UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number: 001-34502 Future FinTech Group Inc. (Exact name of registrant as specified in its charter) | --- | --- | |-------|------------------| | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _________ to _________ Commission File Number 001-34502 Future FinTech Group Inc. (Exact name of registrant as specified in its charter) Florida 98-0222013 (State or other ju ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company presents unaudited condensed consolidated financial statements showing a net loss of $5.04 million for the six months ended June 30, 2022 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $66,452,075 | $72,721,055 | | **Total Assets** | $85,734,516 | $91,657,085 | | **Total Current Liabilities** | $6,973,366 | $7,230,668 | | **Total Liabilities** | $10,709,974 | $10,802,927 | | **Total Stockholders' Equity** | $75,024,542 | $80,854,158 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $7,418,277 | $1,346,924 | $10,884,642 | $1,354,423 | | **Gross Profit** | $1,375,420 | $51,265 | $3,163,397 | $51,855 | | **Loss from Operations** | ($2,842,455) | ($749,563) | ($5,518,926) | ($2,280,571) | | **Net Loss** | ($2,336,688) | ($403,478) | ($5,035,059) | ($1,200,787) | | **Basic Loss Per Share** | ($0.03) | ($0.01) | ($0.07) | ($0.02) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | ($5,129,561) | ($3,077,432) | | **Net Cash Used in Investing Activities** | ($5,985,370) | ($7,308) | | **Net Cash Provided by Financing Activities** | $4,136,402 | $66,884,621 | | **Net (Decrease) Increase in Cash** | ($8,242,297) | $62,591,026 | | **Cash and Cash Equivalents, End of Period** | $42,031,220 | $72,016,338 | [Corporate Information and Business Transformation](index=12&type=section&id=1.%20Corporate%20Information) The company has transitioned from fruit juice production to a diversified fintech business with a global presence - The Company has transformed its business from fruit juice manufacturing to a real-name blockchain e-commerce platform, supply chain financing services, asset management, and cryptocurrency market data services[20](index=20&type=chunk) - **A significant number of new subsidiaries** were established in 2021 and 2022 to support expansion into new business areas and geographies, including FTFT Capital Investments in Dubai, FTFT UK Limited in the UK, FTFT Supercomputing Inc. for crypto mining, and FTFT Paraguay S.A. for crypto mining in Paraguay[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - The company's blockchain e-commerce business is conducted through a **Variable Interest Entity (VIE)**, Cloud Chain E-Commerce (Tianjin) Co., Ltd., in the PRC[24](index=24&type=chunk) [Significant Accounting Policies](index=14&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Key policies include VIE consolidation, segment reclassification, and a going concern warning due to operating losses - The company consolidates its **Variable Interest Entity (VIE)** in China, E-Commerce Tianjin, as it is considered the primary beneficiary through contractual arrangements[27](index=27&type=chunk)[67](index=67&type=chunk) - Several subsidiaries were disposed of or deregistered in 2021 and 2022, with their operating results presented as **discontinued operations**[28](index=28&type=chunk)[126](index=126&type=chunk) - The company incurred **operating losses of $5.03 million** and had **negative operating cash flows of $5.13 million** as of June 30, 2022, which raises substantial doubts about its ability to continue as a **going concern**[31](index=31&type=chunk) [Acquisition of Nice Talent Asset Management](index=29&type=section&id=11.%20ACQUISITION) The company acquired a 90% stake in Hong Kong-based Nice Talent Asset Management for approximately $18.07 million - The company acquired 90% of Nice Talent Asset Management Limited for **HK$144,000,000 (approximately $18.07 million)** on August 6, 2021[95](index=95&type=chunk)[99](index=99&type=chunk) - The acquisition generated **goodwill of $17.16 million**, with the purchase price paid in company common stock and 40% contingent on future performance[94](index=94&type=chunk)[99](index=99&type=chunk) [Segment Reporting](index=37&type=section&id=23.%20SEGMENT%20REPORTING) The company's strategic shift is reflected in asset management becoming the largest segment by revenue and gross profit Segment Revenue and Gross Profit (Six Months Ended June 30, 2022) | Segment | Revenue | Gross Profit | | :--- | :--- | :--- | | Asset management service | $7,152,808 | $3,026,301 | | Coal and Aluminum Ingots supply chain financing/trading | $3,654,982 | $60,256 | | Others | $76,852 | $76,840 | | **Total** | **$10,884,642** | **$3,163,397** | Segment Revenue and Gross Profit (Six Months Ended June 30, 2021) | Segment | Revenue | Gross Profit | | :--- | :--- | :--- | | Coal and Aluminum Ingots supply chain financing/trading | $1,347,785 | $51,252 | | CCM Shopping Mall Membership | $85 | $85 | | Others | $6,553 | $518 | | **Total** | **$1,354,423** | **$51,855** | - The company's shift in business focus is evident, with new segments like **asset management and supply chain financing** becoming the primary revenue drivers, while the former e-commerce membership model has ceased generating revenue[129](index=129&type=chunk)[130](index=130&type=chunk) [Commitments and Contingencies](index=40&type=section&id=24.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is vigorously defending a lawsuit from its former placement agent claiming approximately $7 million in damages - FT Global Capital, Inc. filed a lawsuit in January 2021, claiming approximately **$7,000,000 in damages** and fees related to an alleged breach of a placement agent agreement from July 2020[136](index=136&type=chunk) - The court has dismissed some of FT Global's claims but allowed others to proceed, and the company will continue to **vigorously defend the action**[137](index=137&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew significantly due to new business segments, but rising expenses led to an increased operating loss Revenue Comparison (Six Months Ended June 30) | Segment | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Asset management service | $7,152,808 | $0 | +$7,152,808 | N/A | | Coal and Aluminum Ingots Supply Chain Financing/Trading | $3,654,982 | $1,347,785 | +$2,307,197 | +171.18% | | CCM Shopping Mall Membership | $0 | $85 | ($85) | (100.00)% | | **Total Revenue** | **$10,884,642** | **$1,354,423** | **+$9,530,219** | **+703.64%** | - The **significant revenue growth** was primarily driven by the new asset management business and the expansion of the supply chain financing/trading business[197](index=197&type=chunk)[198](index=198&type=chunk) - Operating expenses for the six months ended June 30, 2022, **increased to $8.68 million from $2.33 million** in the prior year, mainly due to higher professional service, consulting, and R&D fees[205](index=205&type=chunk)[206](index=206&type=chunk) - The company's liquidity decreased, with **cash and cash equivalents falling to $42.03 million**, and net cash used in operating activities increasing to $5.13 million[214](index=214&type=chunk)[215](index=215&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not applicable for the reporting period - Not applicable[217](index=217&type=chunk) [Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective due to a material weakness in internal financial reporting controls - Management identified a **material weakness** in internal control over financial reporting[218](index=218&type=chunk) - The weakness stems from a **lack of sufficient accounting personnel** with appropriate knowledge and experience in U.S. GAAP and SEC reporting[218](index=218&type=chunk) - To remediate the issue, the company has **engaged an outside consultant** to supplement its internal accounting team[219](index=219&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending an ongoing lawsuit from a former placement agent claiming approximately $7 million in damages - A lawsuit was filed by former placement agent FT Global Capital, Inc. in January 2021, claiming approximately **$7,000,000 in damages** and attorneys' fees[220](index=220&type=chunk) - The lawsuit relates to an alleged breach of an exclusive placement agent agreement from July 2020, which the company disputes[220](index=220&type=chunk) - The case is ongoing, and the company states it will **continue to vigorously defend the action**[221](index=221&type=chunk) [Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) This section is not applicable for the reporting period - Not applicable[223](index=223&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities to report for the period - None[223](index=223&type=chunk) [Defaults upon Senior Securities](index=59&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[223](index=223&type=chunk) [Mine Safety Disclosure](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This section is not applicable - Not applicable[223](index=223&type=chunk) [Other Information](index=59&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - None[223](index=223&type=chunk) [Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists key exhibits filed with the Form 10-Q, including loan agreements and officer certifications - Filed exhibits include two loan agreements, officer certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, and various Inline XBRL documents[224](index=224&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financials reflect a major business transformation, with asset and revenue growth offset by higher net losses [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Comparison (Unaudited) | Balance Sheet Items | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $76,572,733 | $15,596,440 | | Cash and cash equivalents | $52,968,840 | $9,425,312 | | Goodwill | $16,727,897 | $0 | | **Total Assets** | **$94,122,813** | **$15,931,712** | | **Total Liabilities** | **$10,443,408** | **$7,200,571** | | **Total Stockholders' Equity** | **$83,679,405** | **$8,731,141** | - Total assets increased significantly, primarily due to a substantial rise in cash and cash equivalents from **$9.4 million to $53.0 million**, and the addition of **$16.7 million in goodwill** from an acquisition[7](index=7&type=chunk) - Stockholders' equity saw a major increase from **$8.7 million to $83.7 million**, largely driven by capital raised from the issuance of common stock[7](index=7&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $11,745,027 | $43,450 | $12,503,894 | $355,700 | | **Gross Profit** | $983,084 | $30,056 | $439,383 | $332,249 | | **Loss from Operations** | ($6,860,427) | ($691,816) | ($9,736,553) | ($2,772,630) | | **Net Loss from Continuing Operations** | ($6,634,386) | ($2,395,965) | ($9,047,648) | ($5,650,104) | | **Net Income (Loss)** | ($10,494,177) | ($2,438,927) | ($11,694,964) | $113,613,952 | | **Basic EPS** | ($0.16) | ($0.07) | ($0.18) | $3.07 | - Revenue for Q3 2021 surged to **$11.7 million** compared to just $43,450 in Q3 2020, driven by new business lines, though operating expenses also rose sharply[10](index=10&type=chunk) - A significant loss from discontinued operations of **$3.86 million** was recorded in Q3 2021, contributing to the total net loss of $10.5 million for the quarter[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (For the Nine Months Ended Sep 30) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($19,812,246) | $561,417 | | Net Cash Used in Investing Activities | ($6,706,933) | ($1,863,550) | | Net Cash Provided by Financing Activities | $68,267,293 | $10,092,349 | | **Net Increase in Cash** | **$43,544,044** | **$430,832** | - The company's operations consumed **$19.8 million** in cash during the first nine months of 2021, a significant shift from providing cash in the same period of 2020[19](index=19&type=chunk) - Financing activities were the primary source of cash, providing **$68.3 million**, mainly from the issuance of common stock, which funded operations and investments[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company has transformed its business from fruit juice manufacturing to a blockchain e-commerce platform and financial technology services[22](index=22&type=chunk) - Multiple new subsidiaries were established in 2021 in China, New York, Dubai, and the UK to expand into supply chain and fintech services[23](index=23&type=chunk)[24](index=24&type=chunk) - The company operates its blockchain e-commerce business in the PRC through a Variable Interest Entity (VIE) structure[24](index=24&type=chunk)[27](index=27&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the business shift to fintech, highlighting massive revenue growth alongside lower margins and higher losses [Overview of Our Business](index=39&type=section&id=Overview%20of%20Our%20Business) - The company has transformed from a fruit juice producer to a holding company focused on a blockchain-based e-commerce platform and fintech services[159](index=159&type=chunk) - Expansion into financial services is a key strategy, evidenced by the acquisition of NTAM and a pending acquisition of Khyber Money Exchange Ltd[159](index=159&type=chunk) - The company acknowledges significant risks associated with its VIE structure in China and recent PRC government regulatory actions[160](index=160&type=chunk)[161](index=161&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Q3 Revenue Breakdown (2021 vs 2020) | Revenue Source | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Coal and Aluminum Ingots Supply Chain | $9,643,977 | $0 | | Asset management service | $2,101,050 | $0 | | CCM Shopping Mall Membership | $0 | $29,779 | | **Total** | **$11,745,027** | **$43,450** | - The overall gross margin for Q3 2021 decreased drastically to **8.37%** from 69.17% in Q3 2020 due to the shift to lower-margin commodity trading[181](index=181&type=chunk) - General and administrative expenses for Q3 2021 increased by **248.66% YoY** to $2.24 million, driven by new business development and a new stock compensation