FGI 10-K & 10-Q changes, risk factors and insider trading
FGI Industries Ltd. (also FGIWW) · Nasdaq · Heating Equip, Except Elec & Warm Air; & Plumbing Fixtures · CIK 1864943 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading ““smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.”
Largest changes
We have been evaluating and have begun implementing certain practices and procedures to address the foregoing materialsee in full comparisonweaknesses.weakness. To remediate the materialweaknessesweakness,relatedmanagement has initiated a series of corrective actions. These include adding dedicated in-house accounting personnel to enhance oversight of thereviewfinancialofclose process, implementing more robust journal entry and accountreconciliation, we have implemented system controls designed to prevent significant unauthorized transactions from being posted withoutreconciliation reviewandproceduresestablishedwithsufficientclearlycompensating controls for effective account reconciliations. Additionally, we have enhanced our management review controls, including more robustdefined documentationrequirements for the reviewand approval requirements, and strengthening evidence retention practices. Management believes that, once these measures are fully implemented and have operated for a sufficient period ofjournal entries. To addresstime, the material weaknessrelatedwill be remediated. Management will continue todebtmonitorcovenantandcompliance,testwethehaveoperatingimplementedeffectiveness of the related controls on anadditionalongoinglayer of review in the calculation and reporting process. We plan to continue the implementation of these and other remediation efforts to address the identified material weaknesses in the future.basis. While we are actively identifying and implementing actions to improve the effectiveness of our internal controls over financial reporting and disclosure controls and procedures, there can be no assurance that our remediation efforts will be fully successful. We expect to continue to incur or expend substantial accounting and other expenses and significant management time and resources in these efforts. It is possible that our future assessment, or the future assessment by our independent registered public accounting firm, may reveal additional materialweaknessesweakness in our internal controls. The failure to fully remediate the existing materialweaknessesweakness or the discovery of any future potential materialweaknessesweakness could result in future misstatements in our financial statements or in documents we file with the SEC and could have a negative impact on our business and the market for our ordinary shares. For more information on our materialweaknessesweakness and the status of our remediation efforts, see Item 9A - Controls and Procedures, which includes Management’s Report on Internal Controls Over Financial Reporting.
The process of designing and implementing an effective accounting and financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain an accounting and financial reporting system that is adequate to satisfy our reporting obligations. Based upon an evaluation conducted in connection with the preparation of FGI’s audited consolidated financial statements as of December 31,see in full comparison2024,2025, management concluded that our internal controls over financial reporting were not effective due to the materialweaknessesweakness in our internal controls over financial reporting.MaterialSpecifically,weaknessesthis material weakness relates to insufficient precision inourthe design and operation of journal entry and account reconciliation review controls at a foreign subsidiary that was newly brought into scope and subject to a full-scope evaluation of internalcontrolcontrols over financial close and reportingincluded (a) inadequate segregation of duties related tofor theinitiationfirstandtimerecording of journal entries toduring thegeneral ledger, (b) inadequate evidence of management review controls regarding the review and approval of certain account reconciliations, and (c) inadequate evidence and precision of management review controls regarding loan covenants and covenant calculations.year. We believe thatthesethis materialweaknessesweakness set forth above did not have an effect on our financial results.
Global or regional unrest,see in full comparisonconflict,conflict (such as the hostilities in the Middle East and the war between Russia and Ukraine), geopolitical disputes or catastrophic events could affect global trade routes, financial markets, global economic activity and our operations and results of operations.
Our business can be affected by war, large-scale terrorist or other hostile acts, especially those directed against the United States or other major industrialized countries in which we do business or supply products, major natural disasters, long-term periods of drought, or widespread outbreaks of infectious diseases. Such events could impair our ability to manage our business, could disrupt our supply of raw materials, and could affect production, transportation and delivery of products. For example, the U.S.-China trade relations remain uncertain, and if tensions continue to worsen, our supply chain, production and delivery of products could be negatively impacted. Further, regional conflicts, such as thesee in full comparisonUkraine-Russiahostilities in the Middle East andIsrael-Hamastheconflicts,war between Russia and Ukraine, could escalate and expand, which in turn could have negative impacts on trade routes, our operations, the global economy and financial markets. Such disruptions of regional or global economic activity can affect consumers’ purchasing power in the affected areas and, therefore, reduce demand for our products.
“The commerce we conduct in the international marketplace and our reliance on overseas manufacturing makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, Canada, Mexico and other countries have been escalating in recent years. In 2025, the U.S.government enacted significant changes to its tariff regime that increased rates on a substantial number of imports. …”see in full comparison
“The commerce we conduct in the international marketplace and our reliance on overseas manufacturing makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, Canada, Mexico and other countries have been escalating in recent years. Recently, the U.S. presidential administration has announced new tariffs on imports from China, Canada and Mexico and may impose restrictions against other regions. In prior years, U.S. …”see in full comparison
Full comparison: every changed paragraph (17)
The commerce we conduct in the international marketplace and our reliance on overseas manufacturing makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, Canada, Mexico and other countries have been escalating in recent years. In 2025, the U.S.government enacted significant changes to its tariff regime that increased rates on a substantial number of imports. Certain foreign jurisdictions have responded with reciprocal tariffs which resulted in corresponding actions by the U.S. government. Certain of these tariffs have been paused or modified from time to time as trade discussions ensued. In February 2026, in response to the Supreme Court invalidating many of the existing tariffs, the administration instituted a 10% global tariff on all imports and has signaled it may seek higher tariffs. The potential for additional tariff increases may continue to result in increased reciprocal tariffs or other restrictive trade measures by the U.S. or foreign jurisdictions. Given our products are manufactured primarily in Asia, including China, Vietnam, Cambodia, and other Asian countries, additional tariffs are likely to increase our costs of goods sold and could materially adversely impact our profitability, results of operations and financial condition. Moreover, we would likely need to alter our pricing as a result of such tariffs, which could reduce demand for our products or make our products less competitive than those of our competitors whose inputs are not subject to these tariffs, thereby decreasing our revenues and adversely impacting our results of operations. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs, making the products we sell uncompetitive compared to similar products not subjected to such import tariffs.
The recent enactment of tariffs by the government of the United States, along with the unpredictability of the tariff rates, poses a significant risk to our business operations and may materially increase our costs and reduce our margins. We are continuing to analyze and enact strategies to moderate or minimize the effects of these trade actions, including evaluating the country of origin for sourcing product into the United States and diversifying our supply chain, negotiating with suppliers, and adjusting our pricing strategies. However, there can be no assurance that these measures will be successful, or that they will offset the negative impact of the tariffs on our business. Given the uncertainty regarding scope and duration of the current and potential tariffs, as well as the potential for additional trade actions by the United States or other countries, the specific impact to our business, results of operations, cash flows, and financial condition is uncertain but could be material.
Our sales are concentrated with ten significant customers who collectively represented 69%66% and 72%69% of our consolidated net sales for 20242025 and 2023,2024, respectively, and this concentration may continue to increase. InA particular,significant The Home Depot represented approximately 17% and 18%portion of our consolidated net sales inare 2024 and 2023, respectively. The Home Depot and otherto home center retailersretailers, which can significantly affect the prices we receive for our products and the terms and conditions on which we do business with them. Additionally, these home center retailers may reduce the number of vendors from which they purchase and could make significant changes in their volume of purchases from us.
In each of 20242025 and 2023,2024, approximately 38% and 36%, respectively of our sales were made outside of the United States (principally in Canada and Europe) and transacted in currencies other than the U.S. dollar. In addition to our Canadian and European operations, we manufacture products and source products and components from China and parts of Southeast Asia. Risks associated with our international operations include:
Global or regional unrest, conflict,conflict (such as the hostilities in the Middle East and the war between Russia and Ukraine), geopolitical disputes or catastrophic events could affect global trade routes, financial markets, global economic activity and our operations and results of operations.
Our business can be affected by war, large-scale terrorist or other hostile acts, especially those directed against the United States or other major industrialized countries in which we do business or supply products, major natural disasters, long-term periods of drought, or widespread outbreaks of infectious diseases. Such events could impair our ability to manage our business, could disrupt our supply of raw materials, and could affect production, transportation and delivery of products. For example, the U.S.-China trade relations remain uncertain, and if tensions continue to worsen, our supply chain, production and delivery of products could be negatively impacted. Further, regional conflicts, such as the Ukraine-Russiahostilities in the Middle East and Israel-Hamasthe conflicts,war between Russia and Ukraine, could escalate and expand, which in turn could have negative impacts on trade routes, our operations, the global economy and financial markets. Such disruptions of regional or global economic activity can affect consumers’ purchasing power in the affected areas and, therefore, reduce demand for our products.
The commerce we conduct in the international marketplace and our reliance on overseas manufacturing makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, Canada, Mexico and other countries have been escalating in recent years. Recently, the U.S. presidential administration has announced new tariffs on imports from China, Canada and Mexico and may impose restrictions against other regions. In prior years, U.S. tariff impositions against Chinese exports have been followed by retaliatory Chinese tariffs on U.S. exports to China and this may recur in China as well as Canada and Mexico. Our products are manufactured primarily in Asia, and such countries may in the future be subject to these tariffs. To the extent these tariffs increase our costs of goods sold, it could materially adversely impact our profitability, results of operations and financial condition. To the extent we alter our pricing as a result of such tariffs, it could reduce demand for our products or make our products less competitive than those of our competitors whose inputs are not subject to these tariffs, thereby decreasing our revenues and adversely impacting our results of operations. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs, making the products we sell uncompetitive compared to similar products not subjected to such import tariffs. We are still evaluating the potential impact of the recently-announced tariffs on our business and financial condition. There can be no assurances that we will not be adversely impacted by such tariffs or that we will be able to pass on any incremental costs to our customers.
Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials or components may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which would have a material adverse effect on our business, results of operations and financial condition.
Our auditor, MarcumCBIZ LLP,CPAs P.C., is a Registered Public Accounting Firm with the PCAOB and is based in New York, New York. Under the Holding Foreign Companies Accountable Act (the “HFCAA”), the PCAOB is permitted to inspect our independent public accounting firm. If the PCAOB later determined that it cannot inspect or fully investigate our auditor for three consecutive years, trading in our securities may be prohibited under the HFCAA, and, as a result, Nasdaq may determine to delist our securities. Moreover, in December 2022, the Accelerating Holding Foreign Companies Accountable Act was enacted and amended the HFCAA to require the U.S. Securities and Exchange Commission to prohibit an issuer’s securities from trading on U.S. exchanges if its auditor is not subject to PCAOB inspection for two consecutive years instead of three, thus reducing the time period before such securities would be delisted.
We operate in an industry that is subject to changing consumer trends, demands and preferences. The uncertainties associated with developing and introducing new products, such as gauging changing consumer preferences and successfully developing, manufacturing, marketing and selling new products, could lead to, among other things, rejection of a new product line, reduced demand and price reductions for our products. If our products do not keep up with consumer trends, demands and preference, we could lose market share, which could have a material adverse effect on our business, financial condition or results of operations. Moreover, the role of technology is changing rapidly in our industry. We are in the process of introducing certain customer-facing tools powered by artificial intelligence (“AI”) to help promote our product offerings. If these AI products do not work as intended, or if our competitors are better able to effectively integrate these new technologies into their offerings, our competitive position may suffer. In addition, we may be harmed if our proprietary or confidential information regarding our business is exposed through the unauthorized use of AI technologies or our systems infringe on intellectual property rights of others.
Global cybersecurity vulnerabilities, threats and more frequent, sophisticated and targeted attacks pose a risk to our information technology systems and to critical third-party information technology platforms we utilize.utilize, which may be increasingly exacerbated by the proliferation of and advance in AI. We have implemented security policies, processes and layers of defense designed to help identify and protect against misappropriation or corruption of our systems and information and disruption of our operations. Despite these efforts, systems we utilize have been and may in the future be damaged, disrupted, ransomed or shut down due to cybersecurity attacks by unauthorized access, malware, ransomware, undetected intrusion, hardware failures, or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate. These attacks have led and could in the future lead to business interruption, production or operational downtime, product shipment delays, exposure or loss of proprietary confidential or financial information or the personal information of our employees, suppliers, customers or consumers, data corruption, an inability to report our financial results in a timely manner, damage to the reputation of our brands, damage to our relationships with our employees, suppliers, customers and consumers, exposure to litigation, and increased costs associated with the remediation and mitigation of such attacks. In addition, we could be adversely affected if any of our significant customers, suppliers or service providers experiences any similar events that disrupt their business operations or damage their reputation. Such events could adversely affect our results of operations and financial position.
We have implemented security policies, processes and layers of defense designed to help identify and protect against intentional and unintentional misappropriation or corruption of our systems and information and disruption of our operations. Despite these efforts, our systems may in the future be damaged, disrupted, or shut down due to cybersecurity attacks by unauthorized access, malware, ransomware, undetected intrusion, hardware failures, or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate. In addition, the rapid evolution and increased adoption of new technologies, such as artificial intelligence,AI, may intensify our cybersecurity risks. These breaches or intrusions could in the future lead to business interruption, production or operational downtime, product shipment delays, exposure or loss of proprietary, confidential, personal or financial information, data corruption, an inability to report our financial results in a timely manner, damage to the reputation of our brands, damage to our relationships with our customers and suppliers, exposure to litigation, and increased costs associated with the remediation and mitigation of such attacks. Such events could adversely affect our results of operations and financial position. In addition, we could be adversely affected if any of our significant customers or suppliers experiences any similar events that disrupt their business operations or damage their reputation.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
“smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
Management’s determination that a material weaknessesweakness existexists in our internal controls over financial reporting could have a material adverse impact on our ability to produce timely and accurate financial statements and could negatively impact our business and the market for our ordinary shares.
The process of designing and implementing an effective accounting and financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain an accounting and financial reporting system that is adequate to satisfy our reporting obligations. Based upon an evaluation conducted in connection with the preparation of FGI’s audited consolidated financial statements as of December 31, 2024,2025, management concluded that our internal controls over financial reporting were not effective due to the material weaknessesweakness in our internal controls over financial reporting. MaterialSpecifically, weaknessesthis material weakness relates to insufficient precision in ourthe design and operation of journal entry and account reconciliation review controls at a foreign subsidiary that was newly brought into scope and subject to a full-scope evaluation of internal controlcontrols over financial close and reporting included (a) inadequate segregation of duties related tofor the initiationfirst andtime recording of journal entries toduring the general ledger, (b) inadequate evidence of management review controls regarding the review and approval of certain account reconciliations, and (c) inadequate evidence and precision of management review controls regarding loan covenants and covenant calculations.year. We believe that thesethis material weaknessesweakness set forth above did not have an effect on our financial results.
We have been evaluating and have begun implementing certain practices and procedures to address the foregoing material weaknesses.weakness. To remediate the material weaknessesweakness, relatedmanagement has initiated a series of corrective actions. These include adding dedicated in-house accounting personnel to enhance oversight of the reviewfinancial ofclose process, implementing more robust journal entry and account reconciliation, we have implemented system controls designed to prevent significant unauthorized transactions from being posted withoutreconciliation review andprocedures establishedwith sufficientclearly compensating controls for effective account reconciliations. Additionally, we have enhanced our management review controls, including more robustdefined documentation requirements for the review and approval requirements, and strengthening evidence retention practices. Management believes that, once these measures are fully implemented and have operated for a sufficient period of journal entries. To addresstime, the material weakness relatedwill be remediated. Management will continue to debtmonitor covenantand compliance,test wethe haveoperating implementedeffectiveness of the related controls on an additionalongoing layer of review in the calculation and reporting process. We plan to continue the implementation of these and other remediation efforts to address the identified material weaknesses in the future.basis. While we are actively identifying and implementing actions to improve the effectiveness of our internal controls over financial reporting and disclosure controls and procedures, there can be no assurance that our remediation efforts will be fully successful. We expect to continue to incur or expend substantial accounting and other expenses and significant management time and resources in these efforts. It is possible that our future assessment, or the future assessment by our independent registered public accounting firm, may reveal additional material weaknessesweakness in our internal controls. The failure to fully remediate the existing material weaknessesweakness or the discovery of any future potential material weaknessesweakness could result in future misstatements in our financial statements or in documents we file with the SEC and could have a negative impact on our business and the market for our ordinary shares. For more information on our material weaknessesweakness and the status of our remediation efforts, see Item 9A - Controls and Procedures, which includes Management’s Report on Internal Controls Over Financial Reporting.
Management's Discussion & Analysis (MD&A)
New heading “Reverse Share Split”
New heading “Tariff Developments”
Largest changes
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 (see in full comparisonUSD5.2USD5.5 million as of December 31,20242025). 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 CanadaLtd.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 December 31,2024,2025, FGI CanadaLtd.was not in compliance with certainfinancialcovenantsin the Canadian Revolverrelated to its debt to tangible net worth ratio.InRBCDecemberagreed2024,toFGIwaiveCanadaitsLtd.rightobtainedtoa waiver fromcall thelenderdebtacknowledging the non-compliance and FGI Canada Ltd.’s planrelated toremedythisthe default on or before March 31, 2025. The Company has classified the outstanding balance of the loan as a current liability on the consolidated balance sheet as of December 31, 2024. The Company has sufficient liquidity to repay the loan in full if immediate settlement were required.noncompliance.
We generated the majority of our revenue in the United States market, which amounted to $80.7 million for the year ended December 31, 2025, and $82.4 million for the year ended December 31, 2024,see in full comparisonand $74.6 million for the year ended December 31, 2023,representing a10.5%2.0%increase.decrease. This revenue accounted for62.5%61.8% and63.6%62.5% of our total revenue for the years ended December 31,20242025 and2023,2024, respectively. Thisgrowthmodestwasdecreaseprimarilyreflectsdrivenourbyability to minimize theexpansionbroader effects of tariff-related disruptions through proactive supply chain management, pricing strategies, and close collaboration with our key customers. As a result, despite the significant headwinds from trade policies, our U.S. business demonstrated relative resilience and continued to represent a stable 61.8% of total revenue, underscoring the effectiveness of ourdistributioneffortsnetworkto manage external challenges andthemaintainsuccessfulourexecutionmarketof marketing initiatives.position.
“The Company's 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. The Company has incurred net loss of $7.1 million and $1.7 million for the twelve months ended December 31, 2025 and the year ended December 31, 2024, respectively. …”see in full comparison
“However, the Company has been facing and expects to continue to face 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.”see in full comparison
“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. …”see in full comparison
Full comparison: every changed paragraph (101)
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, customercustom 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.
Consistent with our long-term strategic plan, we expect to continue to make significant investments across our business in order to continue to attract new customers, expand existing relationships, develop new products and manufacturing capabilities and expand into new jurisdictions, thereby prioritizing long-term growth over short-term profitability. We intend to drive long-term value creation for our shareholders through a balanced focus on product innovation, organic growth, and efficient capital deployment. The following initiatives represent key strategic priorities for us:
•Commitment to product innovation. We have a history of being an innovator in the kitchen and bath markets and developing “on-trend” products and bringing them to market ahead of the competition. We have developed deep marketing skills, leading design capabilities, and product development expertise. A recent example of our innovative product development includes the Jetcoat® shower wall systems, which offer a stylized design option without the fuss of messy grout. We expect to continue to invest in research and development to drive product innovation in 2024.2026.
•“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. WeIn recently announced that2025, 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 FlushGuardFLUSH 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.
•Enhanced margin performance. Our focus on higher-margin products has continued to deliver results, with gross margins reaching 27.0% in 2025 and 26.9% in 2024 and 27.4% in 2023,2024, a significant rise from 19.5% in 2022. This positive trajectory in margins reflects our commitment to optimizing our product mix and operational efficiency.efficiency despite recent headwinds from tariffs. Looking ahead, we anticipate gross margins to remain in line with the levels achieved in 20242025 and 2023.2024.
•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 liquidityfinancial resources of $15.6$8.5 million as of December 31, 2024,2025, the Company believes it has sufficient financial flexibility to fund its organic growth strategy.
We were incorporated in the Cayman Islands on May 26, 2021 in connection with a reorganization (theand “Reorganization”)separation offrom 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. 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.
Reverse Share Split
On July 28, 2025, the Company filed an amendment (the “Amendment”) to the Company’s Amended and Restated Memorandum and Articles of Association with the Registrar of Companies in the Cayman Islands to effect a 1-for-5 reverse share split (the “Reverse Share Split”) of the Company’s ordinary shares, which was effected on July 31, 2025. Unless otherwise noted, the share and per share information in this Annual Report on Form 10-K have been adjusted to give effect to the Reverse Share Split.
Tariff Developments
Our business was significantly impacted by the changes in the U.S. tariff regime in 2025 and related responses from foreign jurisdictions. On February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Following the Supreme Court decision, the U.S. Administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, subject to certain carveouts. As of the filing date, it remains uncertain what impact these decisions will have on our future financial results, including the process and availability of obtaining refunds of amounts previously paid for the IEEPA tariffs or any fluctuations of the level of replacement tariffs imposed or the addition of any new tariffs through other means.
Our revenue increaseddecreased by $14.6$1.3 million, or 12.4%,1.0%, to $130.5 million for the year ended December 31, 2025, from $131.8 million for the year ended December 31, 2024, from $117.2 million for the year ended December 31, 2023.2024. The increasedecrease in our revenue was primarily driven by increasesdecreases in sales of sanitaryware, showerbath systemfurniture and customshower system, partially offset by an increase in sales of kitchen cabinetry categories.and others.
