ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the
consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and
related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results could differ materially from the results described in or implied by these forward-looking
statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly
under the heading “Risk Factors.”
Overview of Our Business
Future FinTech Group Inc. is a Florida holding
company with no material operations of its own. We conduct substantially all of our business through subsidiaries, and this structure
involves unique risks for investors. We are not a Chinese operating company, although we have had significant operations in China and
Hong Kong.
Historically, our business was focused on fruit
juice manufacturing and distribution in China. Due to rising production costs and stricter environmental laws, we shifted our operations
toward supply chain financing and trading in China, asset management in Hong Kong, cross-border money transfer services in the United
Kingdom, brokerage and investment banking in Hong Kong, and cryptocurrency mining in the United States. Most of these activities have
since been reduced or exited.
Recent strategic changes include:
42
As of December 31, 2025, our principal business
operations consist of: sale of fast-moving consumer goods; commission-based trading and consulting services; and supply chain financing
and trading.
We currently have one directly controlled subsidiary,
Future FinTech (Hong Kong) Limited.
Fast-Moving Consumer Goods (“FMCG”)
Since the third quarter of 2024, we entered into
FMCG business to tap into the fast-growing online retail market. We operate an online store on reputable e-commerce platform and focus
on sales of non-alcoholic beverage and dairy beverages. The business model relies on selling large quantities of goods to generate revenue,
as the profit margin on each individual item is usually slim.
Supply Chain Financing Service and Trading in China
Since the second quarter of 2021, we have engaged
in the coal supply chain financing service and trading business. Since the third quarter of 2021, we have engaged in aluminum ingots supply
chain financing service and trading business. Since the first quarter of 2023, we have engaged in sand and steel supply chain financing
service and trading business.
Our supply chain finance business mainly serves
the receivables and payables of industrial customers, obtains the creditor’s rights or commodity goods rights of large state-owned
enterprises through trade execution, provides customers with working capital, accelerates capital turnover, and then expands the business
scale and improves the industrial value.
Through our supply chain service ability and customer
resources, we can tap into low-risk assets, flexibly carry out financial services around 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 commodity goods such as coal,
aluminum ingots, sand and steel and take large state-owned or listed companies as the core service targets; we use our own funds as the
operation basis, actively uses a variety of channels and products for financing, such as banks, commercial factoring companies, accounts
receivable, asset-backed securities, and other innovative financing methods to obtain sufficient funds.
We sign purchase and sale agreements with suppliers
and buyers. The suppliers are responsible for the supply and transportation of goods to the end users’ designated freight yard or
transfer the title to us in certain warehouses. We also provide trading service as we don’t take control over the ownership of the
goods but receive an agent service fee for the transaction. For the sale of goods where we obtain control of the goods before transferring
them to the customer, we recognize revenue based on the gross revenue amount billed to customers as sales of goods. We consider multiple
factors when determining whether we obtain control of the goods, including evaluating if we can establish the price of the goods, retain
inventory risk for tangible goods or have the responsibility for ensuring acceptability of the goods. We recognize net revenue as agent
services for the sales of coals, aluminum ingots, and steel when no control is obtained throughout the transactions. We select customers
and suppliers that have good credit and reputation.
43
However, due to the continuous decline in coal prices and weakening market
demand in China, we have significantly scaled down our supply chain financing and trading business segment since late 2025. This business
segment generated limited revenue during the year ended December 31, 2025, and we may continue to conduct certain related activities in
2026 depending on market conditions.
Trading Commission and Consulting services
FTFT International Securities and Futures Limited,
a company we acquired in November 2023, provides brokerage and investment banking services in Hong Kong. FTFT International Securities
and Futures Limited holds Type 1 “Securities Trading”, Type 2 “Futures Contract Trading” and Type 4 “Securities
Consulting” financial licenses issued by the Hong Kong Securities and Futures Commission.
Meanwhile, we also provide integrated business
and financial consulting services that helps our customers turn ambitious goals into financial realities. Through our deep industry expertise,
we partner closely with our customers to diagnose complex challenges, develop data-backed strategies, and drive seamless execution. Our
consulting services includes but not limited to debt recovery consulting service, listing and financing consulting service etc.
Critical Accounting Policies and Estimates
Discontinued Operations
On March 7, 2024, Chain Cloud Mall Network and
Technology (Tianjin) Co., Limited was dissolved and deregistered. The loss on disposal was $45,487.54.
On September 4, 2024, Tianjin Future Private Equity
Fund Management Partnership (Ltd Partnership) was dissolved and deregistered. The loss on disposal was $22.46.
On October 18, 2024, Nice Talent Asset Management
Limited (“NTAM”) was disposed of for a consideration of $0.31 million (HK$2.40 million). The loss on disposal was $2.32 million.
On December 6, 2024, FTFT Super Computing Inc.
was disposed of for a consideration of US$1.97 million, of which (i) the assumption of the obligations of FTFT Super Computing totaling
$973,072.24 and (ii) $1,000,000 was paid to an account at Olshan Frome Wolosky LLP to satisfy, in part, the right of payment held by FT
Global Capital, Inc. arising from the judgment entered in favor of FT Global and against the Company registered in the Southern District
of New York. The gain on disposal was $3.42 million.
On February 3, 2025, FTFT UK LIMITED, FTFT Finance
UK Limited, Future Fintech Digital Number One US, LP, Future Fintech Digital Number One Offshore, LLC (Cayman), Future Fintech Digital
Number One GP, LLC (USA), FTFT Digital Number One, Ltd. (Cayman), Future FinTech Labs Inc, Future Fintech Digital Capital, FTFT CAPITAL
INVESTMENTS, DigiPay FinTech Limited, DCON DigiPay Limited-JPN and Global Key Shared Mall Ltd were disposed of for a consideration of
US$25,000 after a court auction sale. The gain on disposal was $28.26 million.
On December 16, 2025, Future Commercial Management (Hainan) Co., Ltd.
was disposed of for a consideration of $1.4 million (RMB 10.0 million). The gain on disposal was $52,749.
44
Segment Information Reclassification
We classified our business segments into Trading
Commission and Consulting services, Fast-Moving Consumer Goods (FMCG), and Supply Chain Financing and Trading.
Uses of Estimates in the Preparation of Financial Statements
Our 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 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 are not limited to, the expected credit losses for receivables, estimated useful life and residual value of property and equipment,
impairment of long-lived assets, provision for staff benefits, 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 consolidated
financial statements.
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.
The Company’s cash and cash equivalents
and restricted cash and short-term investments are classified within level 1 of the fair value hierarchy because they are valued using
quoted market prices.
Revenue Recognition
The Company applies 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 our revenue arrangements against specific criteria in order to determine
if it is acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate distinct goods
or services. We allocate the transaction price to each performance obligation based on the relative standalone selling price of the goods
or services provided. Revenue is recognized upon the transfer of control of promised goods or services to a customer. Control is generally
transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or
services are transferred to its customers.
45
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 United States dollar (“USD”). Assets and liabilities of the Company’s foreign subsidiaries have been translated
into USD using the exchange rate at the balance sheet date, while equity accounts are translated using historical exchange rate. The average
exchange rate for the period has been used to translate revenues and expenses. Translation adjustments are reported separately and accumulated
in a separate component of equity (cumulative translation adjustment).
Other comprehensive income (loss) for the years
ended December 31, 2025 and 2024 represented foreign currency translation adjustments and were included in the consolidated statements
of operation and comprehensive loss.
There is no guarantee the RMB amounts could have
been, or could be, converted into USD at rates used in translation.
Income Taxes
Income taxes are provided on an asset and liability
approach for financial accounting and reporting of income taxes. Any tax paid by subsidiaries during the year is recorded. Current tax
is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purpose
and is calculated using tax rates that have been enacted at the balance sheet date. Deferred income tax liabilities or assets are recorded
to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and the financial reporting
amounts at each period end. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred
tax asset will not be realized.
ASC 740 provides guidance for recognizing and
measuring uncertain tax positions, and it prescribes a threshold condition that a tax position must meet for any of the benefits of the
uncertain tax position to be recognized in the financial statements. ASC 740 also provides accounting guidance on derecognizing, classification
and disclosure of these uncertain tax positions.
Impairment of Long-Lived Assets
In accordance with ASC 360-10, Accounting for
the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment and purchased intangibles subject
to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may
not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other industrial
changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future
undiscounted cash flows to be generated by the assets.
If such assets are considered to be impaired,
the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but
not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the accompanying
consolidated financial statements. See Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for
a description of applicable recent accounting pronouncements.
46
Results of Operations for the Years Ended December
31, 2025 and 2024
The following table summarizes the results of
our operations during the years ended December 31, 2025 and 2024, respectively, and provides information regarding the dollar and percentage
increase or (decrease) during such fiscal years.
For the Years Ended December 31, Variance
OPERATING EXPENSES
OTHER INCOME (EXPENSES)
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Revenue
The following table sets forth the breakdown of
our revenues for the years ended December 31, 2025 and 2024, respectively:
For the Years Ended December 31,
Amount Amount Amount %
Revenue from sales of FMCG increased by $3,234,308,
or 12,665.18%, from $25,537 for the year ended December 31, 2024 to $3,259,845 for the year ended December 31, 2025. The increase was
primarily attributable to the Company’s strategic expansion into the FMCG sector in September 2024, which significantly contributed
to revenue growth during the year ended December 31, 2025.
