Nova LifeStyle(NVFY) - 2023 Q3 - Quarterly Report

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].