What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-15 · 346 added, 187 removed, 200 unchanged (73% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations.

Management’s Discussion and

Analysis of Financial Condition and Results of Operations.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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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

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, 2025 (the “2025 Form 10-K”) and in this Form 10-Q.

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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.

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.

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

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We are not a Chinese operating company, although we have had significant operations in China and

This discussion should be read together with the more detailed business description included in our Annual Report

on Form 10-K for the fiscal year ended December 31, 2025.

As described in our 2025 Form 10-K, our business has changed materially

over recent years.

Historically, we were engaged in the production and sale of fruit juice concentrates and fruit beverages in the PRC.

We later transitioned to financial technology-related businesses, including 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 services in Hong Kong, and

cryptocurrency mining in the United States.

We have since exited or disposed of several of these historical businesses, including our

former VIE operations, asset management business, cryptocurrency mining operations, and certain other subsidiaries.

Those historical dispositions

are described in our 2025 Form 10-K and are reflected in our discontinued operations and segment disclosures where applicable.

As of March 31, 2026, our principal business operations

This discussion should be read together with the more detailed business description included in our Annual Report on Form

10-K for the fiscal year ended December 31, 2025.

As described in our 2025 Form 10-K, our business

has changed materially over recent years.

Historically, we were engaged in the production and sale of fruit juice concentrates and fruit

beverages in the PRC.

We later transitioned to financial technology-related businesses, including 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

services in Hong Kong, and cryptocurrency mining in the United States.

We have since exited or disposed of several of these historical

businesses, including our former VIE operations, asset management business, cryptocurrency mining operations, and certain other subsidiaries.

Those historical dispositions are described in our 2025 Form 10-K and are reflected in our discontinued operations and segment disclosures

where applicable.

As of June 30, 2026, our principal business operations

sale of fast-moving consumer goods;

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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 in China.

During fiscal year 2025, we significantly scaled down this business

segment due to reduced activity in the domestic bulk commodity trading market in China and management’s reassessment of credit exposure

and capital allocation priorities.

During the three months ended March 31, 2026, we generated no revenue from this segment.

to evaluate market conditions and our strategic focus, and there can be no assurance that we will resume this business at historical levels

or that future market conditions will support meaningful growth in this segment.

Since the second quarter of 2021, we have engaged

in the coal supply chain financing service and trading business in China.

During fiscal year 2025, we significantly scaled down this

business segment due to reduced activity in the domestic bulk commodity trading market in China and management’s reassessment of

credit exposure and capital allocation priorities.

During the six months ended June 30, 2026, we generated no revenue from this segment.

We continue to evaluate market conditions and our strategic focus, and there can be no assurance that we will resume this business at

historical levels or that future market conditions will support meaningful growth in this segment.

Trading Commission and Consulting Services

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Consulting” financial licenses issued by the Hong Kong Securities and Futures Commission.

We also provide business and financial consulting services, including

listing-readiness and preparatory consulting services.

As described in our 2025 Form 10-K, this business line remains in an early stage

of development and is conducted primarily through Future FinTech (Hong Kong) Limited and, in certain limited circumstances, Future Information

Service (Shenzhen) Co., Ltd.

During the three months ended March 31, 2026, revenue from trading commission and consulting services increased

compared to the same period in 2025, primarily due to revenue recognized from a new consulting services project during the period.

we nor our subsidiaries engage in underwriting, securities brokerage, placement agent services, investor solicitation, or similar activities

in the United States or in any other jurisdiction where we do not hold the required license or registration.

We also provide business and financial consulting

services, including listing-readiness and preparatory consulting services.

As described in our 2025 Form 10-K, this business line remains

in an early stage of development and is conducted primarily through Future FinTech (Hong Kong) Limited and, in certain limited circumstances,

Future Information Service (Shenzhen) Co., Ltd.

During the six months ended June 30, 2026, revenue from trading commission and consulting

services increased compared to the same period in 2025, primarily due to revenue recognized from a new consulting services project during

Neither we nor our subsidiaries engage in underwriting, securities brokerage, placement agent services, investor solicitation,

or similar activities in the United States or in any other jurisdiction where we do not hold the required license or registration.

Proposed Acquisition of TansGen SC Tech

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and expansion initiatives.

As of March 31, 2026, no definitive acquisition agreement had been executed, and the Company continued to conduct

financial, legal and operational due diligence and valuation procedures.

The execution of any definitive agreement remains subject to

completion of due diligence, negotiation of final terms, regulatory approvals, if applicable, and other customary conditions.

be no assurance that a definitive agreement will be executed, that the proposed acquisition will be completed, or that, if completed,

The proposed acquisition of TansGen SC Tech Limited has been terminated, and the Company is currently searching

for other suitable acquisition targets.

As of June 30, 2026, no definitive acquisition agreement had been executed, and the Company continued

to conduct financial, legal and operational due diligence and valuation procedures.

The execution of any definitive agreement remains

subject to completion of due diligence, negotiation of final terms, regulatory approvals, if applicable, and other customary conditions.

There can be no assurance that a definitive agreement will be executed, that the proposed acquisition will be completed, or that, if completed,

the transaction will achieve the anticipated strategic or financial benefits.

Change in Independent Registered Public

Accounting Firm

On July 6, 2026, the Audit Committee of the Board

of Directors of the Company approved the dismissal of Fortune CPA Inc.

("Fortune") as the Company's independent registered public

accounting firm and approved the engagement of Wei, Wei & Co., LLP ("Wei, Wei & Co.") as the Company's independent registered

public accounting firm, effective immediately, including to act as the Company's auditor for the fiscal year ending December 31, 2026.

Fortune had served as the Company's independent registered public accounting firm since August 2023.

Fortune's audit reports on the Company's consolidated financial statements as of and for the fiscal years ended

December 31, 2025 and December 31, 2024 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified

as to uncertainty, audit scope or accounting principles, except that each such report contained an explanatory paragraph regarding the

Company's ability to continue as a going concern.

During the Company's two most recent fiscal years and the subsequent interim period

through July 6, 2026, there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto)

with Fortune on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, and

no reportable events (as described in Item 304(a)(1)(v) of Regulation S-K), except for the previously disclosed material weakness in the

Company's internal control over financial reporting relating to insufficient staff with the appropriate level of knowledge, training and

experience in U.S.

GAAP and SEC reporting requirements.

During the Company's two most recent fiscal years and the subsequent period from

January 1, 2026 through July 6, 2026, the Company did not consult with Wei, Wei & Co.

regarding any of the matters or events set forth

in Item 304(a)(2)(i) or 304(a)(2)(ii) of Regulation S-K.

Critical Accounting Policies and Estimates

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INVESTMENTS, DigiPay FinTech Limited, DCON DigiPay Limited-JPN and Global Key Shared Mall Ltd were disposed of for a consideration of

US$25,000 after a court auction sale.

$25,000 after a court auction sale.

The gain on disposal was $28.26 million.

3 unchanged sentences

The gain on disposal was $52,749.

Segment Information Reclassification

Segment Information

We classified our business segments into Trading

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the use of management estimates include, but are not limited to, the expected credit losses for receivables, estimated useful life and

residual value of property and equipment, impairment of long-lived assets, provision for staff benefits, recognition and measurement of

deferred income taxes and valuation allowance for deferred tax assets.

residual value of property and equipment, impairment of long-lived assets, provision for staff benefits, recognition and measurement

of deferred income taxes and valuation allowance for deferred tax assets.

Although these estimates are based on management’s knowledge

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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;

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.

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.

The Company’s cash and cash equivalents,

and restricted cash and short-term investments are classified within level 1 of the fair value hierarchy because they are valued using

quoted market prices.

restricted cash and short-term investments are classified within level 1 of the fair value hierarchy because they are valued using quoted

market prices.

Revenue Recognition

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if it is acting as principal or agent.

Revenue arrangements with multiple performance obligations are divided into separate distinct goods

We allocate the transaction price to each performance obligation based on the relative standalone selling price of the goods

or services provided.

Revenue arrangements with multiple performance obligations are divided into separate distinct

goods or services.

We allocate the transaction price to each performance obligation based on the relative standalone selling price of

the goods or services provided.

Revenue is recognized upon the transfer of control of promised goods or services to a customer.

Control is generally

transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or

services are transferred to its customers.

is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership

of products or services are transferred to its customers.

Foreign Currency and Other Comprehensive Income (Loss)

5 unchanged sentences

into USD using the exchange rate at the balance sheet date, while equity accounts are translated using historical exchange rate.

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).

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 (loss) for the three

months ended March 31, 2026 and 2025 represented foreign currency translation adjustments and were included in the unaudited condensed

consolidated statements of operation and comprehensive loss.

and six months ended June 30, 2026 and 2025 represented foreign currency translation adjustments and were included in the unaudited condensed

consolidated statements of operation and comprehensive income (loss).

There is no guarantee the RMB amounts could have

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Impairment of Long-Lived Assets

In accordance with ASC 360-10, Accounting for

the Impairment or Disposal of Long-Lived Assets , long-lived assets, such as property and equipment and purchased intangibles subject

to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may

not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other industrial

The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future

undiscounted cash flows to be generated by the assets.

In accordance with ASC 360-10, Accounting

for the Impairment or Disposal of Long-Lived Assets , long-lived assets, such as property and equipment and purchased intangibles

subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an

asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other

industrial changes.

The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an

asset to future undiscounted cash flows to be generated by the assets.

If such assets are considered to be impaired,

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consolidated financial statements for a description of applicable recent accounting pronouncements.

Results of Operations for the Three Months

Ended March 31, 2026 and 2025

The following table summarizes our operating results

for the three months ended March 31, 2026 and 2025, respectively, and sets forth the dollar and percentage increase or (decrease) between

For the Three Months Ended

Results of Operations

Comparison of Three Months Ended June 30,

2026 and 2025

The following table summarizes our operating

results for the three months ended June 30, 2026 and 2025, respectively, and sets forth the dollar and percentage increase or (decrease)

between the periods.

For the Three

Cost of revenue

1 unchanged sentence

General and administrative expenses

Stock-based compensation

Stock-based compensation expenses

Selling expenses

Allowance for (net recovery of) credit losses/doubtful accounts

Allowance for credit losses/doubtful accounts

Total operating expenses

LOSS FROM OPERATIONS

OTHER INCOME (EXPENSES)

Interest income

Interest expenses

Amortization of debt issuance costs

Gain on debt restructuring

Other income (expense), net

Total other income (expenses), net

Income (Loss) from Continuing Operations

before Income Tax

Net income (loss) from continuing operations

Net income from discontinued operations

NET INCOME (LOSS)

COMPREHENSIVE INCOME

(LOSS) ATTRIBUTABLE TO FUTURE FINTECH GROUP, INC.

$ (1,205,691 )

$ (3,078,115 )

The following table sets forth the breakdown

of our revenues for the three months ended June 30, 2026 and 2025, respectively:

Three months ended June 30,

Fast-Moving Consumer Goods (“FMCG”)

Trading Commission and Consulting services

Total revenue

Revenue from sales of FMCG decreased by $287,419,

or 74.14%, from $387,684 for the three months ended June 30, 2025 to $100,265 for the three months ended June 30, 2026.

was primarily due to intensified competition from other FMCG sellers on the e-commerce platform.

Meanwhile, we reduced investment in

marketing activities as a result of the implementation of cost-control measures, which also adversely affected sales conversion.

Revenue from trading commission and consulting

services increased by $26,368, or 12.75%, from $206,776 for the three months ended June 30, 2025 to $233,144 for the three months ended

June 30, 2026.

The increase was mainly due to a new consulting services project with related revenue recognized in the three months ended

June 30, 2026, and no similar project occurred during the three months ended June 30, 2025.

