officer for a term of two years commencing October1, 2019 with base annual cash compensation of $500,000. During the term of employment,
Mr. Song will perform the duties as are commensurate and consistent with his position and will devote his full working time, attention
and efforts to the Company and to discharging the responsibilities of his position, and such other duties as may be assigned from time
to time by the Company, which relate to the business of the Company and are reasonably consistent with his position. During the term
of employment, Mr. Song will not engage in any business activity that, in the reasonable judgment of the board of directors of the Company,
conflicts with his duties under the Song Agreement, whether or not such activity is pursued for gain, profit or other advantage.
The Song Agreement and employment thereunder
may be terminated (1) automatically upon the death or Total Disability (as defined in the Song Agreement) of Mr. Song, (2) without Cause
by the Company or for Good Reason (both as defined in the Song Agreement) by Mr. Song, in which case Mr. Song shall be entitled to receive
termination payments and benefits, including without limitation, an amount equal to six (6) months’ salary, unpaid salary earned
through the date of termination and unused vacation that has accrued and would be payable under the Company’s standard and other
benefits, or (3) in connection with a Change of Control (as defined in the Song Agreement), in which case Mr. Song shall be entitled
to receive a change in control severance payment in the amount equal to $10,000,000, and other benefits.
Compensation of Directors
As at December 31, 2020, we had four non-employee
directors, of whom only Mr. Mia Kuang Ching has received compensation, as set forth in the table below. Other non-employee directors
received no compensation for their services as directors. Directors who are also employees of the Company and/or its subsidiaries received
no additional compensation for their services as directors:
Name
|
|
Compensation
|
|
|
Other
Fees
|
|
|
Total
|
|
Mia Kuang Ching
|
|
$
|
24,000
|
|
|
|
-
|
|
|
$
|
24,000
|
|
Outstanding Equity Awards at December 31,
2020
We have not implemented a stock option plan at
this time and since inception, we have not issued any stock options, stock appreciation rights or other equity awards to our executive
officers. We may decide, at a later date, and reserve the right to, initiate such a plan or plans as deemed appropriate by the Board.
Pension Benefits
We have not entered into any pension benefit
agreements with any of our executive officers or directors. We contribute to the social insurance for our employees each month, which
includes pension, medical insurance, unemployment insurance, occupational injuries insurance and housing provision funds in accordance
with PRC regulations.
Compensation Committee Interlocks and Insider
Participation
None of the Company’s executive officers
served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity,
the executive officers of which served as a director of the Company or member of the Compensation Committee during 2020.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding
beneficial ownership of our common stock as of March 30, 2021 for: (i) each stockholder known by us to be the beneficial owner of more
than 5% of the outstanding shares of our common stock; (ii) each of our directors and director nominees; (iii) each of our named executive
officers; and (iv) all of our directors and executive officers as a group:
Name and Address of Beneficial Owner(s)(2)
|
|
Amount and
Nature of
Beneficial
Owner(s) (1)
|
|
|
Percentage
of Beneficial
Ownership
|
|
Yongquan Bi, Chairman
|
|
|
1,500,000
|
|
|
|
7.45
|
%
|
Gang Li (3)
|
|
|
1,899,409
|
|
|
|
9.44
|
%
|
Yu Zhang (4)
|
|
|
1,100,000
|
|
|
|
5.46
|
%
|
Tiewei Song, Director, Chief Executive Officer and President
|
|
|
-
|
|
|
|
—
|
|
Jun Jia, Chief Financial Officer
|
|
|
-
|
|
|
|
—
|
|
Xiaoping Wang, Chief Operating Officer
|
|
|
-
|
|
|
|
—
|
|
Mia Kuang Ching, Director
|
|
|
-
|
|
|
|
—
|
|
Fengsheng Tan, Director
|
|
|
-
|
|
|
|
—
|
|
Ju Li, Director
|
|
|
-
|
|
|
|
|
|
All officers and directors as a group (7 persons)
|
|
|
4,499,409
|
|
|
|
22.35
|
%
|
(1)
|
Pursuant to Rule 13-d-3 under the Securities Exchange Act of 1934, as amended, beneficial ownership
of a security consists of sole or shared voting power (including the power to vote or direct the voting) and/or sole or shared investment
power (including the power to dispose or direct the disposition) with respect to a security whether through a contract, arrangement,
understanding, relationship or otherwise. Unless otherwise indicated, each person indicated above has sole power to vote, or dispose
or direct the disposition of all shares beneficially owned.
|
|
(2)
|
Unless as otherwise set forth in the table, the address of each
beneficial owner is c/o BOQI International Medical Inc., at Room 3601, Building A, Harbour View Place, No. 2 Wuwu Road, Zhongshan District,
Dalian, Liaoning Province, P. R. China.
|
|
(3)
|
The address of Gang Li is No. 7, South Huanghe Road, Huanggu District,
Shenyang City, Liaoning Province, P. R. China.
|
|
(4)
|
The address of Yu Zhang is No. 4-27, Taipingguo Road, Pulandian
City, Liaoning Province, P. R. China.
|
Certain Relationships and Related Transactions
Amount
due to related parties
As of December 31, 2020 and 2019, the total amounts
payable to related parties was $226,514 and $382,037, respectively, which included:
|
1.
|
Amount payable to Mr. Yongquan Bi, the former Chief Executive Officer and current Chairman of the
Board of Directors of our company, of $29,566 and $376,639, as of December 31, 2020 and 2019, respectively, free of interest and
due on demand. The amounts represent the remaining balance that Mr. Bi advanced for third party services on behalf of our company
during the ordinary course of business in 2020 and 2019, respectively.
|
|
2.
|
Amount payable to Mr. Yongjian Zhang, one of the directors of Nengfa Technology, of $0 and $4,681,
as of December 31, 2020 and 2019, respectively, free of interest and due on demand. The amount was advanced in several transactions
for our daily operating expenditures during 2019.
|
|
3.
|
Amount payable to Mr. Fuqing Zhang, the Chief Executive Officer of Xinrongxin of $184,370 and $717,
as of December 31, 2020 and 2019, respectively, free of interest and due on demand. The amount due to Mr. Fuqing Zhang relates to
reimbursable operating expenses that we owed to Mr. Fuqing Zhang during and before the acquisition of Boqi Zhengji.
|
|
4.
|
Amount payable to Mr. Youwei Xu, the financial manager of Xinrongxin of $12,578 and $0, as of December
31, 2020 and 2019, respectively, free of interest and due on demand. The amount due to Mr. Youwei Xu, relates to reimbursable operating
expenses that the we owed to Mr. Fuqing Zhang during and before the acquisition of Boqi Zhengji.
|
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act
of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class
of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes
in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5
respectively. Executive officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission
regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received
by us, or written representations that no other reports were required, and to the best of our knowledge, Jun Jia, Ju Li and Fengsheng
Tan have not filed Forms 3 with the SEC in a timely manner.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD
OF DIRECTORS*
The Audit Committee oversees the Company’s
financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting
process, including the systems of internal control over financial reporting and disclosure controls and procedures. In fulfilling its
oversight responsibilities, the Audit Committee reviewed the audited financial statements included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2020, as amended, with management, including a discussion of the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee is responsible for reviewing,
approving and managing the engagement of the Company’s independent registered public accounting firm, including the scope, extent
and procedures of the annual audit and compensation to be paid therefore, and all other matters the Audit Committee deems appropriate,
including the Company’s independent registered public accounting firm’s accountability to the Board and the Audit Committee.