expense of **$5.49 million**[184](index=184&type=chunk)[185](index=185&type=chunk) - Loss from continuing operations for the nine months ended Sep 30, 2021, increased to **$9.05 million** from $5.65 million in the prior year[206](index=206&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2021, the company had cash and cash equivalents of **$52.97 million**, a significant increase from $9.43 million at the end of 2020[209](index=209&type=chunk) - The increase in cash was primarily due to net cash of **$68.27 million** provided by financing activities, mainly from the issuance of common stock[211](index=211&type=chunk) - Working capital improved to a positive **$73.14 million** as of September 30, 2021, up from $5.83 million a year prior[209](index=209&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that this section is not applicable - The company did not provide quantitative and qualitative disclosures about market risk, stating it is not applicable[212](index=212&type=chunk) [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management identified a material weakness in internal controls due to insufficient accounting expertise and has engaged an outside consultant - Management concluded that disclosure controls and procedures were **not effective** as of September 30, 2021[213](index=213&type=chunk) - The ineffectiveness was attributed to a **material weakness**: a lack of sufficient accounting personnel with knowledge in U.S. GAAP and SEC reporting[213](index=213&type=chunk) - As a remediation measure, the company has engaged an outside consultant to supplement its internal accounting team[214](index=214&type=chunk) [PART II. OTHER INFORMATION](index=50&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a lawsuit from a former placement agent claiming approximately $7 million in damages - The company is being sued by its former placement agent, FT Global Capital, Inc., for an alleged breach of an exclusive placement agent agreement[216](index=216&type=chunk) - FT Global claims approximately **$7,000,000 in damages** and attorneys' fees related to securities transactions conducted after the agreement had expired[216](index=216&type=chunk) - A U.S. District Court has dismissed the fraud claim but allowed the breach of contract claim to proceed with discovery[217](index=217&type=chunk) [Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) The company states that this section is not applicable - No new risk factors are reported in this section for the quarter[218](index=218&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of securities occurred during the third quarter that were not previously disclosed - The Company did not make any sales of unregistered securities during the three months ended September 30, 2021 that were not previously disclosed[218](index=218&type=chunk) [Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements, certifications, and Inline XBRL data files - Key exhibits filed with the report include a Loan Agreement, CEO and CFO certifications, and Inline XBRL documents[219](index=219&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2021, reflecting the company's business transformation Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $47.87 million | $15.52 million | | **Total Assets** | $48.36 million | $15.93 million | | **Total Current Liabilities** | $3.06 million | $5.18 million | | **Total Liabilities** | $3.96 million | $7.20 million | | **Total Stockholders' Equity** | $44.40 million | $8.73 million | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Revenue** | $6,613 | $199,951 | | **Gross Profit** | $590 | $199,438 | | **Loss from Operations** | ($1.61 million) | ($5.86 million) | | **Loss from Continuing Operations** | ($0.99 million) | ($6.70 million) | | **Net (Loss) / Income** | ($0.80 million) | $116.89 million | | **Basic Loss Per Share (Continuing)** | ($0.02) | ($0.20) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | ($0.74 million) | ($2.26 million) | | **Net Cash Used in Investing Activities** | ($9,263) | $0 | | **Net Cash Provided by Financing Activities** | $33.26 million | $0.74 million | - The company has transformed its business from fruit juice manufacturing to a real-name blockchain e-commerce platform, integrating blockchain and internet technology[19](index=19&type=chunk) - In April 2021, the company raised approximately **$35 million** through a registered direct offering, acquired a **60% equity interest** in Sichuan Ticode Supply Chain Management Co., Ltd., and changed its independent registered public accounting firm[112](index=112&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses the company's business transformation, noting