Company: FGMCU
Filing Date: 2025-09-18
Form Type: S-4
Source: 0001104659-25-091249
Chunk: 138

Company: FG Merger II Corp.
Filing Date: 2025-09-18
Form: S-4
Chunk 138
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 workforce. |

| ● | In order to catch up with its delivery obligation under the ADS sales contract, we hired additional outside labor and paid overtime and double-time shifts. |

| ● | We have implemented reductions in staff; however, we continue to experience elevated labor costs. |

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| ● | Supply chain delivery issues which caused the purchase of several items of material from local vendors with a substantially higher price. |

| ● | We are still undertaking major research and development activities focusing on our Phase 2 Modular Building System and Baby Box. |

| ● | We have incurred significant expenses related to the sales and marketing of our products. |

In 2024, we recorded an impairment loss of deposits on equipment and fixed assets totaling $12.4 million related to assets that were procured for the anticipated ramp up of our previously planned generation 2.0 Casita. Prompted by a key supplier of equipment failing to fulfill their obligation, we determined that it no longer made sense to continue with production of that configuration of Casita and recognized an impairment loss for this customized equipment. Our costs of goods sold compared to revenues for each period presented remain significantly elevated due to our reduced production levels as we faced delays on revenues mainly from permitting and regulatory issues, customer readiness and financing. As a result, the factory overhead, including the costs of leasing and operating our factories and indirect labor costs, was allocated to the total units produced during the respective periods. While we estimate that we could produce and deliver 1,200 Casitas per year at full factory capacity, or 300 Casitas per quarter, we only produced 25 Casitas and 35 Casitas in the three (3)-month ended June 30, 2025, and 2024, respectively. If we fail to successfully scale up our production or incorrectly estimate the cost of production related to the price of each Casita, our results of operations and financial condition may be adversely impacted. Moreover, if we fail to produce enough Casitas to meet demand, we may lose potential customers who have indicated interest in our products. As we grow our business, we may not be able to manage our growth successfully, including development of our internal controls. As we build and scale up our factories, develop our automated processes for building Casitas, increase the output of our Casitas and other products, and grow our customer base, we will face business risks commonly associated with rapidly growing companies, including the risk that existing management, information systems and financial and internal controls may be inadequate to support our growth