Company: FGI
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001628280-25-052375
Chunk: 185

Company: FGI Industries Ltd.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part II, Item 8
Chunk 185
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 is necessary. The Company’s three-year cumulative loss position was significant negative evidence in assessing the need for a valuation allowance. The weight given to positive and negative evidence is commensurate with the extent such evidence may be objectively verified. Given the weight of objectively verifiable historical losses from operations, during the three months ended September 30, 2025, we recorded a $1.8 million valuation allowance on our deferred tax assets. This allowance significantly impacts the effective tax rate for the period. The Company may be able to reverse the valuation allowance when sufficient positive evidence exists to support the reversal of the valuation allowance.

Net Loss

We incurred net loss of $1.9 million and $0.7 million for the three months ended September 30, 2025 and 2024, respectively, and net loss of $4.1 million and $1.3 million for the nine months ended September 30, 2025 and 2024, respectively. These changes had resulted from the combination of the changes discussed above.

Liquidity and Capital Resources

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 $4.1 million and $1.7 million for the nine months ended September 30, 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 net cash used in operating activities of $7.4 million for the same respective periods. As of September 30, 2025, the Company had approximately $1.9 million in cash and cash equivalents and had $14.1 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 September 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