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, 2022

☐ 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

(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 12, 2022
Common Stock, $0.001 par value per share		73,114,147

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	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
PART II. OTHER INFORMATION		39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults upon Senior Securities	40
Item 4.	Mine Safety Disclosure	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
SIGNATURES		41

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FUTURE FINTECH GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30 , 2022			December 31, 2021
				(Audited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	42,031,220		$	50,273,517
Short term Investment		1,263,550			2,191,294
Accounts receivable, net		1,380,169			9,101,816
Notes receivable		1,174,122			-
Advances to suppliers and other current assets		5,822,537			2,927,699
Loan receivables		11,586,500			6,000,000
Other receivables, net		3,173,546			1,965,159
Amount due from related parties		20,431			261,413
Assets related to discontinued operations		-			157
TOTAL CURRENT ASSETS	$	66,452,075		$	72,721,055

Property, plant and equipment, net	$	2,955,161		$	3,163,052
Right of use assets		15,665			113,163
Intangible assets		618,593			76,140
Goodwill		15,693,022			15,583,675
TOTAL NON-CURRENT ASSETS	$	19,282,441		$	18,936,030
TOTAL ASSETS	$	85,734,516		$	91,657,085

LIABILITIES

CURRENT LIABILITIES
Accounts payable	$	28,540		$	79
Accrued expenses and other payables		1,302,246			1,298,598
Advances from customers		1,647,979			2,893
Dividend payables		-			63,477
Lease liability-current		15,665			113,163
Amounts due to related parties		238,676			992,702
Deferred liabilities		3,740,260			3,740,260
Liabilities related to discontinued operations		-			1,019,496
TOTAL CURRENT LIABILITIES	$	6,973,366		$	7,230,668

NON-CURRENT LIABILITIES
Long term debt		178,800			188,215
Deferred liabilities	$	3,557,808		$	3,384,044
TOTAL NON-CURRENT LIABILITIES		3,736,608			3,572,259
TOTAL LIABILITIES	$	10,709,974		$	10,802,927
Commitments and contingencies (Note 24)
STOCKHOLDER’S EQUITY

Future FinTech Group, Inc, Stockholders’ equity
Common stock, $0.001 par value; 300,000,000 shares authorized; 70,067,147 shares and 70,067,147 shares issued and outstanding as of June 30, 2022 and December 31, 2021 respectively	$	70,067		$	70,067
Additional paid-in capital		221,416,496			220,523,246
Statutory reserve		61,382			61,382
Accumulated deficits		(143,245,468	)		(138,611,914	)
Accumulated other comprehensive loss		(2,285,669	)		(597,862	)
Total Future FinTech Group, Inc. stockholders’ equity		76,016,808			81,444,919
Non-controlling interests		(992,266	)		(590,761	)
Total stockholders’ equity		75,024,542			80,854,158
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	85,734,516		$	91,657,085

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,
	2022			2021*			2022			2021*
Revenue	$	7,418,277		$	1,346,924		$	10,884,642		$	1,354,423
Cost of revenue		6,042,857			1,295,659			7,721,245			1,302,568
Gross profit		1,375,420			51,265			3,163,397			51,855

Operating Expenses
General and administrative expenses		2,649,979			790,768			6,060,389			2,324,645
Research and dvelopment expenses		770,105			-			1,203,160			-
Selling expenses		349,209			10,090			719,678			23,035
Impairment Loss		448,611			-			697,123			-
(Recovery) Provision of doubtful debts		(29	)		(30	)		1,973			(15,254	)
Total operating expenses		4,217,875			800,828			8,682,323			2,332,426

Loss from operations		(2,842,455	)		(749,563	)		(5,518,926	)		(2,280,571	)

Other (expenses) income
Interest income		242,713			5,458			415,943			9,569
Interest expenses		(2,942	)		-			(6,018	)		(3,913	)
Other income (expenses), net		389,938			(532,300	)		385,837			457,208
Total other income (expenses), net		629,709			(526,842	)		795,762			462,864

Loss from Continuing Operations before Income Tax		(2,212,746	)		(1,276,405	)		(4,723,164	)		(1,817,707	)
Income tax provision		(123,788	)		-			(311,741	)		-
Loss from Continuing Operations		(2,336,534	)		(1,276,405	)		(5,034,905	)		(1,817,707	)

Discontinued Operations (Note 22)
(Loss) Gain on disposal of discontinued operations		(154	)		508,407			(154	)		156,493
Income from discontinued operations		-			364,520			-			460,427

NET LOSS		(2,336,688	)		(403,478	)		(5,035,059	)		(1,200,787	)
Less: Net Loss attributable to non-controlling interests		(226,296	)		-			(401,505	)		-
Net loss from continued operations attributable to Future Fintech Group, Inc.	$	(2,110,392	)	$	(403,478	)	$	(4,633,554	)	$	(1,200,787	)
Other comprehensive income (loss)
Loss from continued operations		(2,336,534	)		(1,276,405	)		(5,034,905	)		(1,817,707	)
Foreign currency translation – continued operations		(1,505,190	)		18,220			(1,687,807	)		30,908
Comprehensive loss - continued operation		(3,841,724	)		(1,258,185	)		(6,722,712	)		(1,786,799	)
Net income (loss) from discontinued operations		(154	)		872,927			(154	)		616,920
Foreign currency translation – discontinued operations		-			(62,507	)		-			1,049
Comprehensive income (loss) - discontinued operation		(154	)		810,420			(154	)		617,969
Comprehensive Loss		(3,841,878	)		(447,765	)		(6,722,866	)		(1,168,830	)
Less: Net loss attributable to non-controlling interests		(226,296	)		-			(401,505	)		-
COMPREHENSIVE LOSS ATTRIBUTABLE TO FUTURE FINTECH GROUP INC. STOCKHOLDERS		(3,615,582	)		(447,765	)		(6,321,361	)		(1,168,830	)

Earnings (Loss) per share:
Basic loss per share from continued operation	$	(0.03	)	$	(0.02	)	$	(0.07	)	$	(0.03	)
Basic earnings per share from discontinued operation		-			0.01			-			0.01
	$	(0.03	)		(0.01	)	$	(0.07	)	$	(0.02	)

Diluted Earnings (Loss) per share:
Diluted loss per share from continued operation	$	(0.03	)		(0.02	)	$	(0.07	)	$	(0.03	)
Diluted earnings per share from discontinued operation		-			0.01			-			0.01
	$	(0.03	)		(0.01	)	$	(0.07	)	$	(0.02	)
Weighted average number of shares outstanding
Basic		70,067,147			53,798,156			70,067,147			54,324,447
Diluted		70,624,938			54,355,947			70,624,938			54,882,238

Reclassification- certain reclassifications have been made to the financial statements for the period ended June 30, 2021 to conform to the presentation for the period ended June 30, 2022, with no effect on previously reported net income (loss).

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, 2021

	Common Stock				Additional paid-in		Accumulated			Accumulative other comprehensive			Non- controlling
	Shares		Amount		capital		deficits			loss			interests			Total
Balance at March 31, 2021		59,583,486	$	59,583	$	169,891,428	$	(125,181,610	)	$	(321,769	)	$	(47,459	)	$	44,400,173
Issuance of common stocks - cash		5,737,706		5,738		32,374,754		-			-			-			32,380,492
Net loss from continued operations		-		-		-		(1,276,405	)		-			-			(1,276,405	)
Net income from discontinued operations		-		-		-		364,520			-			-			364,520
Foreign currency translation adjustment		-		-		-		-			18,220			-			18,220
Disposal of discontinued operation		-		-		-		508,407			(62,508	)		-			445,899
Balance at June 30, 2021		65,321,192	$	65,321	$	202,266,182	$	(125,585,088	)	$	(366,057	)	$	(47,459	)	$	76,332,899

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		70,067,147	$	70,067	$	221,416,496		61,382	$	(141,135,076	)	$	(780,479	)	$	(765,970	)	$	78,866,420
Net loss		-		-		-		-		(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		70,067,147	$	70,067	$	221,416,496		61,382	$	(143,245,468	)	$	(2,285,669	)	$	(992,266	)	$	75,024,542

Six Months ended June 30, 2021

	Common Stock				Additional paid-in		Accumulated			Accumulative other comprehensive			Non- controlling
	Shares		Amount		capital		deficits			loss			interests			Total
Balance at December 31, 2020		50,053,606	$	50,053	$	133,510,862	$	(124,384,301	)	$	(398,014	)	$	(47,459	)	$	8,731,141
Issuance of common stocks - cash		15,267,586		15,268		67,862,070		-			-			-			67,877,338
Net loss from continued operations		-		-		-		(1,817,707	)		-			-			(1,817,707	)
Net income from discontinued operations		-		-		-		460,427			-			-			460,427
Share-based payments-service		-		-		893,250		-			-			-			893,250
Foreign currency translation adjustment		-		-		-		-			30,908			-			30,908
Disposal of discontinued operation		-		-		-		156,493			1,049			-			157,542
Balance at June 30, 2021		65,321,192	$	65,321	$	202,266,182	$	(125,585,088	)	$	(366,057	)	$	(47,459	)	$	76,332,899

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		70,067,147	$	70,067	$	220,523,246		61,382	$	(138,611,914	)	$	(597,862	)	$	(590,761	)	$	80,854,158
Net loss		-		-		-		-		(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		70,067,147	$	70,067	$	221,416,496		61,382	$	(143,245,468	)	$	(2,285,669	)	$	(992,266	)	$	75,024,542

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,
	2022			2021

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,035,059	)	$	(1,200,787	)
Net (loss) income from discontinued operation		(154	)		616,920
Net loss from continuing operations		(5,034,905	)		(1,817,707	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation		90,182			1,411
Amortization		28,233			2,500
Provision (Recovery) of doubtful debts		1,973			(15,254	)
Share-based payments		893,250			893,250
Impairment of short term investment		697,123			-
Interest expenses related to convertible note		-			(96,691	)
Changes in operating assets and liabilities
Accounts receivable		2,519,226			(851,560	)
Notes receivable		(1,174,122	)		-
Other receivable		(1,198,592	)		(182,587	)
Advances to suppliers and other current assets		(2,894,838	)		12,226
Accounts payable		28,461			818,903
Proceeds from amounts due from related parties, net		122,329			127,438
Repayment of amounts due to related parties, net		(242,828	)		(1,180,054	)
Accrued expenses		(569,006	)		(789,516	)
Taxes payable		(41,133	)		-
Advances from customers		1,645,086			209
Net Cash Used in Operating Activities – Continued Operations		(5,129,561	)		(3,077,432	)
Net Cash Used in Operating Activities – Discontinued Operations		3			(1,247,917	)

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(52,019	)		(7,308	)
Payment for loan receivable		(11,363,000	)		-
Repayment of loan receivable		6,000,000			-
Purchase of intangible assets		(570,351	)		-
Net Cash Used in Investing Activities from Continued Operations		(5,985,370	)		(7,308	)
Net Cash Used in Investing Activities from Discontinuing Operations		-			-

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock, net of issuance costs		-			67,877,338
Repayment of convertible payable		-			(1,163,146	)
Payment of dividends to the non-controlling interest		(63,477	)		-
Proceeds from loan payable		4,199,879			170,429
Net cash provided by financing activities		4,136,402			66,884,621

Effect of change in exchange rate		(1,263,771	)		39,062

NET INCREASE IN CASH AND CASH EQUIVALENTS		(8,242,297	)		62,591,026
Cash and cash equivalents, beginning of period		50,273,517			9,425,312
Cash and cash equivalents, end of period		42,031,220			72,016,338
Less: Cash and cash equivalents from the discontinued operations, end of period		-			(85,056	)
Cash and cash equivalents, from the continuing operations, end of period	$	42,031,220		$	71,931,282

SUPPLEMENTARY DISCLOSURE OF SIGNIFICANT NON-CASH TRANSACTION
Deferred liabilities	$	173,764		$	-
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid		41,133			-
Interest paid		6,018			3,913

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 an online shopping platform, Chain Cloud Mall, which is based on blockchain technology, supply chain financing services and trading, assets management, 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. 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 a real-name blockchain e-commerce platform that integrates blockchain and internet technology, supply chain financing services and trading, assets management and cryptocurrency market data service.

On May 11, 2021, the Company established Future Supply (Chengdu) Co., Ltd. Its business is coal and aluminum ingots supply chain financing services and trading.

On May 12, 2021, the Company established Future Big Data (Chengdu) Co., Ltd. in Chengdu, China. Its business includes big data technology and industrial internet data services.

On June 8, 2021, the Company established Tianjin Future Private Equity Fund Management Partnership (Limited Partnership) in Tianjin, China. Its main business is external equity investment.

June 14, 2021, the Company established Future FinTech Labs Inc. in New York to serve as its global R&D and technical support center.

On June 24, 2021, the Company established FTFT Capital Investments L.L.C. in Dubai, United Arab Emirates. Its business is to provide financial technology and services, including a cryptocurrency market data platform that provides investors with real-time cryptocurrency market data and trading information.

On July 2, 2021, the Company established Future Fintech Digital Number One US, LP. which is an investment fund.

On July 6, 2021, the Company established Future Fintech Digital Capital Management, LLC, in the State of Connecticut, which provides investment advisory services and investment fund management.

On July 6, 2021, the Company established Future Fintech Digital Number One GP, LLC., which is an off-shore investment fund.

On August 2, 2021, the Company incorporated FTFT UK Limited in United Kingdom which serve as its operating base to develop fintech business in Europe.

On August 6, 2021, the Company acquired 90% equity interest of Nice Talent Asset Management Limited which mainly provides assets and wealth management services.

On August 11, 2021, the Company established Future Private Equity Fund Management (Hainan) Co., Ltd. Its business is investment fund management.

On November 22, 2021, the Company established FTFT Digital Number One, Ltd., an investment fund.

On November 22, 2021, the Company established Future Fintech Digital Number One Offshore, LLC., an investment fund.

On December 15, 2021, the Company established FTFT Supercomputing Inc. Its business is bitcoin and other cryptocurrency mining and related services.

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 plans to develop bitcoin and other cryptocurrency mining and related services in Paraguay. The Company has changed its name from KAZAN S.A to FTFT Paraguay S.A. on July 28, 2022.

The Company’s business and operations are principally conducted by its subsidiaries and its blockchain based e-commerce platform business is conducted through its Variable Interest Entity (“VIE”) - Cloud Chain E-Commerce (Tianjin) Co., Ltd., formerly known as Chain Cloud Mall E-Commerce (Tianjin) Co., Ltd. (“E-Commerce Tianjin”) in the PRC.

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, 2022 and the results of operations and cash flows for the periods ended June 30, 2022 and 2021. 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 three to six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2022. The balance sheet of December 31, 2021 has been derived from the audited financial statements at that date.

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

As a result of our direct ownership in our wholly foreign-owned enterprise (“WFOE”) and the contractual arrangements with our VIE, we are regarded as the primary beneficiary of our VIE, and we treat it and its subsidiaries as our consolidated affiliated entities under U.S. GAAP. We have consolidated the financial results of our 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, 2021 as included in our Annual Report on Form 10-K.

Discontinued Operations

On March 18, 2021, Chain Future Digital Tech (Beijing) Co., Ltd. was deregistered.

On April 9, 2021, FT Commercial Management (Beijing) Co., Ltd. was dissolved and deregistered.

On August 2, 2021, the Company sold Guangchengji (Guangdong) Industrial Co., Ltd. to an unrelated third party.

On September 2, 2021, Future Supply Chain Co., Ltd. discontinued its operations, and on November 4, 2021, it was transferred to Shaanxi Fu Chen Venture Capital Management Co. Ltd.

On June 27, 2022, Chain Cloud Mall Logistics Center (Shanxi) Co., Ltd. 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 CCM Shopping Mall Membership, asset management service, coal and aluminum ingots supply chain financing service 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 amounted $5.03 million and had negative operating cash flows amounted $5.13 million as of June 30, 2022 and may continue to incur operating losses and generate negative cash flows as the Company implements its future business plan. 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. All the expenses are related to the planning and implementation phases of development, and costs that are associated with maintenance of the existing websites or software for internal use, apps for users.

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 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 are classified within level 1 of the fair value hierarchy because they are value using quoted market price.

Earnings (Loss) 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.

Three Months ended June 30, 2022:

	Income			Share		Pre-share amount

Loss from continuing operations	$	(2,110,238	)		70,067,147	$	(0.03	)
Loss from discontinuing operations	$	(154	)		70,067,147	$	-

Basic EPS:
Loss available to common stockholders from continuing operations	$	(2,110,238	)		70,067,147	$	(0.03	)
Loss available to common stockholders from discontinuing operations	$	(154	)		70,067,147	$	-

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	)		70,624,938	$	(0.03	)
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	(154	)		70,624,938	$	-

Three Months ended June 30, 2021:

	Income			Share		Pre-share amount

Loss from continuing operations	$	(1,276,405	)		53,798,156	$	(0.02	)
Income from discontinuing operations	$	872,927			53,798,156	$	0.01

Basic EPS:
Loss available to common stockholders from continuing operations	$	(1,276,405	)		53,798,156	$	(0.02	)
Income available to common stockholders from discontinuing operations	$	872,927			53,798,156	$	0.01

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	$	(1,276,405	)		54,355,947	$	(0.02	)
Diluted Earnings per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	872,927			54,355,947	$	0.01

For the six months ended June 30, 2022:

	Income			Share		Pre-share amount

Loss from continuing operations	$	(5,034,905	)		70,067,147	$	(0.07	)
Loss from discontinuing operations	$	(154	)			$	-

Basic EPS:
Loss available to common stockholders from continuing operations	$	(5,034,905	)		70,067,147	$	(0.07	)
Loss available to common stockholders from discontinuing operations	$	(154	)		70,067,147	$	-

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	)		70,624,938	$	(0.07	)
Diluted loss per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	(154	)		70,624,938	$	-

For the six months ended June 30, 2021:

	Income			Share		Pre-share amount

Loss from continuing operations	$	(1,817,707	)		54,324,447	$	(0.03	)
Income from discontinuing operations	$	616,920			54,324,447	$	0.01

Basic EPS:
Loss available to common stockholders from continuing operations	$	(1,817,707	)		54,324,447	$	(0.03	)
Income available to common stockholders from discontinuing operations	$	616,920			54,324,447	$	0.01

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	$	(1,817,707	)		54,882,238	$	(0.03	)
Diluted Earnings per share is calculated by taking net loss, divided by the diluted weighted average common shares outstanding.	$	616,920			54,882,238	$	0.01

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, and are consequently exposed to risk of loss. The Company believes the probability of a bank failure, causing loss to the Company, is remote.

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.

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 in June 2022. Upon such credit terms, bad debt expense was $1,973 and $(15,254) during the six months ended June 30, 2022 and 2021, respectively. There is no accounts receivable balance overdue for over 90 days as of June 30, 2022 and December 31, 2021.

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.

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:

Online sales and Membership fee:

The Company recognizes the sale of goods 15 days after the products are shipped (after the 15 days return policy). The revenue from the membership fee is amortized over the lifetime of the membership, which is one year. For the merchandise gift package, revenue is recognized when the receipt of the gift package is confirmed by the members. Other revenues include revenues earned on net basis from sales of certain products on our platform. During the second quarter of 2021, the Company has transformed its member based business model to sales agent based business model for its online shopping mall.

Sales of coals and aluminum ingots

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.

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		20 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 non-cash 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 years, 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 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 6.71 and 6.38 at the balance sheet dates of June 30, 2022 and December 31, 2021, 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 6.48 and 6.47 for six months ended June 30, 2022 and 2021, respectively.

The exchange rate we used to convert HKD to USD was 7.85 at the balance sheet dates of June 30, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rate we used to convert HKD to USD was 7.83 for six months ended June 30, 2022.

The exchange rate we used to convert GBP to USD was 0.82 at the balance sheet dates of June 30, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rate we used to convert GBP to USD was 0.77 for six months ended June 30, 2022.

The exchange rate we used to convert AED to USD was 3.67 at the balance sheet dates of June 30, 2022. The average exchange rate for the period has been used to translate revenues and expenses. The average exchange rate we used to convert AED to USD was 3.67 for six months ended June 30, 2022.

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

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 did not note any events occurred or circumstances indicated the fair value of a reporting unit was below its carrying value as of June 30, 2022.

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. As of June 30, 2022 and December 31, 2021, the short-term investments amounted to $1.26 million and $2.19 million, respectively.

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, Chain Cloud Mall Network and Technology (Tianjin) Co., Limited (“CCM Tianjin”), Chain Cloud Mall E-commerce (Tianjin) Co., Ltd. (“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 expanding 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 Chain Cloud 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 Chain Cloud 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 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, 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 Chain Cloud Mall E-commerce (Tianjin) Co., Ltd, to exclusively operate and use the Chain Cloud Mall System and the authorization period is the same as the term of the Exclusive Technology Consulting and Service Agreement entered into by and between Chain Cloud Mall Network and Technology (Tianjin) Co., Ltd. and Cloud Chain Mall E-commerce (Tianjin) Co., Ltd. dated July 31, 2019.

GlobalKey Shared Mall Shopping Platform Software and System Transfer Agreement by and between Future Supply Chain Co., Ltd. and Chain Cloud 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.

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 will adopt ASU 2016-13 effective January 1, 2023. Management is currently evaluating the effect of the adoption 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 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,
	2022			2021
	(Unaudited)			(Audited)
Current assets	$	94,310		$	46,721
Property and equipment, net		220			469
Intangible assets		36,506			36,231
Total assets		131,036			83,421
Total liabilities		(256,900	)		(270,413	)
Net assets	$	(125,864	)	$	(186,992	)

	June 30,		December 31,
	2022		2021
	(Unaudited)		(Audited)
Current liabilities:
Accounts payable	$	19,361	$	79
Accrued expenses and other payables		5,241		1,112
Advances from customers		2,748		2,893
Amount due to related party		229,550		266,329
Total current liabilities		256,900		270,413
Total liabilities	$	256,900	$	270,413

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021*			2022			2021*
Revenue	$	652		$	24		$	652		$	6,638
Gross profit		639			13			640			603
Net loss		(51,194	)		(44,817	)		(94,752	)		(20,949	)

4. ACCOUNTS RECEIVABLE

Accounts receivable, net consist of the following:

	June 30,		December 31,
	2022		2021
	(Unaudited)		(Audited)
Coal and Aluminum Ingots Supply Chain Financing/Trading	$	-	$	7,938,152
Asset management service		1,380,169		1,163,664
Total accounts receivable		1,380,169		9,101,816

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

	June 30,			December 31,
	2022			2021

Debtor A		79.06	%		87.22	%
Debtor B		13.15	%		10.60	%
Debtor C		4.09	%		1.14	%
Total accounts receivable, net		96.30	%		98.96	%

5. NOTE RECEIVABLES

As of June 30, 2022, the balance of note receivables was $1.17 million, which was from third party.

The Company accepted $1.17 million (RMB7.88 million) bank acceptance drafts from third party interest free of accounts receivable. The acceptance draft was issued on April 28, 2022 and has a maturity date of April 28, 2023.

6. OTHER RECEIVABLES

As of June 30, 2022, the balance of other receivables was $3.17 million.

On September 1, 2021, FTFT UK Limited, a company organized under the laws of United Kingdom and a wholly owned subsidiary of the Company entered into a Share Purchase Agreement (the “Agreement”) with Rahim Shah, a resident of United Kingdom (“Seller”). Under this agreement, FTFT UK Limited (the “Buyer”) agreed to acquire 100% of the issued and outstanding shares (the “Sale Shares”) of Khyber Money Exchange Ltd. (“Khyber”), a company incorporated in England and Wales from the Seller for a total of Euros €685,000 (“Purchase Price”). Buyer deposited Euros €685,000 ($0.72 million) for the Purchase Price and £400,000 ($0.48 million) for cash balance expected to be left in the bank account of Khyber upon the closing (subject to refund to the Buyer upon the actual amount in Khyber’s account at closing) to Buyer’s solicitors to be held by Buyer’s solicitors in their client account upon the final closing of the acquisition.

April 22, 2022, Champion Energy Services, LLC and FTFT Supercomputing Inc. signed an Electricity Sales and Purchases Agreement. Upon enrollment of FTFT Supercomputing Inc.’s facilities, Champion Energy Services, LLC shall sell and deliver, or engage a third party (including Local Utility) to deliver, and FTFT Supercomputing Inc. shall purchase and receive, 100% of FTFT Supercomputing Inc.’s electricity requirements for enrolled FTFT Supercomputing Inc.’s facilities at the Delivery Point(s) solely for use at FTFT Supercomputing Inc’s facilities. FTFT Supercomputing Inc shall provide an initial amount of Adequate Assurance to Champion Energy Services, LLC in the form of a cash deposit amounted $1.00 million.

In addition, other receivables included deposit paid and prepayments amounting to $0.97 million.

7. LOAN RECEIVABLES

As of June 30, 2022, the balance of loan receivables was $11.59 million, which was from third parties.

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 US$0.22 million (RMB1.5million) to the third party at the annual interest rate of 5% from September 8, 2021 to September 7, 2022.

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 US$5 million to the third party at the annual interest rate of 10% from March 10, 2022 to September 9, 2022.

On May 30, 2022, FTFT HK entered into a “Loan Agreement” with a third party. Pursuant to the Loan Agreement, FTFT HK loaned an amount of US$ 6.36 million to the third party at the annual interest rate of 10% from May 31, 2022 to May 30,2023.

8. SHORT TERM INVESTMENT

As of June 30, 2022, the balance of short term investment was $1.26 million. On September 6, 2021, Future Private Equity Fund Management (Hainan) Co., Ltd. invested $1.94 million (RMB13,000,000) 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 $1.26 million on June 30, 2022.

9. ADVANCES TO SUPPLIERS AND OTHER CURRENT ASSETS

The amount of advances to suppliers and other current assets consisted of the followings:

	June 30,		December 31,
	2022		2021
	(Unaudited)		(Audited)
Prepayments for Coal and Aluminum Ingots Supply Chain Financing/Trading	$	5,315,262	$	2,243,295
Prepaid expenses		237,428		439,404
Others		269,847		245,000
Total		5,822,537		2,927,699

10. GOODWILL

As of June 30, 2022, the balance of goodwill mainly represented an amount of $15.69 million that arose from acquisition of Nice Talent Asset Management Limited (“Nice Talent”) in 2021. 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 (“Joy Rich”) 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) paid in 2,244,156 shares of common stock of the Company on August 4, 2021. 40% of the Purchase Price ($7.21 million) shall be paid in shares of common stock of the Company upon the completion of the audited reports for Nice Talent with 20% for each of the years ended on December 31, 2021 and December 31, 2022, respectively. Nice Talent has met the performance requirements for the year ended on December 31, 2021, however, the 20% 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.

11. ACQUISITION

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 shares of common stock of the Company on August 4, 2021. 40% of the Purchase Price ($7.21 million) shall be paid in shares of common stock of the Company upon the completion of the audited reports for Nice Talent with 20% for each of the years ended on December 31, 2021 and December 31, 2022, respectively. Nice Talent has met the performance requirements for the year ended on De

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