FGI Industries Ltd.
For the period ended Mar 31, 2025. Filed May 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 14, 2025
FGI$7.36-0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001628280-24-047654
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0001628280-25-025588
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 78 previous paragraphs and 83 current paragraphs.
34 unchanged; 31 reworded; 17 added; 12 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 9 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
•Enhanced margin performance. Our focus on higher-margin products has continued to deliver results, with gross margins reaching 26.9% in 2024 and 27.4% in 2023, a significant rise from 19.5% in 2022. This positive trajectory reflects our commitment to optimizing our product mix and operational efficiency. Looking ahead, we anticipate gross margins to remain in line with the levels achieved in 2024 and 2023.
Current report
We derive the majority of our revenue from sales of sanitaryware, which accounted for 60.7% of our total revenue for the three months ended March 31, 2025, compared to 66.7% for the comparable period of 2024. Revenue generated from the sales of sanitaryware decreased by 1.7% to $20.2 million for the three months ended March 31, 2025 from $20.5 million for same period of 2024. While the U.S. and China have temporarily agreed to reduce their reciprocal tariffs during trade talks, we expect demand for this category to be uncertain due to the current environment as consumers await clarity on tariffs affecting a number of jurisdictions.
Current report
Revenue from sales of Shower Systems made up approximately 17.1% of our total revenue for the three months ended March 31, 2025, compared to 18.7% for the comparable periods of 2024. Revenue from sales of shower systems decreased by 1.3% to $5.7 million for the three months ended March 31, 2025, compared to $5.8 million for the comparable period of 2024. While revenue dropped slightly this quarter, our recently launched programs have driven growth in recent periods and we anticipate being a positive driver moving forward. Similar to Sanitaryware, however, we expect demand to be uncertain due to the current environment as consumers await tariff clarity, which may offset the impact of these programs.
Current report
We generated the majority of our revenue in the United States market, which amounted to $21.2 million for the three months ended March 31, 2025, compared to $19.6 million for the three months ended March 31, 2024, representing a 8.0% increase for the three-month periods. Such revenue consistently accounted for 63.7% of our total revenue for the three months ended March 31, 2025 and 2024. The growth was largely attributable to higher sales of bath furniture and kitchen cabinetry, as previously discussed.
Current report
Net Loss
Current report
The Company's unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue to operate in the normal course of business and will be able to realize its assets and discharge its liabilities as they become due. However, substantial doubt exists about the Company's ability to continue as a going concern. The Company has incurred net loss of $0.8 million and $1.7 million for the three months ended March 31, 2025 and the year ended December 31, 2024, respectively. In addition, the Company had net cash used in operating activities of $1.7 million and $7.4 million for the same respective periods. As of March 31, 2025, the Company had approximately $1.2 million in cash and cash equivalents and had $13.2 million outstanding under its credit facilities, which were used primarily for working capital purposes.
Current report
As discussed in Note 8, the Company was not in compliance with certain financial covenants related to its debt coverage ratio as of March 31, 2025. The Company is in discussions with its lenders regarding these covenant breaches.
Current report
Additionally, the Company has been facing adverse impacts from elevated tariff costs on imported goods. These increased costs have put pressure on gross margins and have contributed to the overall liquidity challenges.
Current report
In response to the conditions that gave rise to the substantial doubt, the Company implemented a number of actions, including:
Current report
•Termination of the lease for one of its warehouse facilities in the first quarter of 2025, which resulted in a non-recurring lease exit cost. The facility had idle capacity, and the termination reduced the Company’s ongoing fixed overhead expenses.
Current report
•Execution of cost control initiatives across multiple operating departments, targeting to lower recurring operating expenses.
Current report
•Commercial launch and promotion of new product lines, including anti-overflow toilets, shower systems, and custom kitchen cabinetry, which began generating increased revenue lately.
Current report
•In the event of a requirement for immediate loan repayment, the Company has sufficient accounts receivable available for factoring to meet such obligations.
Current report
As a result of these actions, the Company expects to improve its liquidity and reduce its cost structure. The Company’s management is of the opinion that it has sufficient funds to meet the Company’s working capital requirements and debt obligations as they become due over the next twelve (12) months.
Current report
RBC Bank Loan
Current report
Net cash used in operating activities was approximately $1.7 million for the three months ended March 31, 2025, compared to $8.0 million for the three months ended March 31, 2024. The lower outflow was caused by improved working capital, including a $1.4 million decrease in inventory and an $0.8 million decrease in accounts receivable, both due to stronger inventory management and better collections. Cash was also used to cover the net loss of $0.8 million, lease payments, and reductions in accounts payable and accrued liabilities. Non-cash items such as depreciation, amortization, and a higher deferred tax benefit helped offset the net loss.
Current report
Beginning in the first quarter of 2025, we have revised the presentation of non-GAAP measures to provide more meaningful insight into the Company's performance. Historical comparative figures have been adjusted to reflect the current presentation format. These changes are intended to better align with how management evaluates results and makes operating decisions. Reconciliations to the most directly comparable GAAP measures are provided to support transparency and comparability.
Removed paragraphs (12)
Previous report
•Enhanced margin performance. We generated gross margin of 27.7% in the first nine months of 2024, up from 26.7% in the same period last year, owing to the ongoing shift to higher margin products. During the remainder of 2024, we expect gross margins to remain consistent with those generated during fiscal year 2023.
Previous report
For the Three and Nine Months Ended September 30, 2024 and 2023
Previous report
We derive the majority of our revenue from sales of sanitaryware, which accounted for 59.4% and 61.6% of our total revenue for the three and nine months ended September 30, 2024, compared to 69.3% and 63.7% for the comparable periods of 2023. Revenue generated from the sales of sanitaryware increased by 3.4% to $21.5 million for the three months ended September 30, 2024 from $20.7 million for same period of 2023. For the nine months ended September 30, 2024, this revenue increased by 7.9% to $59.3 million from $54.9 million for the same period of 2023. The increase in revenue was due, in part, by a reversal of delayed shipments in the prior quarter stemming from our transition to a new enterprise software system and ocean freight disruptions.
Previous report
Revenue from sales of Shower Systems made up approximately 19.8% and 19.5% of our total revenue for the three and nine months ended September 30, 2024, compared to 16.5% and 16.5% for the comparable periods of 2023. Revenue from sales of shower systems increased by 44.9% to $7.1 million for the three months ended September 30, 2024, compared to $4.9 million for the comparable period of 2023. For the nine months ended September 30, 2024, revenue from sales of shower systems increased by 31.9% to $18.8 million from $14.2 million for the same period of 2023. Our recently launched programs continue to have a positive impact during the third quarter.
Previous report
We generated the majority of our revenue in the United States market, which amounted to $22.2 million for the three months ended September 30, 2024, compared to $18.4 million for the three months ended September 30, 2023, representing a 20.9% increase for the three-month periods. For the nine months ended September 30, 2024, however, revenue from United States market increased by 8.9% to $59.8 million, compared to $54.9 million for the same period of 2023. Such revenue accounted for 61.5% and 62.2% of our total revenue for the three and nine months ended September 30, 2024, respectively, compared to 61.3% and 63.7% for the three and nine months ended September 30, 2023, respectively. The increase in revenue was due, in part, by a reversal of delayed shipments in the prior quarter stemming from our transition to a new enterprise software system and ocean freight disruptions.
Previous report
Net (Loss) Income
Previous report
Our principal sources of liquidity are cash generated from operating activities and cash borrowed under credit facilities, which we believe provides sufficient liquidity to support our financing needs. As of September 30, 2024, we had cash and working capital of $3.0 million and $12.7 million, respectively. During the nine months ended September 30, 2024, we drew an aggregate of approximately $5.5 million on the Credit Agreement, the Canadian Revolver and the CTBC Credit Line for working capital replenishment.
Previous report
We believe our revenue and operations will continue to grow and the current working capital is sufficient to support our operations and debt obligations well into the foreseeable future. However, we may need additional cash resources in the future if we experience changes in business conditions or other developments, such as rising interest rates, inflation and increased costs, and may also need additional cash resources in the future if we wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. For example, from time to time we may provide loans or other operational support to Foremost to assist Foremost in capital expenditures or other efforts related to the manufacturing services that Foremost provides to us, which could limit the assets available for other corporate purposes or require additional resources. If it is determined that the cash requirements exceed our amount of cash on hand, we may seek to issue debt or equity securities, and there can be no assurances that additional financing will be available on acceptable term, if at all.
Previous report
As of September 30, 2024, FGI’s total outstanding debt consisted of the Credit Agreement with East West Bank and the CTBC Credit Line with CTBC Bank (each discussed below).
Previous report
HSBC Canada Bank Loan
Previous report
Net cash used in operating activities was approximately $8.0 million for the nine months ended September 30, 2024 and was primarily attributable to an increase in prepayments and other receivables - related parties of approximately $6.0 million, an increase in inventories of approximately $3.9 million, an increase in accounts receivable of approximately $3.8 million, a decrease in operating lease liabilities of approximately $1.4 million, net loss of $1.3 million, a decrease in accounts payable - related parties of approximately $0.7 million, and an increase in other noncurrent assets of approximately $0.6 million. These drivers were partially offset by non-cash items of $2.2 million, an increase in accounts payable of approximately $5.7 million, an increase in accrued expenses and other current liabilities of approximately $1.1 million, and a decrease in prepayments and other current assets of approximately $0.8 million.
Previous report
Net cash used in operating activities was approximately$2.0 million for thenine months ended September 30, 2023 and was primarily attributable to an increase in prepayments and other receivables - related parties of approximately$5.4 million, an increase in accounts receivable of approximately$1.6 million, an increase in prepayments and other current assets of approximately$1.3 million, a decrease in operating lease liabilities of approximately$0.9 million, and a decrease in accounts payable of approximately$0.7 million. These drivers were partially offset by non-cash items of$0.9 million, a decrease in inventories of approximately$3.7 million, an increase in accounts payable - related parties of approximately$2.4 million, and a decrease in other noncurrent assets of$0.6 million.
Reworded paragraphs (31)
Previous wording
FGI is a global supplier of kitchen and bath products. Over the course of 30 years, we have built an industry-wide reputation for product innovation, quality, and excellent customer service. We are currently focused on the following product categories: sanitaryware (primarily toilets, sinks, pedestals and toilet seats), bath furniture (vanities, mirrors and cabinets), shower systems, customer kitchen cabinetry and other accessory items. These products are sold primarily for R&R activity and, to a lesser extent, new home or commercial construction. We sell our products through numerous partners, including mass retail centers, wholesale and commercial distributors, online retailers and specialty stores.
Current wording
FGI is a global supplier of kitchen and bath products. Over the course of 30 years, we have built an industry-wide reputation for product innovation, quality, and excellent customer service. We are currently focused on the following product categories: sanitaryware (primarily toilets, sinks, pedestals and toilet seats), bath furniture (vanities, mirrors and cabinets), shower systems, custom kitchen cabinetry and other accessory items. These products are sold primarily for R&R activity and, to a lesser extent, new home or commercial construction. We sell our products through numerous partners, including mass retail centers, wholesale and commercial distributors, online retailers and specialty stores.
Previous wording
•“BPC” (Brands, Products, Channels) strategy to drive above-market organic growth. We have continued to invest in our BPC strategy despite the market challenges, which is expected to drive improved organic growth in the longer term. We recently announced that we entered into a 5-year licensing agreement that will provide us access to an industry leading overflow toilet technology. We will continue to market this technology as FlushGuard Overflow Technology. During the fourth quarter of 2023, we were awarded product placements at several large customers, including two of the largest commercial distributors in North America. In addition, we continue to focus on our initiatives to expand geographically, with recently signed agreements providing entry into India, Eastern Europe and the UK.
Current wording
•“BPC” (Brands, Products, Channels) strategy to drive above-market organic growth. We have continued to invest in our BPC strategy despite the market challenges, which is expected to drive improved organic growth in the longer term. We have entered into a 5-year licensing agreement that will provide us access to an industry leading overflow toilet technology. We will continue to market this technology as FLUSH GUARD® Overflow Technology. We were recently awarded product placements at several large customers, including two of the largest commercial distributors in North America. In addition, we continue to focus on our initiatives to expand geographically, with recently signed agreements providing entry into India, Eastern Europe and the UK.
Previous wording
•Efficient capital deployment. We will continue to prioritize capital deployment in support of organic growth opportunities, while continuing to evaluate strategic M&A opportunities. With total liquidity of $16.3 million as of September 30, 2024, the Company believes it has sufficient financial flexibility to fund its organic growth strategy.
Current wording
•Efficient capital deployment. We will continue to prioritize capital deployment in support of organic growth opportunities, while continuing to evaluate strategic M&A opportunities. With total liquidity of $14.3 million as of March 31, 2025, the Company believes it has sufficient financial flexibility to fund its organic growth strategy.
Previous wording
Investment Limited, an entity formed in the British Virgin Islands, and FGI International, Limited, an entity formed under the laws of Hong Kong, each a wholly-owned subsidiary of Foremost, to the newly formed FGI Industries Ltd. Foremost was established in 1987 and has become a global leader in kitchen and bath design, indoor and outdoor furniture, food service equipment, and manufacturing. This discussion, and any financial information and results of operations discussed herein, refers to the assets, liabilities, revenue, expenses and cash flows that are directly attributable to the kitchen and bath business of Foremost before the completion of the Reorganization and are presented as if we had been in existence and the Reorganization had been in effect for the entirely of each of the periods presented.
Current wording
We were incorporated in the Cayman Islands on May 26, 2021 in connection with a reorganization and separation our parent company, Foremost Groups Ltd. (“Foremost”), and its affiliates, pursuant to which, among other actions, Foremost contributed all of its equity interests in FGI Industries Inc. (“FGI Industries”), FGI Europe Investment Limited, an entity formed in the British Virgin Islands, and FGI International, Limited, an entity formed under the laws of Hong Kong, each a wholly-owned subsidiary of Foremost, to the newly formed FGI Industries Ltd. Foremost was established in 1987 and has become a global leader in kitchen and bath design, indoor and outdoor furniture, food service equipment, and manufacturing.
Previous wording
The following table summarizes the results of our operations for the three and nine months ended September 30, 2024 and 2023 and provides information regarding the dollar and percentage increase (decrease) during such periods.
Current wording
The following table summarizes the results of our operations for the three months ended March 31, 2025 and 2024 and provides information regarding the dollar and percentage increase (decrease) during such periods.
Previous wording
Our revenue increased by $6.2 million, or 20.6%, to $36.1 million for the three months ended September 30, 2024, from $29.9 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024, our revenue increased by $9.9 million, or 11.5%, to $96.2 million from $86.3 million for the same period last year. The increase in our revenue was primarily driven by increases in sales of shower system, bath furniture and custom kitchen cabinetry.
Current wording
Our revenue increased by $2.5 million, or 8.0%, to $33.2 million for the three months ended March 31, 2025, from $30.8 million for the three months ended March 31, 2024. The increase in our revenue was primarily driven by increases in sales of bath furniture and custom kitchen cabinetry.
Previous wording
Our revenue from bath furniture sales accounted for 11.5% and 11.7% of our total revenue for the three and nine months ended September 30, 2024, compared to 8.5% and 14.3% for the comparable periods of 2023. Bath Furniture sales increased by 64.4% to $4.2 million for the three months ended September 30, 2024, compared to $2.5 million for the same period of 2023. For the nine months ended September 30, 2024, revenue from Bath Furniture sales decreased by 8.3% to $11.3 million from $12.3 million for the same period of 2023. Our recently launched mid-tier products to better address the current demand environment of trading down to lower priced offering is gaining traction.
Current wording
Our revenue from bath furniture sales accounted for 12.3% of our total revenue for the three months ended March 31, 2025, compared to 10.0% for the comparable period of 2024. Bath Furniture sales increased by 32.7% to $4.1 million for the three months ended March 31, 2025, compared to $3.1 million for the same period of 2024. Our recently launched mid-tier products to better address the current demand environment of trading down to lower priced offering is gaining traction.
Previous wording
Our revenue from sales of other products (custom kitchen cabinetry and other small offerings) increased by 93.3% to $3.3 million for the three months ended September 30, 2024, compared to $1.7 million for the same period of 2023. For the nine months ended September 30, 2024, other revenue increased by 43.1% to $6.8 million from $4.8 million for the same period of 2023. The increase was primarily driven by volume growth resulting from continued strength in sales of the Covered Bridge custom-kitchen cabinetry businesses.
Current wording
Our revenue from sales of other products (custom kitchen cabinetry and other small offerings) increased by 135.7% to $3.3 million for the three months ended March 31, 2025, compared to $1.4 million for the same period of 2024. The increase was primarily driven by volume growth resulting from continued strength in sales of the Covered Bridge custom-kitchen cabinetry businesses.
Previous wording
Our second largest market is Canada. Our revenue generated in the Canadian market was $9.9 million for the three months ended September 30, 2024, compared to $9.1 million for the three months ended September 30, 2023, representing a 9.2% increase. For the nine months ended September 30, 2024, revenue from Canadian market increased by 14.1% to $26.4 million, compared to $23.1 million for the same period in 2023. The increased sales in the Canada market were primarily driven by stabilized demand from wholesale customers.
Current wording
Our second largest market is Canada. Our revenue generated in the Canadian market was $8.2 million for the three months ended March 31, 2025, compared to $7.9 million for the three months ended March 31, 2024, representing a 3.8% increase. The increased sales in the Canada market were primarily driven by stabilized demand from wholesale customers.
Previous wording
We also derive revenue from Europe, which consists primarily of sales in Germany. This amounted to $3.4 million and $9.3 million for the three and nine months ended September 30, 2024, compared to $2.5 million and $8.2 million for the three and nine months ended September 30, 2023, representing a 38.9% and 13.0% increase for the three-month and nine-month periods, respectively.
Current wording
We also derive revenue from Europe, which consists primarily of sales in Germany. This amounted to $3.1 million for the three months ended March 31, 2025, compared to $3.2 million for the three months ended March 31, 2024, representing a 2.8% decrease for the three-month period.
Previous wording
Gross profit was $9.3 million and $26.7 million for the three and nine months ended September 30, 2024, an increase of 18.9% and 15.8% compared to the same periods of 2023. Gross profit margin was 25.8% and 27.7% for the three and nine months ended September 30, 2024, down 40 and up 100 basis points from 26.2% and 26.7% for the three and nine months ended September 30, 2023, respectively.
Current wording
Gross profit was $8.9 million for the three months ended March 31, 2025, an increase of 5.8% compared to the same periods of 2024, due to higher sales volumes. Gross profit margin remained relatively stable at 26.8% for the three months ended March 31, 2025, down 60 basis points from 27.4% for the three months ended March 31, 2024.
Previous wording
Selling and distribution expenses primarily consisted of personnel costs, marketing and promotion costs, commission, and freight and leasing charges. Our selling and distribution expenses increased by $1.7 million, or 37.4%, to $6.3 million for the three months ended September 30, 2024, from $4.6 million for the three months ended September 30, 2023, and increased by $4.6 million, or 32.6%, to $18.7 million for the nine months ended September 30, 2024, from $14.1 million for the nine months ended September 30, 2023. The increase in selling and distribution expenses was largely attributable to increased personnel costs, marketing and promotion expenses and warehouse expenses as a result of inflation and our initiatives to drive sales growth.
Current wording
Selling and distribution expenses primarily consisted of personnel costs, marketing and promotion costs, commission, and freight and leasing charges. Our selling and distribution expenses increased by $1.0 million, or 16.8%, to $7.2 million for the three months ended March 31, 2025, from $6.1 million for the three months ended March 31, 2024. The increase was largely due to expanded marketing efforts aimed at supporting our growth initiatives including Isla Porter and FGI India, higher personnel-related expenses, and the one-time cost associated with the termination of a warehouse lease. These investments were aligned with our strategic focus on strengthening brand visibility and optimizing our distribution network.
Previous wording
General and administrative expenses primarily consisted of personnel costs, professional service fees, depreciation, travel, and office supply expenses. Our general and administrative expenses increased by $0.3 million, or 12.2%, to $2.6 million for the three months ended September 30, 2024, from $2.4 million for the three months ended September 30, 2023, and increased by $0.8 million, or 11.8%, to $7.5 million for the nine months ended September 30, 2024, from $6.7 million for the nine months ended September 30, 2023. The increase was primarily attributable to inflation and expenses incurred in connection with newly formed subsidiaries.
Current wording
General and administrative expenses primarily consisted of personnel costs, professional service fees, depreciation, travel, and office supply expenses. Our general and administrative expenses increased by $0.4 million, or 18.3%, to $2.7 million for the three months ended March 31, 2025, from $2.3 million for the three months ended March 31, 2024. The increase was primarily due to inflationary pressures and additional expenditures related to corporate support activities.
Previous wording
Research and development expenses mainly consisted of personnel costs and product development costs. Our research and development activities remained stable and are relatively immaterial to our unaudited condensed consolidated statements of operations and comprehensive (loss) income.
Current wording
Research and development expenses mainly consisted of personnel costs and product development costs. Our research and development activities remained stable and are relatively immaterial to our unaudited condensed consolidated statements of operations and comprehensive loss.
Previous wording
Other income (expenses) represents interest income and expenses, as well as non-recurring non-operating gains and losses. Other expenses, net decreased as a result of proceeds received from a settlement agreement and gains from foreign currency transactions.
Current wording
Other income (expenses) represents interest income and expenses, as well as non-recurring non-operating gains and losses. Interest expense increased due to a higher average loan balance during the period.
Previous wording
We recorded provision for income taxes of $0.3 million and benefit of income taxes of approximately $9,000 for the three and nine months ended September 30, 2024, and provision for income taxes of $0.2 million and $0.4 million for the three and nine months ended September 30, 2023. The fluctuation in effective tax rate was primarily driven by foreign operations with various tax rates and non-deductible items.
Current wording
We recorded a benefit of income taxes of $0.7 million for the three months ended March 31, 2025, and provision for income taxes of approximately $22,000 for the three months ended March 31, 2024. The fluctuation in effective tax rate was primarily driven by foreign operations with various tax rates and non-deductible items.
Previous wording
We incurred net loss of $0.7 million and net income of $0.3 million for the three months ended September 30, 2024 and 2023, respectively, and net loss of $1.3 million and net income of $0.1 million for the nine months ended September 30, 2024 and 2023, respectively. These changes had resulted from the combination of the changes discussed above.
Current wording
We incurred net loss of $0.8 million and $0.5 million for the three months ended March 31, 2025 and 2024, respectively. These changes had resulted from the combination of the changes discussed above.
Previous wording
Our wholly owned subsidiary, FGI Industries, has a line of credit with East West Bank pursuant to a Business Loan Agreement (the “Credit Agreement”) with East West Bank, which is collateralized by all of the assets of FGI Industries and personally guaranteed by Liang Chou Chen, who holds approximately 49.89% of the voting control of Foremost. On November 25, 2022, the Credit Agreement was amended and restated with a maximum borrowing amount of $18,000,000 and a maturity date of December 21, 2024.
Current wording
The Company's wholly-owned subsidiary, FGI Industries, has a line of credit agreement (the “Credit Agreement”) with East West Bank, which is collateralized by all assets of FGI Industries and personally guaranteed by Liang Chou Chen, who holds approximately 49.91% of the voting control of Foremost. The current amount of maximum borrowings is $18,000,000 and the Credit Agreement had a maturity date of December 21, 2024. East West Bank has agreed to extend the maturity date to June 21, 2025 while efforts regarding a renewal of the facility are ongoing.
Previous wording
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 for the quarter ended June 30, 2021 and thereafter, on a 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 a consolidated basis. As of September 30, 2024, FGI Industries was in compliance with this financial covenant. As described in Item 1. Note 8, 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. As of the date of this report, FGI Industries has obtained a waiver for such Corporate Borrower’s Audited Annual Statements, a U.S. standalone reporting obligation under the Credit Agreement, which were due by April 30, 2024.
Current wording
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 a 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 a consolidated basis. As of March 31, 2025, FGI Industries was not in compliance with certain financial covenants related to its debt coverage ratio. As of the date of this quarterly report, FGI Industries has requested a waiver from the lender, which is being processed by the lender. In the absence of an executed waiver, the Company has classified the outstanding balance of the loan as a current liability on the unaudited condensed consolidated balance sheet as of March 31, 2025.
Previous wording
The loan bears interest 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, 2024 and December 31, 2023 was 7.75% and 8.25%, resp ectively.
Current wording
The loan bears interest at a 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, 2025 and December 31, 2024 was 7.25% and 7.25%, resp ectively.
Previous wording
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 $9,161,641 and $6,959,175 as of September 30, 2024 and December 31, 2023, respectively.
Current wording
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 $10.7 million and $9.6 million as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
FGI Canada Ltd. 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 CAD7,500,000 (USD5,474,453 as of September 30, 2024). This is an assets-based line of credit, the borrowing limit is calculated based on certain percentage of accounts receivable and inventory balances. Pursuant to the Canadian Revolver, FGI Canada Ltd. is required to maintain (a) a debt to tangible net worth ratio of no more than 3.00 to 1.00; and (b) a ratio of current assets to current liabilities of at least 1.25 to 1.00. The loan bears interest at a rate of Prime rate plus 0.50%. As of September 30, 2024, FGI Canada Ltd. was not in compliance with certain financial covenants in the Canadian Revolver related to its debt to tangible net worth ratio. As of the date of this quarterly report, FGI Canada Ltd. has requested a waiver from the lender, which is being processed by the lender. In the absence of an executed waiver, the Company has classified the outstanding balance of the loan as a current liability on the unaudited condensed consolidated balance sheet as of September 30, 2024. The Company has sufficient liquidity to repay the loan in full if immediate settlement were required.
Current wording
FGI Canada Ltd. (“FGI Canada”) has a line of credit agreement with Royal Bank of Canada (“RBC”), successor by amalgamation of HSBC Canada (the “Canadian Revolver”). The revolving line of credit with RBC allows for borrowing up to CAD7.5 million (USD5.2 million as of March 31, 2025). This is an assets-based line of credit, the borrowing limit is calculated based on certain percentage of accounts receivable and inventory balances. Pursuant to the Canadian Revolver, FGI Canada is required to maintain (a) a debt to tangible net worth ratio of no more than 3.00 to 1.00; and (b) a ratio of current assets to current liabilities of at least 1.25 to 1.00. The loan bears interest at a rate of Prime rate plus 0.50%. As of March 31, 2025, FGI Canada was in compliance with these financial covenants.
Previous wording
Borrowings under this line of credit amounted to $1,026,392 and $0 as of September 30, 2024 and December 31, 2023, respectively. The facility matures at the discretion of HSBC Canada upon 60 days’ notice.
Current wording
Borrowings under this line of credit amounted to $0 and $2.6 million as of March 31, 2025 and December 31, 2024, respectively. The facility matures at the discretion of RBC upon 60 days’ notice.
Previous wording
FGI Canada Ltd. also has a revolving foreign exchange facility up to a permitted maximum of USD3,000,000. The advances are available to purchase foreign exchange forward contracts from time to time up to six months, subject to an overall maximum aggregate USD Equivalent outstanding face value not exceeding the Foreign Exchange Facility Limit.
Current wording
FGI Canada also has a revolving foreign exchange facility with RBC of up to a permitted maximum of USD3.0 million. The advances are available to purchase foreign exchange forward contracts from time to time up to six months, subject to an overall maximum aggregate USD Equivalent outstanding face value not exceeding USD3.0 million.
Previous wording
On January 25, 2024, FGI International entered into an omnibus credit line (the “CTBC Credit Line”) with CTBC Bank Co., Ltd. (“CTBC”). 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 amounted to $2,297,464 and $0 as of September 30, 2024 and December 31, 2023, respectively.
Current wording
On January 25, 2024, FGI International entered into an omnibus credit line (the “CTBC Credit Line”) with CTBC Bank Co., Ltd. (“CTBC”). 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. On January 14, 2025, FGI International and CTBC agreed to increase the CTBC Credit Line to $3.0 million. 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 amounted to $2.5 million and $2.3 million as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
The following table summarizes the key components of our cash flows for the nine months ended September 30, 2024 and 2023.
Current wording
The following table summarizes the key components of our cash flows for the three months ended March 31, 2025 and 2023.
Previous wording
Net cash used in investing activities was $2.0 million and $0.9 million for the nine months ended September 30, 2024 and 2023, respectively, which was attributable to the purchases of property and equipment and intangible assets.
Current wording
Net cash used in investing activities was $0.5 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively. The decrease was due to lower spending on equipment and intangible assets, as capital investments were paced more conservatively.
Previous wording
Net cash used in financing activities was approximately $1.8 million for the nine months ended September 30, 2023, which represents net repayment of bank loans.
Current wording
Net cash used in financing activities was approximately $1.3 million for the three months ended March 31, 2025 which represents net repayment of bank loans.
Previous wording
Net cash provided by financing activities was approximately $5.5 million for the nine months ended September 30, 2024 which represents net proceeds from bank loans.
Current wording
Net cash used in financing activities was approximately $4.5 million for the three months ended March 31, 2024, which represents net proceeds from bank loans.
Previous wording
Our capital expenditures were incurred primarily in connection with the acquisition of property and equipment. Our capital expenditures amounted to $2.0 million and $0.9 million for the nine months ended September 30, 2024 and 2023, respectively. We do not expect to incur significant capital expenditures in the immediate future.
Current wording
Our capital expenditures were incurred primarily in connection with the acquisition of property and equipment. Our capital expenditures amounted to $0.5 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively. We do not expect to incur significant capital expenditures in the immediate future.
Previous wording
A discussion of our critical accounting policies and significant accounting estimates is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K. The preparation of the unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenue and expenses during the applicable reporting period. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported for the nine months ended September 30, 2024.
Current wording
A discussion of our critical accounting policies and significant accounting estimates is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K. The preparation of the unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenue and expenses during the applicable reporting period. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported for the three months ended March 31, 2025.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
For the Three Months Ended March 31, 2025 and 2024
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We were incorporated in the Cayman Islands on May 26, 2021 in connection with a reorganization (the “Reorganization”) of our parent company, Foremost Groups Ltd. (“Foremost”), and its affiliates, pursuant to which, among other actions, Foremost contributed all of its equity interests in FGI Industries Inc. (“FGI Industries”), FGI Europe