Financial Analysis

Commitments and contingencies Litigation From time to time, the Company is involved in legal and regulatory proceedings that are incidental to the operation of its businesses. These proceedings may seek remedies relating to matters including environmental, tax, intellectual property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pension, government contract issues and commercial or contractual disputes. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including managements assessment of the merits of the particular claims, the Company does not believe it is reasonably possible that any asserted or unasserted legal claims or proceedings, individually or in aggregate, will have a material adverse effect on its results of operations or financial condition. …

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The Companys disaggregated revenue is summarized as follows: For the Year Ended December 31, 2025 2024 USD USD Revenue by product line Sanitaryware $ 80,331,947 $ 81,109,955 Bath Furniture 14,204,305 14,739,205 Shower System 22,581,882 25,521,977 Others 13,410,518 10,446,936 Total $ 130,528,652 $ 131,818,073 …

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Share-based compensation 2021 Equity Plan and Employee Stock Purchase Plan On October 7, 2021, the board of directors adopted the 2021 Equity Incentive Plan (the 2021 Equity Plan). The 2021 Equity Plan permits the grant of equity and equity-based incentive awards, including non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, stock unit awards and other stock-based awards. The purpose of the 2021 Equity Plan is to attract and retain the best available personnel for positions of responsibility within the Company, to provide additional incentives to them to align their interests with those of the Companys shareholders and to thereby promote the Companys long-term business success. On October 7, 2021, the board approved the adoption of the FGI Industries Ltd. Employee Stock Purchase Plan (the ESPP). The ESPP was approved by the Companys shareholders on October 7, 2021, and became effective on the effective date of the Companys consummation of the IPO of its ordinary shares. The ESPP offers eligible employees the opportunity to acquire a stock ownership interest in the Company through periodic payroll deductions that will be applied towards the purchase of ordinary shares at a discount from the then-current market price. The board set the maximum aggregate number of ordinary shares reserved and available pursuant to the 2021 Equity Plan at 300,000 shares (giving effect to the Reverse Share Split that became effective July 31, 2 …

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Income taxes The source of pre-tax income and the components of income tax expense are as follows: For the Year Ended December 31, 2025 2024 USD USD Income components United States $ (5,378,499) $ (5,300,760) Outside United States 1,039,485 3,018,662 Total pre-tax loss $ (4,339,014) $ (2,282,098) Provision for (benefit of) income taxes Current Federal $ (944) $ 2,809 State 4,549 46,915 Foreign 328,783 899,207 332,388 948,931 Deferred Federal 1,892,588 (941,331) State 586,651 (435,241) Foreign (25,235) (120,180) 2,454,004 (1,496,752) Total provision for (benefit of) income taxes $ 2,786,392 $ (547,821) Reconciliations between taxes at the U.S. federal income tax rate and taxes at the Companys effective income tax rate on earnings before income taxes are as follows: For the Year Ended December 31, 2025 2024 USD % USD % Income tax expense at Federal statutory tax rate $ (911,194) 21.0 $ (479,240) 21.0 Increase (decrease) in tax rate resulting from: State and local income taxes, net of federal benefit (1) 311,429 (7.2) (306,778) 13.4 Foreign tax effects (statutory rate differential) Hong Kong (54,845) 1.3 (165,121) 7.3 Canada 158,369 (3.7) 150,688 (6.6) Cayman Islands 184,621 (4.3) 134,299 (5.9) Cambodia (123,932) 2.9 (8,626) 0.4 Other (87,185) 2.0 34,313 (1.6) Nontaxable or nondeductible items 25,721 (0.6) 185,639 (8.1) Valuation allowance 3,419,636 (78.8) Other adjustments (136,228) 3.2 (92,995) 4.1 Income tax expense $ 2,786,392 (64.2) $ (547,821) 24.0 (1) The states that cont …

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Leases The Company has operating leases primarily for corporate offices, warehouses and showrooms. For the years ended December 31, 2025, and 2024, the total lease expenses were $2,577,192 and $2,763,970 respectively. The table below presents the operating lease related assets and liabilities recorded on the Companys consolidated balance sheets: As of December 31, 2025 As of December 31, 2024 USD USD Operating lease right-of-use assets $ 11,031,892 $ 12,823,747 Operating lease liabilities current $ 1,700,936 $ 1,867,956 Operating lease liabilities noncurrent 10,012,616 11,352,939 Total operating lease liabilities $ 11,713,552 $ 13,220,895 Information relating to the lease term and discount rate are as follows: As of December 31, 2025 As of December 31, 2024 Weighted-average remaining lease term Operating leases 8.5 years 8.7 years Weighted-average discount rate Operating leases 5.9 % 5.7 % As of December 31, 2025 , the maturities of operating lease liabilities were as follows: For the 12 months ending December 31, 2026 $ 2,344,918 2027 2,368,923 2028 2,439,489 2029 1,564,539 2030 1,187,866 Thereafter 4,723,326 Total lease payments 14,629,061 Less: imputed interest (2,915,509) Present value of lease liabilities $ 11,713,552 …

