UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number: 001-34502

Future FinTech Group Inc.

(Exact name of registrant as specified in its charter)

Florida		98-0222013
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

Americas Tower, 1177 Avenue of The Americas

Suite 5100, New York, NY 10036

(Address of principal executive offices including zip code)

888-622-1218

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		FTFT		Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No.

Class		Outstanding at August 18, 2023
Common Stock, $0.001 par value per share		14,645,653

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	42
PART II. OTHER INFORMATION		43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults upon Senior Securities	44
Item 4.	Mine Safety Disclosure	44
Item 5.	Other Information	44
Item 6.	Exhibits	44
SIGNATURES		45

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FUTURE FINTECH GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2023			December 31, 2022

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	33,327,145		$	26,145,588
Restricted cash		3,459,825			3,589,582
Short - term investment		1,061,956			988,073
Accounts receivable, net		2,708,493			7,796,672
Advances to suppliers and other current assets		19,935,923			4,670,264
Loan receivables		4,911,526			19,157,538
Other receivables, net		5,740,199			2,649,536
Amount due from related party		55,533			53,126
TOTAL CURRENT ASSETS	$	71,200,600		$	65,050,379

Property, plant and equipment, net	$	4,379,329		$	4,417,281
Right of use assets - operation lease		884,253			1,055,906
Intangible assets		489,551			518,069
Goodwill		13,976,084			13,976,084
TOTAL NON-CURRENT ASSETS		19,729,217			19,967,340
TOTAL ASSETS	$	90,929,817		$	85,017,719

LIABILITIES

CURRENT LIABILITIES
Accounts payable	$	396,591		$	3,603,577
Notes payable		3,459,825			3,589,582
Accrued expenses and other payables		2,930,193			2,214,256
Advances from customers		14,714,796			1,236,241
Lease liability - operation lease		297,571			294,944
Amounts due to related parties		226,371			244,819
Deferred liabilities		7,387,697			7,387,697
TOTAL CURRENT LIABILITIES	$	29,413,044		$	18,571,116

NON-CURRENT LIABILITIES
Lease liability - operation lease		586,682			760,962
TOTAL NON-CURRENT LIABILITIES		586,682			760,962
TOTAL LIABILITIES	$	29,999,726		$	19,332,078
Commitments and contingencies (Note 24)
STOCKHOLDER’S EQUITY

Future FinTech Group, Inc, Stockholders’ equity
Common stock, $0.001 par value; 60,000,000 shares authorized; 14,645,653 shares and 14,645,653 shares issued and outstanding as of June 30, 2023 and December 31, 2022 respectively	$	14,646		$	14,646
Additional paid-in capital		222,751,657			222,751,657
Statutory reserve		98,357			98,357
Accumulated deficits		(155,924,902	)		(152,276,434	)
Accumulated other comprehensive loss		(4,593,257	)		(3,623,005	)
Total Future FinTech Group, Inc. stockholders’ equity		62,346,501			66,965,221
Non-controlling interests		(1,416,410	)		(1,279,580	)
TOTAL STOCKHOLDERS’ EQUITY		60,930,091			65,685,641
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		90,929,817			85,017,719

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue	$	3,808,991		$	7,418,277		$	7,202,956		$	10,884,642
Cost of revenues-third party		2,201,188			6,042,857			4,025,558			7,721,245
Cost of revenues-related party		348,636			-			710,594			-
Gross profit		1,259,167			1,375,420			2,466,804			3,163,397

Operating Expenses
General and administrative expenses		2,545,955			2,649,979			6,024,355			6,060,389
Research and development expenses		116,366			770,105			325,089			1,203,160
Selling expenses		123,812			349,209			256,251			719,678
Impairment Loss		-			448,611			-			697,123
(Recovery) Provision of doubtful debts		(1,187,403	)		(29	)		(1,170,577	)		1,973
Total operating expenses		1,598,730			4,217,875			5,435,118			8,682,323

Loss from operations		(339,563	)		(2,842,455	)		(2,968,314	)		(5,518,926	)

Other (expenses) income
Interest income		245,580			242,713			701,037			415,943
Interest expenses		-			(2,942	)		-			(6,018	)
Other (expense) income, net		(1,513,440	)		389,938			(1,561,949	)		385,837
Total other income, net		(1,267,860	)		629,709			(860,912	)		795,762

Loss from Continuing Operations before Income Tax		(1,607,423	)		(2,212,746	)		(3,829,226	)		(4,723,164	)
Income tax provision		(35,878	)		(123,788	)		(61,552	)		(311,741	)
Loss from Continuing Operations		(1,643,301	)		(2,336,534	)		(3,890,778	)		(5,034,905	)

Discontinued Operations
Gain/(Loss) on disposal of discontinued operations		105,480			(154	)		105,480			(154	)

NET LOSS		(1,537,821	)		(2,336,688	)		(3,785,298	)		(5,035,059	)
Less: Net Loss attributable to non-controlling interests		(65,817	)		(226,296	)		(136,830	)		(401,505	)
Net income/(loss) from continued operations attributable to Future Fintech Group, Inc.	$	(1,472,004	)	$	(2,110,392	)	$	(3,648,468	)	$	(4,633,554	)
Other comprehensive income (loss)
Loss from continued operations		(1,643,301	)		(2,336,534	)		(3,890,778	)		(5,034,905	)
Foreign currency translation – continued operations		(1,488,634	)		(1,505,190	)		(1,084,545	)		(1,687,807	)
Unrealized holding (losses)/gains on available-for-sale securities		(66,558	)		-			114,293			-
Comprehensive loss - continued operation		(3,198,493	)		(3,841,724	)		(4,861,030	)		(6,722,712	)
Net income (loss) from discontinued operations		105,480			(154	)		105,480			(154	)
Foreign currency translation – discontinued operations		-			-			-			-
Comprehensive income (loss) - discontinued operation		105,480			(154	)		105,480			(154	)
Comprehensive Loss		(3,093,013	)		(3,841,878	)		(4,755,550	)		(6,722,866	)
Less: Net loss attributable to non-controlling interests		(65,817	)		(226,296	)		(136,830	)		(401,505	)
COMPREHENSIVE LOSS ATTRIBUTABLE TO FUTURE FINTECH GROUP INC. STOCKHOLDERS		(3,027,196	)		(3,615,582	)		(4,618,720	)		(6,321,361	)

Earnings (Loss) per share:
Basic loss per share from continued operation	$	(0.11	)	$	(0.16	)	$	(0.26	)	$	(0.35	)
Basic earnings per share from discontinued operation		0.01			-			0.01			-
	$	(0.10	)		(0.16	)	$	(0.25	)	$	(0.35	)

Diluted Earnings (Loss) per share:
Diluted loss per share from continued operation	$	(0.11	)		(0.16	)	$	(0.26	)	$	(0.34	)
Diluted earnings per share from discontinued operation		0.01			-			0.01			-
	$	(0.10	)		(0.16	)	$	(0.25	)	$	(0.34	)
Weighted average number of shares outstanding
Basic		14,645,653			13,088,090			14,645,653			13,088,090
Diluted		14,687,761			13,645,881			14,687,761			13,645,881

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Three Months ended June 30, 2022

												Accumulative
					Additional							other			Non-
	Common Stock				paid-in		Statutory		Accumulated			comprehensive			controlling
	Shares		Amount		capital		reserve		deficits			loss			interests			Total
Balance at March 31, 2022		14,036,253	$	14,036	$	221,472,527		61,382	$	(141,135,076	)	$	(780,479	)	$	(765,970	)	$	78,866,420
Net loss from continued operation		-		-		-		-		(2,110,238	)		-			(226,296	)		(2,336,534	)
Foreign currency translation adjustment		-		-		-		-		-			(1,505,190	)		-			(1,505,190	)
Disposition of discontinued operation		-		-		-		-		(154	)		-			-			(154	)
Balance at June 30, 2022		14,036,253	$	14,036	$	221,472,527		61,382	$	(143,245,468	)	$	(2,285,669	)	$	(992,266	)	$	75,024,542

Three Months ended June 30, 2023

												Accumulative
					Additional							Other			Non-
	Common Stock				paid-in		Statutory		Accumulated			comprehensive			controlling
	Shares		Amount		capital		reserve		Deficits			income			interests			Total
Balance at March 31, 2023		14,645,653	$	14,646	$	222,751,657		98,357	$	(154,452,898	)	$	(3,038,065	)	$	(1,350,593	)	$	64,023,104
Net loss from continued operation		-		-		-		-		(1,577,484	)		-			(65,817	)		(1,643,301	)
Unrealized loss on available-for-sale securities		-		-		-		-		-			(66,558	)		-			(66,558	)
Foreign currency translation adjustment		-		-		-		-		-			(1,488,634	)		-			(1,488,634	)
Disposition of discontinued operation		-		-		-		-		105,480			-			-			105,480
Balance at June 30, 2023		14,645,653	$	14,646	$	222,751,657		98,357	$	(155,924,902	)	$	(4,593,257	)	$	(1,416,410	)	$	60,930,091

Six Months ended June 30, 2022

												Accumulative
					Additional							other			Non-
	Common Stock				paid-in		Statutory		Accumulated			comprehensive			controlling
	Shares		Amount		capital		reserve		deficits			loss			interests			Total
Balance at December 31, 2021		14,036,253	$	14,036	$	220,579,277		61,382	$	(138,611,914	)	$	(597,862	)	$	(590,761	)	$	80,854,158
Net loss from continued operation		-		-		-		-		(4,633,400	)		-			(401,505	)		(5,034,905	)
Share-based payments-service		-		-		893,250		-		-			-			-			893,250
Foreign currency translation adjustment		-		-		-		-		-			(1,687,807	)		-			(1,687,807	)
Disposition of discontinued operation		-		-		-		-		(154	)		-			-			(154	)
Balance at June 30, 2022		14,036,253	$	14,036	$	221,472,527		61,382	$	(143,245,468	)	$	(2,285,669	)	$	(992,266	)	$	75,024,542

Six Months ended June 30, 2023

												Accumulative
					Additional							Other			Non-
	Common Stock				paid-in		Statutory		Accumulated			comprehensive			controlling
	Shares		Amount		capital		reserve		Deficits			income			interests			Total
Balance at December 31, 2022		14,645,653	$	14,646	$	222,751,657		98,357	$	(152,276,434	)	$	(3,623,005	)	$	(1,279,580	)	$	65,685,641
Net loss from continued operation		-		-		-		-		(3,753,948	)		-			(136,830	)		(3,890,778	)
Unrealized gains on available-for-sale securities		-		-		-		-		-			114,293			-			114,293
Foreign currency translation adjustment		-		-		-		-		-			(1,084,545	)		-			(1,084,545	)
Disposition of discontinued operation		-		-		-		-		105,480			-			-			105,480
Balance at June 30, 2023		14,645,653	$	14,646	$	222,751,657		98,357	$	(155,924,902	)	$	(4,593,257	)	$	(1,416,410	)	$	60,930,091

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2023			2022

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,785,298	)	$	(5,035,059	)
Net income/(loss) from discontinued operation		105,480			(154	)
Net loss from continuing operations		(3,890,778	)		(5,034,905	)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		149,803			90,182
Amortization		28,518			28,233
Provision of doubtful debts		17,085			1,973
Share-based payments		-			893,250
Impairment of short term investment		-			697,123
Changes in operating assets and liabilities
Accounts receivable		5,088,179			2,519,226
Notes receivable		-			(1,174,122	)
Other receivable		(3,107,748	)		(1,198,592	)
Advances to suppliers and other current assets		(15,265,659	)		(2,894,838	)
Accounts payable		(3,206,986	)		28,461
Proceeds from amounts due from related parties, net		97,523			122,329
Repayment of amounts due to related parties, net		(112,491	)		(242,828	)
Accrued expenses		715,937			(569,006	)
Taxes payable		-			(41,133	)
Advances from customers		13,478,555			1,645,086
Net cash used in operating activities – Continued Operations		(6,008,062	)		(5,129,561	)
Net cash provided by operating activities – Discontinued Operations		105,480			3

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(128,098	)		(52,019	)
Payment of loan receivable		-			(11,363,000	)
Repayment for loan receivable		14,767,621			6,000,000
Purchase of intangible assets		-			(570,351	)
Net cash provided by (used in) investing activities from Continued Operations		14,639,523			(5,985,370	)
					-
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends to the non-controlling interest		-			(63,477	)
Proceeds from loan payable		-			4,199,879
Net cash provided by financing activities		-			4,136,402

Effect of change in exchange rate		(1,685,141	)		(1,263,771	)

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH		7,051,800			(8,242,297	)
Cash and Restricted Cash at Beginning of Year		29,735,170			50,273,517
Cash and Restricted Cash at End of Year	$	36,786,970		$	42,031,220

SUPPLEMENTARY DISCLOSURE OF SIGNIFICANT NON-CASH TRANSACTION
Deferred liabilities		-		$	173,764
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		-		$	6,018
Cash paid for income taxes	$	713,501		$	41,133

The accompanying notes are an integral part of these condensed consolidated financial statements.

FUTURE FINTECH GROUP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. CORPORATE INFORMATION

Future FinTech Group Inc. (the “Company”) is a holding company incorporated under the laws of the State of Florida. The main business of the Company includes supply chain financing services and trading, asset management and cross-border money transfer services. The Company has also expanded into cryptocurrency mining and cryptocurrency market data and information service business. Prior to 2019, the Company engaged in the production and sales of fruit juice concentrates, fruit juice beverages and other fruit-related products in the People’s Republic of China (“PRC”, or “China”), and overseas markets. Due to the drastically increased production cost and tightened environmental law in China, the Company has transformed its business from fruit juice manufacturing and distribution to supply chain financing services and trading, asset management and cross-border money transfer services.

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 (registration number 903050).

On April 14, 2022, the Company established Future Trading (Chengdu) Co., Ltd. Its business is coal and aluminum ingots 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. The Company owns 90% and FTFT HK owns 10% of Kazan S.A., respectively. Kazan S.A. has no operation before the acquisition. The Company is developing bitcoin and other cryptocurrency mining and related service business in Paraguay. The Company has changed its name from KAZAN S.A to FTFT Paraguay S.A. on July 28, 2022.

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, from Rahim Shah, a resident of United Kingdom for a total of Euros €685,000 (“Purchase Price”), pursuant to a Share Purchase Agreement (the “Agreement”) dated September 1, 2021. 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. Khyber Money Exchange Ltd. is regulated by the UK Financial Conduct Authority (FCA) and the parties received approval by the FCA before the formal closing of the transaction. On October 11, 2022, the Company changed the name of Khyber Money Exchange Ltd. to FTFT Finance UK Limited.

On February 27, 2023, Future FinTech (Hong Kong) Limited (“Buyer”), a company incorporated in Hong Kong and a wholly owned subsidiary of Future FinTech Group Inc. (the “Company”) entered into a Share Transfer Agreement (the “Agreement”) with Alpha Financial Limited, a company incorporated in Hong Kong (“Seller”) and sole owner and shareholder of Alpha International Securities (Hong Kong) Limited, a company incorporated in Hong Kong (“Alpha HK”) and Alpha Information Service (Shenzhen) Co., Ltd., a company incorporated in China (“Alpha SZ”). 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. Alpha SZ provides technical support services to Alpha HK. The share transfer transaction is subject to the approval of the Securities and Futures Commission of Hong Kong (“SFC”) and the Company has recently received the approval from SFC. The acquisition is expected to close in September 2023.

The Company’s business and operations are principally conducted by its subsidiaries in the PRC and Hong Kong.

On January 26, 2023, the Company filed with the Florida Secretary of State’s office Articles of Amendment (the “Amendment”) to amend its Second Amended and Restated Articles of Incorporation, as amended (“Articles of Incorporation”). As a result of the Amendment, the Company has authorized and approved a 1-for-5 reverse stock split of the Company’s authorized shares of common stock from 300,000,000 shares to 60,000,000 shares, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). The common stock will continue to be $0.001 par value. The Company rounds up to the next full share of the Company’s shares of common stock any fractional shares that result from the Reverse Stock Split and no fractional shares is issued in connection with the Reverse Stock Split and no cash or other consideration is paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split. No changes are being made to the number of preferred shares of the Company which remain as 10,000,000 preferred shares as authorized but not issued. The amendment to the Articles of Incorporation of the Company took effect at 1:00am Eastern Time on February 1, 2023. The Reverse Stock Split and Amendment were authorized and approved by the Board of Directors of the Company without shareholders’ approval, pursuant to 607.10025 of the Florida Business Corporation Act of the State of Florida.

The reverse stock split would be reflected in our June 30, 2023 and December 31, 2022 statements of changes in stockholders’ equity, and in per share data for all periods presented.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of June 30, 2023 and the results of operations and cash flows for the periods ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2023. The balance sheet at December 31, 2022 has been derived from the audited financial statements at that date.

Our contractual arrangements with the VIE and their respective shareholders allow us to (i) exercise effective control over the VIE, (ii) receive substantially all of the economic benefits of the VIE, and (iii) have an exclusive option to purchase all or part of the equity interests in the VIE when and to the extent permitted by PRC law.

As a result of our direct ownership in our wholly owned subsidiary and the contractual arrangements with the VIE, we are regarded as the primary beneficiary of the VIE, and we treat it and its subsidiaries as our consolidated affiliated entities under U.S. GAAP. We have consolidated the financial results of the VIE in our condensed consolidated financial statements in accordance with U.S. GAAP

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2022 as included in our Annual Report on Form 10-K.

Discontinued Operations

On June 27, 2022, Chain Cloud Mall Logistics Center (Shanxi) Co., Ltd. was dissolved and deregistered.

On June 16, 2023, QR (HK) Limited was dissolved and deregistered.

Based on the disposal plan and in accordance with ASC 205-20, the Company presented the operating results from these operations as a discontinued operation.

Segment Information Reclassification

The Company classified business segment into asset management service and, supply chain financing and trading, and others.

Uses of Estimates in the Preparation of Financial Statements

The Company’s 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 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 not limited to, the allowance for doubtful receivable, estimated useful life and residual value of property, plant and equipment, impairment of long-lived assets provision for staff benefit, 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 condensed consolidated financial statements.

Going Concern

The Company’s financial statements are prepared assuming that the Company will continue as a going concern.

The Company incurred operating losses and had negative operating cash flows and may continue to incur operating losses and generate negative cash flows as the Company implements its future business plan. The Company’s operating losses amounted $3.89 million, and it had negative operating cash flows amounted $6.01 million as of June 30, 2023. These factors raise substantial doubts about the Company’s ability to continue as a going concern. The Company has raised funds through issuance of convertible notes and common stock.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully execute its new business strategy and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

Research and development

Research and development expenses include salaries, contracted services, as well as the related expenses for our research and product development team, and expenditures relating to our efforts to develop, design, and enhance our service to our clients. The Company expenses research and development costs as they are incurred.

Impairment of Long-Lived Assets

In accordance with the ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property, plant 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.

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.

Our cash and cash equivalents and restricted cash and short-term investments are classified within level 1 of the fair value hierarchy because they are value using quoted market price.

Earnings Per Share

Under ASC 260-10, Earnings Per Share, basic EPS excludes dilution for Common Stock equivalents and is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of Common Stock outstanding for the period.

Diluted EPS is calculated by using the treasury stock method, assuming conversion of all potentially dilutive securities, such as stock options and warrants. Under this method, (i) exercise of options and warrants is assumed at the beginning of the period and shares of Common Stock are assumed to be issued, (ii) the proceeds from exercise are assumed to be used to purchase Common Stock at the average market price during the period, and (iii) the incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) are included in the denominator of the diluted EPS computation. The numerators and denominators used in the computations of basic and diluted EPS are presented in the following table.

For the six Months ended June 30, 2023:

	Income			Share		Pre-share amount

Net loss from continuing operations attributable to Future Fintech Group, Inc.	$	(3,753,948	)		14,645,653	$	(0.26	)
Net income from discontinuing operations attributable to Future Fintech Group, Inc.	$	105,480			14,645,653		0.01

Basic EPS:
Loss available to common stockholders from continuing operations	$	(3,753,948	)		14,645,653	$	(0.26	)
Income available to common stockholders from discontinuing operations	$	105,480			14,645,653		0.01

Dilutive EPS:

Warrants		-			42,108		-
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive	$	(3,753,948	)		14,687,761	$	(0.26	)
Diluted income per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	105,480			14,687,761		0.01

For the six months ended June 30, 2022:

	Income			Share		Pre-share amount

Loss from continuing operations	$	(5,034,905	)		13,088,090	$	(0.35	)
Loss from discontinuing operations	$	(154	)		13,088,090	$	-

Basic EPS:
Loss available to common stockholders from continuing operations	$	(5,034,905	)		13,088,090	$	(0.35	)
Loss available to common stockholders from discontinuing operations	$	(154	)		13,088,090	$	-

Dilutive EPS:

Warrants		-			557,791		-
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive from continuing operations	$	(5,034,905	)		13,645,881	$	(0.34	)
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	(154	)		13,645,881	$	-

Three Months ended June 30, 2023:

	Income			Share		Pre-share amount

Net loss from continuing operations attributable to Future Fintech Group, Inc.	$	(1,577,484	)		14,645,653	$	(0.11	)
Net income from discontinuing operations attributable to Future Fintech Group, Inc.	$	105,480			14,645,653		0.01

Basic EPS:
Loss available to common stockholders from continuing operations	$	(1,577,484	)		14,645,653	$	(0.11	)
Income available to common stockholders from discontinuing operations	$	105,480			14,645,653		0.01

Dilutive EPS:

Warrants		-			42,108		-
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive	$	(1,577,484	)		14,687,761	$	(0.11	)
Diluted income per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	105,480			14,687,761		0.01

Three Months ended June 30, 2022:

	Income			Share		Pre-share amount

Loss from continuing operations	$	(2,110,238	)		13,088,090	$	(0.16	)
Loss from discontinuing operations	$	(154	)		13,088,090	$	-

Basic EPS:
Loss available to common stockholders from continuing operations	$	(2,110,238	)		13,088,090	$	(0.16	)
Loss available to common stockholders from discontinuing operations	$	(154	)		13,088,090	$	-

Dilutive EPS:

Warrants		-			557,791		-
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive from continuing operations	$	(2,110,238	)		13,645,881	$	(0.16	)
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	(154	)		13,645,881	$	-

Cash and Cash Equivalents

Cash and cash equivalents included cash on hand and demand deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal and use and with an original maturity of three months or less.

Deposits in banks in the PRC are only insured by the government up to RMB500,000, in the HK are only insured by the government up to HKD500,000, in the United Kingdom are only insured by the government up to GBP18,000, in the United States of America are only insured by the Federal Deposit Insurance Corporation up to USD250,000, and are consequently exposed to risk of loss.

The Company believes the probability of a bank failure, causing loss to the Company, is remote.

Cash that is restricted as to withdrawal for use or pledged as security is reported separately on the face of the consolidated balance sheets, and is not included in the total cash and cash equivalents in the consolidated statements of cash flows.

Receivable and Allowances

Accounts receivable are recognized and carried at the original invoice amounts less an allowance for any uncollectible amount. We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required.

Other receivables, and loan receivables are recognized and carried at the initial amount when occurred less an allowance for any uncollectible amount. We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable impairment losses in our existing receivable.

Allowances for doubtful accounts are maintained for expected credit losses resulting from the Company’s customers’ inability to make required payments. The allowances are based on the Company’s regular assessment of various factors, including the credit-worthiness and financial condition of specific customers, historical experience with bad debts and customer deductions, receivables aging, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. The Company maintains an allowance for credit losses in accordance with ASC Topic 326, Credit Losses (“ASC 326”) and records the allowance for credit losses as an offset to accounts receivable and contract assets, and the estimated credit losses charged to the allowance is classified as “Bad debt expense” in the consolidated statements of comprehensive income. We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivable or otherwise evaluate other circumstances that indicate that we should abandon such efforts.

The Company has assessed its accounts receivable including credit term and corresponding all its accounts receivables as of June 30, 2023. Bad debt expense was $(1,170,577) and $1,973 during the six months ended June 30, 2023 and 2022, respectively. Accounts receivables of $1.42 million and nil have been outstanding for over 90 days as of June 30, 2023 and December 31, 2022, respectively.

Revenue Recognition

We apply 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 its 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.

We do not make any significant judgment in evaluating when control is transferred. Revenue is recorded net of value-added tax.

Revenue recognitions are as follows:

Sales of coals, aluminum ingots, sand and steel

The Company recognize revenue when the receipt of merchandise is confirmed by the customers, which is the point that the title of the goods is transferred to the customer. Revenue was nil and $3.65 million during the six months ended June 30, 2023 and 2022, respectively.

Sales agent services of coals, aluminum ingots, sand and steel

For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross revenue amount billed to customers as sales of goods listed above. The Company considers multiple factors when determining whether it obtains control of third-party products, including evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. The Company recognizes net revenue as agent services for the sales of coals and aluminum ingots when no control obtained throughout the transactions. Revenue was $0.48 million and nil during the six months ended June 30, 2023 and 2022, respectively.

Asset Management Service

The Company recognizes service revenue when a service is rendered, the Company issues bills to its customers and recognizes revenue according to the bills.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are expensed as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income.

Depreciation related to property, plant and equipment used in production is reported in cost of sales, and includes amortized amounts related to capital leases. We estimated that the residual value of the Company’s property and equipment ranges from 3% to 5%. Property, plant and equipment are depreciated over their estimated useful lives as follows:

Machinery and equipment			5-10 years
Building			30 years
Furniture and office equipment			3-5 years
Motor vehicles			5 years

Intangible Assets

Acquired intangible assets are recognized based on their cost to the Company, which generally includes the transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the Company’s book. These assets are amortized over their useful lives if the assets are deemed to have a finite life and they are reviewed for impairment by testing for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The fair value of an intangible asset is the amount that would be determined if the entity used the assumptions that market participants would use if they were pricing the intangible asset. The useful life of the Company’s intangible assets is ten year, which is determined by using the time period that an intangible is estimated to contribute directly or indirectly to a Company’s future cash flows.

Foreign Currency and Other Comprehensive Income (Loss)

The financial statements of the Company’s foreign subsidiaries and VIE are measured using the local currency as the functional currency; however, the reporting currency of the Company is the USD. Assets and liabilities of the Company’s foreign subsidiaries have been translated into USD using the exchange rate at the balance sheet dates, while equity accounts are translated using historical exchange rate.

The exchange rate we used to convert RMB to USD was 7.23:1 and 6.96:1 at the balance sheet dates of June 30, 2023 and December 31, 2022, respectively. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert RMB to USD were 6.93:1 and 6.48:1 for six months ended June 30, 2023 and 2022, respectively.

The exchange rate we used to convert HKD to USD was 7.84:1 and 7.80:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert HKD to USD were 7.84:1 and 7.83:1 for six months ended June 30, 2023 and 2022, respectively.

The exchange rate we used to convert GBP to USD was 0.79:1 and 0.83:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert GBP to USD were 0.81:1 and 0.77:1 for six months ended June 30, 2023 and 2022, respectively.

The exchange rate we used to convert AED to USD was 3.66:1 and 3.67:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rates we used to convert AED to USD were 3.67:1 and 3.67:1 for six months ended June 30 2023 and 2022, respectively.

The exchange rate we used to convert PYG to USD was 7258.03:1 and 7322.90:1 at the balance sheet dates of June 30, 2023 and December 31, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rate we used to convert PYG to USD was 7240.40:1 for six months ended June 30 2023.

Translation adjustments are reported separately and accumulated in a separate component of equity (cumulative translation adjustment).

Government subsidies

Government subsidies primarily consist of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. For certain government subsidies, there are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. The government subsidies of operating nature with no further conditions to be met are recorded of operating expenses in “Other income” in the consolidated statements when received.

The amendments in this update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements.

Income Taxes

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-25 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Goodwill

The Company tests goodwill for impairment for its reporting units on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that implied fair value of the goodwill within the reporting unit is less than its carrying value. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the reporting unit to its carrying value. The Company uses the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to forecasts of future revenue and operating margin. The company will perform annual goodwill impairment test end of the fiscal year.

Short-term investments

Short-term investments consist primarily of investments in fixed deposits with original maturities between three months and one year and certain investments in wealth management products and other investments that the Company has the intention to redeem within one year. Fair valued or carried at amortized costs. As of June 30, 2023 and December 31, 2022, the short-term investments amounted to $1.06 million and $0.99 million, respectively. Due to fluctuations of the quoted shares included in its investment portfolios, the Company unrealized holding gains on available-for-sale securities of $0.11 million on June 30, 2023 and recognized an impairment to the investment portfolio of $0.91 million on December 31, 2022.

Lease

We adopted ASU No. 2016-02, Leases (Topic 842), or ASC 842, from January 1, 2020. We determine if an arrangement is a lease or contains a lease at lease inception. For operating leases, we recognize a right-of-use (“ROU”) asset and a lease liability based on the present value of the lease payments over the lease term on the consolidated balance sheets at commencement date. As most of our leases do not provide an implicit rate, we estimate our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The ROU assets also include any lease payments made, net of lease incentives. Lease expense is recorded on a straight-line basis over the lease term. Our leases often include options to extend and lease terms include such extended terms when we are reasonably certain to exercise those options. Lease terms also include periods covered by options to terminate the leases when we are reasonably certain not to exercise those options.

Share-based compensation

The Company awards share options and other equity-based instruments to its employees, directors and consultants (collectively “share-based payments”). Compensation cost related to such awards is measured based on the fair value of the instrument on the grant date. The Company recognizes the compensation cost over the period the employee is required to provide service in exchange for the award, which generally is the vesting period. The amount of cost recognized is adjusted to reflect the expected forfeiture prior to vesting. When no future services are required to be performed by the employee in exchange for an award of equity instruments, and if such award does not contain a performance or market condition, the cost of the award is expensed on the grant date. The Company recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date.

Variable interest entities

On July 31, 2019, Cloud Chain Network and Technology (Tianjin) Co., Limited (“CCM Tianjin” or “WFOE”, formerly known as Chain Cloud Mall Network and Technology (Tianjin) Co., Limited), E-commerce Tianjin, and Mr. Zeyao Xue and Mr. Kai Xu, citizens of China and shareholders of E-commerce Tianjin, entered into the following agreements, or collectively, the “Variable Interest Entity Agreements” or “VIE Agreements,” pursuant to which CCM Tianjin has contractual rights to control and operate the business of E-commerce Tianjin (the “VIE”). Therefore, pursuant to ASC 810, E-Commerce Tianjin is included in the Company’s consolidated financial statements since then.

Pursuant to Chinese law and regulations, a foreign owned enterprise cannot apply for and hold a license for operation of certain e-commerce businesses, the category of business which the Company is conducting in China. CCM Tianjin is an indirectly wholly foreign owned enterprise of the Company. In order to comply with Chinese law and regulations, CCM Tianjin agreed to provide E-commerce Tianjin an Exclusive Operation and Use Rights Authorization to operate and use the Cloud Chain Mall System owned by CCM Tianjin.

E-commerce Tianjin was incorporated by Mr. Zeyao Xue and Mr. Kai Xu solely for the purpose of holding the operation license of the Cloud Chain Mall System. Mr. Zeyao Xue is a major shareholder of the Company and the son of Mr. Yongke Xue, the president of the Company. Mr. Kai Xu was the Chief Operating Officer of the Company and currently is the Deputy General Manager of FT Commercial Group Ltd., a wholly owned subsidiary of the Company and the vice president of blockchain division of the Company.

The VIE Agreements are as follows:

1)	Exclusive Technology Consulting and Service Agreement by and between CCM Tianjin and E-commerce Tianjin. Pursuant to the Exclusive Technology Consulting and Service Agreement, CCM Tianjin agreed to act as the exclusive consultant of E-commerce Tianjin and provide technology consulting and services to E-commerce Tianjin. In exchange, E-commerce Tianjin agreed to pay CCM Tianjin a technology consulting and service fee, the amount of which is to be equivalent to the amount of net profit before tax of E-commerce Tianjin, payable on a quarterly basis after making up losses of previous years (if necessary) and deducting necessary costs and expenses and taxes related to the business operations of E-commerce Tianjin. Without the prior written consent of CCM Tianjin, E-commerce Tianjin may not accept the same or similar technology consulting and services provided by any third party during the term of the agreement. All the benefits and interests generated from the agreement, including but not limited to intellectual property rights, know-how and trade secrets, will be CCM Tianjin’s sole and exclusive property. This agreement has a term of 10 years and may be extended unilaterally by CCM Tianjin with CCM Tianjin’s written confirmation prior to the expiration date. E-commerce Tianjin cannot terminate the agreement early unless CCM Tianjin commits fraud, gross negligence or illegal acts, or becomes bankrupt or winds up.

2)	Exclusive Purchase Option Agreement by and among CCM Tianjin, E-commerce Tianjin, Mr. Zeyao Xue and Mr. Kai Xu. Pursuant to the Exclusive Purchase Option Agreement, Mr. Zeyao Xue and Mr. Kai Xu granted to CCM Tianjin and any party designated by CCM Tianjin the exclusive right to purchase, at any time during the term of this agreement, all or part of the equity interests in E-commerce Tianjin, or the “Equity Interests,” at a purchase price equal to the registered capital paid by Mr. Zeyao Xue and Mr. Kai Xu for the Equity Interests, or, in the event that applicable law requires an appraisal of the Equity Interests, the lowest price permitted under applicable law. Pursuant to powers of attorney executed by Mr. Zeyao Xue and Mr. Kai Xu, they irrevocably authorized any person appointed by CCM Tianjin to exercise all shareholder rights, including but not limited to voting on their behalf on all matters requiring approval of E-commerce Tianjin’s shareholder, disposing of all or part of the shareholder’s equity interest in E-commerce Tianjin, and electing, appointing or removing directors and executive officers. The person designated by CCM Tianjin is entitled to dispose of dividends and profits on the equity interest without reliance on any oral or written instructions of Mr. Zeyao Xue and Mr. Kai Xu. The powers of attorney will remain in force for so long as Mr. Zeyao Xue and Mr. Kai Xu remain the shareholders of E-commerce Tianjin. Mr. Zeyao Xue and Mr. Kai Xu have waived all the rights which have been authorized to CCM Tianjin’s designated person under the powers of attorney.

3)	Equity Pledge Agreements by and among CCM Tianjin, E-commerce Tianjin, Mr. Zeyao Xue and Mr. Kai Xu. Pursuant to the Equity Pledge Agreements, Mr. Zeyao Xue and Mr. Kai Xu pledged all of the Equity Interests to CCM Tianjin to secure the full and complete performance of the obligations and liabilities on the part of E-commerce Tianjin and them under this and the above contractual arrangements. If E-commerce Tianjin, Mr. Zeyao Xue, or Mr. Kai Xu breaches their contractual obligations under these agreements, then CCM Tianjin, as pledgee, will have the right to dispose of the pledged equity interests. Mr. Zeyao Xue and Mr. Kai Xu agree that, during the term of the Equity Pledge Agreements, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests, and they also agree that CCM Tianjin’s rights relating to the equity pledge should not be interfered with or impaired by the legal actions of the shareholders of E-commerce Tianjin, their successors or designees. During the term of the equity pledge, CCM Tianjin has the right to receive all of the dividends and profits distributed on the pledged equity. The Equity Pledge Agreements will terminate on the second anniversary of the date when E-commerce Tianjin, Mr. Zeyao Xue and Mr. Kai Xu have completed all their obligations under the contractual agreements described above.

4)	Exclusive Operation and Use Rights Authorization letter which authorizes CCM Tianjin, to exclusively operate and use the Cloud Chain Mall System and the authorization period is the same as the term of the EXCLUSIVE THEHNOLOGY CONSULTING AND SERVICE AGREEMENT entered into by and between CCM Tianjin and E-commerce Tianjin dated July 31, 2019.

5)	GlobalKey Shared Mall Shopping Platform Software and System Transfer Agreement by and between Future Supply Chain Co., Ltd. and Cloud Chain Mall Network and Technology (Tianjian) Co., Ltd., pursuant to which the GlobalKey Shared Mall Shopping Platform Software and System was transferred from Future Supply China Co., Ltd. to CCM Tianjin and that both parties were wholly owned subsidiaries of the Company and transfer price is $0.

6)	Spousal Consent Letters. The spouse of Mr. Kai Xu (Mr. Zeyao Xue is not married), the shareholder of E-Commerce Tianjin has signed a spousal consent letter agreeing that the equity interests in E-Commerce Tianjin held by and registered under the name of such shareholder will be disposed pursuant to the contractual agreements with CCM Tianjin. The spouse of such shareholder agreed not to assert any rights over the equity interest in E-Commerce Tianjin held by such shareholder.

New Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”) “Financial Instruments - Credit Losses” (“ASC 326”): Measurement of Credit Losses on Financial Instruments” which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” (“ASC 2019-10”), which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for public entities which meet the definition of a smaller reporting company. The Company adopt ASU 2016-13 effective January 1, 2023. Management adopted of ASU 2016-13 on the consolidated financial statements. The effect will largely depend on the composition and credit quality of our investment portfolio and the economic conditions at the time of adoption.

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The amendments in this update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements. The amendments are effective for all entities within their scope, which excludes not-for-profit entities and employee benefit plans, for financial statements issued for annual periods beginning after December 15, 2021. Early application of the amendment is permitted. The Company adopted ASU No. 2021-10 effective on January 1, 2022. The adoption of this standard did not have a material impact on the Company consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying consolidated financial statements.

3. VARIABLE INTEREST ENTITY

The carrying amount of the VIE’s consolidated assets and liabilities are as follows:

	June 30,			December 31,
	2023			2022

Cash and cash equivalents	$	15,689		$	12,684
Other receivables		1,196			768
Other current assets		6,925			14,371
Total current assets		23,810			27,823
Property and equipment, net		71			98
Intangible assets		-			88,302
Total assets		23,881			116,223
Total liabilities		(238,771	)		(248,964	)
Net assets	$	(214,890	)	$	(132,741	)

	June 30,		December 31,
	2023		2022
Current liabilities:
Accounts payable	$	17,982	$	18,657
Accrued expenses and other payables		5,029		6,455
Advances from customers		2,552		2,648
Amount due to related party		213,208		221,204
Total current liabilities		238,771		248,964
Total liabilities	$	238,771	$	248,964

The summarized operating results of the VIE’s are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue	$	61,922		$	652		$	72,810		$	652
Gross profit		4,988			639			9,828			640
Net loss		(2,361	)		(51,194	)		(19,558	)		(94,752	)

4. ACCOUNTS RECEIVABLE

Accounts receivable, net consist of the following:

	June 30,		December 31,
	2023		2022

Supply Chain Financing/Trading	$	1,415,853	$	6,624,654
Asset management service		1,283,617		1,145,518
Others	$	9,023	$	26,500
Total accounts receivable, net	$	2,708,493	$	7,796,672

The following table sets forth our concentration of accounts receivable, net of specific allowances for doubtful accounts.

	June 30,			December 31,
	2023			2022

Debtor A		32.70	%		46.08	%
Debtor B		33.41	%		15.65	%
Debtor C		19.58	%		14.26	%
Total accounts receivable, net		85.69	%		75.99	%

5. OTHER RECEIVABLES

As of June 30, 2023, the balance of other receivables was $5.74 million.

As of April 22, 2022 and January 31, 2023, FTFT Super Computing Inc. entered into a “Electricity Sales and Purchase Agreement” with a third-party seller. FTFT Super Computing Inc. provided an initial amount of Adequate Assurance to the seller in the form of a cash deposit in the amount of $1.86 million and has receivables from resale of electricity $0.18 million.

On February 3, 2023, Future Fintech Group Inc. entered into a “Consulting Agreement” with a third party for its professional service of potential acquisition projects. Future Fintech Group Inc. provided initial amount of cash deposit to the third party in the amount of $2.40 million. On May 18, 2023, the parties terminated the agreement and the Company has received repayment of $2.40 million.

In addition, other receivables included total $1.48 million deposit paid and prepayments to third parties.

As of December 31, 2022, the balance of other receivables was $2.65 million.

On October 1, 2022, FTFT UK Limited (the “Buyer”), a wholly owned subsidiary of the Company acquired 100% equity interest of Khyber Money Exchange Ltd. (“Khyber”) for £786,887. Buyer deposited £400,000 for cash balance expected to be left in the bank account of Khyber at the closing to the Buyer’s solicitors’ client account upon the final closing of the acquisition, and the Buyer’s solicitors shall refund the amount after deducting the cash balance in Khyber’s account upon closing. As of January 9, 2023, the Company has received refund $0.24 million.

As of April 22, 2022, FTFT Super Computing Inc. entered into a “Electricity Sales and Purchase Agreement” with a third-party seller. FTFT Super Computing Inc. provided an initial amount of Adequate Assurance to the seller in the form of a cash deposit in the amount of $1.00 million and has receivables from resale of electricity $0.24 million.

In addition, other receivables included total $1.17 million deposit paid and prepayments to third parties.

6. LOAN RECEIVABLES

As of June 30, 2023, the balance of loan receivables was $4.91 million, which was from a third party.

On March 10, 2022, Future FinTech (Hong Kong) Limited (“FTFT HK”), a wholly owned subsidiary of the Company, entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $5.00 million to the third party at the annual interest rate of 10% from March 10, 2022 to September 9, 2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $2.16 million.

On May 31, 2022, FTFT HK entered into a “Loan Agreement” with the same third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $6.36 million to the third party at the annual interest rate of 10% from May 31, 2022 to May 30,2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $6.36 million.

On December 26, 2022, FTFT HK entered into a “Loan Agreement” with the same third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $0.40 million to the third party at the annual interest rate of 10% from December 26, 2022 to March 26, 2023. As of April 17, 2023, the Company has received repayment $0.40 million.

On July 14, 2022, Future Private Equity Fund Management (Hainan) Co., Limited entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, Future Private Equity Fund Management (Hainan) Co., Limited loaned an amount of $6.92 million (RMB50 million) to the third party at the annual interest rate of 8% from July 15, 2022 to July 14, 2023, guarantee by Junde Chen. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $4.83 million (RMB35 million). The amount of $2.07 million (RMB15 million) will be repaid within 6 months.

As of December 31, 2022, the balance of loan receivables was $19.16 million, which was from a third party.

On September 8, 2021, FUCE Future Supply Chain (Xi’an) Co., Ltd., a wholly owned subsidiary of the Company, entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FUCE Future Supply Chain (Xi’an) Co., Ltd. loaned an amount of $0.22 million (RMB1.5 million) to the third party at the annual interest rate of 5.25% from September 8, 2021 to September 6, 2023.

On March 10, 2022, FTFT HK entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $5.00 million to the third party at the annual interest rate of 10% from March 10, 2022 to September 9, 2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $2.16 million.

On May 31, 2022, FTFT HK entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $6.36 million to the same third party at the annual interest rate of 10% from May 31, 2022 to May 30,2023. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $6.36 million.

On December 26, 2022, FTFT HK entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of $0.40 million to the same third party at the annual interest rate of 10% from December 26, 2022 to March 26, 2023. As of April 17, 2023, the Company has received repayment $0.40 million.

On July 14, 2022, Future Private Equity Fund Management (Hainan) Co., Limited entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, Future Private Equity Fund Management (Hainan) Co., Limited loaned an amount of $7.28 million (RMB50 million) to the third party at the annual interest rate of 8% from July 15, 2022 to July 14, 2023, guarantee by Junde Chen. To strengthen the liquidity, the Company negotiated with the borrower to early settle part of the loan. As of April 17, 2023, the Company has received repayment $5.09 million (RMB35 million). The amount of $2.18 million (RMB15 million) will be repaid within 6 months.

7. SHORT - TERM INVESTMENT

As of June 30, 2023, the balance of short - term investments were $1.06 million. On September 6, 2021, Future Private Equity Fund Management (Hainan) Co., Ltd. invested RMB13,000,000 ($1.79 million) to entrust Shanghai Yuli Enterprise Management Consulting Firm to invest in various types of investment portfolios. According to the market value, the Company’s balance of the short - term investment was $1.06 million on June 30, 2023. Due to fluctuations of the quoted shares included in its investment portfolios, the Company unrealized holding gains on available-for-sale securities of $0.11 million.

As of December 31, 2022, the balance of short - term investments were $0.99 million. On September 6, 2021, Future Private Equity Fund Management (Hainan) Co., Ltd. invested RMB13,000,000 ($1.87 million) to entrust Shanghai Yuli Enterprise Management Consulting Firm to invest in various types of investment portfolios. According to the market value, the Company’s balance of the short - term investments was $0.99 million on December 31, 2022. Due to fluctuations of the quoted shares included in its investment portfolios, the Company recognized an impairment to the investment portfolio of $0.91 million.

8. OTHER CURRENT ASSETS

The amount of other current assets consisted of the followings:

	June 30,		December 31,
	2023		2022

Prepayments for Supply Chain Financing/Trading	$	14,955,258	$	3,766,643
Prepayments for Sand and Steel Supply Chain Financing/Trading		3,938,132		-
Prepaid expenses		110,762		72,544
Others		906,461		831,077
Total	$	19,910,613	$	4,670,264

9. GOODWILL

As of June 30, 2023 and December 31, 2022, the balance of goodwill mainly represented an amount of $13.98 million that arose from acquisition of Nice Talent Asset Management Limited (“Nice Talent”) in 2021 and Khyber Money Exchange Ltd., in 2022.

On August 6, 2021, the Company through its wholly owned subsidiary Future FinTech (Hong Kong) Limited., completed its acquisition of 90% of the issued and outstanding shares of Nice Talent from Joy Rich Enterprises Limited for HK$144,000,000 (the “Purchase Price”) which shall be paid in the shares of common stock of the Company (the “Company Shares”). 60% of the Purchase Price ($11.22 million) was paid in 2,244,156 pre reverse stock split shares of common stock of the Company on August 4, 2021. 40% of the Purchase Price ($7.39 million) in two installments for 20% each shall be paid in shares of common stock of the Company upon the completion of the audited reports for Nice Talent for each of the years ended on December 31, 2021 and December 31, 2022, respectively.

On October 1, 2022, FTFT UK Limited, a wholly owned subsidiary of the Company, acquired 100% equity interest of Khyber Money Exchange Ltd., a company incorporated in England and Wales, for £786,887 ($0.95 million).

The Company recorded $2.21 million of impairment loss in fiscal year 2022 related with goodwill mainly arose from acquisition of Nice Talent Asset Management Limited and FTFT Finance UK Limited (formerly known as Khyber Money Exchange Ltd.). Goodwill impairment test as of December 31, 2022 using compare the carrying amount of the reporting unit (including goodwill) with its fair value. If the carrying amount exceeds the fair value, compare the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss should be recognized.

10. ACQUISITION

Nice Talent

On August 6, 2021 (“Acquisition Date”), the Company through its wholly owned subsidiary Future FinTech (Hong Kong) Limited., completed its acquisition of 90% of the issued and outstanding shares of Nice Talent from Joy Rich Enterprises Limited for HK$144,000,000 (the “Purchase Price”) which shall be paid in the shares of common stock of the Company (the “Company Shares”). 60% of the Purchase Price ($11.22 million) was paid in 2,244,156 pre reverse stock split shares of common stock of the Company on August 4, 2021. 40% of the Purchase Price ($7.39 million) in two installments for 20% each shall be paid in shares of common stock of the Company upon the completion of the audited reports for Nice Talent of the years ended on December 31, 2021 and 2022, respectively. Nice Talent has met the performance requirements for the year ended on December 31, 2021 and 2022, however, the 40% of the Purchase Price has not been paid in the shares of common stock of the Company to Joy Rich as of the date of this report.

The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained an independent appraisal firm to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.

As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.

The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:

Accounts receivable	$	1,407,902
Other receivables		27,701
Other current assets		7,039
Property, plant and equipment, net		53,577
Amount Due from Related Party		38,323
Accrued expenses and other payables		(498,515	)
Net identifiable assets acquired	$	1,036,027
Less: non-controlling interests		131,165
Add: goodwill		17,164,598
Total purchase price for acquisition net of $275,624 of cash	$	18,069,460

The Company has included the operating results of Nice Talent in its consolidated financial statements since the Acquisition Date.

Khyber Money Exchange Ltd.

On October 1, 2022, FTFT UK Limited, a wholly owned subsidiary of the Company acquired 100% equity interest of Khyber Money Exchange Ltd., a company incorporated in England and Wales, for £786,887 ($0.95 million). The Company has changed its name from Khyber Money Exchange Ltd., to FTFT Finance UK Limited on October 11, 2022.

The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:

Other receivables	$	242,087
Property, plant and equipment, net		584
Accrued expenses and other payables		(89,888	)
Net identifiable assets acquired	$	152,783
Add: goodwill		628,938
Total purchase price for acquisition net of $166,676 of cash	$	781,721

The Company has included the operating results of FTFT Finance UK Limited in its consolidated financial statements since October 1, 2022.

11. LEASES

The Company’s non-cancellable operating leases consist of leases for office space. The Company is the lessee under the terms of the operating leases. For the six months ended June 30, 2023, the operating lease cost was $0.88 million.

The Company’s operating leases have remaining lease terms of approximately 45 months. As of June 30, 2023, the weighted average remaining lease term and weighted average discount rate were 3.75 years and 4.75%, respectively.

Maturities of lease liabilities were as follows:

SEC Form 10-Q filed by Future FinTech Group Inc.