Company: FGI
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001628280-25-040149
Chunk: 51

Company: FGI Industries Ltd.
Filing Date: 2025-08-13
Form: 10-Q
Item: Part I, Item 1
Chunk 51
---
 of June 30, 2025, the Company had approximately $2.5 million in cash and cash equivalents and had $12.6 million outstanding under its credit facilities, which were used primarily for working capital purposes.As discussed in Note 8, the Company was not in compliance with certain financial covenants related to its debt coverage ratio as of June 30, 2025. The Company is in discussions with its lenders regarding these covenant breaches.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.In response to the conditions that gave rise to the substantial doubt, the Company implemented a number of actions, including:•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.•Execution of cost control initiatives across multiple operating departments, targeting to lower recurring operating expenses.•Commercial launch and promotion of new product lines, including anti-overflow toilets, shower systems, and custom kitchen cabinetry, which began generating increased revenue lately.•In the event of a requirement for immediate loan repayment, the Company has sufficient accounts receivable available for factoring to meet such obligations.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.Basis of presentationThe unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commissions (the “SEC”), regarding financial reporting, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative of results to be expected for any other interim period or for the full year.Principles of consolidationThe unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.Subsidiaries are those entities which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to