Future FinTech Group Inc. 10-Q

Item 1. Financial Statements FUTURE FINTECH GROUP INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2023 December 31, 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 33,327,145 $ 26,145,588 Restricted cash 3,459,825 3,589,582 Short - term investment 1,061,956 988,073 Accounts receivable, net 2,708,493 7,796,672 Advances to suppliers and other current assets 19,935,923 4,670,264 Loan receivables 4,911,526 19,157,538 Other receivables, net 5,740,199 2,649,536 Amount due from related party 55,533 53,126 TOTAL CURRENT ASSETS $ 71,200,600 $ 65,050,379 Property, plant and equipment, net $ 4,379,329 $ 4,417,281 Right of use assets - operation lease 884,253 1,055,906 Intangible assets 489,551 518,069 Goodwill 13,976,084 13,976,084 TOTAL NON-CURRENT ASSETS 19,729,217 19,967,340 TOTAL ASSETS $ 90,929,817 $ 85,017,719 LIABILITIES CURRENT LIABILITIES Accounts payable $ 396,591 $ 3,603,577 Notes payable 3,459,825 3,589,582 Accrued expenses and other payables 2,930,193 2,214,256 Advances from customers 14,714,796 1,236,241 Lease liability - operation lease 297,571 294,944 Amounts due to related parties 226,371 244,819 Deferred liabilities 7,387,697 7,387,697 TOTAL CURRENT LIABILITIES $ 29,413,044 $ 18,571,116 NON-CURRENT LIABILITIES Lease liability - operation lease 586,682 760,962 TOTAL NON-CURRENT LIABILITIES 586,682 760,962 TOTAL LIABILITIES $ 29,999,726 $ 19,332,078 Commitments and contingencies (Note 24) STOCKHOLDER’S EQUITY Future FinTech Group, Inc, Stockholders’ equity Common stock, $ 0.001 par value; 60,000,000 shares authorized; 14,645,653 shares and 14,645,653 shares issued and outstanding as of June 30, 2023 and December 31, 2022 respectively $ 14,646 $ 14,646 Additional paid-in capital 222,751,657 222,751,657 Statutory reserve 98,357 98,357 Accumulated deficits ( 155,924,902 ) ( 152,276,434 ) Accumulated other comprehensive loss ( 4,593,257 ) ( 3,623,005 ) Total Future FinTech Group, Inc. stockholders’ equity 62,346,501 66,965,221 Non-controlling interests ( 1,416,410 ) ( 1,279,580 ) TOTAL STOCKHOLDERS’ EQUITY 60,930,091 65,685,641 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 90,929,817 85,017,719 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 FUTURE FINTECH GROUP INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenue $ 3,808,991 $ 7,418,277 $ 7,202,956 $ 10,884,642 Cost of revenues-third party 2,201,188 6,042,857 4,025,558 7,721,245 Cost of revenues-related party 348,636 - 710,594 - Gross profit 1,259,167 1,375,420 2,466,804 3,163,397 Operating Expenses General and administrative expenses 2,545,955 2,649,979 6,024,355 6,060,389 Research and development expenses 116,366 770,105 325,089 1,203,160 Selling expenses 123,812 349,209 256,251 719,678 Impairment Loss - 448,611 - 697,123 (Recovery) Provision of doubtful debts ( 1,187,403 ) ( 29 ) ( 1,170,577 ) 1,973 Total operating expenses 1,598,730 4,217,875 5,435,118 8,682,323 Loss from operations ( 339,563 ) ( 2,842,455 ) ( 2,968,314 ) ( 5,518,926 ) Other (expenses) income Interest income 245,580 242,713 701,037 415,943 Interest expenses - ( 2,942 ) - ( 6,018 ) Other (expense) income, net ( 1,513,440 ) 389,938 ( 1,561,949 ) 385,837 Total other income, net ( 1,267,860 ) 629,709 ( 860,912 ) 795,762 Loss from Continuing Operations before Income Tax ( 1,607,423 ) ( 2,212,746 ) ( 3,829,226 ) ( 4,723,164 ) Income tax provision ( 35,878 ) ( 123,788 ) ( 61,552 ) ( 311,741 ) Loss from Continuing Operations ( 1,643,301 ) ( 2,336,534 ) ( 3,890,778 ) ( 5,034,905 ) Discontinued Operations Gain/(Loss) on disposal of discontinued operations 105,480 ( 154 ) 105,480 ( 154 ) NET LOSS ( 1,537,821 ) ( 2,336,688 ) ( 3,785,298 ) ( 5,035,059 ) Less: Net Loss attributable to non-controlling interests ( 65,817 ) ( 226,296 ) ( 136,830 ) ( 401,505 ) Net income/(loss) from continued operations attributable to Future Fintech Group, Inc. $ ( 1,472,004 ) $ ( 2,110,392 ) $ ( 3,648,468 ) $ ( 4,633,554 ) Other comprehensive income (loss) Loss from continued operations ( 1,643,301 ) ( 2,336,534 ) ( 3,890,778 ) ( 5,034,905 ) Foreign currency translation – continued operations ( 1,488,634 ) ( 1,505,190 ) ( 1,084,545 ) ( 1,687,807 ) Unrealized holding (losses)/gains on available-for-sale securities ( 66,558 ) - 114,293 - Comprehensive loss - continued operation ( 3,198,493 ) ( 3,841,724 ) ( 4,861,030 ) ( 6,722,712 ) Net income (loss) from discontinued operations 105,480 ( 154 ) 105,480 ( 154 ) Foreign currency translation – discontinued operations - - - - Comprehensive income (loss) - discontinued operation 105,480 ( 154 ) 105,480 ( 154 ) Comprehensive Loss ( 3,093,013 ) ( 3,841,878 ) ( 4,755,550 ) ( 6,722,866 ) Less: Net loss attributable to non-controlling interests ( 65,817 ) ( 226,296 ) ( 136,830 ) ( 401,505 ) COMPREHENSIVE LOSS ATTRIBUTABLE TO FUTURE FINTECH GROUP INC. STOCKHOLDERS ( 3,027,196 ) ( 3,615,582 ) ( 4,618,720 ) ( 6,321,361 ) Earnings (Loss) per share: Basic loss per share from continued operation $ ( 0.11 ) $ ( 0.16 ) $ ( 0.26 ) $ ( 0.35 ) Basic earnings per share from discontinued operation 0.01 - 0.01 - $ ( 0.10 ) ( 0.16 ) $ ( 0.25 ) $ ( 0.35 ) Diluted Earnings (Loss) per share: Diluted loss per share from continued operation $ ( 0.11 ) ( 0.16 ) $ ( 0.26 ) $ ( 0.34 ) Diluted earnings per share from discontinued operation 0.01 - 0.01 - $ ( 0.10 ) ( 0.16 ) $ ( 0.25 ) $ ( 0.34 ) Weighted average number of shares outstanding Basic 14,645,653 13,088,090 14,645,653 13,088,090 Diluted 14,687,761 13,645,881 14,687,761 13,645,881 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 FUTURE FINTECH GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Three Months ended June 30, 2022 Accumulative Additional other Non- Common Stock paid-in Statutory Accumulated comprehensive controlling Shares Amount capital reserve deficits loss interests Total Balance at March 31, 2022 14,036,253 $ 14,036 $ 221,472,527 61,382 $ ( 141,135,076 ) $ ( 780,479 ) $ ( 765,970 ) $ 78,866,420 Net loss from continued operation - - - - ( 2,110,238 ) - ( 226,296 ) ( 2,336,534 ) Foreign currency translation adjustment - - - - - ( 1,505,190 ) - ( 1,505,190 ) Disposition of discontinued operation - - - - ( 154 ) - - ( 154 ) Balance at June 30, 2022 14,036,253 $ 14,036 $ 221,472,527 61,382 $ ( 143,245,468 ) $ ( 2,285,669 ) $ ( 992,266 ) $ 75,024,542 Three Months ended June 30, 2023 Accumulative Additional Other Non- Common Stock paid-in Statutory Accumulated comprehensive controlling Shares Amount capital reserve Deficits income interests Total Balance at March 31, 2023 14,645,653 $ 14,646 $ 222,751,657 98,357 $ ( 154,452,898 ) $ ( 3,038,065 ) $ ( 1,350,593 ) $ 64,023,104 Net loss from continued operation - - - - ( 1,577,484 ) - ( 65,817 ) ( 1,643,301 ) Unrealized loss on available-for-sale securities - - - - - ( 66,558 ) - ( 66,558 ) Foreign currency translation adjustment - - - - - ( 1,488,634 ) - ( 1,488,634 ) Disposition of discontinued operation - - - - 105,480 - - 105,480 Balance at June 30, 2023 14,645,653 $ 14,646 $ 222,751,657 98,357 $ ( 155,924,902 ) $ ( 4,593,257 ) $ ( 1,416,410 ) $ 60,930,091 Six Months ended June 30, 2022 Accumulative Additional other Non- Common Stock paid-in Statutory Accumulated comprehensive controlling Shares Amount capital reserve deficits loss interests Total Balance at December 31, 2021 14,036,253 $ 14,036 $ 220,579,277 61,382 $ ( 138,611,914 ) $ ( 597,862 ) $ ( 590,761 ) $ 80,854,158 Net loss from continued operation - - - - ( 4,633,400 ) - ( 401,505 ) ( 5,034,905 ) Share-based payments-service - - 893,250 - - - - 893,250 Foreign currency translation adjustment - - - - - ( 1,687,807 ) - ( 1,687,807 ) Disposition of discontinued operation - - - - ( 154 ) - - ( 154 ) Balance at June 30, 2022 14,036,253 $ 14,036 $ 221,472,527 61,382 $ ( 143,245,468 ) $ ( 2,285,669 ) $ ( 992,266 ) $ 75,024,542 Six Months ended June 30, 2023 Accumulative Additional Other Non- Common Stock paid-in Statutory Accumulated comprehensive controlling Shares Amount capital reserve Deficits income interests Total Balance at December 31, 2022 14,645,653 $ 14,646 $ 222,751,657 98,357 $ ( 152,276,434 ) $ ( 3,623,005 ) $ ( 1,279,580 ) $ 65,685,641 Net loss from continued operation - - - - ( 3,753,948 ) - ( 136,830 ) ( 3,890,778 ) Unrealized gains on available-for-sale securities - - - - - 114,293 - 114,293 Foreign currency translation adjustment - - - - - ( 1,084,545 ) - ( 1,084,545 ) Disposition of discontinued operation - - - - 105,480 - - 105,480 Balance at June 30, 2023 14,645,653 $ 14,646 $ 222,751,657 98,357 $ ( 155,924,902 ) $ ( 4,593,257 ) $ ( 1,416,410 ) $ 60,930,091 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 FUTURE FINTECH GROUP INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Six Months Ended June 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 3,785,298 ) $ ( 5,035,059 ) Net income/(loss) from discontinued operation 105,480 ( 154 ) Net loss from continuing operations ( 3,890,778 ) ( 5,034,905 ) Adjustments to reconcile net income to net cash provided by operating activities Depreciation 149,803 90,182 Amortization 28,518 28,233 Provision of doubtful debts 17,085 1,973 Share-based payments - 893,250 Impairment of short term investment - 697,123 Changes in operating assets and liabilities Accounts receivable 5,088,179 2,519,226 Notes receivable - ( 1,174,122 ) Other receivable ( 3,107,748 ) ( 1,198,592 ) Advances to suppliers and other current assets ( 15,265,659 ) ( 2,894,838 ) Accounts payable ( 3,206,986 ) 28,461 Proceeds from amounts due from related parties, net 97,523 122,329 Repayment of amounts due to related parties, net ( 112,491 ) ( 242,828 ) Accrued expenses 715,937 ( 569,006 ) Taxes payable - ( 41,133 ) Advances from customers 13,478,555 1,645,086 Net cash used in operating activities – Continued Operations ( 6,008,062 ) ( 5,129,561 ) Net cash provided by operating activities – Discontinued Operations 105,480 3 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment ( 128,098 ) ( 52,019 ) Payment of loan receivable - ( 11,363,000 ) Repayment for loan receivable 14,767,621 6,000,000 Purchase of intangible assets - ( 570,351 ) Net cash provided by (used in) investing activities from Continued Operations 14,639,523 ( 5,985,370 ) - CASH FLOWS FROM FINANCING ACTIVITIES Payment of dividends to the non-controlling interest - ( 63,477 ) Proceeds from loan payable - 4,199,879 Net cash provided by financing activities - 4,136,402 Effect of change in exchange rate ( 1,685,141 ) ( 1,263,771 ) NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH 7,051,800 ( 8,242,297 ) Cash and Restricted Cash at Beginning of Year 29,735,170 50,273,517 Cash and Restricted Cash at End of Year $ 36,786,970 $ 42,031,220 SUPPLEMENTARY DISCLOSURE OF SIGNIFICANT NON-CASH TRANSACTION Deferred liabilities - $ 173,764 SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid - $ 6,018 Cash paid for income taxes $ 713,501 $ 41,133 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 FUTURE FINTECH GROUP INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CORPORATE INFORMATION Future FinTech Group Inc. (the “Company”) is a holding company incorporated under the laws of the State of Florida. The main business of the Company includes supply chain financing services and trading, asset management and cross-border money transfer services. The Company has also expanded into cryptocurrency mining and cryptocurrency market data and information service business. Prior to 2019, the Company engaged in the 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 the drastically increased production cost and tightened environmental law in China, the Company has transformed its business from fruit juice manufacturing and distribution to supply chain financing services and trading, asset management and cross-border money transfer services. In March 2022, FTFT UK Limited received approval to operate as an Electronic Money Directive (“EMD”) Agent and has been registered as such with the Financial Conduct Authority (FCA), a UK regulator. This status grants FTFT UK Limited the ability to distribute or redeem e-money and provide certain financial services on behalf of an e-money institution (registration number 903050). On April 14, 2022, the Company established Future Trading (Chengdu) Co., Ltd. Its business is coal and aluminum ingots supply chain financing services and trading. On April 18, 2022, the Company and Future Fintech (Hong Kong) Limited, a wholly owned subsidiary of the Company jointly acquired 100 % equity interest of KAZAN S.A., a company incorporated in Republic of Paraguay for $ 288 . The Company owns 90 % and FTFT HK owns 10 % of Kazan S.A., respectively. Kazan S.A. has no operation before the acquisition. The Company is developing bitcoin and other cryptocurrency mining and related service business in Paraguay. The Company has changed its name from KAZAN S.A to FTFT Paraguay S.A. on July 28, 2022. On September 29, 2022, FTFT UK Limited completed its acquisition of 100 % of the issued and outstanding shares of Khyber Money Exchange Ltd., a company incorporated in England and Wales, from Rahim Shah, a resident of United Kingdom for a total of Euros € 685,000 (“Purchase Price”), pursuant to a Share Purchase Agreement (the “Agreement”) dated September 1, 2021. Khyber Money Exchange Ltd. is a money transfer company with a platform for transferring money through one of its agent locations or via its online portal, mobile platform or over the phone. Khyber Money Exchange Ltd. is regulated by the UK Financial Conduct Authority (FCA) and the parties received approval by the FCA before the formal closing of the transaction. On October 11, 2022, the Company changed the name of Khyber Money Exchange Ltd. to FTFT Finance UK Limited. On February 27, 2023, Future FinTech (Hong Kong) Limited (“Buyer”), a company incorporated in Hong Kong and a wholly owned subsidiary of Future FinTech Group Inc. (the “Company”) entered into a Share Transfer Agreement (the “Agreement”) with Alpha Financial Limited, a company incorporated in Hong Kong (“Seller”) and sole owner and shareholder of Alpha International Securities (Hong Kong) Limited, a company incorporated in Hong Kong (“Alpha HK”) and Alpha Information Service (Shenzhen) Co., Ltd., a company incorporated in China (“Alpha SZ”). Alpha HK holds Type 1 ’Securities Trading’, Type 2 ‘Futures Contract Trading’ and Type 4 ’Securities Consulting’ financial licenses issued by the Hong Kong Securities and Futures Commission. Alpha SZ provides technical support services to Alpha HK. The share transfer transaction is subject to the approval of the Securities and Futures Commission of Hong Kong (“SFC”) and the Company has recently received the approval from SFC. The acquisition is expected to close in September 2023. The Company’s business and operations are principally conducted by its subsidiaries in the PRC and Hong Kong. On January 26, 2023, the Company filed with the Florida Secretary of State’s office Articles of Amendment (the “Amendment”) to amend its Second Amended and Restated Articles of Incorporation, as amended (“Articles of Incorporation”). As a result of the Amendment, the Company has authorized and approved a 1-for-5 reverse stock split of the Company’s authorized shares of common stock from 300,000,000 shares to 60,000,000 shares, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). The common stock will continue to be $ 0.001 par value. The Company rounds up to the next full share of the Company’s shares of common stock any fractional shares that result from the Reverse Stock Split and no fractional shares is issued in connection with the Reverse Stock Split and no cash or other consideration is paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split. No changes are being made to the number of preferred shares of the Company which remain as 10,000,000 preferred shares as authorized but not issued. The amendment to the Articles of Incorporation of the Company took effect at 1:00am Eastern Time on February 1, 2023. The Reverse Stock Split and Amendment were authorized and approved by the Board of Directors of the Company without shareholders’ approval, pursuant to 607.10025 of the Florida Business Corporation Act of the State of Florida. The reverse stock split would be reflected in our June 30, 2023 and December 31, 2022 statements of changes in stockholders’ equity, and in per share data for all periods presented. 5 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 June 30, 2023 and the results of operations and cash flows for the periods ended June 30, 2023 and 2022. 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 six months ended June 30, 2023 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2023. The balance sheet at December 31, 2022 has been derived from the audited financial statements at that date. Our contractual arrangements with the VIE and their respective shareholders allow us to (i) exercise effective control over the VIE, (ii) receive substantially all of the economic benefits of the VIE, and (iii) have an exclusive option to purchase all or part of the equity interests in the VIE when and to the extent permitted by PRC law. As a result of our direct ownership in our wholly owned subsidiary and the contractual arrangements with the VIE, we are regarded as the primary beneficiary of the VIE, and we treat it and its subsidiaries as our consolidated affiliated entities under U.S. GAAP. We have consolidated the financial results of the VIE in our condensed consolidated financial statements in accordance with U.S. GAAP 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, 2022 as included in our Annual Report on Form 10-K. Discontinued Operations On June 27, 2022, Chain Cloud Mall Logistics Center (Shanxi) Co., Ltd. was dissolved and deregistered. On June 16, 2023, QR (HK) Limited was dissolved and deregistered. Based on the disposal plan and in accordance with ASC 205-20, the Company presented the operating results from these operations as a discontinued operation. Segment Information Reclassification The Company classified business segment into asset management service and, supply chain financing and trading, and others. Uses of Estimates in the Preparation of Financial Statements The Company’s condensed consolidated financial statements have been prepared in accordance with US GAAP and this requires management to make estimates and assumptions that affect the reported 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 allowance for doubtful receivable, estimated useful life and residual value of property, 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 future, actual results may ultimately differ from those estimates and such differences may be material to our condensed consolidated financial statements. 6 Going Concern The Company’s financial statements are prepared assuming that the Company will 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. The Company’s operating losses amounted $ 3.89 million, and it had negative operating cash flows amounted $ 6.01 million as of June 30, 2023. These factors raise substantial doubts about the Company’s ability to continue as a going concern. The Company has raised funds through issuance of convertible notes and common stock. 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. Research and development Research and development expenses include salaries, contracted services, as well as the related expenses for our research and product development team, and expenditures relating to our efforts to develop, design, and enhance our service to our clients. The Company expenses research and development costs as they are incurred. Impairment of Long-Lived Assets In accordance with the ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets , long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other industrial changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Fair Value of Financial Instruments The Company has adopted FASB ASC Topic on Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable input, which may be used to measure fair value and include the following: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Input other than Level 1 that is observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other input that is observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable input that is supported by little or no market activity and that is significant to the fair value of the assets or liabilities. Our cash and cash equivalents and restricted cash and short-term investments are classified within level 1 of the fair value hierarchy because they are value using quoted market price. Earnings Per Share Under ASC 260-10, Earnings Per Share , basic EPS excludes dilution for Common Stock equivalents and is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of Common Stock outstanding for the period. 