Financial Performance - Net sales for the three months ended March 31, 2024, were $2.38 million, a 27% increase from $1.87 million in the same period of 2023, driven by a 30% increase in sales volume[245]. - Gross profit increased to $1.02 million for the three months ended March 31, 2024, compared to $0.66 million for the same period of 2023, resulting in a gross profit margin of 43%[248]. - Operating expenses rose to $2.50 million for the three months ended March 31, 2024, from $1.84 million in the same period of 2023, with research and development expenses increasing by 636,524% to $0.75 million[249]. - The net loss for the three months ended March 31, 2024, was $1.46 million, compared to a net loss of $1.22 million for the same period of 2023[252]. - Cash used in operating activities was $0.22 million for the three months ended March 31, 2024, a decrease in cash outflow by $0.51 million from $0.73 million in the same period of 2023[256]. - Sales to North America increased by 32% to $2.33 million for the three months ended March 31, 2024, compared to $1.76 million for the same period of 2023[246]. - Cost of sales increased by 12% to $1.36 million for the three months ended March 31, 2024, with cost of sales as a percentage of sales decreasing to 57% from 65%[247]. - Other income, net was $25,635 for the three months ended March 31, 2024, compared to other expenses, net of $38,705 for the same period of 2023, representing an increase of $64,340[250]. Assets and Liabilities - As of March 31, 2024, the company had a working capital deficit of $441,348, a decrease of $501,405 from net working capital of $60,057 at December 31, 2023[255]. - As of March 31, 2024, 85.3% of accounts receivable outstanding had been collected, with gross accounts receivable totaling $137,264[259]. Taxation - The company had no income tax expense for the three months ended March 31, 2024, and 2023[208]. - Unrecognized tax benefits were approximately $0 as of March 31, 2024, with no anticipated significant changes in the next 12 months[218]. - The corporate tax rate decreased from 35% to 21% effective for tax years beginning after December 31, 2017, due to the Tax Cuts and Jobs Act of 2017[214]. - The Company is subject to Malaysia income taxes at a statutory rate of 24%[212]. - The Tax Cuts and Jobs Act of 2017 introduced new taxes on certain foreign-sourced earnings, effective for tax years beginning after January 1, 2018[213]. - The CARES Act, enacted on March 27, 2020, includes provisions relaxing limitations on the deductibility of interest and the use of net operating losses[215]. - Beginning in 2022, the Tax Cuts and Jobs Act requires taxpayers to amortize research and development expenditures over five years[216]. - As of March 31, 2024, the accumulated undistributed earnings from foreign subsidiaries were approximately $25.3 million, which were previously subject to U.S. tax, GILTI, or the one-time transition tax[217]. Business Operations - The company sold its entire jade mats inventory for $2.00 million in liquidation sales in June 2023, exiting the jade mats business[196]. - Nova LifeStyle completed a registered direct offering of common stock in July 2021, raising gross proceeds of $3,120,622[197]. - The company shifted a portion of its manufacturing from China to other Asian countries, such as Vietnam and India, to mitigate tariff impacts[199]. - The company launched its Summer 2023 Collection in the Las Vegas and High Point Markets, focusing on attracting higher-end customers[199]. - The Company operates exclusively in one business segment: the design and sale of furniture[233]. Stock and Shares - A 1-for-5 reverse stock split was executed on May 22, 2023, affecting the company's authorized shares of common stock[203]. - The company increased its authorized shares from 3,000,000 to 250,000,000 as of September 5, 2023[204]. Credit and Receivables - The allowance for expected credit losses increased to $1,373 as of March 31, 2024, from $532 as of December 31, 2023[206]. - Nova LifeStyle reported a gross receivable of $137,264 as of March 31, 2024, with no amounts over 90 days past due[206]. Currency and Exchange Rates - The exchange rate for translating Malaysian Ringgit to U.S. dollars was RM4.72 to 1 as of March 31, 2024[231]. - The financial statements are presented in U.S. dollars, with foreign currency transactions translated at prevailing exchange rates[229]. Market Conditions - The company aims to maintain a relatively high gross profit margin despite challenges in the North American market due to high interest rates and inflation[199].