We derive the majority of our revenue from sales of sanitaryware, which accounted for 61.5% and 64.4%61.5% of our total revenue for the years ended December 31, 20242025 and 2023,2024, respectively. Revenue generated from the sales of sanitaryware increaseddecreased by 7.4%1.0% to $80.3 million for the year ended December 31, 2025, from $81.1 million for the year ended December 31, 2024, from $75.6 million for the year ended December 31, 2023. This growth was primarily driven by higher sales volumes.2024. Despite thethis overallmodest increasedecline, sanitaryware maintained its position as our largest product category. The stability in revenue, the decline in sanitaryware’sits share of total revenue suggestsreflects athe diversificationongoing ofresilience and steady demand for sanitaryware products, even as we continue to diversify our product mix,portfolio reflecting our strategic efforts toand expand other productcategories categories.in line with our long-term growth strategy.
Our revenue from bath furniture sales accounted for 11.2%10.9% and 12.6%11.2% of our total revenue for the years ended December 31, 20242025 and 2023,2024, respectively. Revenue generated from bath furniture sales decreased by 0.2%3.6% to $14.2 million for the year ended December 31, 2025 from $14.7 million for the year ended December 31, 20242024. fromAs $14.8part millionof forour broader strategic focus on diversifying our product mix and expanding higher-growth categories, resources and sales efforts were increasingly allocated to other segments, which likely were factors in bath furniture sales during the year ended December 31, 2023.period.
Revenue from shower systems made up approximately 19.4%17.3% and 17.1%19.4% of our total revenue for the years ended December 31, 20242025 and 2023,2024, respectively. Revenue from sales of shower systems increaseddecreased by 27.6%11.5% to $22.6 million for the year ended December 31, 2025 from $25.5 million for the year ended December 31, 20242024. fromWhile $20.0shower millionsystem forrevenue thedropped year ended December 31, 2023. Our strategic initiativesyear-over-year in the2025, showerour systemsrecently categorylaunched continueprograms drivinghave significantdriven revenuegrowth growth.in recent quarters and we anticipate them continuing to be a positive driver moving forward, similar to our sanitaryware programs.
We generated the majority of our revenue in the United States market, which amounted to $80.7 million for the year ended December 31, 2025, and $82.4 million for the year ended December 31, 2024, and $74.6 million for the year ended December 31, 2023, representing a 10.5%2.0% increase.decrease. This revenue accounted for 62.5%61.8% and 63.6%62.5% of our total revenue for the years ended December 31, 20242025 and 2023,2024, respectively. This growthmodest wasdecrease primarilyreflects drivenour byability to minimize the expansionbroader effects of tariff-related disruptions through proactive supply chain management, pricing strategies, and close collaboration with our key customers. As a result, despite the significant headwinds from trade policies, our U.S. business demonstrated relative resilience and continued to represent a stable 61.8% of total revenue, underscoring the effectiveness of our distributionefforts networkto manage external challenges and themaintain successfulour executionmarket of marketing initiatives.position.
Our second largest market is Canada. Our revenue generated in the Canadian market was $33.3 million and $35.2 million for the years ended December 31, 2025 and 2024, respectively, representing a 5.1% decrease. This decline reflects a moderation in sales during the second half of the year, as retailers continued to slow purchases following strong activity in the first half. While the wholesale channel showed signs of improvement in the third quarter, this momentum was not sufficient to offset the overall softness in demand during the latter part of the year. Despite these headwinds, Canada remained our second largest market, accounting for 25.5% of total revenue, and we continue to closely monitor market dynamics and adjust our strategies to support long-term growth in the region.
Our second largest market is Canada. Our revenue generated in the Canadian market was $35.2 million and $31.1 million for the years ended December 31, 2024 and 2023, respectively, representing a 13.1% increase. The strong performance in Canada underscores the effectiveness of our regional growth strategy and highlights the market’s increasing contribution to our overall revenue.
We also derive our revenue from Europe, which consists primarily of sales in Germany. This amounted to $13.3$14.2 million and $11.5$13.3 million for the years ended December 31, 20242025 and 2023,2024, respectively, representing a 15.9%6.8% increase. Our warehouse business in Germany has been gaining traction in recent years.
Gross profit was $35.4$35.3 million for the year ended December 31, 2024,2025, reflecting a 10.4%0.5% increasedecrease compared to the prior year. Gross profit margin percentage stood at 26.9%27.0% for the year ended December 31, 2024,2025, a 50-basis-point10-basis-point decreaseincrease from 27.4%26.9% in 2023. This gross profit performance was driven by increased sales volume and a sustained focus on a higher-margin product mix.2024.
Selling and distribution expenses primarily consisted of personnel costs, marketing and promotion costs, commission, and freight and leasing charges. Our selling and distribution expenses increaseddecreased by $5.7$0.5 million, or 28.3%,1.9%, to $25.1 million for the year ended December 31, 2025, from $25.6 million for the year ended December 31, 2024,2024. fromThis $20.0reduction millionis fora the year ended December 31, 2023. The increase was driven by higher personnel costs, expanded marketing and promotional activities, and rising warehouse expenses, reflecting the impactresult of inflation and our continued investmentfocus inon drivingoperational salesefficiency growth.and cost management initiatives.
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 $1.8$0.9 million, or 21.1%,8.9%, to $10.2$11.1 million for the year ended December 31, 2024,2025, as compared to the year ended December 31, 2023.2024. The increase was drivenprimarily bydue to inflationary pressures and expensesadditional expenditures related to newlycorporate formedsupport subsidiaries and growth initiatives, supporting our continued expansion and operational growth.activities.
Total other expenses, net decreasedincreased by approximately $0.7$1.8 million orto 80.1%,$1.9 tomillion for the year ended December 31, 2025, from $0.2 million for the year ended December 31, 2024, from $0.9 million for the year ended December 31, 2023.2024. This decreaseincrease was primarily driven by proceeds from a settlement agreement and gainslosses from foreign currency transactions, partially offset by higher interest expenses derived from our credit facilities.transactions.
We recorded provision for income tax of $2.8 million for the year ended December 31, 2025, primarily due to the requirement to maintain a full valuation allowance on deferred tax assets in our U.S. subsidiaries as a result of recurring losses. While this accounting treatment is required under current standards, we remain focused on executing our strategic initiatives and are encouraged by the progress we are making, which we believe positions us well for potential future improvements in our operating results. Any sustained positive performance in future periods will be evaluated in accordance with applicable accounting guidance to determine the appropriate level of valuation allowance.
We recorded income tax benefit of $0.5 million for the year ended December 31, 2024, and provision for income tax of $0.8 million for the year ended December 31, 2023. Loss before income taxes resulted in a tax benefit for the year.
Net (Loss) Income
For the year ended December 31, 2024,2025, we reported a net loss of $1.7$7.1 million, compared to a net incomeloss of $0.6$1.7 million in 2023,2024, reflecting a $2.3$5.4 million decrease. This change was driven by a combination of factors discussed above. While these factors impacted short-term profitability, they position us for long-term growth and operational strength.