Revenue from supply chain financing/trading decreased
by $956,359, or 99.86%, from $957,708 for the year ended December 31, 2024 to $1,349 for the year ended December 31, 2025. The decrease
was due to our management’s decision to temporarily suspend these operations resulting from lower coal prices and reduced market
demand in China during the year ended December 31, 2025.
Revenue from trading commission and consulting
services decreased by $562,554, or 49.73%, from $1,131,165 for the year ended December 31, 2024 to $568,611 for the year ended December
31, 2025. The decrease was mainly because a major project, which boosted revenue from consulting service during the year ended December
31, 2024, did not recur during the year ended December 31, 2025.
Gross Profit
The following table sets forth the breakdown of
the gross profit for the years ended December 31, 2025 and 2024, respectively:
For the Years Ended December 31, Variance
48
Overall gross profit decreased by $829,619, or
67.02%, to $408,320 for the year ended December 31, 2025 from $1,237,939 for the year ended December 31, 2024. The decrease was primarily
due to the decrease in gross profit from trading commission and consulting services, and supply chain financing/trading which were in
line with the decrease in revenue for these two business segments for the year ended December 31, 2025. Although revenue from the FMCG
segment increased significantly for the year ended December 31, 2025, gross profit from this business segment did not increase simultaneously
due to its low gross margin. Overall gross margin as a percentage of revenue was 10.66% for the year ended December 31, 2025, representing
a decrease of 47.89 percentage points from 58.55% for the year ended December 31, 2024, mainly due to the decrease in gross margin for
debt recovery consulting service fee, and our gross margin was further eroded by that of the FMCG segment, which accounted for a majority
portion of total revenue for the year ended December 31, 2025.
Operating Expenses
The following table sets forth the breakdown of
our operating expenses and operating expenses as a percentage of revenue for the years ended December 31, 2025 and 2024, respectively:
For the Years Ended December 31,
Amount % of revenue Amount % of revenue Amount % of
General and administrative expenses decreased
by $359,279, or 7.64%, from $4,702,662 for the year ended December 31, 2024 to $4,343,383 for the year ended December 31, 2025. The decrease
was primarily attributable to reduced salary, employee benefit and bonus expenses as a result of the implementation of cost-control measures,
as well as a decrease in commission caused by decreased consulting service revenue for the year ended December 31, 2025.
Stock compensation expense increased by $414,020
or 61.70%, from $670,980 for the year ended December 31, 2024 to $1,085,000 for the year ended December 31, 2025. On March 10, 2025, the
Compensation Committee of the Board of Directors of the Company granted 125,000 shares of common stock, pursuant to the Company’s
2024 Omnibus Equity Plan, to certain officers and employees of the Company and its subsidiaries. As the closing price of the Company stock
was $8.68 on March 10, 2025, the Company recorded an expense of $1.09 million in the year ended December 31, 2025.
Selling expenses increased by $212,395, or 33.40%,
from $635,918 for the year ended December 31, 2024 to $848,313 for the year ended December 31, 2025. The increase was primarily attributable
to increased business entertainment expenses, resulting from our initiatives to expand into new business segments and acquire new customers.
49
Allowance for credit losses/doubtful accounts
increased slightly by $24,768, or 0.09%, from $28,113,978 for the year ended December 31, 2024 to $28,138,746 for the year ended December
31, 2025. Our management will continue monitoring and putting effort in collection of receivables to lower the level of the allowance.
Other Income (Expense), Net
Net other income increased by $3,914,274 or 458.66%,
from net other expense of $853,406 for the year ended December 31, 2024 to net other income of $3,060,868 for the year ended December
31, 2025. The increase was primarily due to the gain on debt restructuring during the year ended December 31, 2025. On June 17, 2025,
we entered into a settlement and forbearance agreement (“the Agreement”) with FT Global. Pursuant to the Agreement, we were
required to pay an aggregate settlement amount of $2.0 million and issue a total of 425,000 shares of common stock. Upon the debt restructurings,
we recognized a gain of $3.07 million which was recorded as gain on debt restructuring on the consolidated statements of operations and
comprehensive loss. The increase in net other income was also attributable to the absence of litigation-related compensation paid to FT
Global during the year ended December 31, 2024, and no such cost was incurred during the year ended December 31, 2025.
Net Loss From Continuing Operations
Net loss from continuing operations decreased
by $2,792,751, or 8.28%, from $33,739,005 for the year ended December 31, 2024 to $30,946,254 for the year ended December 31, 2025. The
decrease was primarily due to the increase in other income, net as discussed above.
Gain on Disposal of Discontinued Operations
Gain on disposal of discontinued operations was
$28.31 million for the year ended December 31, 2025, which was related to the transfer of FTFT UK LIMITED, FTFT Finance UK Limited, Future
Fintech Digital Number One US, LP, Future Fintech Digital Number One Offshore, LLC (Cayman), Future Fintech Digital Number One GP, LLC
(USA), FTFT Digital Number One, Ltd. (Cayman), Future FinTech Labs Inc, Future Fintech Digital Capital, FTFT CAPITAL INVESTMENTS, DigiPay
FinTech Limited, DCON DigiPay Limited-JPN, Global Key Shared Mall Ltd. and Future Commercial Management (Hainan) Co., Ltd.
Earnings (Loss) per Share
For the year ended December 31, 2025, basic and
diluted loss per share from continuing operations were both $15.52, as compared to loss per share of $64.49 (both basic and diluted) for
the year ended December 31, 2024. For the year ended December 31, 2025, basic and diluted earnings per share from discontinued operations
were both $13.21, as compared to earnings per share of $1.50 and $1.49 for the year ended December 31, 2024, respectively.
Liquidity and Capital Resources
We currently finance our business operations primarily
through convertible notes and the sale of our common stock. Our current cash primarily consists of cash on hand and cash in bank. As of
December 31, 2025, we had cash and restricted cash of $5.08 million, representing an increase of $0.31 million from $4.77 million as of
December 31, 2024.
50
Working Capital
Our working capital has historically been generated from our operating
cash flows, advances from our customers and convertible notes. Our working capital was $42.55 million as of December 31, 2025, an increase
of $34.95 million from working capital of $7.60 million as of December 31, 2024, mainly due to the increase in investment funds and the
decrease in accrued expenses and other payables.
Cash Flows
The following is a summary of cash provided by
or used in each of the indicated types of activities during the years ended December 31, 2025 and 2024, respectively.
For the Years Ended December 31,
Effect of exchange rate change on cash and restricted cash 42,297 (141,708 )
Net increase (decrease) in cash and restricted cash 312,053 (11,250,449 )
Operating Activities
Net cash used in operating activities from continuing
operations amounted to $31.77 million for the year ended December 31, 2025, primarily due to i) a net loss from continuing operations
of $30.95 million adjusted for non-cash activities including allowance for credit losses/doubtful accounts of $28.14 million, gain on
debt restructuring of $2.98 million and share-based payments of $1.09 million, and ii) net changes in our operating assets and liabilities,
which mainly include a) an increase in other receivables of $27.24 million, b) a decrease in accrued expenses and other payables of $2.35
million, c) an increase in advances to suppliers and other current assets of $0.89 million, which was partially offset by a) an increase
in accounts payable of $1.04 million, b) an increase in other non-current liabilities of $1.09 million, c) a decrease in accounts receivable
of $0.85 million.
Net cash used in operating activities from continuing operations amounted
to $20.43 million for the year ended December 31, 2024, primarily due to i) a net loss from continuing operations of $33.74 million adjusted
for non-cash activities including allowance for credit losses/doubtful accounts of $28.11 million, and share-based payments of $0.67
million, and ii) net changes in our operating assets and liabilities, which mainly include a) an increase in other receivables of $11.15
million, b) an increase in advances to suppliers and other current assets of $4.67 million, c) a decrease in accrued expenses and other
payables of $1.19 million, d) a decrease in accounts payable of $1.08 million, which was partially offset by a decrease in accounts receivable
of $2.64 million.
Investing Activities
Net cash used in investing activities from continuing
operations amounted to $28.96 million for the year ended December 31, 2025, primarily due to prepayment for a business acquisition of
$29.93 million, which was partially offset by repayment from debt investment of $0.84 million.
Net cash used in investing activities from continuing
operations amounted to $1.72 million for the year ended December 31, 2024, primarily due to payment for debt investments of $1.54 million
and payment for loan receivable of $0.14 million.
51
Financing Activities
Net cash provided by financing activities from
continuing operations amounted to $31.77 million for the year ended December 31, 2025, primarily consisting of i) proceeds from the issuance
of common stock, net of issuance costs of $30.00 million, and ii) proceeds from convertible notes payables of $1.80 million.
Net cash provided by financing activities from
continuing operations amounted to $2.48 million for the year ended December 31, 2024, primarily consisting of proceeds from the issuance
of common stock, net of issuance costs of $2.58 million, which was partially offset by repayment of amounts due to related parties of
$0.09 million.
Contractual Obligations
The Company has no long-term fixed contractual
obligations or commitments other than leases that are disclosed in Note 8 in the notes to our consolidated financial statements.
Off-balance sheet arrangements
As of December 31, 2025 and 2024, we did not
have any off-balance sheet arrangements.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is included
in the Company’s consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our
CEO and CFO, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e)
and 15d-15(e) of the Exchange Act, as of December 31, 2025.
The term “disclosure controls and procedures”
as defined in Rules 13a-15(e) and 15d-15(e) means controls and other procedures of the Company that are designed to ensure that information
required to be disclosed by a company in reports, such as this report, that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it
files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive
and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives,
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
52
Based on that evaluation, our CEO and CFO concluded
that our disclosure controls and procedures were not effective as of December 31, 2025, due to a material weakness in our internal control
over financial reporting., we currently are training our staff with the appropriate level of knowledge, experience and training in U.S.
GAAP and SEC reporting requirements.
Management’s Report on Internal Controls
Over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide
reasonable assurances regarding the reliability of financial reporting and the preparation of our consolidated financial statements in
accordance with U.S. GAAP. Our accounting policies and internal controls over financial reporting, established and maintained by management,
are under the general oversight of the Board’s audit committee.
Our internal control over financial reporting
includes those policies and procedures that:
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance
with the policies or procedures may deteriorate.
Management assessed our internal control over
financial reporting as of December 31, 2025.
The standard measures adopted by management in
making its evaluation are the measures in the Internal-Control Integrated Framework published by the Committee of Sponsoring Organizations
of the Treadway Commission.
Based on management’s assessment, our CEO
and CFO concluded that our internal control over financial reporting as of December 31, 2025 was ineffective. We have taken, and are
taking, certain actions to remediate the material weakness related to our lack of U.S. GAAP and SEC reporting experience. We engaged
a consultant with U.S. GAAP knowledge and experience to supplement our current internal accounting personnel and assist us in the preparation
of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP. We also engaged an internal
control consulting firm in July 2023 to review, test and improve our internal accounting controls and internal control over financial
reporting. We have adopted and are implementing policies, procedures and practices recommended in the report of the consultant and have
arranged training of internal control for our employees and management on disclosure controls and procedures. We believe the measures
described above will remediate the material weakness. The Company continues to make efforts to implementing its existing and newly adopted
procedures to improve our disclosure controls and internal controls over financing reporting.
Changes to Internal Control over Financial
Reporting
Other than discussed above, there has been no
change to our internal control over financial reporting that occurred during the period covered by this annual report on Form 10-K that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B - OTHER INFORMATION
None
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
Not applicable.
53
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth as of March 16, 2026, the names, positions
and ages of our current executive officers and directors. Our directors serve until the next annual meeting of shareholders or until their
successors are elected and qualified. Our officers are elected by the Board and their terms of office are, except to the extent governed
by an employment contract, at the discretion of the Board.
Name of Current Director and/or Executive Officer Age Position(s)
Hu Li (1) 52 Chief Executive Officer (“CEO”) and Director
Ting Ouyang (2) 41 Chief Financial Officer (“CFO”) and Director
Hu Li, Chief Executive Officer and Director
Mr. Hu Li has served as a director and Chief
Executive Officer of FTFT International Securities and Futures Limited, a wholly owned subsidiary of the Company since January 2024,
and as Corporate Secretary of the Company since June 2019. Since September 2021, he has served as an independent Director of Shineco
Inc. (Nasdaq: SISI). Mr. Li served as the chief supervisor of Anhui Yihai Mining Equipment Co., Ltd., a public company in the China NEEQ
stock market (stock symbol: 831451) from February 2018 to July 2021. From September 2015 to February 2018, Mr. Li served as the Vice
General Manager of Shaanxi Huipu Financial Leasing Co., Ltd. Mr. Li obtained his master’s degree in Business Administration (MBA)
from Xi’an Technology University in 2008 and bachelor’s degree from Xi’an Fanyi University in 1996.
Ting (Alina) Ouyang, Chief Financial Officer
and Director
Ms. Ouyang, age 41, has served as the Financial Controller of the Company
since August 2020. Prior to that, Ms. Ouyang served as the Chief Financial Officer of Weath Index Capital Group from March 2016 to September
2020. Ms. Ouyang served as Internal Control Manager of the Company from September 2020 to December 2023, and as Financial Controller since
December 2023. Ms. Ouyang is a Certified Management Accountant (CMA) in the United States. Ms. Ouyang has over 10 years of senior financial
management experience and is proficient in financial disclosures, ESG reporting, and investor relations for public companies listed in
China, the United States, and Hong Kong. She has led multiple cross-border mergers and acquisitions as well as financing projects and
is fluent in English and Mandarin. Ms. Ouyang obtained her bachelor’s degree in Business Administration from Beijing Union University
in 2008.
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David
Xu, Chairman of the Board, a member of the audit committee and a member of compensation committee
Mr. David Xu, age 39, has extensive experience in financial services,
enterprise management, and investment banking. From July 2022 to May 2025, Mr. Xu served as a middle and senior manager at China CITIC,
a comprehensive financial services provider, where he was responsible for assisting companies in going public. From June 2020 to July
2022, he served as a middle manager at China Construction Bank, where he focused on helping companies secure funding and complete initial
public offerings. Mr. Xu has been deeply involved in the listing projects of several prominent companies in both China and overseas capital
markets. He possesses in-depth knowledge of the listing procedures, regulatory frameworks, and market environments across major international
capital markets. Mr. Xu obtained his master’s degree in Business Administration from The Australian National University in 2020
and his master’s degree in Law from the University of International Business and Economics in 2011.
Mingyong Hu, member of the Board, Chairman of the Audit Committee
and a member of Compensation Committee
Mr. Mingyong Hu, age 47, was the founder and
CFO of Beijing Xiaowu Supply Chain Technology Co., Ltd. from August 2021 to April 2024. From March 2019 to July 2021, Mr. Hu was the
executive vice president of Zhenghua Guotai International Trading Co., Ltd. From October 2017 to March 2019, Mr. Hu was the general manager
of Zhongrong Dinghui (Beijing) Equity Investment Fund Management Co., Ltd. From January 2016 to October 2017, Mr. Hu was the executive
vice president of Zhongsheng Wantong Equity Investment Fund Management (Beijing) Co., Ltd. From June 2007 to December 2015, Mr. Hu was
a partner and executive deputy general manager of Zhonghao Investment Group Co., Ltd.
Mingjie Zhao, member of the Board and Chairman
of the Compensation Committee and a member of Audit Committee
Mr. Mingjie Zhao was appointed as a member of
the Board and Chairman of the Compensation Committee and a member of Audit Committee of the Board on July 15, 2020. Mr. Zhao has served
as a director of New York Hua Yang, Inc. since April 2018. From July 2016 to March 2018, Mr. Zhao served as Chief Executive Officer of
TD Holdings, Inc. (formerly known as China Commercial Credit Inc. and Nasdaq: CLG). Mr. Zhao was the Chief Operating Officer and
a director of New York Hua Yang, Inc. from September 2011 to July 2016. Mr. Zhao obtained his Master of Business Administration degree
from University of Bridgeport in Connecticut in May 2003 and his Bachelor of Science degree from China Eastern Normal University in Shanghai,
China in July 1985. The Board believes that Mr.
All of our directors and officers reside outside
of the United States, except for Mr. Mingjie Zhao. Mr. Hu Li, Mr. Ting Ouyang, Mr. Mingyong Hu, Mr. David Xu reside in China.
Board Diversity Matrix
Board Diversity Matrix (As of March 16, 2026)
Total Number of Directors 5
Female Male Non-Binary Did Not Disclose Gender
Part I: Gender Identity
Part II: Demographic Background
Asian (other than South Asian) 5
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Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires that
directors, certain officers of the Company and ten percent shareholders file reports of ownership and changes in ownership with the Commission
as to the Company’s securities beneficially owned by them. Such persons are also required by SEC rules to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of copies of such
forms received by the Company, or on written representations from certain reporting persons, the Company believes that, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten percent shareholders were complied with during the fiscal
year ended December 31, 2025,.
Code of Ethics
We have adopted a code of business conduct and
ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Our
code of business conduct and ethics is available on our website at www.ftft.com and may be found by first clicking on “Investors,”
then “Corporate Governance” and then “Governance Documents.” We intend to disclose any amendments to the code,
or any waivers of its requirements, on our website.
Committees of the Company’s Board of Directors
The Board held 12 regularly scheduled and special meetings during fiscal
year 2025. All of the directors attended (in person or by telephone) all of the Board meetings and any committees of the Board on which
they served during the fiscal year. Directors are expected to use their best efforts to be present at the shareholders annual meeting.
All of our directors attended the December 12, 2025 shareholders annual meeting by tele-conference or in person.
Audit Committee
On April 25, 2008, the Board formed an audit committee. Mr. Mingyong
Hu, Mr. David Xu and Mingjie Zhao currently serve on the audit committee, which is chaired by Mr. Mingyong Hu. Each member of the audit
committee is “independent” as that term is defined in the rules of the SEC and within the meaning of such term as defined
under the rules of the NASDAQ Capital Market. The Board has determined that each audit committee member has sufficient knowledge in financial
and auditing matters to serve on the audit committee. The audit committee held 4 meetings during fiscal year 2025, and all audit committee
members attended each of those meetings. Our Board has determined that Mr. Hu is an “audit committee financial expert,” as
defined under the applicable SEC rules. The audit committee has a written charter, which is available on the Company’s website at
http://www.ftft.com.
Management is responsible for the Company’s
internal controls and the financial reporting process. The independent accounting firm is responsible for performing an independent audit
of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and issuing reports thereon. The audit committee’s responsibility is to monitor these
processes. The audit committee meets with management, the leader of the internal audit function, and the independent accounting firm
to facilitate communication. In addition, the audit committee appoints the Company’s independent accounting firm and pre-approves
all audit and non-audit services to be performed by the independent accounting firm.
Compensation Committee
On April 25, 2008, the Board formed a compensation committee. Mr. Mingyong
Hu, Mr. David Xu and Mingjie Zhao currently serve on the compensation committee, which is chaired by Mr. Mingjie Zhao. Each member of
the compensation committee is “independent” as that term is defined in the SEC rules and within the meaning of such term as
defined under the rules of the NASDAQ Capital Market, a “nonemployee director” for purposes of Section 16 of the Exchange
Act. No interlocking relationship exists between the Board or the compensation committee and the Board or compensation committee of any
other company, nor has any interlocking relationship existed during the last fiscal year. The compensation committee held 4 meetings during
fiscal year 2025. The compensation committee has a written charter, which is available on the Company’s website at http://www.ftft.com/.
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Our Board has delegated to the compensation committee
the responsibility, among other things, to determine any and all compensation payable to our executive officers, including annual salaries,
incentive compensation, long-term incentive compensation and any other compensation, and to administer our equity and incentive compensation
plans applicable to our executive officers. Decisions regarding executive compensation made by the compensation committee are considered
final and are not generally subject to Board review or ratification. Under the terms of its written charter, the compensation committee
has the power and authority to delegate any of its duties and responsibilities to subcommittees as the compensation committee may deem
appropriate in its sole discretion. Historically, the compensation committee has not generally delegated any of its duties and responsibilities
to subcommittees, but rather has taken such actions as a committee, as a whole. Deliberations and decisions by the compensation committee
concerning executive officers are made by the compensation committee, without the presence of the any executive officer of the Company.
Other Committees
The Board may on occasion establish other committees,
as it deems necessary or required. We do not currently have a standing nominating committee, or a committee performing similar functions.
The full Board currently serves this function. Our directors believe that it is not necessary to have such committees, at this time,
because the functions of such committees can be adequately performed by the Board. The independent directors of the Board will assess
all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment by the Board. Other
than the Rule 14a-19 under the Exchange Act, there have been no material changes to the procedures by which security holders may recommend
nominees to the Board.
Board Leadership Structure
Our Board of Directors is currently comprised of five members, including
three independent directors who serve as members of our audit committee and compensation committee. Our Board leadership structure consists
of a Chairman of the Board. Currently, Mr. David Xu, an independent director, serves as Chairman of the Board. The Board of Directors
believes that this leadership structure, with Mr. David Xu serving as the Chairman and Mr. Hu Li serving as Chief Executive Officer, is
appropriate at this time because it enables the Board, as a whole, to engage in oversight of management, promote communication and collaboration
between management and the Board, and oversee governance matters, while allowing our Chief Executive Officer to focus on his primary responsibility,
the operational leadership and strategic direction of the Company. In addition to chairing the Board, Mr. David Xu is a member of the
Audit and Compensation Committees.
Board independence and oversight of the senior
management of the Company are enabled by the presence of independent directors who have a wide range of expertise and skills and have
oversight over critical functions of the Company, such as the review of business development, evaluation and compensation of executive
management, the nomination of directors. Our independent directors collectively provide additional strength and balance to our Board
leadership structure.
Compensation Committee Interlocks and Insider Participation
None of the Company’s executive officers
has served as a member of a compensation committee, or other committee serving an equivalent function, of any other entity whose executive
officers serve as a director of the Company or member of the Company’s compensation committee.
Family Relationships
There are no family relationships between any
current executive officer or director of the Company.
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ITEM 11 - EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Objectives
We operate in a highly competitive and rapidly
changing industry. The key objectives of our executive compensation programs are to:
● the individual’s demonstrated ability to perform that role.
Stock Incentive Plans
The Board of Directors of the Company approved and adopted the Future
FinTech Group Inc. 2025 Omnibus Equity Plan, which was approved by the shareholders at the shareholders annual meeting on December 12,
2025, to provide equity awards to employees, directors and consultants of the Company (the “2025 Plan”). There are 5,000,000
shares of commons stock available for awards under 2025 Plan (All the share numbers stated here are before the 1 for 4 reverse stock split
effected in January 20, 2026). As of December 31, 2025, no awards had been granted under the plan, and no shares were subject to outstanding
options, warrants, or other rights.
The Board of Directors of the Company approved and adopted the Future
FinTech Group Inc. 2024 Omnibus Equity Plan (the “2024 Equity Plan”) on October 12, 2024, which was approved by the shareholders
at the shareholders annual meeting on December 5, 2024, to provide equity awards to employees, directors and consultants of the Company
(the “2024 Plan”). There are 5,000,000 shares of commons stock available for awards under 2024 Plan. On March 10, 2025, the
Compensation Committee of the Board granted stock awards of 5,000,000 shares of common stock of the Company, pursuant to the Company’s
2024 Omnibus Equity Plan, to sixteen officers and employees of the Company and its subsidiaries, including: 300,000 shares to Hu Li, Chief
Executive Officer of the Company (All the share numbers stated here are before the 1 for 10 reverse stock split effected in April 1, 2025)
The Board of Directors of the Company approved
and adopted the Future FinTech Group Inc. 2023 Omnibus Equity Plan (the “2023 Equity Plan”) on October 12, 2023, which was
approved by the shareholders at the shareholders annual meeting on December 5, 2023. The 2023 Equity Plan has a total of 5,000,000 shares
of Common Stock. On December 23, 2023 (the “Grant Date”), the Compensation Committee of the Board of Directors (the “Board”)
of the Company granted stock awards of 2,890,000 shares of common stock of the Company, pursuant to the Company’s 2023 Equity Plan,
to sixteen officers and employees of the Company and its subsidiaries (the “Grantees”), including: 200,000 shares to Shanchun
Huang, Chief Executive Officer and President of the Company, 40,000 shares to Peng Lei, Chief Operating Officer of the Company, and 30,000
shares to Hoo Lee, Corporate Secretary of the Company (collectively, the “Grants”). The Grants vested immediately on the
Grant Date and each of the Grantees also entered into an Unrestricted Stock Award Agreement with the Company on December 23, 2023. On
October 4, 2024, the Company granted the remaining 2,110,000 share under 2023 Omnibus Equity Plan to 4 employees of the Company and its
subsidiaries. (All the share numbers stated here are before the 1 for 10 reverse stock split effected in April 1, 2025)
We believe that the future success of the Company
depends, in large part, upon the ability of the Company to maintain a competitive position in attracting, retaining and motivating key
personnel.
What Our Executive Compensation Program is
Designed to Reward
Our executive compensation program is designed
to reward each individually named executive officer’s contribution to the advancement of our overall performance and execution
of our goals, ideas and objectives. It is designed to reward and encourage exceptional performance at the individual level in the areas
of organization, creativity and responsibility while supporting our core values and ambitions. This in turn aligns the interest of our
executive officers with the interests of our shareholders, and thus with our interests.
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Determining Executive Compensation
The Board’s compensation committee reviews
and approves the compensation for executive officers annually. The compensation committee considers the overall performance of the past
year and the financial and operating plans for the upcoming year in determining the compensation for the executive officers.
A named executive officer’s base salary
is determined by an assessment of his/her sustained performance against individual job responsibilities, including, where appropriate,
the impact of his/her performance on our business results, current salary in relation to the salary range designated for the job, experience
and mastery, and potential for advancement. The compensation committee also annually reviews market compensation levels with comparable
jobs in the industry to determine whether the total compensation for our officers remains in the targeted median pay range.
Role of Executive Officers in Determining Executive Compensation
The compensation committee determines the compensation
for the CEO, which is based on various factors, such as level of responsibility and contributions to our performance. The CEO recommends
the compensation for our executive officers (other than the compensation of the CEO) to the compensation committee. The compensation
committee reviews the recommendations made by the CEO and determines the compensation of the CFO and the other executive officers.
Employment Agreements
We entered into an Employment Agreement with
our CEO, Mr. Hu Li, on August 5, 2024 with a term of three year subject to renewal. Mr. Li receives compensation in the amount of $7,000
per month and will be eligible for an annual cash and equity bonus in the Board’s sole discretion.
On July 28, 2023, the Board of Directors of the Company appointed Mr.
Peng Lei as the COO of the Company. In connection with his appointment as COO, the Company entered into an employment agreement (the “Agreement”)
with Mr. Peng Lei on August 1, 2023. The Agreement provides that Mr. Lei will receive compensation in the amount of $50,000 per year before
tax and the term of the Agreement is for one (1) year which was renewed until August 1, 2025. On June 13, 2025, the Company received a
resignation letter from Mr. Peng Lei to resign from his position as the Chief Operating Officer (“COO”) of the Company, effective
on June 15, 2025.
On December 1, 2020, the Company entered into an employment agreement
with Mr. Ming Yi as CFO of the Company and the term of the agreement is for one (1) year. The agreement provides that Mr. Yi receives
compensation in the amount of $4,000 per month before tax. Mr. Ming Yi resigned from his position as the CFO of the Company, effective
on June 25, 2025. On June 26, 2025, the Board appointed Ms. Ting (Alina) Ouyang as a director of the Board and the CFO of the Company,
effective immediately, to fill the vacancy following the resignation of Ms. Ying Li. The Agreement provides that Ms. Ouyang will receive
compensation in the amount of $2,500 per month before tax and the term of the Agreement is for three (3) years. On September 22, 2025,