7 Diluted EPS is calculated by using the treasury stock method, assuming conversion of all potentially dilutive securities, such as stock options and warrants. Under this method, (i) exercise of options and warrants is assumed at the beginning of the period and shares of Common Stock are assumed to be issued, (ii) the proceeds from exercise are assumed to be used to purchase Common Stock at the average market price during the period, and (iii) the incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) are included in the denominator of the diluted EPS computation. The numerators and denominators used in the computations of basic and diluted EPS are presented in the following table. For the six Months ended June 30, 2023: Income Share Pre-share amount Net loss from continuing operations attributable to Future Fintech Group, Inc. $ ( 3,753,948 ) 14,645,653 $ ( 0.26 ) Net income from discontinuing operations attributable to Future Fintech Group, Inc. $ 105,480 14,645,653 0.01 Basic EPS: Loss available to common stockholders from continuing operations $ ( 3,753,948 ) 14,645,653 $ ( 0.26 ) Income available to common stockholders from discontinuing operations $ 105,480 14,645,653 0.01 Dilutive EPS: Warrants - 42,108 - Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive $ ( 3,753,948 ) 14,687,761 $ ( 0.26 ) Diluted income per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. $ 105,480 14,687,761 0.01 For the six months ended June 30, 2022: Income Share Pre-share amount Loss from continuing operations $ ( 5,034,905 ) 13,088,090 $ ( 0.35 ) Loss from discontinuing operations $ ( 154 ) 13,088,090 $ - Basic EPS: Loss available to common stockholders from continuing operations $ ( 5,034,905 ) 13,088,090 $ ( 0.35 ) Loss available to common stockholders from discontinuing operations $ ( 154 ) 13,088,090 $ - Dilutive EPS: Warrants - 557,791 - Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive from continuing operations $ ( 5,034,905 ) 13,645,881 $ ( 0.34 ) Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. $ ( 154 ) 13,645,881 $ - 8 Three Months ended June 30, 2023: Income Share Pre-share amount Net loss from continuing operations attributable to Future Fintech Group, Inc. $ ( 1,577,484 ) 14,645,653 $ ( 0.11 ) Net income from discontinuing operations attributable to Future Fintech Group, Inc. $ 105,480 14,645,653 0.01 Basic EPS: Loss available to common stockholders from continuing operations $ ( 1,577,484 ) 14,645,653 $ ( 0.11 ) Income available to common stockholders from discontinuing operations $ 105,480 14,645,653 0.01 Dilutive EPS: Warrants - 42,108 - Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive $ ( 1,577,484 ) 14,687,761 $ ( 0.11 ) Diluted income per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. $ 105,480 14,687,761 0.01 Three Months ended June 30, 2022: Income Share Pre-share amount Loss from continuing operations $ ( 2,110,238 ) 13,088,090 $ ( 0.16 ) Loss from discontinuing operations $ ( 154 ) 13,088,090 $ - Basic EPS: Loss available to common stockholders from continuing operations $ ( 2,110,238 ) 13,088,090 $ ( 0.16 ) Loss available to common stockholders from discontinuing operations $ ( 154 ) 13,088,090 $ - Dilutive EPS: Warrants - 557,791 - Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive from continuing operations $ ( 2,110,238 ) 13,645,881 $ ( 0.16 ) Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. $ ( 154 ) 13,645,881 $ - Cash and Cash Equivalents Cash and cash equivalents included cash on hand and demand deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal and use and with an original maturity of three months or less. Deposits in banks in the PRC are only insured by the government up to RMB 500,000 , in the HK are only insured by the government up to HKD500,000, in the United Kingdom are only insured by the government up to GBP 18,000 , in the United States of America are only insured by the Federal Deposit Insurance Corporation up to USD250,000, and are consequently exposed to risk of loss. The Company believes the probability of a bank failure, causing loss to the Company, is remote. Cash that is restricted as to withdrawal for use or pledged as security is reported separately on the face of the consolidated balance sheets, and is not included in the total cash and cash equivalents in the consolidated statements of cash flows. 9 Receivable and Allowances Accounts receivable are recognized and carried at the original invoice amounts less an allowance for any uncollectible amount. We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required. Other receivables, and loan receivables are recognized and carried at the initial amount when occurred less an allowance for any uncollectible amount. We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable impairment losses in our existing receivable. Allowances for doubtful accounts are maintained for expected credit losses resulting from the Company’s customers’ inability to make required payments. The allowances are based on the Company’s regular assessment of various factors, including the credit-worthiness and financial condition of specific customers, historical experience with bad debts and customer deductions, receivables aging, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. The Company maintains an allowance for credit losses in accordance with ASC Topic 326, Credit Losses (“ASC 326”) and records the allowance for credit losses as an offset to accounts receivable and contract assets, and the estimated credit losses charged to the allowance is classified as “Bad debt expense” in the consolidated statements of comprehensive income. We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary. Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivable or otherwise evaluate other circumstances that indicate that we should abandon such efforts. The Company has assessed its accounts receivable including credit term and corresponding all its accounts receivables as of June 30, 2023. Bad debt expense was $( 1,170,577 ) and $ 1,973 during the six months ended June 30, 2023 and 2022, respectively. Accounts receivables of $ 1.42 million and nil have been outstanding for over 90 days as of June 30, 2023 and December 31, 2022, respectively. Revenue Recognition We apply the five steps defined under ASC 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We assess its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate distinct goods or services. We allocate the transaction price to each performance obligation based on the relative standalone selling price of the goods or services provided. Revenue is recognized upon the transfer of control of promised goods or services to a customer. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. We do not make any significant judgment in evaluating when control is transferred. Revenue is recorded net of value-added tax. 10 Revenue recognitions are as follows: Sales of coals, aluminum ingots, sand and steel The Company recognize revenue when the receipt of merchandise is confirmed by the customers, which is the point that the title of the goods is transferred to the customer. Revenue was nil and $ 3.65 million during the six months ended June 30, 2023 and 2022, respectively. Sales agent services of coals, aluminum ingots, sand and steel For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross revenue amount billed to customers as sales of goods listed above. The Company considers multiple factors when determining whether it obtains control of third-party products, including evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. The Company recognizes net revenue as agent services for the sales of coals and aluminum ingots when no control obtained throughout the transactions. Revenue was $ 0.48 million and nil during the six months ended June 30, 2023 and 2022, respectively. Asset Management Service The Company recognizes service revenue when a service is rendered, the Company issues bills to its customers and recognizes revenue according to the bills. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are expensed as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Depreciation related to property, plant and equipment used in production is reported in cost of sales, and includes amortized amounts related to capital leases. We estimated that the residual value of the Company’s property and equipment ranges from 3 % to 5 %. Property, plant and equipment are depreciated over their estimated useful lives as follows: Machinery and equipment 5 - 10 years Building 30 years Furniture and office equipment 3 - 5 years Motor vehicles 5 years Intangible Assets Acquired intangible assets are recognized based on their cost to the Company, which generally includes the transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the Company’s book. These assets are amortized over their useful lives if the assets are deemed to have a finite life and they are reviewed for impairment by testing for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The fair value of an intangible asset is the amount that would be determined if the entity used the assumptions that market participants would use if they were pricing the intangible asset. The useful life of the Company’s intangible assets is ten year , which is determined by using the time period that an intangible is estimated to contribute directly or indirectly to a Company’s future cash flows. Foreign Currency and Other Comprehensive Income (Loss) The financial statements of the Company’s foreign subsidiaries and VIE are measured using the local currency as the functional currency; however, the reporting currency of the Company is the USD. Assets and liabilities of the Company’s foreign subsidiaries have been translated into USD using the exchange rate at the balance sheet dates, while equity accounts are translated using historical exchange rate. The exchange rate we used to convert RMB to USD was 7.23:1 and 6.96:1 at the balance sheet dates of June 30, 2023 and December 31, 2022, respectively. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert RMB to USD were 6.93:1 and 6.48:1 for six months ended June 30, 2023 and 2022, respectively. The exchange rate we used to convert HKD to USD was 7.84:1 and 7.80:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert HKD to USD were 7.84:1 and 7.83:1 for six months ended June 30, 2023 and 2022, respectively. The exchange rate we used to convert GBP to USD was 0.79:1 and 0.83:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert GBP to USD were 0.81:1 and 0.77:1 for six months ended June 30, 2023 and 2022, respectively. 11 The exchange rate we used to convert AED to USD was 3.66:1 and 3.67:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert AED to USD were 3.67:1 and 3.67:1 for six months ended June 30 2023 and 2022, respectively. The exchange rate we used to convert PYG to USD was 7258.03:1 and 7322.90:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rate we used to convert PYG to USD was 7240.40:1 for six months ended June 30 2023. Translation adjustments are reported separately and accumulated in a separate component of equity (cumulative translation adjustment). Government subsidies Government subsidies primarily consist of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. For certain government subsidies, there are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. The government subsidies of operating nature with no further conditions to be met are recorded of operating expenses in “Other income” in the consolidated statements when received. The amendments in this update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements. Income Taxes We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-25 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented. 12 Goodwill The Company tests goodwill for impairment for its reporting units on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that implied fair value of the goodwill within the reporting unit is less than its carrying value. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the reporting unit to its carrying value. The Company uses the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to forecasts of future revenue and operating margin. The company will perform annual goodwill impairment test end of the fiscal year. Short-term investments Short-term investments consist primarily of investments in fixed deposits with original maturities between three months and one year and certain investments in wealth management products and other investments that the Company has the intention to redeem within one year. Fair valued or carried at amortized costs. As of June 30, 2023 and December 31, 2022, the short-term investments amounted to $ 1.06 million and $ 0.99 million, respectively. Due to fluctuations of the quoted shares included in its investment portfolios, the Company unrealized holding gains on available-for-sale securities of $ 0.11 million on June 30, 2023 and recognized an impairment to the investment portfolio of $ 0.91 million on December 31, 2022. Lease We adopted ASU No. 2016-02, Leases (Topic 842), or ASC 842, from January 1, 2020. We determine if an arrangement is a lease or contains a lease at lease inception. For operating leases, we recognize a right-of-use (“ROU”) asset and a lease liability based on the present value of the lease payments over the lease term on the consolidated balance sheets at commencement date. As most of our leases do not provide an implicit rate, we estimate our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The ROU assets also include any lease payments made, net of lease incentives. Lease expense is recorded on a straight-line basis over the lease term. Our leases often include options to extend and lease terms include such extended terms when we are reasonably certain to exercise those options. Lease terms also include periods covered by options to terminate the leases when we are reasonably certain not to exercise those options. Share-based compensation The Company awards share options and other equity-based instruments to its employees, directors and consultants (collectively “share-based payments”). Compensation cost related to such awards is measured based on the fair value of the instrument on the grant date. The Company recognizes the compensation cost over the period the employee is required to provide service in exchange for the award, which generally is the vesting period. The amount of cost recognized is adjusted to reflect the expected forfeiture prior to vesting. When no future services are required to be performed by the employee in exchange for an award of equity instruments, and if such award does not contain a performance or market condition, the cost of the award is expensed on the grant date. The Company recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date. Variable interest entities On July 31, 2019, Cloud Chain Network and Technology (Tianjin) Co., Limited (“CCM Tianjin” or “WFOE”, formerly known as Chain Cloud Mall Network and Technology (Tianjin) Co., Limited), 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 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 is conducting 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 Cloud Chain 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 Cloud Chain Mall System. Mr. Zeyao Xue is a major shareholder of the Company and the son of Mr. Yongke Xue, the president of the Company. Mr. Kai Xu was the Chief Operating Officer of the Company and currently is the Deputy General Manager of FT Commercial Group Ltd., a wholly owned subsidiary of the Company and the vice president of blockchain division of the Company. 13 The VIE Agreements are as follows: 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 and 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. 4) Exclusive Operation and Use Rights Authorization letter which authorizes CCM Tianjin, to exclusively operate and use the Cloud Chain Mall System and the authorization period is the same as the term of the EXCLUSIVE THEHNOLOGY CONSULTING AND SERVICE AGREEMENT entered into by and between CCM Tianjin and E-commerce Tianjin dated July 31, 2019. 5) GlobalKey Shared Mall Shopping Platform Software and System Transfer Agreement by and between Future Supply Chain Co., Ltd. and Cloud Chain Mall Network and Technology (Tianjian) Co., Ltd., pursuant to which the GlobalKey Shared Mall Shopping Platform Software and System was transferred from Future Supply China Co., Ltd. to CCM Tianjin and that both parties were wholly owned subsidiaries of the Company and transfer price is $ 0 . 6) Spousal Consent Letters. The spouse of Mr. Kai Xu (Mr. Zeyao Xue is not married), the shareholder of E-Commerce Tianjin has signed a spousal consent letter agreeing that the equity interests in E-Commerce Tianjin held by and registered under the name of such shareholder will be disposed pursuant to the contractual agreements with CCM Tianjin. The spouse of such shareholder agreed not to assert any rights over the equity interest in E-Commerce Tianjin held by such shareholder . 14 New Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”) “Financial Instruments - Credit Losses” (“ASC 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 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-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. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” (“ASC 2019-10”), which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for public entities which meet the definition of a smaller reporting company. The Company adopt ASU 2016-13 effective January 1, 2023. Management adopted of ASU 2016-13 on the consolidated financial statements. The effect will largely depend on the composition and credit quality of our investment portfolio and the economic conditions at the time of adoption. In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The amendments in this update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements. The amendments are effective for all entities within their scope, which excludes not-for-profit entities and employee benefit plans, for financial statements issued for annual periods beginning after December 15, 2021. Early application of the amendment is permitted. The Company adopted ASU No. 2021-10 effective on January 1, 2022. The adoption of this standard did not have a material impact on the Company consolidated financial statements. Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying consolidated financial statements. 3. VARIABLE INTEREST ENTITY The carrying amount of the VIE’s consolidated assets and liabilities are as follows: June 30, December 31, 2023 2022 Cash and cash equivalents $ 15,689 $ 12,684 Other receivables 1,196 768 Other current assets 6,925 14,371 Total current assets 23,810 27,823 Property and equipment, net 71 98 Intangible assets - 88,302 Total assets 23,881 116,223 Total liabilities ( 238,771 ) ( 248,964 ) Net assets $ ( 214,890 ) $ ( 132,741 ) June 30, December 31, 2023 2022 Current liabilities: Accounts payable $ 17,982 $ 18,657 Accrued expenses and other payables 5,029 6,455 Advances from customers 2,552 2,648 Amount due to related party 213,208 221,204 Total current liabilities 238,771 248,964 Total liabilities $ 238,771 $ 248,964 The summarized operating results of the VIE’s are as follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenue $ 61,922 $ 652 $ 72,810 $ 652 Gross profit 4,988 639 9,828 640 Net loss ( 2,361 ) ( 51,194 ) ( 19,558 ) ( 94,752 ) 15 4. ACCOUNTS RECEIVABLE Accounts receivable, net consist of the following: June 30, December 31, 2023 2022 Supply Chain Financing/Trading $ 1,415,853 $ 6,624,654 Asset management service 1,283,617 1,145,518 Others $ 9,023 $ 26,500 Total accounts receivable, net $ 2,708,493 $ 7,796,672 The following table sets forth our concentration of accounts receivable, net of specific allowances for doubtful accounts. June 30, December 31, 2023 2022 Debtor A 32.70 % 46.08 % Debtor B 33.41 % 15.65 % Debtor C 19.58 % 14.26 % Total accounts receivable, net 85.69 % 75.99 % 5. OTHER RECEIVABLES As of June 30, 2023, the balance of other receivables was $ 5.74 million. As of April 22, 2022 and January 31, 2023, FTFT Super Computing Inc. entered into a “Electricity Sales and Purchase Agreement” with a third-party seller. FTFT Super Computing Inc. provided an initial amount of Adequate Assurance to the seller in the form of a cash deposit in the amount of $ 1.86 million and has receivables from resale of electricity $ 0.18 million. On February 3, 2023, Future Fintech Group Inc. entered into a “Consulting Agreement” with a third party for its professional service of potential acquisition projects. Future Fintech Group Inc. provided initial amount of cash deposit to the third party in the amount of $ 2.40 million. On May 18, 2023, the parties terminated the agreement and the Company has received repayment of $ 2.40 million. In addition, other receivables included total $ 1.48 million deposit paid and prepayments to third parties. As of December 31, 2022, the balance of other receivables was $ 2.65 million. On October 1, 2022, FTFT UK Limited (the “Buyer”), a wholly owned subsidiary of the Company acquired 100 % equity interest of Khyber Money Exchange Ltd. (“Khyber”) for £ 786,887 . Buyer deposited £ 400,000 for cash balance expected to be left in the bank account of Khyber at the closing to the Buyer’s solicitors’ client account upon the final closing of the acquisition, and the Buyer’s solicitors shall refund the amount after deducting the cash balance in Khyber’s account upon closing. As of January 9, 2023, the Company has received refund $ 0.24 million. As of April 22, 2022, FTFT Super Computing Inc. entered into a “Electricity Sales and Purchase Agreement” with a third-party seller. FTFT Super Computing Inc. provided an initial amount of Adequate Assurance to the seller in the form of a cash deposit in the amount of $ 1.00 million and has receivables from resale of electricity $ 0.24 million. In addition, other receivables included total $ 1.17 million deposit paid and prepayments to third parties. 16 6 . LOAN RECEIVABLES As of June 30, 2023, the balance of loan receivables was $ 4.91 million, which was from a third party. On March 10, 2022, Future FinTech (Hong Kong) Limited (“FTFT HK”), a wholly owned subsidiary of the Company, entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $ 5.00 million to the third party at the annual interest rate of 10 % from March 10, 2022 to September 9, 2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $ 2.16 million. On May 31, 2022, FTFT HK entered into a “Loan Agreement” with the same third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $ 6.36 million to the third party at the annual interest rate of 10 % from May 31, 2022 to May 30,2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $ 6.36 million. On December 26, 2022, FTFT HK entered into a “Loan Agreement” with the same third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $ 0.40 million to the third party at the annual interest rate of 10 % from December 26, 2022 to March 26, 2023. As of April 17, 2023, the Company has received repayment $ 0.40 million. On July 14, 2022, Future Private Equity Fund Management (Hainan) Co., Limited entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, Future Private Equity Fund Management (Hainan) Co., Limited loaned an amount of $ 6.92 million (RMB 50 million) to the third party at the annual interest rate of 8 % from July 15, 2022 to July 14, 2023, guarantee by Junde Chen. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $ 4.83 million (RMB 35 million). The amount of $ 2.07 million (RMB 15 million) will be repaid within 6 months. As of December 31, 2022, the balance of loan receivables was $ 19.16 million, which was from a third party. On September 8, 2021, FUCE Future Supply Chain (Xi’an) Co., Ltd., a wholly owned subsidiary of the Company, entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FUCE Future Supply Chain (Xi’an) Co., Ltd. loaned an amount of $ 0.22 million (RMB 1.5 million) to the third party at the annual interest rate of 5.25 % from September 8, 2021 to September 6, 2023. On March 10, 2022, FTFT HK entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $ 5.00 million to the third party at the annual interest rate of 10 % from March 10, 2022 to September 9, 2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $ 2.16 million. On May 31, 2022, FTFT HK entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $ 6.36 million to the same third party at the annual interest rate of 10 % from May 31, 2022 to May 30,2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $ 6.36 million. On December 26, 2022, FTFT HK entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $ 0.40 million to the same third party at the annual interest rate of 10 % from December 26, 2022 to March 26, 2023. As of April 17, 2023, the Company has received repayment $ 0.40 million. On July 14, 2022, Future Private Equity Fund Management (Hainan) Co., Limited entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, Future Private Equity Fund Management (Hainan) Co., Limited loaned an amount of $ 7.28 million (RMB 50 million) to the third party at the annual interest rate of 8 % from July 15, 2022 to July 14, 2023, guarantee by Junde Chen. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $ 5.09 million (RMB 35 million). The amount of $ 2.18 million (RMB 15 million) will be repaid within 6 months. 17 7. SHORT - TERM INVESTMENT As of June 30, 2023, the balance of short - term investments were $ 1.06 million. On September 6, 2021, Future Private Equity Fund Management (Hainan) Co., Ltd. invested RMB 13,000,000 ($ 1.79 million) to entrust Shanghai Yuli Enterprise Management Consulting Firm to invest in various types of investment portfolios. According to the market value, the Company’s balance of the short - term investment was $ 1.06 million on June 30, 2023. Due to fluctuations of the quoted shares included in its investment portfolios, the Company unrealized holding gains on available-for-sale securities of $ 0.11 million. As of December 31, 2022, the balance of short - term investments were $ 0.99 million. On September 6, 2021, Future Private Equity Fund Management (Hainan) Co., Ltd. invested RMB 13,000,000 ($ 1.87 million) to entrust Shanghai Yuli Enterprise Management Consulting Firm to invest in various types of investment portfolios. According to the market value, the Company’s balance of the short - term investments was $ 0.99 million on December 31, 2022. Due to fluctuations of the quoted shares included in its investment portfolios, the Company recognized an impairment to the investment portfolio of $ 0.91 million. 8. OTHER CURRENT ASSETS The amount of other current assets consisted of the followings: June 30, December 31, 2023 2022 Prepayments for Supply Chain Financing/Trading $ 14,955,258 $ 3,766,643 Prepayments for Sand and Steel Supply Chain Financing/Trading 3,938,132 - Prepaid expenses 110,762 72,544 Others 906,461 831,077 Total $ 19,910,613 $ 4,670,264 9. GOODWILL As of June 30, 2023 and December 31, 2022, the balance of goodwill mainly represented an amount of $ 13.98 million that arose from acquisition of Nice Talent Asset Management Limited (“Nice Talent”) in 2021 and Khyber Money Exchange Ltd., in 2022. On August 6, 2021, the Company through its wholly owned subsidiary Future FinTech (Hong Kong) Limited., completed its acquisition of 90 % of the issued and outstanding shares of Nice Talent from Joy Rich Enterprises Limited for HK$ 144,000,000 (the “Purchase Price”) which shall be paid in the shares of common stock of the Company (the “Company Shares”). 60 % of the Purchase Price ($ 11.22 million) was paid in 2,244,156 pre reverse stock split shares of common stock of the Company on August 4, 2021. 40 % of the Purchase Price ($ 7.39 million) in two installments for 20 % each shall be paid in shares of common stock of the Company upon the completion of the audited reports for Nice Talent for each of the years ended on December 31, 2021 and December 31, 2022, respectively. On October 1, 2022, FTFT UK Limited, a wholly owned subsidiary of the Company, acquired 100 % equity interest of Khyber Money Exchange Ltd., a company incorporated in England and Wales, for £ 786,887 ($ 0.95 million). The Company recorded $ 2.21 million of impairment loss in fiscal year 2022 related with goodwill mainly arose from acquisition of Nice Talent Asset Management Limited and FTFT Finance UK Limited (formerly known as Khyber Money Exchange Ltd.). Goodwill impairment test as of December 31, 2022 using compare the carrying amount of the reporting unit (including goodwill) with its fair value. If the carrying amount exceeds the fair value, compare the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss should be recognized. 10. ACQUISITION Nice Talent On August 6, 2021 (“Acquisition Date”), the Company through its wholly owned subsidiary Future FinTech (Hong Kong) Limited., completed its acquisition of 90 % of the issued and outstanding shares of Nice Talent from Joy Rich Enterprises Limited for HK$ 144,000,000 (the “Purchase Price”) which shall be paid in the shares of common stock of the Company (the “Company Shares”). 60 % of the Purchase Price ($ 11.22 million) was paid in 2,244,156 pre reverse stock split shares of common stock of the Company on August 4, 2021. 40 % of the Purchase Price ($ 7.39 million) in two installments for 20 % each shall be paid in shares of common stock of the Company upon the completion of the audited reports for Nice Talent of the years ended on December 31, 2021 and 2022, respectively. Nice Talent has met the performance requirements for the year ended on December 31, 2021 and 2022, however, the 40 % of the Purchase Price has not been paid in the shares of common stock of the Company to Joy Rich as of the date of this report. The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained an independent appraisal firm to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date. As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired. 18 The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed: Accounts receivable $ 1,407,902 Other receivables 27,701 Other current assets 7,039 Property, plant and equipment, net 53,577 Amount Due from Related Party 38,323 Accrued expenses and other payables ( 498,515 ) Net identifiable assets acquired $ 1,036,027 Less: non-controlling interests 131,165 Add: goodwill 17,164,598 Total purchase price for acquisition net of $ 275,624 of cash $ 18,069,460 The Company has included the operating results of Nice Talent in its consolidated financial statements since the Acquisition Date. Khyber Money Exchange Ltd. On October 1, 2022, FTFT UK Limited, a wholly owned subsidiary of the Company acquired 100 % equity interest of Khyber Money Exchange Ltd., a company incorporated in England and Wales, for £ 786,887 ($ 0.95 million). The Company has changed its name from Khyber Money Exchange Ltd., to FTFT Finance UK Limited on October 11, 2022. The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed: Other receivables $ 242,087 Property, plant and equipment, net 584 Accrued expenses and other payables ( 89,888 ) Net identifiable assets acquired $ 152,783 Add: goodwill 628,938 Total purchase price for acquisition net of $ 166,676 of cash $ 781,721 The Company has included the operating results of FTFT Finance UK Limited in its consolidated financial statements since October 1, 2022. 11. LEASES The Company’s non-cancellable operating leases consist of leases for office space. The Company is the lessee under the terms of the operating leases. For the six months ended June 30, 2023, the operating lease cost was $ 0.88 million. The Company’s operating leases have remaining lease terms of approximately 45 months. As of June 30, 2023, the weighted average remaining lease term and weighted average discount rate were 3.75 years and 4.75 %, respectively. Maturities of lease liabilities were as follows: Operating As of June 30, Lease From July 1, 2023 to July 31, 2024 $ 371,336 From July 1, 2024 to July 31, 2025 231,889 From July 1, 2025 to July 31, 2026 204,000 From July 1, 2026 to July 31, 2027 153,000 Total $ 960,225 Less: amounts representing interest $ 75,972 Present Value of future minimum lease payments 884,253 Less: Current obligations 297,571 Long term obligations $ 586,682 The Company leases office space and equipment under various short-term operating leases. As permitted by ASC 842, the Company has elected the practical expedient for short-term leases, whereby lease assets and lease liabilities are not recognized on the balance sheet. Short term leases cost was $ 0.14 million for six months ended June 30, 2023. 19 12. PROPERTY AND EQUIPMENT Property and equipment consist of the following: June 30, December 31, 2023 2022 Office equipment, fixtures and furniture $ 561,668 $ 491,022 Vehicle 859,646 798,955 Building 37,590 37,785 Subtotal 1,458,904 1,327,762 Less: accumulated depreciation and amortization ( 430,112 ) ( 277,094 ) Construction in progress 3,356,020 3,372,301 Impairment ( 5,483 ) ( 5,688 ) Total $ 4,379,329 $ 4,417,281 Depreciation expense included in general and administration expenses for the six months ended June 30, 2023 and 2022 was $ 149,803 and $ 90,182 , respectively. Depreciation expense included in cost of sales for the six months ended June 30, 2023 and 2022 was nil , respectively. 13. INTANGIBLE ASSETS Intangible assets consist of the following: June 30, December 31, 2023 2022 Trademarks $ 830 862 System and software 2,506,162 2,578,647 Subtotal 2,506,992 2,579,509 Less: accumulated depreciation and amortization ( 222,372 ) ( 199,151 ) Less: impairment ( 1,795,069 ) ( 1,862,289 ) Total $ 489,551 $ 518,069 Amortization expense included in general and administration expenses for the six months ended June 30, 2023 and 2022 was $ 28,518 and $ 28,233 , respectively. Amortization expense included in cost of sales for the six months ended June 30, 2023 and 2022 was nil , respectively. The estimated amortization is as follows: As of June 30, 2023 Estimated amortization expense From July 1, 2023 to July 31, 2024 $ 57,035 From July 1, 2024 to July 31, 2025 57,035 From July 1, 2025 to July 31, 2026 57,035 From July 1, 2026 to July 31, 2027 57,035 From July 1, 2027 to July 31, 2028 57,035 Thereafter 204,376 Total $ 489,551 14. NOTE PAYABLE Note payable consist of the following: Issue date Principal amount US$ Mature date Fee FUCE Future Supply Chain (Xi’an) Co., Ltd. August 10, 2022 $ 1,383,930 August 10, 2023 0.05 % FUCE Future Supply Chain (Xi’an) Co., Ltd. August 12, 2022 691,965 August 12, 2023 0.05 % FUCE Future Supply Chain (Xi’an) Co., Ltd. July 28, 2022 691,965 July 28, 2023 0.05 % FUCE Future Supply Chain (Xi’an) Co., Ltd. December 19, 2022 691,965 December 19, 2023 0.05 % Total $ 3,459,825 20 At maturity, the Notes are payable at their principal amount thereon. The occurring with respect to any of the Company’s indebtedness, an event of default resulting in accelerated maturity or a failure to pay principal, interest or premium when due, the overdue interest shall be charged at 0.05 % per day, without the need to notify the applicant and sign another loan contract. As of June 30, 2023, there was no such event of default. 15. ACCOUNT PAYABLES The amount of account payables were consisted of the followings: June 30, December 31, 2023 2022 Supply Chain Financing/Trading payment $ 378,608 $ 3,584,920 Others 17,983 18,657 Total $ 396,591 $ 3,603,577 16. ACCRUED EXPENSES AND OTHER PAYABLES The amount of accrued expenses and other payables consisted of the followings: June 30, December 31, 2023 2022 Legal fee and other professionals $ 64,303 $ 533,048 Wages and employee reimbursement 67,275 763,983 Suppliers 1,040,142 708,287 Accruals 1,758,473 208,938 Total $ 2,930,193 $ 2,214,256 17. ADVANCES FROM CUSTOMERS The amount of advances from customers consisted of the followings: June 30, December 31, 2023 2022 Coal and Aluminum Ingots Supply Chain Financing/Trading $ 14,669,656 $ 1,233,592 Others 45,140 2,649 Total $ 14,714,796 $ 1,236,241 21 18. DEFERRED LIABILITIES As of June 30, 2023 and December 31, 2022, the balance of deferred liabilities mainly represented an amount of $ 7.39 million that arose from the payment for the remaining 40 % of the Purchase Price of the acquisition of Nice Talent Asset Management Limited (“Nice Talent”). 20 % and 20 % of the Purchase Price in two installments for 20 % each shall be paid in shares of common stock of the Company upon the completion of the audited reports for Nice Talent for the years ended on December 31, 2021 and 2022, respectively. However, the 40 % of the Purchase Price has not been paid in the shares of common stock of the Company as of the date of this report. 19. RELATED PARTY TRANSACTION As of June 30, 2023, the amounts due to the related parties were consisted of the followings: Name Amount (US$) Relationship Note Zhi Yan 212,358 General Manager of a subsidiary of the Company Accrued expenses, interest free and payment on demand. Reits (Beijing) Technology Co., Ltd 14,013 Zhi Yan is the legal representative of this company Acquisition of intangibles upon the full completion of the online platform pursuant to an agreement originally entered between parties before Zhi Yan became a related party. The amount is interest free and payment on demand. Total $ 226,372 As of June 30, 2023, the amounts due from the related parties were consisted of the followings: Name Amount (US$) Relationship Note Kai Xu 50,365 Deputy General Manager of a subsidiary of the Company Prepaid expenses, interest free and payment on demand. Ming Yi 5,168 Chief Financial Officer of the Company Prepaid expenses, interest free and payment on demand. Total $ 55,533 22 During six months ended June 30, 2023, the Company had the following transactions with related parties: Name Amount Relationship Note JKNDC Limited $ ( 3,827 ) A company owned by the minority shareholder of NTAM Other income JKNDC Limited 710,594 A company owned by the minority shareholder of NTAM Cost of revenue- Asset management service payable to JKNDC Alpha Yield Limited 411,184 A director of NTAM is a shareholder of this company Consultancy fee payable to Alpha Yield Nice Talent Partner Limited 229,627 A company owned by the minority shareholder of NTAM Consultancy fee payable to Nice Talent Partner As of December 31, 2022, the amount due to the related parties was consisted of the followings: Name Amount (US$) Relationship Note Reits (Beijing) Technology Co., Ltd 14,538 Zhi Yan is the legal representative of this company Acquisition of intangibles upon the full completion of the online platform pursuant to an agreement originally entered between parties before Zhi Yan was the general manager of our subsidiary. Zhi Yan 230,281 General Manager of a subsidiary of the Company Other payables, interest free and payment on demand. Total $ 244,819 As of December 31, 2022, the amount due from the related parties was consisted of the followings: Name Amount Relationship Note Kai Xu $ 16 Deputy General Manager of a subsidiary of the Company Advance to the officer, interest free and payment on demand. Ming Yi 12,135 Chief Financial Officer of the Company Advance to the officer, interest free and payment on demand. Jing Chen 971 Vice president of the Company Advance to the officer, interest free and payment on demand. Ola Johannes Lind 2,168 Chief Executive Officer of the FTFT Capital Investments L.L.C. and Chief Strategy Officer of the Company Advance to the officer, interest free and payment on demand. Wong Tai Kue 37,836 NTAM’s Director Advance to the directors Amount is interest free and payment on demand. Total $ 53,126 * The related party transactions have been approved by the Company’s Audit Committee. 23 20. INCOME TAX The Company is incorporated in the United States of America and is subject to United States federal taxation. The applicable tax rate is 21 % in 2023 and 2022. No provisions for income taxes have been made, as the Company had no U.S. taxable income for the six months ended June 30, 2023 and 2022. For the six months ended June 30, 2023 and 2022, the Company had current income tax expenses of $ 61,552 and $ 311,741 , respectively. The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. For the six months ended June 30, 2023, the Company had no unrecognized tax benefits. Due to uncertainties surrounding future utilization, the Company estimates there will not be sufficient future income to realize the deferred tax assets for certain subsidiaries and a VIE. The amount of unrecognized deferred tax liabilities for temporary differences related to the dividend from foreign subsidiaries is not determined because such determination is not practical. The Company has not provided deferred taxes on undistributed earnings attributable to its PRC and Hong Kong subsidiaries as they are to be permanently reinvested. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of ASC Topic 740, Income Taxes . Since the Company intends to reinvest its earnings to further expand its businesses in mainland China, its PRC subsidiaries do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, the Company has not recorded any deferred taxes in relation to US tax on the cumulative amount of undistributed retained earnings since January 1, 2008. Effective on January 1, 2008, the PRC Enterprise Income Tax Law, EIT Law, and Implementing Rules imposed a unified enterprise income tax rate of 25% on all domestic-invested enterprises and foreign-invested enterprises in the PRC, unless they qualify under certain limited exceptions. The tax rate for pre-tax profits below RMB 1 million is 2.5%; the tax rate for pre-tax profits between RMB1 million to RMB 3 million is 10%. E-Commerce Tianjin, Future Supply (Chengdu) Co., Ltd. and Future Big Data (Chengdu) Co., Ltd. were subject to an enterprise income tax rate of 2.5% and 10%. Other subsidiaries and VIE were subject to an enterprise income tax rate of 25%. Future Fin Tech (HongKong) Limited, QR (HK) Limited and Nice Talent Asset Management Limited is incorporated in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5 % in Hong Kong. FTFT UK Limited and FTFT Finance UK Limited are incorporated in United Kingdom and are subject to United Kingdom Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant United Kingdom tax laws. The applicable tax rate is 19 % in United Kingdom. FTFT Capital investments L.L.C is incorporated in Dubai, United Arab Emirates. The applicable tax rate is nil in Dubai, United Arab Emirates. Digipay Fintech Limited is incorporated in British Virgin Island. The applicable tax rate is nil in British Virgin Island. FTFT Paraguay S.A. is incorporated in Republic of Paraguay. The applicable tax rate is 10 % in Paraguay. Reconciliation of the differences between the statutory EIT rate applicable to profits of the consolidated entities and the income tax expenses of the Company: June 30, 2023 June 30, 2022 Loss before taxation $ ( 3,829,226 ) $ ( 4,723,164 ) PRC statutory tax rate 25 % 25 % Computed expected benefits ( 957,307 ) ( 1,180,791 ) Others, primarily the differences in tax rates 223,650 306,902 Effect of tax losses not recognized 795,209 1,185,630 Total $ 61,552 $ 311,741 24 21. IMPAIRMENT LOSS The Company recorded nil and $ 0.70 million of impairment loss in six months ended 2023 and 2022 relating to the short - term investment mainly due to Future Private Equity Fund Management (Hainan) Co., Ltd. invested $ 1.94 million (RMB 13,000,000 ) to entrust Shanghai Yuli Enterprise Management Consulting Firm to invest in various types of investment portfolios. The Company may still suffer significant impairment loss or downward adjustments of our investments in the future, due to the potential worsening global economic conditions, high interest rate and the volatility in the continuing low market price of shares that caused the Company to recognize a fair-value loss in six months ended June 30, 2022. According to the market value, the Company’s balance of the short - term investment was $ 1.26 million on June 30, 2022. 22. SHARE BASED COMPENSATION On February 1, 2023, the Company effected a 1-for-5 reverse stock split of the Company’s authorized shares of common stock from 300,000,000 shares to 60,000,000 shares, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock. 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 the Consultant to the Company, the Company agrees to pay the Consultant a three-year consulting fee totaling $ 3.0 million. The Company shall issue a total of 3,750,000 restricted shares of the Company Common Stock (the “Consultant Shares”) at a price of $ 0.794 per share (the closing price of the Agreement date), as the payment for the abovementioned 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 been 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. For the year ended December 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. On January 25, 2021, the Company recorded stock related compensation of $ 0.89 million, based on the stock closing price of $ 0.794 on the date of the Agreement, for the 1,125,000 shares which were released to the Consultant on January 25, 2021. On January 25, 2022, the Company released the final 1,125,000 shares to the Consultant and the Company has recognized stock related compensation of $ 0.89 million for the 1,125,000 shares. The share numbers are pre-reverse stock split effected on February 1, 2023. Restricted net assets PRC laws and regulations permit payments of dividends by the Company’s subsidiaries incorporated in the PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Company’s subsidiaries incorporated in the PRC are required to annually appropriate 10 % of their net income to the statutory reserve prior to payment of any dividends, unless the reserve has reached 50 % of their respective registered capital. Furthermore, registered share capital and capital reserve accounts are also restricted from distribution. As a result of the restrictions described above and elsewhere under PRC laws and regulations, the Company’s subsidiaries incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Company in the form of dividends. The restriction amounted to $ 30.70 million (RMB 212,706,932 ) as of June 30, 2023. Except for the above or disclosed elsewhere, there is no other restriction on the use of profits generated by the Company’s subsidiaries to satisfy any obligations of the Company. Payments-omnibus equity plan On July 12, 2022 (the “Grant Date”), the Compensation Committee of the Board of Directors (the “Board”) of the Company granted 3,047,000 shares of common stock of the Company, par value $ 0.001 (the “Shares”), pursuant to the Company’s 2020 Omnibus Equity Plan, to certain officers and employees of the Company and its subsidiaries (the “Grantees”), including: 800,000 shares to Shanchun Huang, Chief Executive Officer of the Company; 800,000 shares to Yongke Xue, President of the Company; 100,000 shares to Ming Yi, Chief Financial Officer of the Company, 547,000 shares to Peng Lei, general manager of a subsidiary of the Company, 300,000 shares to Pang Dong, general manager of a subsidiary the Company, and 500,000 shares to Kai Xu, Deputy General Manager of a subsidiary of the Company and vice president of blockchain division of the Company (collectively, the “Grants”). The Grants vested immediately on the Grant Date and each of the Grantees also entered into an Unrestricted Stock Award Agreement with the Company on July 12, 2022. As the closing price of the Company stock was $ 0.42 on July 12, 2022, the Company recorded an expense of $ 1.28 million in the third quarter of fiscal year 2022. As of the date of this report, the Shares have been issued to the Grantees. The share numbers are pre-reverse stock split effected on February 1, 2023. 25 23. SEGMENT REPORTING In its operation of the business, management, including our chief operating decision maker, who is our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis consistent with GAAP. The Company operates in three segments: supply chain financing service and trading business, asset management service and others. The Company began to provide coal and aluminum ingots supply chain financing services during the second quarter of 2021 and the Company acquired Nice Talent and started to provide asset management services since August 2021. The Company began to provide sand and steel supply chain financing services during the first quarter of 2023. Some of our operation 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 and products 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. Three months ended June 30, 2023 Asset management service Supply chain financing/ trading Others Total Reportable segment revenue $ 3,255,065 $ 369,993 $ 183,933 $ 3,808,991 Inter-segment loss - - - - Revenue from external customers $ 3,255,065 369,993 183,933 3,808,991 Segment gross profit $ 1,125,152 $ 69,644 $ 64,371 $ 1,259,167 Three months ended June 30, 2022 Asset management service Supply chain financing/ trading Others Total Reportable segment revenue $ 3,696,433 $ 3,654,981 $ 66,863 $ 7,418,277 Inter-segment loss - - - - Revenue from external customers $ 3,696,433 3,654,981 66,863 7,418,277 Segment gross profit $ 1,248,314 $ 60,255 $ 66,851 $ 1,375,420 Six months ended June 30, 2023: Asset management service Supply chain financing/ trading Others Total Reportable segment revenue $ 6,418,129 $ 480,792 $ 304,035 $ 7,202,956 Inter-segment loss - - - - Revenue from external customers $ 6,418,129 480,792 304,035 7,202,956 Segment gross profit $ 2,181,459 $ 175,500 $ 109,845 $ 2,466,804 26 Six months ended June 30, 2022: Asset management service Supply chain financing/ trading Others Total Reportable segment revenue $ 7,152,808 $ 3,654,982 $ 76,852 $ 10,884,642 Inter-segment loss - - - - Revenue from external customers $ 7,152,808 3,654,982 76,852 10,884,642 Segment gross profit $ 3,026,301 $ 60,256 $ 76,840 $ 3,163,397 Loss before Income Tax: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Supply chain financing/trading $ ( 287,602 ) $ 3,014 $ ( 68,423 ) $ 102,131 Asset management service 901,980 518,486 1,684,157 1,017,328 Others ( 417,994 ) 199,025 ( 403,423 ) 838,744 Corporate and Unallocated 2,670,206 2,867,641 5,083,719 5,928,358 Total operating expenses and other expense 2,866,590 3,588,166 6,296,030 7,886,561 Loss before Income Tax $ ( 1,607,423 ) $ ( 2,212,746 ) $ ( 3,829,226 ) $ ( 4,723,164 ) Segment assets: June 30, 2023 December 31, 2022 Supply chain financing/trading $ 35,803,626 $ 26,487,090 Asset management service 3,697,940 3,387,506 Others 16,374,244 14,090,091 Corporate and Unallocated 35,054,007 41,053,032 Total assets $ 90,929,817 $ 85,017,719 24. COMMITMENTS AND CONTINGENCIES Legal case with FT Global Litigation In January 2021, FT Global Capital, Inc. (“FT Global”), a former placement agent of the Company filed a lawsuit against the Company in the Superior Court of Fulton County, Georgia. FT Global served the complaint upon the Company in January 2021. In the complaint, FT Global alleges claims, most of which attempt to hold the Company liable under legal theories that relate back to an alleged breach of an exclusive placement agent agreement between FT Global and the Company in July 2020 which had a term of three months. FT Global claims that the Company failed to compensate FT Global for securities purchase transactions between December 2020 and April 2021, pursuant to the terms of the expired exclusive placement agent agreement. Allegedly, the exclusive placement agent agreement required the Company to pay FT Global for capital received during the term of the agreement and for the 12-month period following the termination of the agreement involving any investors that FT Global introduced and/or wall-crossed to the Company. However, the Company believes the securities purchase transactions at issue did not involve the one investor which FT Global introduced or wall-crossed to the Company during the term of the agreement. FT Global claims approximately $ 7,000,000 in damages and attorneys’ fees. 27 The Company timely removed the case to the United States District Court for the Northern District of Georgia (the (“Court”) on February 9, 2021 based on diversity of jurisdiction. On March 9, 2021, the Company filed a motion to dismiss based on FT Global’s failure to state a claim which is pending before the Court. On March 23, 2021, FT Global filed its response to the Company’s motion to dismiss. FT Global argues that the Court should deny the Company’s motion to dismiss. However, if the Court is inclined to grant the Company’s motion to dismiss, FT Global requested that the Court permit it to file an amended complaint. On April 8, 2021, the parties filed a Joint Preliminary Report and Discovery Plan. On April 12, 2021, the Court approved the Joint Preliminary Report and Discovery Plan and issued a Scheduling Order placing this case on a six-month discovery tract. On April 30, 2021, the Company served FT Global with its Initial Disclosures. On May 6, 2021, FT Global served the Company with its Initial Disclosures. On May 17, 2021, FT Global served the Company with its First Amended Initial Disclosures. On November 10, 2021, the Court entered an Order granting the Company’s motion to dismiss FT Global’s fraud claim and breach of contract claim as to the disclosure of its confidential and proprietary information. The Court denied the Company’s motion to dismiss FT Global’s i) breach of contract claim for failure to pay FT Global pursuant to the terms of the exclusive placement agent agreement; ii) claim for breach of the covenant of good faith and fair dealing; and iii) claim for attorney’s fees, and the court concluded that additional information can be obtained through discovery. The Company timely filed an answer and defenses to FT Global’s complaint on November 24, 2021. On January 3, 2022, the Company propounded discovery requests upon FT Global, including interrogatories and requests for production of documents. On March 23, 2022, the Company propounded requests for admission upon FT Global. On March 24, 2022, FT Global propounded discovery requests upon the Company, including requests for production of documents and requests for admission. On April 1, 2022, FT Global served its response to the Company’s requests for production of documents. On May 13, 2022, FT Global served its responses to the Company’s interrogatories and requests for admissions. On May 13, 2022, FT Global produced documents in response to the Company’s requests for production of documents. On June 3, 2022, the Company produced documents in response to FT Global’s requests for production of documents. On August 3, 2022, the Company took the deposition of FT Global. On August 4, 2022, FT Global took the deposition of the Company. On August 3, 2022, the Court granted the parties’ Consent Motion to Extend Discovery Period extending the discovery period from August 5, 2022 to September 14, 2022 and the deadline to file dispositive motions to October 12, 2022. On October 12, 2022, the Company filed a motion for summary judgment on all claims asserted by FT Global in this lawsuit. On November 2, 2022, FT Global filed its opposition to the Company’s motion for summary judgment. On November 16, 2022, the Company filed its reply in support of its motion for summary judgement on all claims asserted by FT Global in this lawsuit. The Company will continue to vigorously defend the action against FT Global. Settlement with SEC On December 17, 2019, the Company announced that it received a subpoena from the SEC’s Division of Enforcement requiring the Company to produce documents and other information and the Company has cooperated with the SEC’s investigation and information request. On July 3, 2023, the SEC announced a settlement of the investigation with the Company. Without admitting or denying the SEC’s findings, the Company has consented to: (i) cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and (3) of the Securities Act, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-13 and 13a-15(a) thereunder; (ii) pay a civil money penalty in the amount of $ 1,650,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3) and the payment shall be made in the following installments: the first installment of $ 150,000 shall be paid within ten (10) days of July 3, 2023 (the “Order Date”); the second installment of $ 375,000 shall be paid within 90 days of the Order Date; the third installment of $ 375,000 shall be paid within 180 days of the Order Date; the fourth installment of $ 375,000 shall be made within 270 days of the Order Date; and the last installment of $ 375,000 shall be made within 360 days of the Order Date; (iii) retain, within sixty (60) days of the Order Date, at Company’s own expense, a qualified independent consultant (the “Consultant”) not unacceptable to the SEC staff, to test, assess, and review the Company’s internal accounting controls and internal control over financial reporting (collectively, “review), and the Consultant, at the conclusion of the review, which in no event shall be no more than 180 days after the Order Date, to submit a report of the Consultant to the Company and the SEC staff and the report shall address the Consultant’s findings and shall include a description of the review performed, the conclusions reached, and the Consultant’s recommendations for changes or improvements; and (iv) adopt, implement, and maintain all policies, procedures and practices recommended in the report of the Consultant within 120 days of receiving the report from the Consultant. The first installment of $ 150,000 has been paid by the Company on July 7, 2023. 25. RISKS AND UNCERTAINTIES Impact of COVID 19 In December 2019, a novel strain of coronavirus was reported and has spread throughout China and other parts of the world. On March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic”. 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. In response to the evolving dynamics related to the COVID-19 outbreak, the Company was 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 were closed and the employees worked from home at the end of January 2020 until late March 2020. The quarantines, travel restrictions, and the temporary closure of office buildings have materially negatively impacted our business. The outbreak has had and might continue to have disruption to our supply chain, logistics providers, customers or our marketing activities with the new variants of COVID-19, which could materially adversely impact our business and results of operations. There were outbreaks in various cities and provinces in China due to Omicron variant, such as Xi’an city, Hong Kong, Shanghai, Beijing and other cities in 2022, which have resulted quarantines, travel restrictions, and temporary closure of office buildings and facilities in these cities. In December 2022, the Chinese government eased its strict zero COVID-19 policy which resulted in a surge of new COVID-19 cases during December 2022 and January 2023, which has disrupted our business operations in China. The Company’s promotion strategy of CCM Shopping Mall previously mainly relied on the training of members and distributors through meetings and conferences. Chinese government put a restriction on large gatherings in 2020 and 2021, which made the promotion strategy for our online e-commerce platforms difficult to implement and the Company experienced difficulties to subscribe new members for its online e-commerce platforms. Due to the lack of new subscribers, in June 2021, the Company suspended its cross-border e-commerce platform NONOGIRL which later being closed. Also, since the second quarter of 2021, the Company has transformed its member-based Chain Cloud Mall to a sale agent based eCAAS platform and began to provide supply chain financing services. 28 The global economy has also been materially negatively affected by the COVID-19 and there is continued severe uncertainty about the potential outbreak and new variants of COVID-19. The Chinese and global growth forecast is extremely uncertain, which would seriously affect our business. While the potential economic impact brought by, and the duration of COVID-19 and its new variants 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 and its new variants could materially negatively 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. In the event that we do need to raise capital in the future and there is any outbreak due to new variants, outbreak-related instability in the securities markets could adversely affect our ability to raise additional capital. Consequently, our results of operations have been materially and adversely affected by COVID-19 pandemic. Any potential further impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the new variants of COVID-19, the efficacy and distribution of COVID-19 vaccines 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. PRC Regulations There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. We are considered foreign persons or foreign funded enterprises under PRC laws and, as a result, we are required to comply with PRC laws and regulations related to foreign persons and foreign funded enterprises. These laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business. Customer concentration risk For six months ended June 30, 2023, one customer accounted for 79.62 % of the Company’s total revenues. For six months ended June 30, 2022, one customer accounted for 61.05 % of the Company’s total revenues. Vendor concentration risk For six months ended June 30, 2023, four vendors accounted for 27.78 %, 12.31 %, 11.63 % and 11.48 % of the Company’s total purchases. For six months ended June 30, 2022, four vendors accounted for 25.20 %, 24.15 %, 12.72 % and 10.63 % of the Company’s total purchases. 26. SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date of the issuance of the condensed consolidated financial statements and no subsequent event is identified. 29