Nova LifeStyle(NVFY) - 2025 Q2 - Quarterly Report

Filing Information This section details the company's registration, stock listing, filer status, and outstanding shares Registrant Details This section details Nova LifeStyle, Inc.'s incorporation, stock exchange listing, filer status, and outstanding common shares - Company Name: NOVA LIFESTYLE, INC.[2] - State of Incorporation: Nevada[2] Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :---------------- | :---------------- | :---------------------------------------- | | Common Stock, par value $0.001 per share | NVFY | Nasdaq Stock Market | Filer Status | Filer Status | Designation | | :-------------------- | :---------------- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☐ | - 13,771,322 shares of common stock outstanding as of August 12, 2025[7] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents Nova LifeStyle, Inc.'s unaudited condensed consolidated financial statements and notes for periods up to June 30, 2025 Condensed Consolidated Balance Sheets This section provides the unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (Unaudited) | Assets | June 30, 2025 ($) | December 31, 2024 ($) | | :----------------------------------- | :---------------- | :-------------------- | | Current Assets | | | | Cash and cash equivalents | 468,825 | 161,902 | | Accounts receivable, net | 35,754 | 36,371 | | Advance to suppliers | 7,875,174 | 4,689,148 | | Inventories | 1,578,678 | 2,824,353 | | Prepaid expenses | 262,708 | 202,294 | | Other receivables | 20,706 | 17,415 | | Total Current Assets | 10,241,845 | 7,931,483 | | Non-current Assets | | | | Plant, property and equipment, net | 235,451 | 252,186 | | Operating lease right-of-use assets, net | 1,056,170 | 1,389,796 | | Finance lease right of use assets, net | 47,514 | 69,700 | | Intangible assets, net | 427 | 3,109 | | Lease deposit | 53,097 | 52,523 | | Goodwill | - | 218,606 | | Total Non-current Assets | 1,392,659 | 1,985,920 | | Total Assets | 11,634,504 | 9,917,403 | | | | | | Liabilities and Stockholders' Equity | | | | Current Liabilities | | | | Accounts payable | 159,144 | 728,546 | | Operating lease liabilities, current | 742,255 | 716,602 | | Finance lease liabilities - current | 21,922 | 32,585 | | Advance from customers | 357,682 | 413,583 | | Loan from shareholders | 381,436 | 385,147 | | Accrued liabilities and other payables | 987,465 | 1,683,033 | | Other loan | 3,505 | 13,424 | | Income tax payable | 1,832,736 | 1,852,399 | | Total Current Liabilities | 4,486,145 | 5,825,319 | | Non-current Liabilities | | | | Other Loan | 210,185 | 197,828 | | Operating lease liabilities, non-current | 361,149 | 730,291 | | Finance lease liabilities - non-current | 30,304 | 40,451 | | Total Non-current Liabilities | 601,638 | 968,570 | | Total Liabilities | 5,087,783 | 6,793,889 | | Stockholders' Equity | | | | Common stock | 13,773 | 7,301 | | Additional paid-in capital | 56,657,801 | 52,585,582 | | Accumulated other comprehensive income | 495,440 | 522,146 | | Accumulated deficits | (50,620,293) | (49,991,515) | | Total Stockholders' Equity | 6,546,721 | 3,123,514 | | Total Liabilities and Stockholders' Equity | 11,634,504 | 9,917,403 | Condensed Consolidated Statements of Loss and Comprehensive Loss This section presents unaudited condensed consolidated statements of loss and comprehensive loss for the periods ended June 30, 2025 and 2024 Condensed Consolidated Statements of Loss and Comprehensive Loss (Unaudited) | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Net Sales | 5,191,941 | 5,064,926 | 2,556,223 | 2,688,533 | | Cost of Sales | 2,703,660 | 2,853,799 | 1,272,176 | 1,493,566 | | Gross Profit | 2,488,281 | 2,211,127 | 1,284,047 | 1,194,967 | | Total Operating Expenses | 2,878,135 | 4,197,182 | 1,480,541 | 1,692,631 | | Loss From Operations | (389,854) | (1,986,055) | (196,494) | (497,664) | | Total Other Expenses, Net | (302,181) | (35,314) | (94,410) | (60,949) | | Loss Before Income Taxes | (692,035) | (2,021,369) | (290,904) | (558,613) | | Income Tax Benefit (Expense) | 63,257 | (4,876) | 997 | (4,876) | | Net Loss | (628,778) | (2,026,245) | (289,907) | (563,489) | | Other Comprehensive Loss (Foreign currency translation) | (26,706) | (82,600) | (23,731) | (909) | | Net