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 (including fruit purees and fruit juices), fruit beverages (including fruit juice beverages and fruit cider beverages) in the PRC. Due to drastically increased production costs and tightened environmental laws in China, the Company had 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 UK. The Company also expanded into brokerage and investment banking business in Hong Kong and cryptocurrency mining farm in the U.S. The Company had contractual arrangements with a VIE E-Commerce Tianjin in China, which has generated minimal revenue and business since 2021 due to the negative impact caused by COVID-19. The Company started the process to close it down in November 2023 and completed deregistration and dissolution of the VIE with local authority on March 7, 2024.

There are legal and operational risks associated with being based in and having a substantial majority of operations in China and Hong Kong. These risks could result in a material change in our operations and/or the value of our common stock or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our shares to significantly decline or be worthless. The PRC government has initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.

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 Financial Conduct Authority (FCA), a UK regulator. This status grants FTFT UK Limited the ability to distribute or redeem e-money and provide certain financial services on behalf of an e-money institution.

On April 14, 2022, the Company established Future Trading (Chengdu) Co., Ltd. Its business is bulk commodities supply chain financing services and trading.

On April 18, 2022, the Company and Future Fintech (Hong Kong) Limited, a wholly owned subsidiary of the Company jointly acquired 100% equity interest of KAZAN S.A., a company incorporated in Republic of Paraguay for $288. Kazan S.A. has no operation before the acquisition. The Company tried to develop bitcoin and other cryptocurrency mining and related service business in Paraguay but was not able to develop the business as planned, and KAZAN S.A. was dissolved in December 2023.

On September 29, 2022, FTFT UK Limited completed its acquisition of 100% of the issued and outstanding shares of Khyber Money Exchange Ltd., a company incorporated in England and Wales, and renamed it to FTFT Finance UK Limited. Khyber Money Exchange Ltd. is a money transfer company with a platform for transferring money through one of its agent locations or via its online portal, mobile platform or over the phone.

On February 27, 2023, Future FinTech (Hong Kong) Limited acquired 100% equity interest of Alpha International Securities (Hong Kong) Limited and Alpha Information Service (Shenzhen) Co., Ltd. Alpha HK 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. The names of the two entities were changed to ‘FTFT International Securities and Futures Limited’ and ‘FTFT Information Services (Shenzhen) Co. Ltd.’, respectively.

On January 26, 2023, the Company implemented a 1-for-5 reverse stock split of its common stock.

The Company operated a blockchain based online shopping platform, Chain Cloud Mall (CCM) through its VIE, which has generated minimal revenue and business since 2021 due to the negative impact of COVID-19. The Company started a process to close it down in November 2023 and completed deregistration and dissolution of the VIE in March 2024.

The Company currently has eight directly controlled subsidiaries operating in various financial technology businesses.

Supply Chain Financing Service and Trading in China

Since the second quarter of 2021, the Company started coal supply chain financing service and trading business. Since the third quarter of 2021, the Company started aluminum ingots supply chain financing service and trading business. Since the first quarter of 2023, the Company started sand and steel supply chain financing service and trading business.

The Company’s supply chain finance business mainly serves the receivables and payables of industrial customers, obtains the creditor’s rights or commodity goods rights of large state-owned enterprises through trade execution, provides customers with working capital, accelerates capital turnover, and then expands the business scale and improves the industrial value.

The Company focuses on bulk commodity goods such as coal, aluminum ingots, sand and steel and takes large state-owned or listed companies as the core service targets. The Company uses its own funds as the operation basis, actively uses a variety of channels and products for financing, such as banks, commercial factoring companies, accounts receivable, asset-backed securities, and other innovative financing methods to obtain sufficient funds.

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

NTAM, the Company’s asset management subsidiary, engages in assets management and advisory services. NTAM’s main revenue is generated from providing professional advice to customers and management fees for managing the investment of the clients. NTAM is licensed under the Securities and Futures Commission of Hong Kong (SFC) for carrying out regulated activities in “Advising on Securities” and “Asset Management”.

NTAM offers diversified asset management portfolio for professional investors, including equity investment, debt investment, precious metals and currencies investment, and derivative investment. As of September 30, 2024, NTAM has approximately US$367 million assets under its management.

FTFT International Securities and Futures Limited, a company acquired by the Company in November 2023, provides brokerage and investment banking services in Hong Kong. It 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.

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 UK Financial Conduct Authority (FCA) for its cross-border money transfer systems and service. FTFT Finance provides money transfer services through its platform to transfer money around the world via one of its agent locations or its online portal, mobile platform, or over the phone.

Impact of COVID-19 on our business

The COVID-19 pandemic has materially and negatively impacted the Company’s business operations. The quarantines, travel restrictions, and temporary closure of office buildings in China disrupted the Company’s supply chain, logistics providers, customers and marketing activities. The Company’s promotion strategy for its online e-commerce platform Chain Cloud Mall mainly relied on the training of members and distributors through meetings and conferences, which became difficult to implement due to the restrictions on large gatherings. As a result, CCM generated minimal revenue and business since 2021, and the Company started the process to close it down in November 2023.

The potential economic impact of new COVID-19 variants could negatively affect the Company’s ability to access capital and raise additional funds in the future. The Company does not have access to a revolving credit facility, and any outbreak-related instability in the securities markets could adversely impact the Company’s ability to raise capital.

Results of Operations

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

Revenue Revenue for the three months ended September 30, 2024 decreased to approximately $5.18 million from approximately $23.74 million for the same period of the last year. The decrease was primarily due to a decline in revenue from supply chain financing/trading, as the real estate, infrastructure and overall economy in China have slowed down in 2024.

Asset management service revenues increased $0.44 million from $3.27 million for the three months ended September 30, 2023 to $3.71 million for the same period of 2024, as the Company hired more seasoned account managers to boost the services and the revenues.

Other revenues increased from $0.47 million for the three months ended September 30, 2023 to $1.04 million for the same period of 2024, mainly due to the increased debt recovery consulting service fee as well as U.S. dollar bond service income.

Gross Profit and Margin Overall gross profit increased to $1.51 million for three months ended September 30, 2024 from $1.41 million for the same period of 2023. The increase is mainly due to the increase of gross profit from other business segments. Overall gross margin as a percentage of revenue was 29.25% for the three months ended September 30, 2024, an increase of 22.42% from 5.95% for the same period of last fiscal year, mainly due to higher profit margin from supply chain financing/trading business and other businesses.

Operating Expenses General and administrative expenses decreased by $0.47 million, or 12.45%, to $3.32 million for the three months ended September 30, 2024, from $3.79 million for the same period of last fiscal year. The decrease was mainly due to decreased professional service fees and rental fee.

Bad debt provision increased by $3.37 million during the three months ended September 30, 2024, compared to the same period of last fiscal year, due to bad debt recovery recognized in previous years and a different bad debt provision accounting treatment method used in 2024.

Other Income (Expense), Net Other expenses, net increased by $0.23 million to $0.38 million for the three months ended September 30, 2024 from $0.15 million in the same period of the last fiscal year, primarily due to change of foreign currency exchange rate and impact of exchange gains and losses.

Net loss from continue operation Net loss from continue operation increased by $2.54 million from $2.39 million for the three months ended September 30, 2023 to $4.93 million for the same period of 2024 mainly due to the increase in operating expenses.

Comparison of Nine Months ended September 30, 2024 and 2023:

Revenue Revenue for the nine months ended September 30, 2024 decreased to approximately $14.5 million from approximately $30.82 million for the same period of the last year. The decrease was primarily due to a decline in revenue from supply chain financing/trading, as the real estate, infrastructure and overall economy in China have slowed down in 2024.

Asset management service increased $2.18 million from $9.69 million for the nine months ended September 30, 2023 to $11.88 million for the same period of 2024, due to the Company hiring more seasoned account managers.

Other revenues increased from $0.66 million for the nine months ended September 30, 2023 to $1.69 million for the same period of 2024, mainly due to the increased debt recovery consulting service fee, U.S. dollar bond service income and cryptocurrency mining service income.

Gross Profit and Margin Overall gross profit increased to $5.06 million for nine months ended September 30, 2024 from $3.86 million for the same period of 2023. The increase is mainly due to higher profit margin from supply chain financing/trading business and other businesses. Overall gross margin as a percentage of revenue was 34.89% for the nine months ended September 30, 2024, an increase of 22.38% from 12.51% for the same period of last fiscal year.

Operating Expenses General and administrative expenses increased by $0.54 million, or 5.62%, to $10.13 million for the nine months ended September 30, 2024 from $9.59 million for the same period of last fiscal year. The increase was mainly due to increased professional service fees and internal control training fees.

Bad debt provision increased by $5.09 million during the nine months ended September 30, 2024, compared to the same period of last fiscal year, due to bad debt recovery recognized in previous years and a different bad debt provision accounting treatment method used in 2024.

Other Income (Expense), Net Other expenses, net increased by $0.43 million to $1.15 million for the nine months ended September 30, 2024 from $0.71 million in the same period of the last fiscal year, primarily due to civil penalty payments and change of foreign currency exchange rate.

Net loss from continue operation Net loss from continue operation increased by $4.63 million from $6.07 million for the nine months ended September 30, 2023 to $10.70 million for the same period of 2024 mainly due to the increase in operating expenses.

Gain on disposal of discontinued operations Gain on disposal of discontinued operation was $0.64 million for the nine months ended September 30, 2024, related to the dissolution and deregistration of Chain Cloud Mall Network and Technology (Tianjin) Co., Limited and Tianjin Future Private Equity Fund Management Partnership (Ltd Partnership).

Liquidity and Capital Resources As of September 30, 2024, the Company had cash and restricted cash of $6.52 million, a decrease from $19.02 million as of December 31, 2023, mainly due to increased other current assets.

The Company’s working capital was $28.29 million as of September 30, 2024, a decrease of $10.85 million from $39.14 million as of September 30, 2023, mainly due to the decrease in current assets and an increase in current liabilities.

Net cash used in operating activities increased by $6.10 million to $13.52 million for the nine months ended September 30, 2024 from $7.43 million for the same period of the last fiscal year, primarily due to increase in advances to suppliers and other current assets.

Net cash used in investing activities increased $14.94 million to $1.18 million for the nine months ended September 30, 2024 from positive $13.76 million for the same period of the last fiscal year, due to decrease in repayment for loan receivable.

Net cash provided in financing activities for the nine months ended September 30, 2024 was $1.32 million, an increase of $4.23 million, as compared to cash used in financing activities of $2.91 million during the nine months ended September 30, 2023, mainly due to proceeds from the issuance of common stock from a private placement.

Outlook The Company faces various legal and operational risks associated with its operations in China and Hong Kong, including increased regulatory scrutiny and oversight by the Chinese government. The Company’s ability to continue its business operations and list its securities on U.S. or foreign stock exchanges could be significantly limited or hindered by these regulatory changes.

The COVID-19 pandemic has also had a material negative impact on the Company’s business, disrupting its supply chain, logistics, customers and marketing activities. While the Company has taken steps to diversify its business and expand into new areas like asset management, brokerage and money transfer services, its overall financial performance remains challenged.

Going forward, the Company will need to navigate the evolving regulatory landscape in China, manage the ongoing impact of COVID-19, and continue to execute on its diversification strategy in order to return to profitability and sustainable growth. Investors should closely monitor the Company’s ability to adapt to these dynamic market conditions and regulatory changes.