What changed in this filing

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Item 1. Financial Statements

2023-11-13 compared with 2023-08-11 · 230 added, 172 removed, 701 unchanged (36% of the section changed)

2 unchanged sentences

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022 (Audited)

Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2023 and 2022

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2023 and 2022

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 (Audited)

Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2023 and 2022

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2023 and 2022

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2023

September 30, 2023

December 31, 2022

24 unchanged sentences

SHAREHOLDERS’ EQUITY

Preference Shares ($ 0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022)

Ordinary shares ($ 0.0001 par value, 200,000,000 shares authorized, 9,500,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022)

Preference Shares ($ 0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022)

Ordinary shares ($ 0.0001 par value, 200,000,000 shares authorized, 9,500,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022)

Additional paid-in capital

3 unchanged sentences

( 1,396,319 )

FGI Industries Ltd.

shareholders’ equity

Non-controlling interests

Total shareholders’ equity

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

COST OF REVENUES

5 unchanged sentences

INCOME FROM OPERATIONS

OTHER (EXPENSES) INCOME

OTHER INCOME (EXPENSES)

Interest income

Interest expense

Other (loss) income, net

Total other (expenses), net

Other income, net

Total other income (expenses), net

INCOME BEFORE INCOME TAXES

1 unchanged sentence

Total provision for income taxes

NET INCOME (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS)

net loss attributable to non-controlling shareholders

Net income attributable to FGI Industries Ltd.

OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustment

COMPREHENSIVE INCOME (LOSS)

( 1,006,323 )

COMPREHENSIVE INCOME

comprehensive loss attributable to non-controlling shareholders

Comprehensive income attributable to FGI Industries Ltd.

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’

Industries Ltd.

Preference Shares

1 unchanged sentence

Comprehensive

Shareholders'

Balance at December 31, 2021

8 unchanged sentences

Balance at June 30, 2022

Share-Based compensation

Foreign currency translation adjustments

Balance at September 30, 2022

( 1,661,055 )

Industries Ltd.

Preference Shares

1 unchanged sentence

Comprehensive

Shareholders'

Balance at December 31, 2022

8 unchanged sentences

( 1,371,323 )

Share-Based compensation

Foreign currency translation adjustments

Balance at September 30, 2023

( 1,415,820 )

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

Net (loss) income

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

Adjustments to reconcile net income to net cash used in operating activities

Depreciation and amortization

2 unchanged sentences

Reversal of defective return

( 1,456,022 )

Foreign exchange transaction gain

Adjustment for Right of use assets

Deferred income (benefits) taxes

( 2,552,649 )

Deferred income tax (benefit) expense

Changes in operating assets and liabilities

Accounts receivable

Prepayments and other current assets

( 1,627,547 )

Prepayments and other current assets

( 1,858,888 )

3 unchanged sentences

Other noncurrent assets

( 1,048,150 )

Right-of-use assets

1 unchanged sentence

( 18,257,595 )

( 10,805,982 )

Accounts payable-related parties

1 unchanged sentence

Accrued expenses and other current liabilities

( 1,443,014 )

Net cash used in operating activities

2 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of property and equipment

Purchase of property and equipment

Prepayment for purchase of equipment and construction-in-progress

( 1,295,924 )

Net cash used in investing activities

( 1,350,974 )

CASH FLOWS FROM FINANCING ACTIVITIES

Net (repayments of) proceeds from revolving credit facility

Net repayments of revolving credit facility

( 1,832,849 )

( 1,649,631 )

Net proceeds from issuance of ordinary shares in IPO

4 unchanged sentences

( 4,697,481 )

CASH, BEGINNING OF YEAR

CASH, END OF YEAR

CASH, BEGINNING OF PERIOD

CASH, END OF PERIOD

SUPPLEMENTAL CASH FLOW INFORMATION

1 unchanged sentence

Cash paid during the period for income taxes

( 1,755,531 )

NON-CASH INVESTING AND FINANCING ACTIVITIES

Net changes in parent company investment

New addition on Right-of-use assets

29 unchanged sentences

● A Canadian company

100 % owned by FGI

100 % owned by FGI Industries, Inc.

● Incorporated on October 17, 1997

Industries, Inc.

● Sales and distribution in Canada

1 unchanged sentence

● A German company

100 % owned by FGI Europe

100 % owned by FGI Europe Investment Limited

● Incorporated on January 24, 2013

● Sales and distribution in Germany

Investment Limited

FGI China, Ltd.

● A PRC limited liability company

100 % owned by FGI

100 % owned by FGI International, Limited

● Incorporated on August 19, 2021

International, Limited

● Sourcing and product development

1 unchanged sentence

● An UK company

100 % owned by FGI Europe

100 % owned by FGI Europe Investment Limited

● Incorporated on December 10, 2021

Investment Limited

● Sales and distribution in UK

4 unchanged sentences

● Sales and distribution in Australia

Covered Bridge Cabinetry

Covered Bridge Cabinetry Manufacturing Co., Ltd

● A Cambodian company

100 % owned by FGI

Manufacturing Co., Ltd

● Incorporated on April 21, 2022

1 unchanged sentence

Isla Porter LLC

● A New Jersey corporation

60 % owned by FGI

● Incorporated on June 2, 2023

Industries, Inc.

● A New Jersey company

60 % owned by FGI Industries, Inc.

● Formed on June 2, 2023

● Sales and distribution in the United States

30 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 three and six months ended June 30, 2023 and 2022, respectively.

for three and nine months ended September 30, 2023 and 2022, respectively.

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

7 unchanged sentences

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 three and six months ended June 30, 2023 and 2022, respectively.

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 three and nine months ended September 30, 2023 and 2022, respectively.

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

( 22,853,884 )

( 22,455,116 )

Selling and distribution expenses

8 unchanged sentences

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

As of June 30, 2023, the Company had approximately $ 6.9 million in cash and cash equivalents, which primarily consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use.

As of September 30, 2023, the Company had approximately $ 5.4 million in cash and cash equivalents, which primarily consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use.

As further described in Note 8, as of the date of this quarterly report, our wholly owned subsidiary FGI Industries Inc.

30 unchanged sentences

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 7.2797 and 6.9653 as of June 30, 2023 and December 31, 2022, respectively;

shareholders’ equity accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 6.9795 and 6.5443 for the three months ended June 30, 2023 and 2022, respectively, and 6.9369 and 6.4488 for the six months ended June 30, 2023 and 2022, respectively.

Dollars at the exchange rate on the balance sheet date, which was 7.3144 and 6.9653 as of September 30, 2023 and December 31, 2022, respectively;

shareholders’ equity accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 7.2414 and 6.7811 for the three months ended September 30, 2023 and 2022, respectively, and 7.0384 and 6.5595 for the nine months ended September 30, 2023 and 2022, 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 1.3541 and 1.3541 as of June 30, 2023 and December 31, 2022, respectively;

shareholders’ equity accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 1.3541 and 1.2697 for the three months ended June 30, 2023 and 2022, respectively, and 1.3541 and 1.2697 for the six months ended June 30, 2023 and 2022, respectively.

Dollars at the exchange rate on the balance sheet date, which was 1.3541 and 1.3541 as of September 30, 2023 and December 31, 2022, respectively;

shareholders’ equity accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 1.3541 and 1.2697 for the three months ended September 30, 2023 and 2022, respectively, and 1.3541 and 1.2296 for the nine months ended September 30, 2023 and 2022, 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 0.9163 and 0.9338 as of June 30, 2023 and December 31, 2022, respectively;

shareholders’ equity accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 0.9201 and 0.9249 for the three months ended June 30, 2023 and 2022, respectively, and 0.9269 and 0.9068 for the six months ended June 30, 2023 and 2022, respectively.

Dollars at the exchange rate on the balance sheet date, which was 0.9490 and 0.9338 as of September 30, 2023 and December 31, 2022, respectively;

shareholders’ equity accounts are translated at historical rates, and income and expense items are translated at the average exchange rate during the period, which was 0.9143 and 0.9770 for the three months ended September 30, 2023 and 2022, respectively, and 0.9227 and 0.9302 for the nine months ended September 30, 2023 and 2022, respectively.

Reclassification

Certain prior year amounts have been reclassified to conform with the current year presentation, specifically the interest expenses and accrued expenses and other current liabilities in consolidated statements of cash flow.

These reclassifications have no effect on the consolidated balance sheets and results of operations previously reported.

These reclassifications have no effect on the consolidated balance sheets previously reported.

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, 2023 and December 31, 2022.

The Company did no t have any cash equivalents as of September 30, 2023 and December 31, 2022.

Accounts receivable, net

30 unchanged sentences

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 June 30, 2023 and December 31, 2022, no impairment of long-lived assets was recognized.

As of September 30, 2023 and December 31, 2022, no impairment of long-lived assets was recognized.

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

33 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Revenues by product line

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Revenues/ total asset by geographic location

For the Nine Months Ended

September 30,

Revenues/ total assets by geographic location

United States

2 unchanged sentences

Shipping and handling costs are expensed as incurred and are included in selling and distribution expenses on the accompanying statement of operations.

For the three months ended June 30, 2023 and 2022, shipping and handling expense was $ 210,370 and $ 242,086 , respectively, for the six months ended June 30, 2023 and 2022, shipping and handling expense was $ 314,084 and $ 489,195 , respectively.

For the three months ended September 30, 2023 and 2022, shipping and handling expense was $ 176,077 and $ 210,561 , respectively, for the nine months ended September 30, 2023 and 2022, shipping and handling expense was $ 490,161 and $ 699,756 , respectively.

Share-based compensation

1 unchanged sentence

In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a liability award or an equity award.

All the Company’s share-based awards were classified as equity awards and are recognized in the consolidated financial statements based on their grant date fair values.

All the Company’s share-based awards were

classified as equity awards and are recognized in the consolidated financial statements based on their grant date fair values.

The Company has elected to recognize share-based compensation using the straight-line method for all share-based awards granted over the requisite service period, which is the vesting period.

2 unchanged sentences

The Black Scholes Model is applied in determining the estimated fair value of the options granted to employees and non-employees.

The Company recognized share-based compensation $ 152,835 , $ 272,556 and $ 104,920 , $ 144,734 for the three and six months ended June 30, 2023 and 2022, respectively.

The Company recognized share-based compensation $ 59,337 , $ 331,893 and $ 115,920 , $ 260,652 for the three and nine months ended September 30, 2023 and 2022, respectively.

Deferred taxes are recognized based on the future tax consequences of the differences between the carrying value of assets and liabilities and their respective tax bases.

7 unchanged sentences

The Company records interest and penalties on our uncertain tax positions in income tax expense.

As of June 30, 2023, the tax years ended December 31, 2019 through December 31, 2022 for FGI Industries, Inc.

As of September 30, 2023, the tax years ended December 31, 2020 through December 31, 2022 for FGI Industries, Inc.

remain open for statutory examination by tax authority.

We record the tax effects of Foreign Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI) related to our foreign operations as a component of income tax expense in the period in which the tax arises.

Non-controlling interests

The Company’s non-controlling interests represent the minority shareholders’ ownership interests related to the Company’s subsidiary, including 40 % in Isla Porter LLC.

The non-controlling interests are presented in the unaudited consolidated balance sheets, separate from equity attributable to the shareholders of the Company.

Non-controlling interests in the results of operations of the Company are presented on the unaudited condensed consolidated statement of income and comprehensive income as allocations of the net income or loss for the period between non-controlling shareholders and the shareholders of the Company.

Comprehensive income

1 unchanged sentence

net income and other comprehensive income.

Other comprehensive income refers to revenue, expenses, gains and losses that under US GAAP are recorded as an element of equity but are excluded from net income.

Other comprehensive income refers to revenue, expenses, gains and losses that under US GAAP are recorded as an element of

equity but are excluded from net income.

Other comprehensive income consists of a foreign currency translation adjustment resulting from the Company not using the U.S.

6 unchanged sentences

Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

The following table sets forth the computation of basic and diluted earnings per share for the six months ended June 30, 2023 and 2022:

The following table sets forth the computation of basic and diluted earnings per share for the nine months ended September 30, 2023 and 2022:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income attributable to FGI Industries Ltd.

13 unchanged sentences

This guidance became effective for interim and annual periods beginning after December 15, 2019 with early adoption permitted for interim and annual periods beginning after December 15, 2018.

The requirements of the amended guidance should be applied using a modified retrospective approach except for debt securities, which require a prospective transition approach.

In November 2019, the FASB issued ASU 2019-10, which finalized the delay of such effective date to fiscal years beginning after December 15, 2022 for private and all other companies, including emerging

growth companies.

The requirements of the amended guidance should be applied using a modified retrospective approach except for debt securities, which require a

prospective transition approach.

As an emerging growth company, the Company adopted this guidance from January 1, 2023 and did not have an impact on its unaudited condensed consolidated financial statements.

3 unchanged sentences

Accounts receivable, net consisted of the following:

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

( 1,595,838 )

Accounts receivable, net

Movements of allowance for credit losses are as follows:

For the Six Months Ended

For the Nine Months Ended

For the Year Ended

September 30,

Beginning balance

1 unchanged sentence

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

For the Six Months Ended

For the Nine Months Ended

For the Year Ended

September 30,

Beginning balance

3 unchanged sentences

Inventories, net consisted of the following:

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

Movements of inventory reserves are as follows:

For the Six Months Ended

For the Nine Months Ended

For the Year Ended

September 30,

Beginning balance

2 unchanged sentences

Prepayments and other assets consisted of the following:

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Property and equipment, net consist of the following:

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

( 3,687,511 )

Depreciation expenses for the six months ended June 30, 2023 and 2022 amounted to $ 78,759 and $ 95,530 , respectively;

depreciation expenses for the three months ended June 30, 2023 and 2022 amounted to $ 43,199 and $ 47,915 .

Depreciation expenses for the nine months ended September 30, 2023 and 2022 amounted to $ 135,256 and $ 139,721 respectively;

depreciation expenses for the three months ended September 30, 2023 and 2022 amounted to $ 56,497 and $ 44,191 .

Depreciation expenses were included in general and administrative expenses on the unaudited condensed consolidated statements of income and comprehensive income.

1 unchanged sentence

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

As of June 30, 2023, the Company’s leases have remaining lease terms up to 11.7 years.

as of September 30, 2023, the Company’s leases have remaining lease terms up to 11.4 years.

The company also purchased an operating lease land from a common control affiliate for manufacturing, which has remaining lease term up to 48.75 years and can be extended for another 50 years for $ 1 .

For the three months ended June 30, 2023 and 2022, the total lease expenses paid was $ 517,588 and $ 414,821 , respectively, for the six months ended June 30, 2023 and 2022, the total lease expenses paid was $ 935,266 and $ 824,972 , respectively.

For the three months ended September 30, 2023 and 2022, the total lease expenses was $ 697,205 and $ 413,829 , respectively, for the nine months ended September 30, 2023 and 2022, the total lease expenses was $ 1,862,939 and $ 1,231,989 , respectively.

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

June 30, 2023

September 30, 2023

December 31, 2022

4 unchanged sentences

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

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

Operating leases

As of June 30, 2023, the maturities of operating lease liabilities were as follows:

For the 12 months ending June 30,

As of September 30, 2023, the maturities of operating lease liabilities were as follows:

For the 12 months ending September 30,

Total lease payments

8 unchanged sentences

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;

(b) an effective tangible net worth (defined as total book net worth plus minority interest, less amounts due from officers, shareholders and affiliates, minus intangible

assets and accumulated amortization, plus debt subordinated to East West Bank) of not less than $ 10,000,000 , tested at the end of each fiscal quarter, on consolidated basis;

(b) an effective tangible net worth (defined as total book net worth plus minority interest, less amounts due from officers, shareholders and affiliates, minus intangible assets and accumulated amortization, plus debt subordinated to East West Bank) of not less than $ 10,000,000 , tested at the end of each fiscal quarter, on consolidated basis;

and (c) a total debt to tangible net worth ratio (defined as total liabilities divided by tangible net worth, which is defined as total book net worth plus minority interest, less loans to officers, shareholders, and affiliates minus intangible assets and accumulated amortization) not to exceed 4.0 to 1, tested at the end of each fiscal quarter, on consolidated basis.

As of June 30, 2023, FGI Industries was in compliance with this financial covenant.

As of September 30, 2023, FGI Industries was in compliance with these financial covenants.

FGI Industries is also required to provide the lender with certain periodic financial information, including annual audited financial statements of FGI Industries on a non-consolidated basis.

2 unchanged sentences

The loan bears interest at rate equal to, at the Company’s option, either (i) 0.25 percentage points less than the Prime Rate quoted by the Wall Street Journal or (ii) the SOFR Rate (as administered by CME Group Benchmark Administration Limited and displayed by Bloomberg LP) plus 2.20 % per annum (in either case, subject to a minimum rate of 4.500 % per annum) .

The interest rate as of June 30, 2023, and December 31, 2022 was 8.00 % and 7.25 %, respectively.

The interest rate as of September 30, 2023, and December 31, 2022 was 8.25 % and 7.25 %, 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 $ 7,863,680 and $ 9,795,052 as of June 30, 2023, and December 31, 2022, respectively.

The outstanding balance of such loan was $ 7,962,203 and $ 9,795,052 as of September 30, 2023, and December 31, 2022, respectively.

HSBC Canada Bank Loan / Foreign Exchange Facility

1 unchanged sentence

has a line of credit agreement with HSBC Canada (the “Canadian Revolver”).

The revolving line of credit with HSBC Canada allows for borrowing up to CAD $ 7,500,000 (US $ 5,538,734 as of the June 30, 2023 exchange rate).

The revolving line of credit with HSBC Canada allows for borrowing up to CAD $ 7,500,000 (US $ 5,538,734 as of the September 30, 2023 exchange rate).

This is an assets-based line of credit, the borrowing limit is calculated based on certain percentage of accounts receivable and inventory balances.

3 unchanged sentences

The loan bears interest at a rate of Prime rate plus 0.50 %.

As of June 30, 2023, FGI Canada Ltd.

was in compliance with this financial covenant.

Borrowings under this line of credit amounts to $ 0 as of June 30, 2023, and December 31, 2022.

As of September 30, 2023, FGI Canada Ltd.

was in compliance with these financial covenants.

Borrowings under this line of credit amounts to $ 0 as of September 30, 2023, and December 31, 2022.

The facility matures at the discretion of HSBC Canada upon 60 days ’ notice.

11 unchanged sentences

Initial Public Offering

On January 27, 2022 , the Company consummated its IPO of 2,500,000 units (“Units”), each consisting of (i) one ordinary share, $ 0.0001 par value per share, of the Company (the “Shares”), and (ii) one warrant of the Company (the

“Warrants”) entitling the holder to purchase one Share at an exercise price of $ 6.00 per Share.

The Shares and Warrants were issued separately in the offering, and may be transferred separately immediately upon issuance.

24 unchanged sentences

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;

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.

14 unchanged sentences

The 2021 Equity Plan permits the grant of equity and equity-based incentive awards, including non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, stock unit awards and other stock-based awards.

The purpose of the 2021 Equity Plan is to attract and retain the best available personnel for positions of

responsibility within the Company, to provide additional incentives to them to align their interests with those of the Company’s shareholders and to thereby promote the Company’s long-term business success.

The purpose of the 2021 Equity Plan is to attract and retain the best available personnel for positions of responsibility within the Company, to provide additional incentives to them to align their interests with those of the Company’s shareholders and to thereby promote the Company’s long-term business success.

On October 7, 2021, the board approved the adoption of the FGI Industries Ltd.

12 unchanged sentences

These awards will vest in three equal installments on each anniversary of the grant date over three years .

As of June 30, 2023, no granted shares under this plan are vested.

As of September 30, 2023, 61,250 of these granted RSUs were vested.

On April 13, 2022, the board of directors approved the issuance of 8,750 RSUs to an employee under the 2021 Equity Plan as compensation awards.

2 unchanged sentences

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.

As of June 30, 2023, no granted shares under this plan are vested.

As of September 30, 2023, 4,132 of these granted RSUs were vested.

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

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.

The fair value for these RSUs was $ 198,000 based on the closing share price of $ 2.26 as at May 11, 2022.

If the maximum performance is met, the Company will issue additional 43,805 RSUs per this plan with fair value of $ 99,000 .

As of June 30, 2023, no granted shares under this plan are vested.

All these awards are subjected to performance conditions through December 31, 2024.

The grant date fair value for these RSUs was $ 198,000 based on the closing share price of $ 2.26 as at May 11, 2022.

If the maximum performance is met, the Company will issue an additional 43,805 RSUs under these awards with a grant date fair value of $ 99,000 .

As of September 30, 2023, all RSUs were canceled and none of them were vested.

On May 17, 2022, the board of directors approved the issuance of 16,363 RSUs to its independent directors under the 2021 Equity Plan as compensation award.

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

All these awards are subjected to performance conditions through December 31, 2024.

The fair value for these RSUs was $ 36,000 based on the closing share price of $ 2.20 as at May 17, 2022.

As of June 30, 2023 , no granted shares under this plan are vested.

As of September 30, 2023, none of these RSUs were vested.

On March 23, 2023, the board of directors approved the issuance of 96,635 RSUs under the 2021 Equity Plan to Company officers to incentivize their performance and continue to align their interests with the Company’s shareholders.

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.

The fair value for these RSUs was $ 201,000 based on the closing share price of $ 2.08 as at March 29, 2023.

If the maximum performance is met, the Company will issue additional 48,317 RSUs per this plan with fair value of $ 100,500 .

As of June 30, 2023, no granted shares under this plan are vested.

All these awards are subjected to performance conditions through December 31, 2025.

The grant date fair value for these RSUs was $ 201,000 based on the closing share price of $ 2.08 as at March 29, 2023.

If the maximum performance is met, the Company will issue an additional 48,317 RSUs under these awards with a grant date fair value of $ 100,500 .

As of September 30, 2023, none of these RSUs were vested.

On March 23, 2023, the board of directors approved the issuance of 17,349 RSUs to its independent directors under the 2021 Equity Plan as compensation award.

All these awards are subjected to performance conditions and will vest on December 31, 2025.

The fair value for these RSUs was $ 36,000 based on the closing share price of $ 2.08 as at March 29, 2023.

As of June 30, 2023 , no granted shares under this plan are vested

All these awards are subjected to performance conditions through December 31, 2025.

The grant date fair value for these RSUs was $ 36,000 based on the closing share price of $ 2.08 as at March 29, 2023.

As of September 30, 2023, none of these RSUs were vested.

The following is a summary of the restricted share granted:

Restricted shares grants

Non-vested as of January 1, 2022

Non-vested as of December 31, 2022

Non-vested as of June 30, 2023

The following is a summary of the status of restricted shares at June 30, 2023:

Non-vested as of September 30, 2023

The following is a summary of the status of restricted shares at September 30, 2023:

Outstanding Restricted Share

4 unchanged sentences

On March 24, 2022, the board of directors approved the issuance of 98,747 share options under the 2021 Equity Plan with an exercise price per share of $ 3.07 and a contractual life of 10 years to the Company’s executive officers and directors to incentivize their performance and continue to align their interests with the Company’s shareholders.

The fair value for these options was $ 141,401 determined using the Black-Scholes simplified method at the per option fair value of $ 1.43 .

The grant date fair value for these options was $ 141,401 determined using the Black-Scholes simplified method at the per option fair value of $ 1.43 .

All these options will vest as to one -third of the options 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.

As of June 30, 2023, no granted options under this plan are vested.

As of September 30, 2023, 49,374 of these granted options were vested.

On April 13, 2022, the board of directors approved the issuance of 97,371 share options under the 2021 Equity Plan with an exercise price per share of $ 2.52 and a contractual life of 10 years to the Company’s employees to incentivize their performance and continue to align their interests with the Company’s shareholders.

The fair value for these options was $ 114,972 determined using the Black-Scholes simplified method at the per option fair value of $ 1.18 .

The grant date fair value for these options was $ 114,972 determined using the Black-Scholes simplified method at the per option fair value of $ 1.18 .

All these options 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.

As of June 30, 2023, no granted options under this plan are vested.

As of September 30, 2023, 45,981 of these granted options were vested.

On May 11, 2022, the board of directors approved the issuance of 159,881 share options under the 2021 Equity Plan with an exercise price per share of $ 2.26 and a contractual life of 10 years to Company officers to incentivize their performance and continue to align their interests with the Company’s shareholders.

The fair value for these options was $ 171,462 determined using the Black-Scholes simplified method at the per option fair value of $ 1.07 .

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 number of options granted were subject to performance conditions through December 31, 2022, which could result in additional options awarded if maximum performance metrics were met.

In addition to the performance criteria, the options 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.

The actual number of options 159,881 shares were determined, no additional options would be granted per performance threshold.

As of June 30, 2023, no granted options under this plan are vested.

The options paid out at threshold under the performance metrics, and no additional options were awarded.

As of September 30, 2023, 71,058 of these granted options were vested.

On March 23, 2023, the board of directors approved the issuance of 158,976 share options under the 2021 Equity Plan with an exercise price per share of $ 2.08 and a contractual life of 10 years to Company officers to incentivize their performance and continue to align their interests with the Company’s shareholders.

The fair value for these options was $ 201,000 determined using the Black-Scholes simplified method at the per option fair value of $ 1.26 .

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 grant date fair value for these options was $ 201,000 determined using the Black-Scholes simplified method at the per option fair value of $ 1.26 .

All these options are subjected to performance conditions through December 31, 2023, which could result in additional options awarded if maximum performance metrics are met.

In addition to the performance criteria, the options 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.

The actual number of options were determined, no additional options would be granted per performance threshold.

As of June 30, 2023, no granted options under this plan are vested.

As of September 30, 2023, none of these granted options were vested.

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, 2022

Share options outstanding at June 30, 2023

Vested and exercisable at June 30, 2023

For the six months ended June 30, 2023 and 2022, the total fair value of options awarded was $ 628,834 and $ 454,373 , respectively.

Share options outstanding at September 30, 2023

Vested and exercisable at September 30, 2023

For the nine months ended September 30, 2023 and 2022, the total fair value of options awarded was $ 628,834 and $ 454,373 , respectively.

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 price below the estimated fair value of the relevant Ordinary Shares.

Fair value of options

The Company used the Black-Scholes simplified method for the six months ended June 30, 2023.

The Company used the Black-Scholes simplified method for the nine months ended September 30, 2023.

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

Six Months Ended

Nine Months Ended

For the Year Ended

September 30,

Risk-free interest rate

8 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 distribution expenses

1 unchanged sentence

Total share-based compensation expenses

As of June 30, 2023, there was $ 1,182,378 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.

As of September 30, 2023, there was $ 1,061,378 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 1.82 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

5 unchanged sentences

Effective tax rate

The effective tax rate for the six months ended June 30, 2023 as presented in the table above did not give consideration to the elimination of unrealized profit from intercompany sales.

The effective tax rate for the nine months ended September 30, 2023 as presented in the table above did not give consideration to the elimination of unrealized profit from intercompany sales.

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

June 30, 2023

September 30, 2023

December 31, 2022

14 unchanged sentences

Deferred tax assets, net of deferred tax liabilities

The deferred tax assets related to the Company’s net operating losses of 2,797,253 (Federal $ 1,762,539 and States $ 1,034,714 ) and $ 3,174,799 (Federal $ 1,975,734 and States $ 1,199,065 ) as of June 30, 2023 and December 31, 2022, respectively.

The deferred tax assets related to the Company’s net operating losses of $ 2,994,939 (Federal $ 1,878,000 and States $ 1,116,939 ) and $ 3,174,799 (Federal $ 1,975,734 and States $ 1,199,065 ) as of September 30, 2023 and December 31, 2022, respectively.

The Federal Net Operating losses have no expiration date.

The States Net Operating losses have either 20 years or no expiration date.

The Company had no material unrecognized tax benefits at June 30, 2023 or, December 31, 2022.

The Company had no material unrecognized tax benefits at September 30, 2023 or, December 31, 2022.

The Company has not taken any tax positions for which it is reasonably possible that unrecognized tax benefits will significantly increase within the next 12 months.

11 unchanged sentences

Note 12 — Related party transactions and balances

Purchase from a related party – consisted of the following:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Sales and purchases from a related party – consisted of the following:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Name of Related Party

3 unchanged sentences

An entity under common control

Foremost Home Inc.

FURNITURE (CAMBODIA) CO., LTD

An entity under common control

The ending balance of such transactions as of June 30, 2023 and December 31, 2022, are listed of the following:

Foremost Australasia Pty Ltd

An entity under common control

For the Nine Months Ended September 30,

Name of Related Party

Foremost Worldwide Co., Ltd

An entity under common control

The ending balance of such transactions as of September 30, 2023 and December 31, 2022, are listed of the following:

Prepayments — related parties

September 30,

Name of Related Party

Focal Capital Holding Limited

Rizhao Foremost Woodwork Manufacturing Co., Ltd.

Accounts Payables — related parties

September 30,

Name of Related Party

1 unchanged sentence

F.P.Z FURNITURE (CAMBODIA) CO., LTD.

Rizhao Foremost Woodwork Manufacturing Co., Ltd.

Foremost Australasia Pty Ltd

Shared Service and Miscellaneous expenses – related party

1 unchanged sentence

is party to the FHI Shared Services Agreement with FHI.

Total amounts provided to FHI under the FHI Share Services Agreement for the three and six months ended June 30, 2023 and 2022 were $ 232,367 , $ 476,981 and $ 661,976 , $ 913,799 respectively, which were booked under selling and distribution expenses and administration expenses.

Total amounts provided to FHI under the FHI Share Services Agreement for the three and nine months ended September 30, 2023 and 2022 were $ 178,249 , $ 655,230 and $ 91,139 , $ 1,004,937 respectively, which were booked under selling and distribution expenses and administration expenses.

FGI is party to the Worldwide Shared Services Agreement with Foremost Worldwide.

Total amounts provided from Foremost Worldwide under the Worldwide Shared Services Agreement for the three and six months ended June 30, 2023 and 2022 were $ 75,898 , $ 145,242 and $ 20,709 , $ 68,604 , respectively.

Total amounts provided from Foremost Worldwide under the Worldwide Shared Services Agreement for the three and nine months ended September 30, 2023 and 2022 were $ 72,408 , $ 8,878 and $ 217,650 , $ 77,482 , respectively.

Other Payables — related parties

September 30,

Name of Related Party

18 unchanged sentences

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

As of June 30, 2023, a cash balance of USD 403,829 was maintained at financial institutions in the United States, of which USD 105,143 was subject to credit risk.

As of September 30, 2023, a cash balance of USD 751,452 was maintained at financial institutions in the United States, of which USD 360,276 was subject to credit risk.

The Canadian Deposit Insurance Corporation pays compensation up to a limit of CAD 100,000 (approximately USD 74,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of June 30, 2023, a cash balance of CAD 4,982,395 (USD 3,679,488 ) was maintained at financial institutions in Canada, of which CAD 4,882,395 (USD 3,605,638 ) 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 96,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of June 30, 2023, an aggregated cash balance of USD 2,461,554 was maintained at financial institutions in Taiwan, of which USD 2,115,395 was subject to credit risk.

As of September 30, 2023, a cash balance of CAD 3,660,964 (USD 2,703,614 ) was maintained at financial institutions in Canada, of which CAD 3,560,964 (USD 2,629,765 ) 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 93,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of September 30, 2023, an aggregated cash balance of USD 1,708,564 was maintained at financial institutions in Taiwan, of which USD 1,369,394 was subject to credit risk.

The European Banking Authority pays compensation up to a limit of EUR 100,000 (approximately USD 105,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of June 30, 2023, cash balance of EUR 135,850 (USD 148,259 ) was maintained at financial institutions in Europe, of which EUR 35,850 (USD 39,124 ) was subject to credit risk.

As of June 30, 2023, cash balance of US 126,958 was maintained at financial institutions in Kingdom of Cambodia, of which USD 126,958 was subject to credit risk.

As of September 30, 2023, cash balance of EUR 106,855 (USD 112,597 ) was maintained at financial institutions in Europe, of which EUR 6,855 (USD 7,223 ) was subject to credit risk.

as of September 30, 2023, cash balance of US 423 was maintained at financial institutions in Kingdom of Cambodia, of which USD 423 was subject to credit risk.

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

3 unchanged sentences

Customer concentration risk

For the three months ended June 30, 2023, three customers accounted for 18.3 %, 16.7 % and 11.4 % of the Company’s total revenues, respectively.

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.

No other customer accounted for more than 10% of the Company’s revenue for the three months ended June 30, 2023 and 2022.

For the six months ended June 30, 2023, two customers accounted for 19.1 % and 17.7 % of the Company’s total revenues, respectively.

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

No other customer accounted for more than 10% of the Company’s revenue for the six months ended June 30, 2023 and 2022.

As of June 30, 2023, three customers accounted for 19.0 %, 17.6 % and 14.8 % of the total balance of accounts receivable, respectively.

For the three months ended September 30, 2023, three customers accounted for 14.5 %, 14.3 % and 13.9 % of the Company’s total revenues, 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.

No other customer accounted for more than 10% of the Company’s revenue for the three months ended September 30, 2023 and 2022.

For the nine months ended September 30, 2023, two customers accounted for 17.4 % and 16.6 % of the Company’s total revenues, respectively.

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

No other customer accounted for more than 10% of the Company’s revenue for the nine months ended September 30, 2023 and 2022.

As of September 30, 2023, four customers accounted for 19.3 %, 15.0 %, 13.3 % and 12.7 % of the total balance of accounts receivable, respectively.

As of December 31, 2022, two customers accounted for 36.7 % and 13.6 % 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, 2023 and December 31, 2022.

No other customer accounted for more than 10% of the Company’s accounts receivable as of September 30, 2023 and December 31, 2022.

Vendor concentration risk

For the three months ended June 30, 2023, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 55.2 % of the Company’s total purchases, and another vendor accounted 10.2 % of the Company’s total purchases.

For the three months ended June 30, 2022, Huida accounted for 58.8 % 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, 2023 and 2022

For the six months ended June 30, 2023, Huida accounted for 53.4 % of the Company’s total purchases, and another vendor accounted 13.3 % of the Company’s total purchases.

For the six months ended June 30, 2022, Huida accounted for 52.2 % of the Company’s total purchases.

No other supplier accounted for more than 10% of the Company’s total purchases for the six ended June 30, 2023 and 2022

As of June 30, 2023, Huida accounted for 78.1 % of the total balance of accounts payable.

For the three months ended September 30, 2023, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 55.8 % of the Company’s total purchases of the Company’s total purchases.

For the three months ended September 30, 2022, Huida accounted for 49.9 % of the Company’s total purchases.

No other supplier accounted for more than 10% of the Company’s total purchases for the three months ended September 30, 2023 and 2022.

For the nine months ended September 30, 2023, Huida accounted for 54.5 % of the Company’s total purchases, and another vendor accounted 10.1 % of the Company’s total purchases.

For the nine months ended September 30, 2022, Huida accounted for 51.4 % 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, 2023 and 2022.

As of September 30, 2023, Huida accounted for 78.3 % and another vendor accounted 13.0 % of the total balance of accounts payable.

As of December 31, 2022, Huida accounted for 85.5 % of the total balance of accounts payable.

No other supplier accounted for more than 10% of the Company’s accounts payable as of June 30, 2023 and December 31, 2022.

No other supplier accounted for more than 10% of the Company’s accounts payable as of September 30, 2023 and December 31, 2022.

Note 14 — Commitments and contingencies

From time to time, the Company is involved in legal and regulatory proceedings that are incidental to the operation of its businesses.

These proceedings may seek remedies relating to matters including environmental, tax, intellectual property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pension, government contract issues and commercial or contractual disputes.

These proceedings may seek remedies relating to matters including environmental, tax, intellectual

property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pension, government contract issues and commercial or contractual disputes.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including management’s assessment of the merits of the particular claims, the Company does not believe it is reasonably possible that any asserted or unasserted legal claims or proceedings, individually or in aggregate, will have a material adverse effect on its results of operations or financial condition.

1 unchanged sentence

The Company follows ASC 280, “Segment Reporting,” which requires that companies disclose segment data based on how management makes decisions about allocating resources to each segment and evaluating their performances.

Company has one reporting segment.

The Company has one reporting segment.

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.

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