Loss and Comprehensive Loss | (655,484) | (2,108,845) | (313,638) | (564,398) | | Weighted average shares outstanding - Basic and Diluted | 11,766,186 | 2,387,653 | 13,729,976 | 2,538,792 | | Net loss per share of common stock - Basic and Diluted | (0.05) | (0.85) | (0.02) | (0.22) | Condensed Consolidated Statements of Stockholders' Equity This section presents the unaudited condensed consolidated statements of stockholders' equity for the periods ended June 30, 2025 and 2024 Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Three Months Ended June 30, 2025 | Metric | Shares | Amount ($) | Additional Paid-in Capital ($) | Accumulated Other Comprehensive Income ($) | (Accumulated Deficits) ($) | Total Stockholders' Equity ($) | | :--------------------------- | :---------- | :--------- | :----------------------------- | :----------------------------------------- | :------------------------- | :----------------------------- | | Balance at beginning of period | 13,708,822 | 13,709 | 56,572,145 | 519,171 | (50,330,386) | 6,774,639 | | Stock issued to employees | 1,500 | 1 | 1,469 | - | - | 1,470 | | Stock issued to consultants | 62,500 | 63 | 84,187 | - | - | 84,250 | | Foreign currency translation loss | - | - | - | (23,731) | - | (23,731) | | Net loss | - | - | - | - | (289,907) | (289,907) | | Balance at end of period | 13,772,822 | 13,773 | 56,657,801 | 495,440 | (50,620,293) | 6,546,721 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Three Months Ended June 30, 2024 | Metric | Shares | Amount ($) | Additional Paid-in Capital ($) | Other Comprehensive Income ($) | (Accumulated Deficits) ($) | Total Stockholders' Equity ($) | | :--------------------------- | :---------- | :--------- | :----------------------------- | :----------------------------- | :------------------------- | :----------------------------- | | Balance at beginning of period | 2,345,179 | 2,346 | 45,407,744 | 439,734 | (45,892,566) | (42,742) | | Stock issued to employees | 1,500 | 1 | 3,224 | - | - | 3,225 | | Stock issued to consultants | 112,500 | 113 | 222,010 | - | - | 222,123 | | Stock issued to designer | 13,248 | 12 | 29,988 | - | - | 30,000 | | Acquisition of AI-Calculation Engine | 200,000 | 200 | 399,800 | - | - | 400,000 | | Foreign currency translation loss | - | - | - | (909) | - | (909) | | Net loss | - | - | - | - | (563,489) | (563,489) | | Balance at end of period | 2,672,427 | 2,672 | 46,062,766 | 438,825 | (46,456,055) | 48,208 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Six Months Ended June 30, 2025 | Metric | Shares | Amount ($) | Additional Paid-in Capital ($) | Other Comprehensive Income ($) | (Accumulated Deficits) ($) | Total Stockholders' Equity ($) | | :--------------------------- | :---------- | :--------- | :----------------------------- | :----------------------------- | :------------------------- | :----------------------------- | | Balance at beginning of period | 7,301,206 | 7,301 | 52,585,582 | 522,146 | (49,991,515) | 3,123,514 | | Stock issued to employees | 3,000 | 3 | 2,938 | - | - | 2,941 | | Stock issued to consultants | 125,000 | 126 | 167,374 | - | - | 167,500 | | Stock issued to creditor | 434,000 | 434 | 216,566 | - | - | 217,000 | | Stock issued to suppliers | 4,909,616 | 4,909 | 3,186,341 | - | - | 3,191,250 | | Stock issued to an investor | 1,000,000 | 1,000 | 499,000 | - | - | 500,000 | | Foreign currency translation loss | - | - | - | (26,706) | - | (26,706) | | Net loss | - | - | - | - | (628,778) | (628,778) | | Balance at end of period | 13,772,822 | 13,773 | 56,657,801 | 495,440 | (50,620,293) | 6,546,721 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Six Months Ended June 30, 2024 | Metric | Shares | Amount ($) | Additional Paid-in Capital ($) | Other Comprehensive Income ($) | (Accumulated Deficits) ($) | Total Stockholders' Equity ($) | | :--------------------------- | :---------- | :--------- | :----------------------------- | :----------------------------- | :------------------------- | :----------------------------- | | Balance at beginning of period | 1,917,706 | 1,918 | 44,402,821 | 521,425 | (44,429,810) | 496,354 | | Stock issued to employees | 3,000 | 3 | 6,447 | - | - | 6,450 | | Stock issued to consultants | 225,000 | 225 | 444,024 | - | - | 444,249 | | Stock