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Item 1. Financial Statements

2024-08-13 compared with 2024-05-10 · 192 added, 131 removed, 714 unchanged (31% of the section changed)

2 unchanged sentences

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of March 31 , 202 4 (Unaudited) and December 31, 202 3 (Audited)

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31 , 202 4 and 202 3

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31 , 202 4 and 202 3

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31 , 202 4 and 202 3

Condensed Consolidated Balance Sheets as of June 30 , 202 4 (Unaudited) and December 31, 202 3 (Audited)

Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30 , 202 4 and 202 3

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30 , 202 4 and 202 3

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30 , 202 4 and 202 3

Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2024

June 30, 2024

December 31, 2023

25 unchanged sentences

SHAREHOLDERS’ EQUITY

Preference Shares ($ 0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023)

Ordinary shares ($ 0.0001 par value, 200,000,000 shares authorized, 9,547,607 shares issued and outstanding as of March 31, 2024 and December 31, 2023)

Preference Shares ($ 0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023)

Ordinary shares ($ 0.0001 par value, 200,000,000 shares authorized, 9,563,914 and 9,547,607 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)

Additional paid-in capital

10 unchanged sentences

FGI INDUSTRIES LTD.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

For the Three Months Ended

COST OF REVENUES

For the Six Months Ended

COST OF REVENUE

OPERATING EXPENSES

3 unchanged sentences

Total operating expenses

LOSS FROM OPERATIONS

(LOSS) INCOME FROM OPERATIONS

OTHER INCOME (EXPENSES)

2 unchanged sentences

Other income (expenses), net

Total other expenses, net

LOSS BEFORE INCOME TAXES

Total other income (expenses), net

(LOSS) INCOME BEFORE INCOME TAXES

PROVISION FOR (BENEFIT OF) INCOME TAXES

Total provision for income taxes

NET (LOSS) INCOME

net loss attributable to non-controlling shareholders

Net loss attributable to FGI Industries Ltd.

Net income (loss) attributable to FGI Industries Ltd.

OTHER COMPREHENSIVE (LOSS) INCOME

Foreign currency translation adjustment

COMPREHENSIVE LOSS

COMPREHENSIVE (LOSS) INCOME

( 1,008,832 )

comprehensive loss attributable to non-controlling shareholders

Comprehensive loss attributable to FGI Industries Ltd.

Comprehensive (loss) income attributable to FGI Industries Ltd.

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES

LOSS PER SHARE

EARNINGS (LOSS) PER SHARE

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

13 unchanged sentences

( 1,134,077 )

Share-based compensation

Net income (loss)

Foreign currency translation adjustments

Balance at June 30, 2024

( 1,559,057 )

Industries Ltd.

10 unchanged sentences

( 1,376,220 )

Share-based compensation

Foreign currency translation adjustments

Balance at June 30, 2023

( 1,371,323 )

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 Three Months Ended March 31,

For the Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

8 unchanged sentences

( 1,941,477 )

( 2,880,929 )

Prepayments and other current assets

( 1,084,906 )

Prepayments and other receivables – related parties

( 6,080,824 )

( 2,998,615 )

Other noncurrent assets

3 unchanged sentences

Operating lease liabilities

( 1,010,637 )

Accrued expenses and other current liabilities

1 unchanged sentence

( 7,127,778 )

( 1,230,619 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

( 1,189,655 )

Purchase of intangible assets

Net cash used in investing activities

( 1,859,419 )

CASH FLOWS FROM FINANCING ACTIVITIES

15 unchanged sentences

( 7,616,898 )

Acquisition of intangible asset partially through prior period advanced payment

( 1,241,664 )

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

60 unchanged sentences

● Sales and distribution in the United States

FGI Industries India Private Limited

● An Indian company

100 % owned by FGI

● Incorporated on June 11, 2024

● Sales and distribution in India

Reorganization

7 unchanged sentences

and (iv) Foremost contributed 100 % of the outstanding shares of stock of each of FGI Industries, FGI Europe Investment Limited (“FGI Europe”), which, directly and, through its wholly-owned German subsidiary, FGI Germany GmbH & Co., operates the K&B sales and distribution business in Europe, and FGI International, which, directly and through its wholly-owned Chinese subsidiary, FGI China, Ltd., operates the K&B sales and distribution business in the remainder of the world, K&B product development and sourcing of K&B products in China, to the Company (collectively, the “Reorganization”), such that, immediately following the Reorganization, (x) Foremost owns 100 % of the equity interests in each of the Company and FHI , (y) the Company owns 100 % of the equity interests in each of FGI Industries, FGI Europe and FGI International , which collectively, and through subsidiaries, operate the K&B business worldwide (the “K&B Business”), and (z) FHI owns 100 % of the equity interests in FKB.

On January 14, 2022 FGI Industries, a wholly-owned subsidiary of the Company, entered into a shared services agreement (the “FHI Shared Services Agreement”) with Foremost Home Industries, Inc., a newly-formed wholly-owned subsidiary of Foremost (“FHI”).

On January 14, 2022 FGI Industries, a wholly-owned subsidiary of the Company, entered into a shared services agreement (the “FHI Shared Services Agreement”) with Foremost Home Inc., a newly-formed wholly-owned subsidiary of Foremost (“FHI”).

Pursuant to the FHI Shared Services Agreement, FGI Industries provides FHI with general and administrative services, information technology systems services and human resources services, as well as warehouse space services and supply chain services in the United States.

9 unchanged sentences

Only those assets and liabilities that are specifically identifiable to the K&B Business are included in the Company’s unaudited condensed consolidated balance sheets.

The Company’s unaudited condensed consolidated statements of operations and comprehensive loss consist of all the revenues, costs and expenses of the K&B Business, including allocations to selling and distribution expenses, general and administrative expenses, and research and development expenses, and which were incurred by FGI but related to the K&B Business prior to the Reorganization.

All revenues and cost of revenues attributable to selling of K&B products were allocated to the Company.

The Company’s unaudited condensed consolidated statements of operations and comprehensive (loss) income consist of all the revenue, costs and expenses of the K&B Business, including allocations to selling and distribution expenses, general and administrative expenses, and research and development expenses, and which were incurred by FGI but related to the K&B Business prior to the Reorganization.

All revenue and cost of revenue attributable to selling of K&B products were allocated to the Company.

Operating expenses were allocated to the Company based on employees and activities that are involved in the K&B Business.

Any expenses that were not directly attributable to any specific business were allocated to the Company based on the proportion of the number of employees of the K&B Business to the total number of employees of both the K&B Business and FHI.

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 months ended March 31, 2024 and 2023, respectively.

Since December 2023, the books and records of FHI have been completely separated from FGI Industries.

The following table sets forth the revenue, cost of revenue 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, 2024 and 2023, respectively.

For the Three Months Ended

Cost of revenues

For the Six Months Ended

Cost of revenue

Selling and distribution expenses

9 unchanged sentences

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

As of March 31, 2024, the Company had approximately $ 3.3 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.

As of June 30, 2024, the Company had approximately $ 1.3 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, the Company’s wholly owned subsidiary FGI Industries Inc.

has obtained a waiver for the Corporate Borrower’s Audited Annual Statements, a U.S.

15 unchanged sentences

The preparation of unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented.

Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property and equipment, allowance for credit losses, inventory reserve, accrued defective return, provision for contingent liabilities, revenue recognition, deferred taxes and uncertain tax position.

9 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 operations and comprehensive loss.

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 7.2550 and 7.1006 as of March 31, 2024 and December 31, 2023, 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 7.1672 and 6.8943 for the three months ended March 31, 2024 and 2023, respectively.

Dollars at the exchange rate on the balance sheet date, which was 7.2980 and 7.1006 as of June 30, 2024 and December 31, 2023, 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 7.2582 and 6.9795 for the three months ended June 30, 2024 and 2023, respectively, and 7.2141 and 6.9369 for the six months ended June 30, 2024 and 2023, 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 1.3246 and 1.3246 as of March 31, 2024 and December 31, 2023, 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 1.3246 and 1.3541 for the three months ended March 31, 2024 and 2023, respectively.

Dollars at the exchange rate on the balance sheet date, which was 1.3700 and 1.3246 as of June 30, 2024 and December 31, 2023, 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 1.3397 and 1.3541 for the three months ended June 30, 2024 and 2023, respectively, and 1.3322 and 1.3541 for the six months ended June 30, 2024 and 2023, 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 0.9260 and 0.9059 as of March 31, 2024 and December 31, 2023, 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 0.9175 and 0.9337 for the three months ended March 31, 2024 and 2023, respectively.

Dollars at the exchange rate on the balance sheet date, which was 0.9342 and 0.9059 as of June 30, 2024 and December 31, 2023, 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 0.9279 and 0.9201 for the three months ended June 30, 2024 and 2023, respectively, and 0.9226 and 0.9269 for the six months ended June 30, 2024 and 2023, respectively.

Reclassification

2 unchanged sentences

Cash consists of cash on hand and demand 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 March 31, 2024 and December 31, 2023.

The Company did no t have any cash equivalents as of June 30, 2024 and December 31, 2023.

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 March 31, 2024 and December 31, 2023, no impairment of long-lived assets was recognized.

As of June 30, 2024 and December 31, 2023, no impairment of long-lived assets was recognized.

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

20 unchanged sentences

The Company recognized revenue in accordance with Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers.

Revenues are recognized when control of the promised goods or performance obligations for services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services.

The Company generates revenues from sales of kitchen and bath 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.

Revenue is recognized when control of the promised goods or performance obligations for services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services.

The Company generates revenue from sales of kitchen and bath 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.

The Company’s customers’ payment terms generally range from 15 to 60 days of fulfilling its performance obligations and recognizing revenue .

7 unchanged sentences

The Company records receivables related to revenue when it has an unconditional right to invoice and receive payment.

The Company’s disaggregated revenues are summarized as follows:

The Company’s disaggregated revenue is summarized as follows:

For the Three Months Ended

Revenues by product line

For the Six Months Ended

Revenue by product line

Bath Furniture

Shower System

Total revenues

Total Revenue

For the Three Months Ended

Revenues/ total assets by geographic location

For the Six Months Ended

Revenue/ 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 March 31, 2024 and 2023, shipping and handling expense was $ 261,989 and $ 103,714 , respectively.

For the three months ended June 30, 2024 and 2023, shipping and handling expense was $ 253,742 and $ 210,370 , respectively.

For the six months ended June 30, 2024 and 2023, shipping and handling expense was $ 500,851 and $ 314,084 , 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 $ 119,586 and $ 119,721 for the three months ended March 31, 2024 and 2023, respectively.

The Company recognized share-based compensation of $ 208,505 and $ 152,835 for the three months ended June 30, 2024 and 2023, respectively, and $ 328,090 and $ 272,556 for the six months ended June 30, 2024 and 2023, 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 March 31, 2024, the tax years ended December 31, 2020 through December 31, 2022 for FGI Industries, Inc.

As of June 30, 2024, the tax years ended December 31, 2020 through December 31, 2022 for FGI Industries, Inc.

remain open for statutory examination by tax authority.

3 unchanged sentences

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.

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

Comprehensive income (loss)

Comprehensive income consists of two components:

Comprehensive income (loss) consists of two components:

net income and other comprehensive income.

Other comprehensive income refers to revenue, expenses, gains and losses that under U.S.

GAAP are recorded as an element of equity but are excluded from net income.

Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under U.S.

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 three months ended March 31, 2024 and 2023:

The following table sets forth the computation of basic and diluted earnings per share for the three months ended June 30, 2024 and 2023:

For the Three Months Ended

Net loss attributable to FGI Industries Ltd.

For the Six Months Ended

Net income (loss) attributable to FGI Industries Ltd.

Weighted-average number of ordinary shares outstanding — basic

1 unchanged sentence

Weighted-average number of ordinary shares outstanding — diluted

Loss per share — basic

Loss per share — diluted

Earnings (loss) per share — basic

Earnings (loss) per share — diluted

Segment reporting

7 unchanged sentences

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.

growth companies.

As an emerging growth company, the Company adopted this guidance from January 1, 2023 , and the adoption of this standard did not have an impact on its financial position or results of operations.

3 unchanged sentences

Accounts receivable, net consisted of the following:

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

Movements of allowance for credit losses are as follows:

For the Three Months Ended

For the Six Months Ended

For the Year Ended

Beginning balance

Provision (recovery)

Ending balance

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

For the Three Months Ended

For the Six Months Ended

For the Year Ended

Beginning balance

Provision (recovery)

Ending balance

1 unchanged sentence

Inventories, net consisted of the following:

March 31, 2024

June 30, 2024

December 31, 2023

3 unchanged sentences

Movements of inventory reserves are as follows:

For the Three Months Ended

For the Six Months Ended

For the Year Ended

Beginning balance

Provision (recovery)

Ending balance

1 unchanged sentence

Prepayments and other assets consisted of the following:

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Property and equipment, net consist of the following:

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

( 2,778,113 )

Depreciation expenses for the three months ended March 31, 2024 and 2023 amounted to $ 87,871 and $ 35,560 respectively.

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

Prepayment for purchase of equipment and construction-in-progress

Depreciation expenses amounted to $ 111,568 and $ 43,199 for the three months ended June 30, 2024 and 2023 respectively, and $ 199,439 and $ 78,759 for the six months ended June 30, 2024 and 2023, respectively.

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

Note 7 — Leases

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

As of March 31, 2024, the Company’s leases have remaining lease terms up to 10.9 years.

As of June 30, 2024, the Company’s leases have remaining lease terms up to 10.7 years.

The company also purchased an operating lease land from a common control affiliate for manufacturing, which has a remaining lease term up to 48.00 years and can be extended for another 50 years for $ 1 .

For the three months ended March 31, 2024 and 2023, the total lease expenses was $ 706,414 and $ 477,669 , respectively.

For the three months ended June 30, 2024 and 2023, total lease expenses were $ 702,507 and $ 690,106 , respectively.

For the six months ended June 30, 2024 and 2023, total lease expenses were $ 1,399,020 and $ 1,352,282 , respectively.

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

March 31, 2024

June 30, 2024

December 31, 2023

4 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

3 unchanged sentences

Operating leases

As of March 31 , 202 4 , the maturities of operating lease liabilities were as follows:

For the 12 months ending March 31,

As of June 30 , 202 4 , the maturities of operating lease liabilities were as follows:

For the 12 months ending June 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;

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 March 31, 2024, FGI Industries was in compliance with these financial covenants.

As of June 30, 2024, 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 March 31, 2024, and December 31, 2023 was 8.25 % and 8.25 %, respectively.

The interest rate as of June 30, 2024, and December 31, 2023 was 8.25 % and 8.25 %, 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 $ 9,929,043 and $ 6,959,175 as of March 31, 2024, and December 31, 2023, respectively.

The outstanding balance of such loan was $ 8,197,141 and $ 6,959,175 as of June 30, 2024, and December 31, 2023, 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 $ 5,662,087 as of the March 31, 2024 exchange rate).

The revolving line of credit with HSBC Canada allows for borrowing up to CAD $ 7,500,000 (US $ 5,474,453 as of the June 30, 2024 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 March 31, 2024, FGI Canada Ltd.

As of June 30, 2024, FGI Canada Ltd.

was in compliance with these financial covenants.

Borrowings under this line of credit amounts to $ 0 as of March 31, 2024, and December 31, 2023.

Borrowings under this line of credit amounts to $ 0 as of June 30, 2024, and December 31, 2023.

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

7 unchanged sentences

The CTBC Credit Line is unsecured and is fully guaranteed by the Company and partially guaranteed by Liang Chou Chen.

Borrowings under this line of credit amounts to $ 1,513,608 and $ 0 as of March 31, 2024 and December 31, 2023, respectively.

Borrowings under this line of credit amounts to $ 1,495,059 and $ 0 as of June 30, 2024 and December 31, 2023, respectively.

Note 9 — Shareholders’ Equity

34 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.

29 unchanged sentences

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

As of March 31, 2024, 122,500 of these granted RSUs were vested.

As of June 30, 2024, 122,500 of these granted RSUs were vested.

In April 2022, the Company issued 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 March 31, 2024, 5,590 of these granted RSUs were vested.

As of June 30, 2024, 6,319 of these granted RSUs were vested.

In May 2022, the Company issued 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.

2 unchanged sentences

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 March 31, 2024, all RSUs were canceled and none of them were vested.

As of June 30, 2024, all RSUs were canceled and none of them were vested.

In May 2022, the Company issued 16,363 RSUs to its independent directors under the 2021 Equity Plan as compensation award.

1 unchanged sentence

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

As of March 31 , 202 4 , none of these RSUs were vested.

As of June 30 , 202 4 , none of these RSUs were vested.

In March 2023, the Company issued 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.

2 unchanged sentences

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 March 31, 2024, none of these RSUs were vested.

As of June 30, 2024, none of these RSUs were vested.

In March 2023, the Company issued 17,349 RSUs to its independent directors under the 2021 Equity Plan as compensation award.

1 unchanged sentence

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

As of March 31 , 202 4 , none of these RSUs were vested.

As of June 30 , 202 4 , 7,229 of these RSUs were vested.

In March 2024, the Company issued 413,354 RSUs under the 2021 Equity Plan to the Company’s directors, officers and employees.

2 unchanged sentences

If the maximum performance is met, the Company will issue an additional 206,677 RSUs under these awards with a grant date fair value of $ 310,016 .

As of March 31 , 202 4 , none of these RSUs were vested.

As of June 30 , 202 4 , none of these RSUs were vested.

In April 2024, the Company issued 13,333 RSUs under the 2021 Equity Plan to one of the Company ’ s employees.

This award is subject to performance obligations through December 31, 2024.

The grant date fair value for these RSUs was $ 20,000 based on the closing share price of $ 1.50 as of April 1, 2024.

If the maximum performance is met, the Company will issue an additional 6,667 RSUs under these awards with a grant date fair value of $ 10,000 .

As of June 30, 2024, none of these RSUs were vested.

The following is a summary of the restricted share granted:

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Non-vested as of December 31, 2023

Non-vested as of March 31, 2024

The following is a summary of the status of restricted shares as of March 31, 2024:

Non-vested as of June 30, 2024

The following is a summary of the status of restricted shares as of June 30, 2024:

Outstanding Restricted Share

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The remaining options will vest in a series of 24 successive equal monthly installments upon completion of each additional month of service.

As of March 31, 2024, 65,831 of these granted options were vested.

As of June 30, 2024, 74,060 of these granted options were vested.

In April 2022, the Company issued 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.

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The remaining options will vest in a series of 24 successive equal monthly installments upon completion of each additional month of service.

As of March 31, 2024, 62,209 of these granted options were vested.

As of June 30, 2024, 70,324 of these granted options were vested.

In May 2022, the Company issued 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.

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

As of March 31, 2024, 97,705 of these granted options were vested.

As of June 30, 2024, 128,213 of these granted options were vested.

In March 2023, the Company issued 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.

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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.

As of March 31, 2024, all options were canceled and none of them were vested.

As of June 30, 2024, all options were canceled and none of them were vested.

In March 2024, the Company issued 529,635 share options under the 2021 Equity Plan with an exercise price per share of $ 1.50 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.

3 unchanged sentences

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.

As of March 31 , 202 4 , none of these granted options were vested.

As of June 30 , 202 4 , none of these granted options were vested.

In April 2024, the Company issued 167,994 share options under the 2021 Equity Plan with an exercise price per share of $ 1.32 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 grant date fair value for these options was $ 126,163 determined using the Black-Scholes simplified method at the per option fair value of $ 0.75 .

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, 2024, 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.

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Share options outstanding at December 31, 2023

Share options outstanding at March 31, 2024

Vested and exercisable at March 31, 2024

For the three months ended March 31, 2024 and 2023, the total fair value of options awarded was $ 447,000 and $ 628,834 , respectively.

Share options outstanding at June 30, 2024

Vested and exercisable at June 30, 2024

For the six months ended June 30, 2024 and 2023, the total fair value of options awarded was $ 573,163 and $ 201,000 , 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 three months ended March 31, 2024.

The Company used the Black-Scholes simplified method for the six months ended June 30, 2024 and 2023.

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

Three Months Ended

Risk-free interest rate

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Treasury yield curve in effect at the time of grant for a term consistent with the contractual term of the awards.

Expected volatility is estimated based on the volatility of ordinary shares or common stock of several comparable companies in the same industry.

Expected volatility is

estimated based on the volatility of ordinary shares or common stock of several comparable companies in the same industry.

The expected exercise multiple is based on management’s estimation, which the Company believes is representative of the future.

1 unchanged sentence

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

For the Three Months Ended

For the Six Months Ended

Selling and distribution expenses

1 unchanged sentence

Total share-based compensation expenses

As of March 31, 2024, there was $ 1,704,987 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 June 30, 2024, there was $ 1,516,494 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 2.27 years.

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Income components

United States

( 1,200,966 )

( 1,840,931 )

Outside United States

Total pre-tax loss

Total pre-tax (loss) income

Provision for income taxes

2 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 Three Months Ended

For the Six Months Ended

Federal statutory rate

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Effective tax rate

The effective tax rate for the three months ended March 31, 2024 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:

March 31, 2024

June 30, 2024

December 31, 2023

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Deferred tax assets, net of deferred tax liabilities

The deferred tax assets related to the Company’s net operating losses of $ 2,104,421 (Federal $ 1,476,655 and States $ 627,766 ) and $ 1,836,077 (Federal $ 1,476,655 and States $ 359,422 ) as of March 31, 2024 and December 31, 2023, respectively.

The deferred tax assets related to the Company’s net operating losses of $ 4,040,249 (Federal $ 2,968,286 and States $ 1,071,963 ) and $ 1,836,077 (Federal $ 1,476,655 and States $ 359,422 ) as of June 30, 2024 and December 31, 2023, 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 March 31, 2024 or, December 31, 2023.

The Company had no material unrecognized tax benefits at June 30, 2024 or, December 31, 2023.

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.

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The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased.

The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase.

The amount of the excise tax is generally 1% of the fair market value of the shares

repurchased at the time of the repurchase.

However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year.

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P urchases from a related party – consisted of the following:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Name of Related Party

5 unchanged sentences

An entity under common control

The ending balance of such transactions as of March 31, 2024 and December 31, 2023, are listed of the following:

Foremost Home Inc.

An entity under common control

The ending balance of such transactions as of June 30, 2024 and December 31, 2023, are listed of the following:

Prepayments — related parties

5 unchanged sentences

Foremost Worldwide Co., Ltd

Rizhao Foremost Woodwork Manufacturing Co., 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 months ended March 31 , 202 4 and 202 3 were $ 175,912 and $ 244,614 , respectively, which were booked under selling and distribution expenses and administration expenses.

Total amounts provided to FHI under the FHI Share Services Agreement were $ 187,050 and $ 232,367 for the three months ended June 30 , 202 4 and 202 3, respectively, and $ 362,962 and $ 476,981 for the six months ended June 30, 2024 and 2023, 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 months ended March 31 , 202 4 and 202 3 were $ 73,914 and $ 69,344 , respectively.

Total amounts provided from Foremost Worldwide under the Worldwide Shared Services Agreement were $ 60,682 and $ 75,898 for the three months ended June 30 , 202 4 and 202 3, respectively , and $ 134,596 and $ 145,242 for the six months ended June 30, 2024 and 2023, respectively.

Other Payables (Receivables) — related parties

6 unchanged sentences

Shared services and Miscellaneous

Focal Capital Holding Limited

An entity under common control

Shared services and Miscellaneous

Furniture (Cambodia) Co., Ltd

6 unchanged sentences

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

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 March 31, 2024, a cash balance of USD 647,326 was maintained at financial institutions in the United States, of which USD 260,282 was subject to credit risk.

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 March 31, 2024, a cash balance of CAD 594,159 (USD 448,557 ) was maintained at financial institutions in Canada, of which CAD 494,159 (USD 373,063 ) was subject to credit risk.

As of June 30, 2024, a cash balance of CAD 1,398,717 (USD 1,020,961 ) was maintained at financial institutions in Canada, of which CAD 1,198,717 (USD 874,976 ) 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 92,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of March 31, 2024, an aggregated cash balance of USD 1,694,558 was maintained at financial institutions in Taiwan, of which USD 1,426,110 was subject to credit risk.

As of June 30, 2024, an aggregated cash balance of USD 544,840 was maintained at financial institutions in Taiwan, of which USD 355,481 was subject to credit risk.

The European Banking Authority pays compensation up to a limit of EUR 100,000 (approximately USD 107,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

As of March 31, 2024, cash balance of EUR 238,338 (USD 257,273 ) was maintained at financial institutions in Europe, of which EUR 138,338 (USD 149,328 ) was subject to credit risk.

as of March 31, 2024, cash balance of USD 129,108 was maintained at financial institutions in Kingdom of Cambodia, of which USD 129,108 was subject to credit risk.

As of June 30, 2024, cash balance of EUR 355,524 (USD 380,565 ) was maintained at financial institutions in Europe, of which EUR 255,524 (USD 273,521 ) was subject to credit risk.

As of June 30, 2024, cash balance of USD 112,587 was maintained at financial institutions in Kingdom of Cambodia, all of which was subject to credit risk.

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

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Customer concentration risk

For the three months ended March 31, 2024, three customers accounted for 18.3 %, 14.4 % and 13.4 % of the Company’s total revenues, respectively.

For the three months ended March 31, 2023, two customers accounted for 19.9 % and 18.6 % 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 March 31, 2024 and 2023.

As of March 31, 2024, four customers accounted for 22.2 %, 14.0 %, 12.8 % and 12.6 % of the total balance of accounts receivable, respectively.

For the three months ended June 30, 2024, two customers accounted for 18.4 % and 17.2 % of the Company’s total revenue, respectively.

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

No other customer accounted for more than 10% of the Company’s revenue for the three months ended June 30, 2024 and 2023.

For the six months ended June 30, 2024, three customers accounted for 17.8 % and 16.3 % of the Company’s total revenue, respectively.

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

No other customer accounted for more than 10% of the Company’s revenue for the six months ended June 30, 2024 and 2023.

As of June 30, 2024, two customers accounted for 28.4 % and 10.5 % of the total balance of accounts receivable, respectively.

As of December 31, 2023, four customers accounted for 27.2 %, 19.0 %, 12.0 % and 11.1 % of the total balance of accounts receivable, respectively.

No other customer accounted for more than 10% of the Company’s accounts receivable as of March 31, 2024 and December 31, 2023.

No other customer accounted for more than 10% of the Company’s accounts receivable as of June 30, 2024 and December 31, 2023.

Vendor concentration risk

For the three months ended March 31, 2024, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 52.5 % of the Company’s total purchases.

For the three months ended March 31, 2023, Huida and another vendor accounted for 51.0 % and 17.3 % 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 March 31, 2024 and 2023.

As of March 31, 2024, Huida accounted for 73.4 % of the total balance of accounts payable.

For the three months ended June 30, 2024, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) and another vendor accounted for 57.0 % and 11.9 % of the Company’s total purchases, respectively.

For the three months ended June 30, 2023, Huida and another vendor accounted for 55.2 % and 10.2 % of the Company’s total purchases, respectively.

No other supplier accounted for more than 10% of the Company’s total purchases for the three months ended June 30, 2024 and 2023.

For the six months ended June 30, 2024, Tangshan Huida Ceramic Group Co., Ltd (“Huida”) accounted for 54.6 % of the Company’s total purchases.

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

No other supplier accounted for more than 10% of the Company’s total purchases for the six months ended June 30, 2024 and 2023.

As of June 30, 2024, Huida accounted for 81.1 % of the total balance of accounts payable.

As of December 31, 2023, Huida accounted for 71.4 % of the total balance of accounts payable.

No other supplier accounted for more than 10% of the Company’s accounts payable as of March 31, 2024 and December 31, 2023.

No other supplier accounted for more than 10% of the Company’s accounts payable as of June 30, 2024 and December 31, 2023.

Note 14 — Commitments and contingencies

7 unchanged sentences

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