The Audit Committee reviewed with the Company’s independent registered public accounting firm, which is responsible for expressing
an opinion on the conformity of audited financial statements with generally accepted accounting principles, its judgment as to the quality,
not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with
the audit committee under auditing standards generally accepted in the United States, including those described in Statement on Auditing
Standards No. 61, as amended, “Communication with Audit Committees,” and discussed and reviewed the results of the Company’s
independent registered public accounting firm’s examination of the financial statements. In addition, the Audit Committee discussed
with the Company’s independent registered public accounting firm the independent registered public accounting firm’s independence
from management and the Company, including the matters in the written disclosures and the letter regarding its independence as required
by the applicable requirements of the Public Company Oversight Board regarding the independent accountant’s communications with
the audit committee concerning independence. The Audit Committee also considered whether the provision of any non-audit services was
compatible with maintaining the independent registered public accounting firm’s independence.
The Audit Committee discussed with the Company’s
independent registered public accounting firm the overall scope and plans for its audits, and received from them written disclosures
and letter regarding their independence. The Audit Committee meets with the Company’s independent registered public accounting
firm, with and without management present, to discuss the results of its examinations and the overall quality of the Company’s
financial reporting. The Audit Committee held four (4) meetings during the fiscal year ended December 31, 2020.
In reliance on the reviews and discussions referred
to above, the Audit Committee recommended to the Board (and the Board approved) that the audited financial statements be included in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the SEC. The Audit Committee retained
Audit Alliance LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.
Audit Committee:
Mia Kuang Ching
Fengsheng Tan
Ju Li
PROPOSAL
TWO—APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO
CHANGE THE COMPANY’S NAME
Background
When we acquired Boqi Zhengji Pharmacy Chain
Co., Ltd. (“Boqi Zhengji”) in 2019 as our first step to shift our focus from the energy sector to the healthcare business,
we changed our company name from NF Energy Saving Corporation to BOQI International Medical Inc. to better reflect the Company’s
new focus, upon stockholder approval at our 2019 Annual Meeting.
Shortly after the acquisition, however, the business
of Boqi Zhengji was severely impacted by the spread of coronavirus, or COVID-19, and its revenues plummeted. The COVID-19 pandemic caused
the pharmacy stores to record almost no sales for several months due to the national shutdown order and other government orders specifically
targeting OTC drugs. While we offered support to Boqi Zhengji, our efforts failed to help improve Boqi Zhengji’s poor performance.
To avoid exposing our other business to further risks and potential joint liabilities, we sold Boqi Zhengji in December 2020, the official
record date of which was updated in February 2, 2021, due to the Chinese government’s alternative working schedule and other delays
caused by COVID-19.
The Board believes that the Company’s current
name BOQI International Medical Inc. reflects a divested business line and is outdated, and a new company name that better describes
us as a group company is advisable. The proposed new company name BIMI International Medical Inc. is consistent with our NASDAQ ticker
symbol “BIMI.”
Text of the Proposed Charter Amendment
We propose that Section 1 of our Certificate
of Incorporation be amended to read in its entirety as follows:
FIRST. The name of this corporation shall be:
BIMI International Medical Inc.
Purpose of the Proposed Charter Amendment
The Board believes that it is advisable and it
is in the best interests of our Company and our stockholders that the Company’s name be changed to BIMI International Medical Inc.,
to accurately reflect us as a group company.
Timing of the Proposed Charter Amendment
If the proposed amendment to our Certificate
of Incorporation is approved by our stockholders, it will become effective immediately upon the filing of a Certificate of Amendment
to our Certificate of Incorporation with the Secretary of State of the State of Delaware, which we expect to file promptly after the
Annual Meeting. If the proposed amendment is not approved by our stockholders, the name of the Company will remain unchanged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” APPROVAL OF THE amendment to
our Certificate of Incorporation to change the Company’s name to BIMI
International Medical Inc.
PROPOSAL THREE—APPROVAL OF PENDING
ISSUANCE OF
ADDITIONAL INSTITUTIONAL INVESTOR SECURITIES
Overview
On May 18, 2020, the Company entered into a Securities
Purchase Agreement (the “SPA”) with CVI Investments Inc. and Hudson Bay Master Fund Ltd. (each an “Institutional Investor”
or “Holder” and collectively the “Institutional Investors” or the “Holders”) to sell a new series
of senior secured convertible notes of the Company in a private placement. The Company entered into the SPA to obtain needed financing.
Pursuant to the SPA, convertible notes in an
aggregate original principal amount of $4,450,000 (the “Original Notes”) were issued to the Holders on June 2, 2020 in a
private placement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933,
as amended (the “1933 Act”), and Rule 506(b) of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act, together with the issuance of warrants to acquire an aggregate
of 1,300,000 shares of Common Stock at an initial exercise price of $2.845 per share (the “Original Warrants”). The placement
agent received warrants (the “Initial Placement Agent Warrants”) to purchase up to 171,845 shares of Common Stock, at an
initial exercise price of $2.845 per share.
Pursuant to the SPA, additional convertible notes
(the “Base Additional Notes”) in an aggregate original principal amount not to exceed $2,100,000 (the “Base Amount
of the Additional Note”) could also be issued to the Institutional Investors at a later date under certain circumstances. The Common
Stock issuable upon conversion of the Original Notes and the Base Additional Notes and upon exercise of the Original Warrants and the
Original Placement Agent Warrants are hereinafter collectively referred to as the “Original Securities”).
Pursuant to Nasdaq Rule 5635, stockholder approval
is required prior to the issuance of securities in a transaction, other than a public offering, involving the sale, issuance or potential
issuance by the Company of its Common Stock (or securities convertible into or exercisable for Common Stock), which alone or together
with sales by officers, directors or substantial shareholders of the company, equals 20% or more of the Common Stock or 20% or more of
the voting power outstanding before the issuance, at a price less than the lower of: (i) the closing price immediately preceding the
signing of the binding agreement, or (ii) the average closing price of the common stock for the five trading days immediately preceding
the signing of the binding agreement for the transaction.
Accordingly, the issuance of the Original Securities
was voted on at our 2020 Annual Meeting, at which time our stockholders approved the issuance of the Original Securities.
On February 24, 2021, the Company entered into
an amendment to the SPA (the “Amendment”) with the Institutional Investors to increase the Base Amount of the Additional
Notes to be sold to them by $3,300,000 to $5,400,000. On February 26, 2021 (the “2021 Closing Date”), two previously approved
Base Additional Notes in the aggregate original principal amount of $2,100,000 and two notes in the aggregate amount of $3,300,000 (the
“Excess Additional Notes”, together with the Base Additional Notes, the “2021 Notes”) were issued to the Institutional
Investors in a private placement (the “2021 Private Placement”) in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of 1933 Act and Regulation D, together with the issuance of warrants to acquire an aggregate of 760,000 shares
of our Common Stock at an initial exercise price of $2.845 per share. The placement agent for the 2021 Private Placement received warrants
to purchase up to 173,745 shares of Common Stock, at an initial exercise price of $2.845 per share. The Common Stock issuable upon conversion
of the Excess Additional Notes and upon exercise of the warrants to acquire 760,000 shares of Common Stock and the warrants to acquire
up to 173,745 shares of Common Stock are hereinafter collectively referred to as the “Additional Institutional Investor Securities”.
Pursuant to the terms of the Amendment, the Additional
Institutional Investor Securities may not be issued unless the Company obtains the approval of its stockholders. Accordingly, the Company
agreed to hold a stockholder meeting, by no later than May 30, 2021, to approve resolutions authorizing the issuance of all of the Additional
Institutional Investor Securities issuable pursuant to the Amendment for the purpose of gaining compliance with Nasdaq Rule 5635.
Accordingly, at the 2021 Annual Meeting, you
are being asked to approve the issuance of the Additional Institutional Investor Securities.
The 2021 Private Placement
The Base Additional Notes were sold to the Institutional
Investors in the aggregate principal amount of $2,100,000 with an aggregate original issue discount of 19.85%, and ranked senior to all
outstanding and future indebtedness of the Company. The Base Additional Notes were sold with an original issue discount and do not bear
interest except upon the occurrence of an event of default.
The Excess Additional Notes were sold to the
Institutional Investors in the aggregate principal amount of $3,300,000 with an aggregate original issue discount of 16.67%, and ranked
senior to all outstanding and future indebtedness of the Company. The Excess Additional Notes were sold with an original issue discount
and do not bear interest except upon the occurrence of an event of default.
The 2021 Notes mature on the eighteen-month anniversary
of the issuance date, are payable by the Company in installments and are convertible at the election of the Institutional Investors as
more fully described below.
The Company will use the proceeds from the sale
of the 2021 Notes for general corporate purposes, but, will not use the funds directly or indirectly, for (i) the satisfaction of any
outstanding indebtedness of the Company or any of its subsidiaries, (ii) the redemption or repurchase of any securities of the Company
or any of its subsidiaries, or (iii) the settlement of any outstanding litigation.
Under the terms of the 2021 Notes:
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The Base Additional Notes are convertible at any time or times, and the Excess Additional Notes at
any time or times after the 2021 Stockholder Approval Date (as defined below), in whole or in part, at the option of the holders
thereof, into shares of Common Stock at a rate equal to the amount of principal, interest (if any) and unpaid late charges (if any),
divided by a conversion price of $2.59.
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Commencing on the six-month anniversary of the 2021 Closing Date, we shall repay the 2021 Notes every
month by converting 1/13th of the principal amount thereof into shares of Common Stock, subject to the satisfaction of certain equity
conditions, or, at our option, in cash. Such conversion of the 2021 Notes into Common Stock will be made at a 22% discount to
the lowest volume weighted average price of the Common Stock during the prior 10 trading days, subject to a floor of $0.554 with
respect to the Base Additional Note, and a floor of $0.372 with respect to the Excess Additional Note.
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Under the terms of the newly issued warrants:
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The warrants are exercisable at any time or times after the Stockholder Approval Date in whole or
in part, at the option of the holders thereof, for shares of Common Stock at an initial exercise price of $2.845 per share.
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Notwithstanding the foregoing, as further described
below, the Institutional Investors are prohibited from converting the 2021 Notes or exercising the newly issued warrants, and any payments
of interest and principal in shares of the Common Stock will be held in abeyance, to the extent a Holder would beneficially own more
than 4.99% (or 9.99%, if the Holder elects the higher threshold) of the Company’s outstanding shares of Common Stock after such
conversion or payment.
The Securities Purchase Agreement
The SPA, as amended, contains certain representations
and warranties, covenants and indemnities customary for similar transactions. Under the SPA, as amended, the Company agreed to hold a
stockholder meeting, by no later than May 30, 2021 (the “2021 Stockholder Approval Date”), to approve resolutions (the “Stockholder
Resolutions”) authorizing the issuance of shares of Common Stock upon conversion of the Excess Additional Notes and exercise of
the newly issued warrants for the purpose of compliance with the stockholder approval rules of the Nasdaq Stock Market (the “Stockholder
Approval”). If such approval is not received by May 30, 2021 the Company will be obligated to continue to seek stockholder approval
by July 31, 2021 and every six months thereafter until such approval is obtained.
The 2021 Notes
Maturity and Repayment Dates
The 2021 Notes mature eighteen-months after February
26, 2021 (the “Maturity Date”), the date on which they were issued (the “Issuance Date”). The principal amount
is payable in equal installments of 1/13th of the principal amount beginning on the six-month anniversary of the Issuance
Date and each month thereafter until the Maturity Date. The 2021 Notes are convertible into Common Stock or may be repaid in cash and
the Company may not prepay any portion of the principal amount nor interest, if any.
Interest
The 2021 Notes were sold with an original issue
discount and do not bear interest except upon the occurrence of an Event of Default (described below), in which event the applicable
rate will be 13.00% per annum.
Conversion
The Base Additional Notes are convertible at
any time or times, and the Excess Additional Notes at any time or times after the 2021 Stockholder Approval Date (as defined below),
in whole or in part, at the option of the holders thereof, into shares of Common Stock at a rate equal to the amount of principal, interest
(if any) and unpaid late charges (if any), divided by a conversion price of $2.59.
Commencing on the six-month anniversary of the
2021 Closing Date, we shall repay the 2021 Notes every month by converting 1/13th of the principal amount thereof into shares of Common
Stock, subject to the satisfaction of certain equity conditions, or, at our option, in cash. Such conversion of the Convertible Notes
into Common Stock will be made at a 22% discount to the lowest volume weighted average price of the Common Stock during the prior 10
trading days, subject to a floor of $0.554 with respect to the Base Additional Note, and a floor of $0.372 with respect to the Excess
Additional Note (each of such floor, the “Floor Price”). The Conversion Price is subject to standard adjustments in the event
of any stock split, stock dividend, stock combination, recapitalization or other similar transaction.
If the Company enters into any agreement to issue
(or issue) any variable rate securities, the Holders have the additional right to substitute such variable price (or formula) for the
conversion price.