The Company's 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. The Company has incurred net loss of $7.1 million and $1.7 million for the twelve months ended December 31, 2025 and the year ended December 31, 2024, respectively. In addition, the Company had net cash provided by operating activities of $0.7 million and net cash used in operating activities of $7.4 million for the same respective periods. As of December 31, 2025, the Company had approximately $1.9 million in cash and cash equivalents and had $11.9 million outstanding under its credit facilities, which were used primarily for working capital purposes.
As discussed in Note 8 to the consolidated financial statements, FGI Industries was not in compliance with certain financial covenants related to its debt coverage ratio as of December 31, 2025. In March 2026, the Company amended and restated its Credit Agreement with East West Bank and is currently in compliance with all covenants. As of December 31, 2025, FGI Canada was not in compliance with certain covenants related to its debt to tangible net worth ratio. RBC agreed to waive its right to call the debt related to this noncompliance.
However, the Company has been facing and expects to continue to face 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, 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 have begun generating increased revenue.
•Successful renewal of the Company’s credit facility with East West Bank, extending the maturity and maintaining access to committed financing.
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.
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 December 31, 2024, we had cash and working capital of $4.6 million and $10.4 million, respectively. As of December 31, 2024, we had approximately $14.5 million outstanding in the aggregate under our credit facilities discussed below for working capital replenishment.
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.
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 athe Credit Agreement had an original maturity date of December 21, 2024. East West Bank has agreed to extend the maturity date toon Juneseveral 21,occasions, 2025most recently through April 3, 2026 while effortsthe regardingparties discuss a renewal of the facility are ongoing.facility.
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 December 31, 2024,2025, FGI Industries was not in compliance with thesecertain financial covenants.covenants related to its debt coverage ratio. The Company has classified the outstanding balance of the loan as a current liability on the consolidated balance sheet as of December 31, 2025.
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 December 31, 20242025 and 20232024 was 7.25%6.50% and 8.25%,7.25%, respectively.
On March 27, 2026, FGI Industries renewed its credit facility with East West Bank, extending the maturity to April 17, 2027. The renewal includes a tiered interest‑rate margin determined by the subsidiary’s trailing‑twelve‑month EBITDA and updates to certain financial covenants, including revised EBITDA requirements and limitations on intercompany balances. Following the renewal, the Company is in compliance with the revised covenant requirements. See Note 16 to the consolidated financial statements.
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 $9.6$8.1 million and $7.0$9.6 million as of December 31, 20242025 and 2023,2024, respectively.
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 (USD5.2USD5.5 million as of December 31, 20242025). 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 December 31, 2024,2025, FGI Canada Ltd. was not in compliance with certain financial covenants in the Canadian Revolver related to its debt to tangible net worth ratio. InRBC Decemberagreed 2024,to FGIwaive Canadaits Ltd.right obtainedto a waiver fromcall the lenderdebt acknowledging the non-compliance and FGI Canada Ltd.’s planrelated to remedythis the default on or before March 31, 2025. The Company has classified the outstanding balance of the loan as a current liability on the consolidated balance sheet as of December 31, 2024. The Company has sufficient liquidity to repay the loan in full if immediate settlement were required.noncompliance.
Borrowings under this line of credit amounted to $2.6$1.7 million and $0$2.6 million as of December 31, 20242025 and 2023,2024, respectively. The facility matures at the discretion of HSBC CanadaRBC upon 60 days’ notice.
FGI Canada Ltd. 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.
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$2.5 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 $2.3$2.1 million and $0$2.3 million as of December 31, 20242025 and 2023,2024, respectively.
On January 14, 2025, FGI International and CTBC agreed to increase the CTBC Credit Line to $3.0 million.
Net cash provided by operating activities was approximately $0.7 million for the year ended December 31, 2025, compared to net cash used in operating activities of $7.4 million in the prior year. The improvement in operating cash flow in 2025 was primarily driven by effective management of working capital, including a significant reduction in accounts receivable and higher accounts payable balances, which more than offset the impact of a net loss for the year. Additionally, a decrease in prepayments and other current assets contributed positively to cash flow, reflecting tighter control over advance payments and operational outflows. These improvements were partially offset by increased payments of operating lease liabilities and continued investments in our business to support long-term growth. The shift from a significant cash outflow in 2024 to a modest inflow in 2025 demonstrates our ongoing efforts to enhance operational efficiency, optimize our working capital structure, and maintain financial flexibility in a dynamic market environment.
Net cash used in operating activities was approximately $7.4 million for the year ended December 31, 2024. This change primarily reflects strategic investments and working capital fluctuations. While 2024 saw a net loss, we continue to focus on long-term growth initiatives. Increases in accounts receivable and prepayments, as well as payments of operating lease liabilities, reflect our expanding operations and commitments. At the same time, higher accounts payable and a reduction in prepayments and other current assets provided a partial offset, demonstrating improved efficiency in managing liabilities.
Net cash provided by operating activities was approximately $2.2 million for the year ended December 31, 2023. This positive cash flow was primarily driven by a reduction in inventory and other current assets, reflecting improved inventory management and efficient working capital utilization. These benefits were partially offset by an increase in prepayments and other receivables, which resulted from higher advance payments to suppliers and other operational commitments. Additionally, a decrease in operating lease liabilities contributed to lower net cash inflows. Furthermore, an increase in accounts receivable impacted cash flow, reflecting higher sales on credit terms.
Net cash used in financing activities was approximately $2.6 million for the year ended December 31, 2025, compared to net cash provided by financing activities of $7.5 million in the prior year. The cash outflow in 2025 primarily reflects net repayments on our revolving credit facilities as we focused on reducing outstanding debt and managing our capital structure in response to evolving business needs. In contrast, the prior year’s positive cash flow from financing activities was largely attributable to increased borrowings to support working capital requirements and operational growth. The transition from net cash inflows in 2024 to net outflows in 2025 underscores our commitment to prudent financial management and maintaining a balanced approach to liquidity and leverage as we continue to execute our strategic objectives.
Net cash provided by financing activities was approximately $7.5 million for the year ended December 31, 2024 compared to net cash used in financing activities of $2.8 million for the year ended December 31, 2023. During 2023, we made net repayments on the revolving credit facility, resulting in an overall cash outflow in financing activities. The shift to net cash inflows in 2024 highlights our focus on enhancing liquidity and financial flexibility in response to evolving business needs and growth opportunities.
Critical Accounting PoliciesEstimates
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. While all estimates are subject to uncertainty, certain accounting estimates are considered critical because they are highly dependent on management’s judgment, involve significant uncertainty, and could materially impact our financial condition or results of operations if actual results differ from those estimates. The following discussion addresses the critical accounting estimates that require our most difficult, subjective, or complex judgments.
The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The preparation of these consolidated financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting policies that are significant to the preparation of the consolidated financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to consolidated financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this registration statement, we believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.
Use of estimates and assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property and equipment, allowance for credit losses, inventory reserve, accrued defective return, provision for contingent liabilities, revenue recognition, deferred taxes and uncertain tax position. Actual results could differ from these estimates.
Allowance for Credit Losses on Accounts receivableReceivable
We maintain an allowance for expected credit losses on accounts receivable based on a combination of historical collection experience, the aging of receivables, current economic conditions, industry trends, and the financial condition of our customers. Management regularly reviews the adequacy of the allowance, considering both quantitative and qualitative factors. Changes in customer creditworthiness, macroeconomic conditions, or unexpected events could result in actual losses differing materially from our estimates. A significant increase in uncollectible accounts could adversely affect our results of operations.
What changed in the latest 10-Q
Risk Factors
Our Annual Report on Form 10-K for the year ended December 31, 2025, includes a detailed discussion of our risk factors. At the time of this filing, there have been no material changes to the risk factors that were included in the Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Supply Chain Operations”
Largest changes
“Sanitaryware is our largest product category, accounting for 60.0% and 56.5% of our total revenue for the three and six months ended June 30, 2026, respectively, compared to 58.3% and 59.6% for the comparable periods of 2025. For the three months ended June 30, 2026, sanitaryware revenue increased by 5.9% to $19.1 million from $18.1 million for the same period of 2025. For the six months ended June 30, 2026, sanitaryware revenue decreased by 7.8% to $35.3 million from $38.2 million for the same period of 2025. …”see in full comparison
“The United States is our largest market, accounting for 67.8% and 66.6% of our total revenue for the three and six months ended June 30, 2026, respectively, compared to 58.0% and 61.0% for the comparable periods of 2025. For the three months ended June 30, 2026, U.S. revenue increased by 20.3% to $21.6 million from $18.0 million for the same period of 2025. The three-month increase was primarily attributable to the comparison against a weaker prior year period, during which customer demand was dampened by tariff-related uncertainty. For the six months ended June 30, 2026, U.S. …”see in full comparison
Our business was significantly impacted by the changes in the U.S. tariff regime in 2025 and related responses from foreign jurisdictions.see in full comparisonOnWe seek to offset tariffs and other costs through pricing, savings, sourcing changes and other measures, but demand could decline if consumer confidence weakens or the prices of our products increase. In February20,2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Following the Supreme Court decision, the U.S. Administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, subject to certain carveouts. These global tariffs were recently invalidated by a US Court of International Trade ruling, but the government has filed a notice of appeal.AsDuring the three months ended June 30, 2026, the Company received approximately $2.7 million in refunds of IEEPA tariffs previously paid, which was recognized as a reduction to cost of revenue in thefilingcurrentdate,period.itIn July 2026, the global tariff under Section 122 expired and was replaced by new tariffs generally ranging from 10% to 12.5% under Section 301. Several legal challenges to these new tariffs have been implemented. It remains uncertain what impactthesethedecisionsongoing legal and regulatory developments will have on our future financial results, including theprocess andavailability ofobtainingany additional refunds of amounts previouslypaid for the IEEPA tariffs orpaid, any fluctuationsofin the level of replacement tariffsimposedimposed, or the addition of any new tariffs through other means.
see in full comparisonOur revenue from bathBath furnituresalesaccounted for14.9%11.0% and 12.9% of our total revenue for the three and six months endedMarchJune31,30, 2026, respectively, compared to12.3%13.3% and 12.8% for the comparableperiodperiods of 2025.Bath furniture sales increased by 10.9% to $4.5 million forFor the three months endedMarchJune31,30, 2026,comparedbath furniture sales decreased by 15.5% to $3.5 million from $4.1 million for the same period of 2025.OurForrecentlythelaunchedsixmid-tiermonthsproductendedlines,Junelaunched30, 2026, bath furniture sales decreased by 2.4% tobetter$8.0addressmillion from $8.2 million for the same period of 2025. The declines across both periods reflect the current demand environment as well as the impact oftradingtariff-relateddownuncertaintytoonlowercustomerpricedpurchasingofferings, is gaining traction.decisions.
“Gross profit was $10.7 million and $18.8 million for the three and six months ended June 30, 2026, representing increases of 22.5% and 6.9% compared to the same periods of 2025, respectively. Gross profit margin was 33.4% and 30.2% for the three and six months ended June 30, 2026, compared to 28.1% and 27.4% for the comparable periods of 2025, representing improvements of 530 and 280 basis points, respectively. …”see in full comparison
Full comparison: every changed paragraph (42)
•Enhanced margin performance. Our focus on higher-margin products has continued to deliver results, with gross margins reaching 26.8%30.2% for the threesix months ended MarchJune 31,30, 2026, 27.0% in 2025 and 26.9% in 2024, a significant rise from 19.5% in 2022. This positive trajectory in margins reflects our commitment to optimizing our product mix and operational efficiencyefficiency, as well as the benefit of certain cost recoveries, despite recent headwinds from tariffs. Looking ahead, we anticipate gross margins to remain in line with the levels achieved in 2025 and 2024.
•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 financial resources of $7.9 million as of MarchJune 31,30, 2026, the Company believes it has sufficient financial flexibility to fund its organic growth strategy.
Our business was significantly impacted by the changes in the U.S. tariff regime in 2025 and related responses from foreign jurisdictions. OnWe seek to offset tariffs and other costs through pricing, savings, sourcing changes and other measures, but demand could decline if consumer confidence weakens or the prices of our products increase. In February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Following the Supreme Court decision, the U.S. Administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, subject to certain carveouts. These global tariffs were recently invalidated by a US Court of International Trade ruling, but the government has filed a notice of appeal. AsDuring the three months ended June 30, 2026, the Company received approximately $2.7 million in refunds of IEEPA tariffs previously paid, which was recognized as a reduction to cost of revenue in the filingcurrent date,period. itIn July 2026, the global tariff under Section 122 expired and was replaced by new tariffs generally ranging from 10% to 12.5% under Section 301. Several legal challenges to these new tariffs have been implemented. It remains uncertain what impact thesethe decisionsongoing legal and regulatory developments will have on our future financial results, including the process and availability of obtainingany additional refunds of amounts previously paid for the IEEPA tariffs orpaid, any fluctuations ofin the level of replacement tariffs imposedimposed, or the addition of any new tariffs through other means.
Supply Chain Operations
As part of our ongoing efforts to diversity our supply chain and manage expenses, we are currently working on initiatives to optimize our warehouse operations and global sourcing strategy. We are in the process of onboarding several suppliers in new jurisdictions in order to diversify our supply chain. As part of these efforts, we have been making several adjustments to our warehouse operations across multiple locations and expect to begin operations at a new warehouse in Texas to support distributions in the southern United States. These initiatives, if successful, are expected to deliver cost savings through reduced freight costs and shipping times for our North American operations.
The following table summarizes the results of our operations for the three and six months ended MarchJune 31,30, 2026 and 2025 and provides information regarding the dollar and percentage increase (decrease) during such periods.
For the Three and Six Months Ended MarchJune 31,30, 2026 and 2025
(1)See “Non-GAAP Measures” below for more information on our use of these adjusted figures and a reconciliation of these financial measures to their closest U.S. generally accepted accounting principles (“GAAP”) comparators.
For the three months ended MarchJune 31,30, 2026, our revenue decreasedincreased by $2.7$0.9 million, or 8.2%,2.9%, to $30.5$31.9 million from $33.2$31.0 million for the same period last year. The decrease in our revenueincrease was primarily driven by decreasesgrowth in salessanitaryware ofand sanitaryware.shower system sales, which increased by 5.9% and 15.2%, respectively, partially offset by a 15.5% decline in bath furniture sales.
For the six months ended June 30, 2026, our revenue decreased by $1.8 million, or 2.8%, to $62.4 million from $64.2 million for the same period last year. The decrease was primarily driven by a 7.8% decline in sanitaryware sales, partially offset by a 14.6% increase in shower system sales reflecting the continued traction of our recently launched programs.
Sanitaryware is our largest product category, accounting for 60.0% and 56.5% of our total revenue for the three and six months ended June 30, 2026, respectively, compared to 58.3% and 59.6% for the comparable periods of 2025. For the three months ended June 30, 2026, sanitaryware revenue increased by 5.9% to $19.1 million from $18.1 million for the same period of 2025. For the six months ended June 30, 2026, sanitaryware revenue decreased by 7.8% to $35.3 million from $38.2 million for the same period of 2025. The three-month increase was primarily attributable to the comparison against a weaker prior year period, during which customer demand was dampened by uncertainty surrounding U.S. tariff policy. The six-month decline reflects the broader softness in sanitaryware demand. Despite the year-to-date decline, sanitaryware continued to represent the majority of our revenue, and we remain focused on sustaining its performance as we further diversify our product portfolio.
We derive the majority of our revenue from sales of sanitaryware, which accounted for 52.9% of our total revenue for the three months ended March 31, 2026, compared to 60.7% for the comparable period of 2025. Revenue generated from the sales of sanitaryware decreased by 20.0% to $16.1 million for the three months ended March 31, 2026 from $20.2 million for same period of 2025. Despite this decline, sanitaryware maintained its position as our largest product category. The stability in its share of total revenue reflects the ongoing resilience and steady demand for sanitaryware products, even as we continue to diversify our product portfolio and expand other categories in line with our long-term growth strategy.
Our revenue from bathBath furniture sales accounted for 14.9%11.0% and 12.9% of our total revenue for the three and six months ended MarchJune 31,30, 2026, respectively, compared to 12.3%13.3% and 12.8% for the comparable periodperiods of 2025. Bath furniture sales increased by 10.9% to $4.5 million forFor the three months ended MarchJune 31,30, 2026, comparedbath furniture sales decreased by 15.5% to $3.5 million from $4.1 million for the same period of 2025. OurFor recentlythe launchedsix mid-tiermonths productended lines,June launched30, 2026, bath furniture sales decreased by 2.4% to better$8.0 addressmillion from $8.2 million for the same period of 2025. The declines across both periods reflect the current demand environment as well as the impact of tradingtariff-related downuncertainty toon lowercustomer pricedpurchasing offerings, is gaining traction.decisions.
Revenue from sales of showerShower systems madeaccounted upfor approximately18.9% 21.2%and 20.0% of our total revenue for the three and six months ended MarchJune 31,30, 2026, respectively, compared to 17.1%16.9% and 17.0% for the comparable periodperiods of 2025. Revenue from sales of shower systems increased by 14.0% to $6.5 million forFor the three months ended MarchJune 31,30, 2026, comparedshower system revenue increased by 15.2% to $5.7$6.0 million from $5.2 million for the comparablesame period of 2025. TheseFor the six months ended June 30, 2026, shower system revenue increased by 14.6% to $12.5 million from $10.9 million for the same period of 2025. The growth across both periods was primarily driven by our recently launched programsshower system programs, which have drivengained growth,commercial traction and wecontributed to shower systems' increasing share of total revenue. We anticipate theythese programs will continue to be a positive driver movinggoing forward.forward, Similarthough demand may remain subject to sanitaryware,uncertainty however, we expect demand to remain uncertain due toin the current environment,macroeconomic which may offset the impact of these programs.environment.
Other revenue, which primarily consists of custom kitchen cabinetry sales from our Covered Bridge business, accounted for 10.1% and 10.6% of our total revenue for the three and six months ended June 30, 2026, respectively, compared to 11.5% and 10.6% for the comparable periods of 2025. For the three months ended June 30, 2026, other revenue decreased by 9.2% to $3.2 million from $3.5 million for the same period of 2025. For the six months ended June 30, 2026, other revenue decreased by 3.6% to $6.6 million from $6.8 million for the same period of 2025. The declines across both periods reflect softer sales across the category.
For the three months ended March 31, 2026, other revenue increased by 2.5% to $3.3 million from $3.3 million for the same period of 2025. The increase was primarily driven by volume growth resulting from continued strength in sales of the Covered Bridge custom-kitchen cabinetry businesses.
The United States is our largest market, accounting for 67.8% and 66.6% of our total revenue for the three and six months ended June 30, 2026, respectively, compared to 58.0% and 61.0% for the comparable periods of 2025. For the three months ended June 30, 2026, U.S. revenue increased by 20.3% to $21.6 million from $18.0 million for the same period of 2025. The three-month increase was primarily attributable to the comparison against a weaker prior year period, during which customer demand was dampened by tariff-related uncertainty. For the six months ended June 30, 2026, U.S. revenue increased by 6.1% to $41.5 million from $39.1 million for the same period of 2025. The six-month increase reflects a strong recovery in the second quarter that more than offset softer sales in the first quarter.
Canada is our second largest market, accounting for 20.8% and 20.4% of our total revenue for the three and six months ended June 30, 2026, respectively, compared to 28.3% and 26.4% for the comparable periods of 2025. For the three months ended June 30, 2026, Canadian revenue decreased by 24.5% to $6.6 million from $8.8 million for the same period of 2025. For the six months ended June 30, 2026, Canadian revenue decreased by 25.0% to $12.7 million from $17.0 million for the same period of 2025. The declines across both periods reflect softer sales across the Canadian market.
Europe, which consists primarily of sales in Germany, accounted for 9.0% and 10.3% of our total revenue for the three and six months ended June 30, 2026, respectively, compared to 11.7% and 10.5% for the comparable periods of 2025. For the three months ended June 30, 2026, European revenue decreased by 21.0% to $2.9 million from $3.6 million for the same period of 2025. For the six months ended June 30, 2026, European revenue decreased by 4.3% to $6.5 million from $6.7 million for the same period of 2025. The declines across both periods were driven by lower sales volumes in the European market.
We consistently generated the majority of our revenue in the United States market, which amounted to $19.9 million and $21.2 million for the three months ended March 31, 2026 and 2025, respectively. Such revenue accounted for approximately 65.3% and 63.7% of our total revenue for the three months ended March 31, 2026 and 2025. The decrease during the period was largely attributable to the decreased sales in sanitaryware as discussed above.
Our second largest market is Canada. Our revenue generated in the Canadian market was $6.1 million for the three months ended March 31, 2026, compared to $8.2 million for the three months ended March 31, 2025, representing a 25.5% decrease. The decrease during the period was largely attributable to the decreased sales in sanitaryware as discussed above.
We also derive revenue from Europe, which consists primarily of sales in Germany. This amounted to $3.6 million for the three months ended March 31, 2026, compared to $3.1 million for the three months ended March 31, 2025, representing a 15.4% increase. We believe this growth reflects continued demand in the European market.
Gross profit was $10.7 million and $18.8 million for the three and six months ended June 30, 2026, representing increases of 22.5% and 6.9% compared to the same periods of 2025, respectively. Gross profit margin was 33.4% and 30.2% for the three and six months ended June 30, 2026, compared to 28.1% and 27.4% for the comparable periods of 2025, representing improvements of 530 and 280 basis points, respectively. The margin expansion across both periods was driven by a favorable product mix shift toward higher-margin categories, ongoing cost control initiatives, and the benefit of certain trade-related cost recoveries, partially offset by the impact of tariff-related headwinds on imported goods.
Gross profit was $8.2 million for the three months ended March 31, 2026, a decrease of 8.3% compared to the same period of 2025. Gross profit margin was 26.8% and 26.8% for the three months ended March 31, 2026 and March 31, 2025, respectively. Despite the decrease in gross profit, gross profit margin remained stable year-over-year.
Selling and distribution expenses primarily consisted of personnel costs, marketing and promotion costs, commission,commissions, and freight and leasing charges. Our selling and distribution expenses decreased by $0.9$0.2 million, or 13.2%,3.7%, to $6.2$6.0 million for the three months ended MarchJune 31,30, 2026, from $7.2$6.2 million for the threesame period of 2025, and decreased by $1.2 million, or 8.8%, to $12.2 million for the six months ended MarchJune 31,30, 2026, from $13.4 million for the same period of 2025. ThisThe decreasedecreases wasacross both periods were largely attributable to actions taken to optimize our facility footprint and reduce ongoing overhead costs.
General and administrative expenses primarily consisted of personnel costs, professional service fees, depreciation, travel, and office supply expenses. Our general and administrative expenses decreasedremained byrelatively $0.3consistent million,at or 12.8%, to $2.4$2.9 million for the three months ended MarchJune 31,30, 2026, fromcompared $2.7to $2.8 million for the threesame period of 2025, and decreased by $0.3 million, or 5.7%, to $5.2 million for the six months ended MarchJune 31,30, 2025.2026, Thefrom decline$5.5 reflectsmillion for the same period of 2025, reflecting our ongoing efforts to optimize operations and reduce overall operating expenses.
We recorded an income tax expense of $0.1 million and an income tax benefit of $0.2 million for the three months ended June 30, 2026 and 2025, respectively, and income tax expense of $0.2 million for the six months ended June 30, 2026, compared to an income tax benefit of $1.0 million for the six months ended June 30, 2025.
WeOur recorded an incomeeffective tax expenserate ofwas $24,67811.1% and 111.0% for the three and six months ended MarchJune 31,30, 2026, respectively, compared to an13.6% incomeand tax benefit of $0.7 million30.4% for the threecomparable monthsperiods ended March 31,of 2025. ThisThe elevated effective tax rate for the six-month period is primarily attributable to the Companyrecognition recordingof a valuation allowance against its deferred tax assets in thecertain firstloss-making quarterjurisdictions, ofwhose 2026. While this accounting treatment is required under current standards, we remain focused on executing our strategic initiatives andlosses are encouragedoffset at the consolidated level by theincome progress we are making, which we believe positions us well for potential future improvementsearned in ourother operating results.jurisdictions. Any sustained positive performance in future periods will be evaluated in accordance with applicable accounting guidance to determine the appropriate level of valuation allowance.
We reported net income of $1.1 million for the three months ended June 30, 2026, compared to a net loss of $1.4 million for the same period of 2025. For the six months ended June 30, 2026, net loss was negligible, compared to a net loss of $2.2 million for the same period of 2025. The improvements across both periods reflect the combination of the factors discussed above, including gross margin expansion, disciplined cost management, and the benefit of certain cost recoveries.
We incurred net loss of $1.1 million and $0.8 million for the three months ended March 31, 2026 and 2025, respectively. These changes had resulted from the combination of the changes discussed above.
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. The Company has incurred net loss of $1.1$0.0 million and net cash usedprovided inby operating activities of $0.3$1.8 million for the threesix months ended MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, the Company had approximately $2.7$4.4 million in cash and had $13.1$13.0 million outstanding balance under its credit facilities, which were used primarily for working capital purposes.
The Credit Agreement contains financial covenants that require FGI Industries to maintain aggregate year to date EBITDA figures (defined as earnings before interest, taxes, depreciation and amortization) on a consolidated and unconsolidated basis, tested monthly, of up to $1.6 million and $1.4 million, respectively, as well as maintain certain limits on intercompany loans and affiliate transactions. As of MarchJune 31,30, 2026, FGI Industries was in compliance with these financial covenants.
Each sum of borrowings under the Credit Agreement is classified as a short-term loan. The outstanding balance of such loan was $9.2$9.1 million and $8.1 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively.
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 (USD5.5USD5.3 million as of MarchJune 31,30, 2026). 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 MarchJune 31,30, 2026, FGI Canada was in compliance with these financial covenants.
Borrowings under this line of credit amounted to $2.3$2.5 million and $1.7 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. The facility matures at the discretion of RBC upon 60 days’ notice.
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 $2.5 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 Rate in effect from time to time, plus 120 basebasis 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 Mr. Liang Chou Chen. Borrowings under this line of credit amounted to $1.6$1.4 million and $2.1 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively.
The following table summarizes the key components of our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025.
Net cash usedprovided inby operating activities was $0.3$1.8 million for the threesix months ended MarchJune 31,30, 2026, compared to $1.7$0.2 million used infor the same period of 2025. The improvement in operating cash flow was primarily driven by favorable changes in working capital,capital changes, including a $1.1$3.2 million decrease in inventories and a $0.6$1.3 million decrease in prepayments and other receivables from related parties, which provided significant cash inflows. Non-cashThese were supplemented by non-cash adjustments suchincluding as $0.5$1.1 million of amortization, $0.2$0.4 million of depreciation, and changesa in$0.5 provisionsmillion provision for credit losses and defective returns also contributed to narrowing the gap between net loss and operating cash flow.returns. These inflows helpedwere partially offset cash outflows fromby a $0.2$2.1 million increase in accounts receivable and a $0.8$1.8 million decrease in accounts payable. Overall, the Company’simprovement in operating cash flow forreflects the quarterCompany's reflectednear-breakeven improvednet managementloss ofposition, disciplined inventory management, and ongoing working capital and cost control initiativesoptimization compared to the prior year period.
Net cash used in investing activities totaled $0.1$0.2 million for the threesix months ended MarchJune 31,30, 2026, compared to $0.5$0.6 million infor the same period of 2025. The decrease was primarily attributable to reduced capital expenditures.expenditures, with property and equipment purchases declining to $0.2 million from $0.6 million in the prior year period.
Net cash provided by financing activities was $1.3$1.2 million for the threesix months ended MarchJune 31,30, 2026, primarily due toreflecting net proceeds from the Company’sCompany's revolving credit facilities. In contrast, financing activities used $1.9 million of cash for the same period inof 2025 incurred $1.3 million in cash used in financing activities,2025, reflecting net repaymentrepayments under these facilities.facilities during that period.
Our capital expenditures were incurred primarily in connection with the acquisition of property and equipment. Our capital expenditures amounted to $0.1$0.2 million and $0.5$0.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. We do not expect to incur significant capital expenditures in the immediate future.
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 2025 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 threesix months ended MarchJune 31,30, 2026.
FGI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding FGI (13F)
None of the 59 investors we track reported a position in their latest 13F.