Q1 2021's revenue decline and improved liquidity [Business Overview](index=30&type=section&id=Overview%20of%20Our%20Business) The company operates as a holding company, focusing on blockchain-based e-commerce and expanding into financial services - The company's main business includes the Chain Cloud Mall (CCM), a blockchain-based online shopping platform, and the NONOGIRL cross-border e-commerce platform[119](index=119&type=chunk) - CCM uses blockchain for product anti-counterfeiting and a points system to incentivize member referrals and purchases, aiming to transform the traditional buyer-seller relationship into a value-sharing one[121](index=121&type=chunk)[124](index=124&type=chunk)[127](index=127&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Q1 2021 revenue fell **96.7%** due to lower membership fees, but loss from continuing operations narrowed significantly Revenue Comparison (Q1 2021 vs Q1 2020) | Revenue Segment | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | CCM Shopping Mall Membership | $73 | $198,885 | ($198,812) | (99.46)% | | Sales of goods | $6,540 | $1,066 | $5,474 | 301.20% | | **Total** | **$6,613** | **$199,951** | **($193,338)** | **(96.69)%** | - The decrease in revenue was primarily due to a decline in new member subscriptions for the CCM Shopping Mall, as COVID-19 restrictions hampered the company's primary marketing strategy of holding in-person meetings and conferences[133](index=133&type=chunk)[134](index=134&type=chunk) - Overall gross margin fell from **99.7% to 8.9%** in Q1 2021, mainly because of lower high-margin membership fee revenue[137](index=137&type=chunk) - General and administrative expenses decreased by **13.4%** to **$1.60 million** in Q1 2021, mainly due to lower share issuance-related expenses[139](index=139&type=chunk) - Loss from continuing operations decreased by **$5.71 million** to **$0.99 million** for Q1 2021, primarily due to a significant reduction in operating expenses[145](index=145&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly improved as of March 31, 2021, with cash increasing to **$42.12 million** from financing activities Liquidity Metrics | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $42.12 million | $9.79 million | | Working Capital | $44.81 million | $10.34 million (Dec 31, 2020) | - Net cash provided by financing activities was **$33.26 million** for Q1 2021, a significant increase from **$0.74 million** in Q1 2020, mainly due to proceeds from common stock issuances[149](index=149&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that this section is not applicable - Not applicable[150](index=150&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of March 31, 2021, due to a material weakness in internal control - Management identified a material weakness in internal control over financial reporting, concluding that disclosure controls and procedures were not effective as of March 31, 2021[151](index=151&type=chunk) - The specific weakness identified was a lack of sufficient accounting personnel with the appropriate level of knowledge and training in U.S. GAAP and SEC reporting[151](index=151&type=chunk) - The company has engaged an outside consultant to supplement its internal accounting team and assist in preparing financial statements in accordance with U.S. GAAP to remediate the weakness[152](index=152&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a lawsuit by former placement agent FT Global Capital, Inc., seeking approximately **$7 million** in damages - In January 2021, former placement agent FT Global Capital, Inc. filed a lawsuit against the Company[154](index=154&type=chunk) - The lawsuit alleges a breach of an exclusive placement agent agreement and claims approximately **$7 million** in damages and attorneys' fees[154](index=154&type=chunk) - The Company believes the transactions at issue did not involve investors introduced by FT Global and will continue to vigorously defend the action[154](index=154&type=chunk)[155](index=155&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company states that this section is not applicable - Not applicable[157](index=157&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities during the quarter not previously disclosed - The Company did not make any sales of unregistered securities during the three months ended March 31, 2021 that were not previously disclosed[157](index=157&type=chunk) [Defaults upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[157](index=157&type=chunk) [Mine Safety Disclosure](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) The company states that this section is not applicable - Not applicable[157](index=157&type=chunk) [Other Information](index=37&type=section&id=Item%205.%20Other%20Information) The company reports no other information - None[157](index=157&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from key officers and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to SEC rules and the Sarbanes-Oxley Act of 2002[158](index=158&type=chunk) - XBRL Instance Document, Schema, Calculation, Definition, Label, and Presentation Linkbase documents are also filed as exhibits[158](index=158&type=chunk)

