Company: FGI
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001628280-25-040149
Chunk: 86

Company: FGI Industries Ltd.
Filing Date: 2025-08-13
Form: 10-Q
Item: Part I, Item 1
Chunk 86
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 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 $2.2 million and $1.7 million for the six months ended June 30, 2025 and the year ended December 31, 2024, respectively. In addition, the Company had net cash provided by operating activities of $0.2 million and net cash used in operating activities of $7.4 million for the same respective periods. As 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.

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•Commercial launch and promotion of new product lines, including anti-overflow toilets, shower systems, and custom kitchen cabinetry, which have begun generating increased revenue.

•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.

East West Bank Credit Facility

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.