Overview of Our Business

Future FinTech is a holding company incorporated under the laws of the State of Florida. The Company historically engaged in the production and sale of fruit juice concentrates, fruit beverages, and other related products in China. Due to increased production costs and tighter environmental laws, the Company has transformed its business from fruit juice manufacturing and distribution to financial technology related service businesses.

The main business of the Company includes supply chain financing services and trading in China, asset management business in Hong Kong, and cross-border money transfer service in the UK. The Company also expanded into brokerage and investment banking business in Hong Kong and cryptocurrency mining farm in the U.S.

There are legal and operational risks associated with being based in and having a substantial majority of operations in China and Hong Kong. The PRC government has initiated a series of regulatory actions and statements to regulate business operations in China, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, and expanding efforts in anti-monopoly enforcement. These new laws and guidelines could materially and adversely impact the Company’s business and financial outlook, and may impact its ability to accept foreign investments or continue to list on a U.S. or other foreign stock exchange.

In March 2022, FTFT UK Limited received approval to operate as an Electronic Money Directive (EMD) Agent and has been registered as such with the UK Financial Conduct Authority (FCA). This status grants FTFT UK Limited the ability to distribute or redeem e-money and provide certain financial services.

The Company has made several strategic acquisitions and investments in recent years to expand its business operations, including:

• Acquisition of Khyber Money Exchange Ltd., a UK-based money transfer company, in September 2022.
• Acquisition of Alpha International Securities (Hong Kong) Limited and Alpha Information Service (Shenzhen) Co., Ltd., companies providing brokerage and investment banking services in Hong Kong, in November 2023.
• Establishment of Future Trading (Chengdu) Co., Ltd. in April 2022 to provide bulk commodities supply chain financing services and trading.
• Acquisition of FTFT Paraguay S.A. (formerly KAZAN S.A.) in April 2022 to develop bitcoin and cryptocurrency mining business, which was later dissolved in December 2023.

The Company also operated a blockchain-based online shopping platform, Chain Cloud Mall (CCM), through a VIE. However, CCM’s business was materially and negatively affected by the COVID-19 outbreak, and the Company started the process to close it down in November 2023.

Supply Chain Financing Service and Trading in China

Since the second quarter of 2021, the Company has been providing coal, aluminum ingots, sand, and steel supply chain financing services and trading business. The Company uses its own funds and various financing channels to provide working capital to industrial customers, focusing on large state-owned or listed companies. The Company signs purchase and sale agreements with suppliers and buyers, and recognizes revenue based on the gross amount billed to customers as sales of goods or net revenue as agent services, depending on whether the Company obtains control of the goods.

Asset Management Service, Brokerage and Investment Banking Services in Hong Kong

The Company’s subsidiary, NTAM, provides asset management and advisory services to professional investors in Hong Kong. NTAM’s main revenue is generated from management fees and providing professional advice to clients. NTAM offers diversified asset management portfolios, including equity, debt, precious metals, currencies, and derivatives investments.

In November 2023, the Company acquired FTFT International Securities and Futures Limited, which 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, to provide brokerage and investment banking services in Hong Kong.

Money Transfer Business

FTFT Finance UK Limited, formerly known as Khyber Money Exchange Ltd., was acquired by FTFT UK Limited in September 2022. It is regulated by the UK Financial Conduct Authority (FCA) for its cross-border money transfer systems and services. FTFT Finance provides money transfer services through its platform to transfer money around the world via its agent locations, online portal, mobile platform, or over the phone.

Impact of COVID-19 on our business

The COVID-19 pandemic has had a material negative impact on the Company’s business operations, particularly its online e-commerce platform Chain Cloud Mall (CCM). The quarantines, travel restrictions, and temporary closure of office buildings in China disrupted the Company’s supply chain, logistics, and marketing activities. The Company’s promotion strategy for CCM, which relied on in-person training of members and distributors, was also severely impacted by the restrictions on large gatherings. As a result, CCM generated minimal revenue and business since 2021, leading the Company to start the process to close it down in November 2023.

The COVID-19 pandemic and any new variants could also result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could negatively affect its liquidity. The Company does not have access to a revolving credit facility, and there can be no assurance that it would be able to secure commercial debt financing in the future if additional capital is required.

Results of Operations

Comparison of Three Months ended June 30, 2024 and 2023:

Revenue

• Total revenue increased by 12.94% to $4.20 million in Q2 2024, primarily due to a 16.50% increase in asset management service revenue.
• Supply chain financing/trading revenue decreased by 82.52% to $0.06 million due to lower coal prices and market demand.
• Other revenue increased by 259.87% to $0.35 million, mainly from debt recovery consulting service fees and U.S. dollar bond service income.

Gross Profit and Margin

• Gross profit increased by 28.32% to $1.59 million, with an overall gross margin of 37.93%, up from 33.39% in Q2 2023.
• The increase in gross margin was mainly due to higher profit margins in the asset management and other business segments.

Operating Expenses

• General and administrative expenses increased by 39.87% to $3.39 million, primarily due to higher professional service fees.
• Bad debt provision decreased by $0.95 million due to bad debt recovery and a change in accounting treatment.

Net loss from continuing operations

• Net loss from continuing operations increased by $0.26 million to $1.80 million, mainly due to the increase in operating expenses.

Comparison of Six Months ended June 30, 2024 and 2023:

Revenue

• Total revenue increased by 31.62% to $9.33 million in H1 2024, driven by a 27.22% increase in asset management service revenue and a 250.41% increase in other revenue.
• Supply chain financing/trading revenue increased by 5.33% to $0.51 million.

Gross Profit and Margin

• Gross profit increased by 45.01% to $3.55 million, with an overall gross margin of 38.02%, up from 34.49% in H1 2023.
• The increase in gross margin was mainly due to higher profit margins in the asset management and other business segments.

Operating Expenses

• General and administrative expenses increased by 17.44% to $6.81 million, primarily due to higher professional service fees.
• Bad debt provision decreased by $1.73 million due to bad debt recovery and a change in accounting treatment.

Net loss from continuing operations

• Net loss from continuing operations increased by $2.09 million to $5.77 million, mainly due to the increase in operating expenses.

Liquidity and Capital Resources

• As of June 30, 2024, the Company had $9.82 million in cash and restricted cash, a decrease from $19.02 million as of December 31, 2023.
• Working capital decreased from $41.79 million as of June 30, 2023 to $33.48 million as of June 30, 2024, mainly due to the decrease in current assets and an increase in current liabilities.
• Net cash used in operating activities increased by $4.98 million to $11.94 million, primarily due to increases in accounts receivable, advances to suppliers, and other current assets.

Outlook The Company continues to face legal and operational risks associated with its operations in China and Hong Kong, as well as the ongoing impact of the COVID-19 pandemic. The Company’s ability to accept foreign investments or continue to list on a U.S. or other foreign stock exchange may be affected by the new regulatory actions and guidelines in China. The Company’s financial performance will depend on its ability to successfully navigate these challenges and continue to grow its supply chain financing, asset management, brokerage, and money transfer businesses.