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 September 30, 2019March 31, 2020

☐  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)

23F,2103 Tower A, SK Plaza,

A6 JianGuoMenWai Avenue, Chaoyang District

Beijing, P.R. China Development Bank

Tower, No. 2, Gaoxin 1st Road,

Xi’an, PRC

710075100022

(Address of principal executive offices including zip code)

86-29-8187827786-10- 8589-9303

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  ☐ No

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No.

Securities registered pursuant to Section 12(b) of the Act:

TABLE OF CONTENTS

SPECIAL NOTE REGARDING RELIANCE ON RELIEF ORDER

On May 12, 2020 we filed a Current Report on Form 8-K (“Form 8-K”) in compliance with and in reliance upon the SEC Order issued pursuant to Section 36 of the Securities Exchange Act of 1934, as amended, granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules thereunder (SEC Release No. 34-88465 on March 25, 2020) (the “Relief Order”). By way of filing the Form 8-K, we, among other things, extended the time of filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”), until no later than June 29, 2020 in reliance on the Relief Order. The Form 8-K disclosed the reasons that our Quarterly Report could not be filed timely.

As required by the Relief Order, we hereby disclose that we were unable to timely file our Quarterly Report and had to avail ourselves of the Relief Order because of the following issues posed by the COVID-19 outbreak:

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic.” Xi’an City and Beijing City, where our headquarters are located, are the most affected areas in China. The Company has been following the orders of local government and health authorities to minimize exposure risk for its employees, including the closures of its offices and having employees work remotely. Our offices were closed for the Lunar New Year Holiday Break in late January 2020 and remained closed as a result of the outbreak until late March 2020. As a result, the Company’s books and records were not easily accessible, resulting in a delay in the preparation, audit and completion of the Company’s financial statements for its annual report on Form 10-K for the year ended December 31, 2019 (the “Form 10-K”). The Company filed the Form 10-K on June 2, 2020. Accordingly, the preparation, review and completion of the Company’s financial statements for its Quarterly Report have been delayed.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FUTURE FINTECH GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

* Reclassification- certain reclassifications have been made to the financial statements for the period ending March 31, 2019 to conform to the presentation for the period ending March 31, 2020, with no effect on previously reported net income (loss).

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Future Fintech Group, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

Three Months ended March 31, 2019

Three Months ended March 31, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2019March 31, 2020 and the results of operations and cash flows for the periods ended September 30, 2019March 31, 2020 and 2018.2019. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three months and nine months ended September 30, 2019March 31, 2020 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2019.2020. The balance sheet at December 31, 20182019 has been derived from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2018 as included in our Annual Report on Form 10-K.

The principal activities of Future FinTech Group Inc. (together with our direct or indirect subsidiaries, “we,” “us,” “our” or “the Company”) consist of production and sales of fruit juice concentrates, fruit juice beverages and other fruit-related products in the People’s Republic of China (“PRC”, or “China”), and overseas markets. Due to drastically increased production cost and tightened environmental law in China, the Company is transforming its business from fruit juice manufacturing and distribution to a real-name blockchain e-commerce platform that integrates blockchain and internet technology.

On January 22, 2019, the company formally launched GlobalKey SharedMall, also known as Chain Cloud Mall (“CCM”) v1.0, the real-name blockchain shared shopping mall platform that integrates blockchain and internet technology and distinguishes itself by utilizing the automatic value distribution system of blockchain and sharing the value of the platform with all participants in the system.

On June 1, 2019, CCM v2.0 was launched. Compared to the 1.0 version, CCM v2.0 has a wider variety of product categories, easier user interface, more transparent information, more stable operation, higher security level, and faster logistics. Currently, CCM v2.0 adopts a “multi-vendor hosted stores + platform self-hosted stores” model, supported by multiple local warehouses in different regions. The platform supports various marketing methods, including point rewards programs, coupons, live webcasts, game interactions, and social media sharing. Besides the blockchain-powered features, CCM v2.0 is also fully equipped with the same functions and services that other Chinese leading traditional e-commerce platforms provide.

On July 30, 2019 the Company announced the adoption of blockchain-powered unalterable Quick Response One (“QRO”) anti-counterfeiting code to all products under the Company's Hedetang brand. On August 2, 2019, the Company announced the adoption of the QRO anti-counterfeiting code on its global shared shopping platform - Chain Cloud Mall (CCM), a blockchain-based shopping platform. By adopting the QRO anti-counterfeiting code technology, the products will be issued an unalterable anti-counterfeiting code that records every event or transaction on a distributed ledger, which makes the whole process from manufacturing to delivering traceable. The adoption of QRO anti-counterfeiting code is an important step to distinguish Chain Cloud Mall from other shopping platforms. With the QRO code, manufacturers can easily and directly build trust with consumers.

Besides the design, development, testing, deployment and maintenance of a blockchain-based CCM Shared Shopping Mall, the Company also operates a supply chain, logistics and trading business for fruit juice products, foods and other consumer and agricultural products as well as a digital payment system, “DCON,” through blockchain technology. DCON is built to be a transparent digital payment system backed by blockchain technology and its mBTC is the only currency and payment system used in Nova Realm City (“NRC”) communities. Each Bitcoin exchanges for one million mBTC and DCON provides exchange services between its mBTC and Bitcoin.

The Company’s activities are principally conducted by subsidiaries operating in the PRC. 

Organizational Structure

Our current organizational structure is set forth in the diagram below: 

On July 31, 2019, Chain Cloud Mall Network and Technology (Tianjin) Co., Ltd., (“CCM Tianjin”), a wholly owned subsidiary of the Company, Chain Cloud Mall E-commerce (Tianjin) Co., Ltd., a limited liability company incorporated under the laws of China (the “E-commerce Tianjin” or “WOFE”), and Mr. Zeyao Xue and Mr. Kai Xu, citizens of China and shareholders of E-commerce Tianjin, entered into the following agreements, or collectively, the “Variable Interest Entity Agreements” or “VIE Agreements,” pursuant to which CCM Tianjin has contractual rights to control and operate the business of E-commerce Tianjin (the “VIE”).

Pursuant to Chinese law and regulations, a foreign owned enterprise cannot apply for and hold a license for operation of certain e-commerce businesses, the category of business which the Company plans to expand in China. CCM Tianjin is an indirectly wholly foreign owned enterprise of the Company. In order to comply with Chinese law and regulations, CCM Tianjin agreed to provide E-commerce Tianjin an Exclusive Operation and Use Rights Authorization to operate and use the Chain Cloud Mall System owned by CCM Tianjin.

The following is a summary of the currently effective contractual arrangements relating to E-commerce Tianjin.

Contractual Arrangements with Our Consolidated Affiliated Entity and Its Respective Shareholders

Our contractual arrangements with our VIE and their respective shareholders allow us to (i) exercise effective control over our VIE, (ii) receive substantially all of the economic benefits of our VIE, and (iii) have an exclusive option to purchase all or part of the equity interests in our VIE when and to the extent permitted by PRC law.

As a result of our direct ownership in our WFOEwholly foreign-owned enterprise (“WFOE”) and the contractual arrangements with our VIE, we are regarded as the primary beneficiary of our VIE, and we treat themit and theirits subsidiaries as our consolidated affiliated entities under U.S. GAAP. We have consolidated the financial results of our VIE in our condensed consolidated financial statements in accordance with U.S. GAAP.GAAP

Agreements that Provide us with Effective Control over our VIE

Exclusive Purchase Option Agreement.

Pursuant to the Exclusive Purchase Option Agreement, Mr. Zeyao XueCertain information and Mr. Kai Xu granted to CCM Tianjin and any party designated by CCM Tianjin the exclusive right to purchase, at any time during the term of this agreement, all or part of the equity interestsfootnote disclosures normally included in E-commerce Tianjin, or the “Equity Interests,” at a purchase price equal to the registered capital paid by Mr. Zeyao Xue and Mr. Kai Xu for the Equity Interests, or, in the event that applicable law requires an appraisal of the Equity Interests, the lowest price permitted under applicable law. Pursuant to powers of attorney executed by Mr. Zeyao Xue and Mr. Kai Xu, they irrevocably authorized any person appointed by CCM Tianjin to exercise all shareholder rights, including but not limited to voting on their behalf on all matters requiring approval of E-commerce Tianjin’s shareholder, disposing of all or part of the shareholder’s equity interest in E-commerce Tianjin, and electing, appointing or removing directors and executive officers. The person designated by CCM Tianjin is entitled to dispose of dividends and profits on the equity interest without reliance on any oral or written instructions of Mr. Zeyao Xue and Mr. Kai Xu. The powers of attorney will remain in force for so long as Mr. Zeyao Xue and Mr. Kai Xu remain the shareholders of E-commerce Tianjin. Mr. Zeyao Xue and Mr. Kai Xu have waived all the rights which have been authorized to CCM Tianjin’s designated person under the powers of attorney.

Equity Pledge Agreement.

Pursuant to the Equity Pledge Agreements, Mr. Zeyao Xue and Mr. Kai Xu pledged all of the Equity Interests to CCM Tianjin to secure the full and complete performance of the obligations and liabilities on the part of E-commerce Tianjin and them under this and the above contractual arrangements. If E-commerce Tianjin, Mr. Zeyao Xue, or Mr. Kai Xu breaches their contractual obligations under these agreements, then CCM Tianjin, as pledgee, will have the right to dispose of the pledged equity interests. Mr. Zeyao Xue and Mr. Kai Xu agree that, during the term of the Equity Pledge Agreements, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests, and they also agree that CCM Tianjin’s rights relating to the equity pledge should not be interfered with or impaired by the legal actions of the shareholders of E-commerce Tianjin, their successors or designees. During the term of the equity pledge, CCM Tianjin has the right to receive all of the dividends and profits distributed on the pledged equity. The Equity Pledge Agreements will terminate on the second anniversary of the date when E-commerce Tianjin, Mr. Zeyao Xue and Mr. Kai Xu have completed all their obligations under the contractual agreements described above.

Agreements that Allow us to Receive Economic Benefits from our VIE

Exclusive Technology Consulting and Service Agreement.

Pursuant to the Exclusive Technology Consulting and Service Agreement, CCM Tianjin agreed to act as the exclusive consultant of E-commerce Tianjin and provide technology consulting and services to E-commerce Tianjin. In exchange, E-commerce Tianjin agreed to pay CCM Tianjin a technology consulting and service fee, the amount of which is to be equivalent to the amount of net profit before tax of E-commerce Tianjin, payable on a quarterly basis after making up losses of previous years (if necessary) and deducting necessary costs, expenses and taxes related to the business operations of E-commerce Tianjin. Without the prior written consent of CCM Tianjin, E-commerce Tianjin may not accept the same or similar technology consulting and services provided by any third party during the term of the agreement. All the benefits and interests generated from the agreement, including but not limited to intellectual property rights, know-how and trade secrets, will be CCM Tianjin’s sole and exclusive property. This agreement has a term of 10 years and may be extended unilaterally by CCM Tianjin with CCM Tianjin’s written confirmation prior to the expiration date. E-commerce Tianjin cannot terminate the agreement early unless CCM Tianjin commits fraud, gross negligence or illegal acts, or becomes bankrupt or winds up.

Agreements that Provide us with the Option to Purchase the Equity Interests in and Assets of our VIE

See Exclusive Purchase Option Agreement above

Spousal Consent Letters. The spouse of Mr. Kai Xu (Mr. Zeyao Xue is not married) of Chain Cloud Mall E-commerce (Tianjin) Co., Ltd. has signed a spousal consent letter agreeing that the equity interests in Chain Cloud Mall E-commerce (Tianjin) Co., Ltd. held by and registered under the name of the shareholder will be disposed pursuant to the contractual agreements with our WFOE. Mr. Xu’s spouse agreed not to assert any rights over the equity interest in Chain Cloud Mall E-commerce (Tianjin) Co., Ltd. held by the shareholder

Principles of Consolidation

Our consolidated financial statements include the accounts of the Company, its subsidiaries and VIEs. All material intercompany accounts and transactions have been eliminated in consolidation. 

The condensed consolidated financial statements are prepared in accordance with U.S. GAAP. This basis differs from that used in the statutory accounts of SkyPeople (China), Food Industry Yidu,, Agriculture Plantation Yidu, Yingkou, Huludao Wonder, Yichang Odd Orchard, Xi’an Cornucopia, Shaanxi Qiyiwangguo, Shaanxi Heying, Food Industry Jingyang,, Foods Industry Zhouzhi, Hedetang Holding, Hedetang Research,, SkyPeople Suizhong, Hedejiachuan Yichang, Guo Wei Mei, HeDeJiaChuan Foods Xi’an,Shenzhen Hedetang, Dcon Digipay, FinTech HK, Hedetang Foods China, Agricultural Silkroad, Agricultural Plantation Mei County Trading Market Yidu, Trading Market Mei County, Hedetang Plantations, GlobalKey Supply Chain Limited, Zhonglian Hengxin, FinTech (Xi’an), and Chain Future (Tianjin), China Future (Beijing), and Chain Cloud Mall (Tianjin), all of which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in the PRC. All necessary adjustments have been made to present the financial statements in accordance with U.S. GAAP. All significant inter-company accounts and transactions have been eliminated.

Uses of Estimates in the Preparation of Financial Statements

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which requires managementhave been condensed or omitted pursuant to make estimatesthe Securities and assumptions that affect the reported amounts of assetsExchange Commission’s rules and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidatedregulations. These unaudited financial statements should be read in conjunction with our audited financial statements and reported amounts of revenue and expenses duringnotes thereto for the reporting period. The significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts receivable, estimated useful life and residual value of property, plant and equipment, provision for staff benefit, recognition and measurement of deferred income taxes and valuation allowance for deferred tax assets. Although these estimates are basedyear ended December 31, 2019 as included in our Annual Report on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from these estimates. Form 10-K.

Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business for the foreseeable future.

Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to laws or regulations. Accordingly, assets and liabilities are recorded on the basisassuming that the entityCompany will be able to realize its assets and discharge its liabilities in the normal course of business.

The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company incurred operating losses and had negative operating cash flows and may continue to incur operating losses and generate negative cash flows as the Company implements its future business plan. In order to meet its working capital needs through the next twelve months and to fund the growth of the Company, the Company may consider plans to raise additional funds through the issuance of equity or debt. Although the Company intends to obtain additional financing to meet its cash needs, the Company may be unable to secure any additional financing on terms that are favorable or acceptable to it, if at all.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute its new business strategy and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

The Company had advanced receipts from its customers for the new business section of blockchain based e-commerce platform since December 2018, and started to recognize those advanced receipts as revenue from January 2019. The amount of recognized revenue and advanced payments received from its customers had been increasing for the nine months ended September 30, 2019.2. BUSINESS DESCRIPTION

ShippingFuture FinTech Group Inc. (together with our direct or indirect subsidiaries, “we,” “us,” “our” or “the Company”) is a holding company incorporated under the laws of the State of Florida. The main business of the Company includes an online shopping platform, Chain Cloud Mall (CCM), which is based on blockchain technology; a cross-border e-commerce platform (NONOGIRL) which has started its trial operation in March 2020 and Handling Costsis expected for a formal launch in the third quarter of 2020; a blockchain-based application incubator and a digital payment system (DCON); and the application and development of blockchain-based e-commerce technology and financial technology.

ShippingPrior to 2019, the Company engaged in the production and handling amounts billedsales of fruit juice concentrates, fruit juice beverages and other fruit-related products in the People’s Republic of China (“PRC”, or “China”), and overseas markets. Due to customersthe drastically increased production cost and tightened environmental law in China, the Company has transformed its business from fruit juice manufacturing and distribution to a real-name blockchain e-commerce platform that integrates blockchain and internet technology from the end of 2018. On February 27, 2020 pursuant to a Share Transfer Agreement entered into by the Company’s subsidiary, HeDeTang Holdings (HK) Ltd (“Hedetang HK”), and New Continent International Co., Ltd. on September 18, 2019, the Company sold Hedetang HK and all its subsidiaries, which mainly engaged in fruit juice related sales transactionsbusiness, to New Continent International Co., Ltd.

The Company’s activities are principally conducted by its subsidiaries operating in the PRC. 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For a detailed discussion about the Company significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in the Company’s consolidated financial statements included in sales revenues and shipping expenses incurred by the Company are reported as a component of selling expenses. The shipping and handling expenses of $5,865 and $13,523 forCompany’s 2019 Form 10-K. During the three months ended September 30, 2019 and 2018, respectively; and $16,459 and $156,729 forMarch 31, 2020, there were no significant changes made to the nine months ended September 30, 2019 and 2018, respectively; are reportedCompany’s significant accounting policies. 

Uses of Estimates in the ConsolidatedPreparation of Financial Statements of Income and Comprehensive Income (Loss) as a component of selling expenses.

The decrease in shipping and handling costs compared to the same period in year 2018 was mainly due to a decrease in sales of our fruit related products.

Leases

Leases are reviewed and classified as capital or operating at their inceptionCompany’s condensed consolidated financial statements have been prepared in accordance with ASC Topic 840,Accounting for Leases. For leasesUS GAAP and this requires management to make estimates and assumptions that contain rent escalations,affect the Company records monthly rent expense equalreported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting period. The significant areas requiring the use of management estimates include, but not limited to, the total amountallowance for doubtful receivable, estimated useful life and residual value of the payments dueproperty, plant and equipment, impairment of long-lived assets provision for staff benefit, recognition and measurement of deferred income taxes and valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the reporting period over the lease term. The difference between rent expense recordedfuture, actual results may ultimately differ from those estimates and amount paid is credited or chargedsuch differences may be material to a deferred rent account.our condensed consolidated financial statements.  

Earnings Per Share (“EPS”)

The Company adopted ASC Topic 215,Statement of Shareholder Equity. Basic EPS are computed by dividing net income available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential common shares outstanding during a period. In computing diluted EPS, the average price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The standard requires implementation costs incurred by customers in cloud computing arrangements to be capitalized and amortized under the same premises of authoritative guidance for internal-use software. Adoption of ASU 2018-15 did not have any other material effect on the results of operations, financial position or cash flows of the Company.

In June 2018,2016, the FASB issued Accounting Standards Update “ASU No. 2018-07 – Compensation – Stock Compensation”.  The2016-13 (ASU 2016-13) "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU expands2016-13 replaces the scopeexisting incurred loss impairment model with an expected loss model which requires the use of current guidanceforward-looking information to include all share-based payment arrangementscalculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to the acquisition of goods and services from both non-employees and employees.  The guidanceavailable-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. ASU is2016-13 effective forJanuary 1, 2023. We are currently evaluating the Company in all fiscal years beginning after December 15, 2018.  Adoptioneffect of the adoption of ASU 2018-07 did2016-13 and believe it does not have any other material effectimpact on theour results of operations financial position or cash flowsfinancial. 

We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company.

February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220), “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 was issued to allow the reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effect resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017. The Tax Cuts and Jobs Act, among other things, reduced the corporate tax rate from 35.00% to 21.00%, which required the re-evaluation of any deferred tax assets or liabilities at the lowered tax rate which potentially could leave disproportionate tax effects in accumulated other comprehensive income. ASU 2018-02 allows for the election to reclassify these stranded tax effects to retained earnings. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for public business entities for reporting periods for which financial statements have not yet been issued. Adoption of ASU 2018-02 did not have any other material effect on the results of operations, financial position or cash flows of the Company.

There were no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended September 30, 2019 compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 that are of significance or potential significance to us.

Inventories by major categories are summarized as follows: (in thousands)

Sales to Related Party

4. RELATED PARTY TRANSACTION  

The Company did not have any sales to related parties for the ninethree months ended September 30,March 31, 2020 and March 31, 2019, and 2018, respectively. 

The accounts receivable balances for such transactions were nilamount due to the related parties was $1.10 million, which consisted of the followings: 

The amount due from the related parties was $3.10 million as of September 30, 2019 and DecemberMarch 31, 2018, respectively

2020, which consisted of the followings:  

5. COMMON STOCKS ISSUED

Sales to our five largest customers accounted for an aggregate of approximately 2.20% and 9.00% of our net sales duringCommon stocks issued in connection with the three months ended September 30, 2019 and 2018, respectively. Since our new business sections mainly targets individuals, resulting in a dramatic decrease in customer concentration, there was no single customer representing over 10.00% of total sales for the three months ended September 30, 2019 and September 30, 2018, respectively.convertible notes

During the three months ended September 30, 2019, no supplier accounted for over 10.00% of our purchases, and only one supplier accounted for 10.00% for the same period of year 2018, respectively. 

On April 12, 2017,March 26, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers identified on the signature pages theretoIliad Research and Trading, L.P., a Utah limited partnership (the “Purchasers”“Purchaser”), pursuant to which the Company offeredsold and issued to the Purchasers,Purchaser a Secured Convertible Promissory Note (the “Note”) in a registered direct offering,the principal amount of $1,070,000. The Purchaser purchased the Note with an aggregateoriginal issue discount of 862,097 shares (the “Shares”)$50,000, and the Company agreed to pay to the Purchaser $20,000 for fees and costs incurred by Purchaser in connection with the consummation of common stock, par value $0.001 per share (“Common Stock”).the Purchase Agreement. The Shares wereNote was sold to the Purchasers at a negotiatedPurchaser pursuant to an exemption from registration under Regulation D, promulgated under the Securities Act of 1933, as amended. The purchase price for the Note was paid by the Purchaser through an initial cash payment of $3.10 per share, for aggregate gross proceeds$500,000 and the issuance of an investor note to the Company with a one-year term and an interest rate of $2,672,500, before deducting fees8% (the “Investor Note”), which the Purchaser agrees to prepay in full upon the satisfaction of certain conditions for pledged shares and transfer agent instruction letter pursuant to the placement agentInvestor Note and other estimated offering expenses payablePurchase Agreement.

On May 2, 2019, the Company received a second cash payment from Purchaser of $0.5 million after satisfying certain conditions for pledged shares as required in the Securities Purchase Agreement, of which $3,818 was interest income for the Company due to late payment past the agreed date by the Company. Purchaser.

The Shares were offered byNote bears interest at the rate of 8% per annum. All outstanding principal and accrued interest on the Note became due and payable on March 26, 2020. The Company’s obligations under the Note may be prepaid at any time, if the company elects to prepay the Company pursuant to an effective shelf registration statement on Form S-3, which was originally filed withwould pay 125% of any amount outstanding under the Securities and Exchange Commission on August 3, 2015, amended on February 17, 2017, and was declared effective on February 23, 2017 (File No. 333-206353) (the “Registration Statement”).

In a concurrent private placement,Note. The Note may be converted at any time, at the Company also issued to each of the Purchasers a warrant to purchase one (1) sharePurchaser’s option, into shares of the Company’s Common Stock for each share purchased undercommon stock at a conversion price of $3.00 per share. During the Purchase Agreement, pursuant to that certain Common Stock Purchase Warrant, by and betweenterm of the Note, the Company and eachshall not, without the prior written consent of the Purchaser, (each, a “Warrant”, and collectively,enter into or effect certain fundamental business transactions. The Company has the “Warrants”). The Warrants are exercisable beginning onoption to redeem the Note at any time after the six month anniversary of the date when the purchase price is delivered to the Company. The Company’s obligations under the Note are secured by a pledge of issuance at an initial exercise price of $5.20 per share and will expire on the five and a half year anniversary2,500,000 shares of the dateCompany’s common stock by Mengyao Chan, an unrelated third party, in favor of issuance.the Purchaser.

From October to December 2019, the Company issued 1,493,333 shares of its common stock to Iliad Research and Trading, L.P., a Utah limited partnership (the “Purchaser”) pursuant seven Exchange Agreements entered into with the Purchaser.

On January 6, 2020, the Company entered into the Eighth Exchange Agreement (the “Eighth Exchange Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Lender”). Pursuant to the Eighth Exchange Agreement, the Company and Lender agreed to partition a new Secured Convertible Promissory Note in the original principal amount of $145,000 (the “Eighth Partitioned Note”) from a Secured Convertible Promissory Note (the “Note”) issued by the Company on March 26, 2019. The Warrantsoutstanding balance of the Note shall be reduced by an amount equal to the outstanding balance of the Partitioned Note. The Company and Lender further agreed to exchange the Eighth Partitioned Note for the delivery of 193,333 shares of the Company’s Common Stock, issuable uponpar value $0.001, according to the exerciseterms and conditions of the WarrantsExchange Agreement.

On January 15, 2020, the Company entered into the Ninth Exchange Agreement (the “Warrant“Ninth Exchange Agreement”) with the Lender. Pursuant to the Exchange Agreement, the Company and Lender agreed to partition a new Secured Convertible Promissory Note in the original principal amount of $140,000 (the “Ninth Partitioned Note”) from the Note issued by the Company on March 26, 2019. The outstanding balance of the Note shall be reduced by an amount equal to the outstanding balance of the Ninth Partitioned Note. The Company and Lender further agreed to exchange the Partitioned Note for the delivery of 186,666 shares of the Company’s Common Stock, par value $0.001, according to the terms and conditions of the Exchange Agreement.

On March 11, 2020, the Company entered into the Tenth Exchange Agreement (the “Tenth Exchange Agreement”) with the Lender.

Pursuant to the Tenth Exchange Agreement, the Company and Lender agreed to partition a new Secured Convertible Promissory Note in the original principal amount of $150,000 (the “Tenth Partitioned Note”) from the Note issued by the Company on March 26, 2019. The outstanding balance of the Note shall be reduced by an amount equal to the outstanding balance of the Partitioned Note. The Company and Lender further agreed to exchange the Partitioned Note for the delivery of 200,000 shares of the Company’s Common Stock, par value $0.001, according to the terms and conditions of the Exchange Agreement.

Consulting Service Agreement

On January 25, 2020, the Company entered into a Consulting Service Agreement (the “Agreement”) with Dragon Investment Holding Limited (Malta) (the “Consultant”), a company incorporated in Malta, pursuant to which Consultant will: (i) help the Company to locate new merger projects globally, develop new merger strategy and provide the Company with at least five (5) merger and acquisition targets that have synergy with the Company’s business and development plans and could clearly contribute to the Company’s strategic goals each year; (ii) help the Company to map out new growth strategies in addition to its current business; (iii) work with the Company to explore new lines of business and associated growth strategies; and (iv) conduct market research and evaluating variable projects and providing feasibility studies per Company’s request from time to time. The term of the Agreement is three years. In consideration of the services to be provided by Consultant to the Company, the Company agrees to pay the Consultant a three-year consulting fee totaling $3 million. The Company shall issue a total of 3,750,000 restricted shares of common stock of the Company (the “Consultant Shares”) areat a price of $0.794 per share, (the closing price of the Agreement date), as the payment for the above mentioned consultant fee to the Consultant. On February 23, 2020, the Company issued the Consultant Shares pursuant to the Agreement, of which 1,500,000 shares were released to the Consultant immediately, 1,125,000 and 1,125,000 shares, respectively, will be held by the Company and released to the Consultant on January 25, 2021 and January 25, 2022 if this Agreement has not being registeredbeen terminated and there has been no breach of the Agreement by the Consultant at such time. If the second and/or third release of the shares mentioned above does not occur, such shares shall be returned to the Company as treasury shares. The shares contemplated in the Agreement were issued pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”),amended. For the three months ended March 31, 2020, the Company recorded stock related compensation of $1.19 million, based on the stock closing price of $0.794 on the Agreement date, for the 1,500,000 shares which were released to the Consultant immediately upon issuance. The Company will recognize stock related compensation of $1.79 million for the 2,250,000 shares in the future when they are released to the Consultant pursuant to the Company’s Registration Statement, and were instead offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act. Each Purchaser was either (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.Agreement.

6.DISCONTINUED OPERATIONS

In connection with the private placement and in accordance with the Purchase Agreement, the Company was required to file a registration statement on Form S-1 within 45 calendar days after the date of the Purchase Agreement to provide for the resale of the Warrant Shares. The Company filed a registration statement on Form S-1 (File No. 333-218276) on May 26, 2017, which was declared effective on June 12, 2017.HeDeTang HK

Rodman & Renshaw, a unit of H.C. Wainwright & Co., served as our placement agent in connection with the offering under the Purchase Agreement and received warrants to purchase our Common Stock in an amount equal to 4.00% of our Shares sold to the Purchasers in the offering on substantially the same terms as the Warrants, with an initial exercise price of $5.20 per share, except that the termination date shall be April 12, 2022 and the warrants have certain transfer restrictions pursuant to FINRA Rule 5110 (the “Placement Agent Warrants”).

On November 2, 2017 (the “Agreement Date”), a wholly-owned indirect subsidiary of the Company, Hedetang Foods (China) Co.,September 18, 2019, HeDeTang Holdings (HK) Ltd. (“Hedetang”HeDeTang HK”), entered into a series of Creditor’s Rights Transfer Agreements (collectively, the “Acquisition Agreements”) with each of Shaanxi Chunlv Ecological Agriculture Co. Ltd., Shaanxi Boai Medical Technology Development Co., Ltd., and Shaanxi Fu Chen Venture Capital Management Co. Ltd. (collectively, the “Sellers”). Pursuant to the Acquisition Agreements, Hedetang agreed to purchase certain creditor’s rights associated with companies located in the PRC, for an aggregate purchase price of RMB 181,006,980 (approximately $27,344,096), of which RMB 108,604,188 (approximately $16,437,249) was paid in cash and RMB 72,402,792 (approximately $10,937,639) was paid in shares of common stock of the Company based on the average of the closing prices of Future FinTech’s common stock over the five trading days preceding the date of the Acquisition Agreements.

A summary of the Acquisition Agreements is as follows:

1) Shaanxi Chunlv Ecological Agriculture Co. Ltd. agreed to transfer all its credit rights of principal and interest owed by Xi’an Tongji Department Store Co., Ltd. to Hedetang. As of the Agreement Date, the book balance of the principal was RMB 23,625,000, the interest was RMB 38,281,900, and the total credit balance, including the principal and the interest, was RMB 61,906,900, of which the RMB 19,757,800 credit was guaranteed by a third party company.

2) Shaanxi Chunlv Ecological Agriculture Co. Ltd. agreed to transfer all its credit rights of principal and interest owed by Shaanxi Youyi Co., Ltd. to Hedetang. As of the Agreement Date, the book balance for the principal was RMB 45,345,000, the interest was RMB 71,224,300, and the total credit balance including the principal and the interest was RMB 116,569,300, all of which was guaranteed by a third party company.

3) Shaanxi Fu Chen Venture Capital Management Co., Ltd. agreed to transfer all its credit rights of principal and interest owed by State Owned Shaanxi No. 8 Cotton and Textile Mill to Hedetang. As of the Agreement Date, the book balance for the principal was RMB 72,370,000, the interest was RMB 138,037,700, the total of credit including the principal and the interest was RMB 210,407,700, and there was no effective guarantee or pledged assets to secure this debt.

4) Shaanxi Boai Medical Technology Development Co., Ltd. agreed to transfer all its credit rights of principal and interest owed by Xi’an Yanliang Economic Development Co., Ltd. to Hedetang. As of the Agreement Date, the book balance for the principal was RMB 6,350,000, the interest was RMB 9,834,300, and the total of credit including the principal and the interest was RMB 16,184,300, which is secured by certain land use rights.

In connection with the Acquisition Agreements and to provide funding for their consummation, on November 3, 2017, the Company entered into a Share PurchaseTransfer Agreement (the “Share Purchase Agreement”“Agreement”) with Mr. Zeyao Xue (“Xue”New Continent International Co., Ltd., (the “Buyer”) pursuant to which Future FinTech agreed to sell 11,362,159 shares of its common stock (the “Shares”) to Xue for an aggregate purchase price of $16,437,249. The per share price for the Shares was determined using the average closing price quoted on the NASDAQ Global Market for the common stock of the Company over the three (3) trading days prior to the date of the Share Purchase Agreement (the “Purchase Price”), subject to potential upward adjustment. The consummation of the Share Purchase Agreement was contingent on Future FinTech receiving shareholder approval at a Special Shareholders Meeting for an amendment to its articles of incorporation and the approval of Share issuance under the Share Purchase Agreement by the shareholders of the Company.

On April 6, 2018, the Company issued an aggregate 7,111,599 shares of the Company’s common stock to three individuals designated by the Sellers in the respective amounts of 3,409,466, 3,323,225 and 378,908 shares, pursuant to the Acquisition Agreements, and 11,362,159 shares of the Company’s common stock pursuant to the Share Purchase Agreement, which such issuances were approved by the Company’s shareholders at a special meeting held on March 13, 2018.

On January 23, 2018, DigiPay FinTech Limited (“DigiPay”), a limited liability company incorporated in the British Virgin Islands and a wholly-owned subsidiary of the Company, and Peng Youwang (“Peng”), a Chinese citizen, entered into a DCON Digital Assets Transfer Agreement (the “DCON Agreement”).

UnderIslands. Pursuant to the terms of the Agreement, Peng transferred to DigiPaythe Buyer purchased 100% ownership of HeDeTang HK, which value is primarily derived from HeDeTang HK’s wholly-owned subsidiary HeDeJiaChuan Holdings Co., Ltd. and 73.41% owned subsidiary SkyPeople Juice Group Co., Ltd., for a 60.00% ownership interesttotal price of RMB 600,000 (approximately $85,714) (the “Sale Transaction”). The Sale Transaction was closed on February 27, 2020. In accordance with ASC Topic 205, Presentation of Financial Statement Discontinued Operations (“ASC Topic 205”), the Company presented the operation results from HeDeTang HK’s and subsidiaries as a discontinued operation, as the Company believed that no continued cash flow would be generated by the discontinued component and that the Company would have no significant continuing involvement in certain digitalthe operations of the discontinued component. The total assets of DCON, a blockchain platform for cryptocurrency conversion, payment and other services (“DCON”), including but not limited to its business plan and white papers, business models, software, codes, architectures, applications, technologies, patents, copyrights, trade secrets, customer lists, business points, trading platforms, digital rights, authentication systems, agreements and contracts, intellectual property, tokens,HeDeTang HK were $106.85 million as of February 27, 2020 and the DCON communities establishedtotal liabilities of HeDeTang HK were $231.21  million as of February 27, 2020, resulting in a gain on Nova Realm City (the “Transfer Assets”) for an aggregate purchase pricedisposal of $9,600,000 (the “Purchase Price”). The Company paid $123.69 million. There was no income or loss from HeDeTang HK from January 1, 2020 tothe Purchase Price by issuing to Peng 1,200,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), equaling a per share sale price of $8.00 (the “Share Payment”). Half of the shares of Common Stock subject to the Share Payment were issued within 30 days of the date of the Agreement, and the remaining Share Payment shares were issued within 90 days of the date of the Agreement. On May 3, 2018, the Company issued the remaining 600,000 shares of its common stock to Mr. Peng and his designee according to the Agreement.sale.

Huludao Wonder

The Agreement also contains customary representations and warranties regardingdiscontinued operation presented in the Transfer Assets and the ownership thereof, and covenants regarding the parties’ cooperation. DigiPay and Peng further agreed to establish a Japanese operating companyfinancial statement for the Transfer Assets, of which DigiPay holds a 60.00% ownership interest and Peng’s designee holds a 40.00% ownership interest.

On January 5, 2018, the Company issued 880,580 shares of its common stock to Reits (Beijing) Technology Co. Ltd., a limited liability company incorporated in China (“Reits”) pursuant to the Technology Development Service Contract (the “Service Agreement”) signed on December 18, 2017 by Reits and GlobalKey Supply Chain Ltd. (“GlobalKey”), a limited liability company incorporated in China and a wholly owned subsidiary of the Company.

Under the Service Agreement, Reits shall provide services to GlobalKey relating to the design, development, testing, deployment and maintenance of a blockchain-based Globally Shared Shopping Mall and other software systems (the “System”). Following the completion and delivery of the System by Reits, (i) GlobalKey shall provide the hardware and network requirements for the trial deployment of the System, (ii) Reits shall provide training of GlobalKey’s staff in the use and operation of the System, and (iii) for a period of one year from the System delivery date and for no additional charge, Reits shall provide ongoing System maintenance and technical support (the “Free Maintenance Period”). Following the completion of the Free Maintenance Period, GlobalKey may elect to engage Reits for ongoing maintenance and technical support. Under the Service Agreement, GlobalKey shall pay Reits aggregate consideration of RMB 13,000,000 ($2,067,397), of which RMB 9,100,000 ($1,447,178) may be paid in shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a per share price equal to the average of the Common Stock’s closing prices over the 5 trading days prior to the date of the Agreement, or $1.554 per share (the “Share Payment”). The exchange rate between US dollar and RMB for the payment is 1:6.65. The Share Payment was made within 15 business days of the date of the Service Agreement, and the remaining Service Agreement consideration shall be paid by GlobalKey in accordance with the schedule described in the Service Agreement. The Company paid RMB 876,663 ($139,416) and RMB 788,353 ($115,459) in cash to Reits in the first and second quarters of 2018, respectively.

On January 5, 2018, the Company issued 30,000 shares of the Company’s common stock to a certain warrant holder for the exercise of Warrants.

On February 28, 2017, the Company issued options to purchase 62,500 shares of the Company’s common stock with an exercise price equal to the fair market value of the Company’s Common Stock (as defined under the 2011 Stock Incentive Plan in conformity with Regulation 409A of the Internal Revenue Code of 1986, as amended) at the date of grant to three of the Company’s employees pursuant to the 2011 Stock Incentive Plan, which was approved by the Company’s shareholders at annual stockholders meeting on August 18, 2011. These options vested immediately on the grant date with a fair market value of $223,375 based on the fair value of $3.57 per share, which was determined by using the Black Scholes option pricing model. The Company recognized stock-based compensation expense of $223,375 in the first quarter of fiscal 2017 under the 2011 Stock Incentive Plan. On January 5, 2018, the Company issued 62,500 shares of the Company’s common stock to three of its employees for the exercise of such stock options.

As of September 30,ended March 31, 2019 there were no shares of stock available for awards under the 2011 Stock Incentive Plan.

On March 29, 2017, the Company issued 250,000 shares of the Company’s unrestricted common stock to six of the Company’s employees pursuant to our 2015 Omnibus Equity Plan, which was approved by the Company’s shareholders at the annual stockholders meeting on November 19, 2015. The Company recorded an expense of $250 in the first quarter of fiscal 2017 under the 2015 Omnibus Equity Plan, reflecting a par value of $0.001 per share of the Company’s common stock.

The Company’s 2015 Omnibus Equity Plan permits the grant of incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock, unrestricted stock and restricted stock units (“RSUs”) to its employees of up to 250,000 shares of Common Stock. As of September 30, 2019, there were no shares of stock available for awards under the 2015 Stock Incentive Plan.

On March 13, 2018, the Company’s shareholders approved the 2017 Omnibus Equity Plan at the annual shareholders meeting, which permits the grant of incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock, unrestricted stock and restricted stock units (“RSUs”) to its employees of up to1,300,000 shares of Common Stock. On December 21, 2018, the Company granted 1,300,000 shares of the Company’s unrestricted common stock to seven of the Company’s employees pursuant to our 2017 Omnibus Equity Plan, which was approved by the Company’s shareholders at the annual shareholders meeting on December 6, 2018.

The Company recorded an expense of $13,000 in the fourth quarter of fiscal year 2018 under the 2017 Omnibus Equity Plan, reflecting a par value of $0.001 per share of the Company’s common stock. As of September 30, 2019, there were no shares of stock available for awards under the 2017 Omnibus Equity Plan.

On October 19, 2018, the Company issued 5 million shares of its Common Stock to Mr. Chenliu pursuant to the InUnion Chain Ltd. Shares Transfer and IUN Digital Assets Investment Agreement entered into on June 22, 2018 between Digipay, Mr. Chenliu, an individual resident of Costa Rica, and InUnion Chain Ltd. (“InUnion”), a British Virgin Islands company wholly owned by Mr. Chenliu.

On January 23, 2018, DigiPay and Peng entered into the DCON Agreement . Under the terms of the DCON Agreement, Peng transferred to DigiPay a 60.00% ownership interest in certain digital assets of DCON, a blockchain platform for cryptocurrency conversion, payment and other services (“DCON”), including but not limited to its business plan and white papers, business models, software, codes, architectures, codes, software, applications, technologies, patents, copyrights, trade secrets, customer lists, business points, trading platforms, digital rights, authentication systems, agreements and contracts, intellectual property, token, and the DCON communities established on Nova Realm City (the “Transfer Assets”) for an aggregate purchase price of $9,600,000 (the “Purchase Price”).

DCON DigiPay Limited was incorporated in Japan and 60.00% owned by the Company. The Company has recognized this digital asset as an intangible asset at a total amount of the purchase price of $9,600,000, and amortized over 5 years, with amortization of $1,440,000 for the nine months ended September 30, 2019.

In April 2016, the Company signed a letter of intent with Mei County Kiwifruits Investment and Development Corporation to purchase 833.5 mu (approximately 137 acres) of kiwifruits orchard in Mei County. The purchase price will be determined by a third party valuation company appointed by both parties. As of the date of this report, the valuation has not been completed and the purchase price has not been settled. The Company paid RMB 200 million (approximately $30 million) as a deposit in the second quarter of 2016. The purchase is subject to government approval, approval by the Company’s Board of Directors and a definitive agreement negotiated and signed by the parties. Pursuant to the letter of intent, the Deposit shall be returned to the Company within 10 working days upon the request of the Company if the kiwifruits orchard cannot be transferred to the Company according to the schedule. The Company expects to complete the purchase process in 2020.

On August 3, 2016, Shaanxi Guoweimei Kiwi Deep Processing Company, an indirectly wholly-owned subsidiary of the Company, signed a lease agreement for 20,000 mu (approximately 3,292 square acres) of a kiwifruits orchard located in Mei County, Shaanxi Province, with the Di’erpo Committe of Jinqu Village, Mei County, Shaanxi for a term of 30 years, from August 5, 2016 to August 4, 2046. The annual leasing fee is RMB 1,250 (approximately $189) per mu, and payment of 10 years of leasing fees shall be made on each of September 25, 2016, 2026 and 2036. The Company made a payment of RMB 250 million (approximately $37.4 million) for the first 10 years’ leasing fees on August 15, 2016, which is recorded as deposits in the Company’s balance sheet.

On August 15, 2016, Hedetang Agricultural Plantations (Yidu) Co., Ltd., an indirectly wholly-owned subsidiary of the Company, signed a lease agreement for 8,000 mu (approximately 1,317 square acres) of an orange orchard located in city of Yidu, Hubei Province, with the Yidu Sichang Farmers Association, Hubei Province, for a term of 20 years, from September 22, 2016 to September 21, 2036. The annual leasing fee is RMB 2,000 (approximately $306) per mu, and payment of 10 years of leasing fees shall be made on each of September 25, 2016 and 2026. The Company made a payment of RMB 160 million (approximately $24.0 million) for the first 10 years’ of leasing fees on September 20, 2016, which is recorded as deposits in the Company’s balance sheet.

The Company’sincludes Huludao Wonder operation, a subsidiary which produces concentrated apple juice, has suffered continued operating losses since year 2014.juice. In December 2016, the Company established a winding-down plan to close this operation. Based on the restructuring plan and in accordance with EITF 03-13,ASC 205-20, the Company presented the operating results from Huludao Wonder as a discontinued operation, as the Company believed that no continued cash flow would be generated by the disposed component (Huludao Wonder) and that the Company would have no significant continuing involvement in the operation of the discontinued component. Management of the Company initiated a plan to sell the property located in Huludao in December 2016, and ceased the depreciation of the property in accordance with SFAS No. 144.ASC 205-20. In accordance with the restructuring plan, the Company intends to transfer the concentrated fruit juice production equipment in Huludao Wonder additionally stopped paymentto another subsidiary and to sell the land and facilities upon favorable circumstances. On February 27, 2020 pursuant to a Share Transfer Agreement entered into by HeDeTang Holdings (HK) Ltd. and New Continent International Co., Ltd. on September 18, 2019, the ownership of interestHuludao Wonder was transferred as a subsidiary of HeDeTang Holdings (HK) Ltd. to New Continent International Co., Ltd.

On March 11,2020, the Company’s Board of Directors passed a resolution to sell the operation of Globalkey Supply Chain limited and Zhonglian Hengxin Assets Management Co. Ltd and close the operation of Digital Online Marketing Limited, Future Digital Fintech (Xi’an) Co. Ltd., SkyPeople Foods Holding Ltd. and Chain Future Digital Tech (Beijing) Co. Ltd. Based on the loan it borrowed during year 2016. The bank sued Huludao Wonder,disposal plan and in accordance with ASC 205-20, the result was that according toCompany presented the enforcement of the court, Huludao Wonder paid off its all owed long-term debt principal and interest due at the time of the settlement with its fixed assets in year 2018.operating results from these operations as a discontinued operation.

As of September 30, 2019, Huludao Wonder no longer incurred any income or expenses, and the Company believes there will not be any future significant cash flows from the discontinued operation, as the outstanding accounts receivable and accounts payable are immaterial to the Company’s financial position and liquidity.7. VARIABLE INTEREST ENTITIES

The Company operates in four segments starting from fiscal 2019: shared shopping mall membership fee, fruit related products, sales of goods and others. Our concentrated juice and juice beverages are primarily produced by the Company’s Jingyang factory.

In compliance with the Company’s business transformation strategy, membership fee from shared shopping mall, sales of goods through shared shopping mall platform started to generate the main revenues for the Company and became more and more important business sections of the Company since fiscal 2019, while its traditional business section of seasonal fruit related products continued to shrink in the third quarter of 2019.

For the three months ended September 30, 2019, the Company sold its fruit related products and other products still mainly to domestic customers in the PRC.

Some of these product segments might not individually meet the quantitative thresholds for determining reportable segments and we determine the reportable segments based on the discrete financial information provided to the chief operating decision maker. The chief operating decision maker evaluates the results of each segment in assessing performance and allocating resources among the segments. Since there is an overlap of services provided and products manufactured between different subsidiaries of the Company, the Company does not allocate operating expenses and assets based on the product segments. Therefore, operating expenses and asset information by segment are not presented. Segment profit represents the gross profit of each reportable segment.

For the three months ended September 30, 2019 (in thousands):

For the three months ended September 30, 2018 (in thousands):

For the nine months ended September 30, 2019 (in thousands)

For the nine months ended September 30, 2018 (in thousands)

The following table reconciles reportable segment profit to the Company’s condensed consolidated income before income tax provision for the three months ended September 30, 2019 and 2018: (in thousands)

On July 31, 2019, CCM TianjinE-commerceTianjin, E-commerce Tianjin, and Mr. Zeyao Xue and Mr. Kai Xu, citizens of China and shareholders of E-commerce Tianjin, entered into the following agreements, or collectively, the “Variable Interest Entity Agreements” or “VIE Agreements,” pursuant to which CCM Tianjin has contractual rights to control and operate the business of E-commerce Tianjin (the “VIE”).

Therefore, pursuant to ASC 810, E-Commerce Tianjin is included in the Company’s condensed consolidated financial statements since then.

Pursuant to Chinese law and regulations, a foreign owned enterprise cannot apply for and hold a license for operation of certain e-commerce businesses, the category of business which the Company plans to expand in China. CCM Tianjin is an indirectly wholly foreign owned enterprise of the Company. In order to comply with Chinese law and regulations, CCM Tianjin agreed to provide E-commerce Tianjin an Exclusive Operation and Use Rights Authorization to operate and use the Chain Cloud Mall System owned by CCM Tianjin.

E-commerce Tianjin was incorporated by Mr. Zeyao Xue and Mr. Kai Xu solely for the purpose of holding the operation license of the Chain Cloud Mall System. Mr. Zeyao Xue is a major shareholder of the Company and the son of Mr. Yongke Xue, our Chairman and Chief Executive Officer. Mr. Kai Xu is the Chief Operating Officer of the Company.

TheFor the details about the VIE Agreements are as follows:agreements, refer to Note 15 “Variable Interest Entities,” in the Company’s consolidated financial statements included in Company’s 2019 Form 10-K.

1) Exclusive Technology Consulting and Service Agreement by and between CCM Tianjin and E-commerce Tianjin. Pursuant to the Exclusive Technology Consulting and Service Agreement, CCM Tianjin agreed to act as the exclusive consultant of E-commerce Tianjin and provide technology consulting and services to E-commerce Tianjin. In exchange, E-commerce Tianjin agreed to pay CCM Tianjin a technology consulting and service fee, the amount of which is to be equivalent to the amount of net profit before tax of E-commerce Tianjin, payable on a quarterly basis after making up losses of previous years (if necessary) and deducting necessary costs, expenses and taxes related to the business operations of E-commerce Tianjin. Without the prior written consent of CCM Tianjin, E-commerce Tianjin may not accept the same or similar technology consulting and services provided by any third party during the term of the agreement. All the benefits and interests generated from the agreement, including but not limited to intellectual property rights, know-how and trade secrets, will be CCM Tianjin’s sole and exclusive property. This agreement has a term of 10 years and may be extended unilaterally by CCM Tianjin with CCM Tianjin's written confirmation prior to the expiration date. E-commerce Tianjin cannot terminate the agreement early unless CCM Tianjin commits fraud, gross negligence or illegal acts, or becomes bankrupt or winds up.

2) Exclusive Purchase Option Agreement by and among CCM Tianjin, E-commerce Tianjin, Mr. Zeyao Xue and Mr. Kai Xu. Pursuant to the Exclusive Purchase Option Agreement, Mr. Zeyao Xue and Mr. Kai Xu granted to CCM Tianjin and any party designated by CCM Tianjin the exclusive right to purchase, at any time during the term of this agreement, all or part of the equity interests in E-commerce Tianjin, or the “Equity Interests,” at a purchase price equal to the registered capital paid by Mr. Zeyao Xue and Mr. Kai Xu for the Equity Interests, or, in the event that applicable law requires an appraisal of the Equity Interests, the lowest price permitted under applicable law. Pursuant to powers of attorney executed by Mr. Zeyao Xue and Mr. Kai Xu, they irrevocably authorized any person appointed by CCM Tianjin to exercise all shareholder rights, including but not limited to voting on their behalf on all matters requiring approval of E-commerce Tianjin’s shareholder, disposing of all or part of the shareholder's equity interest in E-commerce Tianjin, and electing, appointing or removing directors and executive officers. The person designated by CCM Tianjin is entitled to dispose of dividends and profits on the equity interest without reliance on any oral or written instructions of Mr. Zeyao Xue and Mr. Kai Xu. The powers of attorney will remain in force for so long as Mr. Zeyao Xue and Mr. Kai Xu remain the shareholders of E-commerce Tianjin. Mr. Zeyao Xue and Mr. Kai Xu have waived all the rights which have been authorized to CCM Tianjin’s designated person under the powers of attorney.

3) Equity Pledge Agreements by and among CCM Tianjin, E-commerce Tianjin, Mr. Zeyao Xue and Mr. Kai Xu. Pursuant to the Equity Pledge Agreements, Mr. Zeyao Xue and Mr. Kai Xu pledged all of the Equity Interests to CCM Tianjin to secure the full and complete performance of the obligations and liabilities on the part of E-commerce Tianjin and them under this and the above contractual arrangements. If E-commerce Tianjin, Mr. Zeyao Xue, or Mr. Kai Xu breaches their contractual obligations under these agreements, then CCM Tianjin, as pledgee, will have the right to dispose of the pledged equity interests. Mr. Zeyao Xue and Mr. Kai Xu agree that, during the term of the Equity Pledge Agreements, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests, and they also agree that CCM Tianjin’s rights relating to the equity pledge should not be interfered with or impaired by the legal actions of the shareholders of E-commerce Tianjin, their successors or designees. During the term of the equity pledge, CCM Tianjin has the right to receive all of the dividends and profits distributed on the pledged equity. The Equity Pledge Agreements will terminate on the second anniversary of the date when E-commerce Tianjin, Mr. Zeyao Xue and Mr. Kai Xu have completed all their obligations under the contractual agreements described above. 8. OTHER PAYABLE

As a resultof March 31, 2020, other payable was $3.71 million, which consisted of the above contractual arrangements, CCM Tianjin has substantial control over E-commerce Tianjin’s daily operations and financial affairs, election of its senior executives and all matters requiring shareholder approval. Furthermore, as the primary beneficiary of E-commerce Tianjin, the Company, via CCM Tianjin, is entitled to consolidate the financial results of E-commerce Tianjin in its own consolidated financial statements.followings:

On September 18, 2019, SkyPeople Foods Holdings Limited, a company incorporated in the British Virgin Islands (“SkyPeople Foods”) and a wholly owned subsidiary of the Company, entered into a Share Transfer Agreement (the “Agreement”) with New Continent International Co., Ltd., a company incorporated in the British Virgin Islands (the “Buyer”).  Pursuant to the terms of the Agreement, SkyPeople Foods will sell all of the issued and outstanding shares of HeDeTang Holdings (HK) Ltd. (“HeDeTang HK”), a wholly owned subsidiary of SkyPeople Foods, to the Buyer for a total of RMB 600,000, or approximately US$85,714 (the “Purchase Price”), which value is primarily derived from HeDeTang HK’s wholly-owned subsidiary HeDeJiaChuan Holdings Co., Ltd. and 73.41% owned subsidiary SkyPeople Juice Group Co., Ltd. (“SkyPeople China”). The Purchase Price was based upon the preliminary evaluation of HeDeTang HK and its subsidiaries by Shanxi Delixin Assets Evaluation Co., Ltd.(“ Shanxi Delixin”) If the final evaluation amount of HeDeTang HK and its subsidiaries by Shanxi Delixin is lower than or no more than 10.00% higher than the Purchase Price, the Parties agree there will be no change to the Purchase Price. If the final evaluation amount of HeDeTang HK and its subsidiaries by Shanxi Delixin is more than 10.00% higher than the Purchase Price, the Parties agree the final evaluation amount shall be the final purchase price. The closing of the above mentioned share transfer is subject to the approval by the shareholders of both parties and the approval by the shareholders of the Company.

9.COMMITMENTS AND CONTINGENCIES

Litigation

Legal case with Beijing Bank

On June 29, 2015, SkyPeople China entered into a loan agreement with Beijing Bank. Pursuant to the loan agreement, SkyPeople China borrowed RMB 30 million (approximately $4.36 million) from Beijing Bank. Hongke Xue, Yongke Xue and Xiujun Wang provided guarantees for the loan and Shaanxi Boai Medical Technology Development Co., Ltd. (“Shaanxi Boai”) provided certain real estate property as a pledge for the loan. SkyPeople China did not repay the loan on time and Beijing Bank filed an enforcement request with Xi’an Intermediate People'sPeople’s Court in June 2017. The Xi’an Intermediate People’s Court seized real estate properties pledged by Shaanxi Boai and Xiujun Wang. In November 2018, the Court sold the real estate property pledged by Xiujun Wang for RMB1,170,180.at RMB 1.17 million (approximately $0.17 million). Because the real estate property is Xiujun Wang’s primary home, the Court allocated RMB 117,0000.12 million to Xiujun Wang as transition home leasing fee and deducted outstanding mortgage payments, and the remaining amount was delivered to the Beijing Bank as the repayment. The Court has also made inquiries to the Beijing Bank as to whether it is willing to accept the pledged real estate property of Shaanxi Boai as the repayment of the outstanding loan for the amount of RMB 27,932,30027.93 million (approximately $4.06 million) but Beijing Bank has refused to take the real property as repayment of the loan and the enforcement action has been terminated by the Court.Court on December 18, 2018. As of March 31, 2020, SkyPeople China still owe the unpaid amount. SkyPeople China was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Ningxia Bank

On March 8, 2016, SkyPeople China entered into a loan agreement with Ningxia Bank. Pursuant to the loan agreement, SkyPeople China borrowed RMB 25 million (approximately $3.63 million) from Ningxia Bank. Hongke Xue, Yongke Xue, Lake Chen, Shaanxi Boai Medical Technology Development Co., Ltd. and Shaanxi Qiyiwangguo provided guarantees for the loan. SkyPeople China also pledged 37 pieces of equipment and the related trademarks to Ningxia Bank for the loan. SkyPeople China has not repaid the loan and Ningxia Bank filed an enforcement action with Xi’an Intermediate people’s court in August 2017. The Court has frozen the assets of SkyPeople China that were pledged as guarantee for the loan from being transferred to any third-party, but the freeze does not limit or affect the use of these properties by SkyPeople China for its business. In July 2018, Shaanxi Qiyiwangguo filed a petition to the Court and requested the termination of the enforcement action on the basis that its guarantee of the loan was not valid because the seal used on the guarantee agreement was not authentic and the guarantee was not approved by the shareholders of Shaanxi Qiyiwangguo. On November 27, 2018, Shaanxi Qiyiwangguo withdrew its petition and thepetition. The Court agreed to such withdrawal and there has been noon other progress of this case. As of March 31, 2020, SkyPeople China still owe the unpaid amount. SkyPeople China was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020.  The creditors have no recourse to the current Company.

Legal case with China Construction Bank

On December 23, 2015, SkyPeople China entered into two loan agreements with China Construction Bank. Pursuant to the loan agreements, SkyPeople China borrowed RMB 13.90 million (approximately $2.13 million), and RMB 30 million (approximately $4.59 million) from China Construction Bank, respectively. Shaanxi Boai Medical Technology Development Co., Ltd. (“Boai”), Hongke Xue, Yongke Xue, Xiujun Wang and Yingkou Trusty Fruits Co., Ltd. (“Yingkou”) provided pledges for the loans. SkyPeople China has not repaid the loans and China Construction Bank filed an enforcement action with Xi’an Intermediate People'sPeople’s Court in March 2017. In December 2017, SkyPeople China received the enforcement notice from the Court. The Court has seized certain parking space and land use rights pledged by Xiujun Wang and Boai and sold the land use right pledged by Boai in auction for approximately RMB 24,835,790 as repayment to China Construction Bank. The Court also seized certain land use rights pledged by Yingkou Trusty Fruits Co., Ltd., but the auction sale for those rights was not successful. As of March 31, 2020, SkyPeople China currently is in discussionsstill owe the unpaid amount. SkyPeople China was one of the subsidiaries transferred along with China Construction BankHeDengTang HK to New Continent International Co., Ltd. on February 27, 2020.  The creditors have no recourse to the payment terms and the final amount.current Company.

On May 9, 2016, SkyPeople China entered into loan agreements with China Construction Bank. Pursuant to the loan agreements, SkyPeople China borrowed RMB 22.9 million (approximately $3.50 million) from China Construction Bank. Shaanxi Province Credit Reassurance Company (“Credit Reassurance Company”) provided a guarantee to China Construction Bank for the loan, Hongke Xue and Yongke Xue provided their guarantees, and SkyPeople China provided an office space that it owned to Credit Reassurance Company as a pledge. SkyPeople China has not repaid the loan and Credit Reassurance Company repaid the loan for SkyPeople China. In June 2017, Credit Reassurance filed an enforcement action request with Xi’an Intermediate People’s Court (the “Court”) in June 2017. In December 2017, SkyPeople China received the enforcement notice from the Court. The Court issued a verdict to seize the office space of SkyPeople China for auction sale on December 26, 2017. In February 2018, the auction sale was conducted but not successful. In June 2018, the Court decided to use the pledge property as the repayment for the outstanding loan of RMB 12.21million12.21 million (approximately $1.78 million).

Legal case with China Cinda Asset Management Co., Ltd.

In April 2015, China Cinda Asset Management Co., Ltd. Shaanxi Branch (“Cinda Shaanxi Branch”) filed two enforcement proceedings with Xi’an Intermediate People’s Court (the “Court”) against the CompanySkyPeople China for alleged defaults pursuant to guarantees by the CompanySkyPeople China to its suppliers for a total amount of RMB 39,596,25039.60 million or approximately $5.80$5.8 million.

In September 2014, two long term suppliers of pear, mulberry, and kiwi fruits to the CompanySkyPeople China requested that the CompanySkyPeople China provide guarantees for their loans with Cinda Shaanxi Branch. Considering the long term business relationship and to ensure the timely supply of raw materials, the CompanySkyPeople China agreed to provide guarantees on the value of the raw materials supplied to the Company.SkyPeople China. Because Cinda Shaanxi Branch is not a bank authorized to provide loans, it eventually provided financing to the two suppliers through the purchase of accounts receivables of the two suppliers with the Company.SkyPeople China. In July 2014, the parties entered into two agreements – an Accounts Receivables Purchase and Debt Restructure Agreement, and Guarantee Agreements for Accounts Receivables Purchase and Debt Restructure. Pursuant to the agreements, Cinda Shaanxi Branch agreed to provide a RMB 100 million credit line on a rolling basis to the two suppliers and the CompanySkyPeople China agreed to pay its accounts payables to the two suppliers directly to Cinda Shaanxi Branch and provided guarantees for the two suppliers. In April 2015, Cinda Shaanxi Branch stopped providing financing to the two suppliers and the two suppliers were unable to continue the supply of raw materials to the Company.SkyPeople China. Consequently, the CompanySkyPeople China stopped making any payment to Cinda Shaanxi Branch.

The CompanySkyPeople China has responded to the Court and taken the position that the financings under the agreements are essentially the loans from Cinda Shaanxi Branch to the two suppliers, and because Cinda Shaanxi Branch does not have permits to make loans in China, the agreements are invalid, void and had no legal effect from the beginning. Therefore, the CompanySkyPeople China has no obligation to repay the debts owed by the two suppliers to Cinda Shaanxi Branch.

Upon the Court’s suggestion, the parties agreed to a settlement discussion in April 2017. As a part of the settlement discussion, on April 18, 2017, the CompanySkyPeople China withdrew its non-enforcement request fromwith the Court without prejudice. Both parties areAs of March 31, 2020, SkyPeople China still in the process of settlement negotiations. If the parties cannot reach a settlement agreement, the Company has the right to refile the non-enforcement request with the Court. As the Company may still be liable for this loan, the Company recorded expenses andhave liability of $5.80$5.8 million as the result ofrelated with these two enforcement proceedings inproceedings. SkyPeople China was one of the third quarter of 2018.

subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Cinda Capital Financing Co. Ltd.

In August 2017, Cinda Capital Financing Co. Ltd. (“Cinda”) filed a lawsuit with Beijing 2nd Intermediate People’s Court (the “Beijing Intermediate Court”) against the Company’s indirectly wholly-owned subsidiaries Shaanxi Guoweimei Kiwi Deep Processing Company, Ltd. (“Guoweimei”) and Hedetang Farm Products Trading Market (Mei County) Co., Ltd. (“Trading Market Mei County Co”, and together with Guoweimei, “Lessees”) requested that Lessees repay RMB 50 million (approximately $7.27 million) in capital lease fees, plus interest. Cinda has purchased or paid for refrigerant warehouse and trading hall to the suppliers and vendors and agreed to lease them to the Lessees for a leasing fee of RMB 50 million in December 2016. The capital leasing fee became due on its maturity date of June 2017, with certain land use rights of Lessees in Mei County and equity of Guoweimei as a pledge. The Company has disputed that the land use rights for the refrigerant warehouse and trading hall were never sold to or transferred to Cinda, and argues that therefore it is a loan agreement and not a capital lease agreement among the parties. Lessees have taken the position that Cinda is not a bank and does not have government permits required to make loans in China, and the agreements including pledge agreement were invalid, void and without legal effect from the beginning. Therefore, the Company only has the obligations to repay principal but not the interest. In November 2017, Beijing Intermediate Court ruled in favor of Cinda and the Lessees appealed the case to the Beijing Supreme Court. The Beijing Supreme Court held a hearing at the end of July 2018. On December 4, 2018, the Beijing Supreme Court upheld the lower court’s decision. Currently,On April 8, 2019, Beijing Intermediate Court issued the verdict for enforcement of the judgment and the plaintiff has the priority rights for the repayment for the pledged land use rights of Lessees in Mei County and equity of Guoweimei. The case is under enforcement procedure and Cinda is in the process of evaluating the value ofsale the land use rights. Currently,Before the land use right is sold, the subsidiaries of SkyPeople China still owns the seized properties are still owned byand the liabilities to Cinda. As of March 31, 2020, SkyPeople China has not repaid the amount. SkyPeople China was one of the subsidiaries of SkyPeople China.transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

In August 2017, Cinda Capital Financing Co. Ltd. (“Cinda”) filed another lawsuit with Beijing Intermediate Court against the Company’s indirectly wholly-owned subsidiaries Guoweimei and SkyPeople China for repayment of a leasing fee of RMB 84,970,95984.97 million (approximately $12.35 million) plus interest. In January 2014, Guoweimei and SkyPeople China (the “Equipment Lessees”) signed an Equipment Financial Lease Purchase Agreement with Cinda and an equipment supplier pursuant to which Cinda would provide funds to purchase equipment and the Equipment Lessees would lease the equipment from Cinda. Guoweimei pledged certain land use rights in Mei County to Cinda and Xi’an Hedetang and Hedetang Holding pledged their equities in Guoweimei to Cinda to secure the repayment. Mr. Hongke Xue also provided a personal guarantee for the payment of the leasing fee. Beijing Intermediate Court had two hearings of the case and on March 21, 2018, and it ruled in favor of Cinda to the effect that SkyPeople China and Guoweimei shall pay leasing fees due in the amount of RMB 20,994,04821.00 million (approximately $3.05 million), as well as leasing fees not yet due in the amount of RMB 63,975,91063.98 million (approximately $9.30 million), plus attorney’s fees and expenses. Beijing Intermediate Court also ruled that Mr. Hongke Xue is jointly liable for the debt as the guarantor, and that Cinda has priority rights to the pledged land use rights in Mei County and the pledged equities of Guoweimei as well as the ownership of the leasing properties until the leasing fees are paid. SkyPeople China has appealed the decision to the Beijing Supreme Court. The Beijing Supreme Court rejected the appeal and upheld the original verdict on September 7, 2018. Currently, theThe case is under enforcement procedure and Cinda is in the process of sale the seized properties. Before they are sold, the subsidiaries of SkyPeople China still owns the seized properties are still owned byand the liabilities to Cinda. As of March 31, 2020, SkyPeople China has not repaid the amount. SkyPeople China was one of the subsidiaries of SkyPeople China.transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Shaanxi Fangtian Decoration Co. Ltd

In April 2015, SkyPeople China entered into a loan agreement with Shaanxi Fangtian Decoration Co. Ltd. (“Fangtian”). Pursuant to the loan agreement, SkyPeople China borrowed RMB 3.503.5 million (approximately $508,780) from Fangtian. SkyPeople China has not repaid the loan and Fangtian filed a lawsuit with Xi’an Yanta District People’s Court (“Yanta District Court”). On August 10, 2017, Yanta District Court ruled against SkyPeople China and determined that SkyPeople China must repay the loan of RMB 3.503.5 million plus interest RMB of 402,5000.40 million (approximately $585,098). Fangtian has requested that the Yanta District Courtcourt enter into enforcement procedures for the case. As of March 31, 2020, SkyPeople China has not repaid the amount. SkyPeople China was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Shanghai Pudong Development Bank

On May 4, 2015, SkyPeople China and Xi’an Branch of Shanghai Pudong Development Bank (SPD Bank Xi’an Branch) renewed a Working Capital Loan Contract and Repayment Schedule, according to which both parties agreed that SPD Bank Xi’an Branch loaned RMB 26.9026.9 million (approximately $3.92 million) to SkyPeople China with a term of one year. On the signing date of the Loan Contract, Hongke Xue, Yongke Xue, Xiujun Wang and SPD Bank Xi’an Branch signed a Contract of Guaranty guaranteeing the repayment of loan and undertaking joint liability. According to a Mortgage Contract of Maximum Amount signed between SkyPeople China and SPD Bank Xi’an Branch on April 2, 2013, SkyPeople China provided one of its real propertiesthe property and land use rights of Jingyang factory as the pledge. But SkyPeople China failed to repay after SPD Bank Xi’an Branch issued the loan.

In October 2015, SPD Bank Xi’an Branch filed thean enforcement request with the Intermediate Court of Xi’an and the Court has seized pledge realthe property and the land use rights and equity ownership of SkyPeople China in Wonder Fruit and SkyPeople Suizhong.Jingyang factory. During the enforcement procedure, SPD Bank Xi’an Branch has transferred its creditor’s rights to China Huarong Asset Management Co., Ltd. (“China Huarong”). The Court changed the execution applicant to China Huarong on December 12, 2018. China Huarong had applied toHuarong. In March 2019, the Intermediate Court to evaluateof Xi’an issued a verdict for the seized realtransfer of the pledged property and land use rights. The valuation process has not yet been completed.rights of Jingyang factory to China Huarong as the repayment of the loan.

Legal case with Shaanxi Fangyuan construction co., Ltd.

Shaanxi Guoweimei Kiwi Deep Processing Co. Ltd (“Guoweimei”), entered into a construction agreement with Shaanxi Fangyuan construction co., Ltd. (“Fangyuan”) in July 2013. On October 8, 2018, Fangyuan filed a lawsuit and requested that Guoweimei pay a project construction fee plus penalty of RMB 56,323,40456.32 million (approximately $8.22 million). On June 10, 2019, Baoji Intermediate People'sPeople’s Court issued a verdict that Guoweimei justmust pay RMB41, 576,833RMB 41.58 million (approximately $6.07 million) plus penalty to Fangyuan, and Fangyuan will enjoy preferential right for the projects in processing zone of National Wholesale and Trading Center in Mei County for Kiwi Fruits developed by Guoweimei. As of March 31, 2020, Guoweimei has not repaid the amount. Guoweimei was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Shaanxi Zhongkun Construction Co., Ltd.

In May 2015, Hedetang Farm Products Trading Markets (Mei County) Co., Ltd.  (“Hedetang”), subsidiary of GlobalKey Tianjin, and Shaanxi Zhongkun Construction Co., Ltd. (“Zhongkun”) entered into a construction and decoration agreement. On September 5, 2018, Zhongkun filed the lawsuit with Shaanxi ProvincialMei County People’s Court (the “Court”) for repayment of construction and decoration fees. The Court issued a civil judgement in November 2018, ordering Hedetang to pay project funds of RMB 1,632,9721.65 million (approximately $238,389)$0.24 million) to Zhongkun, plus interest. After entering intoOn April 19, 2020, the Court issued a verdict to terminate the enforcement phase, the Court foundbecause assets of Hedetang had already been seized by Xi’an Yanta District People’s Court and Baoji Intermediate People'sPeople’s Court, and there were no other assets for enforcement, soenforcement. Currently the enforcement procedure has been terminated byCompany is still liable for the Court.

unpaid amount and the interest.

Legal case with Xi’an Shanmei Food Co., Ltd.

On October 31, 2017, Xi’an Shanmei Food Co. Ltd. filed a lawsuit against Shaanxi Qiyiwangguo, a majority-owned subsidiary of the Company, with Zhouzhi County People’s Court in connection with a Land Lease Agreement entered into by the parties on October 1, 2013. On March 2, 2018, Zhouzhi County People’s Court issued a verdict that: (i) the Land Lease Agreement was thereby terminated; (ii) Shaanxi Qiyiwangguo shall pay Xi’an Shanmei the outstanding leasing fee RMB 211,6210.21 million (approximately $30,762) and (iii) Shaanxi Qiyiwangguo shall return the 29.3029.3 mu industrial use land to Xi’an Shanmei. Shaanxi Qiyiwangguo has appealed the decision to the Xi’an Intermediate People’s Court on the basis that: (x) the land use right was a capital contribution by Xi’an Shanmei for a shareholder of Shaanxi Qiyiwangguo who is also the sole shareholder of Xi’an Shanmei and the Land Lease Agreement was invalid and has no legal effect; (y) Zhouzhi Court did not schedule the hearing for the count claims filed by Shaanxi Qiyiwangguo; and (z) Zhouzhi Court violated certain civil procedures during the trial of the case. Due to the late notice to Zhouzhi Court, the case file was not timely transferred to Xi’an Intermediate Court and no appeal hearing was scheduled. Zhouzhi Court has issued verdict for enforcement procedure and Qiyiwangguo has filed petition of disagreement for the enforcement which is still under Zhouzhi Court’s review.review. On January 23, 2019, the Court rejected the petition of disagreement and the case has been under enforcement procedure. As of March 31, 2020, Shaanxi Qiyiwanggu has not repaid the amount. Shaanxi Qiyiwanggu was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Nanjing Bailuotong Logistics Services Co., Ltd.

In January 2016 Shaanxi Qiyiwangguo Modern Organic Agriculture Co., Ltd (“Qiyiwangguo”) and Nanjing Bailuotong Logistics Services Co., Ltd (“Bailutong”) entered into a transportation agreement to ship fruit juices. Bailutong failed to deliver the juice products and held them after their expiration date. Shaanxi Qiyiwangguo filed a lawsuit against Bailutong withBailutongwith Zhouzhi county People’s Court, and the Court issueissued the verdict in February 2018 that: (1) the transportation contract between Shaanxi Qiyiwangguo and Bailutong was terminated;terminated, and (2) Bailutong owed RMB 203, 551RMB0.20 million (approximately $29,715) to Shaanxi Qiyiwangguo for the loss of Shaanxi Qiyiwangguo. Bailutong appealed the case to Xi’an Intermediate People'sPeople’s Court. Xi’an Intermediate People'sPeople’s Court rejected the appeal and upheld the original verdict.verdict. As of the date of this report, Shaanxi Qiyiwangguo has not received the payment of RMB0.20 million from Bailutong.

Legal case with Henan Huaxing Glass Co., Ltd.

Shaanxi Qiyiwangguo entered into an agreement with Henan Huaxing Glass Co., Ltd. (“Huaxing”) in May 2014 for Huaxing to supply glass bottles to Shaanxi Qiyiwangguo. However, due to the disputes regarding the quality of products supplied by Huaxing, Shaanxi Qiyiwangguo did not pay the prices for certain glass bottles. In August 2017, Huaxing filed a lawsuit and the court ruled that Shaanxi Qiyiwangguo was required to payowed Huaxing RMB 203,742 (approximately $29,743) in July 2018. During the enforcement process, the parties reached a settlement agreement but Shaanxi Qiyiwangguo failed to pay the amount due and now the case is still in the court enforcement process.process. As of March 31, 2020, Shaanxi Qiyiwanggu has not repaid the amount. Shaanxi Qiyiwanggu was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Huludao Banking Co. Ltd.

In September 2016, the Suizhong Branch of Huludao Banking Co. Ltd. (“Suizhong Branch”) filed a lawsuit with Huludao Intermediate People’s Court (the “Huludao Court”) against the Company’s indirectly wholly-owned subsidiary Huludao Wonder Fruit Co., Ltd. (“Wonder Fruit”) and requested that Wonder Fruit repay a RMB 40 million (approximately $5.81 million) bank loan, plus interest. The loan became due on its maturity date of December 9, 2016. On December 19, 2016, the Huludao Court accepted the case. The Company has been disputing the interest rate of the loan with Suizhong Branch, and has not repaid the loan to date. Wonder Fruit believes that the interest charged by Suizhong Branch is 100.00%100% higher than the base rate set by People’s Bank of China and is not consistent with the China People’s Bank’s base interest and floating rate. The Huludao Court has seized land use rights, buildings and equipment of Wonder Fruit that were pledged as guarantee for the loan and has organized two auction sales for these assets in January and February of 2018, but both auction sales have been unsuccessful in finding a buyer. On July 19, 2018, the Court issued a verdict ordering Huludao Wonder to transfer its land use rights, building, equipment, electronic and transportation assets to Zuizhong Branch as payment of the outstanding principal, auction and evaluation fees and some interest of the loan for RMB 42,639,26442.64 million (approximately $6.22 million).

As of March 31, 2020, there was RMB 11.95 million (approximately $1.74 million) in interest on the loan unpaid. Huludao Wonder was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Andrew Chien

In September 2017, Andrew Chien, a former consultant of SkyPeople China, brought a lawsuit against the Company and Mr. Hongke Xue in the District Court of Connecticut (the “Court”). The complaint was not properly served and the Company learned of the litigation in December 2017. In the complaint, Mr. Chien has made several claims, most of which attempt to hold the Company liable under novel legal theories that relate back to an alleged breach of a consulting agreement between SkyPeople China and Chien from August 2006. Mr. Chien claimed approximately $257,000 damages and interest plus 2.00% of the Company’s then-outstanding shares. Mr. Chien has unsuccessfully attempted to sue the Company on the breach of the same consulting agreement several times in the courts of Connecticut and New York, and these cases have been dismissed. The Company has filed a motion to dismiss (“MTD”) and all proceedings are stayed pending determination of the MTD. On August 31, 2018, the Court granted our MTD. On September 10, 2018, Mr. Chien filed a motion for reconsideration. On September 28, 2018, the Court denied Mr. Chien’s motion for reconsideration. On October 26, 2018, Mr. Chien appealed the case to the United States Court of Appeals for the Second Circuit.  The appeal is fully briefed and presently awaiting decision. The Company will vigorously defend this lawsuit and expects to obtain earlyCourt of Appeals affirmed the trial court’s dismissal of the action on January 22, 2020, and denied Mr. Chien’s claims.petition for en banc rehearing on March 27, 2020.  Mr. Chien’s time to pursue a discretionary appeal to the Supreme Court of the United States has lapsed and the case is closed.

Legal case with Luwei

In 2018, Mr. Luwei, an individual, filed a claim for arbitration against SkyPeople China in Xi’an Arbitration Commission for breach of contract pursuant to a new share purchase agreement and a share redemption agreement. On April, 11, 2019, Xi’an Arbitration Commission made its decision and ordered SkyPeople China to repay RMB 3 million investment to Luwei. Mr. Luwei applied with Intermediate Court of Xi’an (the “Court”) for enforcement of the arbitration award which process was terminated by the Court due to no assets for enforcement. As of March 31, 2020, SkyPeople China has not repaid the amount. SkyPeople China was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Shaanxi Overseas Investment Development Corp.

In November 2019, Shaanxi Overseas Investment Development Corp (“Shaanxi Overseas Investment”) filed a lawsuit against SkyPeople China, Hongke Xue and Shenzhen Tian Shun Da Equity Investment Fund Management Co., Ltd. (“Shenzhen Tian Shun Da”) pursuant to an investment agreement entered in March 2016. According to the agreement, Shaanxi Overseas Investment agreed to invest RMB 5 million for the preferred shares of SkyPeople China with an annual interest rate of 2.38%. Shenzhen Tian Shun Da pledged 1.17% of the shares SkyPeople China that it owned and Hongke Xue provided guarantee for the performance of agreement by SkyPeople China. SkyPeople China failed to make the interests payment and Shaanxi Overseas Investment filed the lawsuit for breach of agreement. On December 26, 2019, Yanta District Court of Xi’an City (the “Court”) ordered SkyPeople China to pay Shaanxi Overseas Investment the preferred share redemption amount of RMB 5 million plus penalty which is calculated based upon the RMB 5 million at a rate of 24% a year. The Court also ruled that Shaanxi Overseas Investment may sell the pledged shares owned by Shenzhen Tianshun Da as the repayment for SkyPeople China and Hongkong Xue shall also assume the repayment obligation as guarantor. As of March 31, 2020, SkyPeople China has not repaid the amount. SkyPeople China was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

Legal case with Shaanxi Wanyuan Construction Co., Ltd.

In July 2019, Shaanxi Wanyuan Construction Co., Ltd. (“Wanyuan) filed a lawsuit with Shaanxi Baoji Municipal Intermediate People’s Court (the “Baoji Court”) against Guoweimei for repayment of construction and decoration costs of RMB 55.07 million pursuant to a Construction and Decoration Agreement entered by the parties in May 2017. In July, 2019, the Baoji Court ordered Guoweimei to pay construction and decoration costs of RMB55.07 million to Wanyuan, plus interest. As of March 31, 2020, Guoweimei has not repaid the amount. Guoweimei was one of the subsidiaries transferred along with HeDengTang HK to New Continent International Co., Ltd. on February 27, 2020. The creditors have no recourse to the current Company.

10. SUBSEQUENT EVENTS

On October 15, 2019,April 17, 2020, the Company entered into anthe Eleventh Exchange Agreement (the “First“Eleventh Exchange Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Lender”).

Pursuant to the FirstEleventh Exchange Agreement, the Company and Lender agreed to partition a new Secured Convertible Promissory Note in the original principal amount of $100,000$153,750 (the “First“Eleventh Partitioned Note”) from a Secured Convertible Promissory Note (the “Note”) issued by the Company on March 26, 2019. The outstanding balance of the Note shall be reduced by an amount equal to the outstanding balance of the FirstEleventh Partitioned Note. The Company and Lender further agreed to exchange the FirstEleventh Partitioned Note for the delivery of 133,333205,000 shares of the Company’s Common Stock, par value $0.001, according to the terms and conditions of the FirstEleventh Exchange Agreement.

On October 17, 2019,April 23, 2020, Future FinTech (Hong Kong) Limited registered GuangChengJi (Shanghai) Industrial Co. Ltd. (“Guangchengji”) with a registered capital of $30 million in Shanghai, China, which needs to be paid before April 22, 2049 when the business license will expire. The business scope of Guangchengji includes wholesaling of electronic components and equipment, metal materials, petroleum products, import and export business, computer software development, information technology, technology consulting and services, business management consulting and supply chain management. This operation has not started operating yet.

On June 10, 2020, the Company entered into a secondthe Twelfth Exchange Agreement (the “Second“Twelfth Exchange Agreement”) with the Lender.

Pursuant to the SecondTwelfth Exchange Agreement, the Company and Lender agreed to partition a new Secured Convertible Promissory Note in the original principal amount of $300,000$111,486 (the “Second“Twelfth Partitioned Note”) from the Note. The outstanding balance of the Note shall be reduced by an amount equal to the outstanding balance of the Second Partitioned Note. The Company and Lender further agreed to exchange the Second Partitioned Note for the delivery of 400,000 shares of the Company’s Common Stock, par value $0.001, according to the terms and conditions of the Second Exchange Agreement.

On October 23, 2019, the Company entered into a Forbearance Agreement (the “Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Lender”).

Pursuant to the Agreement, Lender agreed to withdraw a Redemption Notice delivered by the Lender to the Company on September 30, 2019 which was issued pursuant to a Secured Convertible Promissory Note issued by the Company to the Lender dated March 26, 2019 (the “Note”). Lender agreed not to make any redemptions pursuant to the Note before October 25, 2019. The parties agreed, in the event Lender delivers a Redemption Notice to the Company and the redemption amount set forth therein is not paid in cash to Lender within three (3) trading days, then the applicable redemption amount shall be increased by 25.00% (the “First Adjustment,” and such increase to the redemption amount, the “First Adjusted Redemption Amount”). In the event the First Adjusted Redemption Amount is not paid within three (3) trading days after the date of First Adjustment, then the First Adjusted Redemption Amount shall be increased in accordance with the following formula: $0.75 divided by the lowest closing trade price of the Common Stock of the Company during the twenty (20) trading days prior to the date of the Second Adjustment and the resulting quotient multiplied by the First Adjusted Redemption Amount (the “Second Adjustment,” and such increase to the First Adjusted Redemption Amount, the “Second Adjusted Redemption Amount”), provided, however, that such formula shall only be applied if the resulting quotient is greater than one (1) and such formula shall in no event be used to reduce the First Adjusted Redemption Amount. Upon payment in cash of the First Adjusted Redemption Amount or Second Adjusted Redemption Amount, the outstanding balance of the Note will be reduced by the original amount set forth in the Redemption Notice. The Company also agreed that during each calendar month, beginning in the month of October 2019, it will reduce the outstanding balance of the Note by at least $100,000 and if the outstanding balance is reduced by more than $100,000 in a given month, then the portion of the balance reduction amount that exceeds $100,000 may be counted toward the minimum balance reduction requirement in the next month or months.

On October 25, 2019, the Company entered into the third Exchange Agreement (the “Third Exchange Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Lender”).

Pursuant to the Third Exchange Agreement, the Company and Lender agreed to partition a new Promissory Note in the original principal amount of $145,000 (the “Partitioned Note”) from a Secured Convertible Promissory Note (the “Note”) issued by the Company on March 26, 2019. The outstanding balance of the Note shall be reduced by an amount equal to the outstanding balance of the Partitioned Note. The Company and Lender further agreed to exchange the Twelfth Partitioned Note for the delivery of 193,333148,648 shares of the Company’s Common Stock, par value $0.001, according to the terms and conditions of the ThirdTwelfth Exchange Agreement.

On November 1, 2019, the Company entered into the Fourth Exchange Agreement (the “Fourth Exchange Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Lender”).

Pursuant to the Fourth Exchange Agreement, the Company and Lender agreed to partition a new Promissory Note in the original principal amount of $175,000 (the “Partitioned Note”) from a Secured Convertible Promissory Note (the “Note”) issued by the Company on March 26, 2019. The outstanding balance of the Note shall be reduced by an amount equal to the outstanding balance of the Partitioned Note. The Company and Lender further agreed to exchange the Partitioned Note for the delivery of 233,333 shares of the Company’s Common Stock, par value $0.001, according to the terms and conditions of the Fourth Exchange Agreement.

On November 8, 2019, GlobalKey SharedMall Limited, a wholly owned subsidiary of Future FinTech Group Inc. (the “Company”), entered into a Three Party Cooperation Agreement (the “Agreement”) with Fan Zhang, a citizen of China, and Caixia Wang, a citizen of China.

Pursuant to the Agreement, the three parties agreed to make cash contributions totaling RMB 1,000,000 (approximately $142,857) to QR(HK) Limited (“QR HK”), a wholly owned subsidiary of GlobalKey SharedMall Limited (“GlobalKey”). Of this total, GlobalKey shall contribute RMB 510,000 (approximately $72,857); Fan Zhang shall contribute RMB 300,000 (approximately $42,857); and Caixia Wang shall contribute RMB 190,000 (approximately $27,143). GlobalKey agreed to loan Fan Zhang RMB 300,000 for his cash contribution obligation, which shall be repaid from dividends of QR HK in the future. If QR HK is terminated by the parties before the loan is paid off from the dividends or by liquidation of Fan Zhang’s ownership of QR HK, Fan Zhang shall repay the loan to GlobalKey in two years. Fan Zhang shall be responsible for the operations and daily management of QR HK’s cross-border e-commerce platform and shall be paid RMB 12,000 per month. GlobalKey is responsible for accounting, supervision of Fan Zhang’s management, and auditing the financials of QR HK, and additionally has the right to veto material business decisions of QR HK. 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the SEC (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “may”, “will”, “should”, “would”, “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to Company or Company’s management identify forward-looking statements. Such statements reflect the current view of Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the statements in the section “results of operations” below), and any businesses that Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our Annual Report on Form 10-K for the year ended December 31, 20182019 (the “2018“2019 Form 10-K”) and in this Form 10-Q. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report and in our 20182019 Form 10-K.

Although the Company believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this report, which attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.

Overview of Our Business

We are an integrated producerFuture FinTech is a holding company incorporated under the laws of fruit-related products and blockchain based e-commerce company. We engagethe State of Florida. The Company historically engaged in the production and sale of fruit juice concentrates (including fruit purees and fruit juices), fruit beverages (including fruit juice beverages and fruit cider beverages) in the PRC. Due to drastically increased production costcosts and tightened environmental laws in China, the Company is transforminghad transformed its business from fruit juice manufacturing and distribution to a real-name blockchain e-commerce platform that integrates blockchain and internet technology.

On January 22, 2019, The main business of the company formally launched GlobalKey SharedMall, also known asCompany includes an online shopping platform, Chain Cloud Mall (CCM) v1.0,, which is based on blockchain technology; a cross-border e-commerce platform (NONOGIRL) which has started its trial operation in March 2020 and is expected for a formal launch in the real-namethird quarter of 2020; a blockchain-based application incubator and membership-based blockchain shared shopping mall platform that integrates blockchaina digital payment system (DCON); and internetthe application and development of blockchain-based e-commerce technology and distinguishes itself by utilizing the automatic value distribution system of blockchain and sharing the value of the platform to all the participants in the system.financial technology.

On June 1, 2019, CCM v2.0 was launched. Compared to the 1.0 version, CCM v2.0 has a wider variety of product categories, easier user interface, more transparent information, more stable operation, higher security level, and faster logistics. Currently, CCM v2.0Chain Cloud Mall adopts a “multi-vendor hosted stores + platform self-hosted stores” model, supported by multiple local warehouses in different regions.model. The platform supports various marketing methods, including point rewards programs, coupons, live webcasts, game interaction, and social media sharing. Besides the blockchain-powered features, CCM v2.0 is also fully equipped with the same functions and services that other Chinese leading traditional e-commerce platforms provide.

CCM's blockchain-powered QRO plan enables CCM to record every event or transaction on a distributed ledger and make the whole process traceable. CCM is adopting an unalterable anti-counterfeit code to be issued by the manufacturers, which can ensure the authenticity of products and directly link manufacturers with their targeted customers as a way of precision marketing. On July 30, 2019 the Company announced the adoption of the QRO anti-counterfeiting code to all products under the Company's Hedetang brand. On August 2, 2019, the Company announced the adoption of QRO anti-counterfeiting code on its shared shopping platform CCM.

Based on blockchain technology, CCM is established to transform the relationship between companies and consumers from traditional selling and buying relationships to a value-sharing relationship. The platform will fairly distribute the benefit of the entire mall to users who engaged in the promotion, development, and consumption based on their contributions to the platform. The members of CCM are not only consumers and entrepreneurs but also participants, promoters and beneficiaries.

The CCM shared shopping mall platform is designed to be a block-chain based shopping mall for merchants and goods, not the exchange of digital currencies, and it currently only accepts payment from credit cards, Alipay and Wechat.WeChat.

We offer high-qualityChain Cloud Mall is an enterprise customer interactive and comprehensive shopping and sales service platform. It is an open network promotion system with a blockchain based anti-counterfeit system including point issuance, referral point and discount points settlement. The new business model creates a completely new source of data traffic for enterprises.

Merchants on the Chain Cloud Mall issue their own blockchain points and anti-counterfeiting QR codes. Every product comes with unique anti-counterfeiting QR codes on the label. Customers collect the points issued by the merchants by scanning products at attractive priceswith their mobile phones on the anti-counterfeiting QR code. These QR codes are generated by blockchain system of Chain Cloud Mall and provided to merchants. The successful collection of the merchant points confirms that the authentication of product from such enterprise. The Chain Cloud Mall to record and provide Chain Cloud Mall points to its members upon a successful new member and/or product referral, which can be used as credit when making purchases on CCM. It incentivize ourits members to promote ourthe platform and share ourthe products with their social contacts. Our platform has attracted a growing basecontacts, which in turn increases the sales through Chain Cloud Mall and helps the Company generate greater value.

Future FinTech generated approximately100% of users, including membersits revenue from its two core business segments in the CCM shopping mall membership and non-members. These users are actively purchasing products on our platform. Since our trial operationon-line sale of our platform on December 26, 2018, we had approximately 164goods for the three months ended March 31, 2020. The other sales segment contributed only to the total revenue and 6,071 users as of December 31, 2018 and September 30, 2019, respectivelywas immaterial to the overall business.

CCM shopping mall membership

Members are the key participants on our platformCCM and drivers of ourits growth. Our members typically pay to gain access to a dedicated app that provides access to a curated selection of products, exclusive membership benefits, and features, including discounted prices and point rewards. Members can refer others to become members and are rewarded for doing so. Members can also promote products on various social platforms and are rewarded if those users purchase our products. We currently generate revenues primarily from fixed membership fees and selling products on our platform to users, including both members and non-members.

Currently, there are twothree kinds of membership programs, Diamond Elite, Gold Elite and Silver Elite, with different membership Fees.fees and benefits. The membershigher membership fee provides more benefits to the members.

Sales of Goods

We have a unique real-name and membership–based blockchain e-commerce shopping platform that integrates blockchain, internet technology and distinguishes itself by utilizing the automatic value distribution system of the blockchain and sharing the value of the platform to all the participants in the system.

Our latest CCM v3.0 creates a new value cycle system of online shopping mall with the real-name blockchain system with following characteristics:

Using real-name blockchain technology to carry out anti-counterfeiting for products produced by the enterprises. The essence of anti-counterfeiting is to determine the person responsible for the product. Using real-name blockchain system, it provides the assurance to our customers to the authentication of the products they purchase and solve the problem of counterfeiting products in online shopping mall.

Blockchain points are requiredalso discount coupons for merchants, guiding customers to log onto Chain Cloud Mall (CCM) appthe platform of the merchants, and provide them discounts when purchasing. This process is called secondary data traffic. Every company is aware of the importance of maintaining old customers. Blockchain anti-counterfeiting technology through scanning of QR codes by the customers helps companies identify such customers and allows them to systematically maintain contacts with such customers.

Points promotion system brings secondary data traffic comes with volume and high turnover ratio. All such sales are directed to the merchants’ stores when customers possess and use merchants coupons. With a high level of user stickiness, customers are likely to purchase products again and collect more blockchain points.

Anti-counterfeiting technology plus the Company’s secondary data traffic platform have created great value for the merchants that have stores on our platform. By gathering all loyal customers to a merchant’s store, we can build a standard value community. With the common interest, the value community of a merchants can form a self-organizing system with customer groups to maximize the interests of such merchant.

Approximately $1,057 and $138,000 was recognized as revenue from the “sale of goods” segment from orders on sales of the Company’s own products on the platform for the three months ended March 31, 2020 and March 31, 2019, respectively.

Impact of COVID-19 on our Business

COVID-19 has affected our business during the three months ended March 31, 2020. In early 2020, Chinese government took emergency measures to combat the spread of the virus, including quarantines, travel restrictions, and the temporary closure of office buildings and facilities in China.

Substantially all of our revenues are generated in China.  In response to the evolving dynamics related to the COVID-19 outbreak, the Company is following the guidelines of local authorities as it prioritizes the health and safety of its employees, contractors, suppliers and business partners. Our offices in China have been closed and all of the Company’s employees have been working from home from Chinese New Year at the end of January until late March 2020. The quarantines, travel restrictions, and the temporary closure of office buildings have negatively impacted our business. Our suppliers have negatively been affected, and could continue to be negatively affected in their ability to supply and ship products to our customers. Our customers that are negatively impacted by the outbreak of COVID-19 may reduce their budgets to purchase products and services from us, which may materially adversely impact our revenue. The business operations of the third parties’ stores on our platform have been and could continue to be negatively impacted by the outbreak, which may negatively impact their operations and business, which may in turn adversely affect the business of our platform as a whole as well as our financial condition and operating results. The outbreak has had and might continue to have disruption to our supply chain, logistics providers, customers or web portalour marketing activities which could materially adversely impact our business and results of operations, including causing  our suppliers to cease manufacturing products for a period of time or materially delay delivery to us and customers, which may also lead to loss of customers, as well as reputational, competitive and business harm to us. Some of our customers, contractors, suppliers and other business partners are small and medium-sized enterprises (SMEs), which may not have strong cash flows or be well capitalized, and may be vulnerable to an epidemic outbreak and slowing macroeconomic conditions. If the SMEs that we work with cannot weather the COVID-19 and the resulting economic impact, or cannot resume business as usual after a prolonged outbreak, our revenues and business operations may be materially and adversely impacted.

The global economy has also been materially negatively affected by the COVID-19 and there is continued severe uncertainty about the duration and intensity of its impacts. The Chinese and global growth forecast is extremely uncertain, which would seriously affect customer spending on our shopping mall.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

Further, as we do not have access to a revolving credit facility, there can be no assurance that we would be able to secure commercial debt financing in the future in the event that we require additional capital. We currently believe that our financial resources will be adequate to see us through the outbreak. However, in the event that we do need to raise capital in the future, outbreak-related instability in the securities markets could adversely affect our ability to raise additional capital.

Consequently, our results of operations has been adversely, and may be materially, affected, to the extent that the COVID-19 harms the Chinese and global economy. Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact, almost all of which are beyond our control. 

Results of Operations

Comparison of Three Months ended March 31, 2020 and 2019:

Revenue

The following table presents our consolidated revenues for the three months ended March 31, 2020 and 2019, respectively (in thousands):

The increase in revenue for the three months ended March 31, 2020 was primarily due to the growth of our business section of CCM shopping mall membership, which was partially offset by a decrease in sales of goods.

Sale of goods decreased from $0.14 million for the three months ended March 31, 2019 to $0.001 million for the three months ended March 31, 2020. The decrease was mainly due to the negative impact of COVID-19 during this period, as the staff could not work in the office and shipments stopped.

In order to download someincrease the repeat sales from customers and drive sales growth, the Company subscribes members on its online shopping platform. Currently, there are three kinds of their rewardingmembership programs, Diamond Elite, Gold Elite and Silver Elite, with different membership fees and benefits. The higher membership fee programs provide more benefits to the members. Members can earn points each day. The member could download all his/her rewarding points if he/she log ontoon the app or web portal for at least 200 days within the membership valid period which is 365 days. Members must renew their membership before expiration to continue earning pointsCompany’s sales platform and enjoy discounts on their purchases. Members can refer others to become members and are rewarded for doing so. Members can also promote products on various social platforms and are rewarded if those users purchase the discounts. A non-member user can purchase products from the platform but does not enjoy the above mentioned benefits.

Company’s products. Membership revenue is recognized when member registers and makes his/her first order on CCM app or web portal.

Membership benefits are as follows:

CCM-Points can be used as coupons for the member’s future purchases on our app and website.

In order to promote our membership program, we currently allow our users to join the membership program by purchasing any merchandise of the equivalent value of the membership fee through our CCM app or website as an alternative to paying the upfront fixed membership fee. 

CCM-Points can only be used as credits when making purchases on our platform, with one CCM Point representing RMB1.00. CCM-Points cannot be redeemed for cash. Members may transfer CCM Points to others.

From December 2018, the trial period when our e-commerce platform launched, until September 30, 2019, we received proceeds of RMB 9,025,880, approximately $1,276,121 from the fixed membership fees and merchandise sales with 6,071 members and 6,233 orders. For the three months ended September 30, 2019, we received RMB2,153,935, approximately $653,578 in proceeds from 2,057 members with 2,169 orders.

For our fruit juice business, core products are (1) fruit juice concentrates, mainly including concentrated apple, pear, and kiwi juices; (2) fruit beverages, including pure fruit beverages and fruit cider beverages; and (3) other fruit-related products, including, for example, fresh fruits, vegetables and fructose. Our fruit juice business is highly seasonal and can be greatly affected by weather because of the seasonal nature of growing and harvesting of fruits and vegetables. From the beginning of year 2019, we classified the above products all into one category of fruit related products.

platform.

Our production line at the Shaanxi Qiyiwangguo factory can only produce puree and concentrated puree. We use the production line that produces concentrated apple and pear juice in the facility of the Jingyang branch of SkyPeople (China) to produce concentrated clear kiwifruit juice.

For the third quarter of 2019, sales of our fruit-related products represented 4.68% of our revenue, compared to sales of 97.70%, respectively, for the same period in 2018.

Fresh fruits are the primary raw materials needed for the juice production of our products. Our raw materials mainly consist of apples, pears and kiwifruits. Other raw materials used in our business include pectic enzyme, amylase, auxiliary power fuels and other power sources such as coal, electricity and water. We purchase raw materials from local markets and fruit growers that deliver directly to our plants.

There are two general categories of fruit and vegetable juices available in the market. One is fresh juice that is canned directly upon filtering and sterilization after being squeezed out of fresh fruits or vegetables. The other general category is juice drinks made out of concentrated fruit and vegetable juices. Concentrated fruit and vegetable juices are produced through the pressing, filtering, sterilization and evaporation of fresh fruits or vegetables. Concentrated juices are not drinkable. Instead, they are used as a basic ingredient for manufacturing juice drinks and as an additive to fruit wine, fruit jam, cosmetics and medicines.

As compared to our fruit juice concentrate products, which experience seasonality, fruit juice beverages can be produced and sold year-round.

The manufacturing process for fruit juice beverages involves further processing of fruit juice concentrates. Our fruit juice beverages are divided into two categories: pure fruit juice and fruit cider beverages. Currently we produce five flavors of fruit beverages in 236 ml glass bottles, 258 ml glass bottles, 280 ml glass bottles, 418 ml glass and 500 ml glass bottles, and BIB (bag in box) packages, including kiwifruit juice, mulberry juice, peach juice, pomegranate juice and fruit and vegetable juice. We also produce two flavors of lactobacillus fruit beverages in 268 ml glass bottles, including lactobacillus kiwifruit juice and lactobacillus mulberry juice, as well as three beverages with rich dietary fiber in 330 ml glass bottles, including kumquat and grapefruit juice, kiwifruit juice and mulberry juice. Our products are sold through distributors in stores. 

Results of Operations

Comparison of Three Months ended September 30, 2019 and 2018:

Revenue

The following table presents our consolidated revenues for each of our main products for the three months ended September 30, 2019 and 2018, respectively (in thousands):

Sales for the three months ended September 30, 2019 were $0.34 million, an increase of $0.03 million, or 10.7% compared to sales for the same period of the prior year of $0.31 million.

The increase in revenue for the three months ended September 30, 2019 was primarily due to the growth of our new business section of CCM shopping mall membership and sales of goods.

In the third quarter of year 2018, the Company operated in five segments: concentrated apple juice and apple aroma, concentrated kiwifruit juice and kiwifruit puree, concentrated pear juice, fruit juice beverages, and others. Since 2019, in accordance with the Company’s new business strategy, the Company reclassified the concentrated apple juice and apple aroma, the concentrated kiwifruit juice and kiwifruit puree, and the concentrated pear juice and the fruit juice beverages all into the category of fruit related products.

For the three months ended September 30, 2019, as a result of our business transformation, there was a continuing shrinking of our previous main business section of fruit related products, a decrease of $0.29 million from $0.30 million to $0.02 million.

In the December 2018, the Company started to receive membership fees and sell products on its CCM e-commerce platform to its members or non-members, which is a brand new business section embodied in the Company’s current transformation. Therefore, revenue from segments of membership fees and sales of goods showed 100.00% change during the third quarter of 2019 compared to the same period of 2018.

There was no other revenue for the three months ended September 30, 2019, as compared to $0.07 million for the same period of last year. In the third quarter of 2018, the Company’s other revenue included healthcare products, and other byproducts, such as kiwifruit seeds, but in the third quarter of 2019, there were no such sales.

Gross Margin

The following table presents the consolidated gross profit of each of our main products and services and the consolidated gross profit marginsmargin, which is gross profit as a percentage of the related revenues, for the three months ended September 30,March 31, 2020 and 2019, and 2018, respectively (in thousands):

Overall gross margin as a percentage of revenue was 100% for the three ended March 31, 2020, an increase of 80.6% compared to 19.4% for the same period of last fiscal year. The consolidatedincrease in gross margin as a percentage of revenue was mainly attributable to the CCM Shopping Mall Membership segments, which has high gross margin. In terms of dollar value, the overall gross profit for the three months ended September 30, 2019March 31, 2020 was $0.25$0.20 million, an increase of $0.40$0.17 million, from negative $0.15compared $0.03 million for the same period of 2018, primarily due to different comparable basis as a resultlast fiscal year. The increase in the dollar value of our business transformation. We have shifted to the business sections of CCM shopping mall membership and sales of goods since December 2018, which contributed to the profit for the third quarter of 2019. Business sections of fruit related products and others mainly caused the loss for the same period of last year.

Theoverall gross margin of our fruit related products increased from a gross loss margin of 18.20% of last year to a gross margin of 0.00% for the third quarter of 2019, primarilywas mainly due to the decrease in production, andincrease from the company no longer bearing large fixed expenses such as depreciation and amortization.CCM Shopping Mall Membership fee segment.

The new business sections of CCM shopping mall membership and sales of goods caused a 100.00% change in gross profit, with $0.19 million and $0.06 million, respectively, for the three months ended September 30, 2019 compared to $0 for the same period of last year.

The company did not sell any other products in the third quarter of 2019.

Operating Expenses

The following table presents our consolidated operating expenses and operating expenses as a percentage of revenue for the three months ended September 30,March 31, 2020 and 2019, and 2018, respectivelyrespectively: (in thousands): 

General and administrative expenses decreasedincreased by $1.30$0.97 million, or 50.17%102.1%, from $2.58$0.95 million to $1.28$1.92 million for the three months ended September 30, 2019March 31, 2020, compared to the same period of last year,fiscal year. The increase in general and administrative expenses was mainly due to stock related expenses of $1.19 million that the Company recorded during the three months ended March 31, 2020, for a Consulting Service Agreement that the Company entered into on January 25, 2020 with Dragon Investment Holding Limited (Malta).

Selling expenses decreased by $0.06 million, or 85.7%, from $0.07 million to $0.01 million for the three months ended March 31, 2020, compared to the same period of the last fiscal year. The decrease was mainly due to a decrease in depreciation of fixed assets and amortization of intangible assets. The Company recorded impairmentselling expenses of approximately $26.00 million to its fixed assets and $12.00 million related to its intangible assets in the end of year 2018, which resulted in lower depreciation expenses and amortization costs in the third quarter of 2019.from our e-commerce business.

Selling expenses decreased by $14.69 million, or 98.06%, from $14.98 million to $0.29Bad debt provision was $4.20 million for the three months ended September 30, 2019 as comparedMarch 31, 2020, which was mainly for the other receivables from HeDeTang Hong Kong, which was sold to New Continent International Co., Ltd during the same period in 2018 because the company recorded $14.9 million of bad debt expenses in the thirdfirst quarter of 2018. Besides this extraordinary amount, selling expenses actually increased about$0.21 million for the promotion costs of the new business sections.

In the third quarter of 2019, the company incurred $0.02 million of R&D expenses for developing, testing, updating and maintaining a block-chain based CCM Shared Shopping Mall and other related software systems. There were no such expenses in the same period of 2018.2020.

Other Income (Expense), Net

The decreaseOther expenses, net increased by $0.47 million to $0.55 million for the three months ended March 31, 2020 from $0.08 million in other expenses was mainlythe same period of the last fiscal year, primarily due to a decrease in interest expense, from $0.40 million to $0.12 million, occupying 83.80%currency exchange loss related with the sale of the total decrease because of the lower loan interest expenses as a result of the settlement of a bank loan.HeDeTang Hong Kong.

Income Tax

There were no provisionsWe did not have tax provision for income taxes,the three months ended March 31, 2020 and 2019, as the company suffered a loss.

Company incurred losses in the first quarter of 2020 and 2019.

Non-controlling Interests

As of September 30, 2019, SkyPeople (China)March 31, 2020, Shaanxi Chunlv Ecological Agriculture Co., Ltd. holds 20.0% interest in Chain Cloud Mall Logistics Center (Shaanxi) Co., Limited (“CCM Logistics”), CCM Logistics holds 10% interest in ) Hedetang Farm Products Trading Market (Mei County) Co., Ltd., Nature Worldwide Resources Ltd. held a 91.15%40% interest in DCON Digipay, and Shaanxi Qiyiwangguo, and Hedetang Holding (HK) held a 73.42%Yinlian holds 45% interest in SkyPeople (China). TSD held a 26.36% interest in SkyPeople (China). Net loss attributable to non-controlling interests decreased mainly due to the increase in the net income generatedZhonglian Hengxin.

Loss from our new business sections of CCM shopping mall membership and sales of goods.Continuing Operations

Comparison of Nine Months ended September 30, 2019 and 2018:

Revenue

The following table presents our consolidated revenues for each of our main productsLoss from continuing operations increased by $5.41 million from $1.07 million for the ninethree months ended September 30,March 31, 2019 and 2018, respectively (in thousands):

Total sales for the nine months ended September 30, 2019 were $0.82 million, a decrease of $0.84 million, compared to $1.66$6.48 million for the same period of last year,2020 mainly due to the sales reduction for fruit related products.an increase in operating expenses, as discussed previously. 

Sales from fruit related products decreased by $1.50 million from $1.56 million to $0.06 million due to the business transformation whereupon the company focusedGain on its new business sections.disposal of discontinued operations

Furthermore, our business segmentsGain on disposal of CCM membership and sales of goods were brand new sections, therefore, there were 100.00% changes in these two sections during the nine months ended September 30, 2019 and 2018.

Sales from our other products were $0.01 million and $0.10discontinued operation was $123.69 million for the ninethree months ended September 30, 2019March 31, 2020, which was related with sale of HeDeTang Hong Kong to New Continent International Co., Ltd during the first quarter of 2020. . The total assets of HeDeTang HK were $106.85 million as of February 27, 2020 and 2018 respectively. The segmentthe total liabilities of other products contains different productsHeDeTang HK were $231.21  million as of February 27, 2020, resulting in year 2018a gain on disposal of $123.69 million. There was no income or loss from HeDeTang HK from January 1, 2020 to the sale.

Loss per Share

Basic and 2019. In year 2018,diluted loss per share from continuing operations were $0.20 and $0.20 for the Company’s other products included health care productsthree months ended March 31, 2020, respectively, as compared to a loss of $0.03 and other byproducts, such as kiwifruit seeds, but$0.03 for the same periodperiods of 2019, revenue from others was mainlyrespectively. Basic and diluted income per share attributable to leasing out cold storage from a subsidiary.

Gross Margin

The following table presents the consolidated gross profit of each of our main productsdiscontinued operations was $3.73 and the consolidated gross profit margin, which is gross profit as a percentage of the related revenues,$3.66 for the ninethree months ended September 30, 2019March 31, 2020 respectively. Basic and 2018, respectively (in thousands):