The following table sets forth the breakdown

of the gross profit for the three months ended June 30, 2026 and 2025, respectively:

Three months ended June 30,

Fast-Moving Consumer Goods (“FMCG”)

Trading Commission and Consulting

Total gross profit

Overall gross profit increased by $14,774, or

8.25%, to $193,832 for the three months ended June 30, 2026 from $179,058 for the three months ended June 30, 2025.

The increase was

primarily due to higher gross profit from trading commission and consulting services, which was in line with higher revenue generated

by this business segment for the three months ended June 30, 2026.

The increase was partially offset by lower gross profit from FMCG,

driven by the revenue decline of this segment for the three months ended June 30, 2026.

Overall gross margin as a percentage of revenue

was 58.14% for the three months ended June 30, 2026, representing an increase of 28.02 percentage points from 30.12% for the three months

ended June 30, 2025, mainly due to a larger proportion of higher-margin consulting services revenue for the three months ended June 30,

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, 2026 and 2025, respectively:

For the Three Months Ended June

General and administrative expenses

Stock compensation expense

Selling expenses

Allowance for credit losses/doubtful

Total operating expenses

General and administrative expenses decreased

by $221,323, or 25.98%, from $852,026 for the three months ended June 30, 2025 to $630,703 for the three months ended June 30, 2026.

The decrease was primarily attributable to reduced commission expenses and travelling expense that recognized in the three months ended

June 30, 2026.

Stock compensation expense increased by $1,387,500

or 100.00%, from $ nil for the three months ended June 30, 2025 to $1,387,500 for the three months ended June 30, 2026.

On May 29, 2026,

the Compensation Committee of the Board of Directors of the Company granted 312,500 shares of common stock, pursuant to the Company’s

2025 Omnibus Equity Plan, to certain officers and employees of the Company and its subsidiaries.

As the closing price of the Company

stock was $4.44 on June 3, 2026, the Company recorded an expense of $1.39 million in the three months ended June 30, 2026.

Selling expenses decreased by $172,125, or 69.11%,

from $249,048 for the three months ended June 30, 2025 to $76,923 for the three months ended June 30, 2026.

The decrease was primarily

attributable to reduced business entertainment expenses and other relevant selling expenses as a result of the implementation of cost-control

Allowance for credit losses/doubtful accounts

decreased by $393,167, or 99.88%, from $393,651 for the three months ended June 30, 2025 to $484 for the three months ended June 30,

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 June 30, 2026.

Our management will continue monitoring

and putting effort into the collection of receivables to lower the level of the allowance.

Other Income (Expenses), Net

Net other income decreased by $3,086,554, or

100.92%, from net other income of $3,058,504 for the three months ended June 30, 2025 to net other expenses of $28,050 for the three

months ended June 30, 2026.

The decrease was primarily attributable to the gain on debt restructuring during the three months ended June

On June 17, 2025, we entered into a settlement and forbearance agreement (“the Agreement”) with FT Global.

to the Agreement, we were required to pay an aggregate settlement amount of $4.0 million and issue a total of 107,368 shares of common

Upon the debt restructuring, we recognized a gain of $3.07 million, which was recorded as gain on debt restructuring in the unaudited

condensed consolidated statement of operations and comprehensive income (loss).

Net income (loss) from continuing operations

Net income from continuing operations decreased

by $3,672,665, or 210.73%, from net income of $1,742,837 for the three months ended June 30, 2025 to net loss of $1,929,828 for the three

months ended June 30, 2026.

The decrease was primarily due to the decrease in gain on debt restructuring as discussed above.

Comparison of Six Months Ended June 30,

2026 and 2025:

The following table summarizes our operating

results for the six months ended June 30, 2026 and 2025, respectively, and sets forth the dollar and percentage increase or (decrease)

between the periods.

For the Six Months Ended

Cost of revenue

OPERATING EXPENSES

General and administrative expenses

Stock-based compensation expenses

Selling expenses

Allowance for (Net recovery of)

credit losses/doubtful accounts

(28,392,946 )

Total operating expenses

(28,708,585 )

LOSS FROM OPERATIONS

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Amortization of debt issuance costs

Gain on debt restructuring

Other income, net

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(27,939,676 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO FUTURE FINTECH GROUP, INC.

COMPREHENSIVE LOSS

ATTRIBUTABLE TO FUTURE FINTECH GROUP, INC.

$ (1,742,574 )

The following table sets forth the breakdown of

our revenues for the three months ended March 31, 2026 and 2025, respectively:

For the Three Months Ended March 31,

$ (3,073,927 )

The following table sets forth the breakdown

of our revenues for the six months ended June 30, 2026 and 2025, respectively:

Six months ended June 30,

Fast-Moving Consumer Goods (“FMCG”)

3 unchanged sentences

Revenue from sales of FMCG decreased by $651,768,

or 76.47%, from $476,451 for the three months ended March 31, 2025 to $112,102 for the three months ended March 31, 2026.

was primarily due to intensified competition from other FMCG sellers on the e-commerce platform.

or 75.42%, from $864,135 for the six months ended June 30, 2025 to $212,367 for the six months ended June 30, 2026.

The decrease was

primarily due to intensified competition from other FMCG sellers on the e-commerce platform.

Meanwhile, we reduced investment in marketing

1 unchanged sentence

Revenue from trading commission and consulting

services increased by $36,171, or 56.22%, from $64,339 for the three months ended March 31, 2025 to $100,510 for the three months ended

March 31, 2026.

The increase was mainly due to a new consulting services project with related revenue amortized over the service term

in the three months ended March 31, 2026, and no similar project occurred during the three months ended March 31, 2025.

services increased by $62,539, or 23.07%, from $271,115 for the six months ended June 30, 2025 to $333,654 for the six months ended June

The increase was mainly due to a new consulting services project with related revenue recognized in the six months ended June

30, 2026, and no similar project occurred during the six months ended June 30, 2025.

Revenue from supply chain financing/trading decreased

by $1,341, or 100.00%, from $1,341 for the three months ended March 31, 2025 to $ nil for the three months ended March 31, 2026.

by $1,341, or 100.00%, from $1,341 for the six months ended June 30, 2025 to $ nil for the six months ended June 30, 2026.

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 March 31, 2026.

The following table sets forth the breakdown of

the gross profit for the three months ended March 31, 2026 and 2025, respectively:

For the Three Months Ended March 31,

demand in China during the six months ended June 30, 2026.

The following table sets forth the breakdown

of the gross profit for the six months ended June 30, 2026 and 2025, respectively:

Six months ended June 30,

Fast-Moving Consumer Goods (FMCG)

1 unchanged sentence

Supply Chain Financing/Trading

Total gross profit

Overall gross profit increased slightly by $2,177,

or 3.07%, to $73,203 for the three months ended March 31, 2026 from $71,026 for the three months ended March 31, 2025.

The increase was

primarily due to the increase in gross profit from trading commission and consulting services which was in line with the increase in revenue

for this business segment for the three months ended March 31, 2026.

Although revenue from the FMCG segment decreased significantly for

the three months ended March 31, 2026, gross profit from this business segment did not decrease simultaneously due to its low gross margin.

Overall gross margin as a percentage of revenue was 34.43% for the three months ended March 31, 2026, representing an increase of 21.33

percentage points from 13.10% for the three months ended March 31, 2025, mainly due to the increase in proportion of consulting services

revenue with higher gross margin for the three months ended March 31, 2026.

Overall gross profit increased by $16,951, or

6.78%, to $267,035 for the six months ended June 30, 2026 from $250,084 for the six months ended June 30, 2025.

The increase was primarily

due to the increase in gross profit from trading commission and consulting services, which was in line with the increase in revenue for

this business segment for the six months ended June 30, 2026.

Although revenue from the FMCG segment decreased significantly for the

six months ended June 30, 2026, gross profit from this business segment did not decrease simultaneously due to its low gross margin.

Overall gross margin as a percentage of revenue was 48.91% for the six months ended June 30, 2026, representing an increase of 26.91

percentage points from 22.00% for the six months ended June 30, 2025, mainly due to a larger proportion of higher-margin consulting services

revenue for the six months ended June 30, 2026.

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 March 31, 2026 and 2025, respectively:

For the Three Months Ended March 31,

General and administrative expense

Stock compensation expense

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, 2026 and 2025, respectively:

For the Six Months Ended June 30,

General and administrative expenses

Stock-based compensation expenses

Selling expenses

4 unchanged sentences

General and administrative expenses decreased

by $168,241, or 10.72%, from $1,570,100 for the three months ended March 31, 2025 to $1,401,859 for the three months ended March 31, 2026.

The decrease was primarily attributable to reduced commission expenses that recognized in the three months ended March 31, 2025, but did

not recur in the same period this year.

The decrease was partially offset by an increase in travelling and business entertainment expenses

driven by our new business expansion.

Stock compensation expense decreased by $1,085,000

or 100.00%, from $1,085,000 for the three months ended March 31, 2025 to $ nil for the three months ended March 31, 2026.

2025, the Compensation Committee of the Board of Directors of the Company granted 125,000 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 $8.68 on March 10, 2025, the Company recorded an expense of $1.09 million in the three months ended March 31, 2025.

by $389,564, or 16.08%, from $2,422,126 for the six months ended June 30, 2025 to $2,032,562 for the six months ended June 30, 2026.

The decrease was primarily attributable to commission expenses recognized in the six months ended June 30, 2025 that did not recur in

the same period of 2026.

The decrease was partially offset by an increase in business entertainment expenses driven by our new business

Stock-based compensation expenses increased by $302,500 or 27.88%,

from $1,085,000 for the six months ended June 30, 2025 to $1,387,500 for the six months ended June 30, 2026.

The increase was primarily

attributable to a larger number of shares granted (312,500 shares in June 2026 compared to 31,250 shares in March 2025, in each case as

adjusted for the reverse stock splits), partially offset by a lower grant-date share price ($4.44 compared to $34.72, as adjusted).

Selling expenses decreased by $228,575, or 51.87%,

from $191,630 for the three months ended March 31, 2025 to $135,180 for the three months ended March 31, 2026.

The decrease was primarily

attributable to reduced business entertainment expenses and other relevant selling expenses as a result of the implementation of cost-control

Allowance for (net recovery of) credit losses/doubtful

accounts decreased by $27,999,779, or 100.50%, from an allowance for credit losses/doubtful accounts of $27,860,839 for the three months

ended March 31, 2025 to a recovery of credit losses/doubtful accounts of $138,940 for the three months ended March 31, 2026.

was due to the provision for bad debts on related party receivables in connection with the disposal of a subsidiary during the three months

ended March 31, 2025.

Our management will continue monitoring and putting effort into the collection of receivables to lower the level

of the allowance.

Other Income (Expense), Net

from $440,678 for the six months ended June 30, 2025 to $212,103 for the six months ended June 30, 2026.

The decrease was primarily attributable

to reduced business entertainment expenses and other relevant selling expenses as a result of the implementation of cost-control measures.

Allowance for credit losses/doubtful accounts

decreased by $28,392,946, or 100.49%, from an allowance for credit losses/doubtful accounts of $28,254,490 for the six months ended June

30, 2025 to a net recovery of credit losses/doubtful accounts of $138,456 for the six months ended June 30, 2026.

The decrease was due

to the provision for bad debts on related party receivables in connection with the disposal of a subsidiary during the six months ended

June 30, 2025.

Our management will continue monitoring and putting effort into the collection of receivables to lower the level of the

Other Income, Net

Net other income decreased by $3,135,314, or

49.49%, from net other income of $98,528 for the three months ended March 31, 2025 to $49,768 for the three months ended March 31,

The decrease was primarily attributable to lower investment income resulting from a decreased weighted average debt investment

balance during this period, as well as higher interest expenses caused by the convertible notes payables issued in July 2025 and September 2025.

decrease was partially offset by an increase interest income recognized effective December 2025 for the three months ended March 31,

2026, and no such income was incurred during the three months ended March 31, 2025.

99.31%, from net other income of $3,157,032 for the six months ended June 30, 2025 to $21,718 for the six months ended June 30, 2026.

The decrease was primarily attributable to the gain on debt restructuring during the six months ended June 30, 2025 as we entered into

a settlement and forbearance agreement with FT Global.

The decrease was also attributable to the higher interest expenses caused by the

convertible notes payable issued in July 2025, September 2025 and May 2026.

The decrease was partially offset by an increase in interest

income recognized effective December 2025 for the six months ended June 30, 2026, and no such income was incurred during the six months

ended June 30, 2025.

Net loss from continuing operations

Net loss from continuing operations decreased

by $29,262,887, or 95.82%, from $30,538,015 for the three months ended March 31, 2025 to $1,275,128 for the three months ended March 31,

by $25,590,222, or 88.87%, from $28,795,178 for the six months ended June 30, 2025 to $3,204,956 for the six months ended June 30, 2026.

The decrease was primarily due to the decrease in allowance for credit losses/doubtful accounts as discussed above.

Net Income from Discontinued Operations

Net income from discontinued operations before

non-controlling interests was $27.83 million for the three months ended March 31, 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..

Gain on disposal of discontinued operations

Gain on disposal of discontinued operation was

$28.26 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 three months ended March 31, 2026, basic

and diluted loss per share from continuing operations were both $0.25, as compared to loss per share of $49.92 (both basic and diluted)

for the three months ended March 31, 2025.

For the three months ended March 31, 2026, basic and diluted earnings per share from discontinued

operations were both $ nil, as compared to basic and diluted earnings per share of $42.44 and $42.37 for the three months ended March

For the six months ended June 30, 2026,

basic and diluted loss per share from continuing operations were both $2.27, as compared to loss per share of $162.66 (both basic and

diluted) for the same period last year.

For the six months ended June 30, 2026, basic and diluted earnings per share from discontinued

operations were both $ nil, as compared to basic and diluted earnings per share of $147.29 and $147.07 for the same period last year,

respectively.

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.

March 31, 2026, we had cash and restricted cash of $3.68 million, representing a decrease of $1.40 million from $5.08 million as of December

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

As of June 30, 2026, we had cash, cash equivalents and restricted cash of $4.22 million, representing a decrease of $0.86 million

from $5.08 million as of December 31, 2025.

On July 30, 2026, we received aggregate gross proceeds of $30,000,000 from the private placement of 30,000,000

shares of our common stock described in Note 23 to our unaudited condensed consolidated financial statements.

We intend to use the net

proceeds of the private placement for working capital and general corporate purposes.

In addition, following the completion of the transfer

of the 20% equity interest in Xi’an Changshida Information Technology Co., Ltd.

on July 3, 2026, the cash consideration of RMB 40,000,000

(approximately $5.6 million) and the share consideration became payable in accordance with the related share purchase agreement, and the

remaining cash installments of approximately $1.02 million under the FT Global settlement are payable through December 2026.

Working Capital

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from our operating cash flows, advances from our customers and convertible notes.

Our working capital decreased slightly by $0.30 million,

from $42.55 million as of December 31, 2025 to $42.25 million as of March 31, 2026.

The following is a summary of cash provided by

or used in each of the indicated types of activities during the three months ended March 31, 2026 and 2025, respectively.

For the Three Months Ended

Our working capital was $43.14 million as of June 30,

2026, representing an increase of $0.59 million compared with working capital of $42.55 million as of December 31, 2025.

was primarily attributable to foreign exchange rate impacts on investment funds and a decrease in current liabilities, such as accounts

payable and accrued expenses and other payables.

The following table sets forth a summary of our

cash flows for the periods indicated:

Six months ended

Net cash used in operating activities from continuing operations

3 unchanged sentences

Net cash provided by investing activities from continuing operations

Net cash used in financing activities from continuing operations

Effect of exchange rate change on cash and restricted cash

Net decrease in cash and restricted cash

Cash and restricted cash, at beginning of period

Cash and restricted cash, at end of period

Net cash provided by (used in) financing activities from continuing operations

Effect of exchange rate change on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Operating Activities

Net cash used in operating activities from continuing

operations amounted to $1.53 million for the three months ended March 31, 2026, primarily due to i) a net loss from continuing operations

of $1.28 million adjusted for non-cash activities including net recovery of credit losses/doubtful accounts of $0.14 million, and ii)

net changes in our operating assets and liabilities, which mainly include a) a decrease in other receivables of $0.50 million, and b)

a decrease in accounts payable of $0.82 million.

Net cash used in operating activities from continuing

operations amounted to $19.57 million for the three months ended March 31, 2025, primarily due to i) a net loss from continuing operations

of $30.54 million adjusted for non-cash activities including allowance for credit losses/doubtful accounts of $31.45 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 $27.71 million, b) an increase in accrued expenses and other payables of $9.09 million, c) an increase in advances to suppliers and

other current assets of $3.61 million.

operations amounted to $3.21 million for the six months ended June 30, 2026, primarily due to i) a net loss from continuing operations

of $3.20 million adjusted for non-cash activities including net recovery of credit losses/doubtful accounts of $0.14 million and share-based

payments of $1.39 million, and ii) net changes in our operating assets and liabilities, which mainly include a) a decrease in accounts

payable of $0.96 million, b) a decrease in accrued expenses and other payables of $0.81 million, which was partially offset by a decrease

in other receivables of $0.4 million.

Net cash used in operating activities from continuing operations amounted

to $18.47 million for the six months ended June 30, 2025, primarily due to i) a net loss from continuing operations of $28.80 million

adjusted for non-cash activities including allowance for credit losses/doubtful accounts of $28.25 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 an increase in other receivables of $27.95 million, partially offset by a) an increase in accounts payable of $2.28 million, b)

an increase in accrued expenses and other payables of $8.10 million.

Investing Activities

Net cash provided by investing activities from

continuing operations amounted to $1,439 for the three months ended March 31, 2026, primarily due to redemption of short-term investments

continuing operations amounted to $1,451 for the six months ended June 30, 2026, primarily due to redemption of short-term investments

of $30,465, which was partially offset by payment for short-term investments of $29,014.

Net cash provided by investing activities from

continuing operations amounted to $0.38 million for the three months ended March 31, 2025, primarily due to collection from debt investments

continuing operations amounted to $0.38 million for the six months ended June 30, 2025, primarily due to collection from debt investments

of $0.24 million and repayment of loan receivables of $0.14 million.

Financing Activities

Net cash used in financing activities from continuing

operations amounted to $117,721 for the three months ended March 31, 2026, primarily due to repayment of amounts due to related parties.

Net cash provided by financing activities from

continuing operations amounted to $1.90 million for the six months ended June 30, 2026, primarily consisting of proceeds from convertible

notes payable of $2.00 million, which was partially offset by repayment made for amounts due to related parties of $0.10 million.

Net cash used in financing activities from continuing

operations amounted to $6,093 for the three months ended March 31, 2025, primarily consisting of payment made for amounts due from related

operations amounted to $13,193 for the six months ended June 30, 2025, primarily consisting of payment made for amounts due from related

parties of $4,322 and repayment of amounts due to related parties of $8,871.

Contractual Obligations

The Company has no long-term fixed contractual

obligations or commitments other than leases that are disclosed in Note 7 in the notes to our unaudited condensed consolidated financial

Other than (i) the leases disclosed in Note 7 in the notes to our unaudited condensed consolidated financial

statements, (ii) the remaining cash installments of approximately $1.02 million payable through December 2026 under the Settlement and

Forbearance Agreement with FT Global Capital, Inc.

described in Note 20, (iii) the cash consideration of RMB 40,000,000 (approximately

$5.6 million) and share consideration payable in connection with the acquisition of a 20% equity interest in Xi’an Changshida Information

Technology Co., Ltd.

described in Note 23, and (iv) our obligations under the convertible notes payable described in Note 12, we had no

other long-term fixed contractual obligations or commitments as of June 30, 2026.

Off-balance sheet arrangements

As of March 31, 2026 and 2025, we did not have any off-balance sheet

arrangements.

As of June 30, 2026, we did not have any off-balance

sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis