Item 7. Management’s Discussion and Analysis
ITEM 7 – MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the
consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and
related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results could differ materially from the results described in or implied by these forward-looking
statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly
under the heading “Risk Factors.”
Overview
Future FinTech is a holding company incorporated
under the laws of the State of Florida and it is not a Chinese operating company. As a holding company with no material operations of
our own, we conduct a substantial majority of our operations through our subsidiaries and this structure involves unique risks to investors.
The Company historically engaged in the production and sale of fruit juice concentrates (including fruit purees and fruit juices), fruit
beverages (including fruit juice beverages and fruit cider beverages) in People’s Republic of China. Due to drastically increased
production costs and tightened environmental laws in China, the Company had transformed its business from fruit juice manufacturing and
distribution to supply chain financing services and trading in China, asset management business in Hong Kong and cross-border money transfer
service in UK. The Company also expanded into brokerage and investment banking business in Hong Kong and cryptocurrency mining farm in
the U.S. The Company had a contractual arrangements with a VIE E-Commerce Tianjin in China, which has generated minimal revenue
and business since 2021 due to the negative impact caused by COVID-19. The Company started the process to close it down in November 2023
and completed deregistration and dissolution of the VIE with local authority on March 7, 2024. Due to worsened investment market sentiment
in Hong Kong, the Company sold its ownership in Nice Talent Asset Management Limited (“NTAM”) to a third party for HK$2.4
million (approximately $300,000) in November 2024 and is no longer in asset management business in Hong Kong. On December 6, 2024, the
Company agreed to sell all issued and outstanding shares of FTFT SuperComputing Inc. a wholly owned subsidiary of the Company (“FTFT
SuperComputing”) to DDMM Capital LLC (the “Buyer”) for a purchase price that equals to: (i) the assumption of the
obligations of FTFT SuperComputing totaling $973,072.24 and (ii)$1,000,000, which was paid to an account at Olshan Frome Wolosky LLP to
satisfy, in part, the right of payment held by FT Global Capital, Inc. arising from the judgment entered in favor of FT Global and against
the Company registered in the Southern District of New York and all matters pertaining to such litigation. The closing of the transactions
contemplated by the Agreement took place on December 9, 2024. On December 18, 2024, the Company sold all of its interest and ownership
of Future Fintech Digital Capital Management LLC, FTFT UK Limited, DigiPay FinTech Limited, GlobalKey SharedMall Limited, Future Fintech
Labs Inc., and Future Fintech Digital Number One GP, LLC (USA) to Alec Orudjiev, the general counsel of FT Global for $25,000 through
the court ordered auction by the United States Marshal for the Southern District of New York. Currently, the main business of the Company
is supply-chain financing services and trading in China.
On August 6, 2021, the Company completed acquisition
of 90% of the issued and outstanding shares of Nice Talent Asset Management Limited (“NTAM”), a Hong Kong-based asset management
company, from Joy Rich Enterprises Limited (“Joy Rich”). NTAM is licensed under the Securities and Futures Commission of Hong
Kong (“SFC”) to carry out regulated activities in Type 4: Advising on Securities and Type 9: Asset Management. In order to
retain talent in view of the increased turnover in the industry in Hong Kong, top performers of NTAM who had worked with the company for
years were granted the right to subscribe for new shares of NTAM with cash. As a result, in July 2023, 19 shares of NTAM were issued to
Ms. Lau Kwai Chun at a cash consideration of HK$1,786,301 and in December 2023, 11 shares of NTAM were issued to Aspenwood Capital Partner
Limited at a cash consideration of HK$1,034,174. Due to the abovementioned 30 new shares issuance, the Company’s holding of NTAM
decreased from 90% to 77.14%. In August 2024, NTAM issued additional 168 shares with HK$17,900 each for a total of HK$3,007,200 by way
of rights subscription offer to three existing shareholders of NTAM and Future Fintech (Hong Kong) Limited did not participate in the
subscription and an outsider investor purchased the shares. After the right subscription, the shareholding percentage of NTAM by Future
Fintech (Hong Kong) Limited decreased from 77.14% to 42.86%. In November 2024, the Company sold its remaining 42.86% ownership of
NTAM to a third party for HK$2.4 million and is no longer in asset management business in Hong Kong.
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 plans to develop bitcoin and other cryptocurrency mining
and related services in Paraguay. The Company has changed its name from KAZAN S.A to FTFT Paraguay S.A. on July 28, 2022 and it was dissolved
in December 2023 as the Company was not able to develop the business in Paraguay as planned.
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 was approved by the Securities and Futures
Commission of Hong Kong (“SFC”) in August 2023 and the acquisition was closed on November 7, 2023. The names of the two entities
were subsequently changed to ‘FTFT International Securities and Futures Limited’ and ‘FTFT Information Services (Shenzhen)
Co. Ltd.’, respectively.
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On September 4, 2024, the Company deregistered
and dissolved the Tianjin Future Private Equity Fund Management Partnership, a Limited Partnership under the laws of China.
On December 6, 2024, the Company and FTFT SuperComputing
Inc. a wholly owned subsidiary of the Company (“FTFT SuperComputing”) entered into a Stock Purchase Agreement (the “Agreement”)
with DDMM Capital LLC (the “Buyer”). Pursuant to the terms of the Agreement, the Company sold all of the issued and
outstanding shares of FTFT SuperComputing to the Buyer for a purchase price that equals to: (i) the assumption of the obligations of FTFT
SuperComputing totaling $973,072.24 and (ii)$1,000,000, which was paid to an account at Olshan Frome Wolosky LLP to satisfy, in part,
the right of payment held by FT Global Capital, Inc. arising from the judgment entered in favor of FT Global and against the Company registered
in the Southern District of New York and all matters pertaining to such litigation. The closing of the transactions contemplated by the
Agreement took place on December 9, 2024.
On December 18, 2024, the Company sold all of
its interest and ownership of Future Fintech Digital Capital Management LLC, FTFT UK Limited, DigiPay FinTech Limited, GlobalKey SharedMall
Limited, Future Fintech Labs Inc., and Future Fintech Digital Number One GP, LLC (USA) to Alec Orudjiev, the general counsel of FT Global
for $25,000 through the court ordered auction by the United States Marshal for the Southern District of New York.
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 “2023 Reverse Stock Split”).
On March 27, 2025, 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-10 reverse stock split of the Company’s authorized shares of common stock from 60,000,000
shares to 6,000,000 shares, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock
(“2025 Reverse Stock Split”, collectively with 2023 Reverse Stock Split as “Reverse Splits”). The common stock
will continue to be $0.001 par value. The Company rounded up the fractional shares that result from the 2025 Reverse Stock Split and no
fractional shares will be issued in connection with the 2025 Reverse Stock Split and no cash or other consideration will be paid in connection
with any fractional shares that would otherwise have resulted from the 2025 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 1:00pm E.T. on April 1, 2025.
The Company operated
a blockchain based online shopping platform, Chain Cloud Mall (“CCM”) Chain Cloud Mall through its VIE and its business was
materially and negatively affected during outbreak of COVID-19 because the Company was unable to implement its promotion strategy to enroll
new members through training of such members and distributors via meetings and conferences which was not possible during the outbreak
of COVID-19. CCM has generated minimal revenue and business since 2021, despite the Company transformed the member-based business
model of CCM to a sale agent based “Enterprise Communication as A Service” or eCAAS platform during the second quarter of
2021. The Company started a process to close it down in November 2023 and completed deregistration and dissolution of the VIE with local
authority on March 7, 2024.
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There are legal and operational risks associated
with being based in and having a substantial majority of operations in China and Hong Kong. These risks could result in a material change
in our operations and/or the value of our common stock or could significantly limit or completely hinder our ability to offer or continue
to offer securities to investors and cause the value of our shares to significantly decline or be worthless. In the past few years, the
PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice,
including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas
using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts
in anti-monopoly enforcement. On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office
of the State Council jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality
development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border
oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish
and improve the system of extraterritorial application of the PRC securities laws. On February 15, 2022, Cybersecurity Review Measures
published by Cyberspace Administration of China or the CAC, National Development and Reform Commission, Ministry of Industry and Information
Technology, Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce, People’s Bank of
China, State Administration of Radio and Television, China Securities Regulatory Commission (“CSRC”), State Secrecy Administration
and State Cryptography Administration became effective, which provides that, Critical Information Infrastructure Operators (“CIIOs”)
that intend to purchase internet products and services and Online Platform Operators engaging in data processing activities that affect
or may affect national security shall be subject to the cybersecurity review by the Cybersecurity Review Office. On July 7, 2022, CAC
promulgated the Measures for the Security Assessment of Data Cross-border Transfer, effective on September 1, 2022, which requires the
data processors to apply for data cross-border security assessment coordinated by the CAC under the following circumstances: (i) any data
processor transfers important data to overseas; (ii) any critical information infrastructure operator or data processor who processes
personal information of over 1 million people provides personal information to overseas; (iii) any data processor who provides personal
information to overseas and has already provided personal information of more than 100,000 people or sensitive personal information of
more than 10,000 people to overseas since January 1st of the previous year; and (iv) other circumstances under which the data cross-border
transfer security assessment is required as prescribed by the CAC. On February 17, 2023, the CSRC released New Overseas Listing Rules
with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises
to complete filings with CSRC and report related information under certain circumstances, such as: a) an issuer making an application
for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed
on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s),
share swap, transfer of shares or other means. According to the Notice on Arrangements for Overseas Securities Offering and Listing by
Domestic Enterprises, published by the CSRC on February 17, 2023, a company that (i) has already completed overseas listing or (ii) has
already obtained the approval for the offering or listing from overseas securities regulators or exchanges but has not completed such
offering or listing before effective date of the new rules and also completes the offering or listing before September 30, 2023 are considered
as an existing listed company and is not required to make any filing until it conducts a new offering in the future. Furthermore, upon
the occurrence of any of the material events specified below after an issuer has completed its offering and listed its securities on an
overseas stock exchange, the issuer shall submit a report thereof to the CSRC within 3 business days after the occurrence and public disclosure
of the event: (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or other competent
authorities; (iii) change of listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting. The New Overseas
Listing Rules stipulate the legal consequences to the companies for breaches, including failure to fulfill filing obligations or filing
documents having false statement or misleading information or material omissions, which may result in a fine ranging from RMB1 million
to RMB10 million, and in cases of severe violations, the relevant responsible persons may also be barred from entering the securities
market. On February 24, 2023, the CSRC, the Ministry of Finance, the National Administration of State Secretes Protection and the
National Archives Administration released the Provisions on Strengthening the Confidentiality and Archives Administration Related to the
Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions, which took
effect on March 31, 2023. PRC domestic enterprises seeking to offer securities and list in overseas markets, either directly or indirectly,
shall establish and improve the system of confidentiality and archives work, and shall complete approval and filing procedures with competent
authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving
state secrets and work secrets of state organs to relevant securities companies, securities service institutions, overseas regulatory
agencies and other entities and individuals. It further stipulates that (i) providing or publicly disclosing documents and materials which
may adversely affect national security or public interests, and accounting records or photocopies thereof to relevant securities companies,
securities service institutions, overseas regulatory agencies and other entities and individuals shall be subject to corresponding procedures
in accordance with relevant laws and regulations; and (ii) any working papers formed in the territory of the PRC by securities companies
and securities service agencies that provide domestic enterprises with securities services relating to overseas securities issuance and
listing shall be stored in the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance
with relevant laws and regulations. As of the date of this report, these new laws and guidelines that became effective have not impacted
the Company’s ability to conduct its business, accept foreign investment or list on a U.S. or other foreign stock exchange except
for the filing requirement under New Overseas Listing Rules. The Company is still processing the filings with CSRC for its offerings since
the effective of New Overseas Listing Rules and has not complied the filing requirements yet which would subject the Company to fines
and other penalties for violation of New Overseas Listing Rules. In addition, new rules and regulations could be adopted and there are
uncertainties in the interpretation and enforcement of existing laws and guidelines, which could materially and adversely impact our business
and financial outlook and may impact our ability to accept foreign investments or continue to list on a U.S. or other foreign stock exchange. Any
change in foreign investment regulations, and other policies in China or related enforcement actions by China government could result
in a material change in our operations and the value of our securities and could significantly limit or completely hinder our ability
to offer our securities to investors or cause the value of our securities to significantly decline or be worthless.
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In the opinion of our PRC counsel Fengdong Law
Firm, subsidiaries of the Company are incorporated and operating in mainland China have received all required permissions from Chinese
authorities to operate their current business in China, including Business licenses and Bank Account Open Permits, as of the date of this
report.
In the opinion of Fengdong Law Firm, as of the
date of this report, we, our subsidiaries in China are not subject to permission requirements from the CSRC or CAC or any other entity
that is required to approve of their operations and have not received or were denied such permissions by any PRC authorities. Currently,
we are required to file with CSRC for any offerings under New Overseas Listing Rules. The Company is still processing the filings with
CSRC for its offerings since the effective of New Overseas Listing Rules and has not complied the filing requirements yet which would
subject the Company to fines and other penalties for violation of New Overseas Listing Rules. Given the current PRC regulatory environment,
it is uncertain whether we, our subsidiaries, will be able to obtain permission from the PRC government to offer our securities to foreign
investors, and even when such permission is obtained, whether it will be denied or rescinded. If we or any of our subsidiaries do not
receive or maintain such permissions or approvals, inadvertently conclude that such permissions or approvals are not required, or applicable
laws, regulations, or interpretations change and we or our subsidiaries are required to obtain such permissions or approvals, it could
significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of
our securities to significantly decline or become worthless. Failure to take timely and appropriate measures to adapt to any of these
or similar regulatory compliance challenges could materially and adversely affect our current corporate structure and business operations.
The Company currently has one directly controlled
subsidiaries: Future FinTech (Hong Kong) Limited, a company incorporated under the laws of Hong Kong.
SkyPeople Foods Holdings Limited (“SkyPeople
BVI”) was a wholly owned subsidiary of the Company and a company organized under the laws of the British Virgin Islands, which held
100% of the equity interest of HeDeTang Holdings (HK) Ltd. (“HeDeTang HK”), a company organized under the laws of the Hong
Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), and HeDeTang HK held 73.42% of the
equity interest of SkyPeople Juice Group Co., Ltd., (“SkyPeople (China)”), a company incorporated under the laws of the PRC.
SkyPeople (China) had eleven subsidiaries in the PRC, which were mainly involved in the production and sales of fruit juice concentrates,
fruit juice beverages and other fruit-related products in the PRC and overseas markets. On February 27, 2020, SkyPeople BVI (the “Seller”)
completed the transfer of its ownership of HeDeTang HK to New Continent International Co., Ltd. (the “Buyer”), an unrelated
third party and a company incorporated in the British Virgin Islands for a total price of RMB 0.6 million (approximately $85,714), pursuant
to a Share Transfer Agreement entered into by the Seller and the Buyer on September 18, 2019 and approved at the special shareholders
meeting of the Company on February 26, 2020 (the “Sale Transaction”). SkyPeople BVI had no operational assets or business
after the transfer and the Company dissolved SkyPeople BVI on July 27, 2020.
Supply Chain Financing
Service and Trading in China
Since the second quarter
of 2021, we started supply chain financing service and trading business, which currently includes coal, aluminum ingots, sand and steel
supply chain financing service and trading business.
Our supply chain finance business mainly serves
the receivables and payables of industrial customers, obtains the creditor’s rights or commodity goods rights of large state-owned
enterprises through trade execution, provides customers with working capital, accelerates capital turnover, and then expands the business
scale and improves the industrial value.
Through our supply chain service ability and customer
resources, we can tap into low-risk assets, flexibly carry out financial services around the actual financial needs of certain industries,
and reduce the overall risk of the business by using the control of business flow, goods logistics and capital flow in the process of
commodity circulation.
We focus on bulk commodity goods such as sand,
steel, coal and aluminum ingots and take large state-owned or listed companies as the core service targets; We use our own funds as the
operation basis, actively uses a variety of channels and products for financing, such as banks, commercial factoring companies, accounts
receivable, asset-backed securities, and other innovative financing methods to obtain sufficient funds.
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We sign purchase and sale agreements with suppliers
and buyers. The suppliers are responsible for the supply and transportation of goods to the end users’ designated freight yard or
transfer the title to us in certain warehouses. We also provide trading service as we don’t take control over the ownership of the
goods but receive lower margin for the transaction. For the sale of goods where we obtain control of the goods before transferring it
to the customer, we recognize revenue based on the gross revenue amount billed to customers as sales of goods. We consider multiple factors
when determining whether we obtain control of third-party goods, including evaluating if we can establish the price of the goods, retain
inventory risk for tangible goods or have the responsibility for ensuring acceptability of the goods. We recognize net revenue as agent
services for the sales of coals, aluminum ingots, sand and steel when no control obtained throughout the transactions. We select
the customers and suppliers that have good credit and reputation.
Asset Management,
Brokerage and Investment Banking Services in Hong Kong .
The Company acquired
90% of the issued and outstanding shares of Nice Talent Asset Management Limited (“NTAM”), a Hong Kong-based asset management
company in August 2021. NTAM was founded in 2018 and it engages asset management and advisory services. NTAM is licensed under the Securities
and Futures Commission of Hong Kong (SFC) for carrying out regulated activities in “Advising on Securities” and “Asset
Management”. NTAM offers diversified asset management portfolio for professional investors. Assets of NTAM’s clients are held
in banks, where clients gave the banks their authorization allowing NTAM to place trading instructions on behalf of the clients in order
to manage the clients’ assets. In order to retain talent in view of the increased turnover in the industry in Hong Kong, top performers
of NTAM who had worked with the company for years were granted the right to subscribe for new shares of NTAM with cash. As a result, in
July 2023, 19 shares of NTAM were issued to Ms. Lau Kwai Chun at a cash consideration of HK$1,786,301 and in December 2023, 11 shares
of NTAM were issued to Aspenwood Capital Partner Limited at a cash consideration of HK$1,034,174. Due to the abovementioned 30 new shares
issuance, the Company’s holding of NTAM decreased from 90% to 77.14%. In August 2024, NTAM issued additional 168 shares with HK$17,900
each for a total of HK$3,007,200 by way of rights subscription offer to three existing shareholders of NTAM and Future Fintech (Hong Kong)
Limited did not participate in the subscription and an outsider investor purchased the shares. After the right subscription, the shareholding
percentage of NTAM by Future Fintech (Hong Kong) Limited decreased from 77.14% to 42.86%. In November 2024, the Company closed the
sale of its remaining 42.86% ownership of NTAM to a third party for HK$2.4 million and is no longer in asset management business in Hong
Kong.
NTAM mainly engages in following asset management services for its
clients:
(1) Equity Investment
NTAM manages clients’ investment portfolio
in stocks of the companies listed on the international market with strong liquidity. At the same time, it selects companies that have
unique or differentiated businesses, realizing above average profit growth.
(2) Debt investment
When NTAM manages clients’ investment portfolio
in bonds that are denominated in major international currencies such as US dollar, euro and sterling, the issuer of debts shall have good
credit rating and asset liability ratio. Through active management, NTAM focuses on bonds with higher yield to maturity among bonds with
the same maturity and credit rating.
(3) Precious metals and currencies investment
NTAM also manages clients’ investment portfolio
in major international currencies and precious metals, including US dollar, Euro, British pound, Japanese yen, Australian dollar and offshore
Chinese yuan. Precious metals include gold, platinum and silver. With research on the fundamentals of market supply and demand to predict
the trend of commodity prices, NTAM endeavors to improve the rate of return for clients through dual currency investment, options and
structured products.
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(4) Derivative Investment
NTAM also manages clients’ investment portfolio
in financial derivatives in different asset classes, such as options and structured products.
(5) External Asset Management Services (EAM)
This business takes customer demand as the service
purpose, cooperates with several private banks which provide asset custody services, and innovatively introduces the function of investment
bank to provide exclusive private solutions for clients.
NTAM’s main revenue is generated from providing
professional advices to clients and management fees for managing the investment of the clients.
Impact of COVID-19 on our Business
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. Since 2021, CCM generated minimal revenue and business for the Company. The Company
started a process to close down its operations in November 2023 and completed deregistration and dissolution of the VIE with local authority
on March 7, 2024.
While the potential economic impact brought by
new variants of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global
financial markets, reducing our ability to access capital, which could negatively affect our liquidity. 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.
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Discontinued Operations
On June 16, 2023, QR (HK) Limited was dissolved
and deregistered.
On December 5, 2023, FTFT PARAGUAY S.A. was dissolved.
On March 7, 2024, Chain Cloud Mall Network and
Technology (Tianjin) Co., Limited was dissolved and deregistered.
On September 4, 2024, Tianjin Future Private Equity
Fund Management Partnership (Ltd Partnership) was dissolved and deregistered.
On November 27, 2024, Nice Talent Asset Management
Limited (“NTAM”) was disposed of for a consideration of US$ 0.31 million (HK$2.40 million).
On December 9, 2024, FTFT SuperComputing Inc.
was disposed of for a consideration of US$1.97 million, of which (i) the assumption of the obligations of FTFT SuperComputing totaling
$973,072.24 and (ii) $1,000,000 was paid to an account at Olshan Frome Wolosky LLP to satisfy, in part, the right of payment held by FT
Global Capital, Inc. arising from the judgment entered in favor of FT Global and against the Company registered in the Southern District
of New York.
On December 18, 2024, the Company sold all of its interest and ownership
of Future Fintech Digital Capital Management LLC, FTFT UK Limited, DigiPay FinTech Limited, GlobalKey SharedMall Limited, Future Fintech
Labs Inc., and Future Fintech Digital Number One GP, LLC (USA) to Alec Orudjiev, the general counsel of FT Global for $25,000 through
the court ordered auction by the United States Marshal for the Southern District of New York. Currently, the main business of the Company
is supply-chain financing services and trading in China
Segment Information Reclassification
The Company’s businesses mainly are Supply
Chain Financing and Trading Services and Asset Management Services.
Use of Estimates
The Company’s consolidated financial statements
have been prepared in accordance with U.S. GAAP and this requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure at contingent assets and liabilities at the date of the consolidated financial statements
and reported amounts of revenue and expenses during the reporting period. The significant areas requiring the use of management estimates
include the allowance for doubtful accounts receivable, estimated useful life and residual value of property, plant and equipment, impairment
of long-lived assets, provision for staff benefit, valuation of change in fair value of warrant liability, 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.
Fair Value of Financial Instruments
On January 1, 2009, the Company adopted FASB Accounting
Standard Codification 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 does not require any new
fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source
of the information. In February 2008, FASB deferred the effective date of ASC 820 by one year for certain non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).
The Company adopted the provisions of ASC 820, except as it applies to those non-financial assets and non-financial liabilities for which
the effective date has been delayed by one year.
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. Classification within the hierarchy
is determined based on the lowest level of input that is significant to the fair value measurement.
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Revenue Recognition
The Company adopted ASC 606, Revenue from Contracts
with Customers, from January 1, 2018. The adoption had no impact on the Company’s retained earnings as of January 1, 2018 as well
as the Company’s financial statements for the year ended December 31, 2019. To achieve that core principle, we apply the five steps
defined under Topic 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 is recognized upon the transfer of control of promised goods or services to
a customer. Historically, the Company has not had any returned products. Accordingly, no provision has been made for returnable goods.
The Company is not required to rebate or credit a portion of the original fee if it subsequently reduces the price of its products.
Foreign Currency and Other Comprehensive Income
The financial statements of the Company’s
foreign subsidiaries are measured using the local currency as the functional currency; however, the reporting currency of the Company
is the United States dollar (“USD”). Assets and liabilities of the Company’s foreign subsidiaries have been translated
into USD using the exchange rate at the balance sheet date, while equity accounts are translated using historical exchange rate. The average
exchange rate for the period has been used to translate revenues and expenses. Translation adjustments are reported separately and accumulated
in a separate component of equity (cumulative translation adjustment).
Other comprehensive income for the years ended
December 31, 2024 and 2023 represented foreign currency translation adjustments and were included in the consolidated statements of comprehensive
income.
There is no guarantee the RMB amounts could have
been, or could be, converted into USD at rates used in translation.
Income Taxes
Income taxes are provided on an asset and liability
approach for financial accounting and reporting of income taxes. Any tax paid by subsidiaries during the year is recorded. Current tax
is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purpose
and is calculated using tax rates that have been enacted at the balance sheet date. Deferred income tax liabilities or assets are recorded
to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and the financial reporting
amounts at each period end. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred
tax asset will not be realized.
ASC 740 provides guidance for recognizing and
measuring uncertain tax positions, and it prescribes a threshold condition that a tax position must meet for any of the benefits of the
uncertain tax position to be recognized in the financial statements. ASC 740 also provides accounting guidance on derecognizing, classification
and disclosure of these uncertain tax positions.
Impairment of Long-Lived Assets
In accordance with the FASB 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. It is reasonably possible that these assets could become impaired as a result of technological or other
industrial changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future
net 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 costs to sell.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but
not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company.
See Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a description of applicable recent
accounting pronouncements.
50
Comparison of Operation Results of years ended
December 31, 2024 and 2023
Revenue
The following table presents our consolidated
revenues for our main products and services for the fiscal years 2024 and 2023, respectively, (in thousands):
Year ended
December 31,
Change
2024
2023
Amount
%
Supply Chain Financing/Trading
$ 983
$ 20,826
$ (19,843 )
(95.28 )%
Others
1,175
871
304
34.90 %
Total
$ 2,158
$ 21,697
$ 19,539
(158.50 )%
Revenue decreased from $21.7 million in 2023 to
$2.16 million in 2024, decrease of $19.54 million or 158.5%. The decrease in overall revenue was mainly due to the sale of the subsidiary
NTAM which generated $12.88 million revenue from asset management business in 2023 as well as decrease in revenues generated from supply
chain financing and trading business. As the real estate, infrastructure and overall economy in China have slowed down in 2024, the demand
for sand and steel has dropped during 2024 comparing to the same period of 2023, and coal price has decreased in China and the market
demand has also decreased during 2024 as comparing to the same period of 2023.
Other revenues increased from $0.87 million for
the year ended December 31, 2023 to $1.18 million for the same period of 2024, mainly due to the increased debt recovery consulting service
fee as well as U.S. dollar bond service income, as we did not have such income in 2023.
Gross Margin
(in thousands)
2024
2023
Gross
profit
Gross
margin
Gross
profit
Gross
margin
Supply Chain Financing/Trading
$ 175
17.8 %
423
2.03 %
Others
1,097
93.36 %
698
80.09 %
Total
$ 1,272
58.94 %
$ 1,121
51.95 %
Overall gross profit increased from approximately
$1.12 million in 2023 to approximately $1.27 million in 2024, mainly due to new consulting and US dollar bond services business in 2024
comparing to 2023.
51
Operating Expenses
The following table presents consolidated operating
expenses and operating expenses as a percentage of revenue for 2024 and 2023, respectively, (in thousands):
2024
2023
Amount
% of
revenue
Amount
% of
revenue
General and administrative
$ 6,213
287.91 %
$ 7,244
33.39 %
Research and development expenses
313
14.5 %
340
1.57 %
Stock compensation expense
671
31.09 %
3,468
15.98 %
Selling expenses
636
29.47 %
288
1.33 %
(Recovery) Provision of doubtful debts
27,350
1,267.38 %
(788 )
(3.63 )%
Impairment Loss
-
-
14,161
65.27 %
Total operating expenses
$ 35,207
1,631.46 %
$ 24,713
113.9 %
General and administrative expenses decreased
by $1 million, or 13.89%, from $7.2 million to $6.2 million for the year ended 2024, compared to the same period of last fiscal year.
The decrease in general and administrative expenses was mainly due to decreased professional service fees and rental fee during the year
ended December 31, 2024.
Selling expenses increased by $0.35 million to
$0.63 million in 2024 as compared to $0.28 million in 2023, the increase in selling expenses was mainly due to increase in selling expenses
from our supply chain business.
Bad debt provision increased by $27.35 million
during the year 2024, compared to the same period of last fiscal year. The increase was due to bad debt provision in 2024 because a different
bad debt provision accounting treatment method used in 2024.
Loss from Operations
Loss from operations increased by $1.41 million
to $34.23 million for 2024 from $32.82 million for 2023, mainly due to decrease in cost of revenue.
Noncontrolling Interests
Nature
Worldwide Resources Ltd. holds 40% interest in DCON DigiPay Limited (“DCON Digipay”). Each of Bin Wu and Lixiong Huang holds
25% and 20% interest in FTFT Capital Investments L.L.C., respectively.
52
Loss per Share
Basic and diluted loss per share from continuing
operations were $1.63 and $1.63 in fiscal 2024, as compared to $2.21 and $2.2 in fiscal 2023, respectively. Basic and diluted loss per
share attributable to discontinued operations was $0.06 and $0.06 for fiscal year 2024 as compared to basic and diluted income per share
$0.07 and $0.07 for fiscal year 2023 respectively.
Liquidity and Capital Resources
As of December 31, 2024, we had cash and cash
equivalents of $4.84 million, a decrease of $12.57 million, from $17.41 million as of December 31, 2023. The decrease in cash, cash equivalents
was mainly due the loss in provision of doubtful debt for the year ended December 31, 2024 comparing to the same period of 2023.
Our working capital has historically been generated
from our operating cash flows, advances from our customers and loans from bank facilities. Our working capital was $8.27 million as of
December 31, 2024, a decrease of $28.49 million from $36.76 million as of December 31, 2023, mainly due to decrease in current assets.
In 2024, net cash used in our operating activities
was $21.23 million compared to net cash used in operating activities of $14.56 million in 2023. The increase in net cash used by operating
activities was primarily due to an increase in provision of doubtful debt during the year ended December 31, 2024.
In 2024, net cash provided in our investing activities
was $16.29 million compared to net cash used in operating activities of $8.78 million in 2023 mainly due to decrease in repayment for
loan receivable.
In 2024, cash used by financing activities was
$2.5 million as compared to cash used in financing activities negative $2.4 million in 2023. The increase in cash used by financing activities
was mainly due to proceeds from the issuance of common stock from a private placement, net of issuance costs.
Off-Balance Sheet Arrangements
As of December 31, 2024, we did not have any off-balance
sheet arrangements.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is included
in the Company’s consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.
ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.