issued to designer | 26,721 | 26 | 59,974 | - | - | 60,000 | | Acquisition of AI-Calculation Engine | 300,000 | 300 | 749,700 | - | - | 750,000 | | Stock issued to an investor | 200,000 | 200 | 399,800 | - | - | 400,000 | | Foreign currency translation loss | - | - | - | (82,600) | - | (82,600) | | Net loss | - | - | - | - | (2,026,245) | (2,026,245) | | Balance at end of period | 2,672,427 | 2,672 | 46,062,766 | 438,825 | (46,456,055) | 48,208 | Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flows From Operating Activities | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net loss | (628,778) | (2,026,245) | | Depreciation and amortization | 32,058 | 29,691 | | Amortization of operating lease right-of-use assets | 366,350 | 359,086 | | Write down of inventories | 4,671 | 44,253 | | Stock based compensation expense | 170,441 | 497,794 | | Research and development | - | 750,000 | | Loss on impairment of goodwill | 218,606 | - | | Changes in credit loss | (6) | (83) | | Accounts receivable | 623 | 2,612 | | Advance to suppliers | 5,224 | 42,947 | | Inventories | 1,241,004 | 34,714 | | Other current assets | 64,373 | (109,576) | | Operating lease liabilities | (374,839) | (358,790) | | Accounts payable | (569,402) | (132,281) | | Advance from customers | (69,088) | 124,889 | | Accrued liabilities and other payables | (628,084) | 50,574 | | Taxes payable | (63,257) | - | | Net Cash Used in Operating Activities | (230,104) | (690,415) | | Cash Flows From Investing Activities | - | - | | Cash Flows From Financing Activities | | | | Repayment to loan from a shareholder | (217,000) | - | | Repayment to other loan | (1,726) | - | | Proceed from loan from a shareholder | 200,000 | 360,000 | | Proceed from issuing common stocks | 500,000 | 400,000 | | Net Cash Provided by Financing Activities | 481,274 | 760,000 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 55,753 | (75,313) | | Net Increase (Decrease) in Cash and Cash Equivalents | 306,923 | (5,728) | | Cash and Cash Equivalents, Beginning of Period | 161,902 | 369,137 | | Cash and Cash Equivalents, Ending of Period | 468,825 | 363,409 | | Supplemental Disclosure of Cash Flow Information | | | | Income tax payments | - | 4,800 | | Interest expense | 18,736 | 9,368 | Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining accounting policies and specific items Note 1 - Organization and Description of Business This note describes Nova LifeStyle, Inc.'s business, its subsidiaries, and addresses going concern issues with management's plans - Nova LifeStyle, Inc. is a U.S. holding company marketing, designing, and selling furniture globally through subsidiaries like Nova Furniture, Nova Samoa, Diamond Bar, i Design, and Nova Malaysia, with former subsidiaries sold or liquidated[30][31][37] - The Company incurred a net loss of $0.63 million and $2.03 million for the six months ended June 30, 2025 and 2024, respectively, and an accumulated deficit of $50.62 million as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern[38] - Management plans to alleviate going concern doubt by participating in U.S. furniture fairs, developing innovative home decoration design IT software systems through Nova Malaysia, and raising capital from the market[40] Note 2 - Summary of Significant Accounting Policies This note outlines the Company's significant accounting policies, including stock splits, goodwill impairment, revenue recognition, and segment reporting - A 1-for-5 reverse stock split was effective on May 22, 2023, and authorized common stock increased from 3,000,000 to 250,000,000 shares on September 5, 2023[42][43] - Goodwill was impaired as of June 30, 2025, due to the Company's financial condition, resulting in a $218,606 impairment loss recorded in non-operating expenses[48][49] - Revenue from product sales is recognized when the customer obtains control, typically upon shipment, and is recorded net of applicable discounts and allowances[75] - The Company operates as a single reportable segment, focusing on furniture design and sales, with Diamond Bar and Nova Malaysia operations viewed as one entity for business decisions[106][108] - The Company adopted ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2025-02 (Liabilities) in 2024 or 2025, with no material impact on financial statements[117][118][119] - The Company is evaluating the impact of several recently issued but not yet effective ASUs, including those related to leases, income tax disclosures, expense disaggregation, business combinations, share-based consideration, and credit losses[120][121][122][123][124][125][126][127] Note 3 - Inventories This note provides details on the Company's inventory balances and related write-downs for the reported periods Inventories (Finished Goods) | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------- | :---------------- | :-------------------- | | Total Inventories | 1,578,678 | 2,824,353 | | Inventory Write-down (6 months) | 4,671 | 44,253 | | Inventory Write-down (3 months) | 990 | 5,271 | Note 4 - Property, Plant, and Equipment, Net This note details the Company's property, plant, and equipment, net, and associated depreciation expenses Property, Plant, and Equipment, Net | Asset Category | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------- | :---------------- | :-------------------- | | Computer and office equipment | 276,104 | 271,415 | | Decoration and renovation | 408,623 | 387,288 | | Less: accumulated depreciation | (449,276) | (406,517) | | Total, Net | 235,451 | 252,186 | - Depreciation expense for the six months ended June 30, 2025, was $29,376, an increase from $27,009 in the prior year, and for the three months, it was $14,881, up from $13,493[132] Note 5 – Intangible Assets This note provides information on the Company's intangible assets, net, and their corresponding amortization expenses Intangible Assets, Net | Asset Category | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------- | :---------------- | :-------------------- | | Accounting software | 26,800 | 26,800 | | Less: accumulated amortization | (26,373) | (23,691) | | Total, Net | 427 | 3,109 | - Amortization expense for intangible assets was $2,682 for both six-month periods ended June 30, 2025 and 2024, and $1,341 for both three-month periods[133] Note 6 – Advances to Suppliers This note details the Company's advances to suppliers and confirms no impairment charges were recorded Advances to Suppliers | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------ | :---------------- | :-------------------- | | Advances to suppliers | 7,875,174 | 4,689,148 | - No impairment charges were made on advances to suppliers for the six months ended June 30, 2025, or the twelve months ended December 31, 2024[134] Note 7 – Prepaid Expenses and Other Receivables This note presents the Company's balances for prepaid expenses and other receivables for the reported periods Prepaid Expenses and Other Receivables | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------- | :---------------- | :-------------------- | | Prepaid expenses | 262,708 | 202,294 | | Other receivables | 20,706 | 17,415 | | Total | 283,414 | 219,709 | Note 8 – Accrued Liabilities and Other Payables This note provides a breakdown of the Company's accrued liabilities and other payables, including a significant consulting engagement Accrued Liabilities and Other Payables | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :----------------------------- | :---------------- | :-------------------- | | Other payables | 438,304 | 986,945 | | Salary payable | 4,688 | 8,727 | | Marketing | 10,000 | 10,000 | | Financed insurance premiums | 164,050 | 62,531 | | Auditing fee | - | 190,000 | | Warranty liability | 7,770 | 15,103 | | Accrued commission | 40,018 | 47,466 | | Accrued expenses, others | 322,635 | 362,261 | | Total | 987,465 | 1,683,033 | - Nova Malaysia engaged a consulting firm for AI Trends and Tools services for 5,000,000 Malaysian Ringgit ($1,065,235), with the remaining balance recorded as accrued expenses after 2024 payments[137] Note 9 – Other Loans This note details the Company's other loan agreements, including an SBA loan and an interest-free loan from a third party - Diamond Bar was granted a $150,000 SBA Economic Injury Disaster Loan in June 2020, maturing in June 2050 with a 3.75% annual interest rate[138] - Nova Malaysia entered into a $71,286 (300,000 Malaysian Ringgit) interest-free loan agreement with an unrelated third party in November 2024, maturing in November 2030[139] Note 10 – Related Party Transactions This note describes the Company's transactions with related parties, including lease agreements, commission expenses, and shareholder loans - The Company renewed a showroom lease with its Chairperson for $41,000 annually, with rental expenses for the six months ended June 30 being $20,500 in 2025 and $18,890 in 2024[140] - Commission expenses to a consulting firm owned by the Chairperson were $173,792 for the six months ended June 30, 2025, up from $153,043 in 2024[141] - The Company has multiple loan agreements with shareholders at an 8.5% annual interest rate, including a $200,000 loan (Feb 2024, repaid with stock in Feb 2025), a $160,000 loan (Apr 2024, extended to Apr 2026), and a new $200,000 loan (Apr 2025)[142][143][144] Note 11 – Stockholders' Equity This note details the Company's equity incentive plans, NASDAQ compliance, private placements, debt repayments, and warrant activity - The Company has three equity incentive plans (2021, 2023, and 2024) authorizing 600,000, 800,000, and 3,000,000 shares of common stock for stock rewards[145][146][148] - NASDAQ notified the Company of non-compliance with the minimum stockholders' equity requirement ($2.5 million) in April 2024, regaining compliance by October 2024 through a transaction involving 3,321,429 shares for inventory purchases totaling $4.65 million[149][151][152][153] - The Company regained compliance with NASDAQ's $1.00 minimum bid price requirement by May 27, 2025, after a December 2024 non-compliance notification[224][225] - Between May 2024 and March 2025, the Company completed private placements and debt repayments using common stock, raising $750,000 in 2024 and $500,000 in 2025, and repaying $217,000 debt with 434,000 shares[154][155][156][157][158][159][160][161][162] Warrant Activity (Six Months Ended June 30, 2025) | Metric | Number of Warrants | Average Exercise Price ($) | Remaining Contractual Term (Years) | | :--------------------------- | :----------------- | :------------------------- | :------------------------------- | | Outstanding at January 1, 2025 | 245,192 | 17.50 | 2.02 | | Exercisable at January 1, 2025 | 245,192 | 17.50 | 2.02 | | Outstanding at June 30, 2025 | 245,192 | 17.50 | 1.52 | | Exercisable at June 30, 2025 | 245,192 | 17.50 | 1.52 | - Unrecognized share-based compensation expense was $25,970 as of June 30, 2025[188] Note 12 – Geographical Analysis This note provides a geographical breakdown of the Company's net sales and long-lived assets for the reported periods Net Sales by Geographical Area (Unaudited) | Geographical Areas | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :----------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | North America | 5,174,070 | 4,957,058 | 2,556,223 | 2,631,328 | | Other countries | 17,871 | 107,868 | - | 57,205 | | Total | 5,191,941 | 5,064,926 | 2,556,223 | 2,688,533 | Long-Lived Assets by Geographical Area | Geographical Areas | June 30, 2025 ($) | December 31, 2024 ($) | | :----------------- | :---------------- | :-------------------- | | North America | 1,002,830 | 1,281,203 | | Asia | 389,402 | 413,302 | | Total | 1,392,232 | 1,694,505 | Note 13 – Lease This note details the Company's operating and finance lease agreements, including expenses and maturity schedules - The Company holds various operating and finance lease agreements for office, warehouse, and showroom spaces in the United States and Malaysia, with the main U.S. lease extended to October 31, 2026[190][191][192][193][194][195][196][197] Operating Lease Expense (Unaudited) | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :----------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Operating lease cost | 375,157 | 366,327 | 192,719 | 183,138 | Maturities of Operating Lease Liabilities (as of June 30, 2025) | Year | Operating Leases ($) | | :--- | :------------------- | | 2025 | 379,690 | | 2026 | 653,567 | | 2027 | 54,747 | | 2028 | 45,623 | | Thereafter | - | | Total undiscounted cash flows | 1,133,627 | | Less: imputed interest | (30,223) | | Present value of lease liabilities | 1,103,404 | Finance Lease Expense (Unaudited) | Metric | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :---------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Finance lease cost | 22,503 | 22,503 | 11,251 | 11,251 | Maturities of Finance Lease Liabilities (as of June 30, 2025) | Year | Operating Leases ($) | | :--- | :------------------- | | 2025 | 12,991 | | 2026 | 22,180 | | 2027 | 20,332 | | Thereafter | - | | Total undiscounted cash flows | 55,503 | | Less: imputed interest | (3,277) | | Present value of lease liabilities | 52,226 | Note 14 – Commitments and Contingencies This note addresses the Company's commitments and contingencies, specifically detailing the dismissal of shareholder derivative lawsuits - Two shareholder derivative lawsuits (Jie Action and Samuels Action) against current and former officers/directors were dismissed without prejudice on February 6, 2025, after being stayed pending resolution of the Barney Action[203][204][205][206][207] Note 15 – Subsequent Events This note discloses subsequent events, specifically a public offering of common stock and warrants aiming for significant gross proceeds - The Company is offering up to 5,863,192 shares of common stock and up to 11,726,384 warrants, aiming for gross proceeds of approximately $9.0 million, with an assumed exercise price of $1.84 per warrant[210] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of the Company's financial condition, results of operations, and NASDAQ compliance Overview This section provides an overview of Nova LifeStyle, Inc.'s business as a furniture distributor, its strategic shifts, and NASDAQ compliance status - Nova LifeStyle, Inc. is a distributor of contemporary residential and commercial furniture, operating through global subsidiaries under brands like Nova LifeStyle, Diamond Sofa, and Nova Living[214][215][217] - The Company exited the Jade Mats business in 2023 after $2.00 million in liquidation sales, with Nova Malaysia now developing innovative home decoration design IT software systems[221] - The Company regained compliance with NASDAQ's minimum stockholders' equity requirement ($2.5 million) by October 2024 and the $1.00 minimum bid price requirement by May 2025[223][225] Principal Factors Affecting Our Financial Performance This section discusses key factors influencing the Company's financial performance, including product strategy, economic conditions, and manufacturing shifts - The Company shifted focus from low-margin products to higher-end home furnishings, launching new collections to attract designers, stagers, and retailers, aiming for improved gross profit margins and long-term growth[226] - Key factors affecting operating results include product pricing, general economic conditions in the U.S., China, and international markets, trade wars, tariffs, high interest rates, inflation, and a real estate market slowdown[226] - The Company is exploring shifting manufacturing from China to other Asian countries due to tariffs, but most manufacturing remains in China due to quality and intellectual know-how[226] Critical Accounting Policies This section outlines the Company's critical accounting policies and estimates, including revenue recognition, inventory valuation, and income taxes - No material changes occurred to the Company's critical accounting policies and estimates compared to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024[228] - The Company's unaudited condensed consolidated financial statements conform with U.S. GAAP, consolidating Nova LifeStyle and its subsidiaries[229] - A 1-for-5 reverse stock split was effective May 22, 2023, and authorized shares increased from 3,000,000 to 250,000,000 on September 5, 2023[230][231] - Management makes significant estimates and assumptions for revenue recognition, bad debt allowance, inventory valuation, stock-based compensation, income taxes, deferred tax assets, asset impairment, and loss contingencies[232] - The allowance for expected credit losses on accounts receivable was $361 as of June 30, 2025, with a reversal provision of ($6) for the six months ended June 30, 2025[233] - Income tax benefit for the six months ended June 30, 2025, was ($63,257), primarily attributable to California state taxes and a true-up for Jade Mats inventory impairment[235][295] - Foreign currency translation for U.S. dollar financial statements involves translating assets and liabilities at current exchange rates and revenues and expenses at average rates, with differences recorded in accumulated other comprehensive income[258] - The Company operates as a single reportable segment, focusing on furniture design and sales, with Diamond Bar and Nova Malaysia operations viewed as a whole for business decisions[261][262] New Accounting Pronouncements This section discusses the Company's adoption of new accounting standards and its evaluation of recently issued but not yet effective ASUs - The Company adopted ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2025-02 (Liabilities) in 2024 or 2025, with no material impact on financial statements[264][265][266] - The Company is evaluating the impact of several recently issued but not yet effective ASUs, including those related to leases, income tax disclosures, expense disaggregation, business combinations, share-based consideration, and credit losses[267][268][269][270][271][272][273][274] Results of Operations This section provides a detailed comparison of the Company's financial results for the three and six months ended June 30, 2025 and 2024 Comparison of Three Months Ended June 30, 2025 and 2024 This section compares the Company's net sales, gross profit, operating expenses, and net loss for the three months ended June 30, 2025 and 2024 Summary of Operations (Three Months Ended June 30, 2025 vs. 2024) | Metric | 2025 ($) | % of Sales (2025) | 2024 ($) | % of Sales (2024) | Change ($) | Change (%) | | :--------------------------- | :---------- | :---------------- | :---------- | :---------------- | :---------- | :--------- | | Net sales | 2,556,223 | | 2,688,533 | | (132,310) | (4.9%) | | Cost of sales | (1,272,176) | (50%) | (1,493,566) | (56%) | 221,390 | (14.8%) | | Gross profit | 1,284,047 | 50% | 1,194,967 | 44% | 89,080 | 7.5% | | Operating expenses | (1,480,541) | (58%) | (1,692,631) | (63%) | 212,090 | (12.5%) | | Loss from operations | (196,494) | (8%) | (497,644) | (19%) | 301,150 | (60.5%) | | Other (expenses) income, net | (94,410) | (4%) | (60,949) | (2%) | (33,461) | 54.9% | | Income tax benefit (expense) | 997 | 0% | (4,876) | 0% | 5,873 | (120.4%) | | Net loss | (289,907) | (11%) | (563,489) | (21%) | 273,582 | (48.5%) | - Net sales decreased by 5% to $2.56 million, primarily due to a 12% decrease in sales volume, partially offset by a 26% increase in average selling price, with North America sales decreasing by 3% and other countries by $0.05 million[278][279] - Gross profit increased by $0.09 million to $1.28 million, with gross profit margin rising from 44% to 50%, mainly due to selling higher-margin products[281] - Operating expenses decreased by $0.21 million to $1.48 million, driven by reduced marketing and advertising expenses ($0.10 million decrease), lower stock compensation, travel, and designer fees, partially offset by increased legal/professional fees and insurance[283] - Net loss decreased by 48.5% to $0.29 million, compared to $0.56 million in the prior year, primarily due to improved gross profit and reduced operating expenses[286] Comparison of Six Months Ended June 30, 2025 and 2024 This section compares the Company's net sales, gross profit, operating expenses, and net loss for the six months ended June 30, 2025 and 2024 Summary of Operations (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 ($) | % of Sales (2025) | 2024 ($) | % of Sales (2024) | Change ($) | Change (%) | | :--------------------------- | :---------- | :---------------- | :---------- | :---------------- | :---------- | :--------- | | Net sales | 5,191,941 | | 5,064,926 | | 127,015 | 2.5% | | Cost of sales | (2,703,660) | (52%) | (2,853,799) | (56%) | 150,139 | (5.3%) | | Gross profit | 2,488,281 | 48% | 2,211,127 | 44% | 277,154 | 12.5% | | Operating expenses | (2,878,135) | (55%) | (4,197,182) | (83%) | 1,319,047 | (31.4%) | | Loss from operations | (389,854) | (7%) | (1,986,055) | (39%) | 1,596,201 | (80.4%) | | Other (expenses) income, net | (302,181) | (6%) | (35,314) | (1%) | (266,867) | 755.7% | | Income tax benefit (expense) | 63,257 | 1% | (4,876) | 0% | 68,133 | (1397.4%) | | Net loss | (628,778) | (12%) | (2,026,245) | (40%) | 1,397,500 | (69.0%) | - Net sales increased by 3% to $5.19 million, driven by a 32% increase in average selling price despite a 22% decrease in sales