As filed with the Securities and Exchange Commission on October 20, 2015

Registration No. 333-205894

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



 

PRE-EFFECTIVE AMENDMENT 4 TO
REGISTRATION STATEMENT ON FORM F-1
UNDER THE SECURITIES ACT OF 1933



 

FULING GLOBAL INC.

(Exact name of registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s Name into English)



 

   
Cayman Islands   3089   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 
Southeast Industrial Zone, Songmen Town
Wenling, Zhejiang Province
People’s Republic of China 317511
+86-576-86623058 – telephone
+86-576-86623099 – facsimile
  The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
+1-800-677-3394 – telephone
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
  (Name, address, including zip code, and telephone number,
including area code, of agent for service)


 

Copies to:

 
Anthony W. Basch, Esq.
Xiaoqin Li, Esq.
Kaufman & Canoles, P.C.
Two James Center, 14th Floor
1021 East Cary Street
Richmond, Virginia 23219
+1-804-771-5700 – telephone
+1-888-360-9092 – facsimile
  Mark E. Crone, Esq.
Ronniel Levy, Esq.

CKR Law
1330 Avenue of the Americas, 35th Floor
New York, New York 10019
+1-212-259-7300 – telephone
+1-212-259-8200 – facsimile


 

Approximate date of commencement of proposed sale to public: As soon as practicable after the effective date of this Registration Statement.

If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

       
Title of Each Class of Securities to be Registered   Amount to be
Registered(1)
  Proposed
Maximum
Aggregate Price
Per Share
  Proposed
Maximum
Aggregate
Offering Price(2)
  Amount of
Registration Fee
Common Stock     4,600,000     $ 5.00     $ 23,000,000.00     $ 2,316.10 (3) 

(1) Includes 600,000 shares that may be sold to investors upon the exercise of an over-subscription option.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
(3) Previously paid.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 


 
 

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The information in this prospectus is not complete and may be changed. We will not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated October 20, 2015

4,000,000 Ordinary Shares

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Fuling Global Inc.

This is an initial public offering of Ordinary Shares of Fuling Global Inc., a Cayman Islands company with manufacturing operations in the United States and China. We are offering 4,000,000 of our Ordinary Shares. Prior to this offering, there has been no public market for our Ordinary Shares. We expect the initial public offering price of our Ordinary Shares to be $5.00 per share. We have applied to list our Ordinary Shares on The Nasdaq Capital Market under the symbol “FORK.”

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our Ordinary Shares involves risks. See “Risk Factors” beginning on page 14.

     
  Per Common
Share
  Total (No
Over-subscription)
  Total (Full
Over-subscription)
Assumed public offering price   $ 5.00     $ 20,000,000     $ 23,000,000  
Underwriting fee and commissions (up to 6.8%)   $ 0.34     $ 1,360,000     $ 1,564,000  
Proceeds to us, before expenses   $ 4.66     $ 18,640,000     $ 21,436,000  

Besides the above underwriting fee and commissions, we will pay additional items of value in connection with this offering that are viewed by the Financial Industry Regulatory Authority, or FINRA, as underwriting compensation. These payments will further reduce proceeds available to us before expenses. See “Underwriting.” We expect our total cash expenses for this offering (including cash expenses payable to our underwriters for its out-of-pocket expenses and the above underwriting fee and commissions) to be approximately $2.5 million if the over-subscription option is not exercised or approximately $2.7 million if the over-subscription option is exercised in full.

This offering is being conducted on a best efforts, all-or-none basis and is not being firmly underwritten. The underwriters, Burnham Securities, Inc. and Network 1 Financial Securities, Inc., must sell all 4,000,000 Ordinary Shares if any are sold. The underwriters are required to use only its best efforts to sell the securities offered. In addition, we have given our underwriters an over-subscription option to sell up to an aggregate of 600,000 additional Ordinary Shares. The offering will terminate upon the earlier of: (i) a date mutually acceptable to us and our underwriters once the entire offering is sold or (ii) the close of business on October 31, 2015 unless extended at the sole discretion of the underwriters and us to November 30, 2015. Until we sell 4,000,000 Ordinary Shares, all investor funds will be held in an escrow account at Signature Bank, located at 950 Third Avenue, 9th Floor, New York, NY 10017. If we do not sell 4,000,000 Ordinary Shares by close of business on October 31, 2015 (or November 30, 2015 if extended), all funds will be promptly returned to investors (within one business day) without interest or deduction. If we complete this offering, net proceeds will be delivered to our company on the closing date. We will not be able to use such proceeds in China, however, until we complete certain remittance procedures in China. If we complete this offering, then on the closing date, we will issue Ordinary Shares to investors in the offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 
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Burnham Securities, Inc.
  [GRAPHIC MISSING]
 
Network 1 Financial Securities, Inc.

The date of this prospectus is            , 2015.


 
 

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Table of Contents

 
Prospectus Summary     1  
Risk Factors     14  
Special Note Regarding Forward-Looking Statements     35  
Letter from Chief Executive Officer — Mr. Xinfu Hu     36  
Use of Proceeds     39  
Dividend Policy     41  
Exchange Rate Information     42  
Capitalization     44  
Dilution     45  
Post-Offering Ownership     46  
Management’s Discussion and Analysis of Financial Condition and Results of Operations     47  
Business     75  
Regulations     105  
Our Employees     112  
Description of Property     113  
Management     117  
Executive Compensation     123  
Related Party Transactions     127  
Principal Shareholders     128  
Description of Share Capital     130  
Quantitative and Qualitative Disclosures about Market Risk     142  
Shares Eligible for Future Sale     143  
Material Tax Consequences Applicable to U.S. Holders of Our Ordinary Shares     145  
Enforceability of Civil Liabilities     151  
Underwriting     152  
Expenses Relating to this Offering     158  
Legal Matters     158  
Experts     158  
Interests of Named Experts and Counsel     158  
Disclosure of Commission Position on Indemnification     158  
Where You Can Find Additional Information     159  

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our Ordinary Shares only in jurisdictions where offers and sales are permitted.

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The information in this preliminary prospectus is not complete and is subject to change. No person should rely on the information contained in this document for any purpose other than participating in our proposed initial public offering, and only the preliminary prospectus issued           , 2015 is authorized by us to be used in connection with our proposed initial public offering. The preliminary prospectus will only be distributed by us and the underwriters named herein and no other person has been authorized by us to use this document to offer or sell any of our securities.

Until            , 2015 (25 days after the commencement of our initial public offering), all dealers that buy, sell, or trade our Ordinary Shares, whether or not participating in our initial public offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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Prospectus Summary

This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our Ordinary Shares. You should carefully consider, among other things, our consolidated financial statements and the related notes and the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

Company Overview

If you are like the average American, you have probably already used our products. According to a recent Gallup Consumption poll, more than 80% of Americans eat fast food at least once per month. Our environmentally conscious disposable plastic food service products are used by McDonald’s, Subway, Wendy’s, Burger King, KFC (China only), Walmart, McKesson, Woolworths and more than one hundred other customers.

During the year ended December 31, 2014, we had (a) more than 100 customers that each accounted for less than 1% of our total revenues; (b) 12 customers that each accounted for 1% to 3% of our total revenues; (c) 6 customers that each accounted for 3% to 5% of our total revenues; (d) 2 customers that each accounted for 5% to 7% of our total revenues; (e) 4 customers that each accounted for 7% to 10% of our total revenues; and (f) no single customer that accounted for more than 10% of our total revenues. During the year ended December 31, 2013, we had (a) more than 100 customers that each accounted for less than 1% of our total revenues; (b) 12 customers that each accounted for 1% to 3% of our total revenues; (c) 2 customers that each accounted for 3% to 5% of our total revenues; (d) 0 customers that each accounted for 5% to 7% of our total revenues; (e) 3 customers that each accounted for 7% to 10% of our total revenues; and (f) 2 customers that each accounted for more than 10% of our total revenues.

Although we do not always have written contracts directly with our quick service restaurant (“QSR”) customers, when we do, we typically sign contracts with terms of between one and four years. Our expectations are from the commitments based on these contracts and past course of dealing. However, we cannot guarantee that sales in the future will be at the same rates as in the above paragraph.

In addition to serving these QSR customers, we also provide our products to international supermarket and retail stores, international plastic food service product dealers, manufacturers and small and medium-sized wholesale dealers.

Based on revenues, in 2014, we sold approximately 92.87% of our products in the United States, 2.33% in Europe, 1.46% in Australia, 1.45% in Canada, 0.92% in Central and South America, 0.82% in the Middle East, and 0.15% in China.

Twenty years ago, we were a small manufacturer of plastic household articles and baskets. Today, we have grown into one of China’s largest exporters of disposable serviceware. The China Chamber of Commerce for Import and Export of Light Industrial Products and Arts and Crafts has recognized Taizhou Fuling as one of China’s top three plastic kitchenware and serviceware companies for exports every year from 2011 through 2014, based on export sales amount. During this process, we have transformed our product line, entered the U.S. market, and established our brand recognition in the industry. We have grown steadily and have built trust with customers around the world with the high quality of our products.

As we have grown, we have continued to focus on our mission of producing environmentally-friendly products. Our customers rely on us for top quality foodservice disposable products, delivered quickly with dependable service, all at the lowest reasonable price.

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China Operations

Factory

Currently, we have following three factories in China with more than 1,000 employees:

1. Wenqiao factory: 8 Shengpan Road, Guanweitong Village, Wenqiao County, Wenling City, Zhejiang Province
2. Songmen factory: South of Binhai Road, Songmen Town, Wenling City, Zhejiang Province
3. Sanmen factory: Binhai Xincheng, Sanmen County, Taizhou City, Zhejiang Province

We also plan to build another factory in Wenling city. For more details, please see “Business — Wenling Expansion.”

U.S. Operations and Expansion

Logistics Center

We have a sound and efficient sales network in the North America which we continue to invest in. Currently, we distribute our products through logistics centers in following cities:

1. Linden, New Jersey, U.S.
2. Los Angeles, California, U.S.
3. Lansdale, Pennsylvania, U.S.
4. Allentown, Pennsylvania, U.S.
5. Toronto, Ontario, Canada
6. Vancouver, British Columbia, Canada

After the completion of this offering, we also plan to secure following additional logistics centers:

7. Chicago, Illinois, U.S.
8. Dallas, Texas, U.S.

Allentown Factory

In 2014, after careful consideration, we extended our network by establishing a factory in Allentown, Pennsylvania with initially 4 employees. We have already invested approximately $2.8 million into this U.S. factory, which became operational in June 2015. This modern facility is also greatly expandable, should demand require it. For more details, see “BUSINESS — Allentown Expansion.”

We will integrate the resources from both China and U.S. to continue to deliver our environmentally conscious plastic products to international customers promptly and efficiently.

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Our Offering

This is the initial public offering of our Ordinary Shares. Although we are launching production at our newly-constructed manufacturing facility in Allentown, Pennsylvania, we currently produce all of our products in China. We anticipate that a significant percentage of our products will continue to be produced in China (particularly plastic disposable cutlery, which is more efficiently produced in China and then shipped to the United States for sale).

On the other hand, we also produce straws and drinking cups, and the economics of producing these products currently favors moving production to the United States, which led to our decision to expand into our Allentown facility. When we ship cutlery, we are able to pack it tightly, maximizing the number of pieces in a container. By contrast, when we ship straws and drinking cups, we also have to ship a lot of empty space with the product. Therefore, for these kinds of products, we can choose to manufacture them in the United States to reduce shipping costs.

As we have automated the process of manufacturing our disposable serviceware, we have found that higher wages paid in the United States are, in the case of straws, offset by the savings in shipping costs from China. Moreover, U.S. domestic manufacturing better meets the requirements of our American clients, allowing us to implement just-in-time delivery principles and satisfy the environmental considerations that underlie our business decisions. For this reason, we will use approximately 41% of our offering proceeds to further develop and grow our United States manufacturing and sales operations.

We expect to use approximately 53% this offering to expand our factories in China, which will allow us to keep up with increased demand that we foresee in the near future.

Finally, we believe it is important to continue to innovate so that we can leverage improvements in technology to deliver high quality, ecological products at reasonable prices. For this reason, we are also devoting approximately 6% of our offering proceeds to research and development of new technology, new environmentally-friendly materials and manufacturing process.

We believe that completing our public offering will position our company to compete more effectively and grow more rapidly than relying on purely internal financing and organic growth from existing facilities. Strategically, while we have expanded steadily over the last few years, by raising the profile of our company through an initial public offering in the United States, we expect to increase our U.S. production and sales and find new opportunities in our most important market. Additionally, by virtue of our adherence to the increased transparency required of public companies, we expect that our customers will have even more confidence in transacting business with our company.

Company Structure

Fuling Global Inc. (“FGI”) was incorporated in the Cayman Islands on January 19, 2015. FGI, its subsidiaries and its variable interest entity (“VIE”) (collectively the “Company”) are principally engaged in the production and distribution of environmentally-friendly plastic serviceware and kitchenware in the People’s Republic of China (“PRC” or “China”) and the United States (“U.S.”). Most products are exported to the U.S. and Europe and sold to major fast food chains, international supermarkets and retail stores, manufacturers, and wholesalers.

Taizhou Fuling Plastics Co., Ltd. (“Taizhou Fuling”) was established on October 28, 1992 as a Sino-Foreign joint venture under the laws of China with initial registered capital of $0.51 million.

After several registered capital increases and capital contributions by Taizhou Fuling’s two shareholders, Wenling Fulin Plastic Products Ltd. (previously Wenling County Songmen Plastic Co., Ltd., or “Wenling Songmen”) and Total Faith Holdings Limited (“Total Faith”), and the acquisition on May 28, 2014 by Total Faith of Wenling Songmen’s 24% interest, Taizhou Fuling changed its entity type from a Sino-Foreign joint venture to a wholly foreign owned enterprise (“WFOE”). Total Faith was incorporated in the British Virgin Islands on April 26, 2004. At the completion of such increases in registered capital and purchase of Wenling Songmen’s interest by Total Faith, Taizhou Fuling had registered capital of $11,110,000.

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Taizhou Fuling has three wholly-owned subsidiaries, (1) Zhejiang Great Plastics Technology Co., Ltd. (“Great Plastics”), (2) Direct Link USA LLC (“Direct Link”), and (3) Fuling Plastic USA, Inc. (“Fuling USA”). Total Faith has one minority owned subsidiary, Domo Industry Inc. (“Domo”), a U.S. company established in the State of New York in October 2007. A chart of our corporate structure can be found on page 5 below.

Great Plastics was incorporated in China in March 2010 and principally engaged in the production of plastic straw, cup and plate items. Direct Link was incorporated in the State of Delaware in 2011 to serve as a trading entity in the U.S. for our products. Fuling USA was incorporated in the Commonwealth of Pennsylvania in 2014 to own, expand and operate our Allentown facility. Fuling USA is establishing Company’s first production factory in the U.S. and will principally engage in the production of plastic straw items.

Prior to the incorporation of Fuling USA, Taizhou Fuling wholly owned another subsidiary incorporated in 2009 in the State of New York, named Fuling Plastics USA Inc. (“Old Fuling USA”). Old Fuling USA served as one of the trading entities of Taizhou Fuling in the U.S. until early 2014 and its business was discontinued and transferred over to the new Fuling USA when we decided to set up the new factory in Allentown, Pennsylvania. Old Fuling USA was dissolved on April 8, 2015.

Total Faith also consolidates the financial statements (minus the non-controlling interest of another shareholder) of Domo, because Domo’s equity at risk is not sufficient to permit it to carry on its activities without additional subordinated financial support from Total Faith. Total Faith has a majority of the voting rights on the Board of Directors of Domo. Total Faith is obligated to absorb a majority of the risk of loss from Domo’s activities and to receive a majority of Domo’s residual returns. Based on this arrangement, Total Faith has gained effective control over Domo and Domo is considered a Variable Interest Entity under Accounting Standards Codification (“ASC”) 810-10-05-08A. Accordingly, Total Faith consolidates Domo’s operating results, assets and liabilities.

Both Direct Link and Domo serve as import trading companies of Taizhou Fuling in the United States. Besides manufacturing products in the United States, Fuling USA may import certain products from our China entities and sell them to our customers in the United States.

On January 9, 2015, Fuling USA transferred 100% of its interest in Direct Link to Taizhou Fuling, and our co-founder, Ms. Guilan Jiang, transferred her 49% interest in Domo to Total Faith, both in connection with the reorganization of our corporate structure in preparation for our initial public offering. On February 19, 2015, Ms. Jiang transferred her 100% equity interest in Total Faith to FGI. At the completion of these transactions, (i) Total Faith owns 49% of the equity of Domo but still maintains effective control of Domo; (ii) Taizhou Fuling owns 100% of the equity of Direct Link; (iii) FGI owns 100% of the equity of Total Faith; and (iv) eight shareholders own 100% of FGI.

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Our current corporate structure is as follows prior to completion of this offering:

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Industry and Market Background

Our company’s primary market is the United States, with approximately 92.87% of our products being sold in America in 2014. Our customers span four main groups:

       
    Sales Percentage
Type of Customer   Geographic Region   Six Months
ended
June 30,
2015
  2014   2013
Dealers(1)     USA, Europe, Central and South America,
Australia, Middle East, Canada
      58 %      54 %      58 % 
QSRs     USA       31 %      33 %      33 % 
Retailers(2)     USA, Australia       6 %      6 %      7 % 
Manufacturers(3)     USA       5 %      7 %      2 % 
Total              100 %      100 %      100 % 

(1) Wholesalers of foodservice disposable industry buy our products and sell to other businesses. Our dealers include Imperial Bag & Paper Co., LLC and Fasho International, LLC.
(2) Retailers sell our products directly to individuals for profit, but they do not include QSRs, which typically include our products as a part of the food items they sell and do not sell our products separately.
(3) OEMs resell our products under their own name and branding.