In connection with the occurrence of Events of
Default, the Holders of 2021 Notes will be entitled to convert all or any portion of the 2021 Notes at an alternate conversion price
equal to the lower of (i) the conversion price then in effect, and (ii) the lower of (A) 70% of the lowest volume weighted average price
(“VWAP”) of the Common Stock during the ten (10) consecutive trading day period ending and including the trading day immediately
preceding the delivery or deemed delivery of the applicable notice of conversion and (B) 70% of the VWAP of the Common Stock as of the
date of the delivery or deemed delivery of the applicable notice of conversion, but not less than the Alternate Conversion Floor Amount,
which is the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the trading day
immediately preceding the relevant Alternate Conversion Date (as defined) and (II) the applicable Alternate Conversion Price (as defined)
and (B) the difference obtained by subtracting (I) the number of shares of Common Stock to be delivered to the holder on the applicable
delivery deadline with respect to such Alternate Conversion Price from (II) the quotient obtained by dividing (x) the applicable Conversion
Amount (as defined) that the Holder has elected to be the subject of the applicable Alternate Conversion, by (y) the applicable Alternate
Conversion Price without giving effect to clause (x) of such definition (i.e. the Floor Price).
Conversion Limitation and Exchange Cap
The Holders of the 2021 Notes will not have the
right to convert any portion of the 2021 Notes, to the extent that, after giving effect to such conversion, such Holder (together with
certain related parties) would beneficially own in excess of 4.99% of the shares of our Common Stock outstanding immediately after giving
effect to such conversion. A Holder may from time to time increase this limit to 9.99%, provided that any such increase will not be effective
until the 61st day after delivery of a notice to the Company of such increase.
In addition, the Excess Additional Notes may
not be converted until such time as the Company shall have obtained Stockholder Approval.
Events of Default
Events of Default include: (i) the failure of
the applicable registration statement (the “Registration Statement”) for the shares issuable upon conversion of the 2021
Notes and exercise of the newly issued warrants to be filed with the SEC; (ii) the failure of the Company to maintain the effectiveness
of the Registration Statement; (iii) suspension of trading of the Common Stock of our company on a national securities exchange for five
days; (iv) uncured conversion failure; (v) failure by the Company to maintain required share allocations for the conversion of the 2021
Notes and the exercise of the newly issued warrants; (vi) failure by the Company to pay Principal when due; (vii) failure of the Company
to remove restricted legends from shares issued to the Holder upon conversion of the 2021 Notes or the exercise of the newly issued warrants;
(viii) the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $150,000 of indebtedness
of the Company; (ix) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors
shall be instituted by or against the Company or any Subsidiary and not dismissed within 30 days of initiation; (x) the commencement
by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law; (xi) commencement of any bankruptcy or similar proceeding, voluntary or involuntary, of the Company
or any Subsidiary of the Company; (xii) final judgment for the payment of money aggregating in excess of $150,000 are rendered against
the Company or any subsidiary of the Company and not bonded or discharged within 30 days; (xiii) failure of the Company or any subsidiary
of the Company to pay when due any debts in excess of $150,000 due to any third party; (xiv) breaches by the Company or any subsidiary
of any representations or warranties in the SPA or any document contemplated thereby; (xv) a false or inaccurate certification by the
Company that either (A) the “Equity Conditions” (as defined in the 2021 Notes ) are satisfied, (B) there has been no “Equity
Conditions Failure,” (as defined in the 2021 Notes), or (C) as to whether any Event of Default has occurred; (xvi) failure of the
Company or any Subsidiary to comply with the covenants in the 2021 Notes ; any material adverse effect occurring; or (xvii) any Event
of Default occurs under any 2021 Note.
In connection with an Event of Default, the Holders
of the 2021 Notes may require the Company to redeem in cash any or all of the 2021 Notes. The redemption price will equal the greater
of (i) 110% of the outstanding principal of the 2021 Notes to be redeemed and accrued and unpaid interest and unpaid late charges thereon,
and (ii) an amount equal to market value of the shares of the Common Stock underlying the 2021 Notes , as determined in accordance with
such notes. Upon the occurrence of certain Events of Default relating to the bankruptcy of the Company, whether occurring prior to or
following the maturity date, the Company will be required to immediately redeem the 2021 Notes , in cash, for an amount equal to 110%
of the outstanding principal of the 2021 Notes , and accrued and unpaid interest and unpaid late charges thereon, without the requirement
for any notice or demand or other action by any Holder or any other person or entity.
Change of Control
In connection with a Change of Control (as defined
in the 2021 Notes), the Holders of the 2021 Notes may require the Company to redeem all or any portion of such notes. The redemption
price per share will equal the greatest of (i) 110% of the outstanding principal of the 2021 Notes to be redeemed, and accrued and unpaid
interest and unpaid late charges thereon, (ii) 110% of the market value of the shares of the Common Stock underlying the 2021 Notes ,
as determined in accordance with the such notes, and (iii) 110% of the aggregate cash consideration that would have been payable in respect
of the shares of the Common Stock underlying the 2021 Notes, as determined in accordance with the terms of such notes.
Other Corporate Events
The Company may not enter into a Fundamental
Transaction (as defined in the 2021 Notes ), unless the successor entity assumes all of the obligations under the 2021 Notes pursuant
to written agreements satisfactory to the Holders of the 2021 Notes, and the successor entity is a publicly traded corporation whose
shares of Common Stock are quoted or listed on a national securities exchange. If at any time the Company grants any Purchase Rights
(as defined in the 2021 Notes) or makes any distribution of assets pro rata to all or substantially all of the holders of any class of
its Common Stock, then the holders of the 2021 Notes will be entitled to acquire the aggregate Purchase Rights (as defined in the 2021
Notes ) or assets which such holder could have acquired if such holder had held the number of shares of the Common Stock acquirable upon
complete conversion of the 2021 Notes (without taking into account any limitations on conversion) held by such Holder immediately prior
to the date as of which the record holders are to be determined for such grant of purchase rights or distributions. To the extent any
such grant of rights or distribution would result in the Holders exceeding the maximum percentage described in first paragraph of “Conversion
Limitation and Exchange Cap” above, such rights shall be held in abeyance for up to ninety trading days.
Installment Conversions and Redemptions
The 2021 Notes require that, on each Installment
Date, the Company will pay an amount equal to the lesser of 1/13th of the principal amount and the outstanding principal amount
of the 2021 Notes then outstanding on such Installment Date, less amounts already converted or paid (the “Installment Amount”),
together with interest and late charges, if any, thereon, in shares of our Common Stock, subject to the satisfaction of customary equity
conditions (including minimum price and volume thresholds) (an “Installment Conversion”).
If the Company satisfies such equity conditions
(subject to the Holders’ right to waive any such condition), the Company will convert the portion of the Installment Amount subject
to such Installment Conversion into shares of its Common Stock at a price per share equal to the lower of lowest of (i) the conversion
price then in effect, (ii) the greater of (x) the Floor Price and (y) 78% of the lowest VWAP of the Common Stock during the ten (10)
consecutive trading day period ending and including the trading day immediately preceding the applicable Installment Date. All such determinations
to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during any such measuring
period, but not less than the Floor Price. If the Company elects to effect and Installment Redemption (as defined) or if an Installment
Conversion is not permitted because certain equity conditions are not met, the Company must redeem the Installment Amount in cash at
a price equal to 106% of its aggregate value.