volume, with North America sales increasing by 4% and other countries decreasing by $0.09 million[289][290] - Gross profit increased by $0.28 million to $2.49 million, with gross profit margin rising from 44% to 48%, due to selling higher-margin products[292] - Operating expenses decreased by $1.32 million to $2.88 million, primarily due to a $0.33 million decrease in selling expenses, a $0.24 million decrease in G&A, and a $0.75 million decrease in R&D spending[293] - Other expenses, net, increased significantly by $266,867 to $302,181, mainly due to a $218,606 loss on impairment of goodwill in 2025[294] - Net loss decreased by 69% to $0.63 million, compared to $2.03 million in the prior year, driven by reduced operating expenses and improved gross profit, despite increased other expenses[296] Liquidity and Capital Resources This section analyzes the Company's liquidity, capital resources, cash flow activities, and working capital position - The Company's primary liquidity demands for sales, inventory, and general corporate purposes are met through cash flow from operations, accounts receivable collections, and potential external financing[297][298] Cash Flows Summary (Six Months Ended June 30, 2025 vs. 2024) | Activity | 2025 ($) | 2024 ($) | Change ($) | | :----------------- | :---------- | :---------- | :--------- | | Operating activities | (230,104) | (690,415) | 460,311 | | Investing activities | - | - | 0 | | Financing activities | 481,274 | 760,000 | (278,726) | - Net cash used in operating activities decreased by $0.46 million to $0.23 million outflow, primarily due to a $1.39 million decrease in net loss and a $1.21 million increase in cash inflow from inventory, partially offset by a $0.44 million increase in cash outflow for accounts payable[300] - Net cash provided by financing activities decreased by $0.28 million to $0.48 million, reflecting $0.20 million borrowed from a shareholder and $0.50 million from stock sales in 2025, compared to $0.36 million borrowed and $0.40 million from stock sales in 2024, plus a $0.22 million debt repayment via stock in 2025[302] - Working capital increased by $3,649,536 to $5,755,700 at June 30, 2025, from $2,106,164 at December 31, 2024, with a current ratio of 2.28-to-1[299] - Advances to suppliers increased to $7,875,174 at June 30, 2025, from $4,689,148 at December 31, 2024[304] Off-Balance Sheet Arrangements This section confirms the Company has no material off-balance sheet arrangements, financial guarantees, or variable interests - The Company has no material off-balance sheet arrangements, financial guarantees, derivative contracts indexed to its shares, or variable interests in unconsolidated entities[309][310] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that no quantitative and qualitative disclosures about market risk are required for this report - Not required[311] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[312] - No material changes in internal control over financial reporting occurred during or subsequent to the period covered by this report[314] PART II. OTHER INFORMATION This part contains other information not included in the financial statements, such as legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section refers to legal proceedings in the financial statement notes, confirming no other material legal proceedings are pending - No other material legal proceedings, investigations, or claims are currently pending beyond those discussed in the financial statement notes[317] Item 1A. Risk Factors This section indicates that risk factors are not applicable for this quarterly report - Not Applicable[318] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report - None[318] Item 5. Other Information This section reports that no directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarterly period[318] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the cover page interactive data file - The report includes certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[320] Signatures The report was signed by Nova LifeStyle, Inc.'s CEO, Xiaohua Lu, and CFO, Jeffery Chuang, on August 14, 2025 - The report was signed by Xiaohua Lu (Chief Executive Officer) and Jeffery Chuang (Chief Financial Officer) on August 14, 2025[323]