Sales Performance - For the year ended December 31, 2023, the largest selling product categories were sofas (37%), jade mats (18%), and beds (13%) from continuing operations [39]. - Sales to North America accounted for 79.1% of total sales from continuing operations in 2023, down from 94.2% in 2022 [44]. - Revenues from Diamond Bar accounted for 82.4% of total sales from continuing operations in 2023, while Nova Malaysia's revenues accounted for 17.6% [59]. - Sales to North America accounted for 79.1% of total sales from continuing operations in 2023, down from 94.2% in 2022, indicating a shift towards diversifying international sales [59]. Business Operations - The company sold its entire jade mats inventory for $2.00 million in liquidation sales in June 2023, exiting the jade mats business [44]. - The company sold its entire jade mats inventory for $2.00 million in liquidation sales in June 2023, exiting the jade mats business due to the negative impact of COVID-19 from 2020 to 2022 [45]. - The company has 27 full-time employees worldwide as of December 31, 2023, with 24 in the U.S. and 3 in Malaysia [28]. - Approximately 36% of total purchases in 2023 were from two principal suppliers, highlighting the company's reliance on a limited number of suppliers [55]. Financial Actions - A 1-for-5 reverse stock split was executed on May 22, 2023, consolidating every 5 shares into one [26]. - The company increased its authorized shares from 3,000,000 to 250,000,000 on September 5, 2023 [27]. Strategic Focus - The company focuses on integrating new sources of distribution and manufacturing to expand its customer base and drive growth [24]. - The company aims to respond to changing market conditions and take advantage of upturns in global and local economies [44]. - The company has established long-term relationships with worldwide customers by providing high-quality, cost-effective sourcing solutions [25]. - The company plans to expand the "Diamond Sofa" brand and introduce new brands for direct sales in the U.S. and international markets [50]. - The company aims to increase direct sales to a broad range of retailers and chain stores across the U.S. and international markets [50]. Product Development - The company invested $3.12 million in research and development in 2023, focusing on developing Virtual and Augmented reality software and AI systems [66]. - The company has developed over 230 products exclusively for international markets, showcasing its commitment to product diversification [48]. - The company anticipates introducing new products under the "Diamond Sofa" brand on a quarterly basis for the U.S. market [65]. Shipping and Logistics - The company experienced significant delays in shipping from Asia due to the pandemic, but shipping and related costs returned to normal by June 2022 [56]. - The company markets its products through wholesale and retail channels, as well as various online platforms worldwide [22].

Financial Performance - Net sales from continuing operations for Q3 2023 were $2.48 million, an 18% decrease from $3.02 million in Q3 2022[242]. - The average selling price decreased by 12%, and sales volume decreased by 7% compared to the same period last year[242]. - Sales to North America decreased by 12% to $2.43 million in Q3 2023 from $2.77 million in Q3 2022, primarily due to inflation and tightening monetary policy[243]. - Cost of sales decreased by 25% to $1.41 million in Q3 2023, with cost of sales as a percentage of sales decreasing to 57% from 62% in Q3 2022[244]. - Gross profit was $1.06 million for Q3 2023, down from $1.14 million in Q3 2022, with a gross profit margin of 43% compared to 38%[246]. - Operating expenses increased to $2.12 million in Q3 2023 from $2.09 million in Q3 2022, with selling expenses decreasing by 8% and general and administrative expenses increasing by 5%[248]. - Other expenses, net, decreased significantly to $90,321 in Q3 2023 from $758,994 in Q3 2022, mainly due to a reduction in foreign exchange loss[249]. - Income tax expenses were $147,371 in Q3 2023, compared to $0 in Q3 2022, due to net taxable income from Nova Malaysia[250]. - Loss from continuing operations was $1.29 million in Q3 2023, an improvement from a loss of $1.71 million in Q3 2022[251]. - The net loss for Q3 2023 was $1.29 million, compared to a net loss of $1.71 million in Q3 2022[253]. - Net sales from continuing operations for the nine months ended September 30, 2023, were $8.81 million, a decrease of 16% from $10.50 million for the same period in 2022[256]. - The average selling price decreased by 39%, while sales volume increased by 37% during the same period[256]. - Sales to North America decreased by 33% to $6.62 million, primarily due to inflation and reduced purchasing power[257]. - Gross profit from continuing operations was $3.17 million for the nine months ended September 30, 2023, compared to a gross loss of $0.88 million for the same period in 2022, representing an increase of $4.06 million[260]. - Operating expenses decreased to $5.79 million for the nine months ended September 30, 2023, from $6.58 million for the same period in 2022, a reduction of 12%[262]. - Other expenses, net, decreased by $538,750 to $286,970 for the nine months ended September 30, 2023, primarily due to a reduction in foreign exchange loss[263]. - The net loss for the nine months ended September 30, 2023, was $3.05 million, compared to a net loss of $8.30 million for the same period in 2022[267]. - Cash provided by operating activities was $1.52 million for the nine months ended September 30, 2023, an increase of $4.97 million from cash used in operating activities in the same period of 2022[270]. Operational Changes - Nova LifeStyle transitioned away from low-margin products to improve gross profit margins and net profitability, focusing on high-end product lines[197]. - The company launched its Summer 2023 Collection at the Las Vegas and High Point Markets, targeting a higher-end customer demographic[197]. - Nova LifeStyle is actively pursuing alternative product lines, particularly in the health-oriented furniture segment, which has shown positive growth potential[192]. - The company has shifted some manufacturing from China to other Asian countries like Malaysia and India to mitigate the impact of U.S. trade tariffs[197]. - The de-registration and liquidation of Nova HK were completed in February 2023, with its assets transferred to Nova Malaysia[190]. - The company experienced significant operational disruptions due to COVID-19, impacting its showrooms and manufacturing capabilities[193]. Financial Position - Nova LifeStyle's financial resources are currently believed to be adequate to finance operations for the next 12 months, following a registered direct offering that raised gross proceeds of $3,120,622 in July 2021[194]. - The company received approximately $139,802 under the Paycheck Protection Program (PPP) in May 2020 to support its operations during the pandemic[194]. - As of September 30, 2023, the allowance for bad debt was $692, down from $3,420 as of September 30, 2022, indicating a significant reduction in expected credit losses[204]. - The gross receivable as of September 30, 2023, was $69,203, with $302 over 90 days past due, reflecting the company's credit management practices[204]. - The company maintains an allowance for potential credit losses based on historical bad debt experience and current economic trends, reflecting proactive risk management[204]. - The company recorded no unrecognized tax benefits as of September 30, 2023, indicating a stable tax position with no anticipated significant changes in the next 12 months[216]. - The accumulated undistributed earnings from foreign subsidiaries were approximately $25.5 million as of September 30, 2023, with no deferred tax expense recorded for U.S. federal and state income tax[215]. - Long-term taxes payable as of September 30, 2023, amounted to $0.64 million, primarily due to a one-time transition tax recognized in 2017[279]. - The company elected to pay the one-time transition tax over eight years starting from April 2018[280]. - As of September 30, 2023, 95% of accounts receivable outstanding had been collected, indicating improved cash flow management[273]. - As of September 30, 2023, $9,150 or 12% of advances to suppliers had been delivered in the form of furniture purchases[276]. Stock and Securities - A 1-for-5 reverse stock split was executed on May 22, 2023, affecting the company's authorized and outstanding shares[201]. - The authorized shares of common stock were increased from 3,000,000 to 250,000,000 as per the amendment approved on September 5, 2023[202]. - The company filed a new shelf registration statement on October 13, 2023, allowing for the sale of securities up to a total amount of $55,000,000[278]. - The previous shelf registration statement, effective from October 15, 2020, expired on October 15, 2023, with gross proceeds from a prior offering amounting to $3,120,622[277]. Market and Currency Risks - The translation rate for Malaysian Ringgit (RM) to U.S. dollars was RM4.69 to 1 as of September 30, 2023, compared to RM4.40 to 1 as of December 31, 2022, showing a depreciation of the RM[228]. - Quantitative and qualitative disclosures about market risk are not required[283]. - There are no off-balance sheet arrangements that materially affect the company's financial condition or operations[281]. - The company has not entered into any financial guarantees or derivative contracts that are not reflected in its consolidated financial statements[282]. - The company does not have any retained or contingent interest in assets transferred to unconsolidated entities[282]. - The company has not engaged in any variable interest arrangements with unconsolidated entities[282].

Financial Performance - Net sales from continuing operations for Q2 2023 were $4.46 million, a 17% increase from $3.81 million in Q2 2022, primarily driven by a 149% increase in sales volume[243]. - Cost of sales decreased by 59% to $3.02 million in Q2 2023, compared to $7.36 million in Q2 2022, with cost of sales as a percentage of sales dropping to 68% from 193%[246]. - Gross profit for Q2 2023 was $1.45 million, compared to a gross loss of $3.55 million in Q2 2022, resulting in a gross profit margin of 32% versus a gross loss margin of 93%[248]. - Operating expenses decreased by 14% to $1.83 million in Q2 2023 from $2.13 million in Q2 2022, with selling expenses down by 27%[250]. - Loss from continuing operations was $0.54 million in Q2 2023, significantly reduced from $5.69 million in Q2 2022[253]. - Net loss for Q2 2023 was $0.54 million, compared to a net loss of $5.69 million in Q2 2022[255]. - For the six months ended June 30, 2023, net sales were $6.34 million, down from $7.48 million in the same period of 2022[257]. - Gross profit for the six months ended June 30, 2023, was $2.11 million, compared to a gross loss of $2.02 million in the same period of 2022[257]. - Loss from operations for the six months ended June 30, 2023, was $1.56 million, a decrease from $6.50 million in the same period of 2022[257]. - The net loss was $1.76 million for the six months ended June 30, 2023, compared to a net loss of $6.59 million for the same period in 2022[269]. Revenue and Sales Trends - Net sales from continuing operations for the six months ended June 30, 2023, were $6.34 million, a decrease of 15% from $7.48 million for the same period in 2022, primarily due to a 46% decrease in average selling price, partially offset by a 56% increase in sales volume[258]. - Sales to North America decreased by 41% to $4.19 million for the six months ended June 30, 2023, compared to $7.10 million for the same period in 2022, mainly due to inflation and reduced purchasing power[259]. Operational Changes - Nova LifeStyle transitioned away from low-margin products to improve gross profit margins, which is expected to adversely impact revenue and net profit in the short term[198]. - The company is shifting a portion of its manufacturing from China to other Asian countries such as Vietnam and India to mitigate the impact of U.S. trade tariffs[198]. - The company launched a line of high-end physiotherapeutic jade mats in 2019, targeting therapy clinics and hospitality sectors in Southeast Asia[193]. - The company has limited experience in Southeast Asia, which may require considerable management attention and resources[193]. Financial Position and Cash Flow - As of June 30, 2023, the gross accounts receivable amounted to $1,206,030, with $208,478 being over 90 days past due[205]. - The allowance for bad debt was maintained at $2,718 as of June 30, 2023, compared to $2,104 as of June 30, 2022[205]. - Net cash provided by operating activities was $1.43 million for the six months ended June 30, 2023, an increase of $2.75 million from cash used in operating activities for the same period in 2022[273]. - Net cash used in investing activities was $2.47 million for the six months ended June 30, 2023, an increase from $1,487 used in the same period in 2022, primarily due to a software project[275]. Regulatory and Compliance - The company completed the de-registration and liquidation of Nova HK in February 2023, transferring its assets to Nova Malaysia[190]. - The company adopted ASU 2016-13 and ASU 2022-02 effective January 1, 2023, with no impact on the financial statement presentation or disclosures[235]. - The company recorded long-term taxes payable of $0.64 million as of June 30, 2023, primarily arising from a one-time transition tax recognized in 2017[282]. - No off-balance sheet arrangements that materially affect financial condition or results of operations[284]. - No financial guarantees or commitments to guarantee third-party payment obligations[285]. Market Conditions - The markets in North America (excluding the U.S.) are experiencing a slowdown, potentially entering a recession due to high interest rates and inflation[198]. - Nova LifeStyle's operations in Malaysia faced multiple closures due to COVID-19, with the showroom reopening on March 5, 2021, after a nationwide lockdown[194]. - The exchange rate for translating Malaysian Ringgit (RM) to U.S. dollars was RM4.67 to 1 as of June 30, 2023[229].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-36259 NOVA LIFESTYLE, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 6565 E. Washington Blvd. Co ...

Sales Performance - For the year ended December 31, 2022, the largest selling product categories were sofas (41%), beds (15%), and chairs (11%) from continuing operations [41]. - In 2021, the largest selling product categories were sofas (47%), beds (15%), and coffee tables (7%) from continuing operations [41]. - In 2022, sales to North America accounted for 94.2% of total sales from continuing operations, down from 97.9% in 2021, while sales to other regions increased from 2.1% to 5.8% [46]. - The company’s revenues from Diamond Bar accounted for 99.5% of total sales from continuing operations in 2022, highlighting its reliance on this subsidiary [58]. Employee Information - As of December 31, 2022, the company had 28 full-time employees worldwide, with 24 in the U.S., 3 in Malaysia, and 1 in Hong Kong [26]. - The U.S. corporate office employed 24 full-time employees, while operations in Malaysia and Hong Kong employed 3 and 1 full-time employees, respectively [68]. - The company believes that relations with its employees are satisfactory [68]. - There are no collective bargaining agreements in place with employees [68]. COVID-19 Impact - The company experienced significant shipping delays and increased costs from Asia due to the COVID-19 pandemic, although shipping costs returned to normal by June 2022 [28]. - The ongoing COVID-19 pandemic has adversely affected revenue generation in 2022 due to government-imposed quarantines and supply chain disruptions [46]. - The company has implemented changes to ensure employee safety in response to the COVID-19 pandemic [26]. Product Development and Marketing - The company has developed over 230 products exclusively for international markets, showcasing its extensive product range [48]. - The company aims to introduce new products under the Diamond Sofa brand on a quarterly basis for the U.S. market, indicating a commitment to innovation [64]. - The company anticipates increasing internet sales under the Diamond Sofa brand through third-party shopping portals and its own website [58]. - The company has resumed participation in major trade shows since 2021, which were previously suspended due to COVID-19, to enhance brand visibility and product offerings [52]. Business Strategy - The company has established long-term relationships with worldwide customers by providing high-quality, large-scale, and cost-effective sourcing solutions [24]. - The company’s products are marketed through wholesale and retail channels as well as various online platforms worldwide [21]. - The company has been actively integrating new sources of distribution and manufacturing aligned with its growth strategies [23]. - The company plans to expand direct sales and marketing efforts in North America, particularly in the U.S., which is the largest market for imported furniture [50]. Financial Information - The company invested $10,917 in research and development in 2022, a decrease from $110,287 in 2021, indicating a potential shift in R&D focus [65]. - The company’s functional currency is the U.S. Dollar (USD) [20]. - The company has faced uncertainties in market growth projections due to rapidly changing customer industries [16].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-36259 NOVA LIFESTYLE, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 6565 E. Washington Blvd ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-36259 NOVA LIFESTYLE, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 6565 E. Washington Blvd. Com ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-36259 NOVA LIFESTYLE, INC. (Exact name of registrant as specified in its charter) Nevada 90-0746568 (323) 888-9999 (Registrant's telephone number, including area code) Secu ...

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Nova LifeStyle, Inc. designs and markets contemporary residential and commercial furniture globally, adapting to market trends and managing operational disruptions - Nova LifeStyle, Inc. is a U.S.-headquartered designer and marketer of contemporary residential and commercial furniture, incorporated in Nevada in 2009[24](index=24&type=chunk) - Products are marketed globally through wholesale, retail, and online platforms under brands like Nova LifeStyle, Diamond Sofa, and Nova Living[24](index=24&type=chunk)[25](index=25&type=chunk) - A **1-for-5 reverse stock split** was effected on December 20, 2019, retroactively restating all share and per share data[28](index=28&type=chunk) - As of December 31, 2021, the Company had **29 full-time employees worldwide**, with 25 in the U.S. and 4 internationally[29](index=29&type=chunk) - COVID-19 caused significant disruptions, including showroom closures in Malaysia and Los Angeles, and increased shipping costs from Asia[30](index=30&type=chunk)[31](index=31&type=chunk) - For 2021, largest selling product categories were **sofas (46% of sales)**, **beds (15%)**, and **coffee tables (7%)**[43](index=43&type=chunk) Sales by Geographic Region (Continuing Operations) | Region | 2021 Sales (%) | 2020 Sales (%) | | :------------ | :------------- | :------------- | | North America | 95.9% | 95.6% | | Other Regions | 4.1% | 4.4% | - The Company relies on **three principal suppliers for approximately 60% of total purchases** in 2021, diversifying for stability and pricing[55](index=55&type=chunk) Research and Development Expenses | Year | R&D Expense ($) | | :--- | :-------------- | | 2021 | 110,287 | | 2020 | 33,746 | [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The Company faces significant risks from COVID-19 disruptions, economic downturns, supply chain dependencies, key personnel loss, and potential delisting - The COVID-19 pandemic has caused and could continue to cause significant business disruptions, impacting demand, supply chains, and financial results[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - Changes in economic conditions, including consumer spending, interest rates, and housing markets, can adversely affect product demand[75](index=75&type=chunk) - The strategy to transition to high-profit margin products may decrease future sales and earnings if new business is not successfully developed[77](index=77&type=chunk) - Loss of key personnel, including the CEO and CFO, or inability to retain qualified staff, could adversely affect business objectives[78](index=78&type=chunk)[79](index=79&type=chunk) - Intense competition in the fragmented furniture industry could lead to market share loss if the Company fails to keep pace in price, quality, and style[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Slow-moving inventory, particularly Jade Mats in Malaysia due to COVID-19 lockdowns, led to a **$39.97 million write-down** in 2021, impacting cash flow and liquidity[89](index=89&type=chunk) - Dependence on foreign suppliers, predominantly in Asia, exposes the Company to risks from currency fluctuations, trade restrictions, and supply chain disruptions[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - The Hong Kong-based auditor is not fully inspected by the PCAOB, potentially leading to share delisting under the HFCA Act if inspections are not possible for consecutive years[110](index=110&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - Escalating U.S.-China political tensions, including trade disputes, could adversely affect business by requiring new suppliers and impacting sales[118](index=118&type=chunk) [Item 1B. Unresolved Staff Comments](index=28&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item is not applicable to the Company - Not applicable[139](index=139&type=chunk) [Item 2. Properties](index=28&type=section&id=Item%202.%20Properties) The Company leases principal executive offices, showrooms, and warehouses in California, Nevada, North Carolina, and Malaysia - Principal executive offices, showrooms, distribution, and warehouse facilities are leased in Commerce, California[140](index=140&type=chunk) - Showrooms are maintained in leased spaces at Las Vegas Market in Nevada and High Point Market in North Carolina[140](index=140&type=chunk) - Nova Malaysia operates in leased office, showroom, service center, and warehouse space in Kuala Lumpur, Malaysia[140](index=140&type=chunk) - Nova Macao's office lease was terminated in 2021, and Nova HK shared an office with an unrelated third party[140](index=140&type=chunk) [Item 3. Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) The Company is involved in a settled securities class action and ongoing derivative lawsuits, which it intends to vigorously defend - A putative class action (Barney Action) was filed in December 2018, alleging federal securities law violations, including overstated alliances and inflated sales[142](index=142&type=chunk)[143](index=143&type=chunk) - The Barney Action was settled on March 8, 2022, for **$750,000**, funded by D&O insurance, resolving all claims against the Company and defendants[145](index=145&type=chunk) - Two derivative lawsuits (Jie Action and Samuels Action) were filed in 2019, repeating Barney Action allegations and adding claims of self-dealing and auditor misrepresentation[146](index=146&type=chunk) - The derivative actions were stayed pending the final disposition of the Barney Action, with ongoing disagreement on lifting the stay[147](index=147&type=chunk)[148](index=148&type=chunk) - The Company believes the derivative complaints lack basis and intends to vigorously defend them, potentially incurring significant legal costs[149](index=149&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[150](index=150&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Nova LifeStyle's common stock trades on NASDAQ, with approximately 47 record holders, and the Company does not anticipate paying future cash dividends - Common stock is quoted on The NASDAQ Stock Market under symbol **"NVFY"** since January 17, 2014[153](index=153&type=chunk) - As of April 6, 2022, the common stock closing price was **$1.60 per share**[153](index=153&type=chunk) - As of April 6, 2022, there were approximately **47 holders of record**[154](index=154&type=chunk) - The Company does not anticipate paying cash dividends, intending to retain