What changed in this filing

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Item 1. Financial Statements

2024-05-10 compared with 2023-11-13 · 177 added, 263 removed, 668 unchanged (40% of the section changed)

2 unchanged sentences

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2023

March 31, 2024

December 31, 2023

6 unchanged sentences

PROPERTY AND EQUIPMENT, NET

Intangible assets

Operating lease right-of-use assets, net

16 unchanged sentences

SHAREHOLDERS’ EQUITY

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)

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)

Additional paid-in capital

10 unchanged sentences

FGI INDUSTRIES LTD.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended

For the Nine Months Ended

September 30,

COST OF REVENUES

4 unchanged sentences

Total operating expenses

INCOME FROM OPERATIONS

LOSS FROM OPERATIONS

OTHER INCOME (EXPENSES)

1 unchanged sentence

Interest expense

Other income, net

Total other income (expenses), net

INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

Other income (expenses), net

Total other expenses, net

LOSS BEFORE INCOME TAXES

PROVISION FOR (BENEFIT OF) INCOME TAXES

Total provision for income taxes

net loss attributable to non-controlling shareholders

Net income attributable to FGI Industries Ltd.

OTHER COMPREHENSIVE LOSS

Net loss attributable to FGI Industries Ltd.

OTHER COMPREHENSIVE (LOSS) INCOME

Foreign currency translation adjustment

( 1,006,323 )

COMPREHENSIVE INCOME

COMPREHENSIVE LOSS

comprehensive loss attributable to non-controlling shareholders

Comprehensive income attributable to FGI Industries Ltd.

Comprehensive loss attributable to FGI Industries Ltd.

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES

EARNINGS PER SHARE

LOSS PER SHARE

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

8 unchanged sentences

Balance at December 31, 2023

Consummation of separation transaction upon completion of reorganization

( 1,111,499 )

Share-based compensation

Issuance of ordinary shares upon Initial Public Offering (“IPO”), net

Foreign currency translation adjustments

Balance at March 31, 2024

Share-Based compensation

Foreign currency translation adjustments

Balance at June 30, 2022

Share-Based compensation

Foreign currency translation adjustments

Balance at September 30, 2022

( 1,134,077 )

11 unchanged sentences

( 1,376,220 )

Share-Based compensation

Foreign currency translation adjustments

Balance at June 30, 2023

( 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 Nine Months Ended September 30,

For the Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

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

Depreciation and amortization

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

Share-based compensation

Provision for credit losses

Reversal of defective return

( 1,456,022 )

Foreign exchange transaction gain

Adjustment for Right of use assets

( 2,552,649 )

Deferred income tax (benefit) expense

Provision for defective return

Foreign exchange transaction loss

Deferred income tax benefit

Changes in operating assets and liabilities

2 unchanged sentences

Prepayments and other current assets

( 1,858,888 )

Prepayments and other receivables – related parties

( 5,377,506 )

( 3,895,562 )

Other noncurrent assets

( 1,048,150 )

Right-of-use assets

Accounts payable

3 unchanged sentences

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 revolving credit facility

( 1,832,849 )

Net proceeds from (repayments of) revolving credit facility

( 1,368,504 )

Net proceeds from issuance of ordinary shares in IPO

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

( 1,368,504 )

2 unchanged sentences

( 4,458,175 )

( 2,687,216 )

CASH, BEGINNING OF PERIOD

3 unchanged sentences

Cash paid during the period for income taxes

( 1,755,531 )

NON-CASH INVESTING AND FINANCING ACTIVITIES

72 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.

Immediately before and after the Reorganization, each of the Company, FGI Industries, FGI Europe and FGI International, and each of their respective subsidiaries was and remains ultimately controlled by Foremost.

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

The unaudited condensed consolidated financial statements are presented as if the Company had been in existence and the Reorganization had been in effect during the entirety of the three months ended March 31, 2022.

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

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”).

10 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 income and comprehensive income 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.

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.

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

For the Three Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

( 8,653,083 )

( 25,201,282 )

Selling and distribution expenses

( 1,187,198 )

( 3,509,028 )

General and administrative expenses

Research and development expenses

Income from operations

The following table sets forth the revenues, cost of revenues and operating expenses that were directly related to the K&B Business allocated from Foremost Worldwide Co., Ltd., a wholly-owned subsidiary of Foremost, to FGI International for three and nine months ended September 30, 2023 and 2022, respectively.

for the three months ended March 31, 2024 and 2023, respectively.

For the Three Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

( 22,853,884 )

Selling and distribution expenses

2 unchanged sentences

Income from operations

Since October 2022, the books and records of FGI International have been completely separated from Foremost Worldwide Co., Ltd., a wholly-owned subsidiary of Foremost.

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

4 unchanged sentences

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

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 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.

28 unchanged sentences

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

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

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 7.3144 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.

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.

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 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.

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.

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 0.9490 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.

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.

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 income and comprehensive income and cash flow.

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 September 30, 2023 and December 31, 2022.

Certain prior year amounts have been reclassified to conform with the current year presentation, specifically the depreciation and amortization in the unaudited condensed consolidated statements of cash flows.

These reclassifications have no effect on the condensed consolidated balance sheets and the unaudited condensed consolidated statements of operations and comprehensive loss previously reported.

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.

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

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

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

Operating leases are included in operating lease right-of-use assets, net (“ROU assets”), operating lease liabilities — current and operating lease liabilities — noncurrent on the unaudited condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the duration of the lease term while lease liabilities represent the Company’s obligation to make lease payments in exchange for the right to use an underlying asset.

31 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Revenues by product line

1 unchanged sentence

Shower System

Total revenues

For the Three Months Ended

For the Nine Months Ended

September 30,

Revenues/ total assets by geographic location

3 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 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.

For the three months ended March 31, 2024 and 2023, shipping and handling expense was $ 261,989 and $ 103,714 , 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 $ 59,337 , $ 331,893 and $ 115,920 , $ 260,652 for the three and nine months ended September 30, 2023 and 2022, respectively.

The Company recognized share-based compensation $ 119,586 and $ 119,721 for the three months ended March 31, 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 September 30, 2023, the tax years ended December 31, 2020 through December 31, 2022 for FGI Industries, Inc.

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

remain open for statutory examination by tax authority.

4 unchanged sentences

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

Comprehensive income (loss)

Comprehensive income consists of two components:

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 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.

Dollar as its functional currencies.

Earnings per share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”).

Earnings (loss) per share

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”).

ASC 260 requires companies to present basic and diluted EPS.

2 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 nine months ended September 30, 2023 and 2022:

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

For the Three Months Ended

For the Nine Months Ended

September 30,

Net income attributable to FGI Industries Ltd.

Net 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

Earnings per share — basic

Earnings per share — diluted

Potential ordinary shares that have an anti-dilutive effect are excluded from the calculation of diluted EPS 514,975 and 2,925,000 number of options and warrants, respectively, were excluded from diluted EPS because their effects were anti-dilutive.

Loss per share — basic

Loss per share — diluted

Segment reporting

6 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.

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.

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.

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.

The Company considers the applicability and impact of all ASUs.

2 unchanged sentences

Accounts receivable, net consisted of the following:

September 30, 2023

March 31, 2024

December 31, 2023

5 unchanged sentences

Movements of allowance for credit losses are as follows:

For the Nine Months Ended

For the Three 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 Nine Months Ended

For the Three Months Ended

For the Year Ended

September 30,

Beginning balance

( 1,696,263 )

Ending balance

1 unchanged sentence

Inventories, net consisted of the following:

September 30, 2023

March 31, 2024

December 31, 2023

3 unchanged sentences

Movements of inventory reserves are as follows:

For the Nine Months Ended

For the Three Months Ended

For the Year Ended

September 30,

Beginning balance

2 unchanged sentences

Prepayments and other assets consisted of the following:

September 30, 2023

March 31, 2024

December 31, 2023

2 unchanged sentences

Property and equipment, net consist of the following:

September 30, 2023

March 31, 2024

December 31, 2023

5 unchanged sentences

( 2,778,113 )

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.

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.

Note 7 — Leases

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

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 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.

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

The company also purchased an operating lease land from a common control affiliate for manufacturing, which has a remaining lease term up to 48.25 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.

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

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

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

September 30, 2023

March 31, 2024

December 31, 2023

3 unchanged sentences

Operating leases

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

For the 12 months ending September 30,

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

For the 12 months ending March 31,

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;

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

As of March 31, 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 September 30, 2023, and December 31, 2022 was 8.25 % and 7.25 %, respectively.

The interest rate as of March 31, 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 $ 7,962,203 and $ 9,795,052 as of September 30, 2023, and December 31, 2022, respectively.

The outstanding balance of such loan was $ 9,929,043 and $ 6,959,175 as of March 31, 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 $ 5,538,734 as of the September 30, 2023 exchange rate).

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).

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 September 30, 2023, FGI Canada Ltd.

As of March 31, 2024, 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.

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

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

2 unchanged sentences

The advances are available to purchase foreign exchange forward contacts from time to time up to six months, subject to an overall maximum aggregate USD Equivalent outstanding face value not exceeding $ 3,000,000 .

CTBC Credit Facility

On January 25, 2024 , FGI International entered into an omnibus credit line (the “ CTBC Credit Line”) with CTBC Bank Co., Ltd.

Under the CTBC Credit Line, FGI International may borrow, from time to time, up to $ 2.3 million, with borrowings limited to 90 % of FGI International’s export “open account” trade receivables.

The CTBC Credit Line will bear interest at a rate of “ Base Rate ”, which is based on monthly or quarterly Taipei Interbank Offered in effect from time to time, plus 120 base points and handling fees, unless otherwise agreed to by the parties.

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.

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.

26 unchanged sentences

Restricted shares units (“RSU”)

On January 27, 2022, the board of directors approved the issuance of 183,750 restricted share units (“RSUs”) to certain officers and employees under the 2021 Equity Plan as compensation awards.

The fair value for these RSUs was $ 716,625 based on the closing share price of $ 3.90 as at January 27, 2022.

In January 2022, the Company issued 183,750 restricted share units (“RSUs”) to certain officers and employees under the 2021 Equity Plan as compensation awards.

The fair value for these RSUs was $ 716,625 based on the closing share price of $ 3.90 as of January 27, 2022.

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

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.

The fair value for these RSUs was $ 22,050 based on the closing share price of $ 2.52 as at April 13, 2022.

As of March 31, 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.

The fair value for these RSUs was $ 22,050 based on the closing share price of $ 2.52 as of April 13, 2022.

These awards 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.

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.

As of March 31, 2024, 5,590 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.

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.

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

As of March 31, 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.

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 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.

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.

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.

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.

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

As of March 31, 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.

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 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.

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

All these awards are subjected to performance conditions through December 31, 2026.

The grant date fair value for these RSUs was $ 620,031 based on the closing share price of $ 1.50 as of March 22, 2024.

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.

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 September 30, 2023

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

Non-vested as of March 31, 2024

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

Outstanding Restricted Share

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Share options (“Options”)

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.

In March 2022, the Company issued 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 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 .

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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 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.

As of March 31, 2024, 65,831 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.

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 .

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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 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.

As of March 31, 2024, 62,209 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.

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 .

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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.

As of March 31, 2024, 97,705 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.

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 .

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

As of March 31, 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.

The grant date fair value for these options was $ 447,000 determined using the Black-Scholes simplified method at the per option fair value of $ 0.84 .

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

As of March 31 , 202 4 , 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 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.

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.

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 nine months ended September 30, 2023.

The Company used the Black-Scholes simplified method for the three months ended March 31, 2024.

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

Nine Months Ended

For the Year Ended

September 30,

Three Months Ended

Risk-free interest rate

Expected volatility range

40.30 - 45.67

Fair market value per ordinary share as at grant dates

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

For the Nine Months Ended

September 30,

For the Three Months Ended

Selling and distribution expenses

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Total share-based compensation expenses

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.

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.

Total unrecognized compensation cost may be recognized over a weighted-average period of 2.30 years.

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For the Three Months Ended

For the Nine Months Ended

September 30,

Income components

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Outside United States

Total pre-tax income

Total pre-tax loss

Provision for income taxes

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

For the Nine Months Ended

September 30,

For the Three Months Ended

Federal statutory rate

(Decrease) increase in tax rate resulting from:

Increase (decrease) in tax rate resulting from:

State and local income taxes, net of federal benefit

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Permanent items

Deferred rate changes

Deferred adjustments

Effective tax rate

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 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:

September 30, 2023

March 31, 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 $ 2,994,939 (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 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 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 September 30, 2023 or, December 31, 2022.

The Company had no material unrecognized tax benefits at March 31, 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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Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

There was no material impact of the IR Act on the Company’s consolidated financial statements.

Note 12 — Related party transactions and balances

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,

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

For the Three Months Ended March 31,

Name of Related Party

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An entity under common control

FURNITURE (CAMBODIA) CO., LTD

An entity under common control

Foremost Australasia Pty Ltd

An entity under common control

For the Nine Months Ended September 30,

Name of Related Party

Foremost Worldwide Co., Ltd

Rizhao Foremost Woodwork Manufacturing 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:

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

Prepayments — related parties

September 30,

Name of Related Party

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Accounts Payables — related parties

September 30,

Name of Related Party

Foremost Worldwide Co., Ltd

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

Foremost Australasia Pty Ltd

Rizhao Foremost Woodwork Manufacturing Co., Ltd.

Shared Service and Miscellaneous expenses – related party

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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 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.

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.

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 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,

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.

Other Payables (Receivables) — related parties

Name of Related Party

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

An entity under common control

Miscellaneous

Foremost Home Inc.

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Shared services and Miscellaneous

Property purchase — related party

In July 2022, FGI entered into a property purchase agreement with a common control related party to purchase a building and sub-leased the land use right with an initial term of 50 years in amount of $ 1,963,521 .

The building and sub-lease the land use right were recorded at historic cost in amount of $ 946,066 and $ 519,450 , respectively.

The excess payment over carrying value $ 498,005 was recorded under shareholders equity statement.

FURNITURE (CAMBODIA) CO.,LTD

An entity under common control

Shared services and Miscellaneous

Loan guarantee by a related party

Liang Chou Chen holds approximately 49.75 % of the voting control of Foremost, the Company’s majority shareholder and is a guarantor of the loan obtained by FGI Industries from East West Bank under the Credit Agreement.

Liang Chou Chen holds approximately 49.89 % of the voting control of Foremost, the Company’s majority shareholder and is a guarantor of the loans under the Credit Agreement and under the CTBC Credit Line.

See Note 8 for details.

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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 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.

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 76,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

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.

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.

The Taiwan Central Deposit Insurance Corporation pays compensation up to a limit of New Taiwan Dollar 3,000,000 (approximately USD 94,000 ) 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.

The European Banking Authority pays compensation up to a limit of EUR 100,000 (approximately USD 108,000 ) if the bank with which an individual/a company holds its eligible deposit fails.

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.

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.

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 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 September 30, 2023 and December 31, 2022.

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.

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.

Vendor concentration risk

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.

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.

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 September 30, 2023 and December 31, 2022.

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

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.

4 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