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As filed with the Securities and Exchange Commission on August 10, 2016

 

File No. 333-[●]

 

 

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

 

 

 

FORM S-4

 

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

 

 

 

iFRESH INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   6770
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)

 

7 Times Square, 37th floor,
New York, New York 10036

646-912-8918 

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)

 

 

 

Richard Xu
Executive Chairman of the Board and Chief Executive Officer
7 Times Square, 37th floor,
New York, New York 10036

646-912-8918

(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

 

 

 

Copies to:

Giovanni Caruso, Esq.
Lawrence Venick, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
(212) 407-4866
Facsimile: (212) 937-3943 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after (i) this Registration Statement becomes effective, (ii) all other conditions to the merger of E-compass Acquisition Corp., an exempted company incorporated in the Cayman Islands (“E-compass”), into the Registrant, with the Registrant surviving and the merger of iFresh Merger Sub Inc. into NYM Holding, Inc. (“NYM”), a Delaware corporation, with the result that NYM becomes a wholly owned subsidiary of the Registrant, pursuant to the Acquisition Agreement attached as Appendix A to the Proxy Statement/Prospectus contained herein have been satisfied or, with respect to the share purchase only, waived.  

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. ☐ 

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

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer   Accelerated Filer ☐ 
Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller Reporting Company ☒ 

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Securities  Amount to Be
Registered(3)(4)
   Proposed Maximum Offering Price Per Security(1)    Proposed Maximum Aggregate Offering Price(1)   Amount of Registration Fee 
Units, each consisting of one Ordinary Share, par value $0.0001, and one Right entitling the holder to receive one-seventh (1/10) of an Ordinary Share   2,721,724   $10.31   $28,060,974   $2,825.74 
Ordinary Shares   2,588,276   $10.20   $26,400,415   $2,658.52 
Ordinary Shares underlying Units   2,721,724    -    -    -(2)
Rights   1,588,276   $0.44   $698,841   $70.37 
Rights underlying Units   2,721,724    -    -    -(2)
Ordinary Shares underlying Rights   431,000   $10.20   $4,396,200   $442.70 
Total Fee                 $5,997.33 

 

(1) Based on the market price of the units, shares and rights of E-compass Acquisition Corp. on August 8, 2016 for the purpose of calculating the registration fee pursuant to rule 457(f)(1).
(2) No fee pursuant to Rule 457(i).
(3) Pursuant to Rule 416, there are also being registered such additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.
(4) The securities of the Registrant being registered will be exchanged on a one-for-one basis for securities of E-compass Acquisition Corp. in connection with the merger of E-compass Acquisition Corp. into the Registrant pursuant to which the current security holders of E-compass Acquisition Corp. will become security holders of the Registrant, and the Registrant will become a public company domiciled in the state of Delaware.

 

 

 

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

 

 

 

 

 

 

The information in this proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This proxy statement/prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS SUBJECT TO COMPLETION, DATED August 10, 2016

 

PROXY STATEMENT FOR EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
OF E-COMPASS ACQUISITION CORP.
AND PROSPECTUS FOR COMMON STOCK, RIGHTS AND UNITS
OF iFRESH INC.

 

Proxy Statement/Prospectus dated [●][●], 2016
and first mailed to shareholders on or about [●][●], 2016

 

Dear Shareholders:

 

You are cordially invited to attend the extraordinary general meeting of E-compass’s shareholders. E-compass is a special purpose company incorporated on September 23, 2014 for the purpose of acquiring, through a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities, which we refer to as a “target business.”

 

Holders of E-compass’s ordinary shares will be asked to approve the merger agreement dated as of July 25, 2016, as amended, or the “Acquisition Agreement,” by and among E-compass, iFresh Inc., a Delaware corporation and a wholly-owned subsidiary of E-compass, or “iFresh,” iFresh Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of iFresh, or “Merger Sub,” NYM Holding, Inc., a Delaware corporation, or “NYM,” the shareholders of NYM, and Long Deng, as representative of the NYM shareholders, and the other related proposals. We refer to the shareholders of NYM as the NYM shareholders.

 

The issuance of shares of iFresh to the NYM shareholders is being consummated on a private placement basis, pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The aggregate value of the consideration to be paid by E-compass in the business combination is approximately $125 million (calculated as follows: (i) $5 million in cash, plus, (ii) 12,000,000 shares of common stock of iFresh to be issued to the NYM shareholders multiplied by $10.00 (the deemed value of the shares in the Acquisition Agreement). The transactions contemplated under the Acquisition Agreement relating to the business combination with NYM are referred to in this proxy statement/prospectus as the Business Combination. The transactions contemplated under the Acquisition Agreement pursuant to which E-compass will be reorganized into a Delaware company by E-compass merging with iFresh immediately prior to the consummation of the Business Combination, are referred to in this proxy statement/prospectus as the Redomestication.

 

As of March 31, 2016, there was approximately $40,851,104 in E-compass’s trust account, of which E-compass plans to withdraw the $51,104 interest to pay operating expenses before the shareholder meeting, or approximately $10.40 per outstanding ordinary share issued in E-compass’s initial public offering for the public shareholders except for the lead investor in the initial public offering, which purchased 2,000,000 units and agreed to waive $0.40 per ordinary shares in the event it seeks to convert such shares into cash held in the trust account. Our lead investor also agreed to hold 1,000,000 of the shares it purchased in our initial public offering through the consummation of our initial business combination, to vote in favor of the proposed business combination and not seek redemption in connection therewith. As a result, we do not expect there to be more than 3,000,000 shares that exercise redemption rights. We will enter into an agreement with our lead investor to repurchase 500,000 of such non-redeemable shares promptly after the closing of our business combination at a purchase price of $10.00 per share. On [●], 2016, the record date for the extraordinary general meeting of shareholders, the last sale price of E-compass’s ordinary shares was $[●].

 

Each shareholder’s vote is very important. Whether or not you plan to attend the E-compass extraordinary general meeting in person, please submit your proxy card without delay. Shareholders may revoke proxies at any time before they are voted at the meeting. Voting by proxy will not prevent a shareholder from voting in person if such shareholder subsequently chooses to attend the E-compass special meeting. The proxy statement/prospectus constitutes a proxy statement of E-compass and a prospectus of iFresh for the securities of iFresh that will be issued to the securityholders of E-compass.

 

We encourage you to read this proxy statement/prospectus carefully. In particular, you should review the matters discussed under the caption “RISK FACTORS” beginning on page 16.

 

E-compass’s board of directors unanimously recommends that E-compass shareholders vote “FOR” approval of each of the proposals.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the Acquisition or otherwise, or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

   
Richard Xu  
Chairman of the Board of Directors of  
E-compass Acquisition Corp.  
   
[●], 2016  

 

 

 

 

HOW TO OBTAIN ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about E-compass that is not included or delivered herewith. If you would like to receive additional information or if you want additional copies of this document, agreements contained in the appendices or any other documents filed by E-compass with the Securities and Exchange Commission, such information is available without charge upon written or oral request. Please contact the following:

 

US Office (Principal Executive Office):

 

7 Times Square, 37th floor
New York, New York, 10036
Attn: Richard Xu
Telephone: 646-912-8918

 

If you would like to request documents, please do so no later than [●], 2016 to receive them before E-compass’s extraordinary general meeting. Please be sure to include your complete name and address in your request. Please see “Where You Can Find Additional Information” to find out where you can find more information about E-compass and NYM. You should rely only on the information contained in this proxy statement/prospectus in deciding how to vote on the Business Combination. Neither E-compass nor NYM has authorized anyone to give any information or to make any representations other than those contained in this proxy statement/prospectus. Do not rely upon any information or representations made outside of this proxy statement/prospectus. The information contained in this proxy statement/prospectus may change after the date of this proxy statement/ prospectus. Do not assume after the date of this proxy statement/prospectus that the information contained in this proxy statement/prospectus is still correct.

 

USE OF CERTAIN TERMS

 

Unless otherwise stated in this proxy statement/prospectus:

 

References to “we,” “us” or “our company” refers to E-compass Acquisition Corp. and its subsidiary iFresh Inc.

 

References to “NYM” in this proxy statement/prospectus refer to NYM Holding, Inc.

 

References to “US Dollars” and “$” refer to the legal currency of the United States.

 

 

 

 

E-COMPASS ACQUISITION CORP.
 

US Office (Principal Executive Office):

7 Times Square, 37th floor
New York, New York, 10036
Telephone: 646-912-8918

 

NOTICE OF EXTRAORDINARY GENERAL MEETING OF
E-COMPASS ACQUISITION CORP. SHAREHOLDERS
To Be Held on [●], 2016

 

To E-compass Acquisition Corp. (“E-compass”) Shareholders: 

An extraordinary general meeting of shareholders of E-compass, will be held at [●], on [●], 2016, at [●] a.m., for the following purposes: 

1. To approve the merger of E-compass with and into iFresh, its wholly-owned Delaware subsidiary, with iFresh surviving the merger. The merger will change E-compass’s place of incorporation from the Cayman Islands to Delaware. We refer to the merger as the Redomestication. This proposal is referred to as the Redomestication Proposal. Holders of E-compass’s ordinary shares as of the record date are entitled to vote on the Redomestication Proposal. 

2. To approve the authorization for iFresh’s board of directors to complete the merger of Merger Sub into NYM, resulting in NYM becoming a wholly owned subsidiary of iFresh, as provided for in the Acquisition Agreement, or the “Business Combination.” This proposal is referred to as the Business Combination Proposal. Holders of E-compass’s ordinary shares as of the record date are entitled to vote on the Business Combination Proposal. 

3. To approve the adjournment of the extraordinary general meeting in the event E-compass does not receive the requisite shareholder vote to approve either the Redomestication or the Business Combination. This proposal is called the Business Combination Adjournment Proposal. 

As of [●], 2016, there were 5,310,000 E-compass ordinary shares issued and outstanding and entitled to vote. Only E-compass ordinary shareholders who hold shares of record as of the close of business on [●], 2016 are entitled to vote at the extraordinary general meeting or any adjournment of the extraordinary general meeting. This proxy statement is first being mailed to shareholders on or about [●], 2016. Approval of Redomestication and the Business Combination will each require the affirmative vote of the holders of two-thirds of the shares present and entitled to vote at the extraordinary general meeting; provided, however, that if 3,500,000 or more of the ordinary shares purchased in the IPO demand redemption of their ordinary shares, then the Business Combination will not be completed. Attending the extraordinary general meeting either in person or by proxy and abstaining from voting will have the same effect as voting against the Redomestication and the Business Combination and failing to instruct your bank, brokerage firm or nominee to attend and vote your shares will have no effect on the outcome of either of the Redomestication Proposal or the Business Combination Proposal. 

E-compass currently has authorized share capital of 101,000,000 shares consisting of 100,000,000 ordinary shares with a par value of $0.0001 per share and 1,000,000 preferred shares with a par value of $0.0001 per share. iFresh has an authorized share capital of 100,000,000 shares of common stock with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.0001 per share. 

Holders of E-compass’s ordinary shares will not be entitled to appraisal rights under Cayman Islands law in connection with either the Redomestication or the Business Combination.

Whether or not you plan to attend the extraordinary general meeting in person, please submit your proxy card without delay. Voting by proxy will not prevent you from voting your shares in person if you subsequently choose to attend the extraordinary general meeting. If you fail to return your proxy card and do not attend the meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the extraordinary general meeting. You may revoke a proxy at any time before it is voted at the extraordinary general meeting by executing and returning a proxy card dated later than the previous one, by attending the extraordinary general meeting in person and casting your vote by ballot or by submitting a written revocation to E-compass at E-compass Acquisition Corp., 7 Times Square, 37th floor, New York, New York, 10036, Attention: Richard Xu Telephone: 646-912-8918, that is received by us before we take the vote at the extraordinary general meeting. If you hold your shares through a bank or brokerage firm, you should follow the instructions of your bank or brokerage firm regarding revocation of proxies.

E-compass’s board of directors unanimously recommends that E-compass shareholders vote “FOR” approval of each of the proposals.

By order of the Board of Directors,  
   
   
Richard Xu  
Chairman of the Board of Directors of  
E-compass Acquisition Corp.  

 

_______________, 2016

 

TABLE OF CONTENTS

 

TABLE OF CONTENTS

 

  PAGE
   
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR E-compass SHAREHOLDERS 1
DELIVERY OF DOCUMENTS TO E-compass SHAREHOLDERS 6
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS 7
PRICE RANGE OF SECURITIES AND DIVIDENDS 15
RISK FACTORS 16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 34
EXTRAORDINARY GENERAL MEETING OF E-compass SHAREHOLDERS 36
THE BUSINESS COMBINATION PROPOSAL 43
THE ACQUISITION AGREEMENT 68
THE REDOMESTICATION PROPOSAL 72
THE BUSINESS COMBINATION ADJOURNMENT PROPOSAL 85
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF NYM HOLDING, INC. 86
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 87
COMPARATIVE SHARE INFORMATION 88
NYM HOLDING, INC.’S BUSINESS 93
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NYM HOLDING, INC. 115
Overview 115
SELECTED HISTORICAL FINANCIAL INFORMATION OF E-compass 125
MANAGEMENT’S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION 126
E-compass BUSINESS 128
DIRECTORS, EXECUTIVE OFFICERS, EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE 132
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 140
Security Ownership of the Combined Company after the BUSINESS COMBINATION 141
CERTAIN TRANSACTIONS 142
DESCRIPTION OF E-compass’S SECURITIES 146
DESCRIPTION OF THE COMBINED COMPANY’S SECURITIES FOLLOWING THE BUSINESS COMBINATION 150
EXPERTS 152
LEGAL MATTERS 152
SHAREHOLDER PROPOSALS AND OTHER MATTERS 152
WHERE YOU CAN FIND ADDITIONAL INFORMATION 152
INDEX TO FINANCIAL STATEMENTS F-1
   
ANNEX A – ACQUISITION AGREEMENT  
ANNEX B – OPTION AGREEMENT  
ANNEX C – VOTING AGREEMENT  
ANNEX D – FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF iFRESH INC.  
ANNEX E – FORM OF AMENDED AND RESTATED BYLAWS OF iFRESH INC.  

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR E-compass shareholders

 

Q: What is the purpose of this document?

 

A: 

E-compass Acquisition Corp., an exempted company incorporated under the laws of the Cayman Islands, or E-compass, and NYM Holding, Inc., a Delaware corporation, or NYM, have agreed to a business combination under the terms of a Merger Agreement, dated as of July 25, 2016, as amended, which we refer to as the Acquisition Agreement, by and among E-compass, iFresh Inc., a Delaware corporation and a wholly-owned subsidiary of E-compass, or “iFresh,” iFresh Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of iFresh, or “Merger Sub,” NYM Holding, Inc., a Delaware corporation, or “NYM,” the shareholders of NYM, and Long Deng, as representative of the NYM shareholders, and the other related proposals. The consummation of the transactions contemplated by the Acquisition Agreement pursuant to which E-compass will be merged with and into iFresh are referred to as the Redomestication and the proposal to approve the Redomestication is referred to as the Redomestication Proposal. The consummation of the transactions contemplated by the Acquisition Agreement relating to the business combination with NYM are referred to as the Business Combination and the proposal to approve the Business Combination is referred to as the Business Combination Proposal. The Acquisition Agreement is attached to this proxy statement/prospectus as Annex A, and is incorporated into this proxy statement/prospectus by reference. You are encouraged to read this proxy statement/prospectus, including “Risk Factors” and all the annexes hereto.

   
  E-compass shareholders are being asked to consider and vote upon a proposal to adopt the Acquisition Agreement, pursuant to which, through a series of transactions, E-compass will be merged with and into iFresh, its wholly-owned Delaware subsidiary, with iFresh surviving the merger and NYM becoming a wholly-owned subsidiary of iFresh.
   
  The ordinary shares that were issued in E-compass’s initial public offering, or the E-compass ordinary shares, each consist of one ordinary share of E-compass, par value $0.0001 per share, or a E-compass ordinary share, and one right to receive one-tenth (1/10) of an ordinary share on the consummation of an initial business combination, or a E-compass right. E-compass shareholders (except shareholders who are Founders or an officer or director of E-compass) will be entitled to redeem their E-compass ordinary shares for a pro rata share of the trust account (currently anticipated to be no less than approximately $10.40 per ordinary share for shareholders other than our lead investor, which will only be entitled to $10.00 per share) net of (i) taxes payable, and (ii) interest income earned on the trust account previously released to E-compass to fund its working capital and general corporate requirements in connection with the Business Combination.
   
  The E-compass Units, E-compass Shares and E-compass Rights are currently listed on the Nasdaq Stock Market.
   
  The approval of the Redomestication Proposal and the Business Combination Proposal by E-compass shareholders are cross-conditioned on the approval of each other. Unless both of these proposals are approved, neither of them will take effect.
   
  This proxy statement/prospectus contains important information about the proposed Redomestication and Business Combination and the other matters to be acted upon at the extraordinary general meeting of E-compass shareholders. You should read it carefully.

 

Q: What is being voted on?

 

A: Below are the proposals on which E-compass shareholders are being asked to vote:

 

To approve the merger of E-compass with and into iFresh, its wholly-owned Delaware subsidiary, with iFresh surviving the merger. The merger will change E-compass’s place of incorporation from the Cayman Islands to Delaware. We refer to the merger as the Redomestication. This proposal is referred to as the Redomestication Proposal and consists of the merger of E-compass into iFresh Inc. The Redomestication Proposal is cross-conditioned on the approval of the Business Combination Proposal. For details, see “The Redomestication Proposal” elsewhere in this proxy statement/prospectus.

 

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To approve the authorization for iFresh’s board of directors to complete the merger of Merger Sub into NYM, resulting in NYM becoming a wholly owned subsidiary of iFresh, as provided for in the Acquisition Agreement, or the “Business Combination.” This proposal is referred to as the Business Combination Proposal. Holders of E-compass’s ordinary shares as of the record date are entitled to vote on the Business Combination Proposal.

 

To approve the adjournment of the extraordinary general meeting in the event E-compass does not receive the requisite shareholder vote to approve either of the Redomestication or the Business Combination. This proposal is called the Business Combination Adjournment Proposal. For details, see “The Business Combination Adjournment Proposal.”

 

Q:  Are the proposals conditioned on one another?

 

A: Yes. Each of the Redomestication Proposal and the Business Combination Proposal, as described below, are cross-conditioned upon the approval of each other. Therefore, both must be approved by the E-compass shareholders in order for any of these proposals to take effect. If any of the three proposals is not approved, the Business Combination will not be consummated and E-compass will liquidate and dissolve.

 

Q: Do any of E-compass’s directors or officers have interests that may conflict with my interests with respect to the Business Combination?

 

A: E-compass’s directors and officers may have interests in the Business Combination that are different from your interests as a shareholder. You should keep in mind the following interests of E-compass’s directors and officers:
   
  In October 2014, we issued an aggregate of 1,150,000 ordinary shares for a total of $25,000 in cash, at a purchase price of approximately $0.02 share, 150,000 of which were forfeited because the over-allotment option related to our initial public offering was not exercised. In addition, simultaneously with the consummation of the IPO, the Company consummated the private placement (“Private Placement”) of 310,000 Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, generating total proceeds of $3,100,000, to an affiliate of Richard Xu, the Company’s Chief Executive Officer. The Private Placement Units are identical to the Units sold in the IPO. In light of the amount of consideration paid for the foregoing securities, E-compass’s directors and officers will likely benefit from the completion of the Business Combination even if the Business Combination causes the market price of E-compass’s securities to significantly decrease. The likely benefit to E-compass’s directors and officers may influence their motivation for promoting the Business Combination and/or soliciting proxies for the approval of the Business Combination Proposal.
   
  If E-compass does not consummate the Business Combination by February 18, 2017, E-compass will be required to dissolve and liquidate and the securities held by E-compass’s insiders will be worthless because such holders have agreed to waive their rights to any liquidation distributions.
   
  Approval of each of the Redomestication Proposal and the Business Combination Proposal requires the affirmative vote of the holders of two-thirds of the issued and outstanding E-compass ordinary shares entitled to vote thereon as of the record date, present in person or represented by proxy, at the extraordinary meeting of E-compass shareholders. As of the record date of the extraordinary general meeting of E-compass shareholders, 1,310,000 shares held by the Initial Shareholders, or approximately 24.7% of the outstanding E-compass ordinary shares, would be voted in favor of each of the Redomestication Proposal and the Business Combination Proposal. In addition, the lead investor from our initial public offering has agreed to vote 1,000,000 of the shares purchased by him in in the initial public offering, or approximately 18.8% of the outstanding shares in favor of the Business Combination Proposal.
   
  If E-compass liquidates prior to the consummation of a business combination, Richard Xu and Chen Liu have contractually agreed that they will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us. Therefore, our directors and officers have a financial interest in consummating the Business Combination, thereby resulting in a conflict of interest.

 

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In addition, the exercise of E-compass’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes or waivers are appropriate and in E-compass shareholders’ best interests.

 

Q: When and where is the extraordinary general meeting of E-compass shareholders?

 

A: The extraordinary general meeting of E-compass shareholders will take place at [●] on [●], 2016, at [●] a.m.

 

Q: Who may vote at the extraordinary general meeting of shareholders?

 

A: Only holders of record of E-compass ordinary shares as of the close of business on [●], 2016 may vote at the extraordinary general meeting of shareholders. As of [●], 2016, there were 5,310,000 E-compass ordinary shares outstanding and entitled to vote. Please see “Extraordinary General Meeting of E-compass Shareholders — Record Date; Who is Entitled to Vote” for further information.

 

Q: What is the quorum requirement for the extraordinary general meeting of shareholders?

 

A: Shareholders representing one-third of the E-compass ordinary shares issued and outstanding as of the record date and entitled to vote at the extraordinary general meeting must be present in person or represented by proxy in order to hold the extraordinary general meeting and conduct business. This is called a quorum. E-compass ordinary shares will be counted for purposes of determining if there is a quorum if the shareholder (i) is present and entitled to vote at the meeting, or (ii) has properly submitted a proxy card. In the absence of a quorum, shareholders representing a majority of the votes present in person or represented by proxy at such meeting, may adjourn the meeting until a quorum is present.

 

Q: What vote is required to approve the Proposals?

 

A: Approval of the Business Combination will require the affirmative vote of at least two-thirds of the E-compass ordinary shares present and entitled to vote at the extraordinary general meeting; provided, however, that if 3,500,000 or more of the holders of E-compass ordinary shares exercise their redemption rights then the Business Combination will not be completed. However, our lead investor agreed to hold 1,000,000 of the shares it purchased in our initial public offering through the consummation of our initial business combination, vote in favor of the proposed business combination and not seek redemption in connection therewith. As a result, we do not expect there to be more than 3,500,000 shares that exercise redemption rights. We will enter into an agreement with our lead investor to repurchase 500,000 of such non-redeemable shares promptly after the closing of our business combination at a purchase price of $10.00 per share. Attendance at the extraordinary general meeting and abstentions and broker non-votes will have the same effect as a vote against the approval of the Business Combination Proposal. Approval of the Redomestication Proposal will require the affirmative vote of the holders of two-thirds of the E-compass ordinary shares outstanding present in person and by proxy. The Business Combination Adjournment Proposal will require the affirmative vote of the holders of two-thirds of the shares present in person and by proxy at the meeting.

 

Q: How will the Initial Shareholders vote?

 

A: E-compass’s initial shareholders, who as of [●], 2016 owned 1,310,000 E-compass ordinary shares, or approximately 24.7% of the outstanding E-compass ordinary shares, have agreed to vote their respective ordinary shares acquired by them prior to the initial public offering in favor of the Business Combination Proposal and related proposals. E-compass’s initial shareholders have also agreed that they will vote any shares they purchase in the open market in or after the IPO in favor of each of the Business Combination Proposal, the Redomestication Proposal and the Business Combination Adjournment Proposal. In addition, the lead investor from our initial public offering has agreed to vote 1,000,000 of the shares purchased by him in the initial public offering, or approximately 18.8% of the outstanding shares in favor of the Business Combination Proposal.

 

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Q: Am I required to vote against the Business Combination Proposal in order to have my ordinary shares redeemed?

 

A: No. You are not required to vote against the Business Combination Proposal in order to have the right to demand that E-compass redeem your E-compass ordinary shares for cash equal to your pro rata share of the aggregate amount then on deposit in the trust account (before payment of deferred underwriting commissions and including interest earned on their pro rata portion of the trust account, net of (i) taxes payable and (i) income on the trust account, previously released to E-compass to fund its working capital requirements). These rights to demand redemption of E-compass ordinary shares for cash are sometimes referred to herein as redemption rights. If the Business Combination is not completed, then holders of E-compass ordinary shares electing to exercise their redemption rights will not be entitled to receive such payments. In addition, E-compass’s Amended and Restated Memorandum and Articles of Association, or the E-compass charter, provides that an E-compass shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended, or the Exchange Act), will be restricted from seeking redemption rights in connection with the Business Combination with respect to more than an aggregate of 20% of the E-compass ordinary shares sold in the IPO.

 

Q: How do I exercise my redemption rights?

 

A: In order to exercise your redemption rights, you must vote for or against the business combination and mark the appropriate space on the applicable enclosed proxy card and providing physical or electronic delivery of your ordinary share certificates, as appropriate, prior to the extraordinary general meetings of E-compass shareholders.
   
  Any request for redemption, once made, may be withdrawn at any time up to the date of the extraordinary general meeting of E-compass shareholders. The actual per share redemption price will be equal to the aggregate amount then on deposit in the trust account (before payment of deferred underwriting commissions and including interest earned on their pro rata portion of the trust account, net of (i) taxes payable and (ii) interest income on the trust account, previously released to E-compass to fund its working capital requirements) divided by the number of ordinary shares sold in the IPO. Please see the section entitled “Extraordinary General Meetings of E-compass shareholders—Redemption Rights” for the procedures to be followed if you wish to redeem your E-compass ordinary shares for cash.

 

Q: How can I vote?

 

A: If you were a holder of record of E-compass ordinary shares on [●], 2016, the record date for the extraordinary general meeting of E-compass shareholders, you may vote with respect to the applicable proposals in person at the extraordinary general meeting of E-compass shareholders, or by submitting a proxy by mail so that it is received prior to 9:00 a.m. on [●], 2016, in accordance with the instructions provided to you under “Extraordinary General Meetings of E-compass shareholders.” If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, your broker or bank or other nominee may provide voting instructions (including any telephone or Internet voting instructions). You should contact your broker, bank or nominee in advance to ensure that votes related to the shares you beneficially own will be properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the extraordinary general meeting of E-compass shareholders and vote in person, obtain a proxy from your broker, bank or nominee.

 

Q: If my shares are held in “street name” by my bank, brokerage firm or nominee, will they automatically vote my shares for me?

 

A: No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. E-compass believes the Redomestication Proposal, the Business Combination Proposal and the Business Combination Adjournment Proposal are non-discretionary and, therefore, your broker, bank or nominee cannot vote your shares without your instruction. Broker non-votes will not be considered present for the purposes of establishing a quorum and will have no effect on the Redomestication Proposal, the Business Combination Proposal or the Business Combination Adjournment Proposal. If you do not provide instructions with your proxy, your bank, broker or other nominee may submit a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.” Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your E-compass shares in accordance with directions you provide.

 

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Q: What if I abstain from voting or fail to instruct my bank, brokerage firm or nominee?

 

A: E-compass will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for the purposes of determining whether a quorum is present at the extraordinary general meeting of E-compass shareholders. For purposes of approval, an abstention on the Business Combination Proposal or the Business Combination Adjournment Proposal will have the same effect as a vote “AGAINST” the proposal. Additionally, failure to elect to exercise your redemption rights will preclude you from having your ordinary shares redeemed for cash. In order to exercise your redemption rights, you must make an election on the applicable proxy card to redeem such E-compass ordinary shares or submit a request in writing to E-compass’s transfer agent at the address listed on page [●], and deliver your shares to E-compass’s transfer agent physically or electronically through DTC prior to the extraordinary general meeting of E-compass shareholders.

 

Q: Can I change my vote after I have mailed my proxy card?

 

A: Yes. You may change your vote at any time before your proxy is voted at the extraordinary general meeting. You may revoke your proxy by executing and returning a proxy card dated later than the previous one, or by attending the extraordinary general meeting in person and casting your vote by ballot or by submitting a written revocation stating that you would like to revoke your proxy that we receive prior to the extraordinary general meeting. If you hold your shares through a bank, brokerage firm or nominee, you should follow the instructions of your bank, brokerage firm or nominee regarding the revocation of proxies. If you are a record holder, you should send any notice of revocation or your completed new proxy card, as the case may be, to:

 

7 Times Square, 37th floor
New York, New York, 10036
Telephone: 646-912-8918

 

Q: Should I send in my share certificates now?

 

A: Yes. E-compass shareholders who intend to have their ordinary shares redeemed, by electing to have those ordinary shares redeemed for cash on the proxy card, should send their certificates by the day prior to the extraordinary general meeting. Please see “Extraordinary General Meeting of E-compass Shareholders — Redemption Rights” for the procedures to be followed if you wish to redeem your ordinary shares for cash.

 

Q: When is the Business Combination expected to occur?

 

A: Assuming the requisite shareholder approvals are received, E-compass expects that the Business Combination will occur no later than February 18, 2017.

 

Q: May I seek statutory appraisal rights or dissenter rights with respect to my shares?

 

A: No. Appraisal rights are not available to holders of E-compass ordinary shares in connection with the proposed Redomestication or the Business Combination. For additional information, see the sections entitled “Extraordinary General Meeting of E-compass Shareholders—Appraisal Rights.”

 

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

 

A: If E-compass does not consummate the Business Combination by February 18, 2017, then pursuant to Article 48 of its amended and restated memorandum and articles of association, E-compass’s officers must take all actions necessary in accordance with the Cayman Islands Companies Law (Revised) (referred to herein as the “Companies Law”) to dissolve and liquidate E-compass as soon as reasonably practicable. Following dissolution, E-compass will no longer exist as a company. In any liquidation, the funds held in the Trust Account, plus any interest earned thereon (net of (i) taxes payable and (ii) interest income earned on the trust account previously released to E-compass to fund its working capital and general corporate requirements), together with any remaining out-of-trust net assets will be distributed pro-rata to holders of E-compass ordinary shares who acquired such E-compass ordinary shares in E-compass’s IPO or in the aftermarket. If the Business Combination is not effected by February 18, 2017, the E-compass Rights will expire worthless. The estimated consideration that each E-compass ordinary share would be paid at liquidation would be approximately $10.40 per ordinary share for shareholders (other than our lead investor, which will only be entitled to $10.00 per share) based on amounts on deposit in the Trust Account as of March 31, 2016. The closing price of E-compass’s Ordinary share on the Nasdaq Stock Market as of ____________, 2016 was $_____ per E-compass ordinary share. E-compass’s Initial Shareholders waived the right to any liquidation distribution with respect to any E-compass ordinary shares held by them.

 

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Q: What happens to the funds deposited in the Trust Account following the Business Combination?

 

A: Following the closing of the Business Combination, funds in the Trust Account will be released to E-compass. Holders of E-compass ordinary shares exercising redemption rights will receive their per ordinary share redemption price. The balance of the funds will be utilized to fund the Business Combination. As of March 31, 2016, there was approximately $40,851,104 in E-compass’s Trust Account, of which E-compass plans to withdraw $51,104 of interest to pay operating expenses before the shareholder meeting. Approximately $10.40 per outstanding ordinary share issued in E-compass’s initial public offering for the public investors (except for the lead investor, which purchased 2,000,000 units and agreed to waive $0.40 per ordinary shares in the event it seeks to convert such shares into cash held in the trust account). The amount in the Trust Account that will be used to fund the Business Combination and the expenses related to the transaction is expected to be approximately $500,000 (such expenses are estimated to include the following amounts: (i) legal fees of $300,000; (ii) consulting and other professional fees of $100,000; (iii) E-compass closing and accounting fees of $20,000; and (iv) insurance and other costs of $80,000) and the maximum amount that will be used if holders of up to 3,000,000 E-compass shares exercise their redemption rights will be approximately $30,800,000. Any funds remaining in the Trust Account after such uses will be used (i) for future working capital and other corporate purposes of the combined entity, and (ii) to repurchase 500,000 non-redeemable shares from our lead investor promptly after the closing of our business combination at a purchase price of $10.00 per share.

 

Q: What will I receive in the Redomestication?

 

A: In connection with the Redomestication, E-compass’s issued and outstanding share capital and equity interests will be converted as follows:

 

Each E-compass ordinary share will be converted automatically into one share of common stock of iFresh (the “iFresh Common Stock”).

 

Each E-compass Right will be converted into one substantially equivalent right (each an “iFresh Right”) to receive one right to receive one-tenth (1/10) of a share of iFresh Common Stock on the consummation of the Business Combination.

 

Each E-compass Unit will be converted automatically into one iFresh Unit consisting of one share of iFresh Common Stock and one iFresh Right (each an “iFresh Unit”).

 

Each unit purchase option of E-compass will be converted into one substantially equivalent unit purchase option to purchase one iFresh Unit.

 

DELIVERY OF DOCUMENTS TO E-compass shareholders

 

Pursuant to the rules of the SEC, E-compass and services that it employs to deliver communications to its shareholders are permitted to deliver to two or more shareholders sharing the same address a single copy of the proxy statement/prospectus, unless E-compass has received contrary instructions from one or more of such shareholders. Upon written or oral request, E-compass will deliver a separate copy of the proxy statement/prospectus to any shareholder at a shared address to which a single copy of the proxy statement/prospectus was delivered and who wishes to receive separate copies in the future. Shareholders receiving multiple copies of the proxy statement/prospectus may likewise request that E-compass deliver single copies of the proxy statement/prospectus in the future. Shareholders may notify E-compass of their requests by contacting E-compass as follows:

 

E-compass Acquisition Corp.
7 Times Square, 37th floor
New York, New York, 10036
Attn: Richard Xu
Telephone: 646-912-8918

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

 

This summary highlights selected information from this proxy statement/prospectus but may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement/prospectus, including the Acquisition Agreement attached as Annex A. Please read these documents carefully as they are the legal documents that govern the Redomestication and Business Combination and your rights in the Redomestication and Business Combination. Unless the context otherwise requires, references to “E-compass,” “we,” “us” or “our” in this proxy statement/prospectus refers to E-compass Acquisition Corp., before the consummation of the Redomestication and Business Combination and to iFresh, including its consolidated subsidiaries, after the consummation of the Redomestication and Business Combination.

 

The Parties

 

E-compass

 

E-compass Acquisition Corp.
7 Times Square, 37th floor
New York, New York, 10036
Attn: Richard Xu
Telephone: 646-912-8918

 

E-compass Acquisition Corp., or E-compass, is a special purpose company incorporated under the laws of the Cayman Islands on September 23, 2014 as an exempted company with limited liability. E-compass was formed with the purpose of acquiring, through a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities, which we refer to as a “target business.” E-compass intended to focus on acquiring an operating business with its primary operations located in the People’s Republic of China as well as the Hong Kong Special Administrative Region and the Macau Special Administrative Region (but not Taiwan) (“China” or the “PRC”) operating in the e-commerce and consumer retail industry, but was not limited to a particular geographic region or industry.

 

E-compass completed its initial public offering (“Public Offering”) on August 18, 2015 of 4,000,000 units with each unit consisting of one ordinary share, par value $.0001 per share (“Ordinary Share”), and one right (“Right”) to receive one-tenth of one Ordinary Share upon consummation of an initial business combination. Simultaneous with the consummation of the Public Offering, we consummated the private placement of 310,000 private Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, generating total proceeds of $3,100,000. The Private Placement Units were purchased by Lodestar Investment Holdings I LLC (“Lodestar”), an affiliate of Richard Xu, our Chairman and Chief Executive Officer.

 

After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the Public Offering and private placement were $41,900,000, of which $40,800,000 was deposited into a trust account and the remaining proceeds became available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. As of March 31, 2016 we have approximately $305,000 of unused net proceeds that were not deposited into the trust fund to pay future general and administrative expenses. The net proceeds deposited into the trust fund remain on deposit in the trust fund earning interest. As of March 31, 2016, there was $40,851,104 held in the trust fund (including $51,104 of accrued interest which we intend to withdraw to pay for Business Combination expenses).

 

E-compass’s units, shares and rights are each quoted on the Nasdaq Stock Market, under the symbols “ECACU,” “ECAC” and “ECACR,” respectively. Each of E-compass’s units consist of one ordinary share and one right to receive one-tenth (1/10) of an ordinary share on the consummation of an initial business combination. E-compass’s units commenced trading on August 13, 2015. E-compass’s shares and rights commenced trading on November 25, 2015.

 

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NYM Holding, Inc.

 

NYM Holding, Inc.
2-39 54th Ave
Long Island city, New York 11101
Telephone: 718-628-6200

 

NYM Holding, Inc. (“NYM”) is a fast growing Asian/Chinese grocery supermarket chain in the north-eastern U.S. providing food and other merchandise hard to find in mainstream grocery stores. Since NYM was formed in 1995, NYM has been targeting the Chinese and other Asian population in the U.S. with its in-depth cultural understanding of its target customer’s unique consumption habits. NYM currently has eight retail supermarkets across New York, Massachusetts and Florida, with in excess of 6,940,000 purchases in its stores in the fiscal year ended March 31, 2016. It also has two in-house wholesale businesses, Strong America Limited (“Strong America”) and New York Mart Group, Inc. (“NYMG”), covering more than 6,000 wholesale products and servicing both NYM retail supermarkets and over 1,000 external clients that range from wholesalers to retailing groceries and restaurants. NYM has a stable supply of food from farms in New Jersey and Florida, ensuring reliable supplies of the most popular vegetables, fruits and seafood. Its wholesale business and long term relationships with farms insulate NYM from supply interruptions and sales declines, allowing it to remain competitive even during difficult markets. 

 

NYM plans to strategically expand along the I-95 corridor and its goal is to cover all states on the east coast. Although no agreements are in place, with additional capital support NYM hopes to acquire and open 4, 6 and 20 new stores by March 31, 2017, 2018 and 2019, respectively.

 

NYM’s business features the following characteristics that shape its leadership and success in the niche Asian Chinese grocery industry:

 

a.Differentiated and difficult to substitute products to meet the need of Asian and Chinese customers

 

b.Established merchandising system backed by in-house wholesale business and by long-standing relationships with farms

 

c.In-house cooling system and unique hibernation technology developed during 20 years of experience to manage perishables, especially produce and seafood

 

d.Capitalizing on economies of scale allowing strong negotiating power with upstream vendors, downstream customers and sizable competitors

 

e.Proven and replicable track record of management, operation, acquisition and organic growth

  

NYM’s net sales were $131.2 million and $127.9 million for fiscal years ended March 31, 2016 and 2015, respectively. In terms of sales by category, perishables, including vegetables, seafood, meat, fruit and hot food, constituted approximately 60.2% of total annual sales for the fiscal year ended March 31, 2016. Vegetables and seafood in the aggregate constituted 36.3% of overall annual sales and 60.5% of the perishable sales, which speaks to the unique consumption habits of Asian and Chinese Americans. NYM’s net income was $3.6 million for the year ended March 31, 2016, an increase of $2.8 million or 370.0% from $0.8 million for the year ended March 31, 2015. Adjusted EBITDA was $8.4 million for the year ended March 31, 2016, an increase of $5.0 million or 147.5% from $3.4 million for the year ended March 31, 2015. For additional information on Adjusted EBITDA, See the section entitled “NYM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations — Adjusted EBITDA,” beginning on page 115.

 

The Redomestication, Business Combination and Acquisition Agreement

 

Redomestication to Delaware

 

E-compass, an exempted company incorporated in the Cayman Islands, will effect a merger in which it will merge with and into iFresh Inc., its wholly-owned Delaware subsidiary, with iFresh Inc. surviving the merger (the Redomestication). iFresh is a newly formed shell company formed for the purposes of effectuating the Business Combination. Its Chief Executive Officer and Secretary is Richard Xu, E-compass’s Chief Executive Officer and Director.

 

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At the time of the Redomestication:

 

Each E-compass ordinary share will be converted automatically into one share of common stock of iFresh (the “iFresh Common Stock”).

 

Each E-compass Right will be converted into one substantially equivalent right (“iFresh Right”) to receive one right to receive one-tenth (1/10) of a share of iFresh Common Stock on the consummation of the Business Combination.

 

Each E-compass Unit will be converted automatically into one iFresh Unit consisting of one share of iFresh Common Stock and one iFresh Right (“iFresh Unit”).

 

Each unit purchase option of E-compass will be converted into one substantially equivalent unit purchase option to purchase one iFresh Unit.

 

In connection with the Redomestication, E-compass will cease to exist and iFresh will be the surviving corporation. In connection therewith, iFresh will assume all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of E-compass, including any and all agreements, covenants, duties and obligations of E-compass set forth in the Acquisition Agreement. For further information regarding the Acquisition Agreement, see “The Acquisition Agreement” elsewhere in this proxy statement/prospectus.

 

Business Combination with NYM; Business Combination Consideration

 

Immediately following the Redomestication, Merger Sub will merger with and into NYM, resulting in NYM becoming a wholly owned subsidiary of iFresh. The issuance of shares of iFresh to the post-Business Combination shareholders is being consummated on a private placement basis pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The aggregate value of the consideration to be paid by E-compass in the business combination is approximately $125 million (calculated as follows: (i) $5 million in cash, plus, (ii) 12,000,000 shares of common stock of iFresh to be issued to the NYM shareholders multiplied by $10.00 (the deemed value of the shares in the Acquisition Agreement)).

 

After the Business Combination assuming no redemptions of ordinary shares for cash, E-compass’s current public shareholders will own approximately 22.6% of iFresh, E-compass’s current directors, officers and affiliates will own approximately 7.8% of iFresh, and the former shareholders of NYM will own approximately 69.6% of iFresh. Assuming redemption by holders of 3,000,000 E-compass’s outstanding ordinary shares, E-compass public shareholders will own approximately 6.3% of iFresh, E-compass’s current directors, officers and affiliates will own approximately 9.4% of iFresh, and the former shareholders of NYM will own approximately 84.3% of iFresh.

 

Each of the Redomestication Proposal and the Business Combination Proposal, as described below, is conditioned upon the approval of each other. Therefore, all three must be approved by shareholders in order for the Business Combination to be consummated. If any of the three proposals is not approved, the Business Combination will not be consummated and E-compass will liquidate and dissolve. Upon consummation of the Business Combination, NYM will be a wholly owned subsidiary of iFresh.

 

The Business Combination and the Acquisition Agreement comply with the terms described in E-compass’s Registration Statement on Form S-1 relating to its initial public offering. Furthermore, the consummation of the Business Combination is conditioned upon the majority of the ordinary shares voted by E-compass’s shareholders present and entitled to vote at the extraordinary general meeting voting in favor of the Business Combination and holders of less than 3,500,000 E-compass shares exercising their redemption rights, consistent with the disclosure set forth in E-compass’s initial public offering registration statement (the “S-1”). However, our lead investor agreed to hold 1,000,000 of the shares it purchased in our initial public offering through the consummation of our initial business combination, vote in favor of the proposed business combination and not seek redemption in connection therewith. As a result, we do not expect there to be more than 3,000,000 shares that exercise redemption rights. We will enter into an agreement with our lead investor to repurchase 500,000 of such non-redeemable shares promptly after the closing of our business combination at a purchase price of $10.00 per share.

 

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Management

 

Effective the closing date, the board of directors of iFresh will consist of five members. The members will include Long Deng, Lilly Deng, Jianming You, and Xiangke Fang designated by NYM and Henry Chang-Yu Lee designated by E-compass, of whom Jianming You, Xiangke Fang and Henry Chang-Yu Lee will be independent directors. Long Deng will be the Chief Executive Officer and Chief Operating Officer of iFresh after the consummation of the Business Combination. See “Directors and Executive Officers after the Business Combination” elsewhere in this proxy statement/prospectus.

 

The Acquisition Agreement

 

On July 25, 2016, E-compass, iFresh, Merger Sub, NYM, the NYM shareholders, and the representative of the NYM shareholders entered into the Acquisition Agreement, pursuant to which E-compass will redomicile to Delaware and iFresh Merger Sub will merge into NYM resulting in NYM becoming a wholly owned subsidiary of iFresh. See “The Acquisition Agreement — Business Combination with NYM; Business Combination Consideration” for more detailed information.

 

The merger consideration consists of $5 million in cash and 12,000,000 shares of iFresh Common Stock.

 

Pursuant to the Acquisition Agreement, the Redomestication will not be consummated unless the Business Combination is also approved. Similarly, the Business Combination will not take place unless the Redomestication is also approved. Upon consummation of the Business Combination, NYM will be a wholly owned subsidiary of iFresh Inc.

 

Consummation of the Acquisition Agreement is conditioned on, among other things, (a) holders of two-thirds of E-compass’s shareholders present and entitled to vote at the extraordinary general meeting approving the Business Combination in accordance with its Amended and Restated Memorandum and Articles of Association; (b) the absence of any proceeding pending or threatened to enjoin or otherwise restrict the acquisition and (c) the representations and warranties of the other parties being true on and as of the closing date of the Acquisition Agreement, and compliance with all required covenants in the Acquisition Agreement. To the knowledge of the parties to the Business Combination, none of the events in (b) or (c) above have occurred.

  

The obligations of E-compass to consummate the transactions contemplated by the Acquisition Agreement, in addition to the conditions described above, are conditioned upon each of the following (none of which have been satisfied as of the date hereof), among other things:

 

there having been no material adverse effect to NYM’s business; and

 

iFresh receiving a legal opinion from NYM’s counsel.

 

The obligations of NYM to consummate the transactions contemplated by the Acquisition Agreement, in addition to the conditions described above, are conditioned upon each of the following (none of which have been satisfied as of the date hereof), among other things:

 

E-compass raising $15 million of debt financing on terms reasonably acceptable to NYM.

 

See “The Acquisition Agreement — Conditions to Closing” for more details.

 

Other Agreements Relating to the Business Combination

 

Voting Agreement

 

In connection with the Acquisition, iFresh, the NYM shareholders and certain shareholders of E-compass will enter into a Voting Agreement to set forth their agreements and understandings with respect to how shares of iFresh common stock held by them will be voted on in connection with, and following, the transactions contemplated by the Acquisition Agreement. The parties will agree to vote their shares of iFresh common stock as necessary to ensure that the size of the Board of Directors of iFresh after the consummation of the Redomestication and Business Combination will be five members until two years after the closing of the Business Combination. The parties will also agree to vote their shares of iFresh common stock to ensure the election of one member of the Board of Directors of iFresh designated by the E-compass shareholders party to the agreement, who shall initially be Henry Chang-Yu Lee, and four members designated by the NYM shareholders, of which two designees shall qualify as an independent director pursuant to the rules of any stock exchange on which iFresh may be listed. A copy of the Voting Agreement is attached to this proxy statement/prospectus as Annex C. 

 

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Option Agreement

 

In connection with the Acquisition, iFresh and Long Deng will enter into an option agreement pursuant to which iFresh has the option, but not the obligation, to purchase four additional supermarkets (the “Option Companies”) from Mr. Deng on or prior to March 31, 2017. iFresh has the ability to exercise the option in installments. The option price for each Option Company is $2.5 million in cash minus any liabilities owed to iFresh or any of its subsidiaries by the applicable Option Company as of the closing date. Three of the four stores have been operated for years and one will be opened by the end of 2016. A copy of the Option Agreement is attached to this proxy statement/prospectus as Annex B.

 

Registration Rights Agreement

 

In connection with the Acquisition, iFresh and the NYM shareholders will enter into a Registration Rights Agreement to provide for the registration of the common stock being issued to the NYM shareholders in connection with the Business Combination. The NYM shareholders will be entitled to “piggy-back” registration rights with respect to registration statements filed following the consummation of the Business Combination. iFresh will bear the expenses incurred in connection with the filing of any such registration statements.

 

Recommendations of the Boards of Directors and Reasons for the Redomestication and Business Combination

 

After careful consideration of the terms and conditions of the Acquisition Agreement, the board of directors of E-compass has determined that the Redomestication, the Business Combination and the transactions contemplated thereby are fair to and in the best interests of E-compass and its shareholders. In reaching its decision with respect to the Redomestication and Business Combination and the transactions contemplated thereby, the board of directors of E-compass reviewed various industry and financial data and the due diligence and evaluation materials provided by NYM. The board of directors did not obtain a fairness opinion on which to base its assessment. E-compass’s board of directors recommends that E-compass shareholders vote:

 

FOR the Redomestication Proposal;

 

FOR the Business Combination Proposal; and

 

FOR the Business Combination Adjournment Proposal.

 

Interests of Certain Persons in the Business Combination

 

When you consider the recommendation of E-compass’s board of directors in favor of adoption of the Business Combination Proposal and other proposals, you should keep in mind that E-compass’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a shareholder, including:

 

If the proposed Business Combination is not completed by February 18, 2017, E-compass will be required to liquidate. In such event, the 1,000,000 E-compass ordinary shares held by E-compass officers, directors and affiliates, which were acquired prior to the IPO for an aggregate purchase price of $25,000, will be worthless, as will the 310,000 Units that were acquired by Lodestar prior to the IPO for an aggregate purchase price of $3,100,000. Such ordinary shares and units had an aggregate market value of approximately $_________ based on the closing price of E-compass’s ordinary shares of $_____ and E-compass’s rights $_____, on the Nasdaq Stock Market as of ____________, 2016;

 

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Unless E-compass consummates the Business Combination, its officers, directors and initial shareholders will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceeded the amount of its working capital. As a result, the financial interest of E-compass’s officers, directors and Initial Shareholders or their affiliates could influence its officers’ and directors’ motivation in selecting NYM as a target and therefore there may be a conflict of interest when it determined that the Business Combination is in the shareholders’ best interest;

 

Richard Xu and Chen Liu have contractually agreed that, if it liquidates prior to the consummation of a business combination, they will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by E-compass for services rendered or contracted for or products sold to it. Therefore, E-compass’s initial shareholders have a financial interest in consummating a business combination, thereby resulting in a conflict of interest. E-compass’s Initial Shareholders or their affiliates could influence our officers’ and directors’ motivation in selecting a target business and therefore there may be a conflict of interest when determining whether the Business Combination is in the shareholders’ best interest;

 

If the Business Combination with NYM is completed, Henry Chang-Yu Lee will serve as a director of iFresh and NYM will designate four members to the Board of Directors of iFresh; and

 

In addition, the exercise of E-compass’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in our shareholders’ best interest.