earnings for business development and expansion[155](index=155&type=chunk) [Item 6. Selected Financial Data](index=31&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not required for the Company - Not required[156](index=156&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews Nova LifeStyle's financial condition and operational results, highlighting COVID-19 impacts, inventory write-downs, increased net sales, and liquidity management - Nova LifeStyle distributes contemporary residential and commercial furniture through retail, online, and global fulfillment platforms[158](index=158&type=chunk) - The Company is transitioning to higher-margin products to improve profitability, which may temporarily impact revenue and net profit[173](index=173&type=chunk) - The COVID-19 pandemic caused significant disruptions, including showroom closures and increased shipping costs, materially impacting demand and operations[168](index=168&type=chunk)[169](index=169&type=chunk) - The Company sold its subsidiary Bright Swallow in January 2020 for **$2.5 million**, with operations reported as discontinued[172](index=172&type=chunk) Key Financial Results (Continuing Operations) | Metric | 2021 ($) | 2020 ($) | Change (%) | | :------------------------- | :----------- | :----------- | :--------- | | Net Sales | 12,813,223 | 11,350,230 | 13% | | Cost of Sales | 23,130,588 | 31,242,671 | (26)% | | Gross Loss | (10,317,365) | (19,892,441) | (48)% | | Operating Expenses | 9,478,259 | 6,412,335 | 48% | | Loss from Operations | (19,795,624) | (26,304,776) | (25)% | | Income Tax (Expenses) Benefit | (163,893) | 649,165 | (125)% | | Loss from Continuing Operations | (19,962,493) | (25,751,794) | (22)% | | Net Loss | (19,962,493) | (26,078,325) | (24)% | - Net sales from continuing operations increased by **13% to $12.81 million** in 2021, driven by a **29.43% increase in average selling price** despite a **12.78% decrease in sales volume**[208](index=208&type=chunk) - Cost of sales decreased by **26% to $23.13 million** in 2021, primarily due to a lower inventory write-down of **$15.96 million** and a shift to higher-margin products[210](index=210&type=chunk) - Operating expenses increased by **48% to $9.48 million** in 2021, driven by a **115% increase in marketing and advertising** and a **23% increase in general and administrative expenses**[214](index=214&type=chunk) - Net working capital was **$23.75 million** at December 31, 2021, a decrease of **$17.52 million** from **$41.27 million** in 2020[222](index=222&type=chunk) Cash Flow Summary | Activity | 2021 ($) | 2020 ($) | | :----------------- | :------------ | :----------- | | Operating Activities | (4,782,354) | (2,075,272) | | Investing Activities | (154,820) | 672,757 | | Financing Activities | 2,760,974 | 466,096 | - Net cash used in operating activities increased by **$2.71 million** from 2020 to 2021, primarily due to changes in advances to suppliers and inventories[223](index=223&type=chunk) - In July 2021, a registered direct offering raised gross proceeds of **$3.12 million** and net proceeds of approximately **$2.76 million** from equity financing[230](index=230&type=chunk) [Overview](index=31&type=section&id=Overview) This section provides an overview of the Company's business model and strategic focus on higher-margin products [Discontinued Operations](index=34&type=section&id=Discontinued%20Operations) This section details the financial impact and reporting of the Company's discontinued operations [Principal Factors Affecting Our Financial Performance](index=34&type=section&id=Principal%20Factors%20Affecting%20Our%20Financial%20Performance) This section discusses key internal and external factors influencing the Company's financial performance [Critical Accounting Policies](index=35&type=section&id=Critical%20Accounting%20Policies) This section outlines the Company's critical accounting policies that require significant management judgment [Basis of Presentation](index=35&type=section&id=Basis%20of%20Presentation) This section describes the basis on which the Company's financial statements are prepared [Use of Estimates](index=35&type=section&id=Use%20of%20Estimates) This section explains the use of estimates and assumptions in preparing the Company's financial statements [Accounts Receivable](index=35&type=section&id=Accounts%20Receivable) This section details the Company's policies and balances related to accounts receivable [Advances to Suppliers](index=35&type=section&id=Advances%20to%20Suppliers) This section provides information on the Company's advances made to its suppliers [Income Taxes](index=35&type=section&id=Income%20Taxes) This section outlines the Company's accounting policies and disclosures related to income taxes [Revenue Recognition](index=36&type=section&id=Revenue%20Recognition) This section describes the Company's policies and methods for recognizing revenue from its operations [Foreign Currency Translation and Transactions](index=36&type=section&id=Foreign%20Currency%20Translation%20and%20Transactions) This section explains the Company's accounting for foreign currency translation and transactions [Segment Reporting](index=37&type=section&id=Segment%20Reporting) This section provides information on the Company's operating segments and their financial performance [New Accounting Pronouncements](index=37&type=section&id=New%20Accounting%20Pronouncements) This section discusses the impact of recently issued accounting pronouncements on the Company [Results of Operations](index=39&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance, including revenues, expenses, and profitability [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to meet its short-term and long-term financial obligations [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not required for the Company - Not required[235](index=235&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=42&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the Company's financial statements and supplementary data presented in a separate section - Financial statements and supplementary data appear in a separate section of this Annual Report beginning on page F-1[236](index=236&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=42&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - None[237](index=237&type=chunk) [Item 9A. Controls and Procedures](index=43&type=section&id=Item%209A.%20Controls%20and%20Procedures) The Company's CEO and CFO concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - As of December 31, 2021, the CEO and CFO concluded that disclosure controls and procedures were effective[238](index=238&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2021, based on the COSO 2013 Internal Control-Integrated Framework[241](index=241&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by this annual report[242](index=242&type=chunk) [Item 9B. Other Information](index=43&type=section&id=Item%209B.%20Other%20Information) This item is not applicable to the Company - Not applicable[243](index=243&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=43&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable, but refers to risks regarding PCAOB inspection limitations on the Company's Hong Kong-based auditor - Not applicable, with further information referenced in Item 1A regarding the PCAOB's inability to inspect the Company's auditor and potential delisting risks[243](index=243&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=44&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2021 Annual Meeting of Stockholders[245](index=245&type=chunk) [Item 11. Executive Compensation](index=44&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the Company's definitive Proxy Statement - Information is incorporated by reference from the Proxy Statement[246](index=246&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=44&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of beneficial owners and management is incorporated by reference from the Proxy Statement - Information is incorporated by reference from the Proxy Statement[247](index=247&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=44&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the Proxy Statement - Information is incorporated by reference from the Proxy Statement[248](index=248&type=chunk) [Item 14. Principal Accounting Fees and Services](index=44&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the Proxy Statement - Information is incorporated by reference from the Proxy Statement[249](index=249&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=44&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements and various exhibits filed as part of the Annual Report on Form 10-K - Includes financial statements listed in the Index to Financial Statements, starting on page F-1[251](index=251&type=chunk) - Lists various exhibits such as merger agreements, articles of incorporation, bylaws, stock certificates, warrants, and employment agreements[251](index=251&type=chunk)[252](index=252&type=chunk) - Includes certifications of Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act[253](index=253&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=48&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Centurion ZD CPA & Co. issued an unqualified opinion on the financial statements, identifying inventory write-down as a critical audit matter - Centurion ZD CPA & Co. issued an unqualified opinion on the consolidated financial statements for December 31, 2021 and 2020, affirming fair presentation in conformity with U.S. GAAP[260](index=260&type=chunk) - The auditor did not perform an audit of internal control over financial reporting and expresses no opinion on its effectiveness[262](index=262&type=chunk) - Inventory write-down was identified as a critical audit matter due to subjective management assumptions about future demands and market conditions affecting net realizable value[265](index=265&type=chunk)[266](index=266&type=chunk) - Audit procedures for inventory write-down included observing physical inventory, evaluating management's estimation process, testing report reliability, assessing reasonableness of assumptions, and analyzing subsequent sales[267](index=267&type=chunk)[268](index=268&type=chunk) [Consolidated Balance Sheets](index=50&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased from $46.48 million in 2020 to $29.53 million in 2021, driven by reduced inventories and cash, while liabilities slightly increased Consolidated Balance Sheet Summary | Metric | Dec 31, 2021 ($) | Dec 31, 2020 ($) | | :------------------------- | :--------------- | :--------------- | | **Assets** | | | | Cash and cash equivalents | 6,276,106 | 8,744,784 | | Accounts receivable, net | 103,397 | 514,939 | | Inventories | 17,656,175 | 32,814,520 | | Total Current Assets | 25,568,953 | 43,294,903 | | Total Noncurrent Assets | 3,960,671 | 3,183,619 | | **Total Assets** | **29,529,624** | **46,478,522** | | **Liabilities** | | | | Accounts payable | 358,362 | 743,785 | | Total Current Liabilities | 1,814,397 | 2,025,283 | | Total Noncurrent Liabilities | 4,271,039 | 3,524,764 | | **Total Liabilities** | **6,085,436** | **5,550,047** | | **Stockholders' Equity** | | | | Total Stockholders' Equity | **23,444,188** | **40,928,475** | - Cash and cash equivalents decreased by **$2.47 million (28.2%)** from **$8.74 million** in 2020 to **$6.28 million** in 2021[271](index=271&type=chunk) - Inventories decreased significantly by **$15.16 million (46.2%)** from **$32.81 million** in 2020 to **$17.66 million** in 2021[271](index=271&type=chunk) - Accumulated deficits increased from **$351,370 in retained earnings** in 2020 to a deficit of **$19.60 million** in 2021[273](index=273&type=chunk) [Consolidated Statements of Comprehensive (Loss) Income](index=52&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income) The Company reported a net loss of $19.96 million in 2021, an improvement from $26.08 million in 2020, driven by reduced gross loss despite increased operating expenses Consolidated Statements of Comprehensive (Loss) Income Summary | Metric | 2021 ($) | 2020 ($) | Change (%) | | :------------------------- | :----------- | :----------- | :--------- | | Net Sales | 12,813,223 | 11,350,230 | 13% | | Cost of Sales | 23,130,588 | 31,242,671 | (26)% | | Gross Loss | (10,317,365) | (19,892,441) | (48)% | | Total Operating Expenses | 9,478,259 | 6,412,335 | 48% | | Loss From Operations | (19,795,624) | (26,304,776) | (25)% | | Income Tax (Expense) Benefit | (163,893) | 649,165 | (125)% | | Loss From Continuing Operations | (19,962,493) | (25,751,794) | (22)% | | Loss From Discontinued Operations | - | (326,531) | (100)% | | Net Loss | (19,962,493) | (26,078,325) | (24)% | | Foreign currency translation | (416,440) | 798,290 | (152)% | | Net Loss and Comprehensive Loss | (20,378,933) | (25,280,035) | (19)% | - Net sales increased by **13%** from **$11.35 million** in 2020 to **$12.81 million** in 2021[275](index=275&type=chunk) - Gross loss decreased by **48%** from **$19.89 million** in 2020 to **$10.32 million** in 2021[275](index=275&type=chunk) - Total operating expenses increased by **48%** from **$6.41 million** in 2020 to **$9.48 million** in 2021[275](index=275&type=chunk) - Net loss per share of common stock (Basic and Diluted) improved from **$(4.54)** in 2020 to **$(3.27)** in 2021[275](index=275&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=53&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity decreased from $40.93 million in 2020 to $23.44 million in 2021, primarily due to net loss and foreign currency translation loss Consolidated Statements of Stockholders' Equity Summary | Metric | Dec 31, 2021 ($) | Dec 31, 2020 ($) | | :------------------------- | :--------------- | :--------------- | | Common stock | 6,837 | 5,596 | | Additional paid-in capital | 42,660,383 | 39,766,978 | | Statutory reserves | - | 6,241 | | Accumulated other comprehensive income | 381,850 | 798,290 | | (Accumulated deficits) Retained earnings | (19,604,882) | 351,370 | | **Total Stockholders' Equity** | **23,444,188** | **40,928,475** | - Net loss of **$19.96 million** contributed to the decrease in retained earnings in 2021[277](index=277&type=chunk) - Issuance of common stock generated **$2.76 million** in 2021[277](index=277&type=chunk) - Foreign currency translation resulted in a loss of **$416,440** in 2021, compared to a gain of **$798,290** in 2020[277](index=277&type=chunk) [Consolidated Statements of Cash Flows](index=54&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased by $2.47 million in 2021, primarily due to increased cash used in operating and investing activities, partially offset by equity financing Consolidated Statements of Cash Flows Summary | Activity | 2021 ($) | 2020 ($) | | :----------------- | :------------ | :----------- | | Operating Activities | (4,782,354) | (2,075,272) | | Investing Activities | (154,820) | 672,757 | | Financing Activities | 2,760,974 | 466,096 | | Effect of Exchange Rate Changes | (292,478) | 795,805 | | Net decrease in cash and cash equivalents | (2,468,678) | (140,614) | | Cash and cash equivalents, end of year | 6,276,106 | 8,744,784 | - Net cash used in operating activities increased by **$2.71 million** from 2020 to 2021, primarily due to changes in advances to suppliers and inventories[279](index=279&type=chunk) - Net cash used in investing activities was **$0.15 million** in 2021, a shift from **$0.67 million** provided in 2020, mainly due to the absence of cash received from subsidiary sales[279](index=279&type=chunk) - Net cash provided by financing activities increased to **$2.76 million** in 2021, primarily from equity financing, compared to **$0.47 million** from other loans in 2020[279](index=279&type=chunk) [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the Company's organization, accounting policies, COVID-19 impacts, inventory write-downs, tax positions, related party transactions, and legal proceedings [Note 1 - Organization and Description of Business](index=56&type=section&id=Note%201%20-%20Organization%20and%20Description%20of%20Business) This note describes the Company's corporate structure, business activities, and operational scope [Note 2 - Summary of Significant Accounting Policies](index=57&type=section&id=Note%202%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements [Note 3 - Discontinued Operations](index=67&type=section&id=Note%203%20-%20Discontinued%20Operations) This note provides details on the financial results and assets/liabilities of discontinued operations [Note 4 - Inventories](index=67&type=section&id=Note%204%20-%20Inventories) This note details the composition, valuation, and write-downs related to the Company's inventories [Note 5 - Plant, Property and Equipment, Net](index=67&type=section&id=Note%205%20-%20Plant%2C%20Property%20and%20Equipment%2C%20Net) This note provides information on the Company's property, plant, and equipment, including depreciation [Note 6 - Advances to Suppliers](index=67&type=section&id=Note%206%20-%20Advances%20to%20Suppliers) This note details the amounts and nature of advances made by the Company to its suppliers [Note 7 - Prepaid Expenses and Other Receivables](index=68&type=section&id=Note%207%20-%20Prepaid%20Expenses%20and%20Other%20Receivables) This note outlines the components of prepaid expenses and other non-trade receivables [Note 8 - Accrued Liabilities and Other Payables](index=68&type=section&id=Note%208%20-%20Accrued%20Liabilities%20and%20Other%20Payables) This note details the Company's accrued liabilities and other non-trade payables [Note 9 - Loan to Unrelated Party](index=68&type=section&id=Note%209%20-%20Loan%20to%20Unrelated%20Party) This note provides information on a loan extended by the Company to an unrelated third party [Note 10 - Other Loans](index=68&type=section&id=Note%2010%20-%20Other%20Loans) This note details other loans and borrowing arrangements of the Company [Note 11 - Income Taxes](index=70&type=section&id=Note%2011%20-%20Income%20Taxes) This note provides a reconciliation of income tax expense and deferred tax assets/liabilities [Note 12 - Related Party Transactions](index=72&type=section&id=Note%2012%20-%20Related%20Party%20Transactions) This note discloses transactions and balances with related parties of the Company [Note 13 - Stockholders' Equity](index=72&type=section&id=Note%2013%20-%20Stockholders'%20Equity) This note details changes in common stock, additional paid-in capital, and retained earnings [Note 14 - Geographical Analysis](index=76&type=section&id=Note%2014%20-%20Geographical%20Analysis) This note provides a breakdown of the Company's revenues and assets by geographic region [Note 15 - Lease](index=76&type=section&id=Note%2015%20-%20Lease) This note outlines the Company's lease agreements, including right-of-use assets and lease liabilities [Note 16 - Commitments and Contingencies](index=77&type=section&id=Note%2016%20-%20Commitments%20and%20Contingencies) This note discloses the Company's contractual commitments and potential contingent liabilities [Note 17 - Subsequent Events](index=78&type=section&id=Note%2017%20-%20Subsequent%20Events) This note describes significant events that occurred after the balance sheet date