The Holders of the 2021 Notes may elect to defer
conversion until a subsequent Installment Date selected by each such Holder, or accelerate the conversion of future Installment Amounts
to the current Installment Date, with the amount to be accelerated subject to certain restrictions as set forth in such notes.
Notwithstanding the forgoing, and only during
the period commencing on the Issuance Date and ending on the Stockholder Approval Date, the Company shall automatically be deemed to
have elected to effect Installment Redemptions for all Installment Amounts, with respect to the Excess Additional Notes.
Redemptions at Company Election
At any time after the later of (x) thirty (30)
calendar days after the Applicable Date (as defined in the SPA, as amended) and (y) the date no Equity Conditions Failure exists, the
Company has the right to redeem all, but not less than all, of the Conversion Amount then remaining under 2021 Notes at cash price equal
to 200% of the greater of (i) the Conversion Amount being redeemed and (ii) the product of (1) the Conversion Rate with respect to the
Conversion Amount being redeemed multiplied by (2) the greatest Closing Sale Price (as defined in the 2021 Notes) of the Common Stock
on any trading day during the period commencing on the date immediately preceding such redemption notice date and ending on the Trading
Day (as defined) immediately prior to the date the Company makes the entire payment required to be made for the redemption.
Covenants
The Company will be subject to certain customary
affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the
payment of cash in respect of dividends, distributions or redemptions, and the transfer of assets, among other matters. The Company also
will be subject to a financial covenant that requires it to maintain available cash in the amount of $1,500,000 at the end of each fiscal
quarter.
The Newly Issued Warrants
Expiration and Exercise
The newly issued warrants are exercisable for
an aggregate of 760,000 shares of Common Stock (subject to standard adjustments in the event of any stock split, stock dividend, stock
combination, recapitalization or other similar transaction), expire on the fourth anniversary of the Issuance Date. The warrants are
exercisable at any time after the Stockholder Approval Date until their expiration date, in whole or in part, at the option of the holders.
The exercise price for the newly issued warrants
(subject to possible standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other
similar transaction) is $2.845. Cashless exercise of these warrants is permitted.
Exercise Limitation and Exchange Cap
The holders of the newly issued warrants will
not have the right to exercise any portion of such warrants to the extent that, after giving effect to such exercise, such holder (together
with certain related parties) would beneficially own in excess of 4.99% of the shares of the Company’s Common Stock outstanding
immediately after giving effect to such exercise. A holder may from time to time increase this limit to 9.99%, provided that any such
increase will not be effective until the 61st day after delivery of a notice to the Company of such increase.
In addition, unless the Company obtains the approval
of its stockholders, the Company is prohibited from issuing any shares of Common Stock upon exercise of the newly issued warrants.
Events of Default
Events of Default are cross-referenced to the
definition contained in the 2021 Notes (see summary of the Notes above in the paragraph “Events of Default”).
At any time after the occurrence of an Event
of Default, at the request of a Holder, the Company or a successor entity (as the case may be) shall purchase the newly issued warrants
from the Holders by paying to a Holder cash in an amount equal to the Event of Default Black Scholes Value (as defined).
Other Corporate Events
The Company may not enter into a Fundamental
Transaction (as defined), unless the successor entity assumes all of the obligations under warrants pursuant to written agreements satisfactory
to the holder of the warrants, and the successor entity is a publicly traded corporation whose shares of Common Stock are quoted or listed
on a national securities exchange. If at any time the Company grants any Purchase Rights (as defined) or makes any distribution of assets
pro rata to all or substantially all of the holders of any class of its Common Stock, then the holders of the warrants will be entitled
to acquire the aggregate Purchase Rights or assets which such holder could have acquired if such holder had held the number of shares
of the Company’s Common Stock acquirable upon complete exercise of the newly issued warrants held by such holder immediately prior
to the date as of which the record holders are to be determined for such grant of purchase rights or distributions. To the extent any
such grant of rights or distribution would result in the holders exceeding the maximum percentage described in first paragraph of “Exercise
Limitation and Exchange Cap” above, such rights shall be held in abeyance for up to ninety trading days.
Notwithstanding the foregoing, at the request
of a Holder delivered at any time commencing on the earliest to occur of (x) the public disclosure of any Fundamental Transaction, (y)
the consummation of any Fundamental Transaction and (z) the Holder first becoming aware of any Fundamental Transaction through the date
that is ninety (90) days after the public disclosure of the consummation of such Fundamental Transaction by the Company pursuant to a
Current Report on Form 8-K filed with the SEC (in each case, excluding the sale of the Company’s legacy energy business), the Company
or a successor entity (as the case may be) shall purchase the newly issued warrants from the Holder on the date of such request by paying
to the Holder cash in an amount equal to the Black Scholes Value (as defined). Payment of such amounts shall be made by the Company (or
at the Company’s direction) to the Holder on or prior to the later of (x) the second trading day after the date of such request
and (y) the date of consummation of such Fundamental Transaction.
Shareholder Pledge Agreement
The Institutional Investors and a principal shareholder
and the Chairman of the Board the Company, Mr. Yongquan Bi (the “Principal Stockholder”), have entered into a Shareholder
Pledge Agreement on the 2020 Closing Date, pursuant to which the Principal Stockholder, has agreed to pledge 1.5 million shares of Common
Stock beneficially owned by him, in favor of the Institutional Investors to secure the Company’s performance of its obligations
in the 2021 Private Placement.
Registration Rights Agreement
The Company and the Institutional Investors entered
into a Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement,
the Company has agreed to file and maintain with the SEC a registration statement for resale of the shares of Common Stock issuable upon
conversion of the 2021 Notes and exercise of the newly issued warrants.
Voting Agreement
The Company also entered into a voting agreement
with the Principal Stockholder on the 2020 Closing Date, pursuant to which he agreed to vote the shares of Common Stock now owned or
hereafter acquired by him in favor of the Stockholder Resolutions.
Placement Agent
FT Global Capital, Inc. (“FT Global”)
acted as the placement agent for the 2021 Private Placement. FT Global received a fee of 9% of the gross proceeds of the 2021 Private
Placement, or an aggregate of $405,000, and warrants to purchase up to that number of shares of Common Stock equal to ten percent (10%)
of the aggregate number of shares of Common Stock placed in the 2021 Private Placement, which is initially 173,745 shares, at an initial
exercise price of $2.845 per share, subject to adjustment based on the number of shares of Common Stock issued pursuant to the Excess
Additional Notes.
Reasons for Transaction and Effect on Current
Stockholders
The Board has determined that the issuance of
the Additional Institutional Investor Securities in the 2021 Private Placement is in the best interests of the Company and its stockholders
because of the Company’s immediate need to obtain additional financing. Further, the payment of interest and principal in shares
of Common Stock, and the right of the Holders to convert newly issued notes into shares of Common Stock, will allow the Company to improve
its debt structure and provide funds necessary for the stabilization and expansion of the Company’s operation.
The issuance of securities pursuant to the SPA,
as amended, will have a dilutive effect on our existing stockholders, including the voting power and economic rights of such stockholders.
For example, as of the date of this proxy statement, all of the Original Notes have been converted in full at the initial conversion
price and 3,096,456 shares of Common Stock have been issued as a result. At of the date of this proxy statement, there were [ ] shares
of Common Stock outstanding. In the event all the Base Additional Notes are converted in full at the initial conversion price, all the
Original Warrants and all the Original Placement Agent Warrants are exercised in full at the initial exercise price, which was approved
at the 2020 Annual Meeting, approximately 2,511,346 additional shares of the Common Stock of the Company will be issued. If the Excess
Additional Notes are converted in full at the initial conversion price, the newly issued warrants are exercised in full at the initial
exercise price and the warrants issued to the placement agent in 2021 are exercised in full, for which the Company is seeking shareholder
approval at the 2021 Annual Meeting, approximately an additional 2,567,246 shares of the Common Stock will be issued.
No assurance can be given that any shares of
Common Stock will be issued upon conversion of the Excess Additional Notes or exercise of the newly issued warrants and the warrants
issued to the placement agent in 2021, or that additional shares of Common Stock will not be issued in the event that the conversion
price of the Excess Additional Notes decreases pursuant to the terms of the Excess Additional Notes, or that the number of shares of
Common Stock issuable upon the exercise of the aforementioned warrants s does not increase pursuant to the terms of such warrants.
Each 2021 Note provides that the Institutional
Investors are prohibited from converting a 2021 Note, and any payments of interest and principal in shares of Common Stock will be held
in abeyance, to the extent the Institutional Investor would beneficially own more than 4.99% (or 9.99%, if the holder elects the higher
threshold) of the Company’s outstanding shares of Common Stock after such conversion or payment. Unlike Nasdaq Rule 5635 and the
corresponding provisions of the SPA, as amended, the 2021 Notes and the newly issued warrants, which limit the aggregate number of shares
of Common Stock the Company may issue to the Institutional Investors, this beneficial ownership limitation limits the number of shares
the Institutional Investors may beneficially own at any one time. Consequently, the number of shares of Common Stock the Holders may
beneficially own in compliance with the beneficial ownership limitation may increase over time as the number of outstanding shares of
Common Stock increases over time. In addition, the Institutional Investors may sell some or all of the shares they receive under the
2021 Notes or which they receive upon exercise of the newly issued warrants, permitting them to acquire additional shares of Common Stock
in compliance with the beneficial ownership limitation. We are not seeking shareholder approval to lift such ownership limitation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” APPROVAL OF THE ISSUANCE OF THE
ADDITIONAL INSTITUTIONAL INVESTOR SECURITIES
PROPOSAL FOUR — APPROVAL OF PENDING
ISSUANCE
OF GUANZAN FINAL PAYMENT SHARES
Overview
On February 1, 2020, we and our wholly-owned
subsidiary, Beijing Xinrongxin Industrial Development Co., Ltd, entered into an agreement to purchase Chongqing Guanzan Technology Co.,
Ltd. (“Guanzan”), a distributor of medical devices and pharmaceuticals in the People’s Republic of China (the “Guanzan
SPA”). Pursuant to the Guanzan SPA, we agreed to purchase all the issued and outstanding equity interests in Guanzan (the “Guanzan
Shares”). The terms of the Guanzan SPA were unanimously approved by our Board.
Pursuant to the Guanzan SPA, the aggregate purchase
price for the Guanzan Shares is RMB 100,000,000 (approximately $14,285,714 as of February 1, 2020), to be paid by the issuance of 950,000
shares of Common Stock (the “Stock Consideration”) and the payment of RMB 80,000,000 in cash (the “Cash Consideration”).
The Stock Consideration was paid at closing and the Cash Consideration, which was subject to post-closing adjustments based on the performance
of Guanzan in 2020 and 2021, respectively, was scheduled to be paid pursuant to a post-closing payment schedule. The transaction closed
on March 18, 2020. Upon closing, 950,000 shares of Common Stock were issued to the seller (“Seller”) as the Stock Consideration
and we acquired 100% of the Guanzan Shares.
On November 20, 2020, the parties to the Guanzan
SPA entered into a prepayment and amendment agreement (the “Prepayment Agreement”) in light of Guanzan’s performance
during the period from March 18, 2020 to September 30, 2020, providing for the prepayment (the “Prepayment”) of a portion
of the Cash Consideration in the amount of RMB 20,000,000 (approximately $3,100,000). We elected to make the Prepayment in the form of
shares of Common Stock, valued at the price of $3.00 per share, even though market price was then below $2.00 per share. Accordingly,
on November 30, 2020, we issued 1,000,000 shares of Common Stock as the Prepayment.
Pursuant to the Guanzan SPA, as amended by
the Prepayment Agreement, if Guanzan’s 2020 prorated revenue equals or exceeds the targeted 2020 prorated revenue, which is
RMB 78,600,000 (the “Target”), the entire amount of the Cash Consideration, minus the amount of the prepayment (the
“Updated Cash Consideration ”), would become payable in 2021 and Seller would not be eligible to receive any additional
payment under the Guanzan SPA. On March 9, 2021, the parties to the Guanzan SPA agreed that Guanzan’s 2020 prorated revenue in
2020 exceeded the Target, and therefore the Updated Cash Consideration in the amount of RMB 60,000,000 is payable. We elected to
exercise our option to pay the Updated Cash Consideration in the form of shares of Common Stock, at the volume weighed average of
the closing per share market price of the Common Stock, as reported on NASDAQ, for the immediately preceding 20-day period (the
“Subsequent VWAP Price”), which is $2.02 pers share. As such, 4,600,000 shares of Common Stock (the “Guanzan Final
Payment Shares”) are issuable to Seller. Subject to the stockholder approval of the issuance of the 4,600,000 shares of Common
Stock, we will have issued to Ms. Zhou Li, the prior owner of Guanzan and a resident of the PRC, or her designee(s), a total of
6,550,000 shares of our Common Stock. The Guanzan SPA provides that if issuance of shares of Common Stock as payment of the Updated
Cash Consideration would require stockholder approval pursuant to the Nasdaq rules, the Guanzan Final Payment Shares may not be
issued unless and until such approval has been obtained.
Pursuant to Nasdaq Rule 5635, stockholder approval
is required prior to the issuance of securities in connection with the acquisition of the stock or assets of another company if, where,
due to the present or potential issuance of common stock, including shares issued pursuant to an earn-out provision or similar type of
provision, or securities convertible into or exercisable for common stock, other than a public offering for cash: (A) the common stock
has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock
or securities convertible into or exercisable for common stock; or (B) the number of shares of common stock to be issued is or will be
equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities.
Accordingly, at the 2021 Annual Meeting, you
are being asked to approve the issuance of the Guanzan Final Payment Shares pursuant to Nasdaq Rule 5635.
Further Information about the Guanzan Acquisition,
including background regarding the transaction with Seller and the reasons why the Board believes the issuance of the Guanzan Final Payment
Shares in lieu of a cash payment is in the best interests of the Company and its stockholders, is discussed below.