  

Voting Securities

 

As of [●], 2016, there were 5,310,000 E-compass ordinary shares issued and outstanding. Only E-compass shareholders who hold ordinary shares of record as of the close of business on [●], 2016 are entitled to vote at the extraordinary general meeting of shareholders or any adjournment of the extraordinary general meeting. Approval of the Redomestication Proposal and the Business Combination Proposal require the affirmative vote of two-thirds of the issued and outstanding E-compass ordinary shares entitled to vote thereon as of the record date present in person or represented by proxy at the extraordinary general meeting. Abstentions are considered present for the purposes of establishing a quorum but will have the same effect as a vote “AGAINST” the Redomestication Proposal, the Business Combination Proposal and the Business Combination Adjournment Proposal. Broker non-votes will be considered present for the purposes of establishing a quorum, but not eligible to vote the applicable proposal. A broker non-vote will have no effect on the Redomestication Proposal, the Business Combination Proposal or the Business Combination Adjournment Proposal.

 

As of [●], 2016, E-compass’s initial shareholders, either directly or beneficially, owned and were entitled to vote 1,310,000 ordinary shares, or approximately 24.7% of E-compass’s outstanding ordinary shares. With respect to the Business Combination, E-compass’s initial shareholders have agreed to vote their respective E-compass ordinary shares acquired by them in favor of the Business Combination Proposal and related proposals. They have indicated that they intend to vote their shares, as applicable, “FOR” each of the other proposals although there is no agreement in place with respect to these proposals. In addition, the lead investor from our initial public offering has agreed to vote 1,000,000 of the shares purchased by him in in the initial public offering, or approximately 18.8% of the outstanding shares in favor of the Business Combination Proposal.

  

Appraisal Rights

 

Holders of E-compass ordinary shares are not entitled to appraisal rights under the Companies Law.

 

Emerging Growth Company

 

Each of E-compass, iFresh and NYM is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (or JOBS Act). It is anticipated that after the consummation of the transactions, iFresh will continue to be an “emerging growth company.” As an emerging growth company, iFresh will be eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain shareholder approval of any golden parachute payments not previously approved.

 

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Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. Each of E-compass, iFresh and NYM have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, iFresh, as an emerging growth company, will not adopt the new or revised standard until the time private companies are required to adopt the new or revised standard. This may make comparison of iFresh’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.

 

iFresh could remain an emerging growth company until the last day of its fiscal year following August 18, 2020 (the fifth anniversary of the consummation of its predecessor’s initial public offering). However, if iFresh’s non-convertible debt issued within a three-year period or its total revenues exceed $1 billion or the market value of its shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, iFresh would cease to be an emerging growth company as of the following fiscal year.

 

Material U.S. Federal Income Tax Consequences

 

The Redomestication should qualify as a reorganization for U.S. federal income tax purposes under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). However, due to the absence of guidance directly on point on how the provisions of Section 368(a) apply in the case of a merger of a corporation with no active business and only investment-type assets, this result is not entirely free from doubt. Accordingly, due to the absence of such guidance, it is not possible to predict whether the IRS or a court considering the issue would take a contrary position.

 

If the Redomestication qualifies as a reorganization under Section 368(a), except as otherwise provided below in the sections entitled “Material U.S. Federal Tax Consequences—PFIC Considerations” and “Material U.S. Federal Tax Consequences —Effect of Section 367,” a U.S. Holder of E-compass securities should not recognize gain or loss upon the exchange of its E-compass securities solely for iFresh securities pursuant to the Redomestication. A U.S. Holder’s aggregate tax basis in the iFresh securities received in connection with the Redomestication should be the same as the aggregate tax basis of the E-compass securities surrendered in the transaction, increased by any amount included in the income of such U.S. Holder under the PFIC rules or Section 367(b) of the Code. See the discussion under “Material U.S. Federal Tax Consequences —PFIC Considerations” and “Material U.S. Federal Tax Consequences —Effect of Section 367,” below. In addition, the holding period of the iFresh securities received in the Redomestication generally should include the holding period of the E-compass securities surrendered in the Redomestication.

 

If the Redomestication should fail to qualify as a reorganization under Section 368(a), a U.S. Holder of E-compass securities generally would recognize gain or loss with respect to its E-compass securities in an amount equal to the difference, if any, between the U.S. Holder’s adjusted tax basis in its E-compass securities and the fair market value of the corresponding iFresh securities received in the Redomestication. In such event, the U.S. Holder’s basis in the iFresh securities would be equal to their fair market value, and such U.S. Holder’s holding period for the iFresh securities would begin on the day following the date of the Redomestication.

 

See “Material U.S. Federal Tax Consequences” below for further discussion of these tax consequences.

 

Anticipated Accounting Treatment

 

The Business Combination will be treated by E-compass as a reverse Business Combination under the acquisition method of accounting in accordance with GAAP. For accounting purposes, NYM is considered to be acquiring E-compass in this transaction. Therefore, the aggregate consideration paid in connection with the Business Combination will be allocated to E-compass tangible and intangible assets and liabilities based on their fair values. The assets and liabilities and results of operations of E-compass will be consolidated into the results of operations of NYM as of the completion of the Business Combination.

 

Regulatory Approvals

 

The Business Combination and the other transactions contemplated by the Acquisition Agreement are not subject to any additional federal or state regulatory requirements or approvals, including the Hart-Scott Rodino Antitrust Improvements Act of 1976, except for filings with the State of Delaware and the Cayman Islands Government necessary to effectuate the transactions contemplated by the Acquisition Agreement.

 

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NYM HOLDING, INC. SUMMARY FINANCIAL INFORMATION

 

The data below as for the years ended March 31, 2016 and 2015 has been derived from NYM’s audited consolidated financial statements for such years, which are included in this prospectus/proxy statement.

 

The information presented below should be read in conjunction with “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and NYM’s audited and unaudited financial statements and notes thereto included elsewhere in this prospectus/proxy statement.

 

   For the Years Ended
March 31,
 
   2016   2015 
         
Net sales-third parties  $125,021,947   $122,611,592 
Net sales-related parties   6,203,277    5,297,283 
Total Sales   131,225,224    127,908,875 
Cost of sales   97,259,250    99,835,757 
Occupancy costs   7,367,155    6,736,033 
Gross Profit   26,598,819    21,337,085 
Selling, general and administrative expenses   20,718,062    20,167,247 
Income from operations   5,880,757    1,169,838 
Interest expense   (215,494)   (227,889)
Other income   992,620    807,002 
Income before income tax provision   6,657,883    1,748,951 
Income tax provision   (3,016,874)   (974,222)
Net income  $3,641,009   $774,729 
           
Cash Flow Data:          
Net cash flow provided by operating activities  $8,018,462   $2,489,798 
Net cash flow used in investing activities  $(7,329,227)  $(824,423)
Net cash provided by financing activities  $(632,191)  $(1,962,913)

 

   March 31, 
Balance Sheet Data:  2016   2015 
Cash  $551,782   $494,738 
Total assets  $28,537,674   $25,379,700 
Total liabilities  $23,426,048   $23,909,083 
Total shareholders' equity  $5,111,626   $1,470,617 

 

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PRICE RANGE OF SECURITIES AND DIVIDENDS

 

E-compass’s units, shares and rights are each quoted on the Nasdaq Stock Market, under the symbols “ECACU,” “ECAC” and “ECACR,” respectively. Each of E-compass’s units consist of one ordinary share and one right to acquire 1/10 of an ordinary share of E-compass. Each of E-compass’s ordinary shares consists of one ordinary share and one right to acquire 1/10 of an ordinary share of E-compass. E-compass’s units commenced trading on August 13, 2015. E-compass’s shares and rights commenced trading on November 25, 2015.

 

The table below sets forth the high and low bid prices of E-compass’s ordinary shares, rights, and units as reported on the Nasdaq Stock Market for the period from November 25, 2015 (the date on which our ordinary shares and rights were first quoted on the Nasdaq Stock Market) through July 28, 2016 and for the period from August 13, 2015 (the date on which our units were first quoted on the Nasdaq Stock Market) through July 28, 2016.

 

   Units   Ordinary Shares   Rights 
   High   Low   High   Low   High   Low 
Quarter ended:                        
September 30, 2016*   12.48    10.28    10.17    10.15    0.26    0.26 
June 30, 2016   10.32    10.20    10.20    10.05    0.26    0.24 
March 31, 2016   10.20    10.00    10.02    9.95    0.25    0.20 
Period ended:                              
December 31, 2015   10.75    10.00    9.95    9.82    0.18    0.15 
September 30, 2015   10.15    10.00    -    -    -    - 

 

* Through July 28, 2016

 

E-compass has not paid any cash dividends on its ordinary shares to date and does not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be dependent upon E-compass’s revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of its then board of directors. It is the present intention of E-compass’s board of directors to retain all earnings, if any, for use in its business operations and, accordingly, E-compass’s board does not anticipate declaring any dividends in the foreseeable future.

 

NYM’s securities are not publicly traded.

 

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RISK FACTORS

 

You should consider carefully the following risk factors, as well as the other information set forth in this proxy statement/prospectus, before making a decision on the Acquisition.

 

Risks Related to NYM’s Business

 

The following risk factors apply to the business and operations of NYM, as well as to the business and operations of NYM following the completion of the Business Combination. Any of the risk factors described below could significantly and adversely affect NYM’s business, prospects, sales, revenues, gross profit, cash flows, financial condition, and results of operations.

 

NYM’s continued growth depends on new store acquisitions and openings and on increasing same store sales, and NYM’s failure to achieve these goals could negatively impact its results of operations and financial condition.

 

NYM’s growth strategy depends, in large part, on acquiring and opening new stores in existing and new areas and operating those stores successfully. Successful implementation of this strategy is dependent on sufficient capital support from financing, finding suitable stores to acquire, identifying suitable locations and negotiating acceptable lease terms for store sites, as it faces competition from other retailers for such sites. There can be no assurance that NYM will continue to grow through new store acquisitions and openings. NYM may not be able to obtain sufficient capital support for the expansion plan, or successfully implement the plan to acquire or open new stores timely or within budget or operate them successfully, and there can be no assurance that store acquisition or opening costs for, net sales of, contribution margin of and average payback period on initial investment for new stores will conform to NYM’s operating model discussed elsewhere in this Registration Statement. Lower contribution margins from new stores, along with the impact of related store acquisition, opening and store management relocation costs, may have an adverse effect on NYM’s financial condition and operating results. In addition, if NYM acquires stores in the future, it may not be able to successfully integrate those stores into its existing store base and those stores may not be as profitable as its existing stores. 

 

Also, NYM may not be able to successfully hire, train and retain new store employees or integrate those employees into the programs, policies and culture of NYM. NYM or its third party vendors may not be able to adapt its distribution, management and other operating systems to adequately supply products to new stores at competitive prices so that it can operate the stores in a successful and profitable manner. NYM may not have the level of cash flow or financing necessary to support its growth strategy. 

 

Additionally, NYM’s acquisition and opening of new stores will place increased demands on its operational, managerial and administrative resources. These increased demands could cause NYM to operate its existing business less effectively, which in turn could cause a deterioration in the financial performance of NYM’s existing stores. If NYM experiences a decline in performance, it may slow or discontinue store openings, or may decide to close stores that it is unable to operate in a profitable manner.

 

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Additionally, some of NYM’s new stores may be located in areas where it has little experience or a lack of brand recognition. Those markets may have different competitive conditions, market conditions, consumer tastes and discretionary spending patterns than NYM’s existing markets, which may cause these new stores to be less successful than stores in NYM’s existing markets.

 

NYM’s operating results and stock price will be adversely affected if it fails to implement its growth strategy or if it invests resources in a growth strategy that ultimately proves unsuccessful.

 

NYM’s newly opened stores may negatively impact its financial results in the short-term and may not achieve sales and operating levels consistent with NYM’s mature store base on a timely basis or at all.

 

NYM has actively pursued new store growth and plans to continue doing so in the future. NYM cannot assure you that its new store acquisitions or openings will be successful or result in greater sales and profitability. New store openings may negatively impact NYM’s financial results in the short-term due to the effect of store opening costs and lower sales and contribution margin during the initial period following opening. New stores build their sales volume and their customer base over time and, as a result, generally have lower margins and higher operating expenses, as a percentage of net sales, than NYM’s more mature stores. A new store can take more than a year to achieve a level of operating performance comparable to NYM’s similarly existing stores. Further, NYM has experienced in the past, and expects to experience in the future, some sales volume transfer from its existing stores to its new stores as some of NYM’s existing customers switch to new, closer locations. As a result, part of the increase of the overall sales to NYM arising from a new store opening or a store acquisition may be offset by the “sales volume transfer” phenomena. 

 

The competition from competitors may increase intensively in the future.

 

Food retail is a large and highly competitive industry. However, NYM believes that the market participants in the Chinese supermarket industry are highly fragmented and immature. Currently, NYM faces competition from smaller or dispersed competitors focusing on the niche market of Chinese consumers. However, with the rapid growth of the Chinese and other Asian population and their consumption power, other competitors may also begin operating in this niche market in the future. Those competitors include: (i) national conventional supermarkets, (ii) regional supermarkets, (iii) national superstores, (iv) alternative food retailers, (v) local foods stores, (vi) small specialty stores, and (vii) farmers’ markets.

 

The national and regional supermarket chains are experienced in operating multiple stores locations, expanding management and they have greater marketing or financial resources than NYM does. Even though they currently offer only a limited selection of Chinese and Asian specialty foods, they may be able to devote greater resources to sourcing, promoting and selling their products if they choose to do so. On the contrary, the local food stores and markets are small in size with a deep understanding of local preferences, but their lack of scale results in high risk and limited growth potential.

 

If more and more competitors devote into this market segment aiming to serve Chinese and other Asian customers in the future, the competition will increase. NYM’s operating results may be negatively impacted through a loss of sales, reduction in margin from competitive price changes and/or greater operating costs such as marketing, due to the increase of competition.

 

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NYM relies on a combination of product offerings, customer service, store format, location and pricing to compete.

 

NYM competes with other food retailers on a combination of factors, primarily product selection and quality, customer service, store layout and decoration, location and price. NYM’s success depends on its ability to offer products that appeal to its customers' preferences. Failure to offer such products, or to accurately forecast changing customer preferences, could lead to a decrease in the number of customer transactions at NYM’s stores and in the amount customers spend at NYM’s stores.

 

Pricing in particular is a significant driver of consumer choice in NYM’s industry and NYM expects competitors to continue to apply pricing and other competitive pressures. To the extent that NYM’s competitors lower prices, its ability to maintain gross profit margins and sales levels may be negatively impacted. Some of NYM’s competitors may have greater resources than it does. These competitors could use these advantages to take measures, including reducing prices, which could adversely affect NYM’s competitive position, financial condition and results of operations.

 

If NYM does not succeed in offering attractively priced products that consumers intend to purchase or are unable to provide a convenient and appealing shopping experience, NYM’s sales, operating margins and market share may decrease, resulting in reduced profitability. 

 

Economic conditions that impact consumer spending could materially affect NYM’s business.

 

Ongoing economic uncertainty continues to negatively affect consumer confidence and discretionary spending. NYM’s operating results may be materially affected by changes in economic conditions nationwide or in the regions in which NYM operates that impact consumer confidence and spending, including discretionary spending. This risk may be exacerbated if customers choose lower-cost alternatives to NYM’s product offerings in response to economic conditions. In particular, a decrease in discretionary spending could adversely impact sales of certain of NYM’s higher margin product offerings. Future economic conditions affecting disposable consumer income, such as employment levels, business conditions, changes in housing market conditions, the availability of consumer credit, interest rates, tax rates and fuel and energy costs, could reduce overall consumer spending or cause consumers to shift their spending to lower-priced competitors. In addition, inflation or deflation can impact NYM’s business. Food deflation could reduce sales growth and earnings, while food inflation, combined with reduced consumer spending, could reduce gross profit margins. As a result, NYM’s results of operations could be materially adversely affected.

 

NYM’s existing stores are mainly located in Northeastern American metropolitan areas. The geographic concentration of its stores creates an exposure to the economy of the Northeastern United States and any downturn in this region could materially adversely affect NYM’s financial condition and results of operations.

 

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Perishable products make up a significant portion of NYM’s sales, and ordering errors or product supply disruptions may have an adverse effect on NYM’s profitability and operating results.

 

NYM has a significant focus on perishable products. Sales of perishable products accounted for approximately 60.2% of NYM’s net sales in fiscal year ended March 31, 2016. NYM has self-owned wholesale facilities and stable supply relationship with farm partners, which significantly reduces ordering errors and product disruption. However, NYM still relies on various suppliers and vendors to provide and deliver its product inventory on a continuous basis. NYM could suffer significant perishable product inventory losses in the event of the loss of a major supplier or vendor, disruption of its supply chain, extended power outages, natural disasters or other catastrophic occurrences. While NYM has implemented certain systems to ensure that its ordering is in line with demand, it cannot assure you that its ordering systems will always work efficiently, in particular in connection with the new additional stores, which have no, or a limited, ordering history. If NYM were to over-order, it could suffer inventory losses, which would negatively impact its operating results.

 

The operation of new stores and online sales may cannibalize sales in NYM’s stores and its financial results can be affected by economic and competitive conditions in this area.

 

All of NYM’s existing stores are located in the Northeastern United States and it intends to grow its store base in this area. New stores are expected to be opened in the Greater New York City and Boston metropolitan areas. As NYM opens new stores in closer proximity to its customers who currently travel longer distances to shop at NYM’s stores, NYM expects some of these customers to take advantage of the convenience of NYM’s new locations. Simultaneously, NYM will develop online sales to cover the customers living in a 2.5-hour drive radius, which may satisfy the demand from those Chinese customers living in the suburbs.

 

Some sales volume may transfer from NYM’s existing stores to its new stores as some of its existing customers switch to these new, closer locations, or convenient online shopping. Consequently, NYM’s new stores and online sales may adversely impact sales at NYM’s existing stores.

 

Disruption of relationships with vendors could negatively affect NYM’s business.

 

NYM Purchases vegetables and fruits directly from farms and other vendors and maintains stable relationships with the vendors to ensure reliable supplies of popular seasonal Chinese specialty of vegetables and fruits. NYM also depends on third-party suppliers for exclusive third-party brands. The cancellation of NYM’s supply arrangement with any of its suppliers or the disruption, delay or inability in supply from its suppliers could adversely affect NYM’s sales. If NYM’s suppliers fail to comply with food safety or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. NYM cannot assure you that it would be able to find replacement suppliers on commercially reasonable terms.

 

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NYM may be unable to protect or maintain its intellectual property, which could result in customer confusion, a negative perception of its brand and adversely affect its business.

 

NYM believes that its intellectual property has substantial value and has contributed significantly to the success of NYM’s business. In particular, NYM’s trademarks, including New York Mart, are valuable assets that reinforce NYM’s customers' favorable perception of its stores.

 

From time to time, third parties have used names similar to NYM’s, have applied to register trademarks similar to NYM’s and, as NYM believes, have infringed or misappropriated NYM’s intellectual property rights. NYM responds to these actions on a case-by-case basis, including, where appropriate, by sending cease and desist letters and commencing opposition actions and litigation. The outcomes of these actions have included both negotiated out-of-court settlements as well as litigation. NYM cannot assure you that the steps it has taken to protect its intellectual property rights are adequate, that its intellectual property rights can be successfully defended and asserted in the future or that third parties will not infringe upon or misappropriate any such rights. In addition, NYM’s trademark rights and related registrations may be challenged in the future and could be canceled or narrowed. Failure to protect NYM’s trademark rights could prevent NYM in the future from challenging third parties who use names and logos similar to NYM’s trademarks, which may in turn cause consumer confusion or negatively affect consumers' perception of NYM’s brand and products, and eventually adversely affect NYM’s sales and profitability. Moreover, intellectual property disputes and proceedings and infringement claims may result in a significant distraction for management and significant expense, which may not be recoverable regardless of whether NYM is successful. Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject NYM to liabilities, force NYM to cease use of certain trademarks or other intellectual property or force NYM to enter into licenses with others. Any one of these occurrences may have a material adverse effect on NYM’s business, results of operations and financial condition. 

 

If NYM experiences a data security breach and confidential customer information is disclosed, NYM may be subject to penalties and experience negative publicity, which could affect NYM’s customer relationships and have a material adverse effect on its business.

 

NYM and its customers could suffer harm if customer information was accessed by third parties due to a security failure in NYM’s systems. The collection of data and processing of transactions requires NYM to receive, transmit and store a large amount of personally identifiable and transaction related data. This type of data is subject to legislation and regulation in various jurisdictions. Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting state and federal legislative proposals addressing data privacy and security. If some of the current proposals are adopted, NYM may be subject to more extensive requirements to protect the customer information that it processes in connection with the purchases of NYM’s products. NYM may become exposed to potential liability with respect to the data that it collects, manages and processes, and may incur legal costs if its information security policies and procedures are not effective or if it is required to defend its methods of collection, processing and storage of personal data. Future investigations, lawsuits or adverse publicity relating to NYM’s methods of handling personal data could adversely affect its business, results of operations, financial condition and cash flows due to the costs and negative market reaction relating to such developments. Additionally, if NYM suffers data breaches, one or more of the credit card processing companies that it relies on may refuse to allow it to continue to participate in their network, which would limit NYM’s ability to accept credit cards at its stores and could adversely affect its business, results of operations, financial condition and cash flows.

 

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Data theft, information espionage or other criminal activity directed at the retail industry or computer or communications systems may materially adversely affect NYM’s business by causing NYM to implement costly security measures in recognition of actual or potential threats, by requiring NYM to expend significant time and expense developing, maintaining or upgrading its information technology systems and by causing it to incur significant costs to reimburse third parties for damages. Such activities may also materially adversely affect NYM’s financial condition, results of operations and cash flows by reducing consumer confidence in the marketplace and by modifying consumer spending habits.

 

If NYM is unable to renew or replace current store leases or if it is unable to enter into leases for additional stores on favorable terms, or if one or more of its current leases are terminated prior to expiration of their stated term, and it cannot find suitable alternate locations, NYM’s growth and profitability could be negatively impacted.

 

NYM currently leases all of its store locations. Many of NYM’s current leases provide unilateral option to renew for several additional rental periods at specific rental rates. NYM’s ability to re-negotiate favorable terms on an expiring lease or to negotiate favorable terms for a suitable alternate location, and NYM’s ability to negotiate favorable lease terms for additional store locations, could depend on conditions in the real estate market, competition for desirable properties, its relationships with current and prospective landlords, or other factors that are not within NYM’s control. Any or all of these factors and conditions could negatively impact NYM’s growth and profitability. 

 

NYM leases certain of its stores and related properties from related parties.

 

Long Deng, one of NYM’s directors and executive officers, owns 50% of Dragon Development LLC, which leases to NYM the premises at which Strong America, one of NYM’s wholesale subsidiaries, is located. During fiscal year ended March 31, 2016, rental payments (excluding maintenance and taxes that NYM is obligated to pay) under the leases from Dragon Development LLC were $588,000. The leases with Dragon Development LLC renewed on May 1, 2016, and their remaining terms are 10 years. NYM has no assurance that these related parties will renew the lease agreements with it after expiration. If NYM cannot renew the leases, it will have to move its stores and warehouses locations, which increases the uncertainty of finding suitable locations for those stores and the reputation recognition in new locations, which may adversely affect NYM’s sales, expenses, profit and financial position.

 

Failure to retain NYM’s senior management and other key personnel may adversely affect its operations.

 

NYM’s success is substantially dependent on the continued service of its senior management and other key personnel. These executives, and in particular Long Deng, NYM’s Executive Chairman and Chief Executive Officer and Chief Operating Officer, have been primarily responsible for determining the strategic direction of NYM’s business and for executing its growth strategy and are integral to its brand and culture, and the reputation NYM enjoys with suppliers and consumers. The loss of the services of any of these executives and other key personnel could have a material adverse effect on NYM’s business and prospects, as NYM may not be able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure could be viewed in a negative light by investors and analysts, which may cause NYM’s stock price to decline. The loss of key employees could negatively affect NYM’s business.

 

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If NYM is unable to attract, train and retain employees, it may not be able to grow or successfully operate its business.

 

The retail store industry is labor intensive, and NYM’s success depends in part upon its ability to attract, train and retain a sufficient number of employees who understand and appreciate NYM’s culture and are able to represent its brand effectively and establish credibility with its business partners and consumers. NYM’s ability to meet its labor needs, while controlling wage and labor-related costs, is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force in the markets in which NYM is located, unemployment levels within those markets, prevailing wage rates, changing demographics, health and other insurance costs and changes in employment legislation. In the event of increasing wage rates, if NYM fails to increase its wages competitively, the quality of its workforce could decline, causing its customer service to suffer, while increasing its wages could cause its earnings to decrease. If NYM is unable to hire and retain employees capable of meeting its business needs and expectations, its business and brand image may be impaired. Any failure to meet NYM’s staffing needs or any material increase in turnover rates of NYM’s employees may adversely affect its business, results of operations and financial condition.

 

Changes in and enforcement of immigration laws could increase NYM’s costs and adversely affect NYM’s ability to attract and retain qualified store-level employees.

 

Federal and state governments from time to time implement immigration laws, regulations or programs that regulate NYM’s ability to attract or retain qualified foreign employees. Some of these changes may increase NYM’s obligations for compliance and oversight, which could subject NYM to additional costs and make NYM’s hiring process more cumbersome, or reduce the availability of potential employees. Although NYM has implemented, and is in the process of enhancing, procedures to ensure its compliance with the employment eligibility verification requirements, there can be no assurance that these procedures are adequate and some of its employees may, without NYM’s knowledge, be unauthorized workers. The employment of unauthorized workers may subject NYM to fines or civil or criminal penalties, and if any of NYM’s workers are found to be unauthorized, NYM could experience adverse publicity that negatively impacts its brand and makes it more difficult to hire and keep qualified employees. NYM may be required to terminate the employment of certain of its employees who were determined to be unauthorized workers. The termination of a significant number of employees may disrupt NYM’s operations, cause temporary increases in NYM’s labor costs as it trains new employees and result in additional adverse publicity. NYM’s financial performance could be materially harmed as a result of any of these factors. 

 

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Prolonged labor disputes with employees and increases in labor costs could adversely affect NYM’s business.

 

A considerable amount of NYM’s operating costs is attributable to labor costs and, therefore, its financial performance is greatly influenced by increases in wage and benefit costs, including pension and health care costs. As a result, NYM is exposed to risks associated with a competitive labor market. Rising health care and pension costs and the nature and structure of work rules will be important issues. Any work stoppages or labor disturbances as a result of employees’ dissatisfaction of their current employment terms could have a material adverse effect on NYM’s financial condition, results of operations and cash flows. NYM also expects that in the event of a work stoppage or labor disturbance, it could incur additional costs and face increased competition.

 

Various aspects of NYM’s business are subject to federal, state and local laws and regulations. NYM’s compliance with these regulations may require additional capital expenditures and could materially adversely affect its ability to conduct its business as planned.

 

NYM is subject to federal, state and local laws and regulations relating to zoning, land use, environmental protection, workplace safety, food safety, public health, community right-to-know and alcoholic beverage and tobacco sales. In particular, the states in which NYM operates and several local jurisdictions regulate the licensing of supermarkets and the sale of alcoholic beverages. In addition, certain local regulations may limit NYM’s ability to sell alcoholic beverages at certain times. NYM is also subject to laws governing its relationship with employees, including minimum wage requirements, overtime, working conditions, immigration, disabled access and work permit requirements. Compliance with new laws in these areas, or with new or stricter interpretations of existing requirements, could reduce the revenue and profitability of NYM’s stores and could otherwise materially adversely affect NYM’s business, financial condition or results of operations. NYM’s new store openings could be delayed or prevented or its existing stores could be impacted by difficulties or failures in NYM’s ability to obtain or maintain required approvals or licenses. NYM’s stores are subject to unscheduled inspections on a regular basis, which, if violations are found, could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated "critical" violations, closure of the store until a re-inspection demonstrates that NYM has remediated the problem. Certain of NYM’s parking lots and warehouses either have only temporary certificates of occupancy or are awaiting a certificate of occupancy which, if not granted, would require NYM to stop using such property. Additionally, a number of federal, state and local laws impose requirements or restrictions on business owners with respect to access by disabled persons. NYM’s compliance with these laws may result in modifications to NYM’s properties, or prevent NYM from performing certain further renovations. NYM cannot predict the nature of future laws, regulations, interpretations or applications, or determine what effect either additional government regulations or administrative orders, when and if promulgated, or disparate federal, state and local regulatory schemes would have on NYM’s business in the future.

 

NYM’s plans to acquire and open new stores requires NYM to spend capital. Failure to use its capital efficiently could have an adverse effect on NYM’s profitability.

 

NYM’s growth strategy depends on its acquisition of and opening new stores, which will require NYM to use cash generated by its operations and a portion of the net proceeds of future equity or debt financing and borrowing under bank credit line. NYM cannot assure you that cash generated by its operations, the net proceeds of future equity or debt financing and borrowing under bank credit line will be sufficient to allow NYM to implement its growth strategy. If any of these initiatives prove to be unsuccessful, NYM may experience reduced profitability and it could be required to delay, significantly curtail or eliminate planned store openings, which could have a material adverse effect on its financial condition and future operating performance and the price of its common stock.

 

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Litigation may materially adversely affect NYM’s business, financial condition and results of operations.

 

NYM’s operations are characterized by a high volume of customer traffic and by transactions involving a wide variety of product selections. These operations carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in many other industries. Consequently, NYM may be a party to individual personal injury, product liability and other legal actions in the ordinary course of its business, including litigation arising from food-related illness. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend future litigation may be significant. There may also be adverse publicity associated with litigation that may decrease consumer confidence in NYM’s businesses, regardless of whether the allegations are valid or whether NYM is ultimately found liable. As a result, litigation may materially adversely affect NYM’s businesses, financial condition, results of operations and cash flows.

 

Increased commodity prices and availability may impact profitability.

 

Many of NYM’s products include ingredients such as wheat, corn, oils, milk, sugar, cocoa and other commodities. Commodity prices worldwide have been increasing. While commodity price inputs do not typically represent the substantial majority of NYM’s product costs, any increase in commodity prices may cause its vendors to seek price increases from NYM. Although NYM is typically able to mitigate vendor efforts to increase its costs, it may be unable to continue to do so, either in whole or in part. In the event NYM is unable to continue mitigating potential vendor price increases, it may in turn consider raising its prices, and its customers may be deterred by any such price increases. NYM’s profitability may be impacted through increased costs to it which may impact gross margins, or through reduced revenue as a result of a decline in the number and average size of customer transactions.

 

Severe weather, natural disasters and adverse climate changes may materially adversely affect NYM’s financial condition and results of operations.

 

Severe weather conditions and other natural disasters in areas where NYM has stores or from which NYM obtains the products it sells may materially adversely affect its retail operations or its product offerings and, therefore, its results of operations. Such conditions may result in physical damage to, or temporary or permanent closure of, one or more of NYM’s stores, an insufficient work force in NYM’s markets and/or temporary disruption in the supply of products, including delays in the delivery of goods to NYM’s stores or a reduction in the availability of products in its stores. In addition, adverse climate conditions and adverse weather patterns, such as drought or flood, that impact growing conditions and the quantity and quality of crops may materially adversely affect the availability or cost of certain products within its supply chain. Any of these factors may disrupt NYM’s businesses and materially adversely affect its financial condition, results of operations and cash flows.

 

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The occurrence of a widespread health epidemic may materially adversely affect NYM’s financial condition and results of operations.

 

NYM’s business may be severely impacted by wartime activities, threats or acts of terror or a widespread regional, national or global health epidemic, such as pandemic flu. Such activities, threats or epidemics may materially adversely impact NYM’s business by disrupting production and delivery of products to NYM’s stores, by affecting NYM’s ability to appropriately staff its stores or by causing customers to avoid public gathering places or otherwise change their shopping behaviors.

 

The unaudited pro forma financial information included elsewhere in this proxy statement/prospectus may not be indicative of what the combined company’s actual financial position or results of operations would have been.

 

The unaudited pro forma financial information in this joint proxy statement/prospectus is presented for illustrative purposes only, has been prepared based on a number of assumptions and is not necessarily indicative of what the combined company’s actual financial position or results of operations would have been had the business combination been completed on the dates indicated. See “Unaudited Pro Forma Consolidated Combined Financial Information”.

 

NYM needs approximately $25 million and $50 million for the years ended March 31, 2017 and March 31, 2018, respectively, in order to achieve its planned growth for that year and if it cannot successfully obtain sufficient capital, the financial results and stock price of iFresh after the business combination will be adversely affected.

 

NYM believes that it needs approximately $25 million and $50 million for the years ended March 31, 2017 and March 31, 2018, respectively, in order to achieve its planned growth for that year. If it is not able to obtain financing on commercially reasonable terms in connection with the Business Combination, as is contemplated by the parties, it may not be able to implement its growth plan. If it is unable to effect its growth plan, NYM’s financial results will be significantly worse than anticipated and its stock price may decline as a result.

 

Risk Relating to E-compass

 

E-compass will be forced to liquidate the trust account if it cannot consummate a business combination by February 18, 2017. In the event of a liquidation, E-compass’s public shareholders will receive $10.40 per ordinary share and the E-compass rights will expire worthless.

 

If E-compass is unable to complete a business combination by February 18, 2017 and is forced to liquidate, the per-ordinary share liquidation distribution will be $10.40 (other than for E-compass’s lead investor, who will receive $10.00 per share). Furthermore, there will be no distribution with respect to the E-compass rights, which will expire worthless as a result of E-compass’s failure to complete a business combination.

 

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You must tender your E-compass ordinary shares in order to validly seek redemption at the extraordinary general meeting of shareholders.

 

In connection with tendering your shares for redemption, you must elect either to physically tender your ordinary share certificates to E-compass’s transfer agent in each case by the business day prior to the consummation of the Business Combination, or to deliver your ordinary shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, which election would likely be determined based on the manner in which you hold your ordinary shares. The requirement for physical or electronic delivery by the business day prior to the consummation of the Business Combination ensures that a redeeming holder’s election to redeem is irrevocable once the Business Combination is consummated. Any failure to observe these procedures will result in your loss of redemption rights in connection with the vote on the Business Combination.

 

If third parties bring claims against E-compass, the proceeds held in trust could be reduced and the per-share liquidation price received by E-compass’s shareholders may be less than $10.40.

 

E-compass’s placing of funds in trust may not protect those funds from third party claims against E-compass. Although E-compass has received from many of the vendors, service providers (other than its independent accountants) and prospective target businesses with which it does business executed agreements waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of E-compass’s public shareholders, they may still seek recourse against the trust account. Additionally, a court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of E-compass’s public shareholders. If E-compass liquidates the trust account before the completion of a business combination and distributes the proceeds held therein to its public shareholders, Richard Xu and Chen Liu have agreed that they will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by E-compass for services rendered or contracted for or products sold to E-compass. However, E-compass cannot assure you that they will be able to meet such obligation. Therefore, the per-share distribution from the trust account for our shareholders other than our lead investor may be less than $10.40 due to such claims.

 

Additionally, if E-compass is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in E-compass’s bankruptcy estate and subject to the claims of third parties with priority over the claims of its shareholders. To the extent any bankruptcy claims deplete the trust account, E-compass may not be able to return $10.40 to our public shareholders.

 

Any distributions received by E-compass shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, E-compass was unable to pay its debts as they fell due in the ordinary course of business.

 

E-compass’s Amended and Restated Memorandum and Articles of Association provides that it will continue in existence only until February 18, 2017. If E-compass is unable to consummate a transaction within the required time periods, upon notice from E-compass, the trustee of the trust account will distribute the amount in its trust account to its public shareholders. Concurrently, E-compass shall pay, or reserve for payment, from funds not held in trust, its liabilities and obligations, although E-compass cannot assure you that there will be sufficient funds for such purpose. If there are insufficient funds held outside the trust account for such purpose, Richard Xu and Chen Liu have agreed that they will be liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by E-compass for services rendered or contracted for or products sold to E-compass.

 

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Thereafter, E-compass’s sole business purpose will be to dissolve through the voluntary liquidation procedure under the Companies Law. In such a situation under the Companies Law, a liquidator would be appointed and would give at least 21 days’ notice to creditors of his intention to make a distribution by notifying known creditors (if any) and by placing a public advertisement in the Cayman Islands Official Gazette, although in practice this notice requirement need not necessarily delay the distribution of assets as the liquidator may be satisfied that no creditors would be adversely affected as a consequence of a distribution before this time period has expired. As soon as the affairs of the company are fully wound-up, the liquidator must lay his final report and accounts before a final general meeting which must be called by a public notice at least one month before it takes place. After the final meeting, the liquidator must make a return to the Registrar confirming the date on which the meeting was held and three months after the date of such filing the company is dissolved. It is E-compass’s intention to liquidate the trust account to its public shareholders as soon as reasonably possible and E-compass’s insiders have agreed to take any such action necessary to liquidate the trust account and to dissolve the company as soon as reasonably practicable if E-compass does not complete a business combination within the required time period. Pursuant to E-compass’s Amended and Restated Memorandum and Articles of Association, failure to consummate a business combination by February 18, 2017, will trigger an automatic winding up of the company.

 

If E-compass is forced to enter into an insolvent liquidation, any distributions received by E-compass shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, E-compass was unable to pay its debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by E-compass’s shareholders. Furthermore, E-compass’s board may be viewed as having breached their fiduciary duties to its creditors and/or may have acted in bad faith, and thereby exposing itself and E-compass to claims of damages, by paying public shareholders from the trust account prior to addressing the claims of creditors. E-compass cannot assure you that claims will not be brought against it for these reasons. E-compass and any of E-compass’s insiders who knowingly and willfully authorized or permitted any distribution to be paid while E-compass was unable to pay its debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable to a fine of KYD15,000 (approximately US$18,000) and to imprisonment for five years in the Cayman Islands.

 

If E-compass’s due diligence investigation of NYM was inadequate, then shareholders of E-compass following the Business Combination could lose some or all of their investment.

 

Even though E-compass conducted a due diligence investigation of NYM, it cannot be sure that this diligence uncovered all material issues that may be present inside NYM or its business, or that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of NYM and its business and outside of its control will not later arise.

 

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All of E-compass’s officers and directors own E-compass ordinary shares and E-compass rights which will not participate in liquidation distributions and, therefore, they may have a conflict of interest in determining whether the business combination is appropriate.

 

All of E-compass’s officers and directors own an aggregate of 1,000,000 E-compass ordinary shares and 310,000 E-compass units. Such individuals have waived their right to redeem these shares, or to receive distributions with respect to these shares upon the liquidation of the trust account if E-compass is unable to consummate a business combination. Accordingly, the E-compass ordinary shares, as well as the E-compass units purchased by our officers or directors, will be worthless if E-compass does not consummate a business combination. Based on a market price of $10.20 per E-compass ordinary share on July 29, 2016 and $0.26 per right on July 29, 2016, the value of these shares and units was approximately $54.3 million. The E-compass ordinary shares acquired prior to the IPO, as well as the E-compass units will be worthless if E-compass does not consummate a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting NYM as a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of the Business Combination are appropriate and in E-compass’s shareholders’ best interest.

 

E-compass’s public shareholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group”, are restricted from seeking redemption rights with respect to more than 20% of the E-compass ordinary shares sold in the IPO.

 

E-compass is offering each of its public shareholders (but not its Initial Shareholders) the right to have his, her, or its ordinary shares redeemed for cash. Notwithstanding the foregoing, an E-compass public shareholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” will be restricted from seeking redemption rights with respect to more than 20% of the E-compass ordinary shares sold in the IPO. Accordingly, if you beneficially own more than 20% of the E-compass ordinary shares sold in the IPO and the Business Combination is approved, you will not be able to seek redemption rights with respect to the full amount of your E-compass ordinary shares and may be forced to hold such additional E-compass ordinary shares or sell them in the open market. E-compass cannot assure you that the value of such additional E-compass ordinary shares will appreciate over time following the Business Combination or that the market price of E-compass’s ordinary shares will exceed the redemption price.

 

E-compass’s public shareholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group”, will be restricted from exercising voting rights with respect to more than 20% of the shares sold in the IPO.

 

Pursuant to E-compass’s Amended and Restated Memorandum and Articles of Association, without E-compass’s prior written consent, none of E-compass’s public shareholders, whether acting singly or with any affiliate or other person acting in concert or as a “group,” shall be permitted to exercise voting rights on any proposal submitted for consideration at the extraordinary general meeting with respect to more than 20% of the E-compass ordinary shares sold in the IPO. Accordingly, if you hold more than 20% of the E-compass ordinary shares sold in the IPO (such shares are referred to herein as “Excess Shares”), you will be restricted from exercising voting rights with respect to any Excess Shares and such Excess Shares will remain outstanding following consummation of the Business Combination. We cannot assure you that the value of such Excess Shares will appreciate over time following the Business Combination or that the market price of E-compass’s ordinary shares will exceed the per-share redemption price.

 

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E-compass is requiring shareholders who wish to redeem their ordinary shares in connection with a proposed business combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

 

E-compass is requiring public shareholders who wish to redeem their ordinary shares to either tender their certificates to our transfer agent at any time prior to the business day immediately preceding the consummation of the proposed Business Combination or to deliver their shares to the transfer agent electronically using the Depository Trust Company’s, or DTC, DWAC (Deposit/Withdrawal At Custodian) System. In order to obtain a physical certificate, a shareholder’s broker and/or clearing broker, DTC and E-compass’s transfer agent will need to act to facilitate this request. It is E-compass’s understanding that shareholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, because we do not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical stock certificate. While we have been advised that it takes a short time to deliver shares through the DWAC System, we cannot assure you of this fact. Accordingly, if it takes longer than E-compass anticipates for shareholders to deliver their ordinary shares, shareholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their ordinary shares.

 

E-compass will require its public shareholders who wish to redeem their ordinary shares in connection with the Business Combination to comply with specific requirements for redemption described above, such redeeming shareholders may be unable to sell their securities when they wish to in the event that the Business Combination is not consummated.

 

If E-compass requires public shareholders who wish to redeem their ordinary shares in connection with the proposed Business Combination to comply with specific requirements for redemption as described above and the Business Combination is not consummated, E-compass will promptly return such certificates to its public shareholders. Accordingly, investors who attempted to redeem their ordinary shares in such a circumstance will be unable to sell their securities after the failed acquisition until E-compass has returned their securities to them. The market price for E-compass’s ordinary shares may decline during this time and you may not be able to sell your securities when you wish to, even while other shareholders that did not seek redemption may be able to sell their securities.

 

E-compass’s Initial Shareholders, including its officers and directors, control a substantial interest in E-compass and thus may influence certain actions requiring a shareholder vote.

 

E-compass’s Initial Shareholders, including all of its officers and directors, collectively own approximately 24.7% of its issued and outstanding ordinary shares. However, if a significant number of shareholders vote, or indicate an intention to vote, against the Business Combination, E-compass’s officers, directors, Initial Shareholders or their affiliates could make such purchases in the open market or in private transactions in order to influence the vote. E-compass’s Initial Shareholders have agreed to vote any shares they own in favor of the Business Combination. In addition, the lead investor from our initial public offering has agreed to vote 1,000,000 of the shares purchased by him in in the initial public offering, or approximately 18.8% of the outstanding shares in favor of the Business Combination Proposal.

 

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If E-compass’s security holders exercise their registration rights with respect to their securities, it may have an adverse effect on the market price of E-compass’s securities.

 

E-compass’s initial shareholders are entitled to make a demand that it register the resale of their initial shares at any time commencing three months prior to the date on which their shares may be released from escrow. Additionally, the purchasers of E-compass units sold in an offering that was consummated simultaneously with the IPO or the E-compass unit offering, are entitled to demand that E-compass register the resale of their units and underlying ordinary shares at any time after E-compass consummates a business combination. If such persons exercise their registration rights with respect to all of their securities, then there will be an additional 1,341,000 E-compass ordinary shares eligible for trading in the public market. The presence of these additional ordinary shares trading in the public market may have an adverse effect on the market price of E-compass’s securities.

 

E-compass will not obtain an opinion from an unaffiliated third party as to the fairness of the Business Combination to its shareholders.

 

E-compass is not required to obtain an opinion from an unaffiliated third party that the price it is paying is fair to its public shareholders from a financial point of view. E-compass’s public shareholders therefore, must rely solely on the judgment of E-compass’s board of directors.

 

If the Business Combination’s benefits do not meet the expectations of financial or industry analysts, the market price of E-compass’s securities may decline.

 

The market price of E-compass’s securities may decline as a result of the Business Combination if:

 

E-compass does not achieve the perceived benefits of the acquisition as rapidly as, or to the extent anticipated by, financial or industry analysts; or

 

The effect of the Business Combination on the financial statements is not consistent with the expectations of financial or industry analysts.

 

Accordingly, investors may experience a loss as a result of decreasing stock prices.

 

E-compass’s directors and officers may have certain conflicts in determining to recommend the acquisition of NYM, since certain of their interests, and certain interests of their affiliates and associates, are different from, or in addition to, your interests as a shareholder.

 

E-compass’s management and directors have interests in and arising from the Business Combination that are different from, or in addition to, your interests as a shareholder, which could result in a real or perceived conflict of interest. These interests include the fact that certain of the E-compass ordinary shares owned by E-compass’s management and directors, or their affiliates and associates, would become worthless if the Redomestication and Business Combination Proposals are not approved and E-compass otherwise fails to consummate a business combination prior to its liquidation date.

 

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E-compass will incur significant transaction costs in connection with transactions contemplated by the Acquisition Agreement.

 

E-compass will incur significant transaction costs in connection with the Business Combination. If the Business Combination is not consummated, E-compass may not have sufficient funds to seek an alternative business combination and may be forced to liquidate and dissolve.

 

Risk Factors Relating to the Redomestication and Business Combination

 

E-compass and NYM have incurred and expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by iFresh if the Business Combination is completed or by E-compass if the Business Combination is not completed.

 

E-compass and NYM expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, E-compass expects to incur approximately $[●] in expenses. These expenses will reduce the amount of cash available to be used for other corporate purposes by E-compass if the Business Combination is completed or by E-compass if the Business Combination is not completed.

 

In the event that a significant number of E-compass’s ordinary shares are redeemed, its stock may become less liquid following the Business Combination.

 

If a significant number of E-compass’s ordinary shares are redeemed, E-compass may be left with a significantly smaller number of shareholders. As a result, trading in the shares of the surviving company following the Business Combination may be limited and your ability to sell your shares in the market could be adversely affected.

 

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Nasdaq may not list iFresh’s shares on its exchange, which could limit investors’ ability to make transactions in iFresh’s securities and subject iFresh to additional trading restrictions.

 

iFresh will be required to meet the initial listing requirements to be listed on the Nasdaq Stock Market. iFresh may not be able to meet those initial listing requirements. Even if iFresh’s securities are so listed, iFresh may be unable to maintain the listing of its securities in the future.

 

If iFresh fails to meet the initial listing requirements and Nasdaq does not list its securities on its exchange, iFresh could face significant material adverse consequences, including:

 

a limited availability of market quotations for its securities;

 

a limited amount of news and analyst coverage for the company; and

 

a decreased ability to issue additional securities or obtain additional financing in the future.

 

E-compass may waive one or more of the conditions to the Business Combination without resoliciting shareholder approval for the Business Combination.

 

E-compass may agree to waive, in whole or in part, some of the conditions to its obligations to complete the Business Combination, to the extent permitted by applicable laws. The board of directors of E-compass will evaluate the materiality of any waiver to determine whether amendment of this proxy statement/prospectus and resolicitation of proxies is warranted. In some instances, if the board of directors of E-compass determines that a waiver is not sufficiently material to warrant resolicitation of shareholders, E-compass has the discretion to complete the Business Combination without seeking further shareholder approval. For example, it is a condition to E-compass’s obligations to close the Business Combination that there be no restraining order, injunction or other order restricting NYM’s conduct of its business, however, if the board of directors of E-compass determines that any such order or injunction is not material to the business of NYM, then the board may elect to waive that condition and close the Business Combination.

 

There will be a substantial number of iFresh’s common stock available for sale in the future that may adversely affect the market price of iFresh’s common stock.

 

E-compass currently has authorized share capital of 101,000,000 shares consisting of 100,000,000 ordinary shares with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.0001 per share. iFresh currently is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.0001 per share.

 

The shares to be issued in the Business Combination to the post-Business Combination shareholders, will be subject to certain restrictions on sale and cannot be sold for six (6) months (or in certain cases, twelve (12) months) from the date of the Business Combination. In addition, the holders of the shares to be issued in the Business Combination are parties to a Registration Rights Agreement that would allow the sale of such shares to occur as early as 60 days from the date of the Business Combination. After the expiration of this restricted period, there will then be an additional 81,716,667 shares that are eligible for trading in the public market. The availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of iFresh’s shares.

 

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Even if the Redomestication qualifies as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, or the “Code,” a U.S. Holder generally may still recognize gain with respect to its E-compass securities at the effective time of the Redomestication.

 

Even if the Redomestication qualifies as a reorganization under Section 368(a) of the Code, a U.S. Holder (as that term is defined in the section entitled “Material U.S. Federal Income Tax Consequences — General”) of E-compass securities may still recognize gain (but not loss) upon the exchange of its E-compass securities solely for the securities of iFresh pursuant to the Redomestication under the “passive foreign investment company,” or “PFIC,” rules of the Code or under Section 367(b) of the Code, equal to the excess, if any, of the fair market value of the iFresh securities received in the Redomestication and the U.S. Holder’s adjusted tax basis in the corresponding E-compass securities surrendered in the Redomestication. In such event, the U.S. Holder’s aggregate tax basis in the iFresh securities received in connection with the Redomestication should be the same as the aggregate tax basis of the E-compass securities surrendered in the transaction, increased by any amount included in the income of such U.S. Holder under the PFIC rules or Section 367(b) of the Code, and such U.S. Holder’s holding period for the iFresh securities received in the Redomestication generally should include the holding period of the E-compass securities surrendered in the Redomestication. See the discussion in the sections entitled “Material U.S. Federal Income Tax Consequences — U.S. Holders — Tax Consequences of the Redomestication,” “— “PFIC Considerations” and “— Effect of Section 367(b).”

 

E-compass’s shareholders will experience immediate dilution as a consequence of the issuance of common stock as consideration in the Business Combination. Having a minority share position may reduce the influence that E-compass’ current shareholders have on the management of iFresh.

 

After the Business Combination, assuming no redemptions of ordinary shares for cash, E-compass’s current public shareholders will own approximately 22.6% of iFresh, E-compass’s current directors, officers and affiliates will own approximately 7.8% of iFresh, and the former shareholders of NYM will own approximately 69.6% of iFresh. Assuming redemption by holders of 3,000,000 E-compass’s outstanding ordinary shares, E-compass public shareholders will own approximately 6.3% of iFresh, E-compass’s current directors, officers and affiliates will own approximately 9.4% of iFresh, and the former shareholders of NYM will own approximately 84.3% of iFresh. The minority position of the former E-compass shareholders will give them limited influence over the management and operations of the post-Business Combination company.

 

iFresh is an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make its securities less attractive to investors.

 

iFresh is an “emerging growth company,” as defined in the JOBS Act. It may remain an “emerging growth company” until the fiscal year ended December 31, 2020. However, if its non-convertible debt issued within a three-year period or revenues exceeds $1 billion, or the market value of its ordinary shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, iFresh would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, iFresh is not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, has reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and is exempt from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, iFresh has elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, iFresh’s financial statements may not be comparable to companies that comply with public company effective dates. As a result, potential investors may be less likely to invest in our securities.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement/prospectus contains forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements in this proxy statement/prospectus include, but are not limited to, statements regarding our disclosure concerning NYM’s operations, cash flows, financial position and dividend policy.

 

Forward-looking statements appear in a number of places in this proxy statement/prospectus including, without limitation, in the sections entitled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations of NYM,” and “NYM’s Business”. The risks and uncertainties include, but are not limited to:

 

future operating or financial results;
   
future payments of dividends and the availability of cash for payment of dividends;
   
NYM’s expectations relating to dividend payments and forecasts of its ability to make such payments;
   
future acquisitions, business strategy and expected capital spending;
   
assumptions regarding interest rates and inflation;
   
the combined company’s financial condition and liquidity, including its ability to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities;
   
estimated future capital expenditures needed to preserve iFresh’s capital base;
   
ability of the combined company to effect future acquisitions and to meet target returns; and
   
other factors discussed in “Risk Factors.”

 

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in “Risk Factors” in this proxy statement/prospectus. Accordingly, you should not rely on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission after the date of this proxy statement/prospectus.

 

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CAPITALIZATION

 

The following table sets forth the capitalization on an unaudited, historical basis of each of E-compass and NYM as of March 31, 2016 and the capitalization on an unaudited, as adjusted basis as of March 31, 2016 after giving effect to the Business Combination, assuming (i) that no holders of E-compass’s Ordinary Shares exercise their redemption rights and E-compass does not make any permitted repurchases and (ii) that the maximum number of holders of E-compass’s Ordinary Shares have properly exercised their redemption rights and/or E-compass has made permitted repurchases.

 

   Historical   As Adjusted 
   E-compass   NYM   Assuming Maximum Redemption   Assuming No Redemption 
                 
Cash and cash equivalents   $305,279   $551,782   $308,165   $30,608,165 
Restricted cash and cash equivalents held in trust account    40,851,104    -    -    - 
                     
Long-term debt, including current portion    -    3,561,609    27,311,600    3,561,609 
                     
Ordinary shares, subject to possible redemption    30,800,000    -    -    - 
Total shareholders’ equity    9,838,326    5,111,626    4,449,952    35,249,952 
Total capitalization   $40,638,326   $5,111,626   $4,449,952   $35,249,952 

 

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EXTRAORDINARY GENERAL MEETING OF E-compass SHAREHOLDERS

 

General

 

We are furnishing this proxy statement/prospectus to the E-compass shareholders as part of the solicitation of proxies by our board of directors for use at the extraordinary general meeting of E-compass shareholders to be held on [●], 2016, and at any adjournment or postponement thereof. This proxy statement/prospectus is first being furnished to our shareholders on or about [●], 2016 in connection with the vote on the Redomestication Proposal, the Business Combination Proposal and the Business Combination Adjournment Proposal. This document provides you with the information you need to know to be able to vote or instruct your vote to be cast at the extraordinary general meeting.

 

Date, Time and Place

 

The extraordinary general meeting of shareholders will be held on [●], 2016 at [●] a.m., at [●], or such other date, time and place to which such meeting may be adjourned or postponed.

 

Purpose of the Extraordinary General Meeting of E-compass Shareholders

 

At the extraordinary general meeting of shareholders, we are asking holders of E-compass ordinary shares to approve the following proposals:

 

1. The redomestication of E-compass to Delaware by means of a merger with and into iFresh, its wholly-owned Delaware subsidiary, with iFresh as the surviving entity, which we refer to as the Redomestication. This proposal is referred to as the “Redomestication Proposal.” The Redomestication Proposal is cross-conditioned on the approval of the Business Combination Proposal. For details, see “The Redomestication Proposal” elsewhere in this proxy statement/prospectus.

 

2. The proposed business combination resulting in NYM becoming a subsidiary of iFresh, which we refer to as the Business Combination. This proposal is referred to as the Business Combination Proposal. The Business Combination Proposal is cross-conditioned on the approval of the Redomestication Proposal. For details, see “The Business Combination Proposal” elsewhere in this proxy statement/prospectus.

 

3. The adjournment of the extraordinary general meeting of E-compass shareholders for the purpose of soliciting additional proxies in the event that E-compass does not receive the requisite shareholder vote to approve either the Redomestication or the Business Combination. This proposal is referred to as the Business Combination Adjournment Proposal. For details, see “The Business Combination Adjournment Proposal.”

 

Each of the Redomestication Proposal and the Business Combination Proposal, as described below, are cross-conditioned upon the approval of each other. Therefore, both must be approved by shareholders in order for any of the proposals to take effect. If any of the three proposals is not approved, the Business Combination will not be consummated and E-compass will liquidate and dissolve.

 

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Recommendation of E-compass’s Board of Directors

 

E-compass’s board of directors:

 

has determined that each of the Redomestication Proposal, the Business Combination Proposal, and the other proposals is fair to, and in the best interests of, E-compass and its shareholders;
   
has approved the Redomestication Proposal, the Business Combination Proposal and the other proposals; and
   
recommends that E-compass’s ordinary shareholders vote “FOR” each of the Redomestication Proposal, the Business Combination Proposal, and the Business Combination Adjournment Proposal.

 

E-compass’s board of directors have interests that may be different from or in addition to your interests as a shareholder. See “The Business Combination Proposal — Interests of Certain Persons in the Business Combination” in this proxy statement/prospectus for further information.

 

Record Date; Who is Entitled to Vote

 

We have fixed the close of business on [●], 2016, as the “record date” for determining those E-compass shareholders entitled to notice of and to vote at the extraordinary general meeting. As of the close of business on [●], 2016, there were 5,310,000 E-compass ordinary shares outstanding and entitled to vote. Each holder of E-compass ordinary shares is entitled to one vote per share on each of the Redomestication Proposal, the Business Combination Proposal and the Business Combination Adjournment Proposal.

 

As of [●], 2016, E-compass’s initial shareholders, either directly or beneficially, owned and were entitled to vote 1,310,000 ordinary shares, or approximately 24.7% of E-compass’s outstanding ordinary shares. With respect to the Business Combination, E-compass’s initial shareholders have agreed to vote their respective E-compass ordinary shares acquired by them in favor of the Business Combination Proposal and related proposals. They have indicated that they intend to vote their shares, as applicable, “FOR” each of the other proposals although there is no agreement in place with respect to these proposals. In addition, the lead investor from our initial public offering has agreed to vote 1,000,000 of the shares purchased by him in in the initial public offering, or approximately 18.8% of the outstanding shares in favor of the Business Combination Proposal.

 

Quorum and Required Vote for Shareholder Proposals

 

A quorum of E-compass shareholders is necessary to hold a valid meeting. A quorum will be present at the extraordinary general meeting of E-compass shareholders if one-third of the E-compass ordinary shares issued and outstanding and entitled to vote at the extraordinary general meeting is represented in person or by proxy. Abstentions present in person and by proxy will count as present for the purposes of establishing a quorum but broker non-votes will not.

 

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Approval of the Redomestication Proposal, the Business Combination proposal and the Business Combination Adjournment Proposal requires the affirmative vote of the holders of two-thirds of the issued and outstanding E-compass ordinary shares entitled to vote thereon as of the record date present in person or represented by proxy at the extraordinary general meeting. Abstentions present in person and by proxy are considered present for the purposes of establishing a quorum but will have the same effect as a vote “AGAINST” the Redomestication Proposal, the Business Combination Proposal and the Business Combination Adjournment Proposal. Broker non-votes will be considered present for the purposes of establishing a quorum, but as not being eligible to vote on a particular proposal. A broker non-vote will have no effect on the Redomestication Proposal, the Business Combination Proposal or the Business Combination Adjournment Proposal.

 

The approval of the Redomestication Proposal and the Business Combination Proposal by E-compass shareholders is a precondition to the consummation of the Business Combination. In the event that the Business Combination is not approved, the Redomestication will not take effect.

 

Voting Your Shares

 

Each E-compass ordinary share that you own in your name entitles you to one vote for each proposal on which such shares are entitled to vote at the extraordinary general meeting. Your proxy card shows the number of shares of our common stock that you own.

 

There are two ways to ensure that your E-compass ordinary shares, as applicable, are voted at the extraordinary general meeting:

 

You can cause your shares to be voted by signing and returning the enclosed proxy card. If you submit your proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted, as recommended by our board, “FOR” the adoption of the Redomestication Proposal, the Business Combination Proposal and the Business Combination Adjournment Proposal. Votes received after a matter has been voted upon at either of the extraordinary general meetings will not be counted.
   
You can attend the extraordinary general meetings and vote in person. We will give you a ballot when you arrive. However, if your shares are held in the name of your broker, bank or another nominee, you must get a proxy from the broker, bank or other nominee. That is the only way we can be sure that the broker, bank or nominee has not already voted your shares.

 

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF THE BUSINESS COMBINATION, PROPOSAL AND REDOMESTICATION PROPOSAL (AS WELL AS THE OTHER PROPOSALS). IN ORDER TO REDEEM YOUR ORDINARY SHARES, YOU MUST CONTINUE TO HOLD YOUR ORDINARY SHARES THROUGH THE CLOSING DATE OF THE BUSINESS COMBINATION AND TENDER YOUR PHYSICAL STOCK CERTIFICATE TO OUR STOCK TRANSFER AGENT AT LEAST ONE BUSINESS DAY PRIOR TO THE CONSUMMATION OF THE BUSINESS COMBINATION. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE ORDINARY SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE ORDINARY SHARES IN STREET NAME, YOU WILL NEED TO ELECTRONICALLY TRANSFER YOUR ORDINARY SHARES TO THE DTC ACCOUNT OF CONTINENTAL STOCK TRANSFER & TRUST COMPANY, OUR TRANSFER AGENT, AT LEAST ONE BUSINESS DAY PRIOR TO THE CONSUMMATION OF THE BUSINESS COMBINATION.

 

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Revoking Your Proxy

 

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

 

you may send another proxy card with a later date;
   
if you are a record holder, you may notify our corporate secretary in writing before the extraordinary general meeting that you have revoked your proxy; or
   
you may attend the extraordinary general meeting, revoke your proxy, and vote in person, as indicated above.

 

Who Can Answer Your Questions About Voting Your Shares

 

If you have any questions about how to vote or direct a vote in respect of your shares of our common stock, you may call Morrow & Co., LLC, our proxy solicitor, at (312) 212 4416 or E-compass at 646-912-8918.

 

No Additional Matters May Be Presented at the Extraordinary General Meeting

 

This extraordinary general meeting has been called only to consider the approval of the Business Combination and the Redomestication. Under E-compass’s amended and restated memorandum and articles of association, other than procedural matters incident to the conduct of the extraordinary general meeting, no other matters may be considered at the extraordinary general meeting if they are not included in the notice of the extraordinary general meeting.

 

Redemption Rights

 

Pursuant to E-compass’s amended and restated articles and memorandum, a holder of E-compass ordinary shares may demand that E-compass redeem such ordinary shares for cash. Demand may be made by:

 

Voting for or against the business combination and electing redemption by checking the appropriate box on the proxy card; and
   
Tendering the E-compass ordinary shares for which you are electing redemption by the business day prior to the consummation of the Business Combination by either:

 

Delivering certificates representing E-compass’s ordinary shares to E-compass’s transfer agent, or
   
Delivering the E-compass ordinary shares electronically through the DWAC system; and
   
Not selling or otherwise transferring the E-compass ordinary shares until the closing of the Business Combination (tendering your ordinary shares for redemption is not considered selling or transferring your shares).

 

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Except for E-compass’s lead investor, who will only be entitled to receive $10.00 per share if he elects to redeem any shares, E-compass shareholders will be entitled to redeem their E-compass ordinary shares for a full pro rata share of the trust account (currently anticipated to be no less than approximately $10.40 per ordinary share) net of (i) taxes payable, and (ii) interest income earned on the trust account previously released to E-compass to fund its working capital and general corporate requirements in connection with the Business Combination.

 

In connection with tendering your shares for redemption, you must elect either to physically tender your share certificates to E-compass’s transfer agent or deliver your shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, in each case, by the business day prior to the consummation of the Business Combination.

 

Through the DWAC system, this electronic delivery process can be accomplished by contacting your broker and requesting delivery of your shares through the DWAC system. Delivering shares physically may take significantly longer. In order to obtain a physical stock certificate, a shareholder’s broker and/or clearing broker, DTC, and E-compass’s transfer agent will need to act together to facilitate this request. There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $45 and the broker would determine whether or not to pass this cost on to the redeeming holder. It is E-compass’s understanding that shareholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. E-compass does not have any control over this process or over the brokers or DTC, and it may take longer than two weeks to obtain a physical stock certificate. Shareholders who request physical stock certificates and wish to redeem may be unable to meet the deadline for tendering their ordinary shares before exercising their redemption rights and thus will be unable to redeem their ordinary shares.

 

In the event that a shareholder tenders its ordinary shares and decides prior to the consummation of the Business Combination that it does not want to redeem its ordinary shares, the shareholder may withdraw the tender. In the event that a shareholder tenders ordinary shares and the business combination is not completed, these ordinary shares will not be redeemed for cash and the physical certificates representing these ordinary shares will be returned to the shareholder promptly following the determination that the Business Combination will not be consummated. E-compass anticipates that a shareholder who tenders ordinary shares for redemption in connection with the vote to approve the Business Combination would receive payment of the redemption price for such ordinary shares soon after the completion of the Business Combination.

 

If properly demanded by E-compass’s public shareholders, E-compass will redeem each ordinary share into a pro rata portion of the funds available in the Trust Account, calculated as of two business days prior to the anticipated consummation of the Business Combination. As of the record date, this would amount to approximately $10.40 per ordinary share, other than our lead investor, who would only receive $10.00 per ordinary share. If you exercise your redemption rights, you will be exchanging your E-compass ordinary shares for cash and will no longer own the ordinary shares. If E-compass is unable to complete the Business Combination by February 18, 2017 it will liquidate and dissolve and public shareholders would be entitled to receive approximately $10.40 per ordinary share upon such liquidation, provided that our lead investor will only receive $10.00 per ordinary share.

 

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The Business Combination will not be consummated if the holders of 3,500,000 or more of E-compass’s ordinary shares exercise their redemption rights. However, our lead investor agreed to hold 1,000,000 of the shares it purchased in our initial public offering through the consummation of our initial business combination, vote in favor of the proposed business combination and not seek redemption in connection therewith. As a result, we do not expect there to be more than 3,000,000 shares that exercise redemption rights. We will enter into an agreement with our lead investor to repurchase 500,000 of such non-redeemable shares promptly after the closing of our business combination at a purchase price of $10.00 per share.

 

Limitation on Redemption Rights Upon Consummation of the Business Combination

 

The E-compass amended and restated memorandum and articles of association provide that no E-compass public shareholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) is permitted from seeking redemption rights, without E-compass’s prior written consent, with respect to 20% or more of the ordinary shares sold in the IPO. By limiting a shareholder’s ability to redeem no more than 20% of the ordinary shares sold in the IPO, E-compass believes it has limited the ability of a small group of shareholders to block a transaction which is favored by our other public shareholders. However, this limitation also makes it easier for E-compass to complete a business combination which is opposed by a significant number of public shareholders.

 

Tendering Ordinary share Certificates in connection with Redemption Rights

 

E-compass is requiring the E-compass public shareholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to E-compass’s transfer agent, or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option prior to the business day immediately preceding the consummation of the proposed Business Combination. There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $45.00 and it would be up to the broker whether to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether E-compass requires holders seeking to exercise redemption rights to tender their ordinary shares. The need to deliver ordinary shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.

 

Any request for redemption, once made, may be withdrawn at any time up to the business day immediately preceding the consummation of the proposed Business Combination. Furthermore, if a shareholder delivered his certificate for redemption and subsequently decided prior to the date immediately preceding the consummation of the proposed Business Combination not to elect redemption, he may simply request that the transfer agent return the certificate (physically or electronically).

 

A redemption payment will only be made in the event that the proposed Business Combination is consummated. If the proposed Business Combination is not completed for any reason, then public shareholders who exercised their redemption rights would not be entitled to receive the redemption payment. In such case, E-compass will promptly return the ordinary share certificates to the public shareholder.

 

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Appraisal Rights

 

Appraisal rights are not available to holders of E-compass ordinary shares in connection with the proposed Business Combination.

 

Proxies and Proxy Solicitation Costs

 

We are soliciting proxies on behalf of our board of directors. This solicitation is being made by mail but also may be made by telephone or in person. E-compass and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Any solicitation made and information provided in such a solicitation will be consistent with the written proxy statement and proxy card. Morrow & Co., LLC, a proxy solicitation firm that E-compass has engaged to assist it in soliciting proxies, will be paid its customary fee of approximately $[●] and out-of-pocket expenses.

 

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

 

If you send in your completed proxy card, you may still vote your shares in person if you revoke your proxy before it is exercised at the extraordinary general meeting.

 

E-compass Initial Shareholders

 

On September 23, 2014, Lodestar Investment Holdings I LLC, and affiliate of Richard Xu, Handy Global Limited, an affiliate of Chen Liu, Classical Sky Limited, an affiliate of Peiling (Amy) He, Carnelian Bay Capital Inc., an affiliate of Nicholas Clements, and Xinli Li (such persons and entities collectively referred to as the “Initial Shareholders”), purchased 1,000,000 of E-compass’s ordinary shares for an aggregate purchase price of $25,000.

 

On August 18, 2015, Lodestar Investment Holdings I LLC purchased, for an aggregate purchase price of $3,100,000, 310,000 units in a private placement.

 

Pursuant to a registration rights agreement between us and our initial shareholders the initial shareholders are entitled to certain registration rights with respect to the E-compass rights held by them, as well as the underlying securities. The holders of these securities are entitled to make up to two demands that E-compass register such securities. The holders of the initial shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a business combination. E-compass will bear the expenses incurred in connection with the filing of any such registration statements.

 

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THE BUSINESS COMBINATION PROPOSAL

 

The discussion in this proxy statement/prospectus of the Business Combination and the principal terms of the Acquisition Agreement, is subject to, and is qualified in its entirety by reference to, the Acquisition Agreement. The full text of the Acquisition Agreement is attached hereto as Annex A, which is incorporated by reference herein.

 

General Description of the Business Combination

 

Redomestication to Delaware

 

Immediately prior to the Business Combination, E-compass, an exempted company incorporated in the Cayman Islands, will effect a merger pursuant to the Companies Law in which it will merge with and into iFresh Inc., its wholly-owned Delaware subsidiary, with iFresh Inc. surviving the merger.

 

The Redomestication will result in all of E-compass’s issued and outstanding ordinary shares converting into iFresh Common Stock, and all units, rights and other securities to purchase E-compass’s ordinary shares converting into substantially equivalent securities of iFresh Inc. E-compass will cease to exist and iFresh Inc. will be the surviving company. In connection therewith, iFresh Inc. will assume all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of E-compass, including any and all agreements, covenants, duties and obligations of E-compass set forth in the Acquisition Agreement.

 

Business Combination with NYM; Business Combination Consideration

 

Immediately following the Redomestication, Merger Sub will merge into NYM, resulting in NYM becoming a wholly owned subsidiary of iFresh. The issuance of shares of iFresh to the post-Business Combination shareholders is being consummated on a private placement basis pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The aggregate value of the consideration to be paid by E-compass in the business combination is approximately $125 million (calculated as follows: (i) $5 million in cash, plus, (ii) 12,000,000 shares of common stock of iFresh to be issued to the NYM shareholders multiplied by $10.00 (the deemed value of the shares in the Acquisition Agreement)).

 

E-compass currently has authorized share capital of 101,000,000 shares consisting of 100,000,000 ordinary shares with a par value of $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.0001 per share. iFresh Inc. currently is authorized to issue 100,000,000 shares of common stock, with a par value $0.0001 per share and 1,000,000 shares of preferred stock with a par value of $0.0001 per share.

 

After the Business Combination, assuming no redemptions of ordinary shares for cash, E-compass’s current public shareholders will own approximately 22.6% of iFresh, E-compass’s current directors, officers and affiliates will own approximately 7.8% of iFresh, and the former shareholders of NYM will own approximately 69.6% of iFresh. Assuming redemption by holders of 3,000,000 E-compass’s outstanding ordinary shares, E-compass public shareholders will own approximately 6.3% of iFresh, E-compass’s current directors, officers and affiliates will own approximately 9.4% of iFresh, and the former shareholders of NYM will own approximately 84.3% of iFresh.

 

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Each of the Redomestication Proposal and the Business Combination Proposal, as described below, are conditioned upon the approval of each other. Therefore, both must be approved by shareholders in order for the Business Combination to be consummated. If any of the three proposals is not approved, the Business Combination will not be consummated and E-compass will liquidate and dissolve. Upon consummation of the Business Combination, iFresh will own all of the issued and outstanding units of NYM.

 

Assuming each of the Redomestication Proposal and the Business Combination Proposal are approved, the parties to the transaction expect to close the Business Combination on [●], 2016.

 

Background of the Business Combination

 

Background of the Acquisition

 

E-compass Acquisition Corp. (“E-compass”) is a special purpose company incorporated under the laws of Cayman Islands on September 23, 2014 as an exempted company with limited liability. E-compass was formed with the purpose of acquiring, through a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities, which we refer to as a “target business.”. E-compass intended to focus on acquiring an operating business with its primary operations located in the People’s Republic of China as well as the Hong Kong Special Administrative Region and the Macau Special Administrative Region (but not Taiwan) (“China” or the “PRC”) operating in the e-commerce and consumer retail industry, but was not limited to a particular geographic region or industry. E-compass completed its initial public offering on August 18, 2015 of 4,000,000 units at $10.00 per unit. Each Unit consists of one ordinary share, $.0001 par value per share (“Ordinary Share”), and one right (“Right”) to receive one-tenth of one Ordinary Share upon consummation of the Company’s initial business combination. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $40,000,000. Simultaneously with the consummation of the IPO, E-compass consummated the private placement (“Private Placement”) of 310,000 Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, generating total proceeds of $3,100,000, to an affiliate of Richard Xu, E-compass’s Chief Executive Officer. The Private Placement Units are identical to the Units sold in the IPO. Of the net proceeds, $40,800,000 was placed in a trust account. In accordance with E-compass’s Amended and Restated Memorandum and Articles of Association, the amounts held in the trust account may only be used by E-compass upon the consummation of a business combination, except that there can be released to E-compass, from time to time, (i) any interest earned on the funds in the trust account that it may need to pay its tax obligations and (ii) any remaining interest earned on the funds in the trust account that E-compass needs for its working capital requirements. The remaining interest earned on the funds in the trust account will not be released until the earlier of the completion of a business combination and E-compass’s liquidation. E-compass executed a definitive agreement on July 25, 2016, and it must liquidate unless a business combination is consummated by February 18, 2017. As of March 31, 2016, approximately $40,851,104 was held in deposit in E-compass’s trust account.

 

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Promptly after E-compass’s IPO, the officers and directors of E-compass commenced the process of locating potential targets. The Board of E-compass established a list of criteria for screening potential targets, including but not limited to:

 

businesses with favorable profitability and strong growth outlook;
   
the competitive position of the potential target within the sector (among the leaders or with unique competitive advantages);
   
proprietary technology or unique business processes or business models;
   
business model with long-term sustainability; and
   
strong management with strategic insight and execution capabilities and capable of leading a public company after the business combination.

 

The E-compass team reached out to a large number of business contacts that it believed might refer potential targets to E-compass, including investment banks, financial advisory firms that specialize in deal flow sourcing or advising companies in fund raising and other financial transactions, merchant banks, finders, venture capital funds, private equity funds, senior business executives and other entities and individuals known to the E-compass team as knowledgeable about deals in the marketplace such as lawyers, accounting firms and local governments.

 

As described in the prospectus of our IPO, E-compass initially focused on companies in the Chinese e-commerce industry. Beginning in September 2015, E-compass reviewed over 20 candidates in this industry and identified a company as a suitable candidate for further due diligence and negotiation in October 2015. That potential target is located in Beijing, China and conducts business in e-commerce and consumer finance. We spent about 4 months on financial and legal due diligence and valuation on this company and reached agreement on the key terms for a business combination in February 2016. However, further negotiation was terminated due to E-compass’s concerns on the slowdown of Chinese economy and uncertainty relating to the future growth potential of this company.

 

Given the slow-down in the Chinese economy, in February 2016, we decided to switch our focus from Chinese companies to U.S. based enterprises. We reached out to investment banks and private entities in the U.S. and have had discussions with over 5 potential targets in different industries, including golf clubs, student housing and retail.

 

On February 24, 2016, Melanie Chen, a managing director of UHY Advisors NY Inc. (“UHY”), an affiliate of E-compass’s former auditing firm, provided information about a leading Chinese grocery supermarket chain, NYM Holding, Inc. (“NYM”), to Richard Xu. Richard Xu was interested in the business and asked to meet the owner. Melanie Chen set up a meeting for the next day.

 

On February 25, 2016, Melanie Chen and Richard Xu went to NYM’s headquarters located in Long Island City, New York. They met with the majority owner, Long Deng, who founded the company with his wife, Lilly Deng, approximately 20 years ago. During the meeting, Mr. Deng introduced the history, current status of NYM and briefly discussed the multi-strategy expansion plan of NYM, which included a public offering plan to support NYM’s further development. Richard Xu was impressed by NYM and its business. Both parties believed a transaction between E-compass and NYM was possible and decided to move forward with preliminary discussions of a potential merger.

 

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On March 8, 2016, Nicholas Clements, Vice Chairman of E-compass, and Richard Xu went to NYM’s headquarters to have a further discussion with Long Deng. The parties began to discuss potential terms for a letter of intent.

 

On March 10, 2016, E-compass’s management had internal discussions about the potential merger. Mr. Jianming Hao, special advisor to E-compass, participated in the discussions.

 

On March 20, 2016, E-compass and NYM executed a confidentiality and non-disclosure agreement.

 

On March 21, Richard Xu, Jianming Hao and Mr. Deng met at NYM’s headquarters and signed the Letter of Intent.

 

On March 22, 2016, E-compass’s management team started to perform due diligence on NYM.

 

On March 22, 2016, E-compass was introduced to NYM’s Lilly Deng, Vice President of Legal and Financial, Yifei (Elaine) Ling, Financial Manager, and Shunyu (Simon) She, NYM’s legal department manager, and started the preliminary due diligence process on NYM. After March 22, 2016, NYM provided E-compass with various due diligence items, including financial information, operational information and a prospective expansion schedule. During the process, E-compass conducted numerous conference calls with NYM’s management to better understand and verify the information provided.

 

From April 23 to June 16, 2016, Richard Xu and Peiling He, E-compass’s Chief Financial Officer, visited NYM’s headquarter and retail stores multiple times and: (a) met Mr. Deng to discuss the retail market, NYM’s business model, growth history, future development plan, financial results and projections, (b) met with NYM’s operational team to discuss its operations, marketing strategy, logistics management on perishable products and numerous other items, (c) physically visited certain of NYM’s warehouse and retail stores, (d) discussed with NYM’s financial personnel and UHY, NYM’s financial advisor, financial information, (e) met with NYM’s legal department to discuss corporate structure and gathered information about the NYM’s history, and (f) conducted additional diligence procedures with NYM’s staff.

 

On June 10, 2016, E-compass engaged Loeb and Loeb LLP (“Loeb”) as its legal representative to perform due diligence, draft definitive agreements and prepare applicable securities filings.

 

On June 21, 2016, Loeb distributed a draft of the Acquisition Agreement to E-compass and subsequently made revisions based on E-compass’s review. Additionally, Loeb prepared a list of key terms for both parties to review.

 

On July 6, 2016, Richard Xu and Mr. Deng met in NYM’s headquarters, joined by Peiling He by conference dial-in to discuss the key terms of the Acquisition Agreement.

 

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On July 16, 2016 Richard Xu and Mr. Deng met in NYM’s headquarters to again discuss the key terms of the Acquisition Agreement.

 

On July 19, 2016, Simon She, manager of NYM’s legal department, Elizabeth Chen from Pryor Cashman LLP, counsel to NYM, and Richard Xu met in E-compass’s office to negotiate the Acquisition Agreement, joined via telephone by Giovanni Caruso and Emily Sheahan from Loeb and Loeb LLP, counsel to E-compass, Mr. Deng, and Peiling He.

 

Between July 19, 2016 and July 25, 2016, the parties and their counsel continued to discuss the transaction and revise and comment on the Acquisition Agreement.

 

On July 25, 2016, E-compass held a board of directors meeting approving the proposed combination. Four of E-compass’s directors attended the meeting, and one director who was not able to attend for medical reasons, gave his proxy to Richard Xu. Ms. He from E-compass and Giovanni Caruso and Emily Sheahan from Loeb also attended the meeting. Before the meeting started, copies of significant transaction documents, in substantially final form, were distributed among directors. Mr. Caruso described the major terms of the transaction documents to the directors, and Mr. Xu discussed the search for a target business and detailed NYM’s business, market and expansion plans. Mr. Xu then discussed how the value of NYM was determined. After considerable review and discussion, the Acquisition Agreement was unanimously approved, subject to final negotiation and modification.

 

The Acquisition Agreement was signed by all parties on July 25, 2016. Prior to the market open on July 28, 2016, E-compass issued a press release announcing the execution of the combination agreement and disclosing key terms of the combination agreement. E-compass also filed a Current Report on Form 8-K, which detailed the press release, the combination agreement summarizing key deal terms on NYM’s business. On August 8, 2016, E-compass filed a Current Report on Form 8-K for a presentation on the transaction and NYM’s business.

 

E-compass Board’s Reasons for the Approval of the Acquisition

 

At a meeting held on July 25, 2016, E-compass’s board of directors unanimously approved the Acquisition Agreement and the transactions contemplated thereby, determined that the Business Combination is in the best interests of E-compass and its shareholders, directed that the Acquisition Agreement be submitted to E-compass’s shareholders for approval and adoption, and recommended that E-compass’s shareholders approve and adopt the Acquisition Agreement and the transactions contemplated thereby.

 

Before reaching its decision, E-compass’s board of directors reviewed the results of management’s due diligence, which included:

 

  research on industry trends, cycles, operating cost projections, and other industry factors;
     
  extensive meetings and calls with NYM’s Chief Executive Officer and management team regarding operations and projections;
     
  personal visits to NYM’s headquarters, as well as its stores and warehouse locations;

 

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  review of NYM’s contracts (including store leases) and other legal diligence; and
     
  financial, tax, and accounting diligence.

 

E-compass’s board of directors considered a wide variety of factors in connection with its evaluation of the Business Combination. In light of the complexity of those factors, its board of directors, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Individual members of E-compass’s board of directors may have given different weight to different factors.

 

The board of ECAC considered the following facts that could be the benefits to be generated from the transaction with NYM:

 

Fast Growing yet fragmented niche market with consolidation opportunity: NYM is a leading Chinese grocery chain with stores on the U.S. East Coast. The Chinese grocery market in the U.S. is currently highly fragmented. Most competitors are unsophisticated family businesses or single-store operations. Moreover, according to Nielsen Report 2015, the U.S. Chinese population grew 14.3% between 2010 and 2014, which far exceeded the overall U.S. population growth rate of 3.1%. The Asian-American population is expected to grow 150% between 2014 and 2050. NYM is well-positioned to consolidate such a fragmented and rapidly growing market.
   
Unique Market with High Entry Barriers: Unique Chinese eating habits, which generally continue for generations after immigration, include a preference for live fish and seafood, various animal parts and organs, and exotic and specialty fruits and vegetables. Therefore, we believe that most Chinese Americans are unsatisfied with the current offerings by American mainstream grocery stores. The unique cultural demands form a natural barrier to entry.
   
Integrated Group with Supply Control: Mainstream U.S. supermarkets tend to rely on imports from China for their Chinese ethnic offerings, which precludes the option of fresh produce and live seafood, and suffers from periodic supply disruption. NYM operates its own grocery wholesale facilities with imports from China and other Asia countries to ensure the stable and low price of supply for the most popular grocery products for Chinese and Asia consumers. NYM also enjoys long-term, stable partnerships with U.S.-based specialty farms, orchards, and seafood harvesting facilities, supplemented by robust storage and logistics capabilities. NYM has developed, through significant backward integration of its supply chain, a dependable, integrated, and scalable supply and distribution network.
   
Acquisitions and Online Shopping Capabilities: NYM plans to add approximately 31 new stores, mainly through acquisition, during the next 3 years to grow to approximately 39 stores and 2 wholesale facilities for centralized inventory management. Potential acquisitions are expected to be along the U.S. I-95 corridor, from Massachusetts to Florida, and also in Texas and Illinois. NYM is aggressively developing online grocery shopping and home delivery capabilities to extend its reach to Chinese residents of dispersed suburban areas.

 

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NYM’s track record: NYM grew from zero to eight supermarkets and two wholesale locations via organic development and successful acquisition without any external capital support. It has a track record of successful acquisitions: it spent $2.7 million to acquire and renovate Store Ming in Boston in 2009, and the sales and EBITDA for that store for the fiscal year ended March 31, 2016 were $21.8 million and $2.7 million, respectively. It acquired 2 other stores in 2011 and 2013 in the Greater New York and Greater Boston Areas, which also recorded improved sales and EBITDA under NYM’s operation after the acquisition.
   
Attractive New Store Economics: Based on NYM’s track record, management experience and potential target analysis, a typical new store with over 10,000 square feet requires a net cash investment of approximately $2.5 million, including acquisition cost, renovation and working capital. Such a store would be expected to achieve sales of $9 million, $16 million and $17 million, and EBITDA of $0.3M, $1.0M and $1.2M for the first three years after acquisition. NYM’s business model, including returns on investments in new stores, generates substantial earnings and free cash flow after initial investment.

 

E-compass’s management, including the members of its board of directors and its special advisors, are experienced in financial analysis, valuation for merger and acquisition, and has successfully consummated many transactions of equity investment, merger and acquisition. Although E-compass’s board of directors did not seek a third party valuation in connection with the Business Combination, the board of directors considered valuation information regarding NYM, including industry comparisons of the enterprise values of NYM and other growth retailer with similar growth perspective, projections and comparisons of revenue, gross profit, EBITDA and net income, the growth outlook for the markets that NYM serves, the abilities of NYM’s management team, free cash flow characteristics, same store sales, returns on new retail stores, and ratios of total enterprise value to EBITDA, share price to earnings ratios. These ratios are widely-accepted evaluation methods. In making its determination that the Business Combination is in the best interests of E-compass and its shareholders, the board of directors considered the amount of cash available in the trust account and the rollover equity incentives for members of its management. Significant drivers of value that the board considered are listed above.

 

NYM's management prepared, in collaboration with E-compass's management, projected financial results for The NYM as shown in the following tables:

 

Actual and Projected Financial Results

(dollars in million)

(unaudited)

 

   For Years ended March 31, 
   2016   2017   2018 
   Actual   Projected(1)   Projected 
             
Sales  $131.2   $177.6   $253.4 
Sales Growth   2.6%   35.4%   42.7%
Adjusted EBITDA  $8.4   $11.5   $15.7 
Growth of Adjusted EBITDA   147.5%   36.9%   36.5%
Number of Stores +2 wholesales   10    14    20 

 

(1) Projected financial data includes the numbers of the 4 stores to be acquired before March 31, 2017 pursuant to NYM's option to acquire 4 stores for $10 million pursuant to the option agreement attached hereto as Appendix B.

 

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Net Income to Adjusted EBITDA Reconciliation

(dollars in million)

(unaudited)

 

   For Years ended March 31, 
   2016   2017   2018 
   Actual   Projected(1)   Projected 
             
Net Income  $3.6   $4.6   $3.5 
Adjusted depreciation and amortization   1.6    2.2    3.6 
New store opening expenses   -    0.7    3.5 
Interest expenses   0.2    0.2    2.2 
Income Taxes   3.0    3.8    2.9 
Adjusted EBITDA  $8.4   $11.5   $15.7 

 

(1) Projected financial data includes the numbers of the 4 stores to be acquired before March 31, 2017 pursuant to NYM's option to acquire 4 stores for $10 million pursuant to the option agreement attached hereto as Appendix B.
(2) The projection is based on the assumption that $25 million of debt financing will be raised at the closing of the Business Combination to fund the plan of new store acquisition and openings.
(3) For additional information on Adjusted EBITDA, See the section entitled “NYM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations - Adjusted EBITDA,” beginning on page 115.

 

E-compass and NYM does not intend as a matter of course to make public projections as to future sales, earnings, or other results. The prospective financial information set forth in the above tables was prepared solely for the purpose of estimating the enterprise value of NYM for purposes of the Acquisition Agreement. It was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of NYM’s management, was prepared on a reasonable basis, reflects the best available estimates and judgments, and presents, to the best of management’s knowledge and belief, the expected future financial performance of NYM. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus are cautioned not to place undue reliance on the prospective financial information. Neither NYM’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.

 

As described in more detail below, the management and board of directors of E-compass determined that the approximately $148 million proposed enterprise value and $125 million purchase price for NYM was appropriate based on its evaluation of NYM’s growth prospects, profitability, free cash flow, and the implied trading multiples of other retailers with similar growth prospective.

 

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E-compass’ board of directors reviewed and analyzed the valuation of comparable retailer companies. E-compass’s management determined for the review of the market valuation, it should be more comparable to select those retailers with similar growth prospective. After reviewing the financial data, competitive and growth prospective on the companies in the U.S. mainstream supermarket industries and E-compass’s board of directors concluded that the major players in the industry are not very suitable to be used as comparable companies for valuation. With many decades of development, most of the large market players, such as Walmart, Kroger, Costco, and Whole Foods, are well developed and established. These large players dominate the market and the competition in the mainstream supermarket industry is intense. Most of them maintain a stable yet quite limited growth rate, leaving no high growth prospect in the foreseeable future. However, NYM is exploring a niche market significantly different than mainstream supermarket industries, which is fast growing, but highly fragmented with high entry barriers for mainstream super market chains. NYM specializes in targeting Chinese-Americans and their desire for specialty products that are hard to find at mainstream conventional retailers. E-compass’s management also believes the vertical-integration essence of NYM enables it to consolidate this market, generate fast growth along the value chain, and potentially to grow into a national player in this fragmented niche market. Therefore, the board of directors of E-compass determined that the most relevant comparable companies should be a mixed portfolio of companies displaying a high-growth profile, reflecting a similar business model or pricing strategy and ideally depicting the SPAC structure of the transaction. Therefore, E-compass’ management sourced these most relevant publicly traded retail companies including: (a) high growth supermarket chains in the U.S. and in China such as Sprouts Farmers Market, Inc. and Yonghui Superstores Co., Ltd. ; (b) S.P.Q.R.companies (companies generating small profits yet quick return) who share similar pricing strategies with NYM, such as Dollar Tree, Inc., Dollar General Corporation, and Five Below, Inc.; (c) other fast growing retail stores in the U.S., such as Shake Shack Inc. and Chipotle Mexican Grill, Inc.; (d) successful retail businesses with a SPAC structure, such as Del Taco Restaurants, Inc. and Tile Shop Holdings, Inc. The following table displays financial information and multiples of comparable companies and NYM considered by E-compass’s board of directors.

 

Company           Equity     Enterprise   EV/Revenue   EV/EBITDA   P/E 
Name  Exchange   Ticker  

Value

   Value   CY16   CY17   CY18   CY16   CY17   CY18   CY16   CY17   CY18 
(USD in millions, except per share data)
High-growth Supermarket                                                    
Yonghui Superstores Co., Ltd.   SHSE    601933    5,297    4,501    0.6x   0.5x   0.5x   16.8x   14.2x   11.9x   40.5x   33.6x   27.4x
Sprouts Farmers Market, Inc.   NasdaqGS    SFM    3,490    3,625    0.9x   0.7x   0.7x   10.9x   9.4x   8.3x   23.9x   20.3x   17.4x
                                                                  
S.P.Q.R. Companies                                                                 
Dollar Tree, Inc.   NasdaqGS    SFM    22,655    29,051    1.4x   1.3x   1.2x   12.2x   10.9x   9.4x   25.3x   20.8x   17.6x
Dollar General Corporation   NYSE    DG    27,002    29,805    1.3x   1.2x   1.1x   11.7x   10.8x   9.9x   20.5x   18.4x   16.0x
Five Below, Inc.   NasdaqGS    FIVE    2,798    2,717    2.7x   2.2x   1.9x   19.0x   15.4x   12.8x   39.0x   31.8x   26.2x
                                                                  
Other High-growth Retails                                                                 
Shake Shack Inc.   NYSE    SHAK    908    897    3.6x   2.8x   2.2x   18.7x   15.2x   11.2x   92.2x   73.4x   53.0x
Chipotle Mexican Grill, Inc.   NYSE    CMG    12,883    12,613    3.0x   2.6x   2.2x   36.3x   18.3x   13.9x   99.4x   38.7x   27.7x
                                                                  
Retails with SPAC structure                                                                 
Del Taco Restaurants, Inc.   NasdaqCM    TACO    404.8    567    1.3x   1.2x    NA    8.2x   7.7x    NA    19.4x   17.4x   15.3x
Tile Shop Holdings, Inc.   NasdaqGS    TTS    876.7    894    2.7x   2.5x   2.2x   12.8x   11.0x   8.6x   37.8x   30.7x   23.7x
                                                                  
Average                       1.9x   1.7x   1.5x   16.3x   12.5x   10.7x   44.2x   31.7x   24.9x
Median                       1.4x   1.3x   1.5x   12.8x   11.0x   10.5x   37.8x   30.7x   23.7x
NYM             125    148    1.0x   0.7x   0.5x   17.5x   12.9x   9.4x   34.3x   27.2x   35.7x

 

Source: Capital IQ. Data as of July 24, 2016.

 

(1) CY16, CY17, CY18 for DLTR and FIVE represent for fiscal year ended 1/31/2017, 1/31/2018, 1/31/2019
(2) CY16, CY17, CY18 for NYM represent for fiscal year ended 3/31/2016, 3/31/2017, 3/31/2018
(3) CY16, CY17, CY18 for other companies represent for the fiscal year ended 12/31/2016, 12/31/2017, 12/31/2018

 

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Based on the review of equity research reports written for the retail sector, E-compass’s management team understood that the primary valuation metrics used by equity analysts are ratios of total enterprise value to EBITDA and share price to earnings ratios (P/E). Typically, these metrics are evaluated on the basis of current year’s and one-year forward’s estimated results. When this analysis was prepared in late July 2016, E-compass’s management estimated that the relevant publicly traded comparable companies traded at an average of 12.5x enterprise value divided by CY2017 estimated EBITDA and 10.7x enterprise value divided by CY2018 estimated EBITDA. Thus, since E-compass’ management estimated that a $148 million enterprise value for NYM implied trading multiples of 12.9x estimated pro forma Adjusted EBITDA for the year ended March 31, 2017 and 9.4x estimated Adjusted EBITDA for the year ended March 31, 2018, the management and board of directors of NYM believed that the proposed transaction was priced at an attractive price when compared to other similar publicly traded companies. In addition, these similar publicly traded companies had an average price to earnings ratio (P/E) of 31.7x based on CY2017 estimated earnings and 24.9x based on CY2018 estimated earnings. E-compass’s management estimated that a purchase price of $125 million for NYM implied trading multiples of 27.2x estimated pro forma earnings for the year ended March 31, 2017 and 35.8x estimated earnings for the year ended March 31, 2018. Therefore, the management and board of directors of E-compass believed that the proposed transaction was also priced at an attractive price when compared to other similar publicly traded companies in this respect.

 

The valuation determined by the analyses of E-compass’s management is not necessarily indicative of actual values nor predictive of future results, which may be significantly more or less favorable than those suggested by such analyses. Much of the information used in, and accordingly the results of, are inherently subject to substantial uncertainty. The actual result may be significantly different than the projection. In addition, none of the selected comparable companies have characteristics identical to NYM. The comparable data set was compiled solely for analysis purpose. An analysis of selected publicly traded companies is not mathematical; rather it involves complex consideration and judgments concerning differences in financial and operating characteristics of the selected companies and other factors that could affect the public trading values of the companies reviewed.

 

E-compass’s board of directors also gave consideration to the following negative factors associated with the transactions (which are more fully described in the “Risk Factors” section of this proxy statement/prospectus, although not weighted or in any order of significance:

 

Lack of capital support. The valuation is based on the NYM’s growth strategy and future projected financial results, which is highly dependent on at least $25 million of potential capital support. If NYM can’t successfully obtain sufficient capital support for its growth plan, it might not be able to realize its growth strategy.
   
Change of competitive landscape. The market in which NYM conducts business is a niche market, which is highly fragmented and with moderate competition. There may be some competitors that obtain extensive capital support and start to consolidate the market, which will create more intensive competition and negatively affect NYM’s business and development plan.
   
Corporate governance practices. NYM’s current management doesn’t have experience in running a public company and conducting corporate governance and practices required of a public company. It may take time for NYM’s management team to learn to comply with the reporting, disclosure and corporate governance with listing standards following consummation of the merger.

 

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Other Considerations

 

E-compass’s board of directors unanimously concluded that the Acquisition Agreement with NYM is in the best interests of E-compass’s shareholders. The E-compass board of directors did not obtain a fairness opinion on which to base its assessment. Because of the financial skills and background of its members, E-compass’s board believes it was qualified to perform the valuation analysis discussed in this section.

 

E-compass’s board of directors focused its analysis on whether the proposed business combination is likely to generate a return for its shareholders that is greater than if the trust were to be liquidated.

 

Recommendation of E-compass’s Board

 

After careful consideration, E-compass’s board of directors determined that the Business Combination with NYM is in the best interests of E-compass and its shareholders. On the basis of the foregoing, E-compass’s Board has approved and declared advisable the Business Combination with NYM and recommends that you vote or give instructions to vote “FOR” each of the Business Combination Proposal, Redomestication Proposal, and the other proposals.

 

The board of directors recommends a vote “FOR” each of the Business Combination Proposal, Redomestication Proposal, and the other proposals — E-compass’s board of directors have interests that may be different from, or in addition to your interests as a shareholder. See “The Business Combination Proposal — Interests of Certain Persons in the Acquisition” in this proxy statement/prospectus for further information.

 

Interests of Certain Persons in the Business Combination

 

When you consider the recommendation of E-compass’s board of directors in favor of adoption of the Business Combination Proposal and other proposals, you should keep in mind that E-compass’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a shareholder, including:

 

If the proposed Business Combination is not completed by February 18, 2017, E-compass will be required to liquidate. In such event, the 1,000,000 E-compass ordinary shares held by E-compass officers, directors and affiliates, which were acquired prior to the IPO for an aggregate purchase price of $25,000, will be worthless, as will the 310,000 Units that were acquired prior to the IPO for an aggregate purchase price of $3,100,000. Such ordinary shares and units had an aggregate market value of approximately $_________ based on the closing price of E-compass’s ordinary shares of $_____ and E-compass’s rights $_____, on the Nasdaq Stock Market as of ____________, 2016;

 

Unless E-compass consummates the Business Combination, its officers, directors and Initial Shareholders will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceeded the amount of its working capital. As a result, the financial interest of E-compass’s officers, directors and Initial Shareholders or their affiliates could influence its officers’ and directors’ motivation in selecting NYM as a target and therefore there may be a conflict of interest when it determined that the Business Combination is in the shareholders’ best interest;
   
Richard Xu and Chen Liu have contractually agreed that, if it liquidates prior to the consummation of a business combination, they will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by E-compass for services rendered or contracted for or products sold to it. Therefore, E-compass’s initial shareholders have a financial interest in consummating a business combination, thereby resulting in a conflict of interest. E-compass’s Initial Shareholders or their affiliates could influence our officers’ and directors’ motivation in selecting a target business and therefore there may be a conflict of interest when determining whether the Business Combination is in the shareholders’ best interest;
   

If the Business Combination with NYM is completed, Henry Chang-Yu Lee will serve as a director of iFresh and NYM will designate four members to the Board of Directors of iFresh; and

   
In addition, the exercise of E-compass’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in our shareholders’ best interest.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

 

General

 

The following is a summary of the material U.S. federal income tax consequences of (i) the Redomestication to the U.S. Holders (as defined below) of E-compass units, ordinary shares and rights, which are sometimes referred to collectively, or individually, as E-compass securities, (ii) the redemption of E-compass ordinary shares if a U.S. Holder elects to redeem its E-compass ordinary shares pursuant to the exercise of its redemption right in connection with the shareholder vote regarding the Business Combination Proposal, and (iii) the ownership and disposition of iFresh Common Stock, which is sometimes referred to as iFresh securities, following the Redomestication and Business Combination. This summary is based upon laws and relevant interpretations thereof in effect as of the date of this proxy statement/prospectus, all of which are subject to change.

 

Because the components of an E-compass unit are separable at the option of the holder, the holder of a E-compass unit generally should be treated, for U.S. federal income tax purposes, as the owner of the underlying E-compass ordinary share and E-compass right. As a result, the discussion below of the U.S. federal income tax consequences with respect to actual holders of E-compass ordinary shares and rights should also apply to the holders of E-compass units (as the deemed owners of the E-compass ordinary shares and rights underlying the E-compass units).

 

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of E-compass or iFresh securities that is for U.S. federal income tax purposes:

 

an individual citizen or resident of the United States;
   
a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;
   
an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
   
a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

 

If a beneficial owner of E-compass or iFresh securities is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.” The material U.S. federal income tax consequences applicable specifically to Non-U.S. Holders of the ownership and disposition of iFresh securities following the Redomestication and Business Combination are described below under the heading “Non-U.S. Holders.”

 

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This summary is based on the Internal Revenue Code of 1986, as amended, or the “Code,” its legislative history, Treasury regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations, possibly on a retroactive basis.

 

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular holder based on such holder’s individual circumstances. In particular, this discussion considers only holders that own and hold E-compass securities, and that will own and hold iFresh securities as a result of owning the corresponding E-compass securities, as capital assets within the meaning of Section 1221 of the Code. This discussion does not address the alternative minimum tax or the U.S. federal income tax consequences to holders that are subject to special rules, including:

 

financial institutions or financial services entities;
   
broker-dealers;
   
persons that are subject to the mark-to-market accounting rules under Section 475 of the Code;
   
tax-exempt entities;
   
governments or agencies or instrumentalities thereof;
   
insurance companies;
   
regulated investment companies;
   
real estate investment trusts;
   
certain expatriates or former long-term residents of the United States;
   
Non-U.S. Holders (except as specifically provided below);
   
persons that actually or constructively own five percent (5%) or more of E-compass’s voting securities or iFresh’s voting securities (except as specifically provided below);
   
persons that acquired E-compass securities or iFresh securities pursuant to an exercise of employee options, in connection with employee incentive plans or otherwise as compensation;
   
persons that hold E-compass securities or iFresh securities as part of a straddle, constructive sale, hedging, redemption or other integrated transaction;
   
persons whose functional currency is not the U.S. dollar;
   
controlled foreign corporations; or
   
passive foreign investment companies.

 

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This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, state, local or non-U.S. tax laws or, except as discussed herein, any tax reporting obligations of a holder of E-compass securities or iFresh securities. Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold E-compass securities, or will hold iFresh securities, through such entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of E-compass securities (or iFresh securities), the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. This discussion also assumes that any distribution made (or deemed made) on E-compass securities (or iFresh securities) and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of E-compass securities (or iFresh securities) will be in U.S. dollars. In addition, this discussion assumes that a holder will own a sufficient number of rights such that upon conversion of such rights, the holder will acquire only full ordinary shares (or shares of iFresh Common Stock) and, thus, will not forfeit any rights or have a right to acquire a fractional share after such conversion.

 

Neither E-compass nor iFresh have sought, and neither will seek, a ruling from the U.S. Internal Revenue Service, or the IRS, or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.

 

BECAUSE OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER OF E-COMPASS SECURITIES OR IFRESH SECURITIES IN CONNECTION WITH OR FOLLOWING THE REDOMESTICATION AND BUSINESS COMBINATION MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH HOLDER OF E-COMPASS SECURITIES AND IFRESH SECURITIES IS URGED TO CONSULT WITH ITS OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE REDOMESTICATION AND BUSINESS COMBINATION, AND THE OWNERSHIP AND DISPOSITION OF E-COMPASS SECURITIES OR IFRESH SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND ANY APPLICABLE TAX TREATIES.

 

U.S. Holders

 

Tax Consequences of the Redomestication

 

The Redomestication should qualify as a reorganization for U.S. federal income tax purposes under Section 368(a) of the Code. However, due to the absence of guidance directly on point on how the provisions of Section 368(a) apply in the case of a merger of a corporation with no active business and only investment-type assets, this result is not entirely free from doubt. Accordingly, due to the absence of such guidance, it is not possible to predict whether the IRS or a court considering the issue would take a contrary position.

 

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If the Redomestication qualifies as a reorganization under Section 368(a), except as otherwise provided below in the sections entitled “—PFIC Considerations” and “—Effect of Section 367,” a U.S. Holder of E-compass securities should not recognize gain or loss upon the exchange of its E-compass securities solely for iFresh securities pursuant to the Redomestication. A U.S. Holder’s aggregate tax basis in the iFresh securities received in connection with the Redomestication should be the same as the aggregate tax basis of the E-compass securities surrendered in the transaction, increased by any amount included in the income of such U.S. Holder under the PFIC rules or Section 367(b) of the Code. See the discussion under “—PFIC Considerations” and “—Effect of Section 367,” below. In addition, the holding period of the iFresh securities received in the Redomestication generally should include the holding period of the E-compass securities surrendered in the Redomestication.

 

If the Redomestication should fail to qualify as a reorganization under Section 368(a), a U.S. Holder of E-compass securities generally would recognize gain or loss with respect to its E-compass securities in an amount equal to the difference, if any, between the U.S. Holder’s adjusted tax basis in its E-compass securities and the fair market value of the corresponding iFresh securities received in the Redomestication. In such event, the U.S. Holder’s basis in the iFresh securities would be equal to their fair market value, and such U.S. Holder’s holding period for the iFresh securities would begin on the day following the date of the Redomestication.

 

PFIC Considerations

 

Even if the Redomestication qualifies as a reorganization under Section 368(a) of the Code, the Redomestication may be a taxable event to U.S. Holders of E-compass securities under the PFIC provisions of the Code, to the extent that Section 1291(f) of the Code applies.

 

A. Definition and General Taxation of a PFIC

 

A foreign (i.e., non-U.S.) corporation will be a PFIC if either (a) at least seventy-five percent (75%) of its gross income in a taxable year of the foreign corporation, including its pro rata share of the gross income of any corporation in which it is considered to own at least twenty-five percent (25%) of the shares by value, is passive income or (b) at least fifty percent (50%) of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least twenty-five percent (25%) of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

 

Pursuant to a start-up exception, a corporation will not be a PFIC for the first taxable year the corporation has gross income, if (1) no predecessor of the corporation was a PFIC; (2) the corporation satisfies the IRS that it will not be a PFIC for either of the first two taxable years following the start-up year; and (3) the corporation is not in fact a PFIC for either of those years.

 

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If E-compass is determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of E-compass ordinary shares or rights and, in the case of E-compass ordinary shares, the U.S. Holder did not make either (a) a timely QEF election for E-compass’s first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) E-compass ordinary shares or (b) a QEF election along with a “purging election,” both of which are discussed further below, such holder generally will be subject to special rules with respect to:

 

any gain recognized by the U.S. Holder on the sale or other disposition of its E-compass ordinary shares or rights; and
   
any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the E-compass ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the E-compass ordinary shares).

 

Under these rules,

 

the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the E-compass ordinary shares;
   
the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder’s holding period before the first day of E-compass’s first taxable year in which it qualified as a PFIC, will be taxed as ordinary income;
   
the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and
   
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.

 

In general, if E-compass is determined to be a PFIC, a U.S. Holder may avoid the PFIC tax consequences described above with respect to its E-compass ordinary shares by making a timely QEF election (or a QEF election along with a purging election), as described below. Pursuant to the QEF election, a U.S. Holder will be required to include in income its pro rata share of E-compass’s net capital gain (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, whether or not distributed, in the taxable year of the U.S. Holder in which or with which E-compass’s taxable year ends. E-compass, however, does not believe that it had any earnings and profits in any prior taxable year or will have any earnings and profits for its current taxable year.

 

B. Status of E-compass as a PFIC

 

Based on the composition of its income and assets, E-compass believes that it was a PFIC for its taxable years ended March 31, 2015 (E-compass’s initial taxable year) and March 31, 2016, and that it will qualify as a PFIC for its current taxable year. The determination of whether E-compass is or has been a PFIC is primarily factual, and there is little administrative or judicial authority on which to rely to make a determination of PFIC status. Accordingly, the IRS or a court considering the matter may not agree with E-compass’s analysis of whether or not it is or was a PFIC during any particular year.

 

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C. Impact of PFIC Rules on Certain U.S. Holders

 

The impact of the PFIC rules on a U.S. Holder of E-compass securities will depend on whether the U.S. Holder has made a timely and effective election to treat E-compass as a QEF, under Section 1295 of the Code for E-compass’s first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) E-compass ordinary shares, or if the U.S. Holder made a QEF election along with a “purging election,” as discussed below. A U.S. Holder’s ability to make a QEF election with respect to E-compass is contingent upon, among other things, the provision by E-compass of certain information that would enable the U.S. Holder to make and maintain a QEF election. E-compass has previously indicated that it would endeavor to provide such information, including a PFIC annual information statement, upon request of a U.S. Holder. A U.S. Holder of a PFIC that made a timely and effective QEF election for E-compass’s first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) E-compass ordinary shares or Ordinary Shares, or that made a QEF election along with a purging election, as discussed below, is hereinafter referred to as an “Electing Shareholder.” A U.S. Holder of a PFIC that did not make a timely and effective QEF election for E-compass’s first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) E-compass ordinary shares or Ordinary Shares, or that did not make a QEF election along with a purging election, is hereinafter referred to as a “Non-Electing Shareholder.”

 

As indicated above, if a U.S. Holder of E-compass ordinary shares has not made a timely and effective QEF election with respect to E-compass’s first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) E-compass ordinary shares, such U.S. Holder generally may nonetheless qualify as an Electing Shareholder by filing on a timely filed U.S. income tax return (including extensions) a QEF election and a purging election to recognize under the rules of Section 1291 of the Code any gain that it would otherwise recognize if the U.S. Holder sold its E-compass ordinary shares for their fair market value on the “qualification date.” The qualification date is the first day of E-compass’s tax year in which E-compass qualifies as a QEF with respect to such U.S. Holder. The purging election can only be made if such U.S. Holder held E-compass ordinary shares or Ordinary Shares on the qualification date. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, the U.S. Holder will increase the adjusted tax basis in its E-compass ordinary shares by the amount of the gain recognized and will also have a new holding period in the E-compass ordinary shares for purposes of the PFIC rules.

 

A U.S. Holder may not make a QEF election with respect to its E-compass rights. As a result, if a U.S. Holder of E-compass rights sells or otherwise disposes of such rights (including for this purpose exchanging the E-compass rights for iFresh rights in the Redomestication), any gain recognized will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above, if E-compass were a PFIC at any time during the period the U.S. Holder held the E-compass rights.

 

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U.S. Holders that hold (or are deemed to hold) stock of a foreign corporation that qualifies as a PFIC may annually elect to mark such stock to its market value if such stock is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission or certain foreign exchanges or markets of which the IRS has approved (a “mark-to-market election”). The Nasdaq Stock Market currently is considered to be an exchange that would allow a U.S. Holder to make a mark-to-market election. U.S. Holders are urged to consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election with respect to their E-compass ordinary shares under their particular circumstances.

 

D. Effect of PFIC Rules on the Redomestication

 

Even if the Redomestication should qualify as a reorganization for U.S. federal income tax purposes under Section 368(a) of the Code, Section 1291(f) of the Code requires that, to the extent provided in regulations, a U.S. person that disposes of stock of a PFIC (including rights to acquire stock of a PFIC) must recognize gain notwithstanding any other provision of the Code. No final Treasury regulations are in effect under Section 1291(f). Proposed Treasury regulations under Section 1291(f) were promulgated in 1992, with a retroactive effective date once they become finalized. If finalized in their present form, those regulations would require taxable gain recognition by a Non-Electing Shareholder with respect to its exchange of E-compass securities for iFresh securities in the Redomestication if E-compass were classified as a PFIC at any time during such U.S. Holder’s holding period in E-compass securities. Any such gain would be treated as an “excess distribution” made in the year of the Redomestication and subject to the special tax and interest charge rules discussed above under “—Definition and General Taxation of a PFIC.” In addition, the regulations would provide coordinating rules with Section 367(b) of the Code, whereby, if the gain recognition rule of the proposed Treasury regulations under Section 1291(f) applies to a disposition of PFIC stock that results from a transfer with respect to which Section 367(b) requires the shareholder to recognize gain or include an amount in income as a distribution under Section 301 of the Code, the gain realized on the transfer is taxable as an excess distribution under Section 1291 of the Code, and the excess, if any, of the amount to be included in income under Section 367(b) over the gain realized under Section 1291 is taxable as provided under Section 367(b). See the discussion below under the section entitled “—Effect of Section 367.” The proposed Treasury regulations under Section 1291(f) should not apply to an Electing Shareholder with respect to its E-compass ordinary shares for which a timely QEF election (or a QEF election along with a purging election) is made. An Electing Shareholder may, however, be subject to the rules discussed below under the section entitled “—Effect of Section 367.” In addition, as discussed above, since a QEF election cannot be made with respect to E-compass rights, the proposed Treasury regulations under Section 1291(f) should apply to cause gain recognition under the PFIC rules on the exchange of E-compass rights for iFresh rights pursuant to the Redomestication.

 

The rules dealing with PFICs and with the QEF election and purging election (or a mark-to-market election) are very complex and are affected by various factors in addition to those described above. Accordingly, a U.S. Holder of E-compass securities should consult its own tax advisor concerning the application of the PFIC rules to such securities under such holder’s particular circumstances.

 

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Effect of Section 367

 

Section 367 of the Code applies to certain non-recognition transactions involving foreign corporations, including a domestication of a foreign corporation in a transaction that qualifies as a Section 368(a) reorganization. When it applies, Section 367 imposes income tax on certain U.S. persons in connection with transactions that would otherwise be tax-free. Section 367(b) generally will apply to U.S. Holders that exchange E-compass ordinary shares (but not rights) for iFresh Common Stock as part of the Redomestication.

 

A. U.S. Shareholders of E-compass

 

A U.S. Holder that on the day of the Redomestication beneficially owns (directly, indirectly or constructively) ten percent (10%) or more of the total combined voting power of all classes of E-compass securities entitled to vote (a “U.S. Shareholder”) must include in income as a dividend the “all earnings and profits amount” attributable to the E-compass ordinary shares it directly owns, within the meaning of Treasury Regulation Section 1.367(b)-2(d). Complex attribution rules apply in determining whether a U.S. Holder owns 10% or more of the total combined voting power of all classes of E-compass securities entitled to vote for U.S. federal income tax purposes.

 

A U.S. Shareholder’s all earnings and profits amount with respect to its E-compass ordinary shares is the net positive earnings and profits of the corporation (as determined under Treasury Regulation Section 1.367(b)-2(d)(2)) attributable to the E-compass ordinary shares (as determined under Treasury Regulation Section 1.367(b)-2(d)(3)) but without regard to any gain that would be realized on a sale or exchange of such E-compass ordinary shares.

 

Accordingly, under Treasury Regulation Section 1.367(b)-3(b)(3), a U.S. Shareholder will be required to include in income as a deemed dividend the all earnings and profits amount (as defined in Treasury Regulation Section 1.367(b)-2(d)) with respect to its E-compass ordinary shares. However, E-compass does not expect that its cumulative earnings and profits will be greater than zero through the date of the Redomestication. If E-compass’s cumulative earnings and profits through the date of Redomestication are not greater than zero, then a U.S. Shareholder generally would (depending on what period the E-compass ordinary shares were held) not be required to include in gross income an all earnings and profits amount with respect to its E-compass ordinary shares.

 

However, it is possible that the amount of E-compass’s earnings and profits could be greater than expected through the date of the Redomestication or could be adjusted as a result of an IRS examination. The determination of E-compass’s earnings and profits is a complex determination and may be impacted by numerous factors. Therefore, it is possible that one or more factors may cause E-compass to have positive earnings and profits through the date of the Redomestication. As a result, depending upon the period in which such a U.S. Shareholder held its E-compass ordinary shares, such U.S. Shareholder could be required to include its all earnings and profits amount in income as a deemed dividend under Treasury Regulation Section 1.367(b)-3(b)(3) as a result of the Redomestication. See above under “—PFIC Considerations—Effect of PFIC Rules on the Redomestication” for a discussion of whether the amount of inclusion under Section 367(b) of the Code should be reduced by amounts required to be taken into account by a Non-Electing Shareholder under the proposed Treasury regulations under Section 1291(f) of the Code.

 

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B. U.S. Holders That Own Less Than 10 Percent of E-compass

 

A U.S. Holder that on the day of the Redomestication beneficially owns (directly, indirectly or constructively) E-compass ordinary shares with a fair market value of $50,000 or more but less than ten percent (10%) of the total combined voting power of all classes of E-compass securities entitled to vote must either recognize gain with respect to the Redomestication or, in the alternative, elect to recognize the “all earnings and profits” amount as described below.

 

Unless a U.S. Holder makes the “all earnings and profits election” as described below, such holder generally must recognize gain (but not loss) with respect to iFresh securities received in exchange for its E-compass ordinary shares pursuant to the Redomestication. Any such gain would be equal to the excess of the fair market value of such iFresh securities received over the U.S. Holder’s adjusted tax basis in the E-compass ordinary shares deemed to be surrendered in exchange therefor. Subject to the PFIC rules discussed above, such gain would be capital gain, and should be long-term capital gain if the U.S. Holder held the E-compass ordinary shares for longer than one year.

 

In lieu of recognizing any gain as described in the preceding paragraph, a U.S. Holder may elect to include in income the all earnings and profits amount attributable to its E-compass ordinary shares under Section 367(b). There are, however, strict conditions for making this election. This election must comply with applicable Treasury regulations and generally must include, among other things: (i) a statement that the Redomestication is a Section 367(b) exchange; (ii) a complete description of the Redomestication, (iii) a description of any stock, securities or other consideration transferred or received in the Redomestication, (iv) a statement describing the amounts required to be taken into account for U.S. federal income tax purposes, (v) a statement that the U.S. Holder is making the election that includes (A) a copy of the information that the U.S. Holder received from E-compass establishing and substantiating the U.S. Holder’s all earnings and profits amount with respect to the U.S. Holder’s E-compass ordinary shares, and (B) a representation that the U.S. Holder has notified E-compass (or iFresh) that the U.S. Holder is making the election, and (vi) certain other information required to be furnished with the U.S. Holder’s tax return or otherwise furnished pursuant to the Code or the Treasury regulations thereunder. In addition, the election must be attached by the U.S. Holder to its timely filed U.S. federal income tax return for the year of the Redomestication, and the U.S. Holder must send notice to E-compass (or iFresh) of the election no later than the date such tax return is filed. In connection with this election, E-compass intends to provide each U.S. Holder eligible to make such an election with information regarding E-compass’s earnings and profits upon request.

 

E-compass does not expect that its cumulative earnings and profits will be greater than zero through the date of the Redomestication and if that proves to be the case, U.S. Holders who make this election generally would (depending on what period the E-compass ordinary shares were held) not have an income inclusion under Section 367(b) provided that the U.S. Holder properly executes the election and complies with the applicable notice requirements. Thus, it is expected that the making of any election to include the all earnings and profits amount in income as a dividend generally would be advantageous to a U.S. Holder that would otherwise recognize gain under Section 367(b) with respect to its E-compass ordinary shares in the Redomestication. However, as noted above, if it were determined that E-compass had positive earnings and profits through the date of the Redomestication, a U.S. Holder that makes the election described herein could have an all earnings and profits amount with respect to its E-compass ordinary shares, and thus could be required to include that amount in income as a deemed dividend as a result of the Redomestication. See above under “—PFIC Considerations—Effect of PFIC Rules on the Redomestication” for a discussion of whether the amount of inclusion under Section 367(b) of the Code should be reduced by amounts required to be taken into account by a Non-Electing Shareholder under the proposed Treasury regulations under Section 1291(f) of the Code.

 

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U.S. Holders are strongly urged to consult with their own tax advisors regarding whether to make this election and if the election is determined to be advisable, the appropriate filing requirements with respect to this election.

 

C. U.S. Holders that Own E-compass Securities with a Fair Market Value Less Than $50,000

 

A U.S. Holder that on the date of the Redomestication owns (or is considered to own) E-compass ordinary shares with a fair market value less than $50,000 would not be required to recognize any gain or loss under Section 367(b) of the Code in connection with the Redomestication, and would not be required to include any part of the all earnings and profits amount in income (the “de minimis exception”).

 

D. Shareholder Basis in and Holding Period for iFresh Securities

 

For a discussion of a U.S. Holder’s tax basis and holding period in iFresh securities received in the Redomestication, see above under “—Tax Consequences of the Redomestication.”

 

Taxation on the Redemption of E-compass ordinary shares

 

In the event that a U.S. Holder of E-compass ordinary shares elects to redeem its E-compass ordinary shares and receive cash pursuant to the exercise of its redemption right in connection with the shareholder vote regarding the Business Combination Proposal, the amount received on any such redemption of E-compass ordinary shares generally will be treated for U.S. federal income tax purposes as a payment in consideration for the sale of the E-compass ordinary shares rather than as a distribution. Such amounts, however, will be treated as a distribution for U.S. federal income tax purposes if (i) the redemption is “essentially equivalent to a dividend” (meaning that the U.S. Holder’s percentage ownership in E-compass (including E-compass ordinary shares the U.S. Holder is deemed to own under certain constructive ownership rules) after the redemption is not meaningfully reduced from what its percentage ownership in E-compass (including constructive ownership) was prior to the redemption), (ii) the redemption is not “substantially disproportionate” as to that U.S. Holder (“substantially disproportionate” meaning, among other requirements, that the percentage of E-compass outstanding voting shares owned (including constructive ownership) immediately following the redemption is less than 80% of that percentage owned (including constructive ownership) by such holder immediately before the redemption) and (iii) the redemption does not result in a “complete termination” of the U.S. Holder’s interest in E-compass (taking into account certain constructive ownership rules). If the U.S. Holder had a relatively minimal interest in E-compass ordinary shares and, taking into account the effect of redemptions by other holders, its percentage ownership (including constructive ownership) in E-compass is reduced as a result of the redemption, such holder generally should be regarded as having a meaningful reduction in interest. For example, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority shareholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.” A U.S. Holder should consult with its own tax advisors as to the tax consequences to it of any redemption of its E-compass ordinary shares.

 

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Taxation of Cash Distributions Paid on iFresh Securities

 

A U.S. Holder of iFresh securities generally will be required to include in gross income as ordinary income the amount of any cash dividend paid on the iFresh securities. A cash distribution on such securities generally will be treated as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of iFresh’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). The portion of such distribution, if any, in excess of such earnings and profits generally will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in its iFresh securities. Any remaining excess generally will be treated as gain from the sale or other disposition of the iFresh securities and will be treated as described under “—Taxation on the Disposition of iFresh Securities” below. The dividends received by a non-corporate U.S. Holder may be subject to tax at the regular U.S. federal income tax rate generally applicable to long-term capital gains.

 

Any cash dividends iFresh pays to a U.S. Holder that is treated as a taxable corporation for U.S. federal income tax purposes generally will qualify for the dividends-received deduction if the applicable holding period and other requirements are satisfied. However, if any such dividends are “extraordinary dividends” subject to Section 1059 of the Code, a corporate U.S. Holder may be required to reduce the adjusted tax basis in its iFresh securities by the nontaxed portion of such dividends (and if the nontaxed portion of such dividends exceeds such basis, such excess may be treated as gain from the sale or exchange of such iFresh securities for taxable year in which the extraordinary dividend is received).

 

Taxation on the Disposition of iFresh Securities

 

Upon a sale or other taxable disposition of iFresh securities (which, in general, would include a distribution in connection with iFresh’s liquidation), a U.S. Holder of such securities generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in such securities. See “— Deemed Exercise of iFresh Rights,” below for a discussion regarding a U.S. Holder’s basis in the iFresh Common Stock acquired pursuant to the deemed exercise of an iFresh right.

 

The regular U.S. federal income tax rate on capital gains recognized by U.S. Holders generally is the same as the regular U.S. federal income tax rate on ordinary income, except that long-term capital gains recognized by non-corporate U.S. Holders are generally subject to U.S. federal income tax at a maximum regular rate of 20%. Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the securities exceeds one year. The deductibility of capital losses is subject to various limitations.

 

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Additional Taxes

 

U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% Medicare contribution tax on unearned income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, E-compass or iFresh securities, subject to certain limitations and exceptions. U.S. Holders should consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of E-compass or iFresh securities.

 

Deemed Exercise or Lapse of iFresh Rights

 

A U.S. Holder generally will not recognize gain or loss by reason of the receipt of shares of iFresh Common Stock on the deemed exercise of iFresh rights on the consummation of the Business Combination. The shares acquired pursuant to such conversion generally will have a tax basis equal to the U.S. Holder’s tax basis in the rights. The holding period of such shares generally would begin on the day following the conversion of the rights and would not include the period during which the U.S. Holder held such rights.

 

Non-U.S. Holders

 

Taxation of Distributions on iFresh Securities

 

Any cash distribution (including a constructive distribution) iFresh makes to a Non-U.S. Holder of iFresh securities, to the extent paid out of iFresh’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles), generally will constitute a dividend for U.S. federal income tax purposes. Any such dividend paid to a Non-U.S. Holder with respect to iFresh securities that is not effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States, as described below, generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividend, unless such Non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). In satisfying the foregoing withholding obligation with respect to a distribution, iFresh may withhold up to 30% of either (i) the gross amount of the entire distribution, even if the amount of the distribution is greater than the amount constituting a dividend, as described above, or (ii) the amount of the distribution iFresh projects will be a dividend, based upon a reasonable estimate of both its current and accumulated earnings and profits for the taxable year in which the distribution is made. If U.S. federal income tax is withheld on the amount of a distribution in excess of the amount constituting a dividend, the Non-U.S. Holder may obtain a refund of all or a portion of the excess amount withheld by timely filing a claim for refund with the IRS. Any such distribution not constituting a dividend generally will be treated, for U.S. federal income tax purposes, first as reducing the Non-U.S. Holder’s adjusted tax basis in such securities (but not below zero) and, to the extent such distribution exceeds the Non-U.S. Holder’s adjusted tax basis, as gain from the sale or other taxable disposition of such securities, which will be treated as described under “— Taxation on the Disposition of iFresh Securities” below.

 

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Cash dividends (including constructive dividends) iFresh pays to a Non-U.S. Holder that are effectively connected with such Non-U.S. Holder’s conduct of a trade or business within the United States (and, if certain income tax treaties apply, are attributable to a U.S. permanent establishment or fixed base maintained by the Non-U.S. Holder) generally will not be subject to U.S. withholding tax, provided such Non-U.S. Holder complies with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, such dividends generally will be subject to U.S. federal income tax, net of certain deductions, at the same regular U.S. federal income tax rates applicable to a comparable U.S. Holder. If the Non-U.S. Holder is a corporation, such dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).

 

Taxation on the Disposition of iFresh Securities

 

A Non-U.S. Holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a sale, exchange or other disposition of iFresh securities unless:

 

the gain is effectively connected with the conduct of a trade or business by the Non-U.S. Holder within the United States (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by the Non-U.S. Holder);
   
the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or
   
iFresh is a ‘‘United States real property holding corporation’’ (‘‘USRPHC’’) for U.S. federal income tax purposes at any time during the shorter of the five year period ending on the date of disposition or the Non-U.S. Holder’s holding period for such securities disposed of, and, generally, in the case where iFresh securities are regularly traded on an established securities market, the Non-U.S. Holder has owned, directly or indirectly, more than 5% of such securities, as applicable, at any time during the shorter of the five year period ending on the date of disposition or the Non- U.S. Holder’s holding period for the security disposed of. There can be no assurance that iFresh securities will be treated as regularly traded on an established securities market for this purpose.

 

Unless an applicable tax treaty provides otherwise, gain described in the first and third bullet points above generally will be subject to U.S. federal income tax, net of certain deductions, at the same regular U.S. federal income tax rates applicable to a comparable U.S. Holder. Any gain described in the first bullet point above of a Non-U.S. Holder that is a foreign corporation also may be subject to an additional “branch profits tax” at a 30% rate (or a lower applicable tax treaty rate). Any U.S. source capital gain of a Non-U.S. Holder described in the second bullet point above (which may be offset by U.S. source capital losses during the taxable year of the disposition) generally will be subject to a flat 30% U.S. federal income tax rate (or a lower applicable tax treaty rate).

 

In connection with the third bullet point above, iFresh generally will be classified as a USRPHC if (looking through certain subsidiaries) the fair market value of its “United States real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. Based on the expected composition of its assets (looking through applicable subsidiaries) after the Redomestication and the Business Combination, iFresh believes that it would not be a USRPHC after the Business Combination. Even if it were not a USRPHC immediately after the Business Combination, no assurance can be given that iFresh will not become a USRPHC in the future. Non-U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of owning and disposing of iFresh securities.

 

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Foreign Accounts

 

Certain Non-U.S. Holders may be subject to a U.S. federal withholding tax at a 30% rate with respect to dividends on, and the gross proceeds from the sale or other disposition of, iFresh securities if certain disclosure requirements related to the U.S. accounts maintained by, or the U.S. ownership of, such Non-U.S. Holders are not satisfied. The IRS has indicated, however, that withholding with respect to such gross proceeds will be required only for sales or other dispositions occurring after December 31, 2018. Non-U.S. Holders should consult their own tax advisors regarding the effect, if any, of such withholding taxes on their ownership and disposition of iFresh securities.

 

Information Reporting and Backup Withholding

 

iFresh generally must report annually to the IRS and to each holder the amount of cash dividends and certain other distributions it pays to such holder on such holder’s securities and the amount of tax, if any, withheld with respect to those distributions. In the case of a Non-U.S. Holder, copies of the information returns reporting those distributions and withholding also may be made available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement. Information reporting is also generally required with respect to proceeds from the sales and other dispositions of iFresh securities to or through the U.S. office (and in certain cases, the foreign office) of a broker. In addition, certain information concerning a U.S. Holder’s adjusted tax basis in its securities and adjustments to that tax basis and whether any gain or loss with respect to such securities is long-term or short-term also may be required to be reported to the IRS.

 

Moreover, backup withholding of U.S. federal income tax at a rate of 28% generally will apply to cash distributions made on iFresh securities to, and the proceeds from sales and other dispositions of such securities by, a U.S. Holder (other than an exempt recipient) who:

 

fails to provide an accurate taxpayer identification number;
   
is notified by the IRS that backup withholding is required; or
   
in certain circumstances, fails to comply with applicable certification requirements.

 

A Non-U.S. Holder generally may eliminate the requirement for information reporting (other than with respect to distributions, as described above) and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

 

Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.

 

Anticipated Accounting Treatment

 

The Business Combination will be treated by E-compass as a reverse Business Combination under the acquisition method of accounting in accordance with GAAP. For accounting purposes, NYM is considered to be acquiring E-compass in this transaction. Therefore, the aggregate consideration paid in connection with the Business Combination will be allocated to E-compass tangible and intangible assets and liabilities based on their fair market values. The assets and liabilities and results of operations of E-compass will be consolidated into the results of operations of NYM as of the completion of the Business Combination.

 

Regulatory Approvals

 

The Business Combination and the other transactions contemplated by the Acquisition Agreement are not subject to any additional federal or state regulatory requirements or approvals, including the Hart-Scott Rodino Antitrust Improvements Act of 1976, except for filings with the State of Delaware and the Cayman Islands Government necessary to effectuate the transactions contemplated by the Acquisition Agreement.

 

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THE ACQUISITION AGREEMENT

 

The following is a summary of the material provisions of the Acquisition Agreement, a copy of which is attached as Appendix A to this proxy statement/prospectus. You are encouraged to read the Acquisition Agreement in its entirety for a more complete description of the terms and conditions of the Acquisition.

 

Redomestication to Delaware

 

Immediately prior to the Acquisition, E-compass will be merged with and into iFresh, the separate corporate existence of E-compass will cease and iFresh will continue as the surviving corporation (the “Redomestication Merger”). In connection with the Redomestication Merger, E-compass’s issued and outstanding share capital and equity interests will be converted as follows:

 

Each E-compass ordinary share will be converted automatically into one share of common stock of iFresh (the “iFresh Common Stock”).
   
Each E-compass Right will be converted into one substantially equivalent right (each an “iFresh Right”) to receive one right to receive one-tenth (1/10) of a share of iFresh Common Stock on the consummation of the Business Combination.
   
Each E-compass Unit will be converted automatically into one iFresh Unit consisting of one share of iFresh Common Stock and one iFresh Right (each an “iFresh Unit”).
   
Each unit purchase option of E-compass will be converted into one substantially equivalent unit purchase option to purchase one iFresh Unit.

 

Business Combination with NYM; Acquisition Consideration

 

Upon the closing of the transactions contemplated in the Agreement, iFresh will acquire 100% of the issued and outstanding securities of NYM, in exchange for $5 million in cash and an aggregate of 12,000,000 shares of iFresh Common Stock. We refer to this transaction as the “Business Combination.”

 

Representations and Warranties

 

In the Acquisition Agreement, NYM a makes certain representations and warranties (with certain exceptions set forth in the disclosure schedule to the Agreement) relating to, among other things: (a) proper corporate organization of NYM and its subsidiaries and other companies in which it is a minority shareholder and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Agreement and other transaction documents; (c) absence of conflicts; (d) capital structure and title to units; (e) accuracy of charter documents and corporate records; (f) related-party transactions; (g) required consents and approvals; (h) financial information; (i) absence of certain changes or events; (j) title to assets and properties; (k) material contracts; (l) insurance; (m) licenses and permits; (n) compliance with laws, including those relating to foreign corrupt practices and money laundering; (o) ownership of intellectual property; (p) absence of warranty claims; (q) employment and labor matters; (r) taxes and audits; (s) environmental matters; (t) brokers and finders; (u) investment representations and transfer restrictions; (v) that NYM is not an investment company; and (w) other customary representations and warranties.

 

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In the Acquisition Agreement, E-compass makes certain representations and warranties relating to, among other things: (a) title to shares; (b) proper corporate organization and similar corporate matters; (c) authorization, execution, delivery and enforceability of the Agreement and other transaction documents; (d) brokers and finders; (e) capital structure; (f) validity of share issuance; (g) minimum trust fund amount; and (g) validity of Nasdaq Stock Market listing; and (h) SEC filing requirements.

 

Conduct Prior to Closing; Covenants

 

NYM has agreed to operate the business in the ordinary course, consistent with past practices, prior to the closing of the Acquisition (with certain exceptions) and not to take certain specified actions without the prior written consent of E-compass.

 

The Agreement also contains covenants of NYM providing for:

 

NYM and its subsidiaries and portfolio companies to provide access to their books and records and providing information relating to NYM’s business to Parent, its counsel and other representatives; and
   
NYM to deliver the financial statements required by the Company to make applicable filings with the SEC.

 

Conditions to Closing

 

General Conditions

 

Consummation of the Acquisition Agreement and the acquisition is conditioned on (a) the absence of any order, stay, judgment or decree by any government agency or any pending or threatened litigation seeking to enjoin, modify, amend or prohibit the Acquisition; (b) the consummation of the Redomestication Merger, and (c) the SEC declaring the Registration Statement effective.

 

NYM’s Conditions to Closing

 

The obligations of the Representing Parties to consummate the transactions contemplated by the Acquisition Agreement, in addition to the conditions described above, are conditioned upon (i) E-compass and iFresh complying with all of their respective obligations required to be performed by them pursuant to the required covenants in the Acquisition Agreement, (ii) the representations and warranties of E-compass being true on and as of the closing date of the Acquisition, and (iii) E-compass having obtained debt financing of at least $15 million on terms reasonably acceptable to NYM.

 

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E-compass’s and iFresh’s Conditions to Closing

 

The obligations of E-compass and iFresh to consummate the transactions contemplated by the Acquisition Agreement, in addition to the conditions described above in the first paragraph of this section, are conditioned upon each of the following, among other things:

 

the representations and warranties of NYM being true on and as of the closing date of the acquisition and NYM complying with all required covenants in the Acquisition Agreement;
   
there having been no material adverse effect to NYM’s business, regardless of whether it involved a known risk;
   
receipt by iFresh of third party consents;
   
iFresh receiving a legal opinion from NYM’s counsel; and
   
the holders of ordinary shares of E-compass having approved the Acquisition Agreement and the transactions contemplated by the Acquisition Agreement.

 

Termination

 

The Acquisition Agreement may be terminated and/or abandoned at any time prior to the closing, whether before or after approval of the proposals being presented to E-compass’s shareholders, by:

 

Either E-compass or iFresh if the closing has not occurred by February 18, 2017;
   
Either E-compass or iFresh, if NYM or any of its shareholders has materially breached any representation, warranty, agreement or covenant contained in the Acquisition Agreement and such breach has not been cured within fifteen days following the receipt by NYM or any of its shareholders, as applicable, of iFresh’s written notice to terminate the Agreement; or
   
NYM, if iFresh has materially breached any representation, warranty, agreement or covenant contained in the Agreement and such breach has not been cured within fifteen days following the receipt by the iFresh of NYM’s written notice to terminate the Acquisition Agreement.

 

Effect of Termination

 

In the event of termination and abandonment by either E-compass or NYM, all further obligations of the parties shall terminate.

 

Indemnification

 

Until the third anniversary of the date of the Agreement, the Representing Parties have agreed, jointly and severally, to indemnify the iFresh and its affiliates from any damages arising from (a) any breach of any representation, warranty or covenant made by the Representing Parties, (b) any actions by any third parties with respect to NYM’s business for any period on or prior to the closing date, (c) the violation of any laws in connection with or with respect to the operation of the business on or prior to the closing date, (d) any claims by any employee of NYM or any of its subsidiaries or portfolio companies, (e) any taxes attributable to the period prior to closing or (f) any sales, use, transfer or similar tax imposed on iFresh or its affiliates as a result of the transactions contemplated by the Agreement. The indemnification obligations of the Representing Parties are capped at $24,000,000. Such indemnification can be satisfied with the cancellation of iFresh Common Stock. 2.4 million shares of iFresh Common Stock are to be held in escrow for such purpose and will be valued at $10.00 per share.

 

The foregoing summary of the Acquisition Agreement does not purport to be complete and is qualified in its entirety by reference to the actual agreement, which is filed as Appendix A hereto.

 

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Voting Agreement

 

In connection with the Acquisition, iFresh, the NYM shareholders and certain shareholders of E-compass will enter into a Voting Agreement to set forth their agreements and understandings with respect to how shares of iFresh common stock held by them will be voted on in connection with, and following, the transactions contemplated by the Acquisition Agreement. The parties will agree to vote their shares of iFresh common stock as necessary to ensure that the size of the Board of Directors of iFresh after the consummation of the Redomestication and Business Combination will be five members until two years after the closing of the Business Combination. The parties will also agree to vote their shares of iFresh common stock to ensure the election of one member of the Board of Directors of iFresh designated by the E-compass shareholders party to the agreement, who shall initially be qualified as an independent director pursuant to the rules of any stock exchange on which iFresh may be listed, and four members designated by the NYM shareholders, of which two designees shall qualify as an independent director pursuant to the rules of any stock exchange on which iFresh may be listed. A copy of the Voting Agreement is attached to this proxy statement/prospectus as Annex C.

 

Option Agreement

 

In connection with the Acquisition, iFresh and Long Deng will enter into an option agreement pursuant to which iFresh has the option, but not the obligation, to purchase four additional supermarkets (the “Option Companies”) from Mr. Deng on or prior to March 31, 2017. iFresh has the ability to exercise the option in installments. The option price for each Option Company is $2.5 million in cash minus any liabilities owed to iFresh or any of its subsidiaries by the applicable Option Company as of the closing date. Three of the four stores have been operated for years and one will be opened by the end of 2016. A copy of the Option Agreement is attached to this proxy statement/prospectus as Annex B.

 

Registration Rights Agreement

 

In connection with the Acquisition, iFresh and the NYM shareholders will enter into a Registration Rights Agreement to provide for the registration of the common stock being issued to the NYM shareholders in connection with the Business Combination. The NYM shareholders will be entitled to “piggy-back” registration rights with respect to registration statements filed following the consummation of the Business Combination. iFresh will bear the expenses incurred in connection with the filing of any such registration statements.

 

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THE REDOMESTICATION PROPOSAL

 

General

 

E-compass is redomesticating in Delaware and in that process changing its name and corporate documents and establishing a new board of directors. The Redomestication is a condition to consummation of the Business Combination. NYM required that E-compass redomicile in the state of Delaware in order to enter into the Acquisition Agreement. Being redomiciled in Delaware will create operation efficiencies for the combined company due to the fact that NYM and its subsidiaries are all located in the United States and a Delaware company will provide its shareholders with certain rights not afforded to them by a Cayman Islands company. The Redomestication will be completed immediately prior to the Business Combination. As part of the Redomestication, E-compass’s corporate name will be that of the surviving company, “iFresh Inc.”

 

The full texts of the forms of Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of iFresh are set forth as Annexes D and E, respectively, to this proxy statement/prospectus. A discussion of these documents and the comparison of rights is set forth below.

 

Adoption of the Redomestication Merger

 

The board of directors has approved the Redomestication Proposal and recommends that the shareholders of E-compass approve it. E-compass’s board of directors have interests that may be different from, or in addition to your interests as a shareholder. See “The Business Combination Proposal — Interests of Certain Persons in the Business Combination” in this proxy statement/prospectus for further information.

 

The affirmative vote of the holders of a majority of the shares outstanding of E-compass is required for approval of the Redomestication Proposal. Abstentions will have the effect of a vote against the proposal and broker non-votes will have no effect on the vote.

 

Each of the Redomestication Proposal and the Business Combination Proposal, as described below, are conditioned upon the approval of each other. Therefore, both must be approved by the E-compass shareholders in order for the Business Combination to be consummated. If any of the three proposals is not approved, the Business Combination will not be consummated and E-compass will liquidate and dissolve.

 

The board of directors unanimously recommends a vote “FOR” the approval of the Redomestication Proposal.

 

Plan of Reincorporation and Redomestication Merger

 

The Redomestication will be achieved by the merger of E-compass, an exempted company incorporated in the Cayman Islands, with and into iFresh Inc., a Delaware company, which is wholly owned by E-compass at this time, with iFresh being the surviving entity. The Certificate of Incorporation and Bylaws, the equivalent of a memorandum of association and the articles of association, of the surviving company will be those of iFresh, written in compliance with Delaware law. The effectiveness of the redomestication and the merger is conditioned upon the filing by both E-compass and iFresh of a certificate of merger with the State of Delaware and the issuance of a certificate of strike off by way of merger or consolidation by with the Cayman Islands Registrar of Companies. Upon the filing and receipt of these documents, E-compass will cease its corporate existence in the Cayman Islands.

 

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At the time of the Redomestication:

 

Each E-compass ordinary share will be converted automatically into one share of common stock of iFresh (the “iFresh Common Stock”).
   
Each E-compass Right will be converted into one substantially equivalent right (each an “iFresh Right”) to receive one right to receive one-tenth (1/10) of a share of iFresh Common Stock on the consummation of the Business Combination.
   
Each E-compass Unit will be converted automatically into one iFresh Unit consisting of one share of iFresh Common Stock and one iFresh Right (each an “iFresh Unit”).
   
Each unit purchase option of E-compass will be converted into one substantially equivalent unit purchase option to purchase one iFresh Unit.

 

The E-compass Units, shares and rights will no longer be eligible to trade on the Nasdaq Stock Market after the closing of the Redomestication. The units, shares and rights of iFresh will be eligible to trade in their place beginning on or about the effective date of the Redomestication under a new CUSIP number and trading symbol. We expect the symbols to be “FMKT”.

 

Your percentage ownership of E-compass will not be affected by the Redomestication. However, there will be the issuance of additional shares of common stock as partial consideration for the Business Combination with NYM. In addition, iFresh will assume all other outstanding obligations of E-compass and succeed to those benefits enjoyed by E-compass. The business of E-compass after the Redomestication and the Business Combination will become that of NYM.

 

You do not need to replace the current certificate representing your E-compass securities after the Redomestication. Do not destroy your current certificates issued by E-compass. The issued and outstanding security certificates of E-compass will represent the rights that E-compass’s shareholders will have in iFresh. Shareholders, however, may submit their certificates to our transfer agent, Continental Stock Transfer and Trust Company, 17 Battery Place, New York, New York 10004 (212-509-4000) for new certificates, subject to normal requirements as to proper endorsement, signature guarantee, if required, and payment of applicable taxes.

 

If you have lost your certificate, you can contact our transfer agent to have a new certificate issued. You may be requested to post a bond or other security to reimburse us for any damages or costs if the lost certificate is later delivered for sale or transfer.

 

Appraisal Rights

 

Holders of E-compass ordinary shares are not entitled to appraisal rights under the Companies Law.

 

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Differences in Shareholder Rights

 

At the effective time of the Redomestication, the Certificate of Incorporation and Bylaws of iFresh will become the governing documents of the surviving corporation. Your rights as a shareholder of E-compass are governed by the law of the Cayman Islands and E-compass’s amended and restated articles and memorandum of association until the completion of the redomestication. After the redomestication, you will become a shareholder of iFresh and your rights will be governed by Delaware law and iFresh’s Certificate of Incorporation and Bylaws.

 

The principal attributes of iFresh’s common stock and E-compass’s ordinary shares will be similar. However, there are differences between your rights under Delaware law and Cayman Islands law, which is modeled on the laws of England and Wales. In addition, there are differences between iFresh’s Certificate of Incorporation and bylaws and E-compass’s Amended and Restated Memorandum and Articles of Association. The following discussion is a summary of material changes in your rights resulting from the Redomestication, but does not cover all of the differences between Cayman Islands law and Delaware law affecting corporations and their shareholders or all the differences between iFresh’s Certificate of Incorporation and bylaws and E-compass’s Amended and Restated Memorandum and Articles of Association. You are encouraged to read the complete text of the relevant provisions of the Companies Law, the DGCL, iFresh’s Certificate of Incorporation and bylaws and E-compass’s Amended and Restated Memorandum and Articles of Association. Forms of iFreshs’ Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws are attached to this proxy statement/prospectus as Annexes D and E, respectively.

 

Shareholder Approval of Future Business Combinations

 

iFresh

 

Under the DGCL, a merger or consolidation involving the corporation, a sale, lease, exchange or other disposition of all or substantially all of the property of the corporation, or a dissolution of the corporation, is generally required to be approved by the holders of a majority of the shares entitled to vote on the matter, unless the charter provides otherwise. In addition, mergers in which an acquiring corporation owns 90% or more of each class of stock of a corporation may be completed without the vote of the acquired corporation’s board of directors or shareholders.

 

Unless the Certificate of Incorporation of the surviving corporation provides otherwise, Delaware law does not require a shareholder vote of the surviving corporation in a merger if: (i) the Acquisition Agreement does not amend the existing Certificate of Incorporation, (ii) each share of stock of the surviving corporation outstanding immediately before the transaction is an identical outstanding share after the merger; and (iii) either (x) no shares of common stock of the surviving corporation (and no shares, securities or obligations convertible into such stock) are to be issued in the merger; or (y) the shares of common stock of the surviving corporation to be issued in the merger (including shares issuable upon conversion of any other shares, securities or obligations to be issued in the merger) do not exceed 20% of the shares of common stock of the surviving corporation outstanding immediately prior to the transaction.

 

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E-compass

 

A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or consolidation to be approved by the directors of each constituent company and authorization by (a) a special resolution of the shareholders of each constituent company and (b) any other consent required under the relevant memorandum and articles of association.

 

A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders. For this purpose a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.

 

The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.

 

Save in certain circumstances, a dissident shareholder of a Cayman constituent company is entitled to payment of the fair value of his shares upon dissenting to a merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.

 

In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the Grand Court can be expected to approve the arrangement if it determines that:

 

the statutory provisions as to the required majority vote have been met;
   
the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;
   
the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
   
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

 

When a takeover offer is made and accepted by holders of 90% of the shares within four months, the offer or may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.

 

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If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

 

Special Vote Required for Combinations with Interested Shareholders

 

iFresh

 

Section 203 of the DGCL provides a corporation subject to that statute may not engage in a business combination with an interested shareholder for a period of three years after the time of the transaction in which the person became an interested shareholder.

 

The prohibition on business combinations with interested shareholders does not apply in some cases, including if:

 

the board of directors of the corporation, prior to the time of the transaction in which the person became an interested shareholder, approves either the business combination or the transaction in which the shareholder becomes an interested shareholder;
   
the transaction which made the person an interested shareholder resulted in the interested shareholder owning at least 85% of the voting stock of the corporation; or
   
the board of directors and the holders of at least 66 2/3% of the outstanding voting stock not owned by the interested shareholder approve at an annual or special meeting of shareholders, and not by written consent, the business combination on or after the time of the transaction in which the person became an interested shareholder.

 

The DGCL generally defines an interested shareholder to include any person who (a) owns 15% or more of the outstanding voting stock of the corporation or (b) is an affiliate or associate of the corporation and owned 15% or more of the outstanding voting stock of the corporation at any time within the previous three years, and the affiliates and associates of such person.

 

The restrictions on business combinations contained in Section 203 will not apply if, among other reasons, the corporation elects in its original Certificate of Incorporation not to be governed by that section or if the corporation, by action of its shareholders, adopts an amendment to its Certificate of Incorporation or bylaws expressly electing not to be governed by Section 203 (and any such amendment so adopted shall be effective immediately in the case of a corporation that both has never had a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 shareholders).

 

E-compass

 

There is no provision in the Companies Law equivalent to Section 203 of the DGCL.

 

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Appraisal Rights and Compulsory Acquisition

 

iFresh

 

Under the DGCL, a shareholder of a corporation does not have appraisal rights in connection with a merger or consolidation, if, among other things:

 

the corporation’s shares are listed on a national securities exchange or held of record by more than 2,000 shareholders; or
   
the corporation will be the surviving corporation of the merger, and no vote of its shareholders is required to approve the merger.

 

Notwithstanding the above, a shareholder is entitled to appraisal rights in the case of a merger or consolidation effected under certain provisions of the DGCL if the shareholder is required to accept in exchange for the shares anything other than:

 

shares of stock of the corporation surviving or resulting from the merger or consolidation; or
   
shares of stock of any other corporation that on the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 shareholders.

 

E-compass

 

The Companies Law does not specifically provide for appraisal rights. However, in connection with the compulsory transfer of shares to a 90% shareholder of a Cayman Islands company, a minority shareholder may apply to the court within one month of receiving notice of the compulsory transfer objecting to that transfer. In these circumstances, the burden is on the minority shareholder to show that the court should exercise its discretion to prevent the compulsory transfer. The court is unlikely to grant any relief in the absence of bad faith, fraud, unequal treatment of shareholders or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority shareholders.

 

Shareholder Consent to Action Without a Meeting

 

iFresh

 

Under the DGCL, unless otherwise provided in the Certificate of Incorporation, any action that is required or permitted to be taken at a meeting of the shareholders may be taken without a meeting without prior notice and without a vote if written consent to the action is signed by the holders of outstanding stock having the minimum number of votes necessary to authorize or take the action at a meeting of the shareholders at which all shares entitled to vote thereon were present and voted, and is duly delivered to the corporation. iFresh’s Certificate of Incorporation does not restrict its shareholders from taking action by written consent.

 

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E-compass

 

Article 21.3 of E-compass’s amended and restated Articles of Association provide that the shareholders of the company (or of a particular class) may pass resolutions without holding a meeting if such resolutions of the shareholders (or class thereof) are passed by a unanimous written resolution signed by all of the shareholders (or class thereof) entitled to vote.

 

Special and Extraordinary General Meetings of Shareholders

 

iFresh

 

Under the DGCL, a special meeting of shareholders may be called by the board of directors or by persons authorized in the Certificate of Incorporation or the bylaws. iFresh’s Certificate of Incorporation provides that a special meeting of shareholders may be called only by a majority of the board of directors of iFresh.

 

E-compass

 

Under E-compass’s memorandum and articles of association, an extraordinary general meeting of E-compass may be called by the board of directors or by requisition of the shareholders.

 

Distributions and Dividends; Repurchases and Redemptions

 

iFresh

 

Under the DGCL, a corporation may pay dividends out of surplus and, if there is no surplus, out of net profits for the current and/or the preceding fiscal year, unless the net assets of the corporation are less than the capital represented by issued and outstanding shares having a preference on asset distributions. Surplus is defined in the DGCL as the excess of the “net assets” over the amount determined by the board of directors to be capital. “Net assets” means the amount by which the total assets of the corporation exceed the total liabilities. A Delaware corporation may purchase or redeem shares of any class except when its capital is impaired or would be impaired by the purchase or redemption. A corporation may, however, purchase or redeem out of capital its own shares that are entitled upon any distribution of its assets to a preference over another class or series of its shares, or, if no shares entitled to such a preference are outstanding, any of its own shares, if such shares will be retired upon their acquisition and the capital of the corporation reduced.

 

E-compass

 

Under the Companies Law, the board of directors of E-compass may pay dividends to the ordinary shareholders out of E-compass’s:

 

profits; or