Part I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) The company transformed from a fruit juice producer to a blockchain e-commerce platform, expanding into financial services, while navigating COVID-19 impacts and PRC regulations via a VIE structure - The company has fundamentally transformed its business from fruit juice manufacturing to a **blockchain-based e-commerce platform** (Chain Cloud Mall) and is expanding into **financial services**[9](index=9&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk) - In **February 2020**, the company completed the sale of its entire fruit juice business segment (HeDeTang HK), which is now treated as a **discontinued operation**[16](index=16&type=chunk)[35](index=35&type=chunk)[226](index=226&type=chunk) - The company is actively pursuing expansion into **financial services** through **strategic acquisitions**, including a Hong Kong-based asset management company (NTAM) and a supply chain financial services company in China (Ticode)[37](index=37&type=chunk)[38](index=38&type=chunk) - The **COVID-19 pandemic significantly impacted operations** in 2020, causing office closures, supply chain disruptions, and hindering marketing strategies, leading to decreased sales and new member enrollment[29](index=29&type=chunk)[30](index=30&type=chunk)[91](index=91&type=chunk) - To comply with **PRC regulations** restricting foreign ownership in e-commerce, the company operates its Chain Cloud Mall through a **Variable Interest Entity (VIE) structure**, controlling the entity via contractual agreements[20](index=20&type=chunk)[21](index=21&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from COVID-19, operational challenges in China due to its VIE structure and unpredictable policies, and internal control weaknesses - The **COVID-19 pandemic** poses a **major risk**, having already caused revenue decline, supply chain disruption, and hindrance of marketing efforts, with future outbreaks potentially causing further harm[90](index=90&type=chunk)[91](index=91&type=chunk) - The company's reliance on a **Variable Interest Entity (VIE) structure** to operate in China is a **key risk**, as PRC authorities deeming arrangements non-compliant could lead to severe penalties or loss of control[155](index=155&type=chunk)[156](index=156&type=chunk)[159](index=159&type=chunk) - A **material weakness in internal controls** over financial reporting has been identified, stemming from a lack of personnel with sufficient U.S. GAAP and SEC reporting experience, which could affect investor confidence[132](index=132&type=chunk)[133](index=133&type=chunk) - The company's common stock has faced **multiple delisting warnings from NASDAQ** for failing to meet minimum bid price, timely filing, and minimum stockholders' equity requirements, although compliance was regained each time[186](index=186&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) - There is significant ownership concentration, with the Chairman's son, Zeyao Xue, beneficially owning approximately **19.9%** of outstanding common stock, giving him substantial influence over shareholder matters[182](index=182&type=chunk) [Item 2. Properties](index=37&type=section&id=Item%202.%20Properties) The company leases its principal executive office in New York and additional offices in Beijing and Xi'an, China - The company leases its principal executive office in New York and additional offices in Beijing and Xi'an, China[192](index=192&type=chunk) [Item 3. Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) The company is defending a **$7 million** lawsuit from a former placement agent and addresses other litigation related to divested subsidiaries - The company is currently involved in a lawsuit filed by former placement agent FT Global Capital, Inc., which claims approximately **$7 million** in damages for an alleged breach of contract, and the company is defending the action[193](index=193&type=chunk)[194](index=194&type=chunk) - Other legal proceedings described in the report involve former subsidiaries that were transferred with the sale of HeDeTang HK on February 27, 2020[195](index=195&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "FTFT", with **65.29 million** shares outstanding, and no cash dividends are anticipated - The company's common stock is traded on the **Nasdaq Capital Market** under the ticker "**FTFT**"[197](index=197&type=chunk) - The company has **never declared or paid cash dividends** and intends to retain all future earnings for business operations[198](index=198&type=chunk) Equity Compensation Plan Information as of Dec 31, 2020 | Plan Category | Securities to be issued upon exercise (shares) | Weighted average exercise price ($) | Securities remaining for future issuance (shares) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 62,500 | $3.57 | 5,000,000 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, revenue declined **61%** to **$0.37 million** due to COVID-19, while gross margin rose to **90%**, but loss from continuing operations widened to **$53.48 million** due to impairments, despite working capital improving to **$10.34 million** Revenue by Segment (2020 vs. 2019) | Segment | 2020 Revenue (in thousands) | 2019 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | CCM Shopping Mall Membership | $338 | $542 | -38% | | Sale of goods | $9 | $371 | -98% | | Others | $23 | $28 | -18% | | **Total** | **$370** | **$941** | **-61%** | Gross Margin by Segment (2020 vs. 2019) | Segment | 2020 Gross Margin % | 2019 Gross Margin % | | :--- | :--- | :--- | | CCM Shopping Mall Membership | 99% | 74% | | Sale of goods | 22% | 13% | | Others | -4% | 7% | | **Total** | **90%** | **48%** | - Loss from continuing operations increased significantly to **$53.48 million** in 2020 from **$10.95 million** in 2019, driven by impairment losses on investments and intangible assets, and higher stock compensation expenses[257](index=257&type=chunk)[255](index=255&type=chunk)[254](index=254&type=chunk) - The company's working capital improved dramatically from a deficit of **$102.87 million** in 2019 to a surplus of **$10.34 million** in 2020, primarily due to a reduction in liabilities after the sale of its discontinued operations[258](index=258&type=chunk) - Cash and cash equivalents increased from **$0.19 million** at year-end 2019 to **$9.79 million** at year-end 2020, mainly due to **$16.71 million** generated from financing activities, including stock and debt issuances[258](index=258&type=chunk)[260](index=260&type=chunk) [Item 9A. Controls and Procedures](index=51&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of December 31, 2020, due to a material weakness in financial reporting, now being remediated - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of December 31, 2020[263](index=263&type=chunk) - A **material weakness** was identified in internal control over financial reporting due to a lack of sufficient accounting personnel with expertise in U.S. GAAP and SEC reporting[263](index=263&type=chunk)[266](index=266&type=chunk) - Remediation efforts include engaging U.S. GAAP consultants and hiring a new CFO with more relevant experience[266](index=266&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=53&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The section lists directors and executive officers, including Chairman Yongke Xue and CEO Shanchun Huang, and details the company's governance structure - The leadership team includes **Yongke Xue** as Chairman of the Board and **Shanchun Huang** as Chief Executive Officer[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) - The Board has an audit committee and a compensation committee, both comprised of independent directors, with Mr. Johnson Lau identified as the "**audit committee financial expert**"[286](index=286&type=chunk)[288](index=288&type=chunk) - The company reported several **late filings** of Section 16(a) beneficial ownership reports for its officers and directors during the fiscal year ended December 31, 2020[283](index=283&type=chunk) [Item 11. Executive Compensation](index=56&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation in 2020 primarily involved salaries and stock awards, with **3 million** shares granted under the 2019 Omnibus Equity Plan - On December 28, 2020, the company granted **3,000,000 shares** under its 2019 Omnibus Equity Plan to nine officers, employees, and a director[292](index=292&type=chunk) 2020 Compensation for Key Personnel | Name and Position | Salary ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Yongke Xue (Chairman) | - | 500,000 shares | $990,000 (value) | | Shanchun Huang (CEO) | 1 | - | 1 | | Kai Xu (Former COO) | 13,642 | 400,000 shares | 805,642 (incl. value) | | Yang Liu (COO) | 1 | - | 1 | [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=59&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of April 12, 2021, **65.29 