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 the Company or its management identify forward-looking statements. Such statements reflect the current view of the 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 the 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 that 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 was 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 Super Computing 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, Global Key Shared Mall Ltd., 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. 39 As of September 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. Supply Chain Financing Service and Trading in China Since the second quarter of 2021, we have engaged in the coal supply chain financing service and trading business. Since the third quarter of 2021, we have engaged in aluminum ingots supply chain financing service and trading business. Since the first quarter of 2023, we have engaged in 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 is 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. Results of Operations Comparison of Three Months Ended September 30, 2025 and 2024: Revenue The following table sets forth the breakdown of our revenues for the three months ended September 30, 2025 and 2024, respectively: Three months ended September 30, 2025 2024 Change Amount Amount Amount % Fast-Moving Consumer Goods (“FMCG”) $ 1,196,141 $ 342 $ 1,195,799 349,648.83 % Trading Commission and Consulting service 128,492 598,245 (469,753 ) (78.52 )% Supply Chain Financing/Trading - 428,533 (428,533 ) (100.00 )% Total revenue $ 1,324,633 $ 1,027,120 $ 297,513 28.97 % 40 For the three months ended September 30, 2025 and 2024, revenue from sales of FMCG was $1,196,141 and $342, respectively, representing an increase of $1,195,799, or 349,648.83%. 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 September 30, 2025. For the three months ended September 30, 2025 and 2024, revenue from trading commission and consulting service was $128,492 and $598,245, respectively, representing a decrease of $469,753, or 78.52%. The decrease was mainly because a major project, which boosted revenue from consulting service during the three months ended September 30, 2024, did not recur in the same period this year. For the three months ended September 30, 2025 and 2024, revenue from supply chain financing/trading was nil and $428,533, respectively, representing a decrease of $428,533, 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 September 30, 2025. Gross Profit The following table sets forth the breakdown of the gross profit for the three months ended September 30, 2025 and 2024, respectively: Three months ended September 30, Variance 2025 % 2024 % Amount % Fast-Moving Consumer Goods (“FMCG”) $ 7,066 5.78 % $ 13 - % $ 7,053 54,253.85 % Trading Commission and Consulting service 115,271 94.22 % 586,080 94.10 % (470,809 ) (80.33 )% Supply Chain Financing/Trading - - % 36,764 5.90 % (36,764 ) (100.00 )% Total gross profit $ 122,337 100.00 % $ 622,857 100.00 % $ (500,520 ) (80.36 )% Overall gross profit decreased by $500,520, or 80.36%, to $122,337 for the three months ended September 30, 2025 from $622,857 for the same period last year. The decrease was primarily due to the decrease in gross profit from trading commission and consulting service which was in line with the decrease in revenue for this business segment during the three months ended September 30, 2025. Although revenue from FMCG segment increased significantly for the three months ended September 30, 2025, gross profit from this business segment did not increase simultaneously due to its low gross margin. Overall gross margin as a percentage of revenue was 9.24% for the three months ended September 30, 2025, representing a decrease of 51.41 percentage points from 60.64% for the same period last year, mainly due to the decrease in gross margin for debt recovery consulting service fee, and our gross margin was further eroded by that of the FMCG segment, which accounted for a majority portion of total revenue during the three months ended September 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 three months ended September 30, 2025 and 2024, respectively: Three months ended September 30, 2025 2024 Amount % of revenue Amount % of revenue General and administrative expenses $ 1,324,770 100.01 % $ 1,580,568 153.88 % Selling expenses 240,805 18.18 % 103,794 10.11 % Allowance for credit losses/doubtful accounts 654,222 49.39 % 3,386,630 329.72 % Total operating expenses $ 2,219,797 167.58 % $ 5,070,992 493.71 % 41 For the three months ended September 30, 2025, our general and administrative expenses were $1,324,770, representing a decrease of $255,798, or 16.18%, as compared to the same period last year. The decrease was primarily attributable to reduced salary, employee benefit and bonus expenses as a result of the implementation of cost-control measures, as well as a decrease in commission expenses caused by decreased consulting service revenue. The decrease was partially offset by an increase in business entertainment expenses driven by our new business expansion. For the three months ended September 30, 2025, our selling expenses were $240,805, representing an increase of $137,011, or 132.00%, as compared to the same period last year. The increase was primarily attributable to increased business entertainment expenses, traveling costs and sales team performance incentives, resulting from our initiatives to expand into new business segments and acquire new customers. For the three months ended September 30, 2025, our allowance for credit losses/doubtful accounts was $654,222, representing a decrease of $2,732,408, or 80.68%, as compared to the same period last year. The decrease was primarily due to the management’s efforts to collection of long overdue receivables from our customers, resulting in a smaller allowance for credit