What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 176 added, 120 removed, 637 unchanged (32% of the section changed)

2 unchanged sentences

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2022 and 2021

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (Parent’s Net Investment) for the three and six months ended June 30, 2022 and 2021

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2022 and 2021

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (Parent’s Net Investment) for the three and nine months ended September 30, 2022 and 2021

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2022

September 30, 2022

December 31, 2021

11 unchanged sentences

Total other assets

LIABILITIES AND PARENT’S NET INVESTMENT

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

1 unchanged sentence

Accounts payable

Accounts payable – related parties

Income tax payable

7 unchanged sentences

SHAREHOLDERS’ EQUITY

Preference Shares ($ 0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021)

Ordinary shares ( $ 0.0001 par value, 200,000,000 shares authorized, 9,500,000 and 7,000,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021*)

Preference Shares ($ 0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021)

Ordinary shares ( $ 0.0001 par value, 200,000,000 shares authorized, 9,500,000 and 7,000,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021*)

Parent’s net investment

1 unchanged sentence

Retained earnings

Accumulated other comprehensive income

Accumulated other comprehensive loss

( 1,661,055 )

Total shareholders’ equity

5 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

COST OF REVENUES

8 unchanged sentences

Interest expense

Other income, net

Other income (loss), net

Total other (expenses) income, net

4 unchanged sentences

Foreign currency translation adjustment

( 1,006,323 )

COMPREHENSIVE INCOME

20 unchanged sentences

Balance at June 30, 2021 (Unaudited)

Net distribution to Parent

Foreign currency translation adjustments

Balance at September 30, 2021 (Unaudited)

Preference shares

11 unchanged sentences

Balance at June 30, 2022 (Unaudited)

Share-Based compensation

Foreign currency translation adjustments

Balance at September 30, 2022 (Unaudited)

( 1,661,055 )

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

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash (used in) provided by operating activities

Adjustments to reconcile net income to net cash provided by (used in) operating activities

Depreciation and amortization

2 unchanged sentences

(Reversal of) provision of defective return

( 1,456,022 )

Foreign exchange transaction loss

Interest expenses

Adjustment for Right-of-use assets

( 2,552,649 )

Gain on Forgiveness of PPP loan

7 unchanged sentences

Prepayments and other current assets

( 1,470,609 )

Prepayments and other receivables – related parties

2 unchanged sentences

( 3,316,292 )

( 1,048,150 )

Right-of-use assets

5 unchanged sentences

( 1,443,014 )

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

( 6,331,971 )

2 unchanged sentences

Purchase of property and equipment

Prepayment for purchase of building and sub-lease of land

( 1,295,924 )

Net cash used in investing activities

( 1,350,974 )

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from (repayments of) revolving credit facility

( 1,649,631 )

Net proceeds from issuance of ordinary shares in IPO

10 unchanged sentences

Cash paid during the period for income taxes

( 1,755,531 )

NON-CASH INVESTING AND FINANCING ACTIVITIES

64 unchanged sentences

As such, the accompanying unaudited condensed consolidated financial statements include the assets, liabilities, revenue, expenses and cash flows that are directly attributable to the K&B Business (excluded otherwise) before the Reorganization.

The unaudited condensed consolidated financial statements are presented as if the Company had been in existence and the Reorganization had been in effect during the entirety of the six months ended June 30, 2022 and 2021.

However, such presentation may not necessarily reflect the results of operations, financial position and cash flows if the K&B Business had actually existed on a stand-alone basis during the periods presented before the completion of the Reorganization.

15 unchanged sentences

The following table sets forth the revenues, cost of revenues and operating expenses that were irrelevant to the K&B Business allocated from FGI Industries to Foremost Home, Inc.

for the three and six months ended June 30, 2022 and 2021, respectively.

for the three and nine months ended September 30, 2022 and 2021, respectively.

In accordance with SAB Topic 5.z.7, the Company retroactively reflected the Reorganization in its unaudited condensed consolidated financial statements since the spin-off transaction occurred prior to effectiveness of the registration statement.