Background
On February 1, 2020, we acquired Guanzan, a company
engaged in the wholesale distribution of medical devices and pharmaceuticals, based in Chongqing, the largest city in the Southwest region
of the PRC. At the time of the acquisition, Guanzan had strong sales capabilities in Chongqing. The rationale for the Guanzan Acquisition
was to further expand our operations in the healthcare field by acquiring a medical devices and pharmaceuticals distribution business.
Our Board determined that the acquisition of Guanzan was in line with the Company’s expansion strategy, which focuses on deeper
penetration of the healthcare market in the Southwest region of China and achieving a wider footprint in the PRC.
Summary of the Guanzan Acquisition
The Transaction
We purchased 100% outstanding equity interests
in Guanzan in consideration of RMB 100,000,000 (approximately $14,285,714), to be paid by the issuance of the Stock Consideration and
the payment of the Cash Consideration. The Stock Consideration was paid at closing and the Cash Consideration, which was subject to post-closing
adjustments based on the performance of Guanzan in 2020 and 2021, respectively, was scheduled to be paid pursuant to a post-closing payment
schedule.
Closing
The Guanzan Acquisition was closed on March 18,
2020 when we acquired 100% of the Guanzan Shares in exchange for the Stock Consideration.
Post-closing payment
On November 20, 2020, the parties to the Guanzan
SPA entered into the Prepayment Agreement in light of Guanzan’s performance during the period from March 18, 2020 to September
30, 2020, providing for the prepayment of a portion of the Cash Consideration in the amount of RMB 20,000,000 (approximately $3,100,000).
We elected to make the Prepayment in the form of shares of Common Stock, valued at the price of $3.00 per share, even though market price
was then below $2.00 per share. Accordingly, on November 30, 2020, we issued 1,000,000 shares of Common Stock as the Prepayment to the
prior owner of Guanzan.
Pursuant to the Guanzan SPA. The Cash Consideration
was payable subject to adjustments based on Guanzan’s revenue in 2020 and 2021, respectively. The Guanzan SPA further provided
that if Guanzan’s 2020 prorated revenue equals or exceeds the target amount of RMB 78,600,000 (approximately $ 12,000,000), the
Updated Cash Consideration, which is the result of the entire amount of the Cash Consideration minus the amount of the Prepayment, will
become payable in 2021 and the prior owner of Guanzan will not be eligible to receive any additional payment under the Guanzan SPA.
On March 9, 2021, the parties to the Guanzan
SPA agreed that Guanzan’s 2020 prorated revenue exceeded the Target, and therefore the full amount of the Updated Cash Consideration
is payable. We elected to pay the Updated Cash Consideration in the form of shares of Common Stock at the Subsequent VWAP Price. As such,
4,600,000 shares of Common Stock are issuable to the prior owner of Guanzan as the Updated Cash Consideration.
Stockholder approval required by Guanzan
SPA
As provided in the Guanzan SPA, as amended by
the Prepayment Agreement, if the issuance of shares of Common Stock as payment of the Updated Cash Consideration requires stockholder
approval pursuant to Nasdaq rules, the Guanzan Final Payment Shares may not be issued unless and until such approval has been obtained.
If the necessary stockholder approval has not been received within one (1) year, the Updated Cash Consideration must be paid in cash.
In the event the Company fails to obtain a stockholder approval for the issuance of the Guanzan Final Payment Shares, the Company will
have to seek alternative sources of capital.
Reasons for Proposal and Effect on Current
Stockholders
The Board has determined that paying the Updated
Cash Consideration in the form of shares of Common Stock is in the best interests of the Company and its stockholders. Currently, the
Company needs to preserve its cash for other corporate purposes, including the working capital necessary for the stabilization and expansion
of the Company’s operations. As the Company has insufficient cash to pay the Updated Cash Consideration, it would need to raise
capital from sources such as public or private sales of shares of Common Stock or convertible or nonconvertible debt securities. Based
on the analysis of the likely price and other terms and conditions of such sales, the Board determined that the significant cost of such
financing, even if it could be obtained, and the attendant significant dilution to shareholders was substantially less favorable to the
Company than issuing the Guanzan Final Payment Shares. Our Board believes that the benefits of issuing the Guanzan Final Payment Shares
outweigh the dilutive effect on our existing stockholders, including the dilution of the voting power and economic rights of our existing
stockholders.
The foregoing discussion of the information and
factors considered by the Board is not intended to be exhaustive; but includes the material factors considered by the Board. The Board
based its favorable recommendation to the Company’s shareholders on the totality of the information presented.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR”
APPROVAL OF THE ISSUANCE OF THE GUANZAN FINAL PAYMENT SHARES
PROPOSAL FIVE—ADVISORY VOTE ON EXECUTIVE
COMPENSATION
Background
The Board is providing our stockholders with
an advisory vote on our executive compensation pursuant to the Dodd-Frank Wall Street Consumer Protection Act (“Dodd-Frank Act”)
and Section 14A of the Securities Exchange Act of 1934, as amended.
This advisory vote on executive compensation,
commonly referred to as a “say-on-pay” advisory vote, is not binding on our Board. However, the Board will take into account
the result of the vote when determining future executive compensation arrangements.
At our 2020 Annual Meeting of Stockholders, our
stockholders had the opportunity to vote on an advisory say-on-pay proposal. Votes cast were in favor of our say-on-pay proposal.
Proposed Resolution
The Board recommends that our stockholders vote
in favor of the say-on-pay vote as set forth in the following resolution:
RESOLVED, that the compensation of the Company’s
named executive officers as disclosed in the Proxy Statement for the Company’s 2021 Annual Meeting of Stockholders this proxy statement,
including as discussed in the section entitled “Executive Compensation” and notes and narrative therein, be and hereby is,
approved by the stockholders of BOQI International Medical Inc., on an advisory basis.
Next Say-On-Pay Vote
The next say-on-pay vote is anticipated to occur
at our 2021 Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR”
approval, on an advisory basis, of our executive compensation.
PROPOSAL SIX -- RATIFICATION OF SELECTION
OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected
Audit Alliance LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.
Representatives of Audit Alliance LLP are expected to be present at the Annual Meeting and will be available to respond to appropriate
questions.
Stockholder ratification of the selection of
Audit Alliance LLP as the Company’s independent registered public accounting firm is not required by the Company’s Bylaws
or otherwise. However, the Board, on behalf of the Audit Committee, is submitting the selection of Audit Alliance LLP to the stockholders
for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider
whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment
of different independent registered public accounting firm at any time during the year if they determine that such a change would be
in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR”
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Principal Accountant Fees
The following table represents the aggregate
fees billed for professional audit services rendered by our independent auditors, Audit Alliance LLP and HHC, for their audits of our
annual financial statements during the years ended December 31, 2020 and 2019, respectively:
|
|
2020
|
|
|
2019
|
|
Audit Fees
|
|
$
|
195,000
|
|
|
$
|
150,000
|
|
Audit-Related Fees
|
|
|
-
|
|
|
|
-
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
All Other Fees
|
|
|
134,693
|
|
|
|
-
|
|
Total Accounting Fees and Services
|
|
|
329,693
|
|
|
|
150,000
|
|
Audit Fees. These are fees for professional services
for the audit of our annual financial statements, and for the review of the financial statements included in our filings on Form 10-Q,
and for services that are normally provided in connection with statutory and regulatory filings or engagements. The amounts shown for
Audit Alliance LLP and HHC in 2020 and 2019, respectively, relate to the audits of our annual financial statements and the review of
the financial statements included in our filings on Form 10-Q.
Audit-Related Fees. These are fees for the assurance
and related services reasonably related to the performance of the audit or the review of our financial statements. There were no audit-related
fees billed during the years ended December 31, 2020 and 2019.
Tax Fees. These are fees for professional services
with respect to tax compliance, tax advice, and tax planning. There were no tax fees billed during the years ended December 31, 2020
and 2019.
All Other Fees. These are fees for permissible
work that does not fall within any of the other fee categories, i.e. Audit Fees, Audit-Related Fees, Tax Fees and allowable working costs.
All other fees incurred in 2020 mainly consist of costs relating to the assurance, due diligence and valuation services in connection
with the acquisition of Guanzan and other target companies.
The Audit Committee has the sole and direct responsibility
for appointing, evaluating and retaining our independent registered public accounting firm and overseeing their work. All audit services
to be provided to us and all non-audit services, other than de minims non-audit services, to be provided to us by our independent auditors
must be approved in advance by our Audit Committee.
ADDITIONAL INFORMATION
Stockholder Proposals and Director Nominations
Proposals by stockholders that are submitted
for inclusion in our proxy statement for our 2022 Annual Meeting of Stockholders must follow the procedures set forth in Rule 14a-8 under
the Securities Exchange Act of 1934, as amended, and our Bylaws. To be timely under Rule 14a-8, stockholder proposals must be received
by our Corporate Secretary at BOQI International Medical Inc.’s offices by January 14, 2022. However, if the date of the 2022 Annual
Meeting is changed by more than 30 days from the first anniversary of the date of the 2021 Annual Meeting, the deadline will instead
be a reasonable time before we begin to print and mail the proxy statement for the 2022 Annual Meeting.
Stockholder proposals and nominations may not
be brought before the 2022 Annual Meeting unless, among other things, the stockholder’s submission contains certain information
concerning the proposal or the nominee, as the case may be, and other information specified in the Company’s Bylaws, and the stockholder’s
submission is received by us no later than January 14, 2022. However, if the date of the 2022 Annual Meeting is changed by more than
30 days from the first anniversary of the date of the 2021 Annual Meeting, notice by the stockholder must be delivered not earlier than
the close of business on the 120th day prior to the 2022 Annual Meeting and not later than the close of business on the 90th day prior
to the 2022 Annual Meeting. Proposals or nominations not meeting these requirements will not be entertained at the 2022 Annual Meeting.
Stockholders recommending candidates for consideration
by the Board must provide the candidate’s name, biographical data, and qualifications. Any such recommendation should be accompanied
by a written statement from the individual of his or her consent to be named as a candidate and, if nominated and elected, to serve as
a director. These requirements are separate from, and in addition to, the SEC’s requirements that a stockholder must meet in order
to have a stockholder proposal included in the proxy statement.
Householding Information
The SEC has adopted rules that permit companies
and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect
to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This delivery
method is referred to as “householding” and can result in cost savings for us. To take advantage of this opportunity, we
may deliver a single proxy statement to multiple stockholders who share an address. We will deliver upon oral or written request a separate
copy of our proxy statement to any stockholder of a shared address to which a single copy of our proxy statement was delivered. If you
prefer to receive separate copies of our proxy statement, either now or in the future, or if you currently are a stockholder sharing
an address with another stockholder and wish to receive only one copy of future proxy statements for your household, please call us or
send your request in writing to us.
Copies of 2020 Annual Report
Our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020, is being sent along with this proxy statement. The 2020 Annual Report is also available on our website
at www.usbimi.com. The information on our website is not incorporated by reference into this proxy statement.
Your vote is important. Please promptly
vote your shares of our common stock by completing, signing, dating, and returning your proxy card or by Internet or telephone voting
as described on your proxy card.
|
By Order of the Board of Directors
|
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|
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Tiewei Song
|
|
Chief Executive Officer and President
|
|
|
[ ],
2021
|
|
BOQI INTERNATIONAL MEDICAL INC.
PROXY CARD
2021 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY
[ ], 2021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ☐Mr.
Tiewei Song as attorney and proxy of the undersigned, with full power of substitution, to vote all shares of common stock of BOQI International
Medical Inc. (the “Company”) which the undersigned may be entitled to vote at the 2021 Annual Meeting of Stockholders to
be held on May [ ], 2021, and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned
would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions,
with discretionary authority as to any and all other matters that may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2, 3, 4, 5 AND 6.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
1.
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The election of seven Directors:
|
|
|
|
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NOMINEES:
|
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☐
|
FOR ALL NOMINEES
|
☐ Yongquan Bi
|
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☐
Tiewei Song
☐
Xiaoping Wang
☐
Mia Kuang Ching
|
|
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☐ Ju Li
|
|
☐
|
WITHHOLD AUTHORITY FOR ALL NOMINEES
|
☐
Fengsheng Tan
☐
Jianxin Wang
|
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☐
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FOR ALL EXCEPT (See instructions below)
|
|
Instruction: To
withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee
you wish to withhold, as shown here: ☒
|
2.
|
To approve an amendment to the company’s Certificate of
Incorporation, to change the Company’s name to BIMI International Medical Inc.
|
☐ FOR ☐
AGAINST ☐ ABSTAIN
|
3.
|
To approve the pending issuance of the Additional Institutional
Investor Securities:
|
☐ FOR ☐ AGAINST ☐ ABSTAIN
|
4.
|
To approve the pending issuance of the Guanzan Final Payment Shares:
|
☐ FOR ☐ AGAINST
☐ ABSTAIN
|
5.
|
To approve, by non-binding vote, the Company’s executive
compensation:
|
☐ FOR ☐ AGAINST ☐ ABSTAIN
|
6.
|
To ratify the appointment of Audit Alliance LLC as the independent
registered public accounting firm of the Company for the fiscal year ending December 31, 2021:
|
☐ FOR ☐ AGAINST ☐ ABSTAIN
The shares represented by this proxy will
be voted as directed by the undersigned stockholder. If no direction is given, such shares will be voted “FOR” the nominees
listed in Proposal 1, “FOR” Proposals 2, 3, 4, 5 and 6, and in the discretion of the proxy holder(s) with respect to other
matters properly brought before the meeting, including any adjournments thereof.
Please print the name(s) appearing on each share
certificate(s) over which you have voting authority:
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Date: ___________, 2021
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Signature:
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Signature if held jointly:
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Note: When shares are held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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