Our products form part of the foodservice disposables industry. According to the 2013 forecast report of Freedonia Group, an international business research company, the entire industry in the U.S. is poised to grow to $19.7 billion in 2017, a compound annual growth rate of 3.6% from 2012 through 2017. Demand in the industry is driven by trends in consumer food expenditures. Generally speaking, the more food purchased for

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consumption away from home and outside traditional full-service restaurants (which are more likely to use non-disposable foodservice items), the higher the demand for foodservice disposables.

The foodservice disposables industry consists of three segments: (i) packaging, (ii) serviceware and (iii) napkins and other disposables. Packaging includes containers, lids, wraps, bags, packaging trays and container sleeves. Serviceware includes cups, utensils, plates, bowls, food and beverage carriers, placemats, coffee cup sleeves, coasters and doilies. Napkins and other disposables include food and beverage napkins, moist towelettes, toothpicks and skewers.

We produce environmentally conscious plastic products primarily in the serviceware segment and, to a lesser extent, in the packaging segment.

As a percentage of total U.S. foodservice disposables, the packaging segment accounted for approximately 46.2% of the revenues in the U.S. foodservice disposables industry in 2012 and is projected to grow from $7.6 billion in 2012 to $9.3 billion in 2017, a compound annual growth rate of 4.1%. Growth is anticipated to come from the trend toward limited service restaurants with expanded menu options and longer opening hours. Combined with the popularity of take-out food, these factors should cause the packaging products segment to continue to grow through 2017.

The serviceware segment accounted for approximately 45.5% of the revenues in the U.S. foodservice disposables industry (or $7.5 billion) in 2012 and is expected to grow at 3.2% compound annual growth rate through 2017.

Our Products

We manufacture environmentally-friendly plastic foodservice disposable products (“disposables”). Our historic strength is in the production of disposable cutlery, the quality and value of which has satisfied the exacting requirements of large, sophisticated, multinational purchasers that have decades of experience sourcing foodservice disposables. We have built on that strength to deliver drinking straws, cutlery and serviceware such as cups and plates to customers around the world. Our largest customer base is in the United States, which accounts for more than 90% of our revenues. We plan to systematically integrate the resources from the two countries we primarily operate in, China and the United States, and manufacture straws and potentially cups in the United States. We will be able to send large quantity, single specification orders to be produced through the high capacity automation equipment in our U.S. Allentown factory so we can deliver goods faster and reduce shipping costs. For those low-volume, multi-variety, multi-specification orders, we will continue to send them to our factories in China so we can take advantage of lower labor costs. We own our state-of-the-art factories in Zhejiang Province, China, and we have obtained ISO9001 quality management system, ISO14001 environmental management system, Hazard Analysis Critical Control Point (“HACCP”), Good Manufacturing Practice (“GMP”) and U.S. Food and Drug Administration (“FDA”) food facility registration certifications. These certifications are crucial for businesses like ours that serve some of the most sophisticated and demanding purchasers of foodservice disposables in the world: the leading multinational QSRs.

Cutlery

We manufacture forks, knives, spoons, and general, specialized and multipurpose utensils (for instance, the spork), both in single- and multi-utensil packages. More than ninety customers purchased our cutlery products in 2014. Approximately 54% ($45.211 million) and 56% ($38.828 million) of our sales in 2014 and 2013, respectively, were for cutlery products.

Drinking Straws

We have been expanding into providing straws to QSR customers. While it might initially seem like straws would be an afterthought compared to cutlery, in fact straws are extremely important in QSRs, as consumers frequently purchase a drink at a QSR but often order hamburgers or other sandwiches that do not require utensils. We believe that our straws business will become even more successful as we move production to the United States, since we will reduce our shipping costs significantly, while managing our labor costs, with our new, fully automated production lines in Allentown, Pennsylvania. More than thirty customers purchased our drinking straw products in 2014. Approximately 16% ($13.055 million) and 14% ($9.557 million) of our sales in 2014 and 2013, respectively, were for drinking straw products.

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Cups and Plates

We also manufacture and sell cups and plates. We sell “courtesy cups” to QSRs. Courtesy cups are small, clear or translucent plastic cups designed to hold water and provided free of charge for patrons who do not purchase a beverage. More than fifty customers purchased our cup and plate products in 2014. Approximately 27% of our sales in 2014 ($22.699 million) and 2013 ($18.818 million) were for cup and plate products.

Our Opportunity and Strategy

Our strategy is to increase our operational advantage, continuously develop environmentally-friendly products and solutions for our leading multinational clients, and grow our packaging segment.

1. Increase Operational Advantage

Strategy:  Because of our customer focus, we are very competitive in price, while maintaining high quality and environmentally responsible production. We plan to decrease our costs further by reducing labor costs and shipping costs by increasing our U.S. manufacturing operations.

As labor costs rise in China, we have found that we have less of an advantage over similarly situated companies producing from other countries and exporting to the U.S. As a result, we have focused on increasing automation to reduce our reliance on labor, especially for cutlery. Because we have developed some of our own machinery for producing and packaging our products, we believe we have advantages over less automated competitors. Although we have automated a significant proportion of our operations, we believe we still have room to continue to automate our production processes and enjoy savings in labor expenses and increased productivity.

For those products which normally have higher shipping costs relative to sales price or gross margin, such as straws, we can reduce our shipping costs by manufacturing them in the United States. Our decision to invest in our Allentown factory was for this purpose.

Risks:  Our expansion into America may not be successful in decreasing our costs as anticipated. To the extent lower cost manufacturers develop abroad, they could compete with us on price, notwithstanding our reduction by moving to the United States. Moreover, if we are unable to automate our processes as much as we expect, the reduction in costs may be lower than projected.

2. Develop Environmentally-Friendly Solutions

We also have focused on developing environmentally-friendly solutions in order to continue to compete as our target markets’ environmental laws become more stringent. We have already seen products like foamed polystyrene banned or heavily restricted in some of our target markets. We believe that by providing biodegradable disposable food service items, we may find a competitive advantage over companies that produce only traditional, less environmentally-friendly products.

Risks:  These environmentally-friendly solutions may not bring us the advantage we anticipate. First of all, there is uncertainty that our customers will appreciate the value of our environmental-friendly solutions and be willing to pay a premium for, or otherwise favor purchase of, such environmentally-friendly products. Second, our competitors may have more advanced environmentally-friendly solutions than we develop. In such case, we could find we have less of an advantage than anticipated.

3. Grow Packaging Segment

Strategy:  While we will strengthen our traditional serviceware segment, we also plan to grow our packaging segment. Our customers in this segment are mainly retailers and wholesalers. The packaging segment is only a small percentage of our sales now. We aim to achieve significant growth in this segment. Our decision is based on the following:

(1) We have the same customer base as in our serviceware segment.
(2) Several big cities including New York have announced regulatory bans on some level for plastic foam containers. We believe this trend will only increase. Most of these containers are made of a plastic resin known as expanded polystyrene. These polystyrene materials are difficult to recycle and

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do not biodegrade efficiently. As a result of increased local regulations as well as national and international mandates and socioeconomic pressures on our customers to purchase in an environmentally conscious manner, we estimate that our environmentally-friendly packaging products will see new opportunities for increased sales.
(3) We have developed advanced environmentally-friendly packaging products and have the facilities to produce them.

Risks:  Our plan to grow our packaging segment may fail, because we are competing in a segment with strongly established companies in the U.S., and we are competing in a new market with products of different materials instead of only plastic. For example, the packaging segment makes use of paper and foil products, while plastic dominates the serviceware segment. Even if we are able to produce high-quality plastic packaging products, customers may prefer to use products made from other materials.

Competitive Strengths

We believe we have the following competitive strengths. Some of our competitors may have these or other competitive strengths.

Advanced technology.  We use proprietary industrialized machines and processes protected by patents.
Top-class equipment and facilities.  Our facilities in Taizhou, Zhejiang Province and Allentown, Pennsylvania feature equipment from leading international firms, state-of-the art automated manufacturing systems and quality, health and safety records that allow us to boast an extremely low rate of customer complaints. Our Allentown facility will enable us to manufacture and ship certain products more quickly and cheaply in the U.S. than we have been able to do in the past.
Strong research and development.  We use cutting-edge technology and employ highly educated people with strong research backgrounds to assist us in developing new degradable products and more efficient processes to manufacture our products.
Powerful sales and distribution network.  We use warehouses in New Jersey, Pennsylvania, California, Toronto and Vancouver to ensure that our products are quickly available when our customers need them. While some of our U.S. competitors have equivalent or, in some cases, better distribution, we are not aware of any Chinese competitors that match our North American network.
In-house tooling facility.  Most of our products consist of injection molded plastics, which rely on molds for the products. Each product requires its own specific mold. Many competitors in our industry order such molds from tooling firms, which can be expensive and time consuming. By contrast, we have our own tooling department that is responsible for creating dies from customer specifications. This allows us to save time and money compared to ordering from third parties. Moreover, it allows us to maintain a strong library of dies. At present we maintain approximately 1,100 molds for more than 600 customer products.
Economies of scale.  We are pleased to provide products to a variety of customers and to fill large orders for a number of those customers. These large orders allow us to increase our efficiency, reduce costs and deliver high quality products quickly and to our customers’ exacting demands.
Strong reputation in foodservice disposables industry.  Our customer list is filled with sophisticated, multinational purchasers of foodservice disposable products — some of the largest users of such products and some of the most recognizable consumer brands in the world. They know what they want and they trust us to manufacture it for their restaurant, supermarket, retail store, distributor and other foodservice disposable manufacturer businesses.

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Our Challenges and Risks

We recommend that you consider carefully the risks discussed below and under the heading “Risk Factors” beginning on page 14 of this prospectus before purchasing our Ordinary Shares. If any of these risks occur, our business, prospects, financial condition, liquidity, results of operations and ability to make distributions to our shareholders could be materially and adversely affected. In that case, the trading price of our Ordinary Shares could decline and you could lose some or all of your investment. These risks include, among others, the following:

Risk regarding our ability to use offering proceeds.  Under PRC laws and regulations, we are permitted to use the proceeds from this offering to fund our PRC subsidiaries only through parent/subsidiary loans or capital contributions, subject to applicable government registration and approval requirements. We intend to initiate this process immediately upon completion of this offering. We currently anticipate using approximately two-thirds of the gross proceeds from this offering to increase the registered capital of Taizhou Fuling (after which time Taizhou Fuling may apply such funds to the purposes described in “Use of Proceeds”). The increase in registered capital will require prior approval from (i) China’s Ministry of Commerce (“MOFCOM”) to increase Taizhou Fuling’s registered capital, (ii) China’s State Administration for Industry and Commerce (“SAIC”) to alter Taizhou Fuling’s business certificate to reflect the increase in registered capital and (iii) China’s State Administration of Foreign Exchange (“SAFE”) to allow Taizhou Fuling’s Chinese bank to convert U.S. dollars into Chinese Renminbi (“RMB”) in order to fund such increased registered capital, or each of the foregoing agencies’ respective local counterparts. This approval process typically takes 30 to 90 days in total, and sometimes longer, from the time MOFCOM or its local branches receive all the required application documents to begin the process. The remaining approximately one-third of such gross proceeds will be used for general corporate purposes, including expenses related to this offering. We plan to remit money to China using the capital contribution method. The approval from MOFCOM is the key approval in the capital contribution process, and we believe all other approvals are ministerial if MOFCOM approves such increase in registered capital. We have not yet initiated this process but intend to start the process immediately upon completion of the offering. We do not foresee any problem receiving necessary government approvals for a capital contribution; however, if our application is rejected, we would remit money to China through a parent/subsidiary loan instead. If we were to provide funding to Taizhou Fuling through parent/subsidiary loans, the total amount of such parent/subsidiary loans may not exceed the difference between Taizhou Fuling’s total investment amount as approved by the foreign investment authorities and Taizhou Fuling’s registered capital. Such parent/subsidiary loans must also be registered with the SAFE, which registration usually takes no more than 20 working days after application to complete. The cost for obtaining such approvals and completing such registration is minimal. See “Risk Factors — Risks Related to Doing Business in the PRC — PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make parent/subsidiary loans or additional capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business”.
Possibility to be classified as “Resident Enterprise.”  Under the Enterprise Income Tax Law, we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.
Shareholder enforcement risk.  Since most of our operations and assets are located in the PRC, shareholders may find it difficult to enforce a U.S. judgment against the assets of our company, directors and executive officers located in China.
Reputation risk.  If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss of your investment in our shares, especially if such matter cannot be addressed and resolved favorably.

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Low barrier to entry.  We believe the barrier to entry in our industry is relatively low. Although we believe we distinguish our company from competitors on the basis of quality, technology and service, to the extent our customer base focuses heavily on price, many of our competitors can provide products at relatively low prices, affecting our profit margins as we seek to compete with them.
Expansion risk.  We have devoted significant resources to our decision to build a manufacturing and warehousing facility in the United States and commence operations in Allentown, Pennsylvania. While this decision will offer new opportunities to our company, it also is a new venture and has only recently begun to operate and exposes us to increases in labor costs. As a result, we have no guarantee that we will be successful in this new expansion. If we do not manage our expansion effectively, our business prospects could be impaired.
Significantly larger U.S. competitors.  The three largest U.S. suppliers of foodservice disposables account for a significant percentage of the industry. Our industry consists of a small number of competitors, with approximately 50% of our market controlled by the top 10 companies in the industry and three companies holding almost 30% of the U.S. market share. Under such circumstances, we may be unable to compete effectively against such larger, better-capitalized companies, which have well-established, long-term relationships with the large customers we serve and seek to serve.
Reliance risk.  We are subject to risks related to our dependence on the strength of restaurant, retail and commercial sectors of the economy in various parts of the world.
Limits to increase efficiency.  Our plans to continue to improve productivity and reduce costs may not be successful, which would adversely affect our ability to compete.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

the ability to include only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations disclosure; and
an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002.

We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenue, have more than $700 million in market value of our Ordinary Shares held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period.

Corporate Structure

We are a Cayman Islands exempted company with limited liability. We currently have eight shareholders who will hold approximately 74% after completion of the offering if the over-subscription option is not exercised, or approximately 72% after completion of the offering if the over-subscription option is exercised in full. Of these shareholders, our largest shareholder is Ms. Guilan Jiang, our Chairman of the Board and Chief Operating Officer, who owns her shares through Silver Trillion Investments Limited, a British Virgin Islands company. As Silver Trillion/Ms. Jiang holds 47.5% of our Company prior to completion of this offering and approximately 35.4% after completion of the offering if the over-subscription option is not exercised or approximately 34.1% after completion of the offering if the over-subscription option is exercised in full, Ms. Jiang has significant influence on the operation of our business. Our second largest shareholder is Celestial Sun Holding Limited, a British Virgin Islands company owned by Sujuan Zhu, the sister-in-law of Ms. Jiang, with 19% of our Company prior to completion of this offering and approximately 14.1% after completion of the offering if the over-subscription option is not exercised or approximately 13.6% after completion of the offering if the over-subscription option is exercised in full. No other shareholder holds ten percent or more of our shares prior to this offering.

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Corporate Information

We operate from a 17,780 square meter manufacturing facility in the Southeast Industrial Zone, Songmen Town, located on 28,073 square meters of land in Wenling, Zhejiang Province, China. We lease a 5,120 square meter manufacturing facility in the Economic Development Zone in Wenling, Zhejiang Province. We also have a 33,480 square meter manufacturing facility in Binhai Xincheng, located on 30,349 square meters of land in Sanmen County, Zhejiang Province. We have opened our fourth manufacturing facility with approximately 8,175 square meters of space which we lease in Allentown, Pennsylvania.

Our principal executive offices are located at the Southeast Industrial Zone, Songmen Town, Wenling, Zhejiang Province, People’s Republic of China 317511. The telephone number of our principal executive offices is +86-576-8662 3058. We maintain a website at www.fulingplastics.com, on which we will post our key corporate governance documents, including our board committee charters and our code of ethics. We do not incorporate the information on our website into this prospectus and you should not consider any information on, or that can be accessed through, our website as part of this prospectus.

Prospectus Conventions

Except where the context otherwise requires and for purposes of this prospectus only, “we,” “us,” “our company,” “Company,” “our” and “Fuling” refer to:

Fuling Global Inc., a Cayman Islands company (“FGI” when individually referenced), which is the parent holding company issuing securities hereby;
Total Faith Holdings Limited, a British Virgin Islands company (“Total Faith” when individually referenced), which is a wholly owned subsidiary of FGI;
Taizhou Fuling Plastics Co., Ltd., a PRC company (“Taizhou Fuling”), which is a wholly owned subsidiary of Total Faith;
Domo Industry Inc., a New York company (“Domo”), of which Total Faith owns 49% of the equity but maintains effective control;
Direct Link USA LLC, a Delaware company (“Direct Link”), which is a wholly owned subsidiary of Taizhou Fuling;
Fuling Plastic USA, Inc., a Pennsylvania company (“Fuling USA”), which is a wholly owned subsidiary of Taizhou Fuling; and
Zhejiang Great Plastics Technology Co., Ltd., a PRC company (“Great Plastics”), which is a wholly owned subsidiary of Taizhou Fuling.

This prospectus contains translations of certain RMB amounts into U.S. dollar amounts at a specified rate solely for the convenience of the reader. The exchange rates in effect as of December 31, 2014 and 2013 were US$1.00 for RMB 6.1460 and RMB 6.1140, respectively. The average exchange rates for the years ended December 31, 2014 and 2013 were US$1.00 for RMB 6.1457 and RMB 6.1958, respectively. We use period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

For the sake of clarity, this prospectus follows the English naming convention of first name followed by last name, regardless of whether an individual’s name is Chinese or English. For example, the name of the Chief Operating Officer and Chair of our Board of Directors will be presented as “Guilan Jiang,” even though, in Chinese, Ms. Jiang’s name is presented as “Jiang Guilan.”

We obtained the industry and market data used in this prospectus supplement, the accompanying prospectus, any free writing prospectus or any document incorporated by reference from industry publications, research, surveys and studies conducted by third parties and our own internal estimates based on our management’s knowledge and experience in the markets in which we operate. We did not, directly or indirectly, sponsor or participate in the publication of such materials, and these materials are not incorporated

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in this prospectus other than to the extent specifically cited in this prospectus. We have sought to provide current information in this prospectus and believe that the statistics provided in this prospectus remain up-to-date and reliable, and these materials are not incorporated in this prospectus other than to the extent specifically cited in this prospectus.

The Offering

Shares Offered by Us:    
    4,000,000 Ordinary Shares, plus up to 600,000 additional Ordinary Shares if the over-subscription option is exercised in full
Shares Outstanding Prior to Completion of Offering:    
    11,666,667 Ordinary Shares
Shares to be Outstanding after Offering:    
    15,666,667 Ordinary Shares, or up to 16,266,667 Ordinary Shares if the over-subscription option is exercised in full.
Assumed Offering Price per Share:    
    $5.00
Gross Proceeds to Us, Net of Underwriting Discount but before Expenses:    
    $18,640,000 if the over-subscription option is not exercised, or $21,436,000 if the over-subscription option is exercised in full.
Anticipated Nasdaq Capital Market Symbol:    
    “FORK” (CUSIP No. G3729B 102)
Transfer Agent:    
    VStock Transfer, LLC
77 Spruce Street, Suite 201
Cedarhurst, NY 11516
Risk Factors:    
    Investing in these securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section of this prospectus beginning on page 14 before deciding to invest in our Ordinary Shares.
Use of Proceeds:    
    We plan to devote the net proceeds of this offering to (i) developing our U.S. sales network and factory in Allentown, Pennsylvania, (ii) a new factory in Wenling, China and (iii) research and development projects. See the “Use of Proceeds” section beginning on page 39.
Dividend Policy:    
    We have no present plans to declare dividends and plan to retain our earnings to continue to grow our business.

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Summary Financial Information

In the table below, we provide you with historical selected financial data for the six months ended June 30, 2015 and the fiscal years ended December 31, 2014 and 2013. This information is derived from our consolidated financial statements included elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected for any future period. When you read this historical selected financial data, it is important that you read it along with the historical financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

(All amounts in thousands of U.S. dollars)

Statement of operations data:

     
  For the
six months
ended
June 30,
(unaudited)
  For the year ended
December 31,
     2015   2014   2013
Revenues   $ 45,745     $ 83,181     $ 69,536  
Gross profit   $ 16,072     $ 28,678     $ 21,233  
Operating expenses   $ (10,754 )    $ (19,029 )    $ (16,388 ) 
Income from operations   $ 5,318     $ 9,649     $ 4,845  
Provision for Income taxes   $ (745 )    $ (1,369 )    $ (587 ) 
Net income   $ 4,314     $ 7,728     $ 3,451  

Balance sheet data:

     
  As of
June 30,
(unaudited)
  As of December 31,
     2015   2014   2013
Current assets   $ 38,183     $ 34,700     $ 30,440  
Total assets   $ 62,212     $ 57,224     $ 50,603  
Current liabilities   $ 40,443     $ 39,769     $ 37,967  
Total liabilities   $ 40,443     $ 39,769     $ 37,967  
Total shareholders’ equity   $ 21,769     $ 17,455     $ 12,636  

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Risk Factors

Before you decide to purchase our Ordinary Shares, you should understand the high degree of risk involved. You should consider carefully the following risks and other information in this prospectus, including our consolidated financial statements and related notes. If any of the following risks actually occur, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our Ordinary Shares could decline, perhaps significantly.

Risks Related to Our Business and Industry

Our U.S. competitors are significantly larger than our company.

The three largest U.S. suppliers of foodservice disposables account for a significant percentage of the industry. As of 2012, Dart Container Corporation, Reynolds Group/Pactiv and Georgia-Pacific collectively held approximately 29% of the U.S. market share in the foodservice disposables industry. The overall industry consists of a small number of competitors, with approximately 50% of our market controlled by the top 10 companies in the industry.

Concentration in the foodservice disposables industry varies widely within specific market segments, with some segments dominated by a small number of producers. For example, Dart Container is the leading supplier of plastic foodservice beverage cups, followed by Pactiv and Berry Plastics. By contrast, the market for cutlery is more fragmented, with a growing portion of the market supplied by contract manufacturers in China.

Nevertheless, we may be unable to compete effectively against such larger, better-capitalized companies, which have well-established, long-term relationships with the large customers we serve and seek to serve.

We are subject to risks related to our dependence on the strength of restaurant, retail and commercial sectors of the economy in various parts of the world.

Our business depends on the strength of the restaurant, retail and commercial sectors of the economy in various parts of the world, primarily in North America, and to a lesser extent Europe, Canada, Central and South America, the Middle East, and China. These sectors of the economy are affected primarily by factors such as consumer demand and the condition of the retail industry, which, in turn, are affected by general economic conditions. Challenging economic conditions in our target markets may exert considerable pressure on consumer demand, and the resulting impact on consumer spending may have an adverse effect on demand for our products, as well as our financial condition and results of operations.

Our projections and assumptions underlying may be inaccurate, resulting in slower than anticipated growth.

All statements, except historical data, are forward-looking statements. Although we believe the projections in these forward-looking statements are reasonable, we cannot guarantee these projections will happen. Our operational results in the future may be different from our estimates for many reasons, including but not limited to the oil price (our products are by-products of oil, so we are heavily impacted by oil price), shrinking fast food industry production caused by increased production cost and changed consumption habits of food industry, failure to grow capacity and capacity utilization as quickly as anticipated or at all, losing or failing to secure customers and customer orders, shutdown of important clients, and replacement of plastics industry by paper and wood products industry.

Our plans to continue to improve productivity and reduce costs may not be successful, which would adversely affect our ability to compete.

Our success depends on our ability to continually improve our manufacturing operations to gain efficiencies, reduce supply chain costs and streamline selling, general and administrative expenses in order to produce products that are reasonably priced, while still allowing our Company to invest in innovation.

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In particular, we are in the midst of building a manufacturing and warehousing facility in Allentown, Pennsylvania. Our goal is to manufacture in this facility certain products that are not efficient to manufacture and ship from China. This project may not be completed substantially as planned, may be more costly to implement than expected, may have delays in implementation, or may not result in, in full or in part, the savings and other benefits anticipated. In addition, such initiatives require the Company to implement a significant amount of organizational changes, which could have a negative impact on employee engagement, divert management’s attention from other concerns, and if not properly managed, impact the Company’s ability to retain key employees, cause disruptions in the Company’s day-to-day operations and have a negative impact on the Company’s financial results.

Price increases in raw materials and sourced products could harm the Company’s financial results.

Our primary raw materials are (1) plastic resin (primarily polypropylene (“PP”) and polystyrene (“PS”) which includes General Purpose Polystyrene (“GPPS”) and High Impact Polystyrene (“HIPS”)), (2) plastic bags and membranes for packaging cutlery, (3) shipping cartons, (4) plastic colorants, (5) paper napkins, salt, pepper and wet wipes for inclusion in cutlery packages and (6) labeling materials. These raw materials are subject to price volatility and inflationary pressures. Our success is dependent, in part, on our continued ability to reduce our exposure to increases in those costs through a variety of programs, including sales price adjustments based on adjustments in such raw material costs, while maintaining and improving margins and market share. We also rely on third-party manufacturers as a source for our products. These manufacturers are also subject to price volatility and labor cost and other inflationary pressures, which may, in turn, result in an increase in the amount we pay for sourced products. Raw material and sourced product price increases may more than offset our productivity gains and price increases and may adversely impact the Company’s financial results.

Our reliance on third party logistics providers may put us at risk of service failures for our customers.

Although some of our larger competitors have integrated logistics and delivery service companies, we rely on third parties to ship our products from China to our customers. Even after completing our Allentown facility, we will continue to rely on third parties for transportation within the United States. One of the bases on which we compete (particularly with regard to our QSR customers) is service. To the extent we are unable to meet their demand for products or do not deliver products on time, we stand a substantial risk of losing key accounts. Because we rely on third parties for logistics services, we may be unable to avoid supply chain failures, even if we are able to meet our manufacturing obligations to customers.

If we fail to protect our intellectual property rights, it could harm our business and competitive position.

We rely on a combination of patent, trademark, domain name and trade secret laws and non-disclosure agreements and other methods to protect our intellectual property rights. We own twenty-eight patents in China and one patent in U.S. covering our designs and production technology.

The process of seeking patent protection can be lengthy and expensive, our patent applications may fail to result in patents being issued, and our existing and future patents may be insufficient to provide us with meaningful protection or commercial advantage. Our patents and patent applications may also be challenged, invalidated or circumvented.

We also rely on trade secret rights to protect our business through non-disclosure provisions in employment agreements with employees. If our employees breach their non-disclosure obligations, we may not have adequate remedies in China, and our trade secrets may become known to our competitors.

Implementation of PRC intellectual property-related laws has historically been lacking, primarily because of ambiguities in the PRC laws and enforcement difficulties. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and management attention, which could harm our business and competitive position.

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Our Chinese patents and registered marks may not be protected outside of China due to territorial limitations on enforceability.

In general, patent and trademark rights have territorial limitations in law and are valid only within the countries in which they are registered.

At present, Chinese enterprises may register their trademarks overseas through two methods. One is to file an application for trademark registration in each single country or region in which protection is desired, while the other is to apply via the Madrid system for international trademark registration. By the second way, under the provisions of the Madrid Agreement concerning the International Registration of Marks (the “Madrid Agreement”) or the Protocol Relating to the Madrid Agreement concerning the International Registration of Marks (the “Madrid Protocol”), applicants may designate their marks in one or more member countries via the Madrid system for international registration.

As of the date of the filing, we have registered one trademark ([GRAPHIC MISSING] TM) at the International Bureau of the World Intellectual Property Organization (“WIPO”) under the Madrid Agreement and Protocol. We have also applied for territorial extension by designating 15 member countries through WIPO. Currently the registration for this trademark is valid in 13 foreign member countries, including the U.S. For more details, please see the disclosure of our trademarks on page 101.

Similar with trademarks, Chinese enterprises may also register their patents overseas through two methods. One is to file an application for patent registration in each single country or region, and the other is to file international application with the China Intellectual Property Office or the International Bureau of World Intellectual Property Organization under the Patent Cooperation Treaty. However, such international application may relate to invention or utility model patents, but does not include industrial design patents.

As of the date of the filing, we have registered one design patent at the United States Patent and Trademark Office. This registration is only valid in the U.S. For more details, please see the disclosure of our patents on page 100.

Currently, most of our patents and trademarks are registered in China. If we do not register them in other jurisdictions, they may not be protected outside of China. As a result, our business and competitive position could be harmed.

We may be exposed to intellectual property infringement and other claims by third parties which, if successful, could disrupt our business and have a material adverse effect on our financial condition and results of operations.

Our success depends, in large part, on our ability to use and develop our technology and know-how without infringing third party intellectual property rights. If we sell our branded products internationally, and as litigation becomes more common in China, we face a higher risk of being the subject of claims for intellectual property infringement, invalidity or indemnification relating to other parties’ proprietary rights. Our current or potential competitors, many of which have substantial resources and have made substantial investments in competing technologies, may have or may obtain patents that will prevent, limit or interfere with our ability to make, use or sell our branded products in either China or other countries, including the United States and other countries in Asia. The validity and scope of claims relating to patents in our industry involve complex scientific, legal and factual questions and analysis and, as a result, may be highly uncertain. In addition, the defense of intellectual property suits, including patent infringement suits, and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. Furthermore, an adverse determination in any such litigation or proceedings to which we may become a party could cause us to:

pay damage awards;
seek licenses from third parties;
pay ongoing royalties;
redesign our branded products; or
be restricted by injunctions,

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each of which could effectively prevent us from pursuing some or all of our business and result in our customers or potential customers deferring or limiting their purchase or use of our products, which could have a material adverse effect on our financial condition and results of operations.

Outstanding bank loans may reduce our available funds.

We have approximately $19.52 million in outstanding bank loans as of December 31, 2014. The loans are held at multiple banks and are secured by some of our land and property in China as the collateral for the debt. Our assets outside of China, including our Allentown assets, have not been used as collateral for the foregoing loans. While we believe we have adequate capital to repay these bank loans at present, there can be no guarantee that we will be able to pay all amounts when due or to refinance the amounts on terms that are acceptable to us or at all. If we are unable to make our payments when due or to refinance such amounts, our property could be foreclosed and our business could be negatively affected.

While we do not believe they will impact our liquidity, the terms of the debt agreements impose significant operating and financial restrictions on us. These restrictions could also have a negative impact on our business, financial condition and results of operations by significantly limiting or prohibiting us from engaging in certain transactions, including but not limited to: incurring or guaranteeing additional indebtedness; transferring or selling assets currently held by us; and transferring ownership interests in certain of our subsidiaries. The failure to comply with any of these covenants could cause a default under our other debt agreements. Any of these defaults, if not waived, could result in the acceleration of all of our debt, in which case the debt would become immediately due and payable. If this occurs, we may not be able to repay our debt or borrow sufficient funds to refinance it on favorable terms, if any.

We may be unable to refinance our short-term loans.

We expect to be able to refinance its short-term loans based on past experience and our good credit history. We do not believe failure to refinance from certain banks will have significant negative impact on our normal business operations. In both 2014 and 2013, our operating cash flow was positive. In addition, our related parties including our major shareholders and affiliate companies are willing to provide us financial support. However, it is possible for us to have negative cash flow in the future, and for our related parties to be unable to provide us financial support as needed. As a result, the failure to refinance our short-term loans could potentially affect our capital expenditure and expansion of business.

We have guaranteed third parties’ debt, and a failure by such parties to repay their debts may be enforced against our company.

As a condition of obtaining bank financing, smaller companies in China sometimes enter into reciprocal debt guaranties with third parties, pursuant to which the bank agrees to provide loans to one or more unrelated entities if such entities agree to guaranty the loans made to the other entities. On April 3, 2007, our board of directors adopted a resolution to provide joint and several liability guaranty for Wenling Feilipu Electronic Ltd. Co. (“Wenling Feilipu”) to apply for loans from Bank of China Wenling Brach, which introduced our company to Wenling Feilipu for purpose of obtaining loans. The total guaranty amount was RMB 7,000,000. On April 18 and 23, 2013, Wenling Feilipu failed to repay RMB 4,000,000 and RMB 4,000,000 (of which we guaranteed only RMB 3,000,000), respectively, and we were required to repay RMB 6,320,000 on behalf of Wenling Feilipu. We have paid this amount in full and cleared the guarantee.

On November 21, 2014, our board of directors adopted a resolution to provide guaranty for Taizhou Ruige Mechanical and Electrical Industrial Ltd. Co. to apply for loans from Industrial and Commercial Bank of China Wenling Branch in the amount of RMB 10,000,000. Taizhou Ruige has repaid its loan in full, and this guarantee has been cleared.

We do not currently guarantee any third party debts or intend to enter into any third party guarantees after completion of this offering. In addition, our banks do not currently require such guarantee arrangements from us. However, it is possible that we may, in the future, require bank loans to support our business or expand our operations and be unable to obtain unguaranteed loans. If this were to occur in the future, future lenders might demand unrelated third party guarantees. If we were to enter into any other guarantees for third party debts and they failed to pay, our cash position could be adversely affected and we might be unable to be made whole by our counter-guarantor.

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China’s appreciating currency may make our products more expensive to export to other countries.

We sell a majority of our products in the United States. Historically, we have relied on lower wages and favorable exchange rates in China to make our products sold abroad competitive in price. As China’s currency has appreciated against the US dollar and Chinese shipping and labor rates increase, our products’ prices have been affected in countries that use these currencies. While we plan to move some of our manufacturing to the United States, we anticipate continuing to produce a significant percentage of our products (and the vast majority of our cutlery products) in China. To the extent the Chinese RMB continues to appreciate and such shipping and labor rates continue to increase, our products could become more expensive and, as a result, less attractive to potential customers in other countries. See “Exchange Rate Information.”

If the value of our property decreases, we may not be able to refinance our current debt.

All of our current debt is secured by either mortgages on our real and other business property or guarantees by some of our shareholders. If the value of our real property decreases, we may find that banks are unwilling to loan money to us secured by our business property. A drop in property value could also prevent us from being able to refinance that loan when it becomes due on acceptable terms or at all.

We may require additional financing in the future and our operations could be curtailed if we are unable to obtain required additional financing when needed.

We may need to obtain additional debt or equity financing to fund future capital expenditures. While we do not anticipate seeking additional financing in the immediate future, any additional equity may result in dilution to the holders of our outstanding shares of capital stock. Additional debt financing may include conditions that would restrict our freedom to operate our business, such as conditions that:

limit our ability to pay dividends or require us to seek consent for the payment of dividends;
increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes; and
limit our flexibility in planning for, or reacting to, changes in our business and our industry.

We cannot guarantee that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

The loss of any of our key customers could reduce our revenues and our profitability.

Our key customers are principally multinational QSRs, third party distributors, and retail stores, all located in the U.S. For the six months ended June 30, 2015, sales to our six largest customers amounted in the aggregate to approximately 50.4% of our total revenue. For the six months ended June 30, 2014, sales to our six largest customers amounted in the aggregate to approximately 53.7% of our total revenue. For the year ended December 31, 2014, sales to our seven largest customers amounted in the aggregate to approximately 52.5% of our total revenue. For the year ended December 31, 2013, sales to our six largest customers amounted in the aggregate to approximately 53.3% of our total revenue. There can be no assurance that we will maintain or improve the relationships with these customers, or that we will be able to continue to supply these customers at current levels or at all. Any failure to pay by these customers could have a material negative effect on our company’s business. In addition, having a relatively small number of customers may cause our quarterly results to be inconsistent, depending upon when these customers pay for outstanding invoices.

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During the years ended December 31, 2014 and 2013, respectively, we had zero and two customers that accounted for 10% or more of our revenues. During the six months ended June 30, 2015 and 2014, respectively, we had one and one customer that accounted for 10% or more of our revenues.

       
Customer Name   Six Months
Ended
June 30,
2015
  Six Months
Ended
June 30,
2014
  Year Ended
December 31,
2014
  Year Ended
December 31,
2013
Wendy’s     10.9 %      14.2 %          12.9 % 
Burger King                 11.8 % 

* Less than 10% during the period.

If we cannot maintain long-term relationships with these major customers, the loss of our sales to them could have an adverse effect on our business, financial condition and results of operations.

We buy our supplies from a relatively limited number of suppliers.

During the six months ended June 30, 2015, our five largest suppliers accounted for approximately 54.0% of our total purchases. During the six months ended June 30, 2014, our seven largest suppliers accounted for approximately 51.7% of our total purchases. During the year ended December 31, 2014, our six largest suppliers accounted for approximately 50.1% of our total purchases. During the year ended December 31, 2013, our eight largest suppliers accounted for approximately 52.3% of our total purchases. During the years ended December 31, 2014 and 2013, respectively, we had two and one suppliers that accounted for 10% or more of our purchases. During the six months ended June 30, 2015 and 2014, respectively, we had two and two suppliers that accounted for 10% or more of our purchases.

       
Supplier Name   Six Months
Ended
June 30,
2015
  Six Months
Ended
June 30,
2014
  Year Ended
December 31,
2014
  Year Ended
December 31,
2013
Brilliance Resources Company Limited     14.5 %      13.2 %      14.7 %     
Koco Group Ltd         10.1 %      10.2 %      13.3 % 
Grand Chemical Group     14.5 %             

* Less than 10% during the period.

Because we purchase a material amount of our raw materials from these suppliers, the loss of any such suppliers could result in increased expenses for our company and result in adverse impact on our business, financial condition and results of operations.

Our bank accounts are not fully insured or protected against loss.

We maintain our cash with various banks and trust companies located in mainland China, Hong Kong and the United States. Our cash accounts in the PRC are not insured or otherwise protected. To the extent our U.S. and Hong Kong accounts were to exceed statutory amounts, they would also not be fully protected against loss. Should any bank or trust company holding our cash deposits become insolvent, or if we are otherwise unable to withdraw funds, we would lose the cash on deposit with that particular bank or trust company.

We are substantially dependent upon our senior management and key research and development personnel.

We are highly dependent on our senior management to manage our business and operations and our key research and development personnel for the development of new products and the enhancement of our existing products and technologies. In particular, we rely substantially on our Chief Executive Officer, Mr. Xinfu Hu, and our Chief Operating Officer and Chair, Ms. Guilan Jiang, to manage our operations. Ms. Jiang and Mr. Hu are husband and wife and have been involved in the plastic industry for more than twenty years. Due to their experience in the industry and long relationships with our customer base, they would be difficult to replace.

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While we provide the legally required personal insurance for the benefit of our employees, we do not maintain key person life insurance on any of our senior management or key personnel. The loss of any one of them would have a material adverse effect on our business and operations. Competition for senior management and our other key personnel is intense, and the pool of suitable candidates is limited. We may be unable to quickly locate a suitable reunderwriting for any senior management or key personnel that we lose. In addition, if any member of our senior management or key personnel joins a competitor or forms a competing company, they may compete with us for customers, business partners and other key professionals and staff members of our company. Although each of our senior management and key personnel has signed a confidentiality and non-competition agreement in connection with his employment with us, we cannot assure you that we will be able to successfully enforce these provisions in the event of a dispute between us and any member of our senior management or key personnel.

In our efforts to develop new products and methods of manufacturing, we compete for qualified personnel with technology companies and research institutions. Intense competition for these personnel could cause our compensation costs to increase, which could have a material adverse effect on our results of operations. Our future success and ability to grow our business will depend in part on the continued service of these individuals and our ability to identify, hire and retain additional qualified personnel. If we are unable to attract and retain qualified employees, we may be unable to meet our business and financial goals.

Failure to manage our growth could strain our management, operational and other resources, which could materially and adversely affect our business and prospects.

Our growth strategy includes increasing market penetration of our existing products, developing new products and increasing the number and size of customers we serve. Pursuing these strategies has resulted in, and will continue to result in substantial demands on management resources. In particular, the management of our growth will require, among other things:

continued enhancement of our research and development capabilities;
stringent cost controls and sufficient liquidity;
strengthening of financial and management controls;
increased marketing, sales and support activities; and
hiring and training of new personnel.

If we are not able to manage our growth successfully, our business and prospects would be materially and adversely affected.

Risks Related to Doing Business in China

Labor laws in the PRC may adversely affect our results of operations.

On June 29, 2007, the PRC government promulgated the Labor Contract Law of the PRC, which became effective on January 1, 2008. The Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s decision to reduce its workforce. Further, it requires certain terminations be based upon seniority and not merit. In the event we decide to significantly change or decrease our workforce, the Labor Contract Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our business or in a timely and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations.

Under the Enterprise Income Tax Law, we may be classified as a “Resident Enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.

China passed the Enterprise Income Tax Law, or the EIT Law, and it is implementing rules, both of which became effective on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

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On April 22, 2009, the State Administration of Taxation of China, or the SAT, issued the Circular Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the SAT Notice 82, further interpreting the application of the EIT Law and its implementation to offshore entities controlled by a Chinese enterprise or enterprise group. Pursuant to the SAT Notice 82, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or enterprise group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate stamps, board and shareholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often resident in China. After SAT Notice 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect on September 1, 2011, to provide more guidance on the implementation of SAT Notice 82 and clarify the reporting and filing obligations of such “non-domestically incorporated resident enterprise.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters. On January 29, 2014, the SAT issued Announcement of the State Administration of Taxation on Recognizing Resident Enterprises Based on the Criteria of de facto Management Bodies, to further clarify the reporting and filing procedure for offshore entities controlled by a Chinese enterprise or enterprise group and recognized as a resident enterprise.

The determining criteria set forth in SAT Notice 82 and SAT Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals. If the PRC tax authorities determine that FGI or its subsidiaries is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Currently, we do not have any non-China source income, as we complete our sales, including export sales, in China. Second, under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries would be deemed as “qualified investment income between resident enterprises” and therefore qualify as “tax-exempt income” pursuant to the clause 26 of the EIT Law. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which the dividends we pay with respect to our ordinary shares, or the gain our non-PRC stockholders may realize from the transfer of our ordinary shares, may be treated as PRC-sourced income and may therefore be subject to a 10% PRC withholding tax. If we are required under the EIT Law and its implementing regulations to withhold PRC income tax on dividends payable to our non-PRC stockholders, or if non-PRC stockholders are required to pay PRC income tax on gains on the transfer of their shares of ordinary shares, our business could be negatively impacted and the value of your investment may be materially reduced. Further, if we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both China and such countries in which we have taxable income, and our PRC tax may not be creditable against such other taxes.

We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.

In connection with this offering, we will become subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We are also subject to Chinese anti-corruption laws, which strictly prohibit the payment of bribes to government officials. We have operations, agreements with third parties, and make sales in China, which may experience corruption. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants or distributors of our company, because these parties are not always subject to our control. We are in process of implementing an anticorruption program, which prohibits the offering or giving of anything of value to foreign officials, directly or indirectly, for the purpose of obtaining or retaining business. The anticorruption program also requires that clauses mandating compliance with our policy be included in all contracts with foreign sales agents, sales consultants and distributors and that they certify their compliance with our policy annually. It further requires that all

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hospitality involving promotion of sales to foreign governments and government-owned or controlled entities be in accordance with specified guidelines. In the meantime, we believe to date we have complied in all material respects with the provisions of the FCPA and Chinese anti-corruption laws.

However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

Uncertainties with respect to the PRC legal system could adversely affect us.

We conduct a substantial amount of our business through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because some of these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make parent/subsidiary loans or additional capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

In utilizing the proceeds of this offering in the manner described in “Use of Proceeds,” as an offshore holding company of our PRC operating subsidiaries, we may make additional capital contributions to our PRC subsidiaries, or we may make parent/subsidiary loans to our PRC subsidiaries.

We currently anticipate using a portion of the gross proceeds from this offering to increase the registered capital of Taizhou Fuling (after which time Taizhou Fuling may apply such funds to the purposes described in “Use of Proceeds”). The increase in registered capital will require prior approval from (i) MOFCOM to increase Taizhou Fuling’s registered capital, (ii) SAIC to alter Taizhou Fuling’s business certificate to reflect the increase in registered capital and (iii) SAFE to allow Taizhou Fuling’s bank to convert U.S. dollars into RMB in order to fund such increased registered capital, or each of the foregoing agencies’ respective local counterparts. This approval process typically takes 30 to 90 days, and sometimes longer, from the time MOFCOM or its local branches receive all the required application documents to begin the process. The remaining portion of such gross proceeds will be used to pay expenses related to this offering, for our U.S. operations and for other general corporate purposes. We plan to remit money to China using the capital contribution method. The approval from MOFCOM is the key approval in the capital contribution process, and we believe all other approvals are ministerial if MOFCOM approves such increase in registered capital. We have not yet initiated this process but intend to start the process immediately upon completion of the offering. We do not foresee any problem receiving necessary government approvals for a capital contribution; however, if our application is rejected, we would remit money to China through a parent/subsidiary loan instead. If we are unable to obtain these government approvals on a timely basis, we will not be able to use the proceeds of this offering and capitalize our PRC operations unless and until we are able to remit such funds to China, which could adversely affect our liquidity and our ability to fund and expand our business.

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If we are unable to timely remit money to China using the capital contribution method, we would seek to remit money to China through a parent/subsidiary loan instead. Any parent/subsidiary loans to our PRC subsidiaries are subject to PRC regulations. For example, parent/subsidiary loans by us to our subsidiaries in China, which are foreign invested entities (“FIEs”), to finance their activities cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange, or SAFE. On August 29, 2008, SAFE promulgated Circular 142, a notice regulating the conversion by a foreign-invested company of foreign currency into RMB by restricting how the converted RMB may be used. The notice requires that RMB converted from the foreign currency-denominated capital of a foreign-invested company may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless such investments are otherwise provided for in the business scope. The foreign currency-denominated capital shall be verified by an accounting firm before converting into RMB. In addition, SAFE strengthened its oversight over the flow and use of RMB funds converted from the foreign currency-denominated capital of a foreign-invested company. To convert such capital into RMB, the foreign-invested company must report the use of such RMB to the bank, and the RMB must be used to the reported purposes. According to Circular 142, change of the use of such RMB without approval is prohibited. In addition, such RMB may not be used to repay RMB loans if the proceeds of such loans have not yet been used. Violations of Circular 142 may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Rules.

On May 10, 2013, SAFE released Circular 21, which came into effect on May 13, 2013. According to Circular 21, SAFE has simplified the foreign exchange administration procedures with respect to the registration, account openings and conversions, settlements of FDI-related foreign exchange, as well as fund remittances.

Circular 142 and Circular 21 may significantly limit our ability to convert, transfer and use the net proceeds from this offering and any offering of additional equity securities in China, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. FGI receives revenues and purchases raw materials primarily in U.S. dollars but incurs other expenses primarily in RMB. Although our main suppliers are based in mainland China or based in Hong Kong with Chinese operating subsidiaries, some of them provide quotations in U.S. dollars. We choose quotations based on price competitiveness. In the past, U.S. dollars quotations were more competitive so we purchase almost all of our raw materials in U.S. dollars. However, recently several RMB quotations were more competitive and we accepted them and paid in RMB.

Under our current corporate structure, FGI’s income is primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our security-holders.

We are a holding company and we rely for funding on dividend payments from our subsidiaries, which are subject to restrictions under PRC laws.

We are a holding company incorporated in the Cayman Islands, and we operate our core businesses through our subsidiaries in the PRC and the United States. Therefore, the availability of funds for us to pay dividends to our shareholders and to service our indebtedness depends upon dividends received from these

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PRC subsidiaries. If our subsidiaries incur debt or losses, their ability to pay dividends or other distributions to us may be impaired. As a result, our ability to pay dividends and to repay our indebtedness will be restricted. PRC laws require that dividends be paid only out of the after-tax profit of our PRC subsidiaries calculated according to PRC accounting principles, which differ in many aspects from generally accepted accounting principles in other jurisdictions. PRC laws also require enterprises established in the PRC to set aside part of their after-tax profits as statutory reserves. These statutory reserves are not available for distribution as cash dividends. In addition, restrictive covenants in bank credit facilities or other agreements that we or our subsidiaries may enter into in the future may also restrict the ability of our subsidiaries to pay dividends to us. These restrictions on the availability of our funding may impact our ability to pay dividends to our shareholders and to service our indebtedness.

Our business may be materially and adversely affected if any of our PRC subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.

The Enterprise Bankruptcy Law of the PRC, or the Bankruptcy Law, came into effect on June 1, 2007. The Bankruptcy Law provides that an enterprise will be liquidated if the enterprise fails to settle its debts as and when they fall due and if the enterprise’s assets are, or are demonstrably, insufficient to clear such debts.

Our PRC subsidiaries hold certain assets that are important to our business operations. If any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

According to the SAFE’s Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, effective on December 17, 2012, and the Provisions for Administration of Foreign Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, prior approval from the SAFE for remittance of foreign exchange to our shareholders abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch. It is not clear whether “registration” is a mere formality or involves the kind of substantive review process undertaken by SAFE and its relevant branches in the past.

PRC regulation of direct investments and parent/subsidiary loans by offshore holding companies to PRC entities may delay or limit us from using the proceeds of this Offering to make additional capital contributions or loans to our Company’s PRC subsidiaries.

Any capital contributions or parent/subsidiary loans that we, as an offshore entity, make to our Company’s PRC subsidiaries, including from the proceeds of this offering, are subject to PRC regulations. If we make loans to our Company’s PRC subsidiaries, those parent/subsidiary loans are registered and approved by the local SAFE branch, generally receive approval within 20 working days and cannot exceed the difference between the total investment amount approved by SAFE and the registered capital of each of our PRC subsidiaries. As loans, they would bear interest and need to be repaid in the future in accordance with their terms. As our company is a Cayman Islands company, repayment would also need government approval. In our case, we would be limited to making a parent/subsidiary loan of approximately $8.89 million, which is the difference between Taizhou Fuling’s total investment amount as approved by the foreign investment authorities (currently $20 million), and Taizhou Fuling’s registered capital (currently $11.11 million).

If we make capital contributions instead, the total amount of investment in each of our Company’s PRC subsidiaries must be approved by several agencies or their local counterparts. A capital contribution requires (i) MOFCOM approval to increase the registered capital of the entity receiving funding, (ii) SAIC approval to alter the business certificate to reflect such increased registered capital and (iii) SAFE approval to allow Taizhou Fuling’s bank to convert U.S. dollars into RMB in order to fund such increased registered capital, or each of the foregoing agencies’ respective local counterparts. The process of completing a capital contribution generally requires 30 to 90 working days from the initial filing with MOFCOM, rather than 20 working days for a parent/subsidiary loan. On the other hand, there is no limit to the amount we can fund through a capital contribution, and capital contributions do not require repayment or, as a result, payment of interest. For these reasons, although the process of receiving approval is more arduous, we prefer to (and plan to) fund Taizhou Fuling’s operations through a capital contribution rather than a parent/subsidiary loan.

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We cannot assure you that we will be able to obtain these approvals in a timely manner or at all. If we fail to obtain such approvals or make such registration, our ability to make equity contributions or provide loans to our Company’s PRC subsidiaries or to fund their operations may be negatively affected, which may adversely affect their liquidity and ability to fund their working capital and expansion projects and meet their obligations and commitments.

Fluctuations in exchange rates could adversely affect our business and the value of our securities.

Changes in the value of the RMB against the U.S. dollar, Euro and other foreign currencies are affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect on our revenues and financial condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. For example, to the extent that we need to convert U.S. dollars we receive from our initial public offering into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of paying dividends on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations of the RMB against other currencies may increase or decrease the cost of imports and exports, and thus affect the price-competitiveness of our products against products of foreign manufacturers or products relying on foreign inputs.

Since July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

We reflect the impact of currency translation adjustments in our financial statements under the heading “accumulated other comprehensive income (loss).” For years ended December 31, 2014 and 2013, we had a negative adjustment of $164,781 and a positive adjustment of $431,424, respectively, for foreign currency translations. Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss of your investment in our shares, especially if such matter cannot be addressed and resolved favorably.

Recently, U.S. public companies that have substantially all of their operations in China, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our company, our business and this offering. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend the Company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our company and business operations will be severely hampered and your investment in our shares could be rendered worthless.

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PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to penalties and limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute profits to us, or otherwise adversely affect us.

The SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.

SAFE Circular 37 was issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75.

If our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

Ms. Jiang has completed her SAFE Circular 37 registration. Ms. Sujuan Zhu, Mr. Qian Hu, Mr. Xinzhong Wang, Mr. Jinxue Jiang and Mr. Yongjun Guo have applied to SAFE’s local branch in Taizhou for registration, but we cannot provide any assurances that such registration will be completed in a timely manner. Moreover, we may not be fully informed of the identities of all our beneficial owners who are PRC citizens or residents, and we cannot compel our beneficial owners to comply with SAFE registration requirements.

As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC citizens or residents have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

China’s proposed foreign investment law may impose new burdens on our company.

On January 19, 2015, MOFCOM released the draft Foreign Investment Law for public comment (the “Draft FI Law”). The Draft FI Law proposed fundamental changes to the existing foreign investment legal regime in China. If implemented in its current status, the Draft FI Law, once effective, will require Taizhou Fuling to submit an annual report to the foreign investment authority. The information required by the annual report may be extensive and burdensome, such as the foreign invested company’s main products, import and export, employment, financial status, transactions with our affiliates and material disputes. If we fail to make such reporting timely or if there is any concealment in such reporting, we may be subject to fines or other regulatory sanctions.

Risks Related to Our Corporate Structure and Operation

We will incur additional costs as a result of becoming a public company, which could negatively impact our net income and liquidity.

Upon completion of this offering, we will become a public company in the United States. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules and regulations implemented by the SEC and The Nasdaq Capital Market require significantly heightened corporate governance practices for public companies.

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We expect that these rules and regulations will increase our legal, accounting and financial compliance costs and will make many corporate activities more time-consuming and costly.

We do not expect to incur materially greater costs as a result of becoming a public company than those incurred by similarly sized foreign private issuers. If we fail to comply with these rules and regulations, we could become the subject of a governmental enforcement action, investors may lose confidence in us and the market price of our Ordinary Shares could decline.

Entities controlled by our employees, officers and/or directors will control a majority of our Ordinary Shares, decreasing your influence on shareholder decisions.

Upon completion of this offering, entities controlled by our employees, officers and/or directors will, in the aggregate, continue to own a majority of our outstanding shares. As a result, our employees, officers and directors will possess substantial ability to impact our management and affairs and the outcome of matters submitted to shareholders for approval. These shareholders, acting individually or as a group, could exert control and substantial influence over matters such as electing directors and approving mergers or other business combination transactions. This concentration of ownership and voting power may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our Ordinary Shares. These actions may be taken even if they are opposed by our other shareholders, including those who purchase shares in this offering. See “PRINCIPAL SHAREHOLDERS.”

The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.

Upon completion of this offering, we will be a publicly listed company in the United States. As a publicly listed company, we will be required to file periodic reports with the Securities and Exchange Commission upon the occurrence of matters that are material to our company and shareholders. In some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our company. Similarly, as a U.S.-listed public company, we will be governed by U.S. laws that our non-publicly traded competitors are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public listing could affect our results of operations.

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.

As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

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As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist of independent directors. If we opt to rely on such exemptions in the future, such decision might afford less protection to holders of our ordinary shares.

Section 5605(b)(1) of the Nasdaq Listing Rules requires listed companies to have, among other things, a majority of its board members to be independent, and Section 5605(d) and 5605(e) require listed companies to have independent director oversight of executive compensation and nomination of directors. As a foreign private issuer, however, we are permitted to follow home country practice in lieu of the above requirements. We have agreed with our underwriters that we will not opt to follow home country practice in lieu of such requirements for two years after the completion of this offering. See “Corporate Governance Efforts.” After this period, however, we could decide to follow home country practice. Our Board of Directors could make such a decision to depart from such requirements by ordinary resolution. The remainder of this risk factor, therefore, discusses risks to shareholders in the event the Board of Directors were to depart from some of such Nasdaq requirements and instead follow home country practices.

The corporate governance practice in our home country, the Cayman Islands, does not require a majority of our board to consist of independent directors or the implementation of a nominating and corporate governance committee. Since a majority of our board of directors would not consist of independent directors if we relied on the foreign private issuer exemption, fewer board members would be exercising independent judgment and the level of board oversight on the management of our company might decrease as a result. In addition, we could opt to follow Cayman Islands law instead of the Nasdaq requirements that mandate that we obtain shareholder approval for certain dilutive events, such as an issuance that will result in a change of control, certain transactions other than a public offering involving issuances of 20% or greater interests in the company and certain acquisitions of the shares or assets of another company. For a description of the material corporate governance differences between the Nasdaq requirements and Cayman Islands law, see “Description of Share Capital — Differences in Corporate Law”.

Our directors’ and executive officers’ other business activities may pose conflicts of interest.

Our directors and executive officers have other business interests outside the company that could potentially give rise to conflicts of interest. For example, our Chief Operating Officer and Chair, Guilan Jiang, owns 50% of Wenling Fulin Plastic Products Co. Ltd. Ms. Jiang is also its legal representative, general manager and director. While this company was previously engaged in the plastics industry and, as a result, may have competitive overlap with our company, we do not believe it currently competes with our company. Wenling Fulin Plastic Products Co. Ltd. is a holding company with no investment in any competing business with us, although it has investment in a local commercial bank and leases its land to a restaurant. While the company was previously in our industry, this privately held company’s operations, but not the name, have changed. Notwithstanding the foregoing, if this company were to begin to operate within our industry, we might find a conflict of interest.

Although her business working time at this company is flexible, Ms. Jiang has historically devoted very limited time to matters concerning Wenling Fulin Plastic Products Co. Ltd., and most of her time to matters for FGI. If Ms. Jiang devotes any significant time and effort to this other company in the future, such business activities could both distract her from focusing on FGI and pose a conflict of interest to the extent her activities at Wenling Fulin Plastic Products Co. Ltd. compete with our company.

An insufficient amount of insurance could expose us to significant costs and business disruption.

While we have purchased insurance, including export transportation, product liability and account receivable insurance, to cover certain assets and property of our business, the amounts and scope of coverage could leave our business inadequately protected from loss. For example, not all of our subsidiaries have coverage of business interruption insurance. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected. For the scope of coverage of our insurance, see “BUSINESS — Our Insurance Coverage”.

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Risks Related to Our Initial Public Offering and Ownership of Our Ordinary Shares

Investors risk loss of use of funds subscribed, with no right of return, during the offering period.

We cannot assure you that all or any shares will be sold. Burnham Securities Inc. and Network 1 Financial Securities, Inc. (the “Underwriters”) are offering our shares on a best efforts all-or-none basis. We have no firm commitment from anyone to purchase all or any of the shares offered. If subscriptions for 4,000,000 shares are not received on or before close of business on October 31, 2015 (or November 30, 2015 if extended), escrow provisions require that all funds received be promptly refunded. If refunded, investors will receive no interest on their funds. During the offering period, investors will not have any use or right to return of the funds.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Ordinary Shares less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our Ordinary Shares held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict if investors will find our Ordinary Shares less attractive because we may rely on these exemptions. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail our company of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Ordinary Shares may decline.

As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. In addition, beginning with our 2015 annual report on Form 20-F to be filed in 2016, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are in the process of designing, implementing, and testing the internal control over financial reporting required to comply with this obligation, which process is time consuming, costly, and complicated. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting beginning with our annual report on Form 20-F following the date on which we are no longer an “emerging growth company,” which may be up to five full years following the date of this offering. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Ordinary Shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission, or the SEC, or other regulatory authorities, which could require additional financial and management resources.

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The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual and current reports with respect to our business and operating results. In addition, as long as we are listed on The Nasdaq Capital Market, we are also required to file semi-annual financial statements.

As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.

We also expect that being a public company and these rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

The initial public offering price for our Ordinary Shares will be determined through negotiations between the Underwriter and us and may vary from the market price of our Ordinary Shares following our initial public offering. If you purchase our Ordinary Shares in our initial public offering, you may not be able to resell those shares at or above the initial public offering price. We cannot assure you that the initial public offering price of our Ordinary Shares, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred from time to time prior to our initial public offering. The market price of our Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

actual or anticipated fluctuations in our revenue and other operating results;
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
lawsuits threatened or filed against us; and
other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market

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volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

We have broad discretion in the use of the net proceeds from our initial public offering and may not use them effectively.

If this offering prices above the assumed price per share or if we increase the aggregate offering size with an immediately effective post-effective amendment, we could raise more funds than currently assumed. To the extent (i) we raise more money than required for the purposes explained in the section titled “Use of Proceeds” or (ii) we determine that the proposed uses set forth in that section are no longer in the best interests of our Company, we cannot specify with any certainty the particular uses of such net proceeds that we will receive from our initial public offering. However, we will advise shareholders as required in our annual reports on Form 20-F of any changes in application of funds and will file a current report on Form 6-K to the extent we determine such changes in application must be disclosed more quickly.

Our management will have broad discretion in the application of such net proceeds, including working capital, possible acquisitions, and other general corporate purposes, and we may not spend or invest these proceeds in a way with which our stockholders agree. The failure by our management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds from our initial public offering in a manner that does not produce income or that loses value.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.

There may not be an active, liquid trading market for our Ordinary Shares.

Prior to this offering, there has been no public market for our Ordinary Shares. An active trading market for our Ordinary Shares may not develop or be sustained following this offering. You may not be able to sell your shares at the market price, if at all, if trading in our shares is not active. The initial public offering price was determined by negotiations between us and the Underwriters based upon a number of factors which are descried in the “Underwriting” section. The initial public offering price may not be indicative of prices that will prevail in the trading market.

We will incur increased costs as a result of being a public company.

As a public company, we will incur legal, accounting and other expenses that we did not incur as a private company. For example, we must now engage U.S. securities law counsel and U.S. auditors that we did not require prior to this offering, and we will have annual payments for listing on a stock exchange if we are so listed. In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented by the SEC and Nasdaq, have required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. While it is impossible to determine the amounts of such expenses in advance, we expect that we will incur expenses of between $500,000 and $1 million per year that we did not experience prior to commencement of this offering.

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Shares eligible for future sale may adversely affect the market price of our Ordinary Shares, as the future sale of a substantial amount of outstanding Ordinary Shares in the public marketplace could reduce the price of our Ordinary Shares.

The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our Ordinary Shares. An aggregate of 11,666,667 shares will be outstanding before the consummation of this offering and 15,666,667 shares will be outstanding immediately after this offering if the over-subscription option is not exercised, or 16,266,667 shares if the over-subscription option is exercised in full. All of the shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining shares will be “restricted securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act. See “Shares Eligible for Future Sale.”

Some of our pre-IPO shareholders will be able to sell their shares upon completion of this offering.

Holders of 5% of our outstanding shares prior to completion of this offering will not be subject to lock-up agreements. Our net tangible book value attributable to shareholders at August 31, 2015 was $21,119,082, or approximately $1.81 per Ordinary Share outstanding as of August 31, 2015. Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after August 31, 2015, will be approximately $38,659,082 or $2.47 per Ordinary Share, if the over-subscription option is not exercised, or approximately $41,455,082 or $2.55 per Ordinary Share if the over-subscription option is exercised in full. Because these shareholders have paid a lower price per share than participants in this offering, they may be more willing to accept a lower sales price than the IPO price. This fact could impact the trading price of the stock following completion of the offering, to the detriment of participants in this offering.

You will experience immediate and substantial dilution.

The initial public offering price of our shares is substantially higher than the pro forma net tangible book value per share of our Ordinary Shares. Upon the completion of this offering, if you purchase shares in this offering and assuming no exercise of the underwriters’ over-subscription option, you will incur immediate dilution of approximately $2.53 or approximately 51% in the pro forma net tangible book value per share from the price per share that you pay for the shares; if you purchase shares in this offering and assuming full exercise of the underwriters’ over-subscription option, you will incur immediate dilution of approximately $2.45 or approximately 49% in the pro forma net tangible book value per share from the price per share that you pay for the shares. Accordingly, if you purchase shares in this offering, you will incur immediate and substantial dilution of your investment. See “Dilution.”

We are subject to liability risks stemming from our foreign status, which could make it more difficult for investors to sue or enforce judgments against our company.

Most of our operations and assets are located in the PRC. In addition, most of our executive officers and directors are non-residents of the U.S., and much of the assets of such persons are located outside the U.S. As a result, it could be difficult for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of these persons.

In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of a Cayman Islands company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The Cayman Islands courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original actions brought in the Cayman Islands,

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based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. This means that even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered.

Lastly, under the law of the Cayman Islands, there is little statutory law for the protection of minority shareholders. The principal protection under statutory law is that shareholders may bring an action to enforce the constituent documents of the corporation, our Memorandum and First Amended and Restated Articles of Association. Shareholders are entitled to have the affairs of the company conducted in accordance with the general law and the articles and memorandum.

There are common law rights for the protection of shareholders that may be invoked, largely dependent on English company law, since the common law of the Cayman Islands for business companies is limited. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority or the board of directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to law and the constituent documents of the corporation. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company’s Memorandum and First Amended and Restated Articles of Association, then the courts will grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the wrongdoers control the company; (3) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (4) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded minority shareholders under the laws of many states in the United States.

Our board of directors may decline to register transfers of ordinary shares in certain circumstances.

Our board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as Nasdaq may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect thereof.

If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

You may be unable to present proposals before general meetings or extraordinary general meetings not called by shareholders.

Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our First Amended and Restated Articles of Association allow our shareholders holding shares representing in aggregate not less than 20% of our voting share capital in issue, to requisition an extraordinary general meeting of our shareholders, in which case our directors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting.

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Although our First Amended and Restated Articles of Association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders, any shareholder may submit a proposal to our Board of Directors for consideration of inclusion in a proxy statement. Advance notice of at least ten calendar days is required for the convening of our annual general shareholders’ meeting and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third in nominal value of the total issued voting shares in our company.

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Special Note Regarding Forward-Looking Statements

This prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We do not undertake to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations, other than required by the federal securities laws or other applicable laws.

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Letter from Chief Executive Officer — Mr. Xinfu Hu

Dear investors:

As you read this prospectus, you might be considering investing in Fuling and participating in our future development. I hope, through this letter, to give you a better understanding of our vision and values to help you with your investing decision.

Our Mission and Vision

You may not know the name Fuling, but you probably have used our products, some of which we are making in the United States. With more than 20 years of hard work delivering top quality products to our customers, Fuling has become an important player in the U.S. disposable serviceware market. Our environmentally conscious serviceware are used by McDonald’s, Subway, Wendy’s, Burger King, KFC (China only), Walmart, McKesson, Woolworths and more than one hundred other customers, and we expect to continue to broaden our customer base.

Fuling’s vision is to be an international leader in the production of disposable cutlery, straws and other serviceware. We believe that we can continue to produce serviceware of the highest quality without compromising on our dedication to innovation and the environment. We focus on research and development, craftsmanship, manufacturing technology, environmental protection and quality management to ensure that we can provide excellent products reliably and at fair prices. Anything Fuling produces — even something as small as a straw — is imprinted with our culture and values.

The United States is our main market. We have invested approximately $2.8 million and plan to invest over $9 million in our state of the art, new Allentown facility. Our customer base includes major fast-food chains, other leading disposable serviceware companies, retail stores, and small- and medium-sized customers, including distributors.

Our Guiding Principles

We believe our customers, employees and shareholders are all crucial for our success. Our guiding principle is very simple: if we support our customers and employees, our customers and employees will support our shareholders in return.

We believe that creating lasting value for our customers will bring our shareholders lasting returns. Our dedicated, conscientious employees are the most important factor in customer satisfaction. Without a happy and diligent employee team, we won’t have happy customers; without happy and satisfied customers, we won’t have satisfied shareholders. We believe our employees’ satisfaction and dedication to our mission has been a large reason we have enjoyed continuous growth.

We hope you as investors will not only be rewarded financially, but also share a sense of accomplishment in our contributions to society, both in China and the United States. By investing in us, you help us increase job opportunities in the U.S. and China, encourage innovation, promote environmental protection, and push economic transformation and improvement.

Our Business Model

Years of continuous effort have yielded a sound and efficient business platform in the U.S. We set up three sales companies in the U.S. to specifically service different groups of customers. These sales companies are Fuling Plastic USA, Inc., Direct Link USA LLC and Domo Industry Inc.

In addition, we have distribution centers in New Jersey, California, Pennsylvania in U.S. and Toronto and Vancouver in Canada. We plan to add two more such centers in Chicago and Dallas so that our products will be easily accessible in the entire North American market.

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Our business model, simply put, is to produce high quality products, primarily in China, and to sell them in the United States and around the world. In the coming years, this model will not change fundamentally because the costs of manpower, raw materials and operations in China are lower than those in the United States.

However, we are never static. We have taken a firm step in the diversification of production and operation, and have built our first factory in the United States.

This is a decision made by our management team after careful consideration. We produce knives, forks, drinking cups, straws, and other disposable serviceware available to the U.S. market, but the transportation costs of these products are each different. For example, the transportation costs for cups and straws are more expensive than for other serviceware with similar weight, due to physical attributes of these hollow products. Therefore, instead of spending more money and resources on shipping, it is more economic to build factories producing these products in the U.S. By reducing transportation costs and raising the level of factory automation, higher salaries and raw material costs in the U.S. can be offset.

In 2014, we established our first factory outside of China, in Allenton, Pennsylvania. This transformative initiative is not an easy step, because it requires the factory to adapt to the local American culture while it has to remain consistent with our three factories in China. In addition, we have been exacting in our demands that the factory be a model of sustainable development and environmental protection.

However, this step will be very beneficial to us, because it systematically integrates the resources from the world’s two leading countries: the U.S. and China. For low-volume, multi-variety, multi-specification orders, we will continue to produce them at our factories in China. For orders of large quantities and single specification, we will be able to produce them with the highly-automated equipment in our U.S. factory.

We plan to invest around one-third of the funds raised in this IPO (approximately $9 million) in the development and operation of our U.S. factory and to further develop our U.S. sales network.

We are optimistic about the future of our Allentown factory, and we think this model will be mutually beneficial for both Fuling and our U.S. customers.

Our Approach to Challenges

Our integrity has seen us through numerous challenges over the course of our growth as a company. From the time my spouse, Guilan Jiang, founded Fuling with her sister-in-law Sujuan Zhu, a few close friends and me after being laid off from another job, Fuling has been successful by addressing challenges directly. We transformed our company from a small producer of plastic household articles, baskets and other plastic products into an initially-small disposable serviceware producer because Ms. Jiang found an opportunity at a chance meeting at a trade fair to supply plastic utensils to a global QSR.

Once we had that opportunity, our team rallied around the mission of providing excellent quality products to ensure that the customer was thrilled with the results. There are no shortcuts to satisfying and impressing customers, only hard work done with integrity. These efforts have, over time, resulted in our company being one of China’s largest exporters of disposable serviceware. The China Chamber of Commerce for Import and Export of Light Industrial Products and Arts and Crafts has recognized Taizhou Fuling as one of China’s top three plastic kitchenware and serviceware companies for exports every year from 2011 through 2014, based on export sales amount. Although we are in the leading position in China among exporters of disposable serviceware, compared with the international leading enterprises, we are still in the stage of growing our strength and power.

In any business, innovation often squares off against other competing forces. Besides competitive pressures, financial, exchange rate and many other uncertain factors can also lead to new development crises. We are aware that becoming a public company will bring us more challenges, because of the collision of different cultures, values and laws, and even geopolitical factors. And we will encounter challenges along the way that we do not currently anticipate. However, our many years of dealing at the highest levels with our exacting, multinational clients, with successful results, has prepared us for these future challenges.

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We want you to know that we will maintain our culture of addressing challenges directly and our mission of providing environmentally-friendly products. We will continue to focus on R&D of environmentally-friendly raw materials, and achieving zero pollution emissions in the production process. We will defend Fuling’s and its shareholders’ long-term value and interests. Your trust and support will be our greatest asset.

Thank you all once again for considering participating in the development of our business.

[GRAPHIC MISSING]
 
Xinfu Hu
CEO, Fuling Global Inc.

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Use of Proceeds

After deducting the estimated underwriting fee and offering expenses payable by us, we expect to receive net proceeds of approximately $17.5 million from this offering, or approximately $20.3 million if the over-subscription option is exercised in full. We intend to use the net proceeds of this offering as follows (as to such uses in China, after we complete the remittance process described below), and we have listed the specific uses of proceeds below. If and to the extent the over-subscription option is exercised, we intend to use any such proceeds for our working capital needs and to replace other sources of funding mentioned below where projects require more capital to complete than we anticipate raising in this offering.

   
Description of Use   Amount
($ million)
  Percentage of
Net Proceeds
United States
                 
Operation of Allentown factory and development of U.S. sales network     3.9       22.29 % 
Development of Allentown factory     3.3       18.86 % 
China
                 
Purchase of land for new factory in Wenling     5.0       28.57 % 
Construction costs for Wenling Factory – Phase I(1)     0.3       1.71 % 
Purchase of Equipment and Machinery – Phase I     4.0       22.86 % 
Research and Development – Process Automation     1.0       5.71 % 
Total     17.5       100 % 

(1) We anticipate that the first phase of construction costs for Wenling factory will cost approximately $5 million, of which approximately $0.3 million will come from this offering and the balance from a combination of 2015 operating cash flows and, to the extent required, bank loans and other sources of financing.

Specifically, use of “Operation of Allentown factory and development of U.S. sales network” may entail:

 
Description of Use   Amount
($ million)
Working capital for operation in Allentown     3.0:
(1) 0.5 in 2015
(2) 2.5 in 2016
 
Marketing and distributor relationship development     0.5  
Sales employee recruiting and training     0.4  
Total     3.9  

Approximately two-thirds of the net proceeds from this offering will be remitted to China before we are able to use those funds to expand our business. We are permitted under PRC laws and regulations to provide funding to Taizhou Fuling, through capital contributions or parent/subsidiary loans, subject to approvals from or registrations with relevant PRC government authorities. We plan to use the capital contribution to fund Taizhou Fuling. We expect that a properly submitted application will be approved in the ordinary course of business; however, we cannot guarantee such an approval will occur or be timely. If our application for a capital contribution is denied, we will use the parent/subsidiary loan method of funding Taizhou Fuling.

As mentioned, we currently anticipate financing our subsidiaries by means of capital contributions. We currently anticipate using a portion of the net proceeds from this offering (total net proceeds of approximately $18 million) to increase the registered capital of Taizhou Fuling (after which time Taizhou Fuling may apply such funds to building a new facility in Wenling and research and development). The increase in registered capital will require prior approval from (i) MOFCOM to increase Taizhou Fuling’s registered capital, (ii) SAIC to alter Taizhou Fuling’s business certificate to reflect the increase in registered capital and (iii) SAFE to allow Taizhou Fuling’s bank to convert U.S. dollars into RMB in order to fund such increased registered capital, or each of the foregoing agencies’ respective local counterparts. This approval process typically takes 30 to 90 days in total, and sometimes longer, from the time MOFCOM or its local branches receive all the required application documents to begin the process.

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We plan to remit money to China using the capital contribution method. The approval from MOFCOM is the key approval in the capital contribution process, and we believe all other approvals are ministerial if MOFCOM approves such increase in registered capital. We have not yet initiated this process but intend to start the process immediately upon completion of the offering. We do not foresee any problem receiving necessary government approvals for a capital contribution; however, if our application is rejected, we would remit money to China through a parent/subsidiary loan instead. If we were to provide funding to Taizhou Fuling through parent/subsidiary loans (rather than the capital contribution method), the total amount of such parent/subsidiary loans may not exceed $8.89 million, which is the difference between Taizhou Fuling’s total investment amount as approved by the foreign investment authorities (currently $20 million), and Taizhou Fuling’s registered capital (currently $11.11 million). To the extent we are unable to receive all of the proceeds of this offering through a parent/subsidiary loan, we would anticipate using such excess in our U.S. operations, but may, at any time, reallocate those of other funds via intercompany loans and contributions to our PRC subsidiaries. By contrast, if we fund Taizhou Fuling through a capital contribution, the amount of our contribution is subject to increasing our registered capital, as described above, and applying to change the approved investment amount is not required. Such parent/subsidiary loans must also be registered with the SAFE, which registration usually takes no more than 20 working days after application to complete. The cost for obtaining such approvals and completing such registration is minimal.

We cannot assure you that we will be able to complete these government registrations or obtain the relevant approvals on a timely basis, if at all. The procedure to remit funds may take several months after completion of this offering, and we will be unable to use the funds in China until remittance is completed. We have not yet initiated the process of remitting money to China using either method but will begin to do so promptly upon completion of this offering. See “Risk Factors — Risks Related to Doing Business in the PRC — PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make parent/subsidiary loans or additional capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

Pending use of the net proceeds, we intend to invest our net proceeds in short-term, interest bearing, investment-grade obligations. These investments may have a material adverse effect on the U.S. federal income tax consequences of an investment in our Ordinary Shares. It is possible that we may become a passive foreign investment company for U.S. federal income taxpayers, which could result in negative tax consequences to you. These consequences are discussed in more detail in “Material Tax Matters Applicable to U.S. Holders of Our Ordinary Shares.”

The foregoing represents our current intentions with respect of the use and allocation of the net proceeds of this offering based upon our present plans and business conditions, but our management will have significant flexibility and discretion in applying the net proceeds of this offering. The occurrence of unforeseen events or changed business conditions may result in application of the proceeds of this offering in a manner other than as described in this prospectus.

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Dividend Policy

Other than dividends of (i) $9,000 declared by Taizhou Fuling in 2004 and reinvested in Taizhou Fuling as additional paid in capital, (ii) $900,000 declared by Taizhou Fuling in 2007 and reinvested in Taizhou Fuling as additional paid in capital and (iii) $10,274,848 declared by Taizhou Fuling in 2014, of which $7,530,000 was reinvested in Taizhou Fuling as additional paid in capital, we have never declared or paid any cash dividends on our Ordinary Shares. Those dividends were paid in RMB in China. (Most of the portion of the 2014 dividend that was not reinvested consisted of taxes associated with restructuring the Company.) We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of Directors may deem relevant.

Under Cayman Islands law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the total assets of our company over the sum of our liabilities, as shown in our books of account, plus our capital), and we must be solvent before and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable value of assets of our company will not be less than the sum of our total liabilities, other than deferred taxes as shown on our books of account, and our capital.

If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our BVI subsidiary, Total Faith. Current PRC regulations permit our indirect PRC subsidiaries to pay dividends to Total Faith only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

In addition, pursuant to the EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to us by our PRC subsidiaries are subject to withholding tax at a rate of 10% unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from operations in China may be used to pay dividends to our company. Taizhou Fuling may go to a licensed bank to remit its after-tax profits out of China. Nevertheless, the bank will require Taizhou Fuling to produce the following documents for verification before it may transfer the dividends to an overseas bank account of Taizhou Fuling’s parent company: (1) tax payment statement and tax return; (2) auditor’s report issued by a Chinese certified public accounting firm confirming the availability of profits and dividends for distribution in the current year; (3) the Board minutes authorizing the distribution of dividends to its shareholders; (4) the foreign exchange registration certificate issued by SAFE; (5) the capital verification report issued by a Chinese certified public accounting firm; (6) if the declared dividends will be distributed out of accumulated profits earned in prior years, Taizhou Fuling must appoint a Chinese certified public accounting firm to issue an auditors’ report to the bank to certify Taizhou Fuling’s financial position during the years from which the profits arose; and (7) other information as required by SAFE.

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Exchange Rate Information

Our financial information is presented in U.S. dollars. Our functional currency is Renminbi (“RMB”), the currency of the PRC. Transactions denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China at the dates of the transactions. Exchange gains and losses resulting from transactions denominated in a currency other than the RMB are included in statements of operations as foreign currency transaction gains or losses. Our financial statements have been translated into U.S. dollars in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 52, “Foreign Currency Translation”, which was subsequently codified within ASC 830, “Foreign Currency Matters”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in shareholders’ equity. The relevant exchange rates are listed below:

           
  June 30, 2015   December 31, 2014   December 31, 2013
US$1:RMB exchange rate     Period End       6.1088       Period End       6.1460       Period End       6.1140  
       Average       6.1254       Average       6.1457       Average       6.1958  

We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. We do not currently engage in currency hedging transactions.

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated (www.oanda.com).

       
  Midpoint of Buy and Sell Prices for U.S. Dollar per RMB
Period   Period-End   Average   High   Low
2010     6.6018       6.7696       6.8344       6.6018  
2011     6.3585       6.4640       6.6357       6.3318  
2012     6.3086       6.3116       6.3862       6.2289  
2013     6.0220       6.0720       6.2195       5.9778  
2014     6.1411       6.1463       6.1758       6.0924  
2015 (through October 17, 2015)     6.3535       6.1838       6.4129       6.0933  
March     6.1206       6.1444       6.1646       6.1206  
April     6.1001       6.1081       6.1197       6.1001  
May     6.1065       6.1013       6.1098       6.0933  
June     6.1088       6.1109       6.1210       6.1036  
July     6.2097       6.1103       6.2097       6.1047  
August     6.3885       6.3279       6.4129       6.2096  
September     6.3638       6.3692       6.3836       6.3559  
October (through October 17, 2015)     6.3535       6.3499       6.3568       6.3230  

As of October 17, 2015, the exchange rate is RMB 6.3535 to $1.00.

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Over the past several years, the RMB has moved from a period of being tightly linked to the U.S. dollar, to a period of revaluation and strengthening against the dollar and into a second period of current relative stability. Our primary sales outside China occur in the United States (92.87% in 2014), Europe (2.33% in 2014), Australia (1.46% in 2014), Canada (1.45% in 2014), in Central and South America (0.92% in 2014), and the Middle East (0.82% in 2014), but all such sales outside China are made in U.S. dollars. Following is a chart showing recent changes in the exchange rates between the RMB and U.S. dollars.

Strength of U.S. Dollar against Renminbi

[GRAPHIC MISSING]

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Capitalization

The following table sets forth our capitalization as of August 31, 2015 on an actual and a pro forma as adjusted basis giving effect to the completion of the offering at an assumed public offering price of $5.00 per share and to reflect the application of the proceeds after deducting the estimated underwriting fees. You should read this table in conjunction with our financial statements and related notes appearing elsewhere in this prospectus and “Use of Proceeds” and “Description of Share Capital.”

Pre- and Post-Offering Capitalization
 
As of August 31, 2015

     
    Pro Forma After Offering(1)
     Actual   No
Over-subscription
  Full
Over-subscription
Indebtedness:
                          
Short-term debt   $ 20,687,639     $ 20,687,639     $ 20,687,639  
Long-term debt                  
Total indebtedness     20,687,639       20,687,639       20,687,639  
Shareholders’ Equity:
                          
Ordinary Shares $0.001 par value per share, 70,000,000 shares authorized, 11,666,667 shares issued and outstanding; pro forma without over-subscription reflects 15,666,667 shares issued and outstanding; pro forma with over-subscription reflects 16,266,667 shares issued and outstanding     11,667       15,667       16,267  
Additional paid-in capital(2)     11,108,133       28,644,133       31,439,533  
Statutory reserves     2,397,433       2,397,433       2,397,433  
Retained earnings     8,235,478       8,235,478       8,235,478  
Accumulated other comprehensive gain     871,955       871,955       871,955  
Non-controlling interest     319,374       319,374       319,374  
Total shareholders’ equity     22,944,040       40,484,040       43,280,040  
Total capitalization   $ 43,631,679     $ 61,171,679     $ 63,967,679  

(1) Gives effect to completion of the offering of 4,000,000 shares, at an assumed public offering price of $5.00 per share and to reflect the application of the proceeds after deducting the estimated underwriting fee and our estimated offering expenses. (See note 2 below.) “No over-subscription” column does not give effect to shares sold pursuant to the exercise of the over-subscription option, if any. “Full over-subscription” column assumes 600,000 Ordinary Shares are sold pursuant to the exercise of the over-subscription option.
(2) Pro forma additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting fee, Underwriter expense allowance and other expenses. We expect to receive net proceeds of (a) approximately $17,540,000 in the event the over-subscription option is not exercised ($20,000,000 offering, less underwriting fee of $1,360,000 and offering expenses of approximately $1,100,000) or (b) approximately $20,336,000 in the event the over-subscription option is exercised in full ($23,000,000 offering, less underwriting fee of $1,564,000 and offering expenses of approximately $1,100,000).

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Dilution

If you invest in our Ordinary Shares, your interest will be diluted to the extent of the difference between the initial public offering price per Ordinary Share and the pro forma net tangible book value per Ordinary Share after the offering. Dilution results from the fact that the per Ordinary Share offering price is substantially in excess of the book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares. Our net tangible book value attributable to shareholders at August 31, 2015 was $21,119,082, or approximately $1.81 per Ordinary Share outstanding as of August 31, 2015. Net tangible book value per Ordinary Share represents the amount of total assets less intangible assets and total liabilities, divided by the number of Ordinary Shares outstanding.

Upon completion of this offering, we will have 15,666,667 Ordinary Shares outstanding with 4,000,000, or approximately 25.53%, in the public float. If the over-subscription option is exercised in full, we will have 16,266,667 shares outstanding and 4,600,000, or approximately 28.28%, in the public float. Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after August 31, 2015, will be approximately $2.47 per Ordinary Share if the over-subscription option is not exercised, or approximately $2.55 per Ordinary Share if the over-subscription option is exercised in full. This would result in dilution to investors in this offering of approximately $2.53 per Ordinary Share if the over-subscription option is not exercised or approximately $2.45 if the over-subscription option is exercised in full, from the assumed offering price of $5.00 per Ordinary Share. Net tangible book value per Ordinary Share would increase to the benefit of present shareholders by $0.66 per share if the over-subscription option is not exercised or $0.74 if the over-subscription option is exercised in full, attributable to the purchase of the Ordinary Shares by investors in this offering.

The following table sets forth the estimated net tangible book value per Ordinary Share after the offering and the dilution to persons purchasing Ordinary Shares based on the foregoing offering assumptions.

   
  No Over-subscription
Post-Offering(1)
  Full Over-subscription
Post-Offering(2)
Assumed offering price per Ordinary Share   $ 5.00     $ 5.00  
Net tangible book value per Ordinary Share before the offering   $ 1.81     $ 1.81  
Increase per Ordinary Share attributable to payments by new investors   $ 0.66     $ 0.74  
Pro forma net tangible book value per Ordinary Share after the offering   $ 2.47     $ 2.55  
Dilution per Ordinary Share to new investors   $ 2.53     $ 2.45  

(1) Assumes gross proceeds from offering of 4,000,000 Ordinary Shares.
(2) Assumes gross proceeds from offering of 4,600,000 Ordinary Shares, if over-subscription option is exercised in full.

Assuming no exercise of the over-subscription option, a U.S. $1.00 increase (decrease) in the assumed public offering price of $5.00 per share would increase (decrease) our pro forma net tangible book value after giving effect to the offering by $5 million, the pro forma net tangible book value per ordinary share and per share by $0.24 per ordinary share and the dilution in pro forma net tangible book value per ordinary share to new investors in this offering by $0.76 per ordinary share, assuming no change to the number of shares offered by us as set forth on the cover page of this prospectus, and after deducting the estimated underwriting fee and commissions and estimated offering expenses payable by us.

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Post-Offering Ownership

The following charts illustrate our pro forma proportionate ownership, upon completion of the offering, by present shareholders and investors in this offering, compared to the relative amounts paid by each. The charts reflect payment by present shareholders as of the date the consideration was received and by investors in this offering at the offering price without deduction of commissions or expenses. The charts further assume no changes in net tangible book value other than those resulting from the offering.

Post-Offering Ownership Without Over-subscription

         
  Shares Purchased   Total Consideration   Average Price
Per Share
     Amount   Percent   Amount   Percent
Existing shareholders     11,666,667       74 %    $ 21,119,082       51 %    $ 1.81  
New investors     4,000,000       26 %    $ 20,000,000       49 %    $ 5.00  
Total     15,666,667       100 %    $ 41,119,082       100 %    $ 2.62  

Post-Offering Ownership With Over-subscription

         
  Shares Purchased   Total Consideration   Average Price
Per Share
     Amount   Percent   Amount   Percent
Existing shareholders     11,666,667       72 %    $ 21,119,082       48 %    $ 1.81  
New investors     4,600,000       28 %    $ 23,000,000       52 %    $ 5.00  
Total     16,266,667       100 %    $ 44,119,082       100 %    $ 2.71  

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.”

Overview of Company

We are a specialized production and distribution company for environmentally-friendly plastic serviceware with primary customers from the United States and European countries. We mainly conduct our operations in China and United States through our wholly owned subsidiary, Taizhou Fuling Plastics Co., Ltd. and its subsidiaries in both countries.

Our plastic serviceware products are made from environmentally-friendly material. Our products include disposable cutlery, drinking straws, cups and plates and other plastics products. Our largest customer base is in the United States. Our production facilities include three factories in Zhejiang Province, China and one factory in Pennsylvania, U.S., and we have obtained ISO9001 quality management system, ISO14001 environmental management system, HACCP, FDA food facility registration and GMP certifications. These certifications are crucial for businesses like ours that serve some of the most sophisticated purchasers of foodservice disposables in the world.

Our primary raw materials in production of our products are PP, GPPS and HIPS, which are extracted from crude oil. Thus, our cost of raw material is highly impacted by fluctuations in the price of oil. Cost of revenues mainly includes costs of raw materials, costs of direct labor, utilities, depreciation expenses and other overhead.

Our largest product category is disposable cutlery. It includes forks, knives, spoons, general, specialized and multipurpose utensils (for instance, the spork), both in single- and multi-utensil packages. It accounted for 60% and 54% of our revenue for the six months ended June 30, 2015 and for the year ended December 31, 2014, respectively, and we believe it will continue to be a key area for growth in the coming years. Our other product categories are (i) drinking straws, (ii) cups and plates and (iii) other plastics products. (i) Drinking straws, (ii) cups and plates and (iii) other plastics products accounted for 12%, 24% and 4% of the total sales respectively for the six months ended June 30, 2015. (i) Drinking straws, (ii) cups and plates and (iii) other plastics products accounted for 16%, 27% and 3% of the total sales respectively in 2014.

Direct Link, one of our subsidiaries was incorporated in the United States in 2011 and is engaged in the distribution of our products in the U.S. In May 2014, Fuling Plastic USA, Inc. (“Fuling USA”) was incorporated in the Commonwealth of Pennsylvania as a wholly-owned subsidiary of Taizhou Fuling. Fuling USA is establishing the Company’s first production factory in the U.S. and will principally engage in the production of plastic drinking straw items. We have not established any subsidiaries in Europe and we rely on the sales forces located in China to export our products to European countries.

As of October 19, 2015, our products are sold in 22 countries. Our customers now include McDonald’s, Subway, Wendy’s, Burger King, KFC (China only), Walmart, McKesson and Woolworths.

In 2014, we supplied four of the five largest fast food restaurant chains in the United States, based on U.S. systemwide sales amount as published by QSR Magazine. These top five chains, in order, were 1. McDonald’s, 2. Subway, 3. Starbucks, 4. Wendy’s and 5. Burger King.

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We estimate we supplied the following percentages of these customers’ products in the United States in 2014. These percentages are management’s best estimates, based on orders from such customers and understanding of other supplier relationships.

     
Customer   Cutlery   Straws   Courtesy
Cups
A     100 %      70 %     
B     45 %      45 %     
C     24 %         
D         100 %      100 % 

* Less than 1%; please note that these customers are presented in random order and not in order of size in order to protect the confidentiality of the customers.

For the six months ended June 30, 2015 and 2014, sales to these four customers amounted in the aggregate to 30.6% and 35.3% of our total revenues, respectively. Only Wendy’s (10.9% and 14.2%, respectively) exceeded 10% of our total revenues in the six months ended June 30, 2015 and 2014. Sales to these four customers amounted in the aggregate to 32.7% and 32.9% of our total revenues in the years ended December 31, 2014 and 2013, respectively. None of these customers exceeded 10% in 2014, and only Wendy’s (12.99%) and Burger King (11.8%) exceeded 10% of our total revenues in 2013.

Revenue by Geographic Area*
(All amounts, other than percentages, in thousands of U.S. dollars)

       
  Six Months Ended
June 30, 2015
  Year Ended
December 31, 2014
Region   Amount   %   Amount   %
United States   $ 43,657       95.44 %    $ 76,930       92.87 % 
Europe   $ 926       2.02 %    $ 1,933       2.33 % 
Australia   $ 325       0.71 %    $ 1,214       1.46 % 
Canada   $ 469       1.03 %    $ 1,198       1.45 % 
Central and South America   $ 35       0.08 %    $ 760       0.92 % 
Middle East   $ 37       0.08 %    $ 683       0.82 % 
China   $ 297       0.64 %    $ 122       0.15 % 
Total   $ 45,746           $ 82,840        

* The revenue here does not include our income from sources other than our serviceware products, which are mainly sales of raw materials and recyclable waste.

Factors Affecting Our Results of Operations

Government Policy May Impact our Business and Operating Results

We have not seen any significant impact of unfavorable government policy upon our business in recent years. However, our business and operating results will be affected by China’s overall economic growth and government policy. Unfavorable changes in government policies (as well as government policies affecting our customers) could affect the demand for our products and could materially and adversely affect our results of operations. Our products are currently not subject to the government restrictions in the PRC. However, any future changes in the government’s policy upon plastic related production industry or disposal rules may have a negative effect on our business. As our majority of business is from international trading, any future changes in the government policy affecting the importing and exporting industry may impact our revenue and profitability.

World price of crude oil may impact of our profitability

The price of our products’ main raw material is closely associated with that of crude oil. Fluctuating oil price impacts not only the cost of plastic resin, but also transportation costs. Normally, our customers and we mutually agree to adjust our price according to raw material price fluctuation. However, if we are unable to do that in future, oil price fluctuation will impact our profitability.

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Fast food industry is expected to grow in a slow-growth environment

Our major customers operate in fast food industry in the U.S. The industry is expected to perform marginally better over the next five years as the U.S. economy improves and consumers continue to seek convenient meal options. While no severe revenue declines are expected, fast food restaurants will continue to operate in a slow-growth environment. Successful operators will need to adapt to changing consumer preferences as the traditional concept of fast food evolves to include a wider variety of options. As plenty of opportunities remain for new fast food concepts and products, the industry’s long era of growth is far from over. As a result of these trends, fast food industry revenue is expected to grow at an annualized rate of 2.0% over the five years to 2019 to $219.3 billion in the U.S.

Competition is high and increasing

The three largest U.S. suppliers of foodservice disposables account for a significant percentage of the industry. As of 2012, Dart Container Corporation, Reynolds Group/Pactiv and Georgia-Pacific collectively held approximately 29% of the U.S. market share in the foodservice disposables industry. Our industry is marked by a small number of strong competitors, with approximately 50% of our market controlled by the top 10 companies in the industry. Under such circumstances, we may be unable to compete effectively against such larger, better-capitalized companies, which have well-established long-term relationships with the large customers we serve and seek to serve. Competition in this industry is primarily based on price. Other significant competitive factors are quality and reliability of delivery.

Exchange rate fluctuation may significantly impact our business and profitability

We sell a majority of our products in the United States (approximately 92.87% based on 2014 revenues, and approximately 95.44% based on the revenues for the six months ended June 30, 2015). Historically, we have relied on lower wages and favorable exchange rates in China to make our products sold abroad competitive in price. As China’s currency has appreciated against the U.S. dollar, our advantage in price competitiveness might be impacted. While have already begun to diversify risk by moving some of our manufacturing to the United States, we anticipate continuing to produce the majority of our products in China. To the extent the Chinese RMB continues to appreciate, our products could become more expensive and, as a result, less attractive to potential customers in other countries.

Industry Trends and Company Strategy

We have noted the existence of the following trends since the beginning of 2015, all of which are likely to affect our business to the extent they continue in the future. We are adopting strategies accordingly.

Industry operators will need to cater to environmental concerns in order to succeed

Business and consumer concerns over the environmental impact of plastic will gain importance as an industry trend over the next five years. Consumers will likely be more conscious of the environmental impact of paper and plastic products and look to purchase recycled and eco-friendly products. As a result, industry operators will need to cater to environmental concerns in order to succeed in the industry. For instance, according to Freedonia, McDonald’s reports that its corrugated clamshells contain at least 37 percent recycled content.

Our management believes companies that provide eco-friendly products can charge higher prices which usually offset more than the cost increase and thus achieve higher profit margins. On average, our eco-friendly products have 10% higher gross margin compared to our conventional products.

Innovation and cost cutting

The main material used to produce plastic products is plastic resin, a petroleum-based product. For this reason, fluctuations in global crude oil prices lead to changes in the input costs for plastic manufacturers. Crude oil prices are generally volatile.

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The plastic resins we primarily use are polypropylene (“PP”) and polystyrene (“PS”) which includes General Purpose Polystyrene (“GPPS”) and High Impact Polystyrene (“HIPS”)) The following chart shows their percentages of our total cost of raw materials in the six months ended June 30, 2015 and 2014, and years ended December 31, 2014 and 2013:

       
  Six Months Ended
June 30,
  Year Ended
December 31,
Raw Material   2015   2014   2014   2013
PP     50.93 %      52.70 %      51.31 %      41.13 % 
GPPS     26.55 %      24.28 %      25.66 %      34.21 % 
HIPS     2.74 %      2.30 %      2.26 %      0.80 % 
Total     80.22 %      79.29 %      79.23 %      76.14 % 

The following chart shows the monthly prices of PP, GPPS, HIPS and Brent oil (one kind of crude oil) from January 2014 to August 2015:

       
  PP
($/LB)
  GPPS
($/LB)
  HIPS
($/LB)
  Brent Oil
($/barrel)
2014
                                   
January   $ 0.960     $ 1.365     $ 1.475     $ 108.150  
February     0.950       1.325       1.435       108.860  
March     0.935       1.325       1.435       107.550  
April     0.925       1.295       1.405       107.580  
May     0.920       1.275       1.385       109.650  
June     0.890       1.265       1.375       111.620  
July     0.890       1.335       1.445       106.650  
August     0.940       1.335       1.445       101.600  
September     0.940       1.295       1.405       97.410  
October     0.980       1.275       1.385       87.540  
November     0.930       1.245       1.355       78.900  
December     0.835       1.205       1.315       62.910  
2015
                                   
January     0.730       0.910       1.010       47.870  
February     0.740       0.870       0.970       58.140  
March     0.725       0.870       0.970       55.930  
April     0.685       0.920       1.020       61.020  
May     0.675       0.950       1.050       65.630  
June     0.685       0.900       1.000       63.800  
July     0.670       0.960       1.060       56.690  
August   $ 0.655     $ 0.930     $ 1.030     $ 48.100  
Decreased     31.77 %      31.87 %      30.17 %      55.52 % 

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The following diagrams show the trend of the prices:

[GRAPHIC MISSING]

The following chart shows the normalized and standardized prices:

[GRAPHIC MISSING]

With competition being mostly price-based, market players need to improve technology and manufacturing processes to save cost. In addition, the environmental trend will encourage market players around the world to invest more in research and development.

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We have consistently invested in R&D and new equipment and technology to increase our cost competitiveness. The following chart illustrates the effect:

       
  2012   2013   2014   Increase from 2012 to 2014
Average Worker Annual Salary   $ 5,090     $ 5,705     $ 6,326       21 % 
R&D Expense   $ 1,669,748     $ 2,128,923     $ 2,484,566       49 % 
Productivity Per Worker   $ 80,180     $ 107,980     $ 126,990       58 % 

Proximity to key markets is a major success factor

Although many degradable products are imported from Asia, due to rising manufacturing costs in China, some importers of degradable foodservice disposables are in the midst of establishing U.S. production operations. For example, Trellis Earth Products, an Oregon-based manufacturer of sustainable food service products, is shifting its manufacturing of its bioplastic-based disposables from China to a facility in Rochester, New York. The trend is based on the economic logic of producing or sourcing near the consumer.

The nature of some of our products (straws, cups and plates, specifically) necessitates operations to be fairly localized, as shipping costs tends to be significant for these products. It makes economic sense to manufacture those products at a location close to markets. In addition to reduced transportation costs and delivery time, this is also helpful for customer satisfaction since it allows manufacturers to respond to customer needs more quickly.

In 2014, we commenced construction of a manufacturing facility in Allentown, Pennsylvania, which will provide us a platform to manufacture drinking straws in the United States. The total investment for the project will be roughly $9.9 million. The factory in Allentown became operational in June 2015.

Business Development Trends

Our prices fluctuate based on changes in our material costs. We and our long-term customers closely follow changes in such prices and adjust our product prices accordingly. As a result of decreases in oil prices in 2015, our customers reduced the price they paid for our products during the year, but we have been able to maintain our profit margins on the year. We currently anticipate that our revenues will increase by approximately 12% and that our profits will increase by approximately 18% in 2015. After completion of this offering and assuming our capacity expansion plans are met with the proceeds of this offering and our operational cash flows, we estimate that revenues and profits will both increase by approximately 18% in 2016 and 25% in 2017. These projections are based on the following assumptions; to the extent these assumptions are inaccurate, our results could vary significantly from the foregoing projections.

Projected 2015 revenue growth of 12% and net income growth of 18%

Our revenue growth projections assume that:

a) Our new QSR customer in China, KFC China, begins to generate revenues in the second half of 2015.
b) A major distributor customer, LOLLICUP USA, Inc., places substantially higher orders with us, as it has secured an additional QSR customer in the U.S.
c) Other current customers’ orders remain healthy overall. Our top ten customers’ overall order volume growth rate is 19% through July 2015.
d) The new container production lines (mainly thermoforming machine) we purchased in the first half of 2015 in China for new products in plates, cups, bowls and other categories begin to fill new orders from existing customers in October. We expect production in 2015 to be 1,000 tons or 17% of capacity.

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e) We increase the capacities of our Chinese factories. Our Songmen factory currently operates at 90.9% capacity based on 24/7 operation. We estimate that we could increase capacity by 2,100 tons if we increased to 100% capacity. Our Sanmen factory currently operates at 48.5% capacity based on 24/7 operation; we estimate that we could increase capacity by 2,000 tons if we increased to 73.5% capacity. These capacity rates do not take into consideration the expansion in capacity created by the new container production lines mentioned in (d) above.
f) Our Allentown factory becomes operational as planned. Our Allentown operations began production in June 2015 with four of six current production lines fully functional (completely installed, tested, validated, certified by Underwriters Laboratories). The remaining two production lines became operational in the middle of July 2015. Although we can run all six lines at the same time, we have not yet fully staffed operations to run all six production lines at 24/7 operation. We currently run two of the six production lines most of the time. We estimate that we could have all six production lines in full operation by the end of 2015. This will provide us 1,200 tons of straw production or 25% capacity.

Our net income growth projections assume that:

a) The decrease of our raw material price decrease is not completely offset by the decrease of our sales price, as oil prices have dropped in 2015. If raw material costs increased by 10%, we estimate that approximately 80% of our clients will adjust their purchase prices accordingly. Approximately 30% of our clients adjust price automatically according to changes in raw materials prices. We expect that approximately 50% of our clients will seek to negotiate a price reduction with us. For example, when raw material price decreases by 10%, we may suffer a sales price decrease impact of 5%. Our product prices do not generally adjust price exactly as same as the change of raw material price. We expect that approximately 20% of our clients will not adjust price, whether or not raw material prices increase or decrease.
b) Our labor and shipping costs either decrease or remain stable. If our labor costs increased by 10% from our estimate, we would expect revenue growth to remain stable but net income to decrease by approximately 1%. If shipping costs (by sea) increased by 10%, we expect net income would decrease by approximately 1%.

Projected 2016 revenue growth of 18% and net income growth of 18%

Our revenue growth projections assume that:

a) KFC China continues to place orders of about $1 million in 2016, in line with their agreement with us.
b) We successfully secure a new distributor customer in U.S. This target customer is a buying network group with many distributor members. We estimate our sales to this new customer could approach $5 million in 2016 if we are successful in securing it as a customer and receive orders in line with our estimates.
c) Our other existing customers’ orders continue to increase in line with prior growth rates.
d) The container products capacity added in 2015 continues to provide products to current customers. It is currently impossible to estimate the timing and impact of such orders.
e) We increase the capacities of our Chinese factories (other than our Songmen factory, which we project to remain at 100% capacity in 2016). Phase I of our new Wenling factory is projected to become operational in July 2016, adding 20,000 ton capacity per annum. We expect the utilization will be 3,000 tons of production in 2016. Our Sanmen factory could increase capacity by 2,100 tons if we increased to 100% capacity in 2016.
f) We increase the capacity of our Allentown factory by 1,200 tons to 50% of designated capacity. Total output would be at 2,400 tons.
g) Our product prices remain stable.

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Our net income growth projections assume that:

a) Our raw material prices remain stable compared to 2015 prices.
b) Our shipping costs remain stable compared to 2015 costs.
c) We expect the cost of labor in China will increase approximately 10% in 2016, but we expect our investments in automation and equipment to increase production efficiency will offset such increased labor costs.

Projected 2017 revenue growth of 25% and net income growth of 25%

Our revenue growth projections assume that:

a) We are able to secure a new manufacturer customer and that this customer generates an estimated $9 million in revenue for us in 2017. This target customer has annual sales of more than $1 billion. We are currently negotiating with this client but cannot guarantee that we will be successful in securing them as a customer.
b) The orders from the new distributor client we expect to add in 2016 increase our 2017 revenues by $8 million compared to 2016 revenues.
c) Our increased container products capacity continues to provide products to current customers, resulting in increased revenues of approximately $10 million in 2017.
d) Our Songmen and Sanmen factories remain at 100% capacity utilization and our Wenling factory reaches 50% utilization. In addition, we assume that Phase II of our Wenling factory completes in July 2017, bringing an additional 20,000 tons capacity annually. We expect the utilization will be 15,000 tons of production in 2017.
e) Our Allentown factory capacity utilization reaches 100% or 4,800 ton per annum.

Our net income growth projections assume that:

a) Our raw material prices remain stable compared to 2016.
b) Our shipping and labor costs remain stable compared to 2016 levels.

All of these forward-looking statements depend on adequate market demand for our products, maintenance of full capacity at our facilities and stable pricing for our products and raw materials. Actual results could differ materially from these projections as a result of a number of risks and uncertainties. See “Risk Factors — Our projections and assumptions underlying may be inaccurate, resulting in slower than anticipated growth”.

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Results of Operations

Six Months Ended June 30, 2015 and 2014

The following table summarizes the results of our operations during the six months ended June 30, 2015 and 2014, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods.

(All amounts, other than percentages, in thousands of U.S. dollars)

           
Statement of Operations Data:   Six Months Ended
June 30, 2015
  Six Months Ended
June 30, 2014
  Amount
Increase
(Decrease)
  Percentage
Increase
(Decrease)
  Amount   As % of
Sales
  Amount   As % of
Sales
Revenues   $ 45,746       100 %    $ 37,915       100 %    $ 7,831       21 % 
Cost of goods sold     29,673       65 %      25,340       67 %      4,333       17 % 
Gross profit     16,073       35 %      12,575       33 %      3,498       28 % 
Operating expenses
                                                     
Selling expenses     7,143       16 %      5,433       14 %      1,710       31 % 
G&A expenses     2,679       6 %      1,532       4 %      1,147       75 % 
R&D expense     933       2 %      1,120       3 %      (187 )      -17 % 
Total operating expenses     10,755       24 %      8,085       21 %      2,670       33 % 
Income from operations     5,318       12 %      4,490       12 %      828       18 % 
Other income (expenses)
                                                     
Interest expense, net     (619 )      -1 %      (589 )      -2 %      (30 )      5 % 
Subsidy income     60       0 %      173       0 %      (113 )      -65 % 
Other income     299       1 %      58       0 %      241       420 % 
Total other income (expenses)     (260 )      -1 %      (358 )      -1 %      98       -27 % 
Income before income taxes     5,058       11 %      4,132       11 %      926       22 % 
Provision for income taxes     (745 )      -2 %      (559 )      -1 %      (186 )      33 % 
Net income   $ 4,313       9 %    $ 3,573       9 %    $ 740       21 % 

Revenues.  Revenues increased by approximately $7.8 million, or 21%, to approximately $45.7 million for the six months ended June 30, 2015 from approximately $37.9 million for the same period in 2014. The increase in net sales was driven by higher amount of products sold.

Revenue by Product Type

(All amounts, other than percentages, in thousands of U.S. dollars)

           
  Six Months Ended
June 30, 2015
  Six Months Ended
June 30, 2014
  Variance
     Amount   % of Sales   Amount   % of Sales   Amount
Increase
(Decrease)
  Percentage
Increase
(Decrease)
Cutlery   $ 27,435       60 %    $ 22,621       60 %    $ 4,814       21 % 
Straws     5,440       12 %      4,345       11 %      1,095       25 % 
Cups and plates     11,102       24 %      9,798       26 %      1,304       13 % 
Others     1,769       4 %      1,151       3 %      618       54 % 
Total   $ 45,746       100 %    $ 37,915       100 %    $ 7,831       21 % 

Cutlery

Revenue from cutlery increased by $4.8 million, or 21%, from $22.6 million to $27.4 million for the six months ended June 30, 2015. We sold 2.5 million kilograms more compared to the six months ended June 30, 2014 for this product category. Sales from products made with nano-modified polypropylene material with our patented technology, increased by $2.1 million. The sales increase of cutlery was driven by the increased volume of products sold.

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Sales of cutlery made from traditional polypropylene material and polystyrene materials in 6 months ended June 30, 2015 increased by $2.4 million or 41% from the same period of 2014. This increase was driven by the increase of total volume of products sold by 1.25 million kilograms.

Sales of cutlery made from cornstarch biodegradable material increased by $163,700. We expect that our sales from this type of product will continue to grow due to increasing environmental concerns about plastic products.

Straws

Sales for straws increased by $1.1 million for six months ended June 30, 2015 compared with sales for six months ended June 30, 2014. Our price is very competitive in the U.S. market and our products have been receiving substantial interest from customers. The sales increase was driven by the increased volume of products sold of 262,000 kilograms, or 22% compared to the same period of 2014.

Cups and plates

Sales for cups and plates increased by $1.3 million for six months ended June 30, 2015 compared with sales for the same period in 2014. The sales increase was driven by the higher amount of products sold. The quantity sold increased by 13% or 355,000 kilograms.

Other products

Other products include products for family use, party and other entertainment purposes. Sales from these types of products increased by $618,000 for the six months ended June 30, 2015 compared with sales for the same period in 2014. The sales increase was mainly due to the new products we introduced to the market in 2015. We introduced measuring cups, the sales of which amounted $812,000 for the six months ended June 30, 2015.

Revenue by Geographic Area*

(All amounts, other than percentages, in thousands of U.S. dollars)

           
  Six Months Ended
June 30, 2015
  Six Months Ended
June 30, 2014
  Period-over
Period Increase
Region   Amount   %   Amount   %   Amount   %
United States   $ 43,657       95.44 %    $ 36,016       94,99 %    $ 7,641       21.22 % 
Europe     926       2.02 %      712       1.88 %      214       30.09 % 
Australia     325       0.71 %      486       1.28 %      (161 )      -33.23 % 
Canada     469       1.03 %      468       1.23 %      1       0.29 % 
Central and South America     35       0.08 %      63       0.17 %      (28 )      -44.00 % 
Middle East     37       0.08 %      86       0.23 %      (49 )      -56.41 % 
China     297       0.64 %      84       0.22 %      212       253.38 % 
Total   $ 45,746              $ 37,915              $ 7,830           

* The revenue here does not include our income from sources other than our serviceware products, which are mainly sales of raw materials and recyclable waste.

There was significant increase in the sales from the United States market. In the six months ended June 30, 2015, sales from one major new customer, which is a large beverage chain store based in California U.S., contributed $3.4 million. Sales to other new customers increased by $640,000. With more localized operation in U.S., sales to existing customers increased by $3.36 million. With the Allentown factory becoming operational in the U.S., we expect our sales in the U.S. market will continue to grow due to the lower cost and localized service to be provided to our customers.

The slight change for sales from other regions was primarily due to normal fluctuation of demand.

Cost of goods sold.  Our cost of goods sold increased by approximately $4.3 million or 17% to approximately $29.7 million for the six months ended June 30, 2015 from approximately $25.4 million for the same period in 2014, which is consistent with sales growth in the six months ended June 30, 2015. As

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a percentage of revenues, the cost of goods sold decreased by approximately 2% to 65% in the six months ended June 30, 2015 from 67% in the same period in 2014. The decrease in cost of goods sold as a percentage of revenues was primarily due to higher selling prices, economies of scale in general, and improved production efficiency, particularly for our cups and plates products.

The portions of our products produced by third-party manufacturers in the six months ended June 30, 2015 and 2014 are both less than 1%. The associated impact on our gross margins is very limited considering the portion.

Gross profit.  Our gross profit increased by approximately $3.5 million, or 28% to approximately $16.1 million in the six months ended June 30, 2015 from approximately $12.6 million in the same period in 2014. Gross profit margin was 35% in the six months ended June 30, 2015, as compared with 33% in the same period in 2014. The increase of 2% was primarily attributable to higher selling prices and economies of scale in general, and improved production efficiency for our cups and plates products.

Our cost and gross profit by product types for the six months ended June 30, 2015 and 2014 are as follows:

(All amounts, other than percentages, in thousands of U.S. dollars)

           
  Six Months Ended
June 30, 2015
  Six Months Ended
June 30, 2014
  Variance
     Cost
$
  Gross
Profit
%
  Cost
$
  Gross
Profit
%
  Cost $
Increase
(Decrease)
  Gross Profit %
Increase
(Decrease)
Cutlery     17,841       35 %      14,952       34 %      2,889       1 % 
Straws     4,362       20 %      3,575       18 %      787       2 % 
Cups and plates     6,245       44 %      6,007       39 %      238       5 % 
Others     1,083       39 %      777       32 %      306       7 % 
Taxes     142       N/A       29       N/A       113       N/A  
Total     29,673       35 %      25,340       33 %      4,333       2 % 

Cost of revenue for cutlery products increased by approximately $2.89 million to approximately $17.8 million for the six months ended June 30, 2015 compared to $15.0 million in the same period in 2014. Gross profit margins were 35% and 34%, respectively. Cutlery represented the largest portion of sales.

Cost of revenue for straws was approximately $4.4 million for the six months ended June 30, 2015 compared to approximately $3.6 million in the same period in 2014. The gross profit margin was approximately 20% in the six months ended June 30, 2015 compared to 18% in the same period in 2014. The increase in gross profit margin in the six months ended June 30, 2015 was primarily attributable to higher selling prices and the economies of scale as unit production costs became lower with higher levels of production.

Cost of revenue for cups and plates was around $6.2 million and 6.0 million for the six months ended June 30, 2015 and 2014, respectively. Gross profit margin was 44% in the six months ended June 30, 2015 compared to 39% in the same period in 2014. In the second half year of 2014, we started to use new automated equipment and machinery for cups and plates manufacturing, which helped to improve efficiency and lower costs.

Taxes included in costs represent the value added tax (“VAT”) paid for purchased inventory, which cannot be deducted to offset our sales tax. The amount of tax in costs can vary year to year depending on the timing and amount of purchases made throughout the year.

Selling expenses.  Selling expenses increased by approximately $1.7 million to approximately $7.1 million for the six months ended June 30, 2015 compared to approximately $5.4 million in the same period in 2014. As a percentage of sales, our selling expenses were 16% of revenues in the six months ended June 30, 2015 and 14% in the six months ended June 30, 2014. The increase in selling expenses is consistent with the increase of revenues and was primarily attributable to an increase of approximately $1.2 million in ocean freight charges, $261,000 in customs and inspection related expense, $165,000 in commissions.

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General and administrative expenses.  Our general and administrative expenses increased by approximately $1.1 million or 75%, to approximately $2.7 million for the six months ended June 30, 2015 from approximately $1.5 million in the same period in 2014. As a percentage of revenues, general and administrative expenses were 6% of sales in the six months ended June 30, 2015 and 4% in the six months ended June 30, 2014. The increase was primarily attributable to the following factors:

(a) an increase in expenses related to preparation for the public listing and IPO of approximately $256,000 in the six months ended June 30, 2015; and
(b) an increase in salary and benefit related expense of $491,000 due to business expansion, especially the operation in U.S.
(c) an increase in bad debt expense of $144,000 due to increase of aged account receivable.

Research and development expenses.  Our research and development expenses decreased approximately $187,000 to approximately $933,000 for the six months ended June 30, 2015 compared with approximately $1.1 million in the same period in 2014. We consider this to be a normal fluctuation from period to period. In the long run, we expect the R&D expense to increase as we continue to conduct research and development activities, especially seeking to increase the use of environmentally-friendly materials, develop degradable and biodegradable materials and reduce reliance on fossil-based raw materials.

Interest expense.  Our interest expense increased by approximately $33,000, to approximately $638,000 for the six months ended June 30, 2015, from approximately $605,000 in the same period in 2014. As our average outstanding loan balance is consistent in these two periods, the interest expense was consistent.

The average interest rates for our average outstanding loan in the six months ended June 30, 2015 and 2014 were 4.16% and 5.70%, respectively. At the time of loan application, different commercial banks determine loan interest rates based on various factors, including general economic conditions in China, internal bank lending policies, the applicant’s credit standing and relative bargaining power. In 2015, we paid off some loans with interest rates higher than 5.00% and took on new loans with interest rate lower than 5.00% from various banks. As a result of the change in loan mix, the interest rate for our average outstanding loan in the six months ended June 30, 2015 was lower than in the same period in 2014.

The bank loan balance as of June 30, 2015 and 2014 were $25.1 million and $20.8 million respectively. The average amounts of loan outstanding for the six months ended June 30, 2015 and 2014 were $30.1 million and $20.75 million, respectively. We borrow from commercial banks based on our working capital conditions and forecast of business needs. The average amount of loan outstanding in the six months ended June 30, 2015 was higher than the same period in 2014 due to expansion of our business.

There is no interest expense but only bank fee charged to notes payable. The bank charge is usually 0.05% of the notes payable issued. For the six months ended June 30, 2015 and 2014, bank charges related to notes payable were $1,199 and $1,660, respectively.

Subsidy income.  Our government subsidy income was approximately $60,000 for the six months ended June 30, 2015 compared to approximately $173,000 in the same period in 2014. Our government subsidy income was all granted by local governments in recognizing our achievements in various areas. All subsidies we received in 2015 and 2014 were one-time grants and may not occur again in the future. We cannot predict the likelihood or amount of any future subsidies.

Other income (expense).  Other income was approximately $298,000 and $57,000 for the six months ended June 30, 2015 and 2014, respectively. In the six months ended June 30, 2015, due to the fluctuation of exchange rate of Chinese RMB against USD, the Company recorded $296,000 foreign currency transaction gain.

Income before income taxes.  Our income before income taxes was approximately $5.1 million for the six months ended June 30, 2015, an increase of approximately $927,000 compared with approximately $4.1 million in the same period in 2014. The increase was primarily attributable to increased sales and gross margin, offset by the increased other expense as discussed above.

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Provision for income taxes.  Our provision for income taxes was approximately $745,000 for the six months ended June 30, 2015, an increase of approximately $186,000 or 33% from approximately $559,000 in the same period in 2014. The increase was consistent with the increase of income before taxes while our effective income tax rate were at 14.7% and 13.5% for the six months ended June 30, 2015 and 2014, respectively. The slight increase of the effective rate was due to the decreased percentage of income from entities which is subject to favorable income tax rate of 15%.

Years Ended December 31, 2014 and 2013

The following table summarizes the results of our operations during the fiscal years ended December 31, 2014 and 2013, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such years.

(All amounts, other than percentages, in thousands of U.S. dollars)

           
Statement of Operations Data:   2014   2013   Amount
Increase
(Decrease)
  Percentage
Increase
(Decrease)
  Amount   As % of
Sales
  Amount   As % of
Sales
Revenues   $ 83,181       100 %    $ 69,536       100 %    $ 13,645       20 % 
Cost of goods sold     54,503       66 %      48,303       69 %      6,200       13 % 
Gross profit     28,678       34 %      21,233       31 %      7,445       35 % 
Operating expenses
                                                     
Selling expenses     12,665       15 %      11,048       16 %      1,617       15 % 
G&A expenses     3,880       5 %      3,212       5 %      668       21 % 
R&D expense     2,484       3 %      2,129       3 %      355       17 % 
Total operating expenses     19,029       23 %      16,389       24 %      2,640       16 % 
Income from operations     9,649       12 %      4,844       7 %      4,805       99 % 
Other income (expenses)
                                                     
Interest expense, net     (1,157 )      -1 %      (647 )      -1 %      (510 )      79 % 
Subsidy income     597       1 %      853       1 %      (256 )      -30 % 
Loss of debt guarantee for a third party           0 %      (1,029 )      -1 %      1,029       100 % 
Other income, net     8       0 %      17       0 %      (9 )      53 % 
Total other income (expenses)     (552 )      -1 %      (807 )      -1 %      255       -32 % 
Income before income taxes     9,097       11 %      4,037       6 %      5,060       125 % 
Provision for income taxes     (1,369 )      -2 %      (587 )      -1 %      (782 )      133 % 
Net income   $ 7,728       9 %    $ 3,450       5 %    $ 4,278       124 % 

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Revenues.  Revenues increased by approximately $13.6 million, or 20%, to approximately $83 million in 2014 from approximately $69.5 million in 2013. The increase in net sales was driven by higher amount of products sold, and selling prices. With strong market demand for our products, we were able to raise prices to offset rising material cost as well as operating expenses.

Revenue by Product Type

(All amounts, other than percentages, in thousands of U.S. dollars)

           
  2014   2013   Variance
     Amount   % of
Sales
  Amount   % of
Sales
  Amount
Increase
(Decrease)
  Percentage
Increase
(Decrease)
Cutlery   $ 45,211       54 %    $ 38,828       56 %    $ 6,383