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"Recently adopted accounting standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional income tax disclosures, particularly regarding the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective on a prospective or retrospective basis for annual period beginning after December 15, 2024, with early adoption permitted. The Company has adopted this guidance retrospectively as of January 1, 2024. The adoption of this guidance modified its disclosures, but did not have an impact on its financial position or results of operations. Recently issued accounting standards In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement. ASU 2024-03 is effective on a prospective or retrospective basis for annual periods beginning after December 15, 2026, and interim periods within those annual periods beginning after December 15, 2027. Early adoption is permitted. The Company plans to adopt this ASU for its annual period beginning January 1, 2027 and will modify the Company's disclosures, but is not expected to have an impact on its financial position or results of operations. In July 2025, the FASB released ASU 2025-05, ""Financial Instruments Credit L …

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"Related party transactions and balances Sales to a related party Name of Related Party Relationship Nature of Transactions For the Year Ended December 31, 2025 2024 USD USD Foremost Worldwide Co., Ltd. An entity under common control Sales $ 2,258,887 $ 799,967 $ 2,258,887 $ 799,967 Purchases from related parties Name of Related Party Relationship Nature of Transactions For the Year Ended December 31, 2025 2024 USD USD Focal Capital Holding Limited An entity under common control Purchases $ 5,861,323 $ 6,157,455 Foremost Worldwide Co., Ltd. An entity under common control Purchases 5,995,537 8,385,673 Rizhao Foremost Woodwork Manufacturing Co., Ltd. An entity under common control Purchases 364,719 330,722 F.P.Z. Furniture (Cambodia) Co., Ltd. An entity under common control Purchases 15,376 125,208 $ 12,236,955 $ 14,999,058 The ending balances of such transactions as of December 31, 2025 and 2024 are listed of the following: Prepayments related parties Name of Related Party As of December 31, 2025 As of December 31, 2024 USD USD Focal Capital Holding Limited $ 4,118,054 $ 9,975,298 Foremost Worldwide Co., Ltd. 9,978,936 $ 14,096,990 $ 9,975,298 Accounts Payables related parties Name of Related Party As of December 31, 2025 As of December 31, 2024 USD USD Foremost Worldwide Co., Ltd. $ $ 718,605 Rizhao Foremost Woodwork Manufacturing Co., Ltd. $ 49,855 $ 56,389 F.P.Z. Furniture (Cambodia) Co., Ltd. $ $ 119,667 $ 49,855 $ 894,661 Shared Service and Miscellaneous expenses related …

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Segment information The Company follows ASC 280, Segment Reporting and adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The Company has one reporting segment. The Companys chief operating decision maker has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company, and hence the Company has only one reportable segment which derives its revenue from the supply of bath and kitchen products. The accounting policies of the kitchen and bath segment are the same as those described in the summary of significant accounting policies. The measure of segment net income (loss) is reported on the consolidated statements of operations and comprehensive (loss) income as net income (loss). The measure of segment total assets is reported on the consolidated balance sheets as total assets. The Company's segment revenue, segment expenses, segment net income (loss), and a reconciliation of the total reportable segment's net income (loss) to the consolidated net income (loss) are as follows: Kitchen and Bath Segment For the Year Ended December 31, 2025 2024 USD USD Revenue $ 130,528,652 $ 131,818,073 Less: Cost of revenue 95,277,560 96,390,733 Selling and distribution expenses 25,129,256 25,627,634 General and administrative expenses 11,106,563 10,199,914 Research and development expenses 1,417,329 1,699,383 Other segment items (1) 1,9 …

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"Summary of significant accounting policies Liquidity 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 years ended December 31, 2025 and 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, FGI Industries was not in compliance with certain financial covenants related to its debt coverage ratio as of December 31, 2025. Subsequent to year end, 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 go …

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Shareholders Equity FGI was incorporated in the Cayman Islands on May 26, 2021. The Companys authorized share capital was $21,000 divided into (i) 200,000,000 Ordinary Shares of par value of $0.0001 each, and (ii) 10,000,000 Preference Shares of par value of $0.0001 each. On July 28, 2025, the Company filed an amendment (the Amendment) to the Companys 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 Companys ordinary shares, par value $0.0001 per share (Ordinary Shares). Pursuant to the Amendment, effective as of 12:01 a.m., Eastern Time, on July 31, 2025 (the Effective Time), every 5 Ordinary Shares issued and outstanding, including Ordinary Shares held by the Company as treasury shares, was automatically combined into one Ordinary Share. As a result of the Reverse Share Split, the number of authorized Ordinary Shares was decreased to 40 million and the par value of the Companys Ordinary Shares went from $0.0001 per share to $0.0005 per share. The Reverse Share Split affected all record holders of the Ordinary Shares uniformly and did not affect any record holders percentage ownership interest in the Company, except for de minimis changes as a result of the elimination of fractional shares. Proportional adjustments were made to the number of Ordinary Shares issuable upon the exercise, conversion or vesting of the Companys equity awards and …

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Subsequent events On March 27, 2026, FGI Industries renewed its credit facility with East West Bank, extending the maturity to April 17, 2027. The renewal extends the maturity date of the facility through April 17, 2027 and maintains a maximum borrowing amount of $18,000,000, subject to borrowing base limitations. The credit facility is collateralized by all assets of FGI Industries and guaranteed by the Company, certain other subsidiaries, and by Liang Chou Chen, who holds approximately 49.91% of the voting control of Foremost Groups Ltd. The renewal includes a tiered interest-rate margin determined by the subsidiarys trailing-twelve-month EBITDA and updates to certain financial covenants, including revised EBITDA requirements and limitations on intercompany balances. …

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