Future FinTech (FTFT) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the period ended June 30, 2019 Consolidated Financial Statements The company reports a net loss of $3.62 million for H1 2019 and a significant improvement in operating cash flow Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | Total Current Assets | 20,425,563 | 24,164,227 | | Total Assets | 66,279,267 | 62,946,609 | | Total Current Liabilities | 110,142,196 | 117,173,578 | | Total Liabilities | 142,496,650 | 149,624,445 | | Total Stockholders' Equity (Deficit) | (76,217,383) | (86,677,836) | Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2019 ($) | | :--- | :--- | :--- | | Revenue | 279,710 | 475,005 | | Gross Profit | 133,108 | 186,083 | | Loss from Operations | (1,939,244) | (3,311,365) | | Net Loss | (2,078,043) | (3,624,472) | | Net Loss Attributable to Future FinTech | (1,695,725) | (2,918,509) | | Basic and Diluted Loss Per Share | (0.05) | (0.09) | Consolidated Cash Flow Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | 253,669 | (5,209,610) | | Net cash used in investing activities | 0 | (1,902) | | Net cash provided by financing activities | 503,818 | 155,952 | | Net (Decrease) Increase in Cash | 2,310 | (4,192,649) | Notes to Condensed Consolidated Financial Statements The notes detail the business transformation to a blockchain e-commerce platform and disclose numerous legal proceedings - The company is transforming its business from fruit juice manufacturing to a real-name blockchain e-commerce platform, Chain Cloud Mall (CCM), due to increased production costs and tightened environmental laws in China[14] - CCM v1.0 was launched on January 22, 2019, and an enhanced version, CCM v2.0, was launched on June 1, 2019, featuring more product categories, a better user interface, and higher security[15][16] - To comply with Chinese law regarding foreign ownership in e-commerce, the company established a Variable Interest Entity (VIE) structure for its Chain Cloud Mall E-commerce (Tianjin) Co, Ltd subsidiary[54][55][56] - The company's Huludao Wonder operation, which produced concentrated apple juice, has been classified as a discontinued operation since December 2016 due to sustained losses[116] - The company is involved in numerous litigation and enforcement proceedings, primarily concerning unpaid loans, guarantees, and lease agreements with various banks and creditors[130][131][132] Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the strategic shift to blockchain e-commerce, analyzing revenue declines and liquidity constraints Overview of Our Business The company is transitioning to the Chain Cloud Mall (CCM) platform, which generates revenue from membership fees and sales - The company formally launched its blockchain shared shopping mall, Chain Cloud Mall (CCM) v1.0, on January 22, 2019, and upgraded to v2.0 on June 1, 2019[168][169] - The CCM platform grew from approximately 164 users at the end of 2018 to 4,014 users by June 30, 2019[173] - From its trial period to August 31, 2019, the CCM platform generated approximately $1.24 million in proceeds from membership fees and merchandise sales, with 5,977 members[179] Results of Operations Financial results show a 65% year-over-year revenue decline due to the strategic shift away from the fruit juice business Revenue by Segment - Three Months Ended June 30 (in thousands) | Segment | 2019 ($) | 2018 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Fruit related products | 23 | 758 | (735) | -97% | | CCM Shopping Mall Membership | 109 | 0 | 109 | 100% | | Sales of goods | 148 | 0 | 148 | 100% | | Total | 280 | 788 | (508) | -65% | Revenue by Segment - Six Months Ended June 30 (in thousands) | Segment | 2019 ($) | 2018 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Fruit related products | 44 | 1,259 | (1,215) | -97% | | CCM Shopping Mall Membership | 131 | 0 | 131 | 100% | | Sales of goods | 286 | 0 | 286 | 100% | | Total | 475 | 1,350 | (875) | -65% | - General and administrative expenses for the six months ended June 30, 2019, decreased by 42% to $2.90 million, primarily due to lower depreciation and amortization expenses[211][212] Liquidity and Capital Resources The company reports cash of $0.26 million and a negative working capital of $90 million as of June 30, 2019 - Cash and cash equivalents stood at $0.26 million as of June 30, 2019[218] - Working capital was negative $90 million as of June 30, 2019, a decrease of $32 million from the negative $58 million reported as of June 30, 2018[219] Quantitative and Qualitative Disclosures about Market Risk This item is not applicable for the reporting period - This section is not applicable for the reporting period[221] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the end of the reporting period - Based on an evaluation as of June 30, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[222] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[223] PART II. OTHER INFORMATION Legal Proceedings This section details numerous ongoing legal proceedings and enforcement actions related to loan defaults and guarantees - The company's subsidiary, SkyPeople China, is involved in multiple enforcement actions for unpaid loans, including RMB 30 million from Beijing Bank and RMB 43.9 million from China Construction Bank[225][226][227] - China Cinda Asset Management filed enforcement proceedings for alleged defaults on guarantees totaling approximately $5.8 million[229][232] - Cinda Capital Financing filed two lawsuits for unpaid leasing fees totaling approximately $7.27 million and $12.35 million, respectively[234][235] - A lawsuit brought by a former consultant seeking damages and 2% of the company's shares was dismissed by the District Court of Connecticut, but the decision is under appeal[247] Risk Factors This item is not applicable for the reporting period - This section is not applicable for the reporting period[249] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - None reported for the period[249] Defaults upon Senior Securities No defaults upon senior securities were reported during the period - None reported for the period[249] Mine Safety Disclosure This item is not applicable for the reporting period - This section is not applicable[249] Other Information No other information was reported for the period - None reported for the period[249] Exhibits This section lists filed exhibits, including CEO/CFO certifications and XBRL interactive data files - Exhibits filed include CEO and CFO certifications and XBRL data files[249]