Future FinTech Group Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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, 2025 (the “2025 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 2025 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. 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 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, which has 9 wholly owned subsidiaries in Hong Kong and China. Fast-Moving Consumer Goods (“FMCG”) Since the third quarter of 2024, we entered into FMCG business to tap into the fast-growing online retail market. We operate an online store on a reputable e-commerce platform and focus on sales of non-alcoholic beverages and dairy beverages. The business model relies on selling large quantities of goods to generate revenue, as the profit margin on each individual item is usually slim. 32 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 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 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. 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 the period. 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 Limited As disclosed in our 2025 Form 10-K, in September 2025, our Board of Directors approved a proposal to pursue a potential acquisition of TansGen SC Tech Limited as part of our ongoing strategic transition and expansion initiatives. 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 Discontinued Operations On February 3, 2025, 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 were disposed of for a consideration of $25,000 after a court auction sale. The gain on disposal was $28.26 million. On December 16, 2025, Future Commercial Management (Hainan) Co., Ltd. was disposed of for a consideration of $1.4 million (RMB 10.0 million). The gain on disposal was $52,749. 33 Segment Information We classified our business segments into Trading Commission and Consulting Services, Fast-Moving Consumer Goods (FMCG), and Supply Chain Financing and Trading. Uses of Estimates in the Preparation of Financial Statements Our unaudited condensed consolidated financial statements have been prepared in accordance with US GAAP and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting period. The significant areas requiring the use of management estimates include, but 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. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to our unaudited condensed consolidated financial statements. Fair Value of Financial Instruments The Company has adopted FASB ASC Topic on Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable input, which may be used to measure fair value and include the following: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Input other than Level 1 that is observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other input that is observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable input that is supported by little or no market activity and that is significant to the fair value of the assets or liabilities. The Company’s cash and cash equivalents, 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 The Company applies the five steps defined under ASC 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We assess our revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate distinct goods or services. We allocate the transaction price to each performance obligation based on the relative standalone selling price of the goods or services provided. Revenue is recognized upon the transfer of control of promised goods or services to a customer. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. Foreign Currency and Other Comprehensive Income (Loss) The financial statements of the Company’s foreign subsidiaries are measured using the local currency as the functional currency; however, the reporting currency of the Company is the United States dollar (“USD”). Assets and liabilities of the Company’s foreign subsidiaries have been translated into USD using the exchange rate at the balance sheet date, while equity accounts are translated using historical exchange rate. The average exchange rate for the period has been used to translate revenues and expenses. Translation adjustments are reported separately and accumulated in a separate component of equity (cumulative translation adjustment). 34 Other comprehensive income (loss) for the three 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 been, or could be, converted into USD at rates used in translation. Income Taxes Income taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Any tax paid by subsidiaries during the year is recorded. Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purpose and is calculated using tax rates that have been enacted at the balance sheet date. Deferred income tax liabilities or assets are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and the financial reporting amounts at each period end. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. ASC 740 provides guidance for recognizing and measuring uncertain tax positions, and it prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. ASC 740 also provides accounting guidance on derecognizing, classification and disclosure of these uncertain tax positions. Impairment of Long-Lived Assets In accordance with 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, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Recent Accounting Pronouncements We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the accompanying unaudited condensed consolidated financial statements. See Note 2. Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements for a description of applicable recent accounting pronouncements. 35 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 Months Ended June 30, Variance 2026 2025 Amount % REVENUE $ 333,409 $ 594,460 $ (261,051 ) (43.91 )% Cost of revenue 139,577 415,402 (275,825 ) (66.40 )% Gross profit 193,832 179,058 14,774 8.25 % OPERATING EXPENSES General and administrative expenses 630,703 852,026 (221,323 ) (25.98 )% Stock-based compensation expenses 1,387,500 - 1,387,500 100.00 % Selling expenses 76,923 249,048 (172,125 ) (69.11 )% Allowance for credit losses/doubtful accounts 484 393,651 (393,167 ) (99.88 )% Total operating expenses 2,095,610 1,494,725 600,885 40.20 % LOSS FROM OPERATIONS (1,901,778 ) (1,315,667 ) (586,111 ) 44.55 % OTHER INCOME (EXPENSES) Interest income 126,337 12,930 113,407 877.08 % Interest expenses (139,924 ) (7,241 ) (132,683 ) 1,832.39 % Amortization of debt issuance costs (17,550 ) - (17,550 ) 100.00 % Gain on debt restructuring - 3,071,827 (3,071,827 ) (100.00 )% Other income (expense), net 3,087 (19,012 ) 22,099 (116.24 )% Total other income (expenses), net (28,050 ) 3,058,504 (3,086,554 ) (100.92 )% Income (Loss) from Continuing Operations before Income Tax (1,929,828 ) 1,742,837 (3,672,665 ) (210.73 )% Net income (loss) from continuing operations (1,929,828 ) 1,742,837 (3,672,665 ) (210.73 )% Net income from discontinued operations - 108,943 (108,943 ) (100.00 )% NET INCOME (LOSS) (1,929,828 ) 1,851,780 (3,781,608 ) (204.21 )% COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO FUTURE FINTECH GROUP, INC. $ (1,205,691 ) $ 1,872,424 $ (3,078,115 ) (164.39 )% 36 Revenue 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, 2026 2025 Change Amount Amount Amount % Fast-Moving Consumer Goods (“FMCG”) $ 100,265 $ 387,684 $ (287,419 ) (74.14 )% Trading Commission and Consulting services 233,144 206,776 26,368 12.75 % Total revenue $ 333,409 $ 594,460 $ (261,051 ) (43.91 )% 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. The decrease 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. Gross Profit 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, Variance 2026 % 2025 % Amount % Fast-Moving Consumer Goods (“FMCG”) $ 718 0.37 % $ 10,327 5.77 % $ (9,609 ) (93.05 )% Trading Commission and Consulting Services 193,114 99.63 % 168,731 94.23 % 24,383 14.45 % Total gross profit $ 193,832 100.00 % $ 179,058 100.00 % $ 14,774 8.25 % 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, 2026. 37 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 30, 2026 2025 Variance Amount % of revenue Amount % of revenue Amount % General and administrative expenses $ 630,703 189.17 % $ 852,026 143.33 % $ (221,323 ) (25.98 )% Stock compensation expense 1,387,500 416.16 % - - % 1,387,500 100.00 % Selling expenses 76,923 23.07 % 249,048 41.89 % (172,125 ) (69.11 )% Allowance for credit losses/doubtful accounts 484 0.15 % 393,651 66.22 % (393,167 ) (99.88 )% Total operating expenses $ 2,095,610 628.54 % $ 1,494,725 251.44 % $ 600,885 40.20 % 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 measures. 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, 2026. 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 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 $4.0 million and issue a total of 107,368 shares of common stock. 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. 38 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 June 30, Variance 2026 2025 Amount % REVENUE $ 546,021 $ 1,136,591 $ (590,570 ) (51.96 )% Cost of revenue 278,986 886,507 (607,521 ) (68.53 )% Gross profit 267,035 250,084 16,951 6.78 % OPERATING EXPENSES General and administrative expenses 2,032,562 2,422,126 (389,564 ) (16.08 )% Stock-based compensation expenses 1,387,500 1,085,000 302,500 27.88 % Selling expenses 212,103 440,678 (228,575 ) (51.87 )% Allowance for (Net recovery of) credit losses/doubtful accounts (138,456 ) 28,254,490 (28,392,946 ) (100.49 )% Total operating expenses 3,493,709 32,202,294 (28,708,585 ) (89.15 )% LOSS FROM OPERATIONS (3,226,674 ) (31,952,210 ) 28,725,536 (89.90 )% OTHER INCOME (EXPENSES) Interest income 250,233 35,459 214,774 605.70 % Interest expenses (198,099 ) (15,042 ) (183,057 ) 1,216.97 % Amortization of debt issuance costs (35,100 ) - (35,100 ) 100.00 % Gain on debt restructuring - 3,071,827 (3,071,827 ) (100.00 )% Other income, net 4,684 64,788 (60,104 ) (92.77 )% Total other income, net 21,718 3,157,032 (3,135,314 ) (99.31 )% Loss from Continuing Operations before Income Tax (3,204,956 ) (28,795,178 ) 25,590,222 (88.87 )% Net loss from continuing operations (3,204,956 ) (28,795,178 ) 25,590,222 (88.87 )% Net income from discontinued operations - 27,939,676 (27,939,676 ) (100.00 )% NET LOSS (3,204,956 ) (855,502 ) (2,349,454 ) 274.63 % COMPREHENSIVE LOSS ATTRIBUTABLE TO FUTURE FINTECH GROUP, INC. $ (1,742,574 ) $ (3,073,927 ) $ 1,331,353 (43.31 )% 39 Revenue 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, 2026 2025 Change Amount Amount Amount % Fast-Moving Consumer Goods (“FMCG”) $ 212,367 $ 864,135 $ (651,768 ) (75.42 )% Trading Commission and Consulting Services 333,654 271,115 62,539 23.07 % Supply Chain Financing/Trading - 1,341 (1,341 ) (100.00 )% Total revenue $ 546,021 $ 1,136,591 $ (590,570 ) (51.96 )% Revenue from sales of FMCG decreased by $651,768, 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 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 $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 30, 2026. 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 six months ended June 30, 2025 to $ nil for the six months ended June 30, 2026. 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, 2026. Gross Profit 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, Variance 2026 % 2025 % Amount % Fast-Moving Consumer Goods (FMCG) $ 7,000 2.62 % $ 19,185 7.67 % $ (12,185 ) (63.51 )% Trading Commission and Consulting Services 260,035 97.38 % 229,558 91.80 % 30,477 13.28 % Supply Chain Financing/Trading - - 1,341 0.53 % (1,341 ) (100.00 )% Total Amount $ 267,035 100.00 % $ 250,084 100.00 % $ 16,951 6.78 % 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. 40 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, 2026 and 2025, respectively: For the Six Months Ended June 30, 2026 2025 Variance Amount % of revenue Amount % of revenue Amount % of General and administrative expenses $ 2,032,562 372.25 % $ 2,422,126 213.10 % $ (389,564 ) (16.08 )% Stock-based compensation expenses 1,387,500 254.11 % 1,085,000 95.46 % 302,500 27.88 % Selling expenses 212,103 38.85 % 440,678 38.77 % (228,575 ) (51.87 )% Allowance for (net recovery of) credit losses/doubtful accounts (138,456 ) (25.36 )% 28,254,490 2,485.90 % (28,392,946 ) (100.49 )% Total operating expenses $ 3,493,709 639.85 % $ 32,202,294 2,833.23 % $ (28,708,585 ) (89.15 )% General and administrative expenses decreased 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 expansion. 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 $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 allowance. Other Income, Net Net other income decreased by $3,135,314, or 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. 41 Net loss from continuing operations Net loss from continuing operations decreased 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. 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 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. 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 Our working capital has historically been generated from our operating cash flows, advances from our customers and convertible notes. 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. The increase 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. Cash Flows The following table sets forth a summary of our cash flows for the periods indicated: Six months ended June 30, 2026 2025 Net cash used in operating activities from continuing operations $ (3,214,413 ) $ (18,467,180 ) Net cash provided by operating activities from discontinued operations - 19,037,420 Net cash provided by investing activities from continuing operations 1,451 375,837 Net cash provided by (used in) financing activities from continuing operations 1,901,686 (13,193 ) Effect of exchange rate change on cash, cash equivalents and restricted cash 451,179 88,297 Net increase (decrease) in cash, cash equivalents and restricted cash (860,097 ) 1,021,181 Cash, cash equivalents and restricted cash, beginning of period 5,077,164 4,765,111 Cash, cash equivalents and restricted cash, end of period $ 4,217,067 $ 5,786,292 42 Operating Activities Net cash used in operating activities from continuing 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 $1,451 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 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 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 $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 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 June 30, 2026, we did not have any off-balance sheet arrangements. 43 Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable.