Future FinTech Group Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the SEC (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “may”, “will”, “should”, “would”, “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to Company or Company’s management identify forward-looking statements. Such statements reflect the current view of Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the statements in the section “results of operations” below), and any businesses that Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”) and in this Form 10-Q. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report and in our 2024 Form 10-K. Although the Company believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this report, which attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects. Overview of Our Business Future FinTech Group Inc. is a Florida holding company with no material operations of its own. We conduct substantially all of our business through subsidiaries, and this structure involves unique risks for investors. We are not a Chinese operating company, although we have had significant operations in China and Hong Kong. Historically, our business focused on fruit juice manufacturing and distribution in China. Due to rising production costs and stricter environmental laws, we shifted our operations toward supply chain financing and trading in China, asset management in Hong Kong, cross-border money transfer services in the United Kingdom, brokerage and investment banking in Hong Kong, and cryptocurrency mining in the United States. Most of these activities have since been reduced or exited. Recent strategic changes include: ● Exit from Variable Interest Entity (VIE) operations in China – Our VIE, E-Commerce Tianjin, generated minimal revenue since 2021 and was deregistered on March 7, 2024. ● Disposal of Hong Kong asset management operations – In November 2024, we sold our remaining 42.86% interest in Nice Talent Asset Management Limited for approximately $300,000 and ceased asset management activities in Hong Kong. ● Sale of cryptocurrency mining operations – On December 9, 2024, we sold FTFT SuperComputing Inc., including the assumption of approximately $973,000 in liabilities and $1.0 million applied toward a litigation judgment. ● Disposition of multiple subsidiaries – On December 18, 2024, we sold 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 through a court-ordered auction for $25,000. ● Closure of Paraguay cryptocurrency venture – FTFT Paraguay S.A., acquired in 2022, was dissolved in December 2023 after we were unable to develop planned operations. As of June 30, 2025, our principal business operations consist of: sale of fast-moving consumer goods; commission-based trading and consulting services; and supply chain financing and trading. We currently have one directly controlled subsidiary, Future FinTech (Hong Kong) Limited. 29 Supply Chain Financing Service and Trading in China Since the second quarter of 2021, we started coal supply chain financing service and trading business. Since the third quarter of 2021, we started aluminum ingots supply chain financing service and trading business. Since the first quarter of 2023, we started 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 coal, aluminum ingots, sand and steel 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. 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 agent service fee 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 the 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, and steel when no control obtained throughout the transactions. We select the customers and suppliers that have good credit and reputation. FTFT International Securities and Futures Limited, a company we acquired in November 2023, provides brokerage and investment banking services in Hong Kong. FTFT International Securities and Futures Limited 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. 30 Results of Operations Comparison of Three Months ended June 30, 2025 and 2024: Revenue The following table sets forth the breakdown of our revenues for the three months ended June 30, 2025 and 2024, respectively: Three months ended June 30, 2025 2024 Change Amount Amount Amount % Fast-Moving Consumer Goods (FMCG) $ 387,684 $ - $ 387,684 100.00 % Trading Commission and Consulting service 217,598 204,315 13,283 6.50 % Supply Chain Financing/Trading - 64,674 (64,674 ) (100.00 )% Total revenue $ 605,282 $ 268,989 $ 336,293 125.02 % For the three months ended June 30, 2025 and 2024, revenue from sales of FMCG was $387,684 and nil, respectively, representing an increase of $387,684, or 100.00%. The increase was primarily attributable to the Company’s strategic expansion into the FMCG sector in September 2024, which significantly contributed to our revenue growth during the three months ended June 30, 2025. For the three months ended June 30, 2025 and 2024, revenue from trading commission and consulting service was $217,598 and $204,315, respectively, representing an increase of $13,283, or 6.50%. The increase was mainly attributable to higher trading volume in U.S. equity markets and the completion of a secondary offering during the three months ended June 30, 2025. For the three months ended June 30, 2025 and 2024, revenue from supply chain financing/trading was nil and $64,674, respectively, representing a decrease of $64,674, or 100.00%. The decrease was due to our management’s decision to temporarily suspend these operations resulting from lower coal prices and reduced market demand in China during the three months ended June 30, 2025. Gross Profit The following table sets forth the breakdown of the gross profit for the three months ended June 30, 2025 and 2024, respectively: Three months ended June 30, Variance 2025 % 2024 % Amount % Fast-Moving Consumer Goods (FMCG) $ 10,327 5.53 % $ - - $ 10,327 100.00 % Trading Commission and Consulting service 176,445 94.47 % 195,792 75.94 % (19,347 ) (9.88 )% Supply Chain Financing/Trading - - 62,029 24.06 % (62,029 ) (100.00 )% Total gross profit $ 186,772 100.00 % $ 257,821 100.00 % $ (71,049 ) (27.56 )% Overall gross profit decreased by $0.07 million, or 27.56%, to $0.19 million for the three months ended June 30, 2025 from $0.26 million for the same period last year. The decrease was primarily due to the decrease in gross profit from supply chain financing/trading which was in line with the decrease in revenue for this business segment during the three months ended June 30, 2025. Overall gross margin as a percentage of revenue was 30.86% for the three months ended June 30, 2025, representing a decrease of 64.99% from 95.85% for the same period last year, mainly due to the decrease in gross margin for debt recovery consulting service fee as well as U.S. dollar bond service. Additionally, the decrease in gross margin was due to the lower gross margin from FMCG, which accounted for a majority portion of total revenue during the three months ended June 30, 2025. 31 Operating Expenses The following table sets forth the breakdown of our operating expenses and operating expenses as a percentage of revenue for the three months ended June 30, 2025 and 2024, respectively: (in thousands) Three months ended June 30, 2025 2024 Amount % of revenue Amount % of revenue General and administrative expenses $ 854 141.07 % $ 1,424 423.41 % Selling expenses 249 41.15 % 151 45.06 % Bad debt provision (recovery) 393 69.94 % (276 ) (82.04 )% Total operating expenses $ 1,496 247.16 % $ 1,299 386.42 % For the three months ended June 30, 2025, our general and administrative expenses were $0.85 million, representing a decrease of $0.57 million, or 40.03%, as compared to the same period last year. The decrease was mainly due to decreased professional service fees during the three months ended June 30, 2025. For the three months ended June 30, 2025, our selling expenses were $0.25 million, representing an increase of $0.10 million, or 64.37%, as compared to the same period last year. The increase was mainly due to increased traveling costs and sales team performance incentives. For the three months ended June 30, 2025, our bad debt provision was $0.39 million, representing an increase of $0.67 million, or 242.47%, as compared to the same period last year. The increase was primarily due to the management’s efforts in collection of long overdue receivables from our customers, causing net recovery of credit losses during the three months ended June 30, 2024. Other Income, Net For the three months ended June 30, 2025, our net other income was $3.16 million, representing an increase of $2.93 million, or 1,259.48%, as compared to the same period last year. The increase was primarily due to the gain of $3.1 million on debt restructuring during the three months ended June 30, 2025 as we entered into a settlement and forbearance agreement with FT Global. Income Tax Income tax provision was nil for the three months ended June 30, 2025, and 2024. Net income (loss) from continuing operation For the three months ended June 30, 2025, our net income from continuing operation were $1.85 million, representing an increase of $2.66 million, or 328.85%, as compared to the same period last year. The increase was primarily due to the increase in net other income, as discussed above. Comparison of Six Months ended June 30, 2025 and 2024: Revenue The following table sets forth the breakdown of our revenues for the six months ended June 30, 2025 and 2024, respectively: Six months ended June 30, 2025 2024 Change Amount Amount Amount % Fast-Moving Consumer Goods (FMCG) $ 864,135 $ - $ 864,135 100.00 % Trading Commission and Consulting service 292,783 441,740 (148,957 ) (33.72 )% Supply Chain Financing/Trading 1,341 506,438 (505,097 ) (99.74 )% Total revenue $ 1,158,259 $ 948,178 $ 210,081 22.16 % 32 For the six months ended June 30, 2025 and 2024, revenue from sales of FMCG was $864,135 and nil, respectively, representing an increase of $864,135, or 100.00%. The increase was primarily attributable to the Company’s strategic expansion into the FMCG sector in September 2024, which significantly contributed to revenue growth during the six months ended June 30,2025. For the six months ended June 30, 2025 and 2024, revenue from trading commission and consulting service was $292,783 and $441,740, respectively, representing a decrease of $148,957, or 33.72%. The decrease was mainly due to lower revenue from both U.S. dollar bond trading service and consulting service during the six months ended June 30, 2025. For the six months ended June 30, 2025 and 2024, revenue from supply chain financing/trading was $1,341 and $506,438, respectively, representing a decrease of $505,097, or 99.74%. The decrease was due to our management’s decision to temporarily suspend these operations resulting from lower coal prices and reduced market demand in China during the six months ended June 30, 2025. Gross Profit The following table sets forth the breakdown of the gross profit for the six months ended June 30, 2025 and 2024, respectively: Six months ended June 30, Variance 2025 % 2024 % Amount % Fast-Moving Consumer Goods (FMCG) $ 19,185 7.23 % $ - - $ 19,185 100.00 % Trading Commission and Consulting service 244,864 92.27 % 426,813 80.09 % (181,949 ) (42.63 )% Supply Chain Financing/Trading 1,341 0.50 % 106,102 19.91 % (104,761 ) (98.74 )% Total Amount $ 265,390 100.00 % $ 532,915 100.00 % $ (267,525 ) (50.20 )% Overall gross profit decreased by $0.27 million, or 50.20%, to $0.27 million for the six months ended June 30, 2025 from $0.53 million for the same period last year. The decrease was primarily due to the decrease in gross profit from trading commission and consulting service and supply chain financing/trading which were in line with the decrease in revenue for these two business segments during the six months ended June 30, 2025. Overall gross margin as a percentage of revenue was 22.91% for the six months ended June 30, 2025, representing a decrease of 33.29% from 56.20% for the same period last year, mainly due to the decrease in gross margin for debt recovery consulting service fee as well as U.S. dollar bond service. Additionally, the decrease in gross margin was due to the lower gross margin from FMCG, which accounted for a majority portion of total revenue during the six months ended June 30, 2025. Operating Expenses The following table sets forth the breakdown of our operating expenses and operating expenses as a percentage of revenue for the six months ended June 30, 2025 and 2024, respectively: (in thousands) Six months ended June 30, 2025 2024 Amount % of revenue Amount % of revenue General and administrative expense $ 2,433 210.06 % $ 2,615 275.75 % Stock compensation expense 1,085 93.68 % - - Selling expenses 441 38.05 % 418 44.11 % Bad debt provision 28,762 2,483.26 % 443 46.73 % Total operating expenses $ 32,721 2,825.04 % $ 3,476 366.59 % For the six months ended June 30, 2025, our general and administrative expenses were $2.43 million, representing a decrease of $0.18 million, or 6.94%, as compared to the same period last year. The decrease was mainly due to the decreased professional service fees and traveling fees during the six months ended June 30, 2025. For the six months ended June 30, 2025, our stock compensation expense was $1.09 million, representing an increase of $1.09 million, as compared to the same period last year. On March 10, 2025, the Compensation Committee of the Board of Directors of the Company granted 500,000 shares of common stock of the Company (“Shares”), par value $0.001, pursuant to the Company’s 2024 Omnibus Equity Plan, to certain officers and employees of the Company and its subsidiaries. As the closing price of the Company stock was $2.17 on March 10, 2025, the Company recorded an expense of $1.09 million in the first quarter of fiscal year 2025. The Shares were issued to the Grantees on March 10, 2025. The stock price and share numbers have been adjusted based on the one for ten reverse splits effected on April 1, 2025. 33 For the six months ended June 30, 2025, our selling expenses were $0.44million, representing an increase of $0.02 million, or 5.37%, as compared to the same period last year. For the six months ended June 30, 2025, our bad debt provision was $28.76 million, representing an increase of $28.32 million, or 6,391.30%, as compared to the same period last year. The increase was primarily due to provision for bad debts on related party receivables in connection with the disposal of a subsidiary during the six months ended June 30, 2025. Other Income (Expense), Net For the six months ended June 30, 2025, our net other income was $3.36 million, representing an increase of $4.57 million, or 378.41%, as compared to the same period last year. The increase was primarily due to the gain on debt restructuring during the six months ended June 30, 2025. On June 17, 2025, we entered into a settlement and forbearance agreement (“the Agreement”) with FT Global. Pursuant to the Agreement, we were required to pay an aggregate settlement amount of $2.0 million and issue a total of 1,700,000 shares of common stock. Upon the debt restructurings, we recognized a gain of $3.07 million which was recorded as gain on debt restructuring on the unaudited condensed consolidated statement of operations and comprehensive income (loss). The increase in net other income was also attributable to higher legal case fee of litigation with FT Global during the six months ended June 30, 2024. Income Tax Income tax provision was nil for the six months ended June 30, 2025, and June 30, 2024. Net loss from continuing operation For the six months ended June 30, 2025, our net loss from continuing operation were $29.09 million, representing an increase of $24.94 million, or 600.94%, as compared to the same period last year. The increase was primarily due to the increase in operating expenses, as discussed above. Gain on disposal of discontinued operations Gain on disposal of discontinued operation was $28.24 million for the six months ended June 30, 2025, which was related to the transfer of FTFT UK LIMITED, FTFT Finance UK Limited, Future Fintech Digital Number One US, LP, Future Fintech Digital Number One Offshore, LLC(Cayman), Future Fintech Digital Number One GP,LLC (USA), FTFT Digital Number One, Ltd.(Cayman), Future FinTech Labs Inc, Future Fintech Digital Capital, FTFT CAPITAL INVESTMENTS, DigiPay FinTech Limited, DCON DigiPay Limited-JPN and Global Key Shared Mall Ltd. Earnings (loss) per Share For the six months ended June 30, 2025, basic and diluted loss per share from continuing operations were both $10.27, as compared to loss per share of $2.08 per share (both basic and diluted) for the same period last year. For the six months ended June 30, 2025, basic and diluted earnings per share from discontinued operations was $9.31 and $9.30, respectively, as compared to loss per share of $0.47 per share (both basic and diluted) for the same period last year. Liquidity and Capital Resources As of June 30, 2025, we had cash and restricted cash of $5.79 million, representing an increase of $1.02 million from $4.77 million as of December 31, 2024. 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 $11.47 million as of June 30, 2025, an increase of $3.87 million from working capital of $7.60 million as of December 31, 2024, mainly due to the decrease in current liabilities. 34 Net cash used in operating activities increased by $16.93 million to $27.73 million for the six months ended June 30, 2025 from $10.80 million for the same period last year. The increase in net cash used in operating activities was primarily due to the increase in net loss from continuing operation, the decrease in accrued expenses and other payables, as well as the decrease in other receivables. The increase was partially offset by the increase in bad debt provision, the increase in advances to suppliers and other current assets and the decrease in accounts payable. Net cash provided by investing activities increased by $0.41 million to $0.62 million for the six months ended June 30, 2025 from $0.21 million for the same period last year. The increase was due to the increase in repayment for debt investment and loan receivables. The increase was partially offset by the decrease in repayment for short term investment. Net cash used in financing activities for the six months ended June 30, 2025 was $0.01 million, representing a decrease of $2.46 million, as compared to net cash provided by financing activities of $2.45 million during the same period last year. The decrease in net cash provided by financing activities was mainly due to the decrease in proceeds from the issuance of common stock from a private placement, net of issuance costs. Off-balance sheet arrangements As of June 30, 2025, we did not have any off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable.