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What changed in XMax Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of XMax Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+213 added−207 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-15)

Top changes in XMax Inc.'s 2024 10-K

213 paragraphs added · 207 removed · 145 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

29 edited+8 added−5 removed68 unchanged
Biggest changeWe expect that a majority of our revenues will continue to come from our sales to the U.S. and international markets. Diamond Bar has driven expansion of our sales to the U.S., Mexico, and South America through Diamond Bar’s longstanding customer relationships and distribution capabilities.
Biggest changeDiamond Bar has driven expansion of our sales to the U.S., Mexico, and South America through Diamond Bar’s longstanding customer relationships and distribution capabilities. Diamond Bar’s revenues accounted for 100.0% and 82.4% of our total sales for 2024 and 2023, respectively, and Nova Malaysia’s revenues accounted for 0.0% and 17.6% of our total sales for 2024 and 2023, respectively.
We monitor our suppliers’ ability to meet our product needs and we participate in quality assurance activities to reinforce our high-quality standards. Our third-party manufacturing contracts are generally of annual or shorter durations. We issue production orders to manufacturers based on individual purchase orders.
We monitor our suppliers’ ability to meet our product needs and we participate in quality assurance activities to reinforce our high-quality standards. Our third-party manufacturing contracts are generally of annual or shorter term durations. We issue production orders to manufacturers based on individual purchase orders.
Some common risks include: (i) Economic Instability: Fluctuations in the economy can affect consumer spending on furniture, leading to decreased demand for products; (ii) Competition: Intense competition from other wholesalers, retailers, and online platforms can impact market share and pricing strategies; (iii) Supply Chain Disruptions: Interruptions in the supply chain, such as delays in shipping or shortages of raw materials or finished products, can hinder production and delivery schedules; (iv) Changing Consumer Preferences: Shifts in consumer preferences towards sustainable, trendy, or customized furniture may require wholesalers to adapt their product offerings; (v) Seasonal Demand: The furniture industry often experiences seasonal peaks and troughs, which can impact cash flow and inventory management; (vi) Regulatory Challenges: Compliance with regulations related to product safety, environmental standards, and labor practices can add complexity and costs to operations.
Some common risks include: (i) Economic Instability: Fluctuations in the economy can affect consumer spending on furniture, leading to decreased demand for products; (ii) Competition: Intense competition from other wholesalers, retailers, and online platforms can impact market share and pricing strategies; (iii) Supply Chain Disruptions: Interruptions in the supply chain, such as delays in shipping or shortages of raw materials or finished products, can hinder production and delivery schedules; (iv) Changing Consumer Preferences: Shifts in consumer preferences towards sustainable, trendy, or customized furniture may require wholesalers to adapt their product offerings; (v) Seasonal Demand: The furniture industry often experiences seasonal peaks and troughs, which can impact cash flow and inventory management; (vi) Tariff and Regulatory Challenges: Increase of import tariff for furniture products and compliance with regulations related to product safety, environmental standards, and labor practices can add complexity and costs to operations.
We started the online sales of our jade mats products in Malaysia since 2021. In April 2022, Malaysia has reopened the border for foreign visitors. In June 2023, everything is back to normal in Malaysia.
We started the online sales of our jade mats products in Malaysia since 2021. In April 2022, Malaysia reopened the border for foreign visitors. In June 2023, everything is back to normal in Malaysia.
Our organizational structure as of December 31, 2023 is set forth in the diagram: 2 Table of Contents Our Products We design and market modern residential and commercial furniture in diverse markets worldwide. Our products feature urban and contemporary styles, combining comfort and functionality in matching furniture collections and upscale luxury pieces appealing to lifestyle-conscious middle and upper middle-income consumers.
Our organizational structure as of December 31, 2024 is set forth in the diagram: 2 Table of Contents Our Products We design and market modern residential and commercial furniture in diverse markets worldwide. Our products feature urban and contemporary styles, combining comfort and functionality in matching furniture collections and upscale luxury pieces appealing to lifestyle-conscious middle and upper middle-income consumers.
Employees As of December 31, 2023, we had 27 full time employees worldwide. Our U.S. corporate office and operations employed 24 full-time employees, our location in Malaysia employed 3 full-time employees, respectively. We believe that relations with our employees are satisfactory. We have no collective bargaining agreements with our employees.
Employees As of December 31, 2024, we had 27 full time employees worldwide. Our U.S. corporate office and operations employed 24 full-time employees, our location in Malaysia employed 3 full-time employees, respectively. We believe that relations with our employees are satisfactory. We have no collective bargaining agreements with our employees.
We have used independent designers in the past for product design, from which we built prototype furniture pieces for refinement and testing. During 2023, Nova Malaysia spent $3.12 million on developing Virtual and Augmented reality software and AI system for potential consulting business.
We have used independent designers in the past for product design, from which we built prototype furniture pieces for refinement and testing. During 2024 and 2023, Nova Malaysia spent $2.00 million and $3.12 million on developing Virtual and Augmented reality software and AI system for potential consulting business.
Our expansion in Malaysia with health line products has also been disrupted due to COVID-19. Our initial plan was to establish showrooms in which consumers can interact with our products. Through research, we found that consumers were becoming more self-aware about their health and were willing to improve their lifestyles.
Our expansion in Malaysia with health line products was disrupted due to COVID-19. Our initial plan was to establish showrooms in which consumers can interact with our products. Through research, we found that consumers were becoming more self-aware about their health and were willing to improve their lifestyles.
We generally negotiate renewable supplier agreements with firm pricing on our products, typically for a term of one year, as is customary in the furniture industry, with individual orders made on standard purchase orders. In 2023, we sold products into approximately 14 countries worldwide, with North America as our principal international market, while we expanded our sales in other regions.
We generally negotiate renewable supplier agreements with firm pricing on our products, typically for a term of one year, as is customary in the furniture industry, with individual orders made on standard purchase orders. In 2024, we sold products into approximately 11 countries worldwide, with North America as our principal international market, while we expanded our sales in other regions.
Our largest selling product categories for the year ended December 31, 2023 were sofas, jade mats and beds, which accounted for approximately 37%, 18% and 13% of sales from continuing operations, respectively.
For the year ended December 31, 2023, our largest selling product categories were sofas, beds and chairs, which accounted for approximately 37%, 18% and 13% of sales from continuing operations, respectively.
We believe that our products feature superior materials, attractive appearances, superb functionalities and satisfying price points generally desired by today’s middle to upper middle-income consumers worldwide. 3 Table of Contents International Markets We have been selling products to the U.S., Canada, Honduras, Guam, Puerto Rico, Costa Rica, Colombia, Uruguay, Mexico, Cayman Islands, Saudi Arabia, Kingdom of Saudi Arabia, Kuwait, Armenia and Middle Eastern markets under the Diamond Sofa brand and selling our Jade Mats in Malaysia through Nova Malaysia.
We believe that our products feature superior materials, attractive appearances, superb functionalities and satisfying price points generally desired by today’s middle to upper middle-income consumers worldwide. 3 Table of Contents International Markets We have been selling products to the U.S., Canada, Honduras, Jamaica, Puerto Rico, Colombia, Mexico, Cayman Islands, Saudi Arabia, Kuwait, and Middle Eastern markets under the Diamond Sofa brand and selling our Jade Mats in Malaysia through Nova Malaysia.
The entire system is far from complete as it requires to integrate with other components in order to be functional. It is still in development stage and not in operation. In 2023 and 2022, we invested $3.12 million and $10,917, respectively, on research and development expense. We may increase future investments in R&D based on our growth needs.
The entire system is far from complete as it requires to integrate with other components in order to be functional. It is still in development stage and not in operation. In 2024 and 2023, we invested $2.00 million and $3.12 million, respectively, on research and development expense. We may increase future investments in R&D based on our growth needs.
In the U.S. and international markets, our sales principally are to furniture distributors and retailers who in turn offer our products under their own brands or under our Diamond Sofa brand. One customer accounted for 18% of the Company’s sales and no customer accounted for greater than 10% of our total sales from continuing operations for 2023 and 2022, respectively.
In the U.S. and international markets, our sales principally are to furniture distributors and retailers who in turn offer our products under their own brands or under our Diamond Sofa brand. No customer accounted for greater than 10% of our total sales in 2024 and one customer accounted for 18% of our total sales in 2023, respectively.
Suppliers and Manufacturers We source finished goods from third-party manufacturers to fulfill orders placed by customers through Diamond Bar and Nova Malaysia for the U.S. and international markets. Our two principal suppliers of finished goods in 2023 accounted for approximately 36% of our total purchases from continuing operations for 2023.
Suppliers and Manufacturers We source finished goods from third-party manufacturers to fulfill orders placed by customers through Diamond Bar and Nova Malaysia for the U.S. and international markets. One of our principal suppliers of finished goods in 2024 accounted for approximately 16% of our total purchases from operations for 2024.
In response to the COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees and have followed local government orders to prevent the spread of COVID-19. As of December 31, 2023, we had 27 full time employees worldwide.
We also recognize the importance of keeping our employees safe. In response to the COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees and have followed local government orders to prevent the spread of COVID-19. As of December 31, 2024, we had 27 full time employees worldwide.
To highlight our latest design collections, we maintain year-round showrooms at the Company’s headquarters in California as well as the High Point Market and Las Vegas Market. In 2022 and 2023, via our subsidiary Nova Malaysia, we marketed and sold high-end physiotherapeutic jade mats to individuals and business companies in Malaysia.
To highlight our latest design collections, we maintain year-round showrooms at the Company’s headquarters in California as well as the High Point Market and Las Vegas Market. In 2023, via our subsidiary Nova Malaysia, we sold our entire high-end physiotherapeutic jade mats to an unrelated party and existed the jade mats business in Malaysia.
For the year ended December 31, 2022, our largest selling product categories were sofas, beds and chairs, which accounted for approximately 41%, 15% and 11% of sales from continuing operations, respectively.
Our largest selling product categories for the year ended December 31, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 8% of sales from continuing operations, respectively.
In 2023, our products were sold in 13 countries worldwide, with North America as our principal international market. Sales to North America accounted for 79.1% and 94.2% of our total sales from continuing operations for 2023 and 2022, respectively. Sales to other regions accounted for 20.9% and 5.8% of our total sales from continuing operations for 2023 and 2022, respectively.
In 202 4 , our products were sold in 11 countries worldwide, with North America as our principal international market. Sales to North America accounted for 97.4% and 79.1% of our total sales for 2024 and 2023, respectively. Sales to other regions accounted for 2.6% and 20.9% of our total sales for 2024 and 2023, respectively.
The primary competitive factors in these markets for our products and target consumers are price, quality, style, marketing, functionality and availability. In the U.S. and international markets, we compete against other furniture distributors and wholesalers which are mostly located in China and other Southeast Asian countries. We also compete against traditional distributors in North America and Europe.
In the U.S. and international markets, we compete against other furniture distributors and wholesalers which are mostly located in China and other Southeast Asian countries. We also compete against traditional distributors in North America and Europe.
In order to mitigate these risks, we will continue to diversify our product range, build strong relationships with suppliers, closely monitor market trends, invest in technology for efficiency, and maintain a robust risk management strategy. Our global logistics and delivery capabilities provide our customers with the flexibility to select from our extensive furniture collections to address their respective needs.
In order to mitigate these risks, we will continue to diversify our product range, build strong relationships with suppliers, closely monitor market trends and changes in tariffs and regulations, invest in technology for efficiency, and maintain a robust risk management strategy.
We also sell physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia. Many of our products are segments of multi-component furniture collections in distinctive design styles, attractively priced in the medium and upper-medium ranges. Our product lines feature upholstered, wood and metal-based furniture pieces.
Many of our products are segments of multi-component furniture collections in distinctive design styles, attractively priced in the medium and upper-medium ranges. Our product lines feature upholstered, wood and metal-based furniture pieces.
We design and supply our products under our own brands. We also design and ship products for other major brands as their OEM designer or supplier. We offer a wide selection of stand-alone furniture pieces across a variety of product categories and approximately over 230 products developed exclusively for the international markets.
We offer a wide selection of stand-alone furniture pieces across a variety of product categories and approximately over 63 products developed exclusively for the international markets.
Sales to North America accounted for 79.1% and 94.2% of our total sales from continuing operations for 2023 and 2022, respectively. The change was attributed principally to our changing sales and marketing strategy to diversify international sales. Sales to other regions accounted for 20.9% and 5.8% of our total sales from continuing operations for 2023 and 2022, respectively.
Sales to North America accounted for 97.4% and 79.1% of our total sales from continuing operations for 2024 and 2023, respectively. The change was attributed principally to our changing sales and marketing strategy to focus on sales in the U.S.
Human Capital Resources We understand that our success depends on our ability to attract, train and retain our employees. We strive to attract, recruit, and retain employees through competitive compensation and benefit programs, learning and development opportunities that support career growth and advancement opportunities, and employee engagement initiatives that foster a strong Company culture.
We strive to attract, recruit, and retain employees through competitive compensation and benefit programs, learning and development opportunities that support career growth and advancement opportunities, and employee engagement initiatives that foster a strong Company culture. In addition to cash compensation, we offer customary benefits in accordance with local regulatory requirements as well as stock options to our employees.
On May 22, 2023, the Company filed a Certificate of Change with the Nevada Secretary of State to effect a 1-for-5 reverse stock split , which became effective upon filing (the “Reverse Stock Split”) .
On May 22, 2023, the Company filed a Certificate of Change with the Nevada Secretary of State to effect another 1-for-5 reverse stock split , accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock.
However, due to the shipping backlog, our fourth quarter’s sales were worse than the first three quarters in 2022. We believe that consumer demand for furniture generally reflects sensitivity to overall economic conditions, including, but not limited to, unemployment rates, housing market conditions and consumer confidence. Competition The furniture industry is large and highly competitive.
We believe that consumer demand for furniture generally reflects sensitivity to overall economic conditions, including, but not limited to, tariffs, unemployment rates, housing market conditions and consumer confidence. Competition The furniture industry is large and highly competitive. The industry consists of many manufacturers, distributors and retailers, none of which dominates the fragmented and diverse market.
We hold our suppliers to high quality standards and delivery deadlines. Our quality control procedures may extend to stringent requirements for raw material suppliers. Currently, the factories in China and India are in their normal operations.
We hold our suppliers to high quality standards and delivery deadlines. Our quality control procedures may extend to stringent requirements for raw material suppliers. Customers Our target end customer is the middle and upper middle-income consumer of residential and commercial furniture.
All stockholders who would be entitled to receive fractional shares as a result of the Reverse Stock Split received one whole share for their fractional share interest. There was no change in the par value of our common stock. All references to shares and per share data have been retroactively restated to reflect such splits.
There was no change in the par value of our common stock. All references to shares and per share data have been retroactively restated to reflect such splits. Human Capital Resources We understand that our success depends on our ability to attract, train and retain our employees.
The industry consists of many manufacturers, distributors and retailers, none of which dominates the fragmented and diverse market. Our products principally compete in the U.S., Canada, Honduras, Guam, Puerto Rico, Costa Rica, Colombia, Uruguay, Mexico, Cayman Islands, Saudi Arabia, Kingdom of Saudi Arabia, Kuwait, Armenia and Malaysia and Middle Eastern markets.
Our products principally compete in the U.S., Canada, Honduras, Jamica, Puerto Rico, Colombia, Mexico, Cayman Islands, Saudi Arabia, Kuwait and Malaysia and Middle Eastern markets. The primary competitive factors in these markets for our products and target consumers are price, quality, style, marketing, functionality and availability.
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As a result of the reverse Stock Split, every 5 shares of the Company’s common stock issued and outstanding immediately prior to the filing of the Certificate of Change was consolidated into one issued and outstanding share.
Added
Our global logistics and delivery capabilities provide our customers with the flexibility to select from our extensive furniture collections to address their respective needs. We design and supply our products under our own brands. We also design and ship products for other major brands as their OEM designer or supplier.
Removed
In addition to cash compensation, we offer customary benefits in accordance with local regulatory requirements as well as stock options to our employees. We also recognize the importance of keeping our employees safe.
Added
Sales to other regions accounted for 2.6% and 20.9% of our total sales from continuing operations for 2024 and 2023, respectively. We expect that a majority of our revenues will continue to come from our sales to the U.S.
Removed
Shipping of products from Asia has experienced significant delays since the onset of the pandemic and the costs of shipping from Asia have increased due to the pandemic, supply chain disruption and port congestion. In June 2022, all the shipping and related costs from Asia have been back to normal.
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Trade and Tariff On February 1, 2025, President Trump issued executive orders imposing a 25% tariff on products imported from Canada and Mexico (initially suspended for 30 days) and a 10% tariff on products imported from China, effective February 4, 2025. An additional 10% increase in the China tariffs became effective March 4, 2025.
Removed
It is possible that our overseas’ based manufacturers may experience future suspensions of operations as a result of any resurgence or new variants of COVID-19. Customers Our target end customer is the middle and upper middle-income consumer of residential and commercial furniture.
Added
Tariffs on imports from Canada and Mexico became effective March 4, 2025, but were later subject to broad exemptions effective March 7, 2025.
Removed
Diamond Bar’s revenues accounted for 82.4% and 99.5% of our total sales from continuing operations for 2023 and 2022, respectively, and Nova Malaysia’s revenues accounted for 17.6% and 0.5% of our total sales from continuing operations for 2023 and 2022, respectively.
Added
While previous tariffs on Chinese goods and modifications to trade agreements have resulted in a material impact on our business and where we purchase our finished products, these new tariffs or any additional actions, such as “reciprocal” tariffs on U.S. trading partners to address trade imbalances, could negatively impact our ability and the ability of our third-party vendors and suppliers to source products from foreign jurisdictions, which could lead to an increase in the cost of goods and adversely affect the Company’s profitability.
Added
Tariffs passed on to consumers through higher prices can also negatively impact consumer confidence and discretionary spending. We continue to evaluate the impact of currently effective tariffs, including potential future retaliatory tariffs, as well as other recent changes in foreign trade policy and the U.S.
Added
Administration on our supply chain, costs, sales and profitability, and are working through strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and merchants. At this time, it is unknown how long U.S. tariffs on Chinese goods will remain in effect or whether additional tariffs will be imposed.
Added
Depending upon their duration and implementation, as well as our ability to mitigate their impact, these changes in foreign trade policy and any recently enacted, proposed and future tariffs on products imported by us from China, as well as general uncertainty in the tariff environment, could negatively impact our business, results of operations and liquidity if they seriously disrupt the movement of products through our supply chain or increase their cost.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

23 edited+23 added−21 removed154 unchanged
Biggest changeIn February 2023, Nova HK completed the process of de-registration and liquidation. 11 Table of Contents Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations.
Biggest changeDepending upon their duration and implementation, as well as our ability to mitigate their impact, these changes in foreign trade policy and any recently enacted, proposed and future tariffs on products imported by us from China, as well as general uncertainty in the tariff environment, could negatively impact our business, results of operations and liquidity if they seriously disrupt the movement of products through our supply chain or increase their cost. 11 Table of Contents Additional changes in the U.S. tax regime or in how U.S. corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations.
The international trade policies of China and the U.S. could adversely affect our business, and the imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports from China, including those applied specifically to furniture products, or the imposition of taxes, import duties or other charges on exports to the U.S. could increase our costs and decrease our earnings.
The international trade policies of China and the U.S. could adversely affect our business, and the imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports from China, including those applied specifically to furniture products, or the imposition of taxes, import duties or other charges on exports to the U.S. will increase our costs and decrease our earnings.
If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. 15 Table of Contents Risks Related to Our Securities Our shares may be delisted under the HFCA Act and related regulations if the PCAOB is unable to inspect our auditor, and the delisting of our shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.
If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. 14 Table of Contents Risks Related to Our Securities Our shares may be delisted under the HFCA Act and related regulations if the PCAOB is unable to inspect our auditor, and the delisting of our shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.
Further, new laws and regulations or changes in laws and regulations could affect our ability to list our securities on Nasdaq, which could materially impair the market for and market price for our securities. 16 Table of Contents The market price for our common stock may be volatile, which could make it more difficult or impossible for an investor to sell our common stock for a positive return on their investment.
Further, new laws and regulations or changes in laws and regulations could affect our ability to list our securities on Nasdaq, which could materially impair the market for and market price for our securities. 15 Table of Contents The market price for our common stock may be volatile, which could make it more difficult or impossible for an investor to sell our common stock for a positive return on their investment.
We are required to establish and maintain internal controls over financial reporting and disclosure controls and procedures and to comply with other requirements of the Sarbanes-Oxley Act and the rules promulgated by the SEC. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2023. See “Item 9A.
We are required to establish and maintain internal controls over financial reporting and disclosure controls and procedures and to comply with other requirements of the Sarbanes-Oxley Act and the rules promulgated by the SEC. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2024. See “Item 9A.
Changes in interest rates, consumer confidence, new housing starts, existing home sales, inflation, the availability of consumer credit and geopolitical factors could have particularly significant effects on our consolidated financial condition, results of operations and cash flows.
Changes in interest rates, consumer confidence, new housing starts, existing home sales, inflation, the availability of consumer credit ， increase of tariff and geopolitical factors could have particularly significant effects on our consolidated financial condition, results of operations and cash flows.
In 2022 and 2023, the majority of our products were purchased from foreign suppliers and manufacturers, predominantly in Asia. Our dependence on foreign suppliers means that we may be affected by changes in the value of the U.S. dollar relative to other foreign currencies.
In 2024 and 2023, the majority of our products were purchased from foreign suppliers and manufacturers, predominantly in Asia. Our dependence on foreign suppliers means that we may be affected by changes in the value of the U.S. dollar relative to other foreign currencies.
We historically have derived a substantial part of our sales from a limited number of customers. If we lose any of these customers, or any of these customers reduce the amount of business they do with us, our sales may be adversely affected. Historically, a substantial part of our sales was attributed to a limited number of customers.
If we lose any of these customers, or any of these customers reduce the amount of business they do with us, our sales may be adversely affected. Historically, a substantial part of our sales was attributed to a limited number of customers.
On June 24, 2022, the Company received a letter from Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
On December 27, 2024, the Company received a letter from Nasdaq notifying the Company that, because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”).
T he Company has a period of 180 calendar days from the date of notification, until December 21, 2022 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement.
T he Company has a period of 180 calendar days from the date of notification, until June 25, 2025 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement.
Any decline in economic activity and conditions in the industries and markets served by our customers and in which we operate may reduce demand for our products and could adversely affect our financial condition and results of operations. The COVID-19 pandemic has materially adversely impacted the global economy which in turn adversely affected the demand for our products.
Any decline in economic activity and conditions in the industries and markets served by our customers and in which we operate may reduce demand for our products and could adversely affect our financial condition and results of operations.
The Company started to source certain of its new products from manufacturers in India in 2020. Sales during this stage may also be impacted by this shift in behavior. The U.S. government currently has the increased tariffs of 25% for the furniture products from China.
The Company started to source certain of its new products from manufacturers in India in 2020. Sales during this stage may also be impacted by this shift in behavior.
During this time period our company will continue to seek alternatives and new resources to increase the revenue. If and to the extent we are not able to mitigate the effects of such trade or tariff policies, our operations may be adversely affected.
Tariffs passed on to consumers through higher prices can also negatively impact consumer confidence and discretionary spending. During this time period we will continue to seek alternatives and new resources to increase the revenue. If and to the extent we are not able to mitigate the effects of such trade or tariff policies, our operations may be adversely affected.
If our subsidiaries are unable to pay us dividends and make other payments to us when needed because of regulatory restrictions or otherwise, we may be materially and adversely limited in our ability to make investments or acquisitions that could be beneficial to our business, pay dividends or otherwise fund and conduct our business. 14 Table of Contents If relations between the U.S. and China worsen, our business could be adversely affected as we have to find new suppliers and manufacturers out of China.
If our subsidiaries are unable to pay us dividends and make other payments to us when needed because of regulatory restrictions or otherwise, we may be materially and adversely limited in our ability to make investments or acquisitions that could be beneficial to our business, pay dividends or otherwise fund and conduct our business.
Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations. Controversies may arise in the future between these two countries. These controversies also could make it more difficult for us to provide our products to our customers in the U.S. and China.
Controversies may arise in the future between these two countries. These controversies also could make it more difficult for us to provide our products to our customers in the U.S. and China.
President that prohibit certain transactions with certain Chinese companies and their applications. Rising political tensions could reduce levels of trades, investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse effect on global economic conditions and the stability of global financial markets.
Rising political tensions could reduce levels of trades, investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations.
But we had no sales to a customer greater than 10% of our total sales from continuing operations for 2022 and 2021.
But we had no sales to a customer greater than 10% of our total sales in 2024 and one customer accounted for 18% of our total sales in 2023.
Liu is entitled to vote his shares in his own interests, which may not always be in the interests of our shareholders. 18 Table of Contents Provisions in the Nevada Revised Statutes and our Amended and Restated Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates. 17 Table of Contents Provisions in the Nevada Revised Statutes and our Amended and Restated Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
Any of these factors could result in reduced sales, canceled sales orders and unanticipated inventory accumulation and have a material adverse effect on our operating results, financial position and cash flows. Increases in income tax rates, changes in income tax laws or disagreements with tax authorities could adversely affect our business, financial condition or results of operations.
Any of these factors could result in reduced sales, canceled sales orders and unanticipated inventory accumulation and have a material adverse effect on our operating results, financial position and cash flows. We depend on vendors and suppliers outside the U.S.
If our common stock were to be delisted, the liquidity of our common stock would be materially adversely affected and the market price of our common stock could decrease. 17 Table of Contents Future sales of shares of our common stock by our shareholders could cause our stock price to decline.
If our common stock were to be delisted, the liquidity of our common stock would be materially adversely affected and the market price of our common stock could decrease. We may issue additional shares of our common stock or debt securities to raise capital or complete acquisitions, which would reduce the equity interest of our shareholders.
Our management intends to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
Our management intends to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business.
Political tensions between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the executive orders issued by then U.S.
Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the executive orders issued by then U.S. President that prohibit certain transactions with certain Chinese companies and their applications.
As of April 11, 2024, there were 247,677,855 authorized and unissued shares of our common stock available for future issuance, based on 2,322,115 shares of our common stock issued and outstanding.
Our Articles of Incorporation, as amended, authorize the issuance of up to 250,000,000 shares of common stock, par value $0.001 per share. As of March 28, 2025, there were 236,792,678 authorized and unissued shares of our common stock available for future issuance, based on 13,207,322 shares of our common stock issued and outstanding.
Removed
We are subject to income taxes in the United States and in certain foreign jurisdictions in which we operate. Increases in income tax rates or other changes in income tax laws that apply to our business could reduce our after-tax income from such jurisdiction and could adversely affect our business, financial condition or results of operations.
Added
The COVID-19 pandemic materially adversely impacted the global economy and cause interruption of supply chain which in turn adversely affected our business operation and financial results during the outbreaks.
Removed
In addition, the United States and many of the other countries in which our products are distributed or sold, including countries in which we have significant operations, have recently made or are actively considering changes to existing tax laws.
Added
The international trade disputes, trade policy changes or tariffs and other import-related taxes, fees and controls would significantly adversely impact the cost of, demand for, and profitability of our business in the U.S. market. We historically have derived a substantial part of our sales from a limited number of customers.
Removed
In October 2018, the Macao Legislative Assembly has approved a bill revoking the current offshore law, to abolish the relevant legislation on the Macao offshore business regime. Starting on January 1, 2021, the exemptions of stamp duty, professional tax (for individuals) and complementary tax (for corporations) will no longer be available to these offshore institutions.
Added
Our business has been and could in the future continue to be affected by increase of tariff associated with our products sourced by foreign countries. We depend on vendors for timely and efficient access to products we sell. We source our products from manufacturers located outside the U.S., primarily Asia.
Removed
On October 14, 2020, the Macao Trade and Investment Promotion Institute approved that Nova Macao’s offshore license became invalid under the order of Repeal of Legal Regime of the Offshore Services by Macao Special Administrative Region. Nova Macao was de-registered and liquidated in January 2021 and its business was taken over by Nova HK.
Added
Since 2017, the U.S. and China have been engaged in a trade dispute that has involved a number of actions against China including the imposition of tariffs on Chinese imports.
Removed
In February 2022, Nova HK also entered into a de-registration and liquidation process and all of Nova HK’s inventory was transferred to Nova Malaysia on February 15, 2022.
Added
On February 1, 2025, President Trump issued executive orders imposing a 25% tariff on products imported from Canada and Mexico (initially suspended for 30 days) and a 10% tariff on products imported from China, effective February 4, 2025. An additional 10% increase in the China tariffs became effective March 4, 2025.
Removed
The Company was notified on January 18, 2019 that pursuant to NASDAQ Listing Rule 5810(c)(3)(A), it was afforded 180 calendar days to regain compliance with the minimum bid price requirement and was also provided an additional 180 days grace period.
Added
Tariffs on imports from Canada and Mexico became effective March 4, 2025, but were later subject to broad exemptions effective March 7, 2025.
Removed
On December 18, 2019, we filed a Certificate of Change with the Secretary of State of Nevada with an effective date of December 20, 2019 to effect a 1-for-5 reverse stock split of the Company’s common stock to meet the $1.00 per share minimum closing bid price requirement.
Added
The previous tariffs on products from Chinese have resulted in a material impact on our business and results of operations, and we have switched to source certain products from the suppliers in other Asia countries than China, these new tariffs or any additional actions, such as “reciprocal” tariffs on U.S. trading partners to address trade imbalances, could negatively impact our ability and the ability of our third-party vendors and suppliers to source products from foreign jurisdictions, which could lead to an increase in the cost of goods and adversely affect the Company’s profitability.
Removed
On January 9, 2020, we received a written notification from the NASDAQ Stock Market Listing Qualifications Staff indicating that the Company has regained compliance with the $1.00 minimum closing bid price requirement for continued listing on the NASDAQ Capital Market.
Added
Tariffs passed on to consumers through higher prices can also negatively impact consumer confidence and discretionary spending. We continue to evaluate the impact of currently effective tariffs as well as other recent changes in foreign trade policy and the U.S.
Removed
On December 22, 2022, the Company received a written notification from the Nasdaq indicating that the Company has been granted an additional 180 calendar day period or until June 19, 2023, to regain compliance with the $1.00 minimum closing bid price requirement for continued listing on the NASDAQ Capital Market pursuant to NASDAQ Listing Rule.
Added
Administration on our supply chain, costs, sales and profitability, and are working through strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and suppliers. At this time, it is unknown how long U.S. tariffs on Chinese goods will remain in effect or whether additional tariffs will be imposed.
Removed
On May 22, 2023, we filed a Certificate of Change with the Secretary of State of Nevada to effect a 1-for-5 reverse stock split of the Company’s common stock to meet the $1.00 per share minimum closing bid price requirement.
Added
If relations between the U.S. and China worsen, our business could be adversely affected as we have to find new suppliers and manufacturers out of China. Political tensions between the United States and China have escalated due to, among other things, trade disputes and tariffs, the COVID-19 outbreak, sanctions imposed by the U.S.
Removed
On June 8, 2023, we received a written notification from the NASDAQ Stock Market Listing Qualifications Staff indicating that the Company has regained compliance with the $1.00 minimum closing bid price requirement for continued listing on the NASDAQ Capital Market.
Added
The U.S. government previously has the increased tariffs of 25% for the furniture products from China, and it also imposed a 10% tariff on products imported from China, effective February 4, 2025. An additional 10% increase in the China tariffs became effective March 4, 2025.
Removed
In addition, we may be unable to meet other applicable NASDAQ listing requirements, including maintaining minimum levels of stockholders’ equity or market values of our common stock in which case, our common stock could be delisted.
Added
These new tariffs or any additional actions, such as “reciprocal” tariffs on U.S. trading partners to address trade imbalances, could negatively impact our ability and the ability of our third-party vendors and suppliers to source products from foreign jurisdictions, which could lead to an increase in the cost of goods and adversely affect the Company’s profitability.
Removed
Future sales of shares of our common stock could adversely affect the prevailing market price of our stock. As of April 11, 2024, Steven Qiang Liu, our largest shareholder and vice president of the Company, owned approximately 17.3% of our outstanding shares of common stock. If Mr.
Added
If at any time before the expiration of the Compliance Period the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.
Removed
Liu sells a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Moreover, the perception in the public market that significant shareholders might sell shares of our stock could depress the market for our shares.
Added
If the Company does not regain compliance by the end of the Compliance Period, the Company may be eligible for an additional 180 calendar day period to regain compliance.
Removed
If such shareholders sell substantial amounts of our common stock in the public market, such sales could create a circumstance commonly referred to as an “overhang,” in anticipation of which the market price of our common stock could fall.
Added
To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
Removed
The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price we deem reasonable or appropriate.
Added
However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that the Company’s securities will be subject to delisting.
Removed
We may issue additional shares of our common stock or debt securities to raise capital or complete acquisitions, which would reduce the equity interest of our shareholders. Our Articles of Incorporation, as amended, authorize the issuance of up to 250,000,000 shares of common stock, par value $0.001 per share.
Added
The Company intends to continue actively monitoring the bid price for its common stock between now and the expiration of the Compliance Period and will consider all available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. 16 Table of Contents On April 18, 2024, the Company received written notice from the NASDAQ stating that the Company does not meet the requirement of maintaining a minimum of $2,500,000 in stockholders’ equity for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5550(b)(1), the Company also does not meet the alternative of market value of listed securities of $35 million under NASDAQ Listing Rule 5550(b)(2) or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years under NASDAQ Listing Rule 5550(b)(3), and the Company is no longer in compliance with the NASDAQ Listing Rules.
Removed
Our principal shareholders have the ability to exert significant control in matters requiring a shareholder vote and could delay, deter or prevent a change of control in our company. As of April 11, 2024, Steven Qiang Liu, our largest shareholder, owned approximately 17.3% of our outstanding shares of common stock. Mr.
Added
The NASDAQ notification letter provided the Company until June 6, 2024 to submit a plan to regain compliance. If the plan is accepted, NASDAQ can grant the Company an extension up to 180 calendar days from the date of NASDAQ letter to demonstrate compliance.
Removed
Liu may exert significant influence over us, giving him the ability, among other things, to exercise significant control over the election of all or a majority of the Board of Directors and to approve significant corporate transactions that require the shareholders’ approval.
Added
The Company submitted its plan of compliance on May 28, 2024 and a supplemental letter to the plan of compliance on June 20, 2024.
Removed
Such share ownership and control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company. Without the consent of Mr.
Added
Based on the review of the letters submitted by the Company, Staff has determined to grant the Company an extension until October 14, 2024 to regain compliance with the Rule and the Company must complete its initiatives and provide evidences for the compliance with the Rule as required by Nasdaq.
Removed
Liu, we could be prevented from entering into potentially beneficial transactions if such transactions conflict with our principal shareholder’s interests. As an officer of the Company, Mr. Liu owes a fiduciary duty to our shareholders and must act in good faith in a manner he reasonably believes to be in the best interests of our shareholders. As a shareholder, Mr.
Added
On October 11, 2024, the Company and Nova Samoa have entered into orders to purchase inventories in total amount of $4,600,000, which will be paid in 3,321,429 shares (“Shares”) of common stock of the Company at US$1.40 per share.
Added
As of the date of the report, the Company believes it has regained compliance with the stockholders’ equity requirement based upon the specific transaction referenced.
Added
Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of this annual report the Company does not evidence compliance, that it may be subject to delisting.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTeng Ai Leng, our IT consultant and Tawny Lam, Chief Executive Officer of the Company report to Mr. Charlie La and Board of Directors for cybersecurity risks and incidents. Teng AI Leng has 29 years of working experience in the Information technology industry.
Biggest changeTeng Ai Leng, our IT consultant and Tawny Lam, Chief Executive Officer of the Company report to Mr. Charlie La and Board of Directors for cybersecurity risks and incidents . Teng AI Leng has 30 years of working experience in the Information technology industry.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSee Note 15 to our consolidated financial statements contained herein, which discloses lease agreements. 19 Table of Contents
Biggest changeSee Note 15 to our consolidated financial statements contained herein, which discloses lease agreements. 18 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

10 edited+4 added−11 removed4 unchanged
Biggest changeThe Plaintiff also alleges that President and CEO Lam engaged in self-dealing transactions by leasing her property to Diamond Bar, a Company subsidiary, and asserts, in conclusory fashion, that Lam, former CEO and director Ya Ming Wong, former CFO and director Yuen Ching Ho, and director Umesh Patel sold securities during the period of time when the alleged false and/or misleading statements were made “with knowledge of material non-public information.” On May 15, 2019, Wilson Samuels (the “Samuels Action”) filed a largely duplicative putative derivative complaint purportedly on behalf of the Company against the same current and former directors and officers named in the Jie Action other than Steven Qiang Liu.
Biggest changeOn May 15, 2019, Wilson Samuels (the “Samuels Action”) filed a largely duplicative putative derivative complaint purportedly on behalf of the Company against the same current and former directors and officers named in the Jie Action other than Steven Qiang Liu. That action was filed in the United States District Court for the Central District of California.
Additionally, Samuels claims that, in announcing its change of auditing firms in September 2016, the Company asserted that this change was made because its existing auditor ceased auditing public companies subject to regulation in the United States without disclosing that its new auditing firm was created in a merger of three accounting firms, including a firm whose registration was revoked by the Public Company Accounting Oversight Board.
Additionally, Samuels claims that, in announcing its change of auditing firms in September 2016, the Company asserted that it made this move because its existing auditor ceased auditing public companies subject to regulation in the United States without disclosing that its new auditing firm was created in a merger of three accounting firms, including a firm whose registration was revoked by the Public Company Accounting Oversight Board.
Other than the above, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 20 Table of Contents PART II
Other than the above, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 19 Table of Contents PART II
On March 8, 2019, Jie Yuan (the “Jie Action”) filed a putative shareholder derivative lawsuit in the United States District Court for the Central District of California, purportedly on behalf of the Company against its former and current CEOs and CFOs (Thanh H.
Item 3. Legal Proceedings On March 8, 2019, Jie Yuan (the “Jie Action”) filed a putative shareholder derivative lawsuit in the United States District Court for the Central District of California, purportedly on behalf of the Company against its former and current CEOs and CFOs (Thanh H.
Specifically, the derivative lawsuit alleges that the Defendants caused the Company to make the alleged false and/or misleading statements giving rise to the Barney Action.
It is alleged that the Defendants caused the Company to make the alleged false and/or misleading statements giving rise to the Barney Action.
By Order entered April 7, 2020, the Court granted defendants’ Motion to Stay and stayed the Jie Action until the Barney Action is resolved. The Court subsequently entered a similar Order in the Samuels Action. It also took a motion that the derivative plaintiffs filed to consolidate the proceedings and appoint lead counsel off calendar.
By Order entered April 7, 2020, the Court granted defendants’ Motion to Stay and stayed the Jie Action until the Barney Action is resolved. The Court subsequently entered a similar Order in the Samuels Action. As previously reported, the parties have now settled the Barney Action.
Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) and directors (Charlie Huy La, Bin Liu, Umesh Patel, and Min Su) and vice president (Steven Qiang Liu) (collectively, the “Defendants”) seeking to recover any losses the Company sustains as a result of alleged securities violations outlined in the Seeking Alpha blog and Barney securities class action complaint.
Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) and directors (Charlie Huy La, Bin Liu, Umesh Patel, and Min Su) and vice president (Steven Qiang Liu) (collectively, the “Defendants”).
Similarly, the Company claimed to have previously sold products to Merlino Lewis LLP and failed to update its customer name when the customer restructured its business. On March 31, 2023, the parties filed a Renewed Stipulation of Settlement (“Renewed Stipulation”) resolving all claims asserted in the matter.
Similarly, the Company claimed to have previously sold products to Merlino Lewis LLP and failed to update its customer name when the customer restructured its business.
In support of these claims, plaintiffs alleged that defendants artificially inflated the Company’s share price by issuing a press release announcing a strategic relationship with Shanxi Winqing Senior Care Service Group, claiming in the Company’s Annual Statements on Form 10-Ks for the 2017 and 2018 fiscal years that Shanxi Winqing and Merlino Lewis LLP were among the Company’s largest customers, and reporting revenues from sales transactions with these entities.
The Plaintiff also alleges that President and CEO Lam engaged in self-dealing transactions by leasing her property to Diamond Bar, a Company subsidiary, and asserts, in conclusory fashion, that Lam, former CEO and director Ya Ming Wong, former CFO and director Yuen Ching Ho, and director Umesh Patel sold securities during the period of time when the alleged false and/or misleading statements were made “with knowledge of material non-public information.” In the Barney action, the putative class plaintiffs alleged that the Company artificially inflated its share price by issuing a press release announcing a strategic relationship with Shanxi Winqing Senior Care Service Group, claiming in the Company’s Annual Statements on Form 10-Ks for the 2017 and 2018 fiscal years that Shanxi Winqing and Merlino Lewis LLP were among the Company’s largest customers, and reporting revenues from sales transactions with these entities.
That action was filed in the United States District Court for the Central District of California. Samuels repeats the allegations of the Complaint in the Jie Action.
Samuels repeats the allegations of the Complaint in the Jie Action.
Removed
Item 3. Legal Proceedings The Company has reported a federal putative class action complaint George Barney filed the Company and former and current CEOs and CFOs (Thanh H.
Added
In this action, the putative derivative plaintiffs seek to recover any losses the Company sustains as a result of alleged securities violations that were alleged in the matter of Barney v. Nova Lifestyle, Inc. , United States District Court for the Central District of California.
Removed
Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) in the United States District Court for the Central District of California, claiming the Company violated federal securities laws and pursuing remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 (the “Barney Action”).
Added
The agreed $750,000 settlement payment was entirely funded by the Company’s insurance carrier and has been tendered to a claims facility. With the final settlement of the Barney Action, the conditions for the stay in the Derivative Actions expired. The parties accordingly filed a stipulation to lift the stay and consolidate the actions.
Removed
That matter was resolved by the entry of an Order on January 30, 2024 certifying a settlement class and approving a class settlement.
Added
The Stipulation also set deadlines for plaintiffs to file a consolidated amended complaint and for defendants to respond to this complaint. By January 7, 2025 Orders, the Court adopted the Stipulation. On February 6, 2025, the deadline for filing an amended complaint, plaintiffs filed a Notice of Dismissal without prejudice.
Removed
In the Barney action, Company shareholders sought to assert claims on behalf of all entities purchasing stock from December 21, 2015, through December 20, 2018, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 10b-5.
Added
While plaintiffs should have sought Court approval, the Clerk accepted the Notice of Dismissal and the lead case has been marked closed.
Removed
This Renewed Stipulation was executed and filed after the Court denied plaintiffs’ Motion to Certify a Settlement Class and Approve Class Action settlement in accordance with the parties’ original Stipulation of Settlement. The substantive terms of the settlement as they applied to the Company were not modified between the original Settlement Stipulation and the Renewed Settlement Stipulation.
Removed
The Renewed Stipulation provided for the certification of a settlement class and the Company’s payment to the settlement class of $750,000. It also provided for the complete release of all claims by the settlement class against the Company and its directors, officers, and employees and the other named defendants with respect to any of the matters alleged in the litigation.
Removed
The Company settled without in any manner admitting, and expressly denying, liability. By Order entered July 10, 2023, the Court preliminarily approved a settlement class and the proposed settlement. The settlement escrow was then funded as specified in this Order. The funding was provided through a directors and officers liability insurance policy.
Removed
The Court thereafter certified a settlement class and finally approved the settlement by Order entered January 30, 2024. The entry of this Order resolved the matter as to the Company. The settlement payment was funded through insurance.
Removed
With the settlement of the Barney action, it is expected that the stay of the derivative actions will be lifted.
Removed
While these derivative actions are purportedly asserted on behalf of the Company, when they are subsequently activated, it is possible that the Company may directly incur attorneys’ fees and costs in advancing the costs of defense for its current directors and officers pursuant to contractual and legal indemnity obligations.
Removed
The Company believes there is no basis to the derivative complaints and they will be vigorously defended if necessary.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed2 unchanged
Biggest changeMarket for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Since January 17, 2014, our common stock has been quoted on The NASDAQ Stock Market under the symbol “NVFY.” On April 11, 2024, the closing price for our common stock as reported on the NASDAQ Stock Market was $2.45 per share.
Biggest changeMarket for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Since January 17, 2014, our common stock has been quoted on The NASDAQ Stock Market under the symbol “NVFY.” On March 28, 2025, the closing price for our common stock as reported on the NASDAQ Stock Market was $0.71 per share.
We currently intend to utilize all available funds to develop our business.
We currently intend to utilize all available funds to develop our business. Item 6. [Reserved]
Holders of Record On April 11, 2024, there were approximately 50 holders of record based on information provided by our transfer agent.
Holders of Record On March 28, 2025, there were approximately 60 holders of record based on information provided by our transfer agent.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

78 edited+33 added−25 removed58 unchanged
Biggest changeYears Ended December 31, 2023 2022 $ % of Sales $ % of Sales Net sales $ 11,087,459 $ 12,744,871 Cost of sales (6,913,902 ) 62 % (20,526,484 ) 161 % Gross profit (loss) 4,173,557 38 % (7,781,613 ) (61 )% Operating expenses (10,592,105 ) (96 )% (8,440,738 ) (66 )% Loss from operations (6,418,548 ) (58 )% (16,222,351 ) (127 )% Other expenses, net (573,617 ) (5 )% (851,166 ) (7 )% Income tax expenses (731,092 ) (7 )% (2,400 ) 0 % Loss from continuing operations (7,723,257 ) (70 )% (17,075,917 ) (134 )% Loss from discontinued operations - - % (25,754 ) 0 % Net loss (7,723,257 ) (70 )% (17,101,671 ) (134 )% 28 Table of Contents Net Sales Net sales from continuing operations for the year ended December 31, 2023 were $11.09 million, a decrease of 13% from $12.74 million for 2022.
Biggest changeYears Ended December 31, 2024 2023 $ % of Sales $ % of Sales Net sales $ 9,686,975 $ 11,087,459 Cost of sales (5,437,484 ) (56 )% (6,913,902 ) (62 )% Gross profit 4,249,491 44 % 4,173,557 38 % Operating expenses (9,612,846 ) (99 )% (10,592,105 ) (96 )% Loss from operations (5,363,355 ) (55 )% (6,418,548 ) (58 )% Other expenses, net (195,736 ) (2 )% (573,617 ) (5 )% Income tax expenses (2,614 ) - (731,092 ) (7 )% Net loss (5,561,705 ) (57 )% (7,723,257 ) (70 )% Net Sales Net sales for the year ended December 31, 2024 were $9.69 million, a decrease of 13% from $11.09 million for the same year of 2023.
Each of our subsidiaries is operated under the same senior management of our company, and we view the operations of Diamond Bar, Nova HK and Nova Malaysia as a whole for making business decisions. Our long-lived assets are mainly property, plant and equipment located in the United States and Malaysia for administrative purposes.
Each of our subsidiaries is operated under the same senior management of our company, and we view the operations of Diamond Bar and Nova Malaysia as a whole for making business decisions. Our long-lived assets are mainly property, plant and equipment located in the United States and Malaysia for administrative purposes.
In response to the tariffs imposed by the United States on certain products manufactured in China, we are in the process of shifting a portion of our product manufacturing from third-party manufacturers located in China to third-party manufacturers located in other parts of Asia, such as Vietnam, India and/or Malaysia, countries unaffected by the tariffs.
In response to the tariffs imposed by the United States on products manufactured in China, we are in the process of shifting a portion of our product manufacturing from third-party manufacturers located in China to third-party manufacturers located in other parts of Asia, such as Vietnam, India and/or Malaysia, countries unaffected by the tariffs.
Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for Nova LifeStyle and its subsidiaries, Diamond Bar, i Design, Nova Furniture, Nova Samoa, Nova Malaysia and its former subsidiary, Nova HK.
Basis of Presentation The accompanying audited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for Nova LifeStyle and its subsidiaries, Diamond Bar, i Design, Nova Furniture, Nova Samoa, Nova Malaysia and its former subsidiary, Nova HK.
Implementation of a relocation of manufacturing (which by necessity includes an assessment of the factory’s ability to deliver the quantity of the product, in accordance with the Company’s specifications, and in accordance with the Company’s quality control requirements) is time-consuming, but a portion of our manufacturing has been transitioned to Malaysia and India starting in 2020 and we expect that more of our manufacturing will be transitioned to one or more of these venues.
Implementation of a relocation of manufacturing (which by necessity includes an assessment of the factory’s ability to deliver the quantity of the product, in accordance with the Company’s specifications, and in accordance with the Company’s quality control requirements) is time-consuming, but a portion of suppliers manufacturing our products has been transitioned to Malaysia and India starting in 2020 and we expect that more of our manufacturing will be transitioned to one or more of these venues.
Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2020-2023 remain open to examination by tax authorities in the U.S. Intangible Assets Intangible assets consist primarily of computer software acquired for internal use. Acquired intangible assets are initially recorded at the acquisition-date fair value.
Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2020-2024 remain open to examination by tax authorities in the U.S. Intangible Assets Intangible assets consist primarily of computer software acquired for internal use. Acquired intangible assets are initially recorded at the acquisition-date fair value.
We may seek additional financing in the form of bank loans or other credit facilities or funds raised through offerings of our equity or debt, if and when we determine such offerings are required. As of December 31, 2023, we do not have any credit facilities.
We may seek additional financing in the form of bank loans or other credit facilities or funds raised through offerings of our equity or debt, if and when we determine such offerings are required. As of December 31, 2024, we do not have any credit facilities.
In June 2023, everything is back to normal in Malaysia. Due to the negative impact caused by COVID-19 from 2020 to 2022, the Company eventually sold the entire jade mats inventory for $2.00 million in liquidation sales in June 2023. We existed from Jade Mats business in 2023.
In June 2023, everything is back to normal in Malaysia. Due to the negative impact caused by COVID-19 from 2020 to 2022, the Company eventually sold the entire jade mats inventory for $2.00 million in liquidation sales in June 2023. We exited from Jade Mats business in 2023.
We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. Revenue from product sales is recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers.
We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. 25 Table of Contents Revenue from product sales is recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Intangible assets are amortized on a straight-line basis over their estimated useful lives and are carried at cost less accumulated amortization. The estimated useful life of computer software are generally from 5 years.
Intangible assets are amortized on a straight-line basis over their estimated useful lives and are carried at cost less accumulated amortization. The estimated useful life of computer software is generally 5 years.
Nova Living (HK) Group Limited (“Nova HK”) is incorporated in Hong Kong and is subject to Hong Kong income taxes at the statutory rate of 16.5%. In February 2022, Nova HK was deregistered.
Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%. Nova Living (HK) Group Limited (“Nova HK”) is incorporated in Hong Kong and is subject to Hong Kong income taxes at the statutory rate of 16.5%. In February 2022, Nova HK was deregistered.
These supplier prepayments are made for goods before we actually receive them. 31 Table of Contents For a new product, the normal lead time from new product R&D, prototype, and mass production to delivery of goods from our suppliers to us is approximately six to nine months after we make advance payments to our suppliers.
These supplier prepayments are made for goods before we actually receive them. For a new product, the normal lead time from new product R&D, prototype, and mass production to delivery of goods from our suppliers to us is approximately six to nine months after we make advance payments to our suppliers.
The core focus of the Company’s direction today is entirely centered on product. Identifying a fashion-driven generational shift in the general perception and consumption of furniture and being more aware of actual consumer tastes and how best to fulfill and engage that need.
The core focus of the Company’s direction today is entirely centered on our products. Identifying a fashion-driven generational shift in the general perception and consumption of furniture and being more aware of actual consumer tastes and how best to fulfill and engage that need.
Nova Malaysia markets and sells high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia. On November 5, 2020, Nova LifeStyle, Inc. acquired Nova Living (HK) Group Limited (“Nova HK”) which was incorporated in Hong Kong on November 6, 2019. This company had minimal operations.
Nova Malaysia marketed and sold high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia. On November 5, 2020, Nova LifeStyle, Inc. acquired Nova Living (HK) Group Limited (“Nova HK”) which was incorporated in Hong Kong on November 6, 2019. This company had minimal operations.
Translation of amounts from RM into U.S. dollars has been made at the following exchange rates: Balance sheet items, except for equity accounts December 31, 2023 RM4.59 to 1 December 31, 2022 RM4.40 to 1 Income statement and cash flow items For the year ended December 31, 2023 RM4.56 to 1 For the year ended December 31, 2022 RM4.40 to 1 26 Table of Contents Segment Reporting ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
Translation of amounts from RM into U.S. dollars has been made at the following exchange rates: Balance sheet items, except for equity accounts December 31, 2024 RM4.47 to 1 December 31, 2023 RM4.59 to 1 Income statement and cash flow items For the year ended December 31, 2024 RM4.57 to 1 For the year ended December 31, 2023 RM4.56 to 1 26 Table of Contents Segment Reporting ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
Other Long-Term Liabilities As of December 31, 2023, we recorded long-term taxes payable of $0.64 million, consisting of an income tax payable of $0.64 million, primarily arising from a one-time transition tax recognized in the fourth quarter of 2017 on our post-1986 foreign unremitted earnings, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities.
Other Long-Term Liabilities As of December 31, 2024, we recorded long-term taxes payable of nil million, consisting of an income tax payable of nil, primarily arising from a one-time transition tax recognized in the fourth quarter of 2017 on our post-1986 foreign unremitted earnings, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities.
The markets in North America (excluding the United States) remains challenging because such markets are experiencing a slow-down and may be entering a recession due to high interest rate and inflation. 22 Table of Contents Critical Accounting Policies While our significant accounting policies are described more fully in Note 2 to our accompanying consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this Management’s Discussion and Analysis.
The markets in North America is challenging because such markets are experiencing a slow-down and may be entering a recession due to high interest rate and inflation. 22 Table of Contents Critical Accounting Policies While our significant accounting policies are described more fully in Note 2 to our accompanying audited consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this Management’s Discussion and Analysis.
Significant factors that we believe could affect our operating results are the (i) prices of our products to our domestic and international retailer and wholesaler customers and their markups to end consumers; (ii) general economic conditions in the U.S., Chinese, and other international markets; and (iii) trade tariffs imposed by the United States on certain products manufactured in China; and (iv) the consequences of the COVID-19 outbreak throughout the world; and (v) high interest rate, inflation and slow- down in real estate market.
Significant factors that we believe could affect our operating results are the (i) prices of our products to our domestic and international retailer and wholesaler customers and their markups to end consumers; (ii) general economic conditions in the U.S., Chinese, and other international markets; and (iii) trade tariffs imposed by the United States on certain products manufactured in China; and (iv) high interest rate, inflation and slow- down in real estate market.
The adoption of ASU 2021-10 did not have any impact on our condensed consolidated financial statements. Recently Issued But Not Yet Adopted Accounting Pronouncements In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease).
The adoption of ASU 2017-04 did not have any impact on our audited consolidated financial statements. Recently Issued But Not Yet Adopted Accounting Pronouncements In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease).
The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax benefit, which totaled $0 for the years ended December 31, 2023 and 2022, respectively, related to the Company’s continuing operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months.
The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax benefit, which totaled nil and nil for the years ended December 31, 2024 and 2023, respectively, related to the Company’s operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months.
Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each period’s income statement.
Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in accumulated deficits during the period, which is translated using the historical exchange rates used to translate each period’s income statement.
(“Diamond Bar”) was granted a loan from Cathay Bank in the aggregate amount of $176,294, pursuant to the Paycheck Protection Program. In June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan.
On May 5, 2020, Diamond Bar Outdoors Inc. (“Diamond Bar”) was granted a loan from Cathay Bank in the aggregate amount of $176,294, pursuant to the Paycheck Protection Program. On June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan.
Those earnings are considered to be permanently reinvested and accordingly, no deferred tax expense is recorded for U.S. federal and state income tax or applicable withholding taxes. As of December 31, 2023 and 2022, unrecognized tax benefits were approximately $0.
Those earnings are considered to be permanently reinvested and accordingly, no deferred tax expense is recorded for U.S. federal and state income tax or applicable withholding taxes. As of December 31, 2024 and 2023, unrecognized tax benefits were approximately nil and nil, respectively .
The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $0 as of December 31, 2023 and 2022.
The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was nil as of December 31, 2024 and 2023.
We concluded that we had one reportable segment under ASC 280 because Diamond Bar is a furniture distributor based in California focusing on customers in the US, Nova HK was a furniture distributor based in Hong Kong focusing on international customers and Nova Malaysia is a furniture retailer and distributor focusing on customers primarily in Malaysia.
We concluded that we had one reportable segment under ASC 280 because Diamond Bar is a furniture distributor based in California focusing on customers in the US and Nova Malaysia is a furniture retailer and distributor focusing on customers primarily in Malaysia and Asia.
A reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) for the years ended December 31, 2023 and 2022, is as follows: Gross UTB 2023 2022 Balance – January 1 $ - $ - Foreign exchange adjustment - - Balance – December 31 - - As of December 31, 2023 and 2022, the Company had cumulatively accrued approximately $0 for estimated interest and penalties related to unrecognized tax benefits.
A reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) for the nine months ended December 31, 2024 and 2023, is as follows: Gross UTB 2024 2023 Balance – January 1 Foreign exchange adjustment Balance – December 31 $ - $ - At December 31, 2024 and 2023, the Company had cumulatively accrued approximately nil and nil for estimated interest and penalties related to unrecognized tax benefits.
Net Loss As a result of the foregoing, our net loss was $7.72 million for the year ended December 31, 2023, compared to $17.10 million for 2022. 30 Table of Contents Liquidity and Capital Resources Our principal demands for liquidity are related to our efforts to increase sales and purchase inventory, and for expenditures related to sales distribution and general corporate purposes.
Net Loss As a result of the foregoing, our net loss was $5.56 million for the year ended December 31, 2024, compared to $7.72 million for the same year of 2023. 29 Table of Contents Liquidity and Capital Resources Our principal demands for liquidity are related to our efforts to increase sales and purchase inventory, and for expenditures related to sales distribution and general corporate purposes.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. Item 7A Quantitative and Qualitative Disclosures about Market Risk Not required.
As of December 31, 2023 and 2022, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately $25.4 million and $25.6 million of which substantially all was previously subject to U.S. tax, the one-time transition tax on foreign unremitted earnings required by the Tax Act, or GILTI.
As of December 31, 2024, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately 22.2 million of which substantially all was previously subject to U.S. tax, the one-time transition tax on foreign unremitted earnings required by the Tax Act, or GILTI.
In July 2021, we completed a registered direct offering of our shares of common stock and received offering gross proceeds of $3,120,622. We currently believe that our financial resources will be adequate to finance our operations in the next 12 months.
In July 2021, we completed a registered direct offering of our shares of common stock and received offering gross proceeds of $3,120,622. In May 2024, August 2024 and October 2024, we completed three private placements for gross proceeds of $750,000. We currently believe that our financial resources will be adequate to finance our operations in the next 12 months.
On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses (NOLs) arising in taxable years beginning after December 31, 2017.
The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses (NOLs) arising in taxable years beginning after December 31, 2017.
Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.
Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. 24 Table of Contents On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic.
The ratio of current assets to current liabilities was 1.02-to-1 at December 31, 2023.
The ratio of current assets to current liabilities was 1.56-to-1 at December 31, 2024.
Through our global network of retailers, e-commerce platforms, stagers and hospitality providers, Nova LifeStyle also sells (through an exclusive third-party manufacturing partner) a managed variety of high quality bedding foundation components. Nova LifeStyle’s brand family currently includes Nova LifeStyle, Diamond Sofa ( www.diamondsofa.com ) and Nova Living.
Through our global network of retailers, e-commerce platforms, stagers and hospitality providers, Nova LifeStyle also sells (through an exclusive third-party manufacturing partner) a managed variety of high quality bedding foundation components.
We maintained an allowance for expected credit loss of $532 and $2,914 as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, expected credit losses (reversal) provision from continuing operations was ($2,382) and $1,870, respectively.
We maintained an allowance for expected credit loss of $367 and $532 as of December 31, 2024 and December 31, 2023, respectively. During the years ended December 31, 2024 and 2023, expected credit losses provision (reversal) was ($165) and ($2,382), respectively.
We believe that our current cash and cash equivalents and anticipated cash receipts from sales of products will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We had net working capital of $60,057 at December 31, 2023, a decrease of $6,497,572 from net working capital of $6,557,629 at December 31, 2022.
We believe that our current cash and cash equivalents and anticipated cash receipts from sales of products will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We had working capital of $2,849,236 at December 31, 2024, an increase of $2,789,179 from net working capital of $60,057 at December 31, 2023.
The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our consolidated financial statement presentations and disclosures. We do not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on our financial statement presentation or disclosures.
We do not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on our financial statement presentation or disclosures.
The decrease in gross profit and gross profit margin was mainly a result of declining sales along with liquidation sales of jade mats for the year ended December 31, 2023. Operating Expenses Operating expenses from continuing operations consisted of selling, general and administrative expenses, and research and development.
The increase in gross profit and gross profit margin was mainly a result of the liquidation sales of the jade mats in Malaysia which came with low profit margin during the year ended December 31, 2023 Operating Expenses Operating expenses consisted of selling, general and administrative expenses, and research and development.
This decrease in net sales resulted primarily from a 33% decrease in average selling price, partially offset by a 31% increase in sales volume. Our three largest selling product categories for the year ended December 31, 2023 were sofas, jade mats and beds, which accounted for approximately 37%, 18% and 13% of sales from continuing operations, respectively.
This decrease in net sales resulted primarily from 39% decrease in sales volume, while partially offset by 43% increase in average selling price. Our three largest selling product categories for the year ended December 31, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 8% of sales, respectively.
The decrease in cost of sales in dollar term was mainly due to the decrease in our net sales for the year ended December 31, 2023. The increase in cost of sales as a percentage was mainly a result of liquidation sales of jade mats in Malaysia which came with low profit margin for the year ended December 31, 2023.
The decrease in cost of sales in dollar term was mainly due to decreased net sales. The decrease in cost of sales as a percentage of sales is a result of the liquidation sales of the jade mats in Malaysia which came with high cost and low profit margin in the second quarter of 2023.
We recognize revenues following the five step model prescribed under ASU No. 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. 25 Table of Contents Revenue from product sales is recognized when the customer obtains control of our product, which typically occurs upon shipment to the customer.
We recognize revenues following the five step model prescribed under ASU No. 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
O perations of Nova HK were reported as discontinued operations in the accompanying consolidated financial statements for all periods presented. Principal Factors Affecting Our Financial Performance Since 2019, we have moved away from low margin products and this move was intended to improve our gross profit margin, receivable collections and net profitability, and to increase our return on long-term equity.
Principal Factors Affecting Our Financial Performance Since 2019, we have moved away from low margin products and this move was intended to improve our gross profit margin, receivable collections and net profitability, and to increase our return on long-term equity.
This allows us to continually focus on building both our overall distribution and manufacturing relationships through a deployment of popular, as well as trend-based, furnishing solutions worldwide.
Nova LifeStyle is constantly seeking to integrate new sources of distribution and manufacturing that are properly aligned with our growth strategy. This allows us to continually focus on building both our overall distribution and manufacturing relationships through a deployment of popular, as well as trend-based, furnishing solutions worldwide.
The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. On May 5, 2020, Diamond Bar Outdoors Inc.
On May 4, 2020, the Company received loan proceeds in the amount of approximately $139,802 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.
The Company’s subsidiary with operations in Malaysia uses its local currency, Malaysian Ringgit (“RM”), as its functional currency. An entity’s functional currency is the currency of the primary economic environment in which it operates, which is normally the currency of the environment in which the entity primarily generates and expends cash.
An entity’s functional currency is the currency of the primary economic environment in which it operates, which is normally the currency of the environment in which the entity primarily generates and expends cash.
Sales to Asia increased by $1.93 million to $1.99 million for the year ended December 31, 2023, compared to $0.06 million for 2022, such increase mainly due to our liquidation sales of the entire inventory of jade mats in Nova Malaysia for $1.95 million.
Sales to Asia decreased by 100% to nil for the year ended December 31, 2024, compared to $2.00 million for the same year of 2023, such decrease mainly due to our liquidation sales of the entire inventory of jade mats by Nova Malaysia for approximately $1.95 million in Malaysia for the year ended December 31, 2023.
Results of Operations Comparison of Years Ended December 31, 2023 and 2022 The following table sets forth the results of our operations for the years ended December 31, 2023 and 2022. Certain columns may not add due to rounding.
Results of Operations Comparison of Years Ended December 31, 2024 and 2023 The following table sets forth the results of our operations for the years ended December 31, 2024 and 2023.
Sales to other countries decreased by $344,849 to $330,159 for the year ended December 31, 2023, from $675,008 for 2022, primarily due to less direct container sales in other countries. However, the decrease in net sales from continuing operations was partially offset by the increase in sales to Asia.
Also, sales to other countries decreased by $79,120 to $251,039 for the year ended December 31, 2024, from $330,159 for the same year of 2023, primarily due to less direct container sales in other countries. However, the decrease in net sales in Asia and other countries was partially offset by the increase in sales to North America.
Accordingly, the Company’s condensed consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled. Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%.
Nova Lifestyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI and Nova Samoa was incorporated in Samoa. Accordingly, the Company’s consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled.
Operating expenses from continuing operations were $10.59 million for the year ended December 31, 2023, compared to $8.44 million for 2022. Selling expenses from continuing operations decreased by 16%, or $0.47 million, to $2.42 million for the year ended December 31, 2023, from $2.89 million for 2022, primarily due to decreased marketing and advertising expenses.
Operating expenses were $9.61 million for the year ended December 31, 2024, compared to $10.59 million for the same year of 2023. Selling expenses decreased by 36%, or $0.86 million, to $1.56 million for the year ended December 31, 2024, from $2.42 million for the same year of 2023, primarily due to decreased marketing and advertising expenses.
As of December 31, 2023, we had gross accounts receivable of $47,530 of which $28,362 was not yet past due and $19,168 was less than 90 days past due. We had an allowance for expected credit losses of $532.
As of December 31, 2024, we had gross accounts receivable of $36,738 of which $4,143 was not yet past due and $3,212 was less than 90 days past due. We had an allowance for expected credit losses of $367.
These costs are recorded within selling expenses on our consolidated statements of operations. Foreign Currency Translation and Transactions The accompanying consolidated financial statements are presented in United States Dollar (“$” or “USD”), which is also the functional currency of Nova LifeStyle, Nova Furniture, Nova Samoa, Diamond Bar, Nova HK and i Design.
Foreign Currency Translation and Transactions The accompanying audited consolidated financial statements are presented in United States Dollar (“$” or “USD”), which is also the functional currency of Nova LifeStyle, Nova Furniture, Nova Samoa, Diamond Bar, and i Design. The Company’s subsidiary with operations in Malaysia uses its local currency, Malaysian Ringgit (“RM”), as its functional currency.
As of March 19, 2024, 99.7% of accounts receivable outstanding as of December 31, 2023 had been collected. 100% of our accounts receivable outstanding at December 31, 2022 had been collected during 2023. As of December 31, 2023 and 2022, we had advances to suppliers of $93,740 and $21,173, respectively.
As of March 18, 2025, 93.4% of accounts receivable outstanding as of December 31, 2024 had been collected. 30 Table of Contents 100% of our accounts receivable outstanding at December 31, 2023 had been collected during the year ended December 31, 2024. As of December 31, 2024 and 2023, we had advances to suppliers of $4,689,148 and $93,740, respectively.
Our experience developing and marketing products for international markets has enabled us to develop the scale, logistics, marketing, manufacturing efficiencies and design expertise that serve as the foundation for us to expand aggressively into the highly attractive U.S., Canada, South America, Asia and Middle Easter markets. 21 Table of Contents In 2019, we developed a line of high-end physiotherapeutic jade mats with China-based manufacturing partners for use in therapy clinics, hospitality, and real estate projects in Asia.
Our experience developing and marketing products for international markets has enabled us to develop the scale, logistics, marketing, manufacturing efficiencies and design expertise that serve as the foundation for us to expand aggressively into the highly attractive U.S., Canada, South America, Asia and Middle Easter markets.
We launched our first flagship showroom/retail store in Kuala Lumpur, Malaysia in late 2019, which, after a COVID-19 related closing, was reopened in May 2020. On August 28, 2020, after few months reopening, Malaysia government extended Movement Control Order to prohibit the businesses to open to public until March 5, 2021 to contain the spread of COVID-19.
On August 28, 2020, after few months reopening, Malaysia government extended Movement Control Order to prohibit the businesses to open to public until March 5, 2021 to contain the spread of COVID-19.
The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2023 and 2022: 2023 2022 Cash provided by (used in): Operating activities $ (1,580,247 ) $ (5,367,650 ) Investing activities 18,643 (8,772 ) Financing activities - - Net cash used in operating activities was $1.58 million for the year ended December 31, 2023, an increase in cash inflow of $3.79 million from $5.37 million of cash used in operating activities for 2022.
The following is a summary of cash provided by or used in each of the indicated types of activities during the year ended December 31, 2024 and 2023: 2024 2023 Cash (used in) provided by: Operating activities $ (1,391,779 ) $ (1,580,247 ) Investing activities (14,121 ) 18,643 Financing activities 1,175,578 - Net cash used in operating activities was $1.39 million for the year ended December 31, 2024, a decrease in cash outflow by $0.19 million from $1.58 million of cash used in operating activities for the same year of 2023.
The decrease in other expenses was due primarily to a decrease in foreign exchange loss of $221,742 to $417,690 for the year ended December 31, 2023, from $639,432 for 2022.
The decrease in other expenses was due primarily to an increase in foreign exchange gain by $430,971 to $13,281 for the year ended December 31, 2024, from foreign exchange loss of $417,690 for the same year of 2023.
For the year ended December 31, 2023, the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing. 24 Table of Contents On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code.
For the year ended December 31, 2024, the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing.
Cost of sales as a percentage of sales decreased to 62% for the year ended December 31, 2023, compared to 161% for 2022.
Total cost of sales decreased by 21% to $5.44 million for the year ended December 31, 2024, compared to $6.91 million for the same year of 2023. Cost of sales as a percentage of sales decreased to 56% for the year ended December 31, 2024, compared to 62% for the same year of 2023.
Our customers principally consist of distributors and retailers with specific geographic territories that deploy middle to high end private label home furnishings which have very little competitive overlap with our specific furnishing products or product lines. Nova LifeStyle is constantly seeking to integrate new sources of distribution and manufacturing that are properly aligned with our growth strategy.
Nova LifeStyle’s brand family currently includes Nova LifeStyle, Diamond Sofa ( www.diamondsofa.com ) and Nova Living. 20 Table of Contents Our customers principally consist of distributors and retailers with specific geographic territories that deploy middle to high end private label home furnishings which have very little competitive overlap with our specific furnishing products or product lines.
However, in the event that we do need to raise capital in the future, the instability in the securities markets could adversely affect our ability to raise additional capital. Discontinued Operations On February 15, 2022, we transferred entire assets and business of Nova HK to Nova Malaysia, one of our subsidiaries.
However, in the event that we do need to raise capital in the future, the instability in the securities markets could adversely affect our ability to raise additional capital.
We have limited experience with operations in Southeast Asia and considerable management attention and resources may be required to manage these new markets and product lines. We may be subject to additional risks including credit risk, inflation, currency exchange rate fluctuations, foreign exchange controls, import and export requirements, potentially adverse tax consequences and higher costs associated with doing business internationally.
We may be subject to additional risks including credit risk, inflation, currency exchange rate fluctuations, foreign exchange controls, import and export requirements, potentially adverse tax consequences and higher costs associated with doing business internationally. 21 Table of Contents We do not have access to a revolving credit facility.
The amount of reserves for return of products, the discount provided to the customers, and cost for the replacement parts were immaterial for the years ended December 31, 2023 and 2022. We generally expense sales commissions when incurred because the amortization period would have been one year or less.
The amount of reserves for return of products, the discount provided to the customers, and cost for the replacement parts were immaterial for the years ended December 31, 2024 and 2023.
Other Expenses, Net Other expenses, net, from continuing operations were $573,617 for the year ended December 31, 2023, compared to $851,166 for 2022, representing a decrease in other expenses of $277,549.
Other Expenses, Net Other expenses, net was $195,736 for the year ended December 31, 2024, compared to other expenses, net of $573,617 for the same period of 2023, representing a decrease in other expenses of $377,881.
The increase in operating cash inflow was partially offset by an increase in cash outflow of $0.76 million for advance to supplier to $0.07 million cash outflow for the year ended December 31, 2023, from $0.69 million cash inflow for 2022, such increase in cash outflow being mainly due to less deposits paid to our suppliers with more goods received from them for 2023.
The decrease in cash outflow was partially offset by increase in cash outflow of $3.19 million for inventories to $0.67 million cash outflow for the year ended December 31, 2024, from $2.53 million cash inflow for the same year of 2023, such increase in cash outflow being mainly due to more purchases were made from our suppliers for the year ended December 31, 2024 .
In addition, general and administrative expenses from continuing operations decreased by 9%, or $0.49 million, to $5.06 million for the year ended December 31, 2023, from $5.54 million for 2022, primarily due to a decrease in technology service fees and consulting fees of $0.31 million and $0.29 million, respectively, while the decrease was partially offset by an increase in stock compensation expenses of $0.31 million.
On the other hand, general and administrative expenses increased by 20%, or $1.00 million, to $6.06 million for the year ended December 31, 2024, from $5.06 million for the same year of 2023, primarily due to an increase in consulting fee of $1.17 million and professional fees of $0.05 million, while the increase was partially offset by a decrease in bad debt of $0.19 million and depreciation of $0.30 million.
The allowance for expected credit losses is our best estimate of the amount of expected credit losses in our existing trade accounts receivable.
As of December 31, 2024, we had gross receivable of $36,738 of which $12,796 was over 90 days past due. The allowance for expected credit losses is our best estimate of the amount of expected credit losses in our existing trade accounts receivable.
Net cash provided by investing activities was $0.02 million for the year ended December 31, 2023, an increase in cash inflow of $0.03 million from $8,772 of cash used in investing activities for 2022. For the year ended December 31, 2023, we incurred cash inflow of $0.02 million from disposal of fixed assets.
Net cash used in investing activities was $14,121 for the year ended December 31, 2024, an increase in cash outflow of $32,764 from $18,643 of cash provided by investing activities for the same year of 2023. We incurred cash outflow of $14,121 from the purchase of forklift in Nova Malaysia for the year ended December 31, 2024.
The income tax expenses for 2023 were primary from Nova Malaysia. Nova Malaysia’s net taxable income primarily resulted from cancellation of debt income on debt forgiveness granted by Nova HK, which was partially offset by inventory impairment loss and net operating loss carryovers from prior years.
The net taxable income was resulted from the income from debt forgiveness to Nova Malaysia from Nova HK, while offset with inventory impairment loss incurred in Malaysia, current operating loss and prior year net operating loss in Nova Malaysia.
We will consider the need for a reserve when and if a supplier fails to fulfill our orders within the time frame as stipulated in the purchase contracts. As of March 19, 2024, $57,842 or 62% of our advances to suppliers outstanding at December 31, 2023 had been delivered to us in the form of purchases of furniture.
For other products, the typical time is 4-6 months after our advance payment. We will consider the need for a reserve when and if a supplier fails to fulfill our orders within the time frame as stipulated in the purchase contracts.
Cost of Sales Cost of sales from continuing operations consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales from continuing operations decreased by 66% to $6.91 million for the year ended December 31, 2023, compared to $20.53 million for 2022.
Sales to North America increased by $0.66 million to $9.44 million for the year ended December 31, 2024, from $8.77 million for the same year of 2023, primary due to more sales order received from our customers in North America. 28 Table of Contents Cost of Sales Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers.
The adoption of ASU 2016-13 and ASU 2022-02 did not have any impact on our condensed consolidated financial statement presentation or disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).
New Accounting Pronouncements Recently Adopted Accounting Standards In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).
Gross Profit (Loss) Gross profit from continuing operations was $4.17 million for the year ended December 31, 2023, compared to gross loss of $7.78 million for 2022, representing an increase in gross profit of $11.96 million. Our gross profit margin was 38% for the year ended December 31, 2023, compared to a gross loss margin of 61% for 2022.
Our gross profit margin was 44% for the year ended December 31, 2024, compared to 38% for the same year of 2023.
The decrease in foreign exchange loss was mainly a result of the appreciation of U.S. dollar against Malaysian Ringgit on liquidation sales of jade mats in Malaysia as partial sales were collected in U.S. dollars. Income Tax Expenses Income tax expenses from continuing operations were $0.73 million for the year ended December 31, 2023, compared to $2,400 for 2022.
The increase in foreign exchange gain in 2024 from foreign exchange in 2023 loss was mainly a result of the appreciation of U.S. dollar against Malaysian Ringgit on acquisition of AI and IT systems in U.S. dollars during the year ended December 31, 2024.
The $1.66 million decrease in net sales from continuing operations for the year ended December 31, 2023, compared to the year of 2022, was mainly due to decreased sales to North America and other countries.
For the year ended December 31, 2023, the three largest selling categories were sofa, jade mats, and beds, which accounted for approximately 37%, 18% and 13% of sales, respectively. The $1.40 million decrease in net sales for the year ended December 30, 2024, compared to the same year of 2023, was mainly due to decreased sales to Asia.
Research and development from continuing operations increased by 28,462%, or $3.11 million to $3.12 million for the year ended December 31, 2023, from $10,917 for 2022, primary due to we spent on virtual and augmented reality software and AI IT system for the uses of customer consultation, virtual assistance, data analysis, product and inventory tagging and subscription services, etc.
In addition, research and development decreased by 36%, or $1.12 million to $2.00 million for the year ended December 31, 2024, from $3.11 million for the same year of 2023, primary due to our spending less on our AI and IT system.
For the year ended December 31, 2022, we incurred cash outflow of $8,772 from purchase of office equipment. Net cash provided by financing activities was $0 for the years ended December 31, 2023 and 2022 . During the year ended December 31, 2023, we received $0 from equity financing.
For the year ended December 31, 2023, we incurred cash inflow of $18,643 due to disposal of our fixed assets. Net cash provided by financing activities was $1.18 million for the year ended December 31, 2024, compared to nil for the same year of 2023.
Removed
We do not have access to a revolving credit facility. On May 4, 2020, the Company received loan proceeds in the amount of approximately $139,802 under the Paycheck Protection Program (“PPP”).
Added
In 2019, we developed a line of high-end physiotherapeutic jade mats with China-based manufacturing partners for use in therapy clinics, hospitality, and real estate projects in Asia. We launched our first flagship showroom/retail store in Kuala Lumpur, Malaysia in late 2019, which, after a COVID-19 related closing, was reopened in May 2020.

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