Future FinTech (FTFT) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements 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] - In April 2021, the company raised approximately $35 million through a registered direct offering, acquired a 60% equity interest in Sichuan Ticode Supply Chain Management Co., Ltd., and changed its independent registered public accounting firm[112][115][116] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business transformation, noting Q1 2021's revenue decline and improved liquidity Business Overview The company operates as a holding company, focusing on blockchain-based e-commerce and expanding into financial services - The company's main business includes the Chain Cloud Mall (CCM), a blockchain-based online shopping platform, and the NONOGIRL cross-border e-commerce platform[119] - CCM uses blockchain for product anti-counterfeiting and a points system to incentivize member referrals and purchases, aiming to transform the traditional buyer-seller relationship into a value-sharing one[121][124][127] Results of Operations Q1 2021 revenue fell 96.7% due to lower membership fees, but loss from continuing operations narrowed significantly Revenue Comparison (Q1 2021 vs Q1 2020) | Revenue Segment | Q1 2021 | Q1 2020 | Change ($) | 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][134] - Overall gross margin fell from 99.7% to 8.9% in Q1 2021, mainly because of lower high-margin membership fee revenue[137] - General and administrative expenses decreased by 13.4% to $1.60 million in Q1 2021, mainly due to lower share issuance-related expenses[139] - 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] Liquidity and Capital Resources 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] Quantitative and Qualitative Disclosures about Market Risk The company states that this section is not applicable - Not applicable[150] Controls and Procedures 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] - 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] - 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] PART II. OTHER INFORMATION Legal Proceedings 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] - The lawsuit alleges a breach of an exclusive placement agent agreement and claims approximately $7 million in damages and attorneys' fees[154] - The Company believes the transactions at issue did not involve investors introduced by FT Global and will continue to vigorously defend the action[154][155] Risk Factors The company states that this section is not applicable - Not applicable[157] Unregistered Sales of Equity Securities and Use of Proceeds 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] Defaults upon Senior Securities The company reports no defaults upon senior securities - None[157] Mine Safety Disclosure The company states that this section is not applicable - Not applicable[157] Other Information The company reports no other information - None[157] Exhibits 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] - XBRL Instance Document, Schema, Calculation, Definition, Label, and Presentation Linkbase documents are also filed as exhibits[158]