losses during the three months ended September 30, 2025. Other Income, Net For the three months ended September 30, 2025, our net other income was $132,148, representing a decrease of $99,225, or 42.89%, as compared to the same period last year. The decrease was primarily due to reduced interest income during the three months ended September 30, 2025, resulting from a decreased loan receivable balance. Net loss from continuing operations For the three months ended September 30, 2025, our net loss from continuing operations was $1,965,312, representing a decrease of $2,251,450, or 53.39%, as compared to the same period last year. The decrease was primarily due to the decrease in operating expenses, as discussed above. Comparison of Nine Months Ended September 30, 2025 and 2024: Revenue The following table sets forth the breakdown of our revenues for the nine months ended September 30, 2025 and 2024, respectively: Nine months ended September 30, 2025 2024 Change Amount Amount Amount % Fast-Moving Consumer Goods (“FMCG”) $ 2,060,276 $ 342 $ 2,059,934 602,319.88 % Supply Chain Financing/Trading 1,341 934,971 (933,630 ) (99.86 )% Trading Commission and Consulting service 421,275 1,039,985 (618,710 ) (59.49 )% Total revenue $ 2,482,892 $ 1,975,298 $ 507,594 25.70 % For the nine months ended September 30, 2025 and 2024, revenue from sales of FMCG was $2,060,276 and $342, respectively, representing an increase of $2,059,934, or 602,319.88%. 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 nine months ended September 30,2025. For the nine months ended September 30, 2025 and 2024, revenue from supply chain financing/trading was $1,341 and $934,971, respectively, representing a decrease of $933,630, or 99.86%. 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 nine months ended September 30, 2025. For the nine months ended September 30, 2025 and 2024, revenue from trading commission and consulting service was $421,275 and $1,039,985, respectively, representing a decrease of $618,710, or 59.49%. The decrease was mainly because a major project, which boosted revenue from consulting service during the nine months ended September 30, 2024, did not recur in the same period this year. 42 Gross Profit The following table sets forth the breakdown of the gross profit for the nine months ended September 30, 2025 and 2024, respectively: Nine months ended September 30, Variance 2025 % 2024 % Amount % Fast-Moving Consumer Goods (FMCG) $ 26,251 6.77 % $ 13 - % $ 26,237.6 100.00 % Supply Chain Financing/Trading 1,341 0.34 % 142,866 12.36 % (141,525 ) (99.06 )% Trading Commission and Consulting service 360,135 92.88 % 1,012,893 87.64 % (652,758 ) (64.44 )% Total Amount $ 387,727 100.00 % $ 1,155,772 100.00 % $ (768,045 ) (66.45 )% Overall gross profit decreased by $768,045, or 66.45%, to $387,727 for the nine months ended September 30, 2025 from $1,155,772 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 nine months ended September 30, 2025. Although revenue from FMCG segment increased significantly for the nine months ended September 30, 2025, gross profit from this business segment did not increase simultaneously due to its low gross margin. Overall gross margin as a percentage of revenue was 15.62% for the nine months ended September 30, 2025, representing a decrease of 42.90 percentage points from 58.51% for the same period last year, mainly due to the decrease in gross margin for debt recovery consulting service fee, and our gross margin was further eroded by that of the FMCG segment, which accounted for a majority portion of total revenue during the nine months ended September 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 nine months ended September 30, 2025 and 2024, respectively: Nine months ended September 30, 2025 2024 Amount % of revenue Amount % of revenue General and administrative expense $ 3,757,862 151.35 % $ 4,195,166 212.38 % Stock compensation expense 1,085,000 43.70 % - - Selling expenses 681,483 27.45 % 522,000 26.43 % Allowance for credit losses/doubtful accounts 29,416,788 1,184.78 % 3,829,724 193.88 % Total operating expenses $ 34,941,133 1,407.28 % $ 8,546,890 432.69 % For the nine months ended September 30, 2025, our general and administrative expenses were $3,757,862, representing a decrease of $437,304, or 10.42%, as compared to the same period last year. The decrease was primarily attributable to reduced salary, employee benefit and bonus expenses as a result of the implementation of cost-control measures, as well as a decrease in commission caused by decreased consulting service revenue during the nine months ended September 30, 2025. For the nine months ended September 30, 2025, our stock compensation expense was $1,085,000, representing an increase of $1,085,000, 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, 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. 43 For the nine months ended September 30, 2025, our selling expenses were $681,483, representing an increase of $159,483, or 30.55%, as compared to the same period last year. The increase was primarily attributable to increased business entertainment expenses, resulting from our initiatives to expand into new business segments and acquire new customers. For the nine months ended September 30, 2025, our allowance for credit losses/doubtful accounts was $29,416,788, representing an increase of $25,587,064, or 668.12%, as compared to the same period last year. The increase was primarily due to a provision for bad debts on related party receivables in connection with the disposal of a subsidiary during the nine months ended September 30, 2025. Other Income (Expense), Net For the nine months ended September 30, 2025, our net other income was $3,494,470, representing an increase of $4,470,763, as compared to the same period last year. The increase was primarily due to the gain on debt restructuring during the nine months ended September 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 loss. The increase in net other income was also attributable to the absence of litigation-related compensation paid to FT Global during the nine months ended September 30, 2024, and no such cost was incurred during same period this year. Net loss from continuing operations For the nine months ended September 30, 2025, our net loss from continuing operations was $31,058,936, representing an increase of $22,691,525, or 271.19%, 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 nine months ended September 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 nine months ended September 30, 2025, basic and diluted loss per share from continuing operations were both $8.03, as compared to loss per share of $4.20 (both basic and diluted) for the same period last year. For the nine months ended September 30, 2025, basic and diluted earnings per share from discontinued operations was $6.82 and $6.81, respectively, as compared to loss per share of $0.80 (both basic and diluted) for the same period last year. Liquidity and Capital Resources We currently finance our business operations primarily through convertible notes and the sale of our common stock. Our current cash primarily consists of cash on hand and cash in bank. As of September 30, 2025, we had cash and cash equivalents of $6.89 million, representing an increase of $2.13 million from $4.77 million as of December 31, 2024. Working Capital Our working capital has historically been generated from our operating cash flows, advances from our customers and convertible notes. Our working capital was $40.54 million as of September 30, 2025, an increase of $32.94 million from working capital of $7.60 million as of December 31, 2024, mainly due to the increase in current assets, such as cash and cash equivalent and investment funds, and decrease in current liabilities, such as accrued expenses and other payables. 44 Cash Flows The following table sets forth a summary of our cash flows for the periods indicated: Nine months ended September 30, 2025 2024 Net cash used in operating activities from continuing operations $ (28,707,319 ) $ (15,915,005 ) Net cash provided by operating activities from discontinued operations 28,349,426 2,971,055 Net cash used in investing activities from continuing operations (29,035,242 ) (1,025,101 ) Net cash provided by financing activities from continuing operations 31,828,548 2,409,280 Effect of exchange rate change on cash and cash equivalents (310,054 ) 471,090 Net increase (decrease) in cash and cash equivalents 2,125,359 (11,088,681 ) Cash and cash equivalents, beginning of period 4,765,865 16,159,657 Cash and cash equivalents, end of period $ 6,891,224 $ 5,070,976 Operating Activities Net cash used in operating activities from continuing operations amounted to $28.71 million for the nine months ended September 30, 2025, primarily due to i) a net loss from continuing operations of $31.06 million adjusted for non-cash activities including allowance for credit losses/doubtful accounts of $29.42 million, gain on debt restructuring of $3.07 million and share-based payments of $1.09 million, and ii) net changes in our operating assets and liabilities, which mainly include a) an increase in other receivables of $27.60 million, b) a decrease in accrued expenses and other payables of $1.52 million, which was partially offset by a) an increase in accounts payable of $1.36 million, b) an increase in advances from customers of $0.98 million, c) an increase in other non-current liabilities of $1.09 million, d) a decrease in accounts receivable of $0.59 million. Net cash used in operating activities from continuing operations amounted to $15.92 million for the nine months ended September 30, 2024, primarily due to i) a net loss from continuing operations of $8.37 million adjusted for non-cash activities including allowance for credit losses/doubtful accounts of $3.83 million, and ii) net changes in our operating assets and liabilities, which mainly include a) an increase in advances to suppliers and other current assets of $8.11 million, b) an increase in other receivables of $5.25 million, c) a decrease in accounts payable of $1.54 million, which was partially offset by a decrease in accounts receivable of $2.74 million. Investing Activities Net cash used in investing activities from continuing operations amounted to $29.04 million for the nine months ended September 30, 2025, primarily due to prepayment for a business acquisition of $29.87 million, which was partially offset by repayment from debt investment of $0.70 million. Net cash used in investing activities from continuing operations amounted to $1.03 million for the nine months ended September 30, 2024, primarily due to payment for debt investments of $1.80 million, which was partially offset by repayment from short term investment of $0.95 million. Financing Activities Net cash provided by financing activities from continuing operations amounted to $31.83 million for the nine months ended September 30, 2025, primarily consisting of i) proceeds from the issuance of common stock, net of issuance costs of $30.00 million, ii) proceeds from convertible notes payables of $1.80 million. Net cash provided by financing activities from continuing operations amounted to $2.41 million for the nine months ended September 30, 2024, primarily consisting of proceeds from the issuance of common stock, net of issuance costs of $2.58 million, which was partially offset by repayment of amounts due to related parties of $0.10 million. Contractual Obligations The Company has no long-term fixed contractual obligations or commitments other than leases that are disclosed in Note 8 in the notes to our consolidated financial statements. Off-balance sheet arrangements As of September 30, 2025, we did not have any off-balance sheet arrangements. 45 Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable.