FUTURE FINTECH GROUP INC. Management’s discussion and analysis of financial condition and results of operations. (Form 10-Q)

by James · November 21, 2022

This quarterly report on Form 10-Q and other reports filed by the Company from
time to time with the SEC (collectively the "Filings") contain or may contain
forward-looking statements and information that are based upon beliefs of, and
information currently available to, Company's management as well as estimates
and assumptions made by Company's management. Readers are cautioned not to place
undue reliance on these forward-looking statements, which are only predictions
and speak only as of the date hereof. When used in the filings, the words "may",
"will", "should", "would", "anticipate", "believe", "estimate", "expect",
"future", "intend", "plan", or the negative of these terms and similar
expressions as they relate to Company or Company's management identify
forward-looking statements. Such statements reflect the current view of Company
with respect to future events and are subject to risks, uncertainties,
assumptions, and other factors (including the statements in the section "results
of operations" below), and any businesses that Company may acquire. Should one
or more of these risks or uncertainties materialize, or should the underlying
assumptions prove incorrect, actual results may differ significantly from those
anticipated, believed, estimated, expected, intended, or planned. Factors that
might cause or contribute to such a discrepancy include, but are not limited to,
those listed under the heading "Risk Factors" and those listed in our Annual
Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K")
and in this Form 10-Q. The following discussion should be read in conjunction
with our Financial Statements and related Notes thereto included elsewhere in
this report and in our 2021 Form 10-K.



Although the Company believes the expectations reflected in the forward-looking
statements are based on reasonable assumptions, the Company cannot guarantee
future results, levels of activity, performance, or achievements. Except as
required by applicable law, including the securities laws of the United States,
the Company does not intend to update any of the forward-looking statements to
conform these statements to actual results. Readers are urged to carefully
review and consider the various disclosures made throughout the entirety of this
report, which attempts to advise interested parties of the risks and factors
that may affect our business, financial condition, results of operations, and
prospects.



Overview of Our Business



Future FinTech 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 a real-name blockchain based e-commerce platform, supply
chain financing service and trading business, money transfer service, asset
management and financial technology business. The main business of the Company
includes an online shopping platform, Chain Cloud Mall ("CCM"), which is based
on blockchain technology, supply chain financing services and trading, assets
management, money transfer service and cryptocurrency market data services. The
Company is also engaged in the development of blockchain based e-Commerce
technology, cryptocurrency mining, cryptocurrency investment management as well
as financial service technology businesses. The Company has also expanded into
financial services and cryptocurrency market data and information service
businesses.



On August 6, 2021, the Company completed acquisition of 90% of the issued and
outstanding shares of Nice Talent Asset Management Limited ("NTAM"), a Hong
Kong-based asset management company, from Joy Rich Enterprises Limited ("Joy
Rich"). NTAM is licensed under the Securities and Futures Commission of Hong
Kong ("SFC") to carry out regulated activities in Type 4: Advising on Securities
and Type 9: Asset Management.



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
("Seller") for a total of Euros €685,000 ("Purchase Price"), pursuant to a Share
Purchase Agreement (the "Agreement") dated September 1, 2021. The Company is in
the process of completing accounting and other transition and consolidation of
Khyber into the Company. 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 have
received the approval by the FCA before formal closing of the transaction.



In December 2021, FTFT Capital Investments, L.L.C., a subsidiary of the Company,
officially launched FTFTX, a cryptocurrency market data platform that provides
investors with real-time cryptocurrency market data and trading information from
a large number of cryptocurrency exchanges. The market data is available for
Bitcoin, ETH, EOS, Litecoin, TRON and other cryptocurrencies at
 and via the FTFTX App on iOS and Android devices. The
FTFTX app is free to download on Google Play and the Apple Store.



In March 2022, FTFT UK received has 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 the ability to distribute or redeem e-money and provide certain financial
services on behalf of an e-money institution (registration number 903050).



In June 2022, Future Fintech Labs Inc. ("FTFT Labs") have teamed up with a
third-party money transfer company to launch a cross-border money transfer app
Tempo to offer US-based immigrants and other users a streamlined, secure and
cost-effective way to send money to friends and family among other parties in
Mexico, India and the United Kingdom. By working with the money transfer company
and other service providers that are registered with FinCEN and have licenses
for money transmission business, FTFT Labs has developed Tempo that can provide
its customers with a multicurrency digital wallet that makes sending money to
Mexico, India or the UK easier and more cost-effective than many other
remittance services who charge high fees per transfer.



In October 2022, FTFT UK Limited officially launched the FTFT Orbit e-wallet
app. The new app is now available on Google Play and the Apple App Store. The
FTFT Orbit e-wallet app is an electronic wallet that integrates popular e-wallet
functions similar to Alipay and We chat pay. It also integrates most of the core
services that traditional banks offer such as international remittances,
transfer payments, a physical debit card and bill payments.



In November 2022, FTFT Super Computing Inc. announced it has completed the first
construction phase of the build-out of its cryptocurrency mining farm in
northwest Ohio. Following testing procedures, on October 24, 2022, the first
batch Antminer S19 series mining machines were successfully put into operation.



                                       30







We are a holding company incorporated in Florida and we are not a Chinese
operating company. As a holding company with no material operations of our own,
we conduct a substantial majority of our operations through our subsidiaries in
China, Hong Kong, Dubai, U.S. and UK and we operate a blockchain based online
shopping mall through contractual arrangements with a variable interest entity
(VIE) -E-Commerce Tianjin, based in China and this structure involves unique
risks. Our shares of common stock are shares of our Florida holding company, and
we do not have any equity ownership of our VIE, instead we control and receive
the economic benefits of our VIE's business operations through certain
contractual arrangements, which are used to replicate foreign investment in
Chinese-based companies where Chinese law prohibits foreign invested equity
exceeding 50% in value added telecom/e-commerce business. Chinese regulatory
authorities could disallow the VIE structure, which could result in a material
change in our operations and/or value of our shares, including that it could
cause the value of shares to significantly decline or become worthless.



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. Recently, the PRC government 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, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement. On July 6,
2021, the General Office of the Communist Party of China Central Committee and
the General Office of the State Council jointly issued an announcement to crack
down on illegal activities in the securities market and promote the high-quality
development of the capital market, which, among other things, requires the
relevant governmental authorities to strengthen cross-border oversight of
law-enforcement and judicial cooperation, to enhance supervision over
China-based companies listed overseas, and to establish and improve the system
of extraterritorial application of the PRC securities laws. On February 15,
2022, Cybersecurity Review Measures published by Cyberspace Administration of
China or the CAC, National Development and Reform Commission, Ministry of
Industry and Information Technology, Ministry of Public Security, Ministry of
State Security, Ministry of Finance, Ministry of Commerce, People's Bank of
China, State Administration of Radio and Television, China Securities Regulatory
Commission ("CSRC"), State Secrecy Administration and State Cryptography
Administration became effective, which provides that, Critical Information
Infrastructure Operators ("CIIOs") that intend to purchase internet products and
services and Online Platforms engaging in data processing activities that affect
or may affect national security shall be subject to the cybersecurity review by
the Cybersecurity Review Office. On November 14, 2021, CAC published the
Administration Measures for Cyber Data Security (Draft for Public Comments), or
the "Cyber Data Security Measure (Draft)", which requires cyberspace operators
with personal information of more than 1 million users who want to list abroad
to file a cybersecurity review with the Office of Cybersecurity Review. On
December 24, 2021, the CSRC, together with other relevant government authorities
in China issued the Provisions of the State Council on the Administration of
Overseas Securities Offering and Listing by Domestic Companies (Draft for
Comments), and the Measures for the Filing of Overseas Securities Offering and
Listing by Domestic Companies (Draft for Comments) ("Draft Overseas Listing
Regulations"). On April 2, 2022, the CSRC released the Revised Provisions on
Strengthening Confidentiality and Archives Administration of Overseas Securities
Offering and Listing by Domestic Companies (Draft for Comments), which provides
that PRC issuers listing their securities on foreign stock exchanges are
required to strictly comply with the relevant requirements and procedures on
confidentiality and archives. In the event that the above proposed provisions
and rules are enacted, the relevant filing procedures of the CSRC and other
governmental authorities may be required in connection with any offering of our
securities. As of the date of this report, the new laws and guidelines that
became effective have not impacted the Company's ability to conduct its
business, accept foreign investments, or list on a U.S. or other foreign stock
exchange; however, new rules and regulations could be adopted and there are
uncertainties in the interpretation and enforcement of existing laws and
guidelines, which could materially and adversely impact our business and
financial outlook and may impact our ability to accept foreign investments or
continue to list on a U.S. or other foreign stock exchange. Our VIE and certain
subsidiaries of the Company are incorporated and operating in mainland China and
they have received all required permissions from Chinese authorities to operate
their current business in China, including Business licenses, Bank Account Open
Permits and Value Added Telecom Business License.



Chain Cloud Mall is a unique real-name based blockchain e-commerce shopping
platform that integrates blockchain, internet technology. The CCM shared
shopping mall platform is designed to be a block-chain based shopping mall for
merchants and goods, not the exchange of digital currencies, and it currently
only accepts payment from credit cards, Alipay and WeChat. Currently, Chain
Cloud Mall adopts an "Enterprise Communication as A Service" or eCAAS platform
which is a part of 3.15 China Responsible Brand Program run by the
Anti-Counterfeiting Committee of China Foundation of Consumer Protection (the
"Anti-Counterfeiting Committee"). Anti-Counterfeiting Committee reviews and
accepts the companies to join its 3.15 China Responsible Brand Program. After
acceptance, these companies are authorized to use anti-counterfeiting labels on
their products which have authenticated joint signatures of these companies and
Anti-Counterfeiting Committee that are recorded on the blockchain quality and
safety traceability system controlled by the Anti-Counterfeiting Committee. The
companies will sell such products on our eCAAS platform. The companies can also
use sales agents to sell their products on our eCAAS platform and parties can
negotiate the commission percentages for the products sold. Any new sales agent
must be recommended by existing agents and pay a one-time fee to the eCAAS
platform to be admitted as the authorized agent to provide sales agent services
on the platform.



                                       31





The Company started its trial operation of NONOGIRL, a cross-border e-commerce
platform, in March 2020 and formally launched it in July 2020. The cross-border
e-commerce platform aimed to build a new s2b2c (supplier to business and
consumer) outsourcing sales platform dominated by social media influencers. It
was aimed at the growing female consumer market, with the ability to broadcast,
short video, and all forms communication through the platform. It could also
create a sales oriented sharing ecosystem with other major social media used by
customers. The Company's promotion strategy previously mainly relied on the
training of members and distributors through meetings and conferences. Due to
the outbreak of COVID-19, the Chinese government put a restriction on large
gatherings. These restrictions made the promotion strategy for our online
e-commerce platforms difficult to be implemented and the Company has experienced
difficulties to subscribe new members for its online e-commerce platforms. Due
to the lack of new subscribers, in June 2021, the Company suspended its
cross-border e-commerce platform (NONOGIRL). Also, since the second quarter of
2021, the Company has transformed its member-based business model of Chain Cloud
Mall to a sale agent based eCAAS platform and began to provide supply chain
financing services and trading of coal for coal mines and power generation
plants as well as aluminum ingots.



The Company currently has ten direct wholly-owned subsidiaries: DigiPay FinTech
Limited ("DigiPay"), a company incorporated under the laws of the British Virgin
Islands, Future FinTech (Hong Kong) Limited, a company incorporated under the
laws of Hong Kong, GlobalKey Shared Mall Limited, a company incorporated under
the laws of Cayman Islands ("GlobalKey Shared Mall"), Tianjin Future Private
Equity Fund Management Partnership, a Limited Partnership under the laws of
China, FTFT UK Limited, a company incorporated under the laws of United Kingdom,
Future Fintech Digital Capital Management, LLC, a company incorporated under the
laws of Connecticut, Future Fintech Digital Number One GP, LLC, a company
incorporated under the laws of Connecticut, Future FinTech Labs Inc., a company
incorporated under the laws of New York and FTFT SuperComputing Inc. a company
incorporated under the laws of Ohio and FTFT Paraguay S.A., a company
incorporated under the law of Republic of Paraguay.



CCM Shopping Mall



Due to the lack of new member subscriptions caused by restrictions on our
promotion strategy for the control of spread of COVID-19, we have transformed
the CCM shopping mall from a member based platform to a sale agent based eCAAS
platform since the second quarter of 2021. The eCAAS platform is entrusted by
the Anti-Counterfeiting Committee to run its Responsible Brand Program.



Anti-Counterfeiting Committee reviews and accepts the companies to join its
Responsible Brand Program. After acceptance, these companies are authorized to
use 315 anti-counterfeiting labels on their products and sell them on our eCAAS
platform. The companies can also use sales agents to sell their products on our
eCAAS platform and parties can negotiate the commission percentages for the
products sold. Any new sales agent must be recommended by existing agents and
pay a one-time fee to the eCAAS platform to be admitted as the authorized agent
to provide sales agent services on the platform.

Coal and Aluminum Ingots Supply Chain Financing Service and Trading

Since the second quarter of 2021, we started coal supply chain financing and trading operations. Since the third quarter of 2021, we started supply chain financing services and trading business for aluminum ingots.




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



Through our supply chain service ability and customer resources, we can tap into
low-risk assets, flexibly carry out financial services for the actual financial
needs of certain industries, and reduce the overall risk of the business by
using the control of business flow, goods logistics and capital flow in the
process of commodity circulation.



We focus on bulk coal and aluminum ingots and take large state-owned or listed
companies as the core service targets; We use our own funds as the operation
basis, actively use a variety of channels and products of financing, such as
banks, commercial factoring companies, accounts receivable, asset-backed
securities, and other innovative financing methods to obtain sufficient funds.



We sign purchase and sale agreements with suppliers and buyers. The suppliers
are responsible for the supply and transportation of coal to the end users'
designated freight yard or transfer the title of aluminum ingots to us in
certain warehouses. We select the customers and suppliers that have good credit
and reputation.



                                       32





Asset Management Service



NTAM engages assets management and advisory services. NTAM's main revenue is
generated from providing professional advices 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. Assets of
NTAM's clients are held in banks, where clients gave the banks their
authorization allowing NTAM to place trading instructions on behalf of the
clients in order to manage the clients' assets.



NTAM mainly engages in following asset management services for its clients:



(1) Equity Investment



NTAM manages clients' investment portfolio in stocks of the companies listed on
the international markets with strong liquidity. At the same time, it selects
companies that have unique or differentiated businesses, realizing above average
profit growth.



(2) Debt investment



When NTAM manages clients' investment portfolio in bonds that are denominated in
major international currencies such as US dollar, euro and sterling, the issuer
of debts shall have good credit rating and asset liability ratio. Through active
management, NTAM focus on bonds with higher yield to maturity among bonds with
the same maturity and credit rating.

(3) Investment in precious metals and currencies




NTAM also manages clients' investment portfolio in major international
currencies and precious metals, including US dollar, euro, British pound,
Japanese yen, Australian dollar and offshore Chinese yuan. Precious metals
include gold, platinum and silver. With research on the fundamentals of market
supply and demand to predict the trend of commodity prices, NTAM endeavors to
improve the rate of return for clients through dual currency investment, options
and structured products.



(4) Derivative Investment

NTAM also manages the customers’ investment portfolio in financial derivatives in various asset classes, such as options and structured products.

(5) External Asset Management Services (EAM)

This business takes customer demand as its service purpose, collaborates with several private banks that offer asset custody services, and innovatively introduces the function of investment banking to provide exclusive private solutions for our customers.




NTAM's main revenue is generated from providing professional advices to clients
and management fees for managing the investment of the clients. As of September
30, 2022, NTAM has approximately US$195 million assets under its management.

Recent developments related to the COVID-19 outbreak

In December 2019, a novel strain of coronavirus was reported and has spread
throughout China and other parts of the world. On March 11, 2020, the World
Health Organization characterized the outbreak as a "pandemic". In early 2020,
Chinese government took emergency measures to combat the spread of the virus,
including quarantines, travel restrictions, and the temporary closure of office
buildings and facilities in China.  In response to the evolving dynamics related
to the COVID-19 outbreak, the Company is following the guidelines of local
authorities as it prioritizes the health and safety of its employees,
contractors, suppliers and business partners. Our offices in China were closed
and the employees worked from home at the end of January 2020 until late March
2020. The quarantines, travel restrictions, and the temporary closure of office
buildings have materially negatively impacted our business. Our suppliers were
negatively affected, and could continue to be negatively affected in their
ability to supply and ship products to our customers in case of any resurgence
of COVID-19. Our customers that have been negatively impacted by the outbreak of
COVID-19 may reduce their budgets to purchase products and services from us,
which may materially adversely impact our revenue. The business operations of
the third parties' stores on our e-commerce platform have been and continue to
be negatively impacted by the outbreak, which in turn adversely affects the
business of our platform as a whole as well as our financial condition and
operating results. The outbreak has had and continues to have disruption to our
supply chain, logistics providers, customers or our marketing activities with
the new variants of COVID-19, which could materially adversely impact our
business and results of operations, especially to our supply chain financing and
trading business during the first quarter of 2022. Although China has already
begun to recover from the outbreak of COVID-19, there are still outbreak in
various cities and provinces due to new variants, including the recent outbreak
of Omicron variant in Xi'an city, Hong Kong, Shanghai and Beijing in 2022, which
have resulted quarantines, travel restrictions, and temporary closure of office
buildings and facilities in these cities. The Company's promotion strategy of
CCM Shopping Mall previously mainly relied on the training of members and
distributors through meetings and conferences. Chinese government still puts a
restriction on large gatherings. These restrictions made the promotion strategy
for our online e-commerce platforms difficult to implement and the Company has
experienced difficulties to subscribe new members for its online e-commerce
platforms. Due to the lack of new subscribers, in June 2021, the Company
suspended its cross-border e-commerce platform NONOGIRL. Also, since the second
quarter of 2021, the Company has transformed its member-based Chain Cloud Mall
to a sale agent based eCAAS platform and began to provide supply chain financing
services.



                                       33





The global economy has also been materially negatively affected by the COVID-19
and there is continued severe uncertainty about the duration and intensity of
its impacts. The Chinese and global growth forecast is extremely uncertain,
which would seriously affect our business.



While the potential economic impact brought by, and the duration of COVID-19 and
its new variants may be difficult to assess or predict, a widespread pandemic
could result in significant disruption of global financial markets, reducing our
ability to access capital, which could negatively affect our liquidity. In
addition, a recession or market correction resulting from the spread of COVID-19
and its new variants could materially negatively affect our business and the
value of our common stock.

Further, as we do not have access to a revolving credit facility, there can be
no assurance that we would be able to secure commercial debt financing in the
future in the event that we require additional capital. We currently believe
that our financial resources will be adequate to see us through the outbreak.
However, in the event that we do need to raise capital in the future,
outbreak-related instability in the securities markets could adversely affect
our ability to raise additional capital.



Consequently, our results of operations have been materially and adversely
affected by COVID-19 pandemic. Any potential further impact to our results will
depend on, to a large extent, future developments and new information that may
emerge regarding the duration and severity of the COVID-19, new variants of
COVID-19, the efficacy and distribution of COVID-19 vaccines and the actions
taken by government authorities and other entities to contain the COVID-19 or
treat its impact, almost all of which are beyond our control.



Results of Operations

Comparison of three months ended 30 September 2022 and 2021:



Revenue

The table below shows our consolidated revenues for the three months ended 30 September 2022 and 2021, respectively:



                                                Three months ended
                                                   September 30,                       Change
                                               2022             2021            Amount            %
Coal and Aluminum Ingots Supply Chain
Financing/Trading                             7,839,635        9,643,977       (1,804,342 )      (18.71 )%
Asset management service                      4,118,065        2,101,050

    2,017,015         96.00 %
Others                                            1,319                -            1,319             -
Total                                      $ 11,959,019       11,745,027          213,992          1.82 %




Revenues from coal and Aluminum Ingots Supply Chain Financing/Trading business
decreased from $9.64 million for the three months ended September 30, 2021 to
$7.84 million for the three months ended September 30, 2022. The COVID-19
outbreak in Xi'an and other cities in China where we had our supply chain
services and related control measures by local government has had negative
impact on the coal and aluminum ingot business and resulted the decrease in
revenue in the third quarter 2022 comparing to the same period of 2021.



Revenue from asset management service increased from $2.10 million for the three
months ended September 30, 2021 to $4.12 million for the three months ended
September 30, 2022. We acquired this business on August 6, 2021 and only
consolidated partial of its revenues for the third quarter 2021, comparing to
the full third quarter for 2022. If only comparing revenues from August and
September 2022 to the same period of 2021, the revenue slightly increased in
2022 comparing to such two months in 2021 because NTAM has more assets under its
management in 2022 comparing to the same period of 2021.



Cost of revenues



                                                Three months ended
                                                   September 30,                       Change
                                               2022             2021            Amount            %
Coal and Aluminum Ingots Supply Chain
Financing/Trading                             7,703,074        9,347,804       (1,644,730 )      (17.59 )%
Asset management service                      2,762,819        1,414,139

    1,348,680         95.37 %
Others                                                                                  -             -
Total                                      $ 10,465,893       10,761,943         (296,050 )       (2.75 )%




                                       34





Cost of revenues for the Coal and Aluminum Ingots Supply Chain Financing/Trading
was $7.70 million and $9.35 million for the three months ended September 30,
2022 and 2021, respectively, representing an decrease of 17.59%. The decrease in
cost of revenues was in line with a decrease in revenue.



Cost of revenues for the asset management service increased from $1.41 for the
three months ended September 30, 2021 to $2.76 million for the three months
ended September 30, 2022. We acquired this business on August 6, 2021 and only
consolidated partial of its cost of revenues for the third quarter 2021,
comparing to the full third quarter for 2022.



Gross Margin



The following table presents the consolidated gross profit of each of our main
products and services and the consolidated gross profit margin, which is gross
profit as a percentage of the related revenues, for the three months ended
September 30, 2022 and 2021, respectively:



                                                     Three months ended September 30,
                                                     2022                         2021
                                              Gross          Gross        Gross          Gross
                                             profit         margin        profit        margin
Coal Supply and Aluminum Ingots Chain
Financing/Trading                              136,561          1.74 %     296,173          3.07 %
Asset management service                     1,355,246         32.91 %     686,911         32.69 %
Others                                           1,319           100 %           -             -
Total                                      $ 1,493,126         12.49 %   $ 983,084          8.37 %




Overall gross margin as a percentage of revenue was 12.49% for the three months
ended September 30, 2022, an increase of 4.12% compared to 8.37% for the same
period of last fiscal year, mainly due to more revenues from the asset
management service which has a higher gross margin. Coal Supply and Aluminum
Ingots Chain Financing/Trading gross margin was decreased 1.33% from 3.07% in
three months ended September 30, 2021 to 1.74% in same period of 2022, mainly
due to the purchase prices of coal and aluminum ingot in three months ended
September 30, 2022 increased comparing to the same period of 2021.



Operating Expenses



The following table presents our consolidated operating expenses and operating
expenses as a percentage of revenue for the three months ended September 30,
2022 and 2021, respectively: (in thousands)



                                          September 30,                 September 30,
                                              2022                          2021
                                    Amount      % of revenue      Amount      % of revenue
General and administrative          $ 3,559             29.76 %   $ 2,243             19.10 %

Research and Development expenses       791              6.61 %         -

              -
Stock compensation expense            1,280             10.70 %     5,488             46.73 %
Selling expenses                        274              2.29 %       112              0.96 %
Impairment Loss                         229              1.91 %         -                 -
Total operating expenses            $ 6,132             51.28 %   $ 7,843             66.78 %

General and administrative expenses increased by $1.32 million, or 58.65%, from
$2.24 million to $3.56 million for the three months ended September 30, 2022,
compared to the same period of last fiscal year. The increase in general and
administrative expenses was mainly due to increased professional service fees
for acquisition projects and certain training and consulting fees for the
acquired and newly established companies during the three months ended September
30, 2022.

Stock compensation expense was $1.28 million during the three months ended
September 30, 2022, as the Compensation Committee of the Board of Directors (the
"Board") of the Company granted certain shares of common stock of the Company to
certain officers and employees in July 2022. Stock compensation expense was
decreased 76.68% from $5.49 million in three months ended September 30, 2021 to
$1.28million in same period of 2022, mainly due to stock price was lower than
2021, mainly due to the stock price on the grant date is much lower this year
comparing to price on grant date of 2021.



The Company recorded $0.79 million of research and development expenses for the
nine months ended September 30, 2022, which the Company did not have any during
the same period 2021. Research and development expenses include salaries,
contracted services, as well as the related expenses of our research and product
development team. The research and development expenditures also include
research, develop, design, and enhance our assets and wealth management options
and services to our clients, which is related to the business we acquired in the
third quarter 2021.

Selling expenses increased by 0.16 million dollars during the past three months
30 September 2022 compared to the same period in 2021, the increase in sales costs was mainly due to increased wages and advertising fees.

The Company recorded $0.23 million of impairment loss in three months ended
September 30, 2022 relating to short term investment which mainly due to Future
Private Equity Fund Management (Hainan) Co., Ltd. invested $1.83 million
(RMB13,000,000) to entrust Shanghai Yuli Enterprise Management Consulting Firm
to invest in various types of investment portfolios. The impairment loss
relating to short term investment is due to that overall economic environment
has worsened in China with Covid-19 outbreak and related lockdown in various
cities in China in 2022, Ukraine war, inflation, looming recession worldwide.
According to the market value, the Company's balance of the short term
investment was$0.97 million on September 30, 2022.



Other Income, Net

Other income, net increased by 0.98 million dollars to 1.21 million dollars for the three months ended 30 September 2022 from 0.23 million dollars in the same period last financial year, primarily due to a large change in currency gains.



Income Tax



Tax provision increased by $0.20 million for the three months ended September
30, 2022. We did not have tax provision for the same period of the last fiscal
year.



Non-controlling Interests



Shaanxi Chunlv Ecological Agriculture Co., Ltd. ("Shaanxi Chunlv") holds 20.0%
interest in Chain Cloud Mall Logistics Center (Shaanxi) Co., Limited, which was
dissolved and deregistered on June 27, 2022. Nature Worldwide Resources Ltd.
holds 40% interest in DCON DigiPay Limited ("DCON Digipay"). Each of Bin Wu and
Lixiong Huang holds 25% and 20% interest in FTFT Capital Investments L.L.C.,
respectively.

Loss from continuing operations




Loss from continuing operations decreased by $3.00 million from $6.63 million
for the three months ended September 30, 2021 to $3.63 million for the same
period of 2022 mainly due to the increase in gross profit margin and decrease in
operating expenses, as discussed above.

Comparison of nine months ended 30 September 2022 and 2021



Revenue

The table below shows our consolidated revenues for the nine months ended
30 September 2022 and 2021, respectively:



                                                 Nine months ended
                                                   September 30,                       Change
                                               2022             2021            Amount            %

CCM Shopping Mall Membership                          -               85              (85 )        (100 )%
Coal and Aluminum Ingots Supply Chain
Financing/Trading                            11,494,617       10,402,759        1,091,858         10.50 %
Asset management service                     11,270,874        2,101,050        9,169,824        436.44 %
Others                                           78,170                -           78,170             -
Total                                      $ 22,843,661$ 12,503,894$ 10,339,767         82.69 %




CCM Shopping Mall Membership fees decreased from $85 for the nine months ended
September 30, 2021 to $0 for the nine months ended September 30, 2022 because
there was no new membership enrollment and the Company has transformed its
business model of CCM Shopping Mall from a member-based platform to a sales
agent based eCAAS platform since the second quarter of 2021, which has not
generated any meaningful revenue. Due to COVID-19 related restriction on large
gathering for meetings and conferences which primarily used by us before the
pandemic for marketing and business development of new members for the platform,
we were unable to attract new member enrollment and have had difficulties to
generate revenues for the platform.



Revenues for coal and Aluminum Ingots Supply Chain Financing and Trading
business increased from $10.40 million for the nine months ended September 30,
2021 to $11.49 million for the nine months ended September 30, 2022. We started
the supply chain financing and trading business in the second quarter 2021,
therefore we had more months to generate revenues for such business in
2022comparing to the same period of 2021. The COVID-19 outbreak in Xi'an and
other cities in China where we had our supply chain business and the control
measures by local government have caused material negative impact on our coal
and aluminum ingot supply chain business revenues in the first quarter of 2022.

Revenues from asset management service increased from $2.10 million for the nine
months ended September 30, 2021 to $11.27 million for the nine months ended
September 30, 2022. We acquired this business on August 6, 2021 and only
consolidated partial of its revenues for the nine months ended September 30,
2021, comparing to the full third quarters for 2022. If only comparing revenues
from August and September 2022 to the same period of 2021, the revenue slightly
increased in 2022 comparing to such two months in 2021 because NTAM has more
assets under its management in 2022 comparing to the same period of 2021.



Other revenues increased from $0 for nine months ended September 30, 2021 to
$78,170 for the nine months ended September 30, 2022, which were mainly
increased NTAM's Consulting fee income during the nine months ended September
30, 2022, which we did not have for the same period of 2021.



                                       36





Cost of revenues



                                                 Nine months ended
                                                   September 30,                      Change
                                               2022             2021           Amount            %
CCM Shopping Mall Membership                          -                -               -             -
Coal and Aluminum Ingots Supply Chain
Financing/Trading                            11,297,800       10,650,371         647,429          6.08 %
Asset management service                      6,889,338        1,414,140

   5,475,198        387.18 %
Others                                                -                -               -             -
Total                                      $ 18,187,138       12,064,511       6,122,627         50.75 %




Cost of revenues for the Coal and Aluminum Ingots Supply Chain Financing/Trading
was $11.30 million and $10.65 million for the nine months ended September 30,
2022 and 2021, respectively, representing an increase of 6.08%. The increase in
cost of revenues was in line with an increase in revenue.



Cost of revenues for the asset management service increased from $1.41 million
for the nine months ended September 30, 2021 to $6.89 million for the nine
months ended September 30, 2022. We acquired this business on August 6, 2021 and
only consolidated partial of its cost of revenues for nine months ended 2021,
comparing to the full third quarters for 2022. If only comparing cost of
revenues from August and September 2022 to the same period of 2021, the cost of
revenue slightly increased in 2022 comparing to such two months in 2021 which is
in line with the slight increase in revenue.



Gross Margin



The following table presents the consolidated gross profit of each of our main
products and services and the consolidated gross profit margin, which is gross
profit as a percentage of the related revenues, for the nine months ended
September 30, 2022 and 2021, respectively:



                                               Nine months ended September 30,
                                               2022                        2021
                                         Gross         Gross        Gross         Gross
                                        profit        margin        profit       margin
CCM Shopping Mall Membership                    -           -             85           -
Coal Supply Chain Financing/Trading       196,817        1.71 %     (247,611 )     (2.38 )%
Asset management service                4,381,536       38.87 %      686,909       32.69 %
Others                                     78,170         100              -           -
Total                                 $ 4,656,523       20.38 %      439,383        3.51 %




Overall gross margin as a percentage of revenue was 20.38% for the nine months
ended September 30, 2022, an increase of 16.87% compared to 3.51% for the same
period of last fiscal year, mainly due to more revenues from the asset
management service which had a higher gross margin. The others were mainly
increase in NTAM consulting fee income during the nine months ended September
30, 2022, which we did not have for the same period of 2021.



Operating Expenses



The following table presents our consolidated operating expenses and operating
expenses as a percentage of revenue for the nine months ended September 30, 2022
and 2021, respectively: (in thousands)



                                       September 30, 2022           September 30, 2021
                                                      % of                         % of
                                      Amount        revenue        Amount        revenue

General and administrative 9,619 dollars 42.11% 4568 dollars 36.53% Research and development expenses 1,994 8.73%

-            -
Stock compensation expense                1,280         5.60 %         5,488        43.89 %
Selling expenses                            994         4.35 %           135         1.08 %
Impairment Loss                             926         4.05 %             -            -
Bad debt provision                            2         0.01 %           (15 )      (0.12 )%
Total operating expenses            $    14,815        64.85 %   $    10,176        81.38 %




                                       37

General and administrative expenses increased by $5.05 million, or 110.58%, from
$4.57 million to $9.62 million for the nine months ended September 30, 2022,
compared to the same period of last fiscal year. The increase in general and
administrative expenses was mainly due to increased professional service fees
for acquisition projects and certain training and consulting fees for the
acquired and newly established companies during the nine months ended September
30, 2022.



Stock compensation expense was $1.28 million during the nine months ended
September 30, 2022, as the Compensation Committee of the Board of Directors (the
"Board") of the Company granted certain shares of common stock of the Company to
certain officers and employees in July 2022. Stock compensation expense was
decreased 76.68% from $5.49 million in nine months ended September 30, 2021 to
$1.28million in same period of 2022, mainly due to stock price was lower than
2021, mainly due to the stock price on the grant date is much lower this year
comparing to price on grant date of 2021.



The Company recorded $1.99 million of research and development expenses for the
nine months ended September 30, 2022, which the Company did not have any during
the same period 2021. Research and development expenses include salaries,
contracted services, as well as the related expenses of our research and product
development team. The research and development expenditures also include
research, develop, design, and enhance our wealth management options and
services to our clients, which is related to the new business we acquired in
August 2021.

Selling expenses increased by 0.86 million dollars during the nine months that ended
30 September 2022The increase in selling costs was mainly due to increased wages and advertising fees.

The Company recorded $0.93 million of impairment loss in nine months ended
September 30, 2022 relating to short term investment which mainly due to Future
Private Equity Fund Management (Hainan) Co., Ltd. invested $1.83 million
(RMB13,000,000) to entrust Shanghai Yuli Enterprise Management Consulting Firm
to invest in various types of investment portfolios. The impairment loss
relating to the short term investment is due to that overall economic
environment has worsened in China with Covid-19 outbreak and related lockdown in
various cities in China in 2022, Ukraine war, inflation, looming recession
worldwide. According to the market value, the Company's balance of the short
term investment was $0.97 million on September 30, 2022.



Other Income, Net

Other income, net increased by 1.31 million dollars to 2.00 million dollars for they ended nine months 30 September 2022 from 0.69 million dollars in the same period last financial year, primarily due to a large change in currency gains.



Income Tax

Tax provision increased by 0.51 million dollars for they ended nine months 30 September 2022. We had no tax provision for the same period in the previous financial year.




Non-controlling Interests



Shaanxi Chunlv Ecological Agriculture Co., Ltd. ("Shaanxi Chunlv") holds 20.0%
interest in Chain Cloud Mall Logistics Center (Shaanxi) Co., Limited, which was
dissolved and deregistered on June 27, 2022. Nature Worldwide Resources Ltd.
holds 40% interest in DCON DigiPay Limited ("DCON Digipay"). Each of Bin Wu and
Lixiong Huang holds 25% and 20% interest in FTFT Capital Investments L.L.C.,
respectively.

Loss from continuing operations




Loss from continuing operations decreased by $0.38 million from $9.05 million
for the nine months ended September 30, 2021 to $8.67 million for the same
period of 2022 mainly due to increase in revenues and gross margin which was
partially offset by increases in cost of revenue and operating expenses, as
discussed above.

Gain on disposal of discontinued operations




Loss on disposal of discontinued operation was $154 for the nine months ended
September 30, 2022, which was related to the dissolution and deregistration of
Chain Cloud Mall Logistics Center (Shanxi) Co., Ltd. on June 27, 2022.



Loss per Share

Basic and diluted loss per share from continuing operations were $0.12 and $0.11
for the nine months ended September 30, 2022, respectively, as compared to a
loss of $0.14 and $0.14 for the same periods of 2021, respectively. Basic and
diluted income per share attributable to discontinued operations was nil for the
nine months ended September 30, 2022 respectively. Basic and diluted earnings
per share attributable to discontinued operations was $0.04 and $0.04 for the
nine months ended September 30, 2021 respectively.



                                       38

Liquidity and capital resources




As of September 30, 2022, we had cash and cash equivalents of $32.96 million, as
compared to $50.27 million as of December 31, 2021. The decrease in cash, cash
equivalents was mainly due the loss in operations and Company did not issue
shares of common stock to raise money for the nine months ended September 30,
2022 comparing to the same period of 2021.



Our working capital has mainly been generated from our business operations and
financing activities. Our working capital was $54.59 million, as of September
30, 2022, a decrease of $10.90 million from working capital of $65.49 million,
as of December 31, 2021, mainly due to the Company had loss in its operations
and did not raise any funds during the nine months ended September 30, 2022.



Net cash used in operating activities increased by $20.40 million to $0.59
million for the nine months ended September 30, 2022 from a cash outflow of
$19.81 million for the same period of the last fiscal year. The increase in net
cash used in operating activities was primarily due to a decrease in accounts
receivable, increase in advances from customers and share-based payments during
the nine months ended September 30, 2022.



Net cash used in investing activities increased by $7.73 million in the nine
months ended September 30, 2022, comparing the same period of 2021, mainly due
to additional loan to a third party.



Net cash provided by financing activities for the nine months ended September
30, 2022 was $0.25 million representing a decrease of $68.52 million, as
compared to cash provided by financing activities of $69.43 million during the
nine months ended September 30, 2021. The decrease in cash provided by financing
activities was mainly due to the Company had loss in operations and did not
raise any funds during the nine months ended September 30, 2022, comparing