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Summary:
- Future Fintech ($FTFT) is a purported “blockchain” & “fintech” company based in China that previously produced and sold fruit juice as SkyPeople Foods Holding Ltd. (“SkyPeople”)
- They were publicly listed on the NASDAQ with the help Rodman & Renshaw (featured in the documentary The China Hustle), an underwriter known for bringing a number of questionable Chinese microcap stocks to market – and violating Finra rules
- SkyPeople settled a $2.2m class action lawsuit in 2013 for defrauding shareholders
- They regularly take out and default on loans, leases, and service contracts – 20 times in 6 years (drawing from past two 8Ks)– and then get sued for this behavior
- They’re rapidly burning through cash per their latest 10-Q and admit in their own filings that they may have to cease operations
- As a result, they’ve issued shares twice in the past two months, knowing that their financial position is precarious
- Their “Chain Cloud Mall” and “NONOGIRL” platforms appear to be standard online retail duds, absent of any evidence of blockchain or fintech-related technology implementation, with limited to no engagement
- Their blockchain “platform" & currency, DCON, appears to have been quickly abandoned after launch – if it was ever launched at all
- They received a subpoena from the SEC in February 2020 and have repeatedly been at risk of being delisted by NASDAQ due to their routine failure to file reports on time
Introduction
During a casual scroll through the dregs of Robinhood, I stumbled upon a listing that caught my eye: Future Fintech ($FTFT), a China-based “blockchain e-commerce financial technology company” that’s up an impressive 455% over the past year. Featuring a market cap of ~$500m and share price of ~$5.50 (at the time of discovery), it appeared at first glance to be a player in a hot sector with plenty of room to run. I decided to do a deep-dive into their history, products, and SEC filings as an exercise in due diligence.
What I found was bewildering – and a great lesson in why doing your own thorough research before investing is vital. Let’s take a look at what I found.
A Brief Company History
$FTFT wasn’t always a pioneer in one of the hottest sectors on Wall Street. Before pivoting to blockchain, e-commerce and crypto in 2018, $FTFT produced and sold fruit juice - yes, seriously - as SkyPeople Foods Holding Ltd. (“SkyPeople”). The carcass of the company dates all the way back to 1998, but for brevity’s sake, we’ll focus on their recent history.
SkyPeople was brought onto the NASDAQ via secondary offering through underwriters Rodman & Renshaw (featured in the documentary The China Hustle), who have a history of bringing sketchy Chinese microcap companies to market and violating Finra rules. Interestingly, SkyPeople settled a $2.2m class action lawsuit (.pdf link) in 2013 for overstating their revenues by 1,000% and failing to disclose a related-party transaction involving their former CFO, Yongke Xue (now board chairman), to shareholders.
According to their latest 10-Q, the transition to their latest business focus hasn’t been going so well: “The Company incurred operating losses and had negative operating cash flows, which raised substantial doubts about its ability to continue as a going concern” (pg. 7). As of September 30, 2020, positive operating cashflows were predominantly related to stock compensation and discontinued operations – not their stated core business (pg. 3). The quick ratio for their 3Q2020 financials (0.057) indicates that the company doesn’t have adequate liquid assets to cover their short-term liabilities.
Compounding their troubles is a subpoena from the SEC’s Division of Enforcement issued on February 21, 2020, addressing their accounting practices, management oversight, and the sale of one of their subsidiaries (pg. 16). Note that this critical piece of information is missing from their website’s news page.
Their 2019 10-K - the last one filed with the SEC - details their routine, schizophrenic changes in name and business focus since 1998, as well as their suspiciously complicated and web-like organizational structure, portrayed on a chart (pg. 4) featuring font so small that it’s impossible to read.
In addition to being an industry leader in juice production and blockchain technology, $FTFT is also an innovator in taking out loans, leases, and service contracts, defaulting on them, and getting slapped with judgements in court, boasting an impressive record of 20 defaults and lawsuits in six years (2014-2019, pgs. 42-45). Furthermore, they’ve regularly been in danger of being delisted by NASDAQ due to their persistent failure to file reports on time (pg. 40).
Now that we’ve scratched the surface of this industry heavyweight’s complex history, let’s examine $FTFT’s products and services.
Blockchain, E-Commerce, and Crypto – Oh My!
According to $FTFT’s website, www.ftft.top, their core revenue generators revolve around blockchain-enabled e-commerce. We’ll take a brief, critical look at each of them below.
“Chain Cloud Mall”, AKA “GK Shared Mall” (www.gksharedmall.com), is described on their website as an “...innovative B2B2C e-commerce platform created by well-known investment bankers, e-commerce and blockchain technology industry elites, financial technology experts, and sharing economy scholars." In reality, it appears to be a standard, boring retail platform, absent of any evidence whatsoever that blockchain & fintech “experts” and “scholars” were involved in its creation, or that blockchain technology is even in place at all. It’s replete with dead links and has seemingly little engagement. In fact, according to their 2019 10-K, it generated an abysmal $0.54m in revenue from a total of 6,401 users.
“NONOGIRL” is a “cross-border e-commerce platform” that, in reality, appears to be a standard-web auction site that was seemingly abandoned 7 months ago according to the NONOGIRL LinkedIn page. It’s unclear if the site was ever launched; searches on www.baidu.com and the Google Play Store return no direct results to the platform.
“DCON” is a “blockchain-based application incubator and technical service and support for real name and blockchain based assets” that appears to be dead in the water, as the associated coin never appears to have been released. No development updates are available on $FTFT’s website for either the “incubator” project or the DCON platform itself.
Conclusion
All publicly available evidence points toward this name being an incredibly risky investment with a hefty amount of downside looming overhead. Major red flags abound – and to those holding long positions in this company: invest with caution.
All SEC filings can be found here%2520(CIK%25200001066923)). Thanks for reading.
Submitted March 16, 2021 at 01:08AM by JailedByKamala https://ift.tt/3rQuk1K