million** shares were outstanding, with Chairman's son, Zeyao Xue, being the largest beneficial owner at **19.9%** Security Ownership of 5% or Greater Shareholders (as of April 12, 2021) | Name of Beneficial Owner | Percentage Owned | | :--- | :--- | | Zeyao Xue | 19.9% | | Sincerity Group Enterprises Ltd. | 5.1% | | Mengyao Chen | 5.1% | | Shuiliang Xiao | 5.2% | - Zeyao Xue, the son of Chairman Yongke Xue, is the largest beneficial owner with **19.9%** of the company's outstanding common stock[310](index=310&type=chunk) [Item 14. Principal Accounting Fees and Services](index=61&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Total audit fees were **$211,000** in 2020, and the company changed its independent registered public accounting firm multiple times in 2019 and 2020 Principal Accountant Fees | Fee Category | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Audit Fees | $211,000 | $235,000 | | Tax Fees | — | — | | All Other Fees | — | — | | **Total** | **$211,000** | **$235,000** | - The company changed its independent registered public accounting firm **multiple times** in 2019 and 2020, dismissing Wang CPA in April 2020 and engaging BF Borgers CPA PC[317](index=317&type=chunk)[321](index=321&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=64&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of all exhibits filed as part of the Form 10-K, including corporate governance documents and material contracts [Financial Statements and Supplementary Data](index=70&type=section&id=FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) [Report of Independent Registered Public Accounting Firm](index=70&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued a fair opinion but highlighted a **"Going Concern Uncertainty"** due to recurring losses and identified two Critical Audit Matters - The auditor's report includes a **"Going Concern Uncertainty"** paragraph, citing recurring losses and a net capital deficiency that raise substantial doubt about the company's ability to continue operations[349](index=349&type=chunk) - Critical Audit Matters identified were the valuation and collectability of a new **$5.36 million** loan receivable and the assessment of legal proceeding contingencies[354](index=354&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) [Consolidated Financial Statements](index=72&type=section&id=Consolidated%20Financial%20Statements) Following divestiture, total assets decreased to **$15.9 million** in 2020, liabilities to **$7.2 million**, and stockholders' equity turned positive to **$8.7 million**, with a net income of **$88.9 million** due to a gain on disposal Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $15.5 | $100.3 | | Total Assets | $15.9 | $116.0 | | Total Current Liabilities | $5.2 | $203.2 | | Total Liabilities | $7.2 | $204.1 | | Total Stockholders' Equity (Deficit) | $8.7 | $(88.1) | Consolidated Statement of Operations Highlights (in millions) | Account | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | $0.37 | $0.94 | | Loss from Continuing Operations | $(30.0) | $(11.1) | | Gain on disposal of discontinued operations | $119.4 | $0 | | Net Income (Loss) | $88.9 | $(27.1) | - Net cash from operating activities was **$3.98 million** in 2020, a significant improvement from **$26.32 million** used in 2019, partly due to the removal of the cash-losing fruit juice business[259](index=259&type=chunk) [Notes to Consolidated Financial Statements](index=78&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the company's transformation, reiterate the **"Going Concern"** issue, disclose a **$123.69 million** gain on discontinued operations, and outline **$62 million** in subsequent financing activities - The sale of the HeDeTang HK business on Feb 27, 2020, resulted in a gain on disposal of **$123.69 million**, which is the primary reason for the company's reported net income in 2020[226](index=226&type=chunk)[469](index=469&type=chunk) - The company has **significant related party transactions**, including loans payable to the Chairman and other key personnel, and loans receivable from entities related to management[439](index=439&type=chunk)[440](index=440&type=chunk) - Subsequent to year-end 2020, the company conducted three registered direct offerings in January, February, and April 2021, raising aggregate gross proceeds of approximately **$62 million**[517](index=517&type=chunk)[518](index=518&type=chunk)[522](index=522&type=chunk) - In February 2021, the company entered into a Share Exchange Agreement to acquire **60%** of Sichuan Ticode Supply Chain Management Co., Ltd. in exchange for approximately **7.8 million shares** of its common stock[520](index=520&type=chunk)