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

9 unchanged sentences

General and administrative expenses

( 1,144,992 )

Research and development expenses

Income from operations

The following table sets forth the revenues, cost of revenues and operating expenses that were directly related to the K&B Business allocated from Foremost Worldwide Co., Ltd., a wholly-owned subsidiary of Foremost, to FGI International for the three and six months ended June 30, 2022 and 2021, respectively.

Income (loss) from operations

The following table sets forth the revenues, cost of revenues and operating expenses that were directly related to the K&B Business allocated from Foremost Worldwide Co., Ltd., a wholly-owned subsidiary of Foremost, to FGI International for the three and nine months ended September 30, 2022 and 2021, respectively.

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

2 unchanged sentences

( 74,694,183 )

( 43,128,324 )

Selling and distribution expenses

( 1,261,384 )

General and administrative expenses

Research and development expenses

Income from operations

Income (loss) from operations

Income tax liability is calculated based on a separate return basis as if the K&B Business had filed separate tax returns before the completion of the Reorganization.

3 unchanged sentences

Note 2 — Summary of significant accounting policies

Historically, the Company finances its operations through internally generated cash, short-term loans and payables.

As of September 30, 2022, the Company had approximately $ 6.0 million in cash which primarily consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use.

The current credit facility is expired in December 2022, but expect to be renewed by end of November, please refer to footnote 8 – Short-term loans.

If the Company is unable to realize its assets within the normal operating cycle of a twelve (12) month period, the Company may have to consider supplementing its available sources of funds through the following sources:

· other available sources of financing from other banks and financial institutions;

● financial support from the Company’s shareholders.

Based on the above considerations, the Company’s management is of the opinion that it has sufficient funds to meet the Company’s working capital requirements and debt obligations as they become due over the next twelve (12) months.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

The results of operations for the six months ended June 30, 2022 are not necessarily indicative of results to be expected for the full year of 2022.

Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the years ended December 31, 2021 and 2020.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) for interim financial information and Article 8 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by U.S.

GAAP for complete financial statements.

Management’s opinion is that all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.

These financial statements should be read in conjunction with the Company’s consolidated financial statements and accompanying Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Principles of consolidation

16 unchanged sentences

Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income included in the unaudited condensed consolidated statements of changes in shareholders’ equity.

Transaction gains and losses arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency in the unaudited condensed consolidated statements of income and comprehensive income.

Transaction gains and losses

arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency in the unaudited condensed consolidated statements of income and comprehensive income.

For the purpose of presenting the financial statements of subsidiaries using the Renminbi (“RMB”) as their functional currency, the Company’s assets and liabilities are expressed in U.S.

Dollars at the exchange rate on the balance sheet date, which was 6.6988 and 6.3762 as of June 30, 2022 and December 31, 2021, respectively;

shareholders’ equity or parent’s net investment accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 6.5443 , 6.4488 and 6.4615 , 6.4720 for the three and six months ended June 30, 2022 and 2021, respectively.

Dollars at the exchange rate on the balance sheet date, which was 7.0928 and 6.3762 as of September 30, 2022 and December 31, 2021, respectively;

shareholders’ equity or parent’s net investment accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 6.7811 , 6.5595 and 6.4611 , 6.4683 for the three and nine months ended September 30, 2022 and 2021, respectively.

For the purpose of presenting the financial statements of the subsidiary using the Canadian Dollar (“CAD”) as its functional currency, the Company’s assets and liabilities are expressed in U.S.

Dollars at the exchange rate on the balance sheet date, which was 1.2697 and 1.2697 as of June 30, 2022 and December 31, 2021, respectively;

shareholders’ equity or parent’s net investment accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 1.2697 and 1.2444 for the three months ended June 30, 2022 and 2021, respectively, and 1.2697 and 1.2593 for the six months ended June 30, 2022 and 2021, respectively.

Dollars at the exchange rate on the balance sheet date, which was 1.3690 and 1.2697 as of September 30, 2022 and December 31, 2021, respectively;

shareholders’ equity or parent’s net investment accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 1.2697 and 1.2296 for the three months ended September 30, 2022 and 2021, respectively, and 1.2697 and 1.2494 for the nine months ended September 30, 2022 and 2021, respectively.

For the purpose of presenting the financial statements of the subsidiary using the Euro (“EUR”) as its functional currency, the Company’s assets and liabilities are expressed in U.S.

Dollars at the exchange rate on the balance sheet

date, which was 0.9532 and 0.8815 as of June 30, 2022 and December 31, 2021, respectively;

parent’s net investment accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 0.9249 , 0.9068 and 0.8325 , 0.8261 for the three and six months ended June 30, 2022 and 2021, respectively.

Dollars at the exchange rate on the balance sheet date, which was 1.0274 and 0.8815 as of September 30, 2022 and December 31, 2021, respectively;

parent’s net investment accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 0.9770 , 0.9302 and 0.8428 , 0.8317 for the three and nine months ended September 30, 2022 and 2021, respectively.

Cash consists of cash on hand, demand deposits and time deposits placed with banks or other financial institutions that have original maturities of three months or less.

The Company did no t have any cash equivalents as of June 30, 2022 and December 31, 2021.

The Company did no t have any cash equivalents as of September 30, 2022 and December 31, 2021.

Accounts receivable, net

24 unchanged sentences

The Company’s intangible assets with definite useful lives primarily consist of software acquired for internal use.

The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these

assets for impairment.

The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment.

The Company typically amortizes its intangible assets with definite useful lives on a straight-line basis over the estimated useful lives of ten years .

Impairment for long-lived assets

Long-lived assets, including property and equipment and intangible assets with definite useful lives, are reviewed for impairment whenever material events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable.

The Company assesses the recoverability of an asset based on the undiscounted future cash flows the asset is expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset.

If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.

As of June 30, 2022 and December 31, 2021, no impairment of long-lived assets was recognized.

The Company assesses the recoverability of an asset group based on the undiscounted future cash flows the asset group is expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset group plus net proceeds expected from disposition of the asset group, if any, are less than the carrying value of the asset group.

If an impairment is identified, the Company would reduce the carrying amount of the asset group to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.

As of September 30, 2022 and December 31, 2021, no impairment of long-lived assets was recognized.

The Company determines if an arrangement is a lease at inception.

6 unchanged sentences

As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate on the commencement date of the lease as the discount rate in determining the present value of future lease payments.

The Company determines the incremental borrowing rate for each lease by using the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

payments at commencement date.

The Company’s lease terms may include options to extend or terminate the lease when there are relevant economic incentives present that make it reasonably certain that the Company will exercise that option.

10 unchanged sentences

Revenue recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).

ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

The Company generates revenues from sales of K&B products, and recognizes revenue as control of its products is transferred to its customers, which is generally at the time of shipment or upon delivery based on the contractual terms with the Company’s customers.

10 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Revenues by product line

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Revenues by geographic location

United States

Rest of World

Share-based compensation

40 unchanged sentences

As an emerging growth company, the Company plans to adopt this guidance from January 1, 2023 and is currently evaluating the impact on its unaudited condensed consolidated financial statements upon adoption.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The adoption of the standard did not have an impact on our financial position or results of operation.

The Company considers the applicability and impact of all ASUs.

2 unchanged sentences

Accounts receivable, net consisted of the following:

June 30, 2022

September 30, 2022

December 31, 2021

6 unchanged sentences

Movements of allowance for doubtful accounts are as follows:

June 30, 2022

December 31, 2021

For the Nine Months Ended

For the Years Ended

September 30,

Beginning balance

1 unchanged sentence

Movements of accrued defective return and discount accounts are as follows:

June 30, 2022

December 31, 2021

For the Nine Months Ended

For the Years Ended

September 30,

Beginning balance

Addition (Provision)

( 1,456,022 )

Ending balance

1 unchanged sentence

Inventories, net consisted of the following:

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

Movements of inventory reserves are as follows:

June 30, 2022

December 31, 2021

For the Nine Months Ended

For the Years Ended

September 30,

Beginning balance

3 unchanged sentences

Prepayments and other assets consisted of the following:

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

Property and equipment, net consist of the following:

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

Furniture and fixtures

Prepayment for purchase of building and sub-lease of land

accumulated depreciation

1 unchanged sentence

( 3,602,615 )

Depreciation expense for the six months ended June 30, 2022 and 2021 amounted to $ 95,530 and $ 99,565 , respectively, which were included in general and administrative expenses on the unaudited condensed consolidated statements of income and comprehensive income.

Depreciation expense for the nine months ended September 30, 2022, and 2021 amounted to $ 139,721 and $ 149,256 , respectively, which were included in general and administrative expenses on the unaudited condensed consolidated statements of income and comprehensive income.

Note 7 — Leases

The Company has operating leases primarily for corporate offices, warehouses and showrooms.

As of June 30, 2022, the Company’s leases have remaining lease terms up to 7 years .

Total operating lease cost as of June 30, 2022 and December 31, 2021 amounted to $ 8,678,120 and $ 9,137,045 , respectively.

As of September 30, 2022, the Company’s leases have remaining lease terms up to 6.6 years.

Total unamortized cost of leases as of September 30, 2022, and December 31, 2021 amounted to $ 10,851,359 and $ 9,137,045 , respectively.

For the nine months ended September 30, 2022 and 2021, the total lease expenses paid was $ 1,239,911 and $ 1,226,012 , respectively.

The table below presents the operating lease related assets and liabilities recorded on the Company’s consolidated balance sheets:

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

Information relating to the lease term and discount rate are as follows:

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

Operating leases

As of June 30, 2022, the maturities of operating lease liabilities were as follows:

For the years ending December 31,

As of September 30, 2022, the maturities of operating lease liabilities were as follows:

For the 12 months ending September 30,

Total lease payments

8 unchanged sentences

On August 13, 2020, the line of credit was renewed with an extended maturity date of September 23, 2022, and maximum borrowings were further decreased to $ 18,000,000 .

On September 8, 2022, the line was extended again, with a new maturity date of December 21, 2022.

Pursuant to the Credit Agreement, FGI Industries is required to maintain (a) a debt coverage ratio (defined as earnings before interest, taxes, depreciation and amortization, divided by current portion of long-term debt plus interest expense) of not less than 1.25 to 1, tested at the end of each fiscal quarter;

3 unchanged sentences

however, East West Bank provided a waiver for such non-compliance.

As of June 30, 2022, FGI Industries was in compliance with this financial covenant.

As of September 30, 2022, FGI Industries was in compliance with this financial covenant.

Furthermore, we are currently renewing our borrowing facility with East West bank with an estimated borrowing base of $ 18,000,000 for two years until December 2024.

This agreement is expected to be fully executed by the end of November 2022.

The loan bears interest at a rate per annum equal to 0.25 percentage points above the Prime Rate quoted by the Wall Street Journal.

Under no circumstances will the interest rate on this loan be less than 3.250 % per annum or more than the maximum rate allowed by applicable law.

The interest rate as of June 30, 2022 and December 31, 2021 was 4.75 % and 3.50 %, respectively.

Under no circumstances will the interest rate on this loan be less than 3.250 % per annum or more than the

maximum rate allowed by applicable law.

The interest rate as of September 30, 2022, and December 31, 2021 was 6.50 % and 3.50 %, respectively.

Each sum of borrowings under the Credit Agreement is deemed due on demand and is classified as a short-term loan.

The outstanding balance of such loan was $ 14,690,048 and $ 14,657,280 as of June 30, 2022 and December 31, 2021, respectively.

The outstanding balance of such loan was $ 13,007,649 and $ 14,657,280 as of September 30, 2022 and December 31, 2021, respectively.

On April 9, 2020, Foremost Groups, Inc.

28 unchanged sentences

On January 25, 2022, the underwriters exercised in full their option to purchase up to an additional 375,000 Warrants at the price of $ 0.01 per Option Warrant.

Management determined that these Warrants meet the definition of a derivative under ASC 815-40;

however, they fall under the scope exception, which states that contracts issued that are both a) indexed to its own stock;

and b) classified in shareholders'

equity are not considered derivatives.

determined that these Warrants meet the definition of a derivative under ASC 815-40;

however, they fall under the scope exception, which states that contracts issued that both a) indexed to its own stock;

and b) classified in shareholders' equity are not considered derivatives.

The Warrants were recorded at their fair value on the date of grant as a component of equity.

39 unchanged sentences

The board set the maximum aggregate number of ordinary shares reserved and available pursuant to the 2021 Equity Plan at 1,500,000 shares.

The number of ordinary shares reserved for issuance under our 2021 Equity Plan will automatically increase on the first day of each year, commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to the lesser of (a) 4.5 % of the total number of ordinary shares outstanding on December 31 of the immediately preceding calendar year, (b) 600,000 ordinary shares, or (c) such lesser number of shares as determined by the Board.

December 31 of the immediately preceding calendar year, (b) 600,000 ordinary shares, or (c) such lesser number of shares as determined by the Board.

The Equity Plan became effective on September 28, 2021.

The Company believes the options or awards granted contain an explicit service condition and a performance condition.

The Company believes the options or awards granted contain an explicit service condition and/or performance condition.

Under ASC 718-10-55-76, if the vesting (or exercisability) of an award is based on the satisfaction of both a service and performance condition, the entity must initially determine which outcomes are probable and recognize the compensation cost over the longer of the explicit or implicit service period.

12 unchanged sentences

On May 11, 2022, the board of directors approved the issuance of 184,627 stock options under the 2021 Equity Plan with an exercise price per share of $ 2.26 and a contractual life of 10 years to the Company’s certain officers to incentivize their performance and continue to align their interests with the Company’s shareholders.

All these options will vest as to one -third of the shares on the one-year anniversary of the grant date.

All these options are subjected to performance conditions and will vest as to one -third of the shares on the one-year anniversary of the grant date.

The remaining options will vest in a series of 24 successive equal monthly installments upon completion of each additional month of service, commencing on the grant date.

On May 11, 2022, the board of directors approved the issuance of 87,611 restricted shares under the 2021 Equity Plan to the Company’s certain officers to incentivize their performance and continue to align their interests with the Company’s shareholders.

All these awards will vest as to one -third of the shares on the one-year anniversary of the grant date.

All these awards are subjected to performance conditions and will vest as to one -third of the shares on the one-year anniversary of the grant date.

The remaining shares will vest in a series of 24 successive equal monthly installments upon completion of each additional month of service, commencing on the grant date.

On May 17, 2022, the board of directors approved the issuance of 16,363 restricted shares to our non-employee directors under the 2021 Equity Plan.

These awards will vest on December 31, 2024.

The Company has elected to recognize share-based compensation expense using a straight-line method for all the employee equity awards granted with graded vesting based on service conditions, provided that the amount of compensation cost recognized at any date is at least equal to the portion of the grant date fair value of the equity awards that are vested at that date.

These awards are subjected to performance conditions and will vest on December 31, 2024.

compensation cost recognized at any date is at least equal to the portion of the grant date fair value of the equity awards that are vested at that date.

The options granted to employees are measured based on the grant date fair value of the equity instrument.

2 unchanged sentences

Share options outstanding at December 31, 2021

Share options outstanding at June 30, 2022

Vested and exercisable at June 30, 2022

The aggregate intrinsic value in the table above represents the difference between the exercise price of the awards and the fair value of the underlying ordinary shares at each reporting date for those awards that had exercise prices below the estimated fair value of the relevant ordinary shares.

For the six months ended June 30, 2022 and 2021, the total fair value of options awarded was $ 454,373 and $ 0 , respectively.

Share options outstanding at September 30, 2022

Vested and exercisable at September 30, 2022

For the nine months ended September 30, 2022 and 2021, the total fair value of options awarded was $ 454,373 and $ 0 , respectively.

Fair value of options

The Company used the Black-Scholes simplified method for the six months ended June 30, 2022.

The Company used the Black-Scholes simplified method for the nine months ended September 30, 2022.

The assumptions used to value the options granted to employees were as follows:

For the six months ended

For the nine months ended

September 30,

Risk-free interest rate

7 unchanged sentences

The following table sets forth the amount of share-based compensation expense included in each of the relevant financial statement line items:

For the six months ended

For the nine months ended

September 30,

Selling and marketing expenses

1 unchanged sentence

Total share-based compensation expenses

As of June 30, 2022, there was $ 1,282,314 in total unrecognized employee share-based compensation expense related to unvested options, which may be adjusted for actual forfeitures occurring in the future.

As of September 30, 2022, there was $ 1,162,794 in total unrecognized employee share-based compensation expense related to unvested options and RSUs, which may be adjusted for actual forfeitures occurring in the future.

Total unrecognized compensation cost may be recognized over a weighted-average period of 2.45 years.

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Income components

6 unchanged sentences

federal income tax rate and taxes at the Company’s effective income tax rate on earnings before income taxes are as follows:

For the Six Months Ended

For the Nine Months Ended

September 30,

Federal statutory rate

3 unchanged sentences

Permanent items

Deferred rate changes

Foreign dividends and earnings taxable in the United States

1 unchanged sentence

The following is a summary of the components of the net deferred tax assets and liabilities recognized in the consolidated balance sheets:

June 30, 2022

September 30, 2022

December 31, 2021

14 unchanged sentences

Deferred tax assets, net of deferred tax liabilities

The deferred tax assets related to the Company’s net operating losses as of June 30, 2022 and December 31, 2021 have no expiration date.

The deferred tax assets related to the Company’s net operating losses of $ 4,212,179 and $ 5,150,646 for September 30, 2022 and December 31, 2021.

The Federal Net Operating losses have no expiration date.

Note 12 — Related party transactions and balances

Prepayments — related parties

September 30,

Name of Related Party

3 unchanged sentences

An entity under common control

Accounts Payables — related parties

September 30,

Name of Related Party

Foremost Worldwide Co., Ltd

An entity under common control

Other receivables — related parties

Other Payables — related parties

September 30,

Name of Related Party

8 unchanged sentences

Miscellaneous

( 1,265,013 )

Property purchase — related party

In July 2022, FGI entered into a property purchase agreement with a related party to purchase building and sub-lease of land for the aggregated amount of approximately $ 1.97 million.

As of September 30, 2022, FGI has remitted approximately $ 1.3 million, and remitted the remaining balance in October 2022.

The balance of prepayment for sub-lease of land, in the amount of $ 1.3 million, was included in property and equipment, net on the Company's unaudited condensed consolidated balance sheet as of September 30, 2022 (see Note 6).

Loan guarantee by a related party

2 unchanged sentences

Note 13 — Concentrations of risks

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and restricted cash.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash.

The Canadian Deposit Insurance Corporation pays compensation up to a limit of CAD 100,000 (approximately USD 73,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of June 30, 2022, a cash balance of CAD 2,241,729 (USD 1,765,558 ) was maintained at financial institutions in Canada, of which CAD 2,141,729 (USD 1,686,799 ) was subject to credit risk.

As of September 30, 2022, a cash balance of CAD 5,904,584 (USD 4,313,063 ) was maintained at financial institutions in Canada, of which CAD 5,804,584 (USD 4,240,017 ) was subject to credit risk.

The Taiwan Central Deposit Insurance Corporation pays compensation up to a limit of New Taiwan Dollar 3,000,000 (approximately USD 95,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of June 30, 2022, an aggregated cash balance of USD 865,845 was maintained at financial institutions in Taiwan, of which USD 645,912 was subject to credit risk.

The Federal Deposit Insurance Corporation pays compensation up to a limit of USD 250,000 if the bank with which an individual/a company holds its eligible deposit fails.

As of June 30, 2022, a cash balance of USD 275,776 was maintained at financial institutions in the United States, of which USD 25,776 was subject to credit risk.

As of September 30, 2022, an aggregated cash balance of USD 1,412,605 was maintained at financial institutions in Taiwan, of which USD 1,223,658 was subject to credit risk.

While management believes that these financial institutions are of high credit quality, it also continually monitors their creditworthiness.

3 unchanged sentences

Customer concentration risk

For the three months ended June 30, 2022, three customers accounted for 21.2 %, 19.3 % and 10.8 % of the Company’s total revenues, respectively.

For the three months ended June 30, 2021, three customers accounted for 26.3 %, 18.5 % and 13.1 % of the Company’s total revenues, respectively.

No other customer accounts for more than 10% of the Company’s revenue for the three months ended June 30, 2022 and 2021.

For the six months ended June 30, 2022, two customers accounted for 23.3 % and 20.0 % of the Company’s total revenues, respectively.

For the six months ended June 30, 2021, three customers accounted for 27.9 %, 13.5 % and 13.1 % of the Company’s total revenues, respectively.

No other customer accounts for more than 10% of the Company’s revenue for the six months ended June 30, 2022 and 2021.

As of June 30, 2022, four customers accounted for 22.1 %, 17.9 %, 13.8 % and 11.2 % of the total balance of accounts receivable, respectively.

For the three months ended September 30, 2022, two customers accounted for 23.8 % and 19.2 % of the Company’s total revenues, respectively.

For the three months ended September 30, 2021, three customers accounted for 19.9 %, 15.0 % and 10.4 % of the Company’s total revenues, respectively.

No other customer accounts for more than 10% of the Company’s revenue for the three months ended September 30, 2022 and 2021.

For the nine months ended September 30, 2022, two customers accounted for 22.1 % and 21.1 % of the Company’s total revenues, respectively.

For the nine months ended September 30, 2021, three customers accounted for 24.7 %,

14.0 % and 12.0 % of the Company’s total revenues, respectively.

No other customer accounts for more than 10% of the Company’s revenue for the nine months ended September 30, 2022 and 2021.

As of September 30, 2022, three customers accounted for 30.6 %, 14.6 % and 12.6 % of the total balance of accounts receivable, respectively.

As of December 31, 2021, four customers accounted for 22.4 %, 14.0 %, 13.1 % and 12.1 % of the total balance of accounts receivable, respectively.

No other customer accounted for more than 10% of the Company’s accounts receivable as of June 30, 2022 and December 31, 2021.

No other customer accounted for more than 10% of the Company’s accounts receivable as of September 30, 2022 and December 31, 2021.

Vendor concentration risk

For the three months ended June 30, 2022, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 58.8 % of the Company’s total purchases.

For the three months ended June 30, 2021, Huida accounted for 34.8 % of the Company’s total purchases.

No other supplier accounted for more than 10% of the Company’s total purchases for the three ended June 30, 2022 and 2021

For the six months ended June 30, 2022, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 52.2 % of the Company’s total purchases.

For the six months ended June 30, 2021, Huida accounted for 38.3 % and another vendor accounted 10.2 % of the Company’s total purchases.

No other supplier accounted for more than 10% of the Company’s total purchases for the six months ended June 30, 2022 and 2021.

As of June 30, 2022, Huida accounted for 68.9 % of the total balance of accounts payable.

For the three months ended September 30, 2022, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 49.9 % of the Company’s total purchases.

For the three months ended September 30, 2021, Huida accounted for 44.2 % of the Company’s total purchases.

No other supplier accounted for more than 10% of the Company’s total purchases for the three ended September 30, 2022 and 2021

For the nine months ended September 30, 2022, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 51.4 % of the Company’s total purchases.

For the nine months ended September 30, 2021, Huida accounted for 40.8 % of the Company’s total purchases.

No other supplier accounted for more than 10% of the Company’s total purchases for the nine months ended September 30, 2022 and 2021.

As of September 30, 2022, Huida accounted for 72.4 % of the total balance of accounts payable.

As of December 31, 2021, Huida accounted for 66.1 % of the total balance of accounts payable.

No other supplier accounts for more than 10% of the Company’s accounts payable as of June 30, 2022 and December 31, 2021.

No other supplier accounts for more than 10% of the Company’s accounts payable as of September 30, 2022 and December 31, 2021.

Note 14 — Commitments and contingencies

6 unchanged sentences

The Company’s chief operating decision maker has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company, and hence the Company has only one reportable segment.

Note 16 — Subsequent events

In July 2022, FGI has entered into a property purchase agreement with a related party to purchase building and sub-lease of land for the aggregated amount of approximately $ 1.97 million.

As of the date of this report, FGI has remitted approximately $ 0.6 million, and is expected to remit the remaining balance by the end of November 2022 to complete the purchase transactions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements