Future FinTech (FTFT) - 2020 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Financial statements reflect a significant transformation post-fruit juice business disposal, showing net income from the sale despite continuing operations loss, with going concern uncertainty Notes to Condensed Consolidated Financial Statements Notes detail the company's transformation to blockchain e-commerce and fintech, including a $123.7 million gain from fruit juice business sale, a new loan, and an SEC investigation - The company has transformed its business from fruit juice manufacturing to a real-name blockchain e-commerce platform (Chain Cloud Mall) and has launched a cross-border e-commerce platform, NONOGIRL[16][17] - On February 27, 2020, the company sold its fruit juice business (HeDeTang HK and its subsidiaries), resulting in a gain on disposal of $123.69 million[17][68] - The company entered into a loan agreement to lend up to RMB 35 million (approx. $5.14 million) to Shenzhen Tiantian Haodian Technology Co., Ltd. at a 10% annual interest rate[34] - On February 21, 2020, the company received a subpoena from the SEC's Division of Enforcement related to its accounting procedures, management oversight, and the sale of HeDeTang holdings, and is cooperating with the investigation[82][83] - The company entered into a Share Exchange Agreement to acquire 90% of Nice Talent Asset Management Limited, a Hong Kong firm licensed for asset management and advising on securities, pending regulatory approval[86][88] Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $11,620,201 | $100,345,801 | | Total Assets | $29,236,513 | $115,980,570 | | Total Current Liabilities | $7,618,421 | $202,789,675 | | Total Liabilities | $9,284,712 | $204,057,776 | | Total Stockholders' Equity | $19,951,801 | $(88,077,206) | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Revenue | $43,657 | $357,295 | | Loss from Continuing Operations | $(2,473,891) | $(5,211,436) | | Gain on disposal of discontinued operations | $115,947 | $119,582,658 | | Net Income (Loss) | $(2,438,927) | $114,230,428 | | Basic Earnings (Loss) per Share | $(0.07) | $3.09 | - The company's ability to continue as a going concern is in doubt due to recurring operating losses and negative operating cash flows, with continuity depending on successfully executing its new business strategy and achieving profitability[26][27] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift to blockchain e-commerce and financial services, with COVID-19 impacting revenue, and significant working capital improvement post-discontinued operations - The company is expanding into financial services, including the planned acquisition of Nice Talent Asset Management Limited and a strategic entry into the challenger bank and digital payment sector[104][106] - The COVID-19 pandemic materially and adversely affected business, especially promotion strategies for the CCM Shopping Mall, which relied on in-person meetings and conferences, leading to a sharp decline in sales[95][118][128] Revenue Comparison (in thousands) | Period | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $44 | $342 | $(298) | (87.1)% | | Nine Months Ended Sep 30 | $357 | $745 | $(388) | (52.1)% | - For the nine months ended Sep 30, 2020, G&A expenses increased due to $1.19 million in stock-related expenses for a consulting agreement, while selling expenses decreased significantly due to lower payroll and shipping costs[146][147] - As of September 30, 2020, working capital was $4.0 million, a significant improvement from a deficit of $102 million a year prior, mainly due to a decrease in current liabilities after the disposal of the fruit juice business[153] Quantitative and Qualitative Disclosures about Market Risk This section is not applicable for the reporting period - Not applicable[157] Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in accounting personnel, engaging consultants for remediation - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2020[157] - The ineffectiveness was due to a material weakness: a lack of sufficient accounting personnel with appropriate knowledge and training in U.S. GAAP and SEC reporting[157] - To remediate the weakness, the company has engaged consultants with U.S. GAAP experience to assist with financial statement preparation[158] PART II. OTHER INFORMATION Legal Proceedings There have been no material developments in the company's ongoing legal proceedings during the three months ended September 30, 2020 - There were no material developments in the company's legal proceedings during the third quarter of 2020[161] - Previously disclosed legal cases related to the sold subsidiary HeDengTang HK are no longer a liability for the company[93] Risk Factors This section is not applicable for the reporting period - Not applicable[161] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds for the period - None[161] Defaults upon Senior Securities The company reported no defaults upon senior securities - None[161] Mine Safety Disclosure This section is not applicable to the company - Not applicable[162] Other Information The company reported no other information for the period - None[162] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as XBRL data files[162]