Filed 2025-03-31 · Period ending 2024-12-31 · 55,671 words · SEC EDGAR
← XWIN Profile · XWIN JSON API
# XMax Inc. (XWIN) — 10-K **Filed:** 2025-03-31 **Period ending:** 2024-12-31 **Accession:** 0001641172-25-001773 **Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1473334/000164117225001773/) **Origin leaf:** b5bffebaa5edc659bfeb5f0e2b0b06142033c90fe1f0200ca9bd1b16bf61ab41 **Words:** 55,671 --- ** UNITED STATES** **SECURITIES AND EXCHANGE COMMISSION** **Washington, D.C. 20549** **FORM 10-K** **** **** **** (Mark One) | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | **For the fiscal year ended December 31, 2024** **OR** | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | **For the transition period from ______________to_______________** **Commission file number: 001-36259** **NOVA LIFESTYLE, INC.** *(Exact name of registrant as specified in its charter)* | Nevada | | 90-0746568 | | | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | | 6565 E. Washington Blvd. Commerce, CA | | 90040 | | | (Address of principal executive offices) | | (Zip Code) | | **Registrant****s telephone number, including area code: (323) 888-9999** **Securities registered pursuant to Section 12(b) of the Act:** | 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 | | **Securities registered pursuant to Section 12(g) of the Act:** None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act. | Large accelerated filer | Accelerated filer | | | Non-accelerated filer | Smaller reporting company | | | Emerging growth company | | | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b). Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No As of June 28, 2024, the registrants most recently completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $3.66 million, based upon the closing price of the Companys common stock of $1.63 per share as reported on the same date. As of March 28, 2025, there were 13,207,322 shares of common stock outstanding. **DOCUMENTS INCORPORATED BY REFERENCE:** The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2024. Portions of such definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K. | Auditor Firm ID: | 6907 | Auditor Name: | Enrome, LLP | Auditor Location: | Singapore | | | | | **NOVA LIFESTYLE, INC.** **Table of Contents** | | | | Page | | | PART I | | | | | | | | | | | Item 1. | Business | | 1 | | | Item 1A. | Risk Factors | | 7 | | | Item 1B. | Unresolved Staff Comments | | 18 | | | Item 1C. | Cybersecurity | | 18 | | | Item 2. | Properties | | 18 | | | Item 3. | Legal Proceedings | | 19 | | | Item 4. | Mine Safety Disclosures | | 19 | | | | | | | | | PART II | | | | | | | | | | | Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | 20 | | | Item 6. | [Reserved] | | 20 | | | Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations | | 20 | | | Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | | 31 | | | Item 8. | Financial Statements and Supplementary Data | | 31 | | | Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | | 31 | | | Item 9A. | Controls and Procedures | | 31 | | | Item 9B. | Other Information | | 32 | | | Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | | 32 | | | | | | | | | PART III | | | | | | | | | | | Item 10. | Directors, Executive Officers and Corporate Governance | | 33 | | | Item 11. | Executive Compensation | | 33 | | | Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | 33 | | | Item 13. | Certain Relationships and Related Transactions, and Director Independence | | 33 | | | Item 14. | Principal Accounting Fees and Services | | 33 | | | | | | | | | PART IV | | | | | | | | | | | Item 15. | Exhibits, Financial Statement Schedules | | 34 | | | | Financial Statements | | F-1 | | | i | | | Table of Contents | | **NOTE ABOUT FORWARD-LOOKING STATEMENTS** This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, regarding our company that include, but are not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These forward-looking statements are based on our current expectations, estimates and projections about our industry, managements beliefs and certain assumptions made by us. Words such as anticipates, expects, intends, plans, predicts, potential, believes, seeks, hopes, estimates, should, may, will, with a view to and variations of these words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. These forward-looking statements involve various risks and uncertainties. Although we believe our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations, Our Business and other sections in this report. You should read this report and the documents we refer to thoroughly with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this report include additional factors which could adversely impact our business and financial performance. This report contains statistical data we obtained from various publicly available government publications and industry-specific third-party reports. Statistical data in these publications also include projections based on a number of assumptions. The markets for our products may not grow at the rate projected by market data, or at all. The failure of these markets to grow at the projected rates may have a material adverse effect on our business and the market price of our securities. In addition, the rapidly changing nature of our customers industries results in significant uncertainties in any projections or estimates relating to the growth prospects or future condition of our markets. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements. Unless otherwise indicated, information in this report concerning economic conditions and our industry is based on information from independent industry analysts and publications, as well as our estimates. Except where otherwise noted, our estimates are derived from publicly available information released by third party sources, as well as data from our internal research, and are based on such data and our knowledge of our industry, which we believe to be reasonable. None of the independent industry publication market data cited in this report was prepared on our or our affiliates behalf. The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents we refer to in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. As used in this report, Nova LifeStyle, Nova, the Company, we, our and similar terms refer to Nova LifeStyle, Inc. and its subsidiaries, unless the context indicates otherwise. Our functional currency is the U.S. Dollar, or USD. See Note 2 of the consolidated financial statements included herein. | ii | | | Table of Contents | | **PART I** **Item 1. Business** **Our Company** Nova LifeStyle, Inc. (Nova LifeStyle or the Company) is a U.S.-headquartered innovative designer and marketer of contemporary styled residential and commercial furniture formerly known as Stevens Resources, Inc. We were incorporated in the State of Nevada on September 9, 2009. The Companys products are marketed through wholesale and retail channels as well as various online platforms worldwide. Nova LifeStyles family of brands includes Nova LifeStyle, Diamond Sofa (www.diamondsofa.com) and Nova Living. Our business strength lies in our abilities to quickly adapt to changing market demand and stay ahead of the latest trends in modern furniture designs. Our customers principally consist of designers, distributors and retailers who cater to mid-level and high-end private label home furnishings that have little product overlap within our specific furnishings products or product lines. Nova LifeStyle is constantly seeking to integrate new sources of distribution and manufacturing that are aligned with our growth strategies, allowing us to continually focus on growing our customer base as well as driving the expansion of our overall distribution and manufacturing relationships worldwide, providing our customers with trendy furnishing solutions. We generate the majority of our sales as a branding and marketing company with vertically integrated third-party manufacturing capabilities for global furniture distributors and large national retailers. We have established long term relationships with our worldwide customers by providing them with high quality, large scale and cost-effective sourcing solutions. Our worldwide logistics and delivery capabilities provide our customers with the flexibility to select from our extensive furniture collections tailored for their respective needs. Our experience marketing products to international customers have enabled us to fully integrate the supply scale, product delivery logistics, marketing efficiency and design expertise to address customer demand from established markets in the North America, Central America, South America, Asia, and the Middle East. **Reverse split** On December 18, 2019, the Company filed a Certificate of Change with the Secretary of State of Nevada with an effective date of December 20, 2019, at which time a 1-for-5 reverse stock split of the Companys authorized shares of common stock, par value $0.001, accompanied by a corresponding decrease in the Companys issued and outstanding shares of common stock, was effected. On May 22, 2023, the Company filed a Certificate of Change with the Nevada Secretary of State to effect another 1-for-5 reverse stock split, accompanied by a corresponding decrease in the Companys issued and outstanding shares of common stock. On September 5, 2023, Nova LifeStyle, Inc., a Nevada corporation (the Company) filed the Certificate of Change (the Amendment) with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to increase the amount of authorized shares of its common stock, par value $0.001 per share, from 3,000,000 to 250,000,000. The Amendment was approved by the Companys Board of Directors (the Board) on June 28, 2023 and by the shareholders at a special meeting of the Companys shareholders held on August 31, 2023. The Amendment does not affect the rights of the Companys shareholders and was effective immediately upon filing. There was no change in the par value of our common stock. All references to shares and per share data have been retroactively restated to reflect such splits. **Human Capital Resources** We understand that our success depends on our ability to attract, train and retain our employees. We strive to attract, recruit, and retain employees through competitive compensation and benefit programs, learning and development opportunities that support career growth and advancement opportunities, and employee engagement initiatives that foster a strong Company culture. In addition to cash compensation, we offer customary benefits in accordance with local regulatory requirements as well as stock options to our employees. We also recognize the importance of keeping our employees safe. In response to the COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees and have followed local government orders to prevent the spread of COVID-19. As of December 31, 2024, we had 27 full time employees worldwide. Our U.S. corporate office and operations employed 24 full-time employees, our location in Malaysia employed 3 full-time employees, respectively. We believe that relations with our employees are satisfactory. We have no collective bargaining agreements with our employees. | 1 | | | Table of Contents | | **** **Our History** We are a U.S. holding company that operates through several wholly-owned subsidiaries. We design and market residential and commercial furniture products worldwide. Our subsidiaries include Nova Furniture Limited in the British Virgin Islands (Nova Furniture), Nova Furniture Limited in Samoa (Nova Samoa), Diamond Bar Outdoors, Inc. (Diamond Bar), I Design Blockchain Technology, Inc (i Design), Nova Living (M) SDN. BHD. (Nova Malaysia) and Nova Living (HK) Group Limited (Nova HK). Diamond Bar is a California corporation organized on June 15, 2000, which we acquired pursuant to a stock purchase agreement on August 31, 2011. On April 24, 2013, we acquired all of the outstanding stock of Bright Swallow International Group Limited (Bright Swallow). On September 23, 2016, Nova Furniture, a wholly-owned subsidiary of the Company (the Seller), entered into a Share Transfer Agreement (the Agreement) with Kuka Design Limited, an unrelated company incorporated in British Virgin Islands (Kuka Design BVI or Buyer). Pursuant to the terms of the Agreement, the Seller sold all of the outstanding equity interests in Nova Furniture (Dongguan) Co., Ltd. (Nova Dongguan), a company incorporated in China and a wholly owned subsidiary of the Seller, to the Buyer for a total of $8,500,000 (the Transaction). Upon consummation of the Transaction on October 25, 2016, the Buyer became the sole owner of Nova Dongguan. On November 10, 2016, Nova Furniture entered into a Trademark Assignment Agreement with Kuka Design BVI (Assignee). Pursuant to the terms of the Trademark Assignment Agreement, Nova Furniture assigned the Assignee its full right to, and title in, the NOVA trademark in China for $6,000,000. On December 7, 2017, Nova LifeStyle, Inc. incorporated i Design under the laws of the State of California, USA. The purpose of i Design is to build our own blockchain technology team. This new company will focus on application of blockchain technology in the furniture industry, including encouraging and facilitating interactions among designers and customers, and building blockchain-powered platform that enables designers to showcase their products including current and future furniture designs. This company is in a planning stage and has had minimum operations to date. On December 12, 2019, Nova LifeStyle, Inc. acquired Nova Malaysia which was incorporated in Malaysia on July 26, 2019. Nova Malaysia was acquired to market and sell high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia. On January 7, 2020, the Company transferred its entire interest in Bright Swallow to Y-Tone (Worldwide) Limited an unrelated third party, for cash consideration of $2.50 million, pursuant to a formal agreement entered into on January 7, 2020. We received the payment on May 11, 2020. Operations of Bright Swallow were reported as discontinued operations in the accompanying consolidated financial statements for all periods presented. Nova Furniture Macao Commercial Offshore Limited (Nova Macao) was organized under the laws of Macao on May 20, 2006 as a wholly owned subsidiary of Nova Furniture. On October 14, 2020, the Macao Trade and Investment Promotion Institute approved that Nova Macaos offshore license became invalid under the order of Repeal of Legal Regime of the Offshore Services by Macao Special Administrative Region. Nova Macao was de-registrated and liquidated in January 2021 and its business was taken over by Nova HK. On November 5, 2020, Nova LifeStyle, Inc. acquired Nova HK from unrelated third party at cost of $1,290 which was incorporated in Hong Kong on November 6, 2019. Nova HK took over Nova Macaos business upon its deregistration. Nova HK had minimum operations in 2021. On February 15, 2022, the Company transferred its entire assets and business in Nova HK to Nova Malaysia. In February 2023, Nova HK was completed the process of de-registration and liquidation. Operations of Nova HK were reported as discontinued operations in the accompanying consolidated financial statements for all periods presented. Our organizational structure as of December 31, 2024 is set forth in the diagram: * | 2 | | | Table of Contents | | **** **Our Products** We design and market modern residential and commercial furniture in diverse markets worldwide. Our products feature urban and contemporary styles, combining comfort and functionality in matching furniture collections and upscale luxury pieces appealing to lifestyle-conscious middle and upper middle-income consumers. Many of our products are segments of multi-component furniture collections in distinctive design styles, attractively priced in the medium and upper-medium ranges. Our product lines feature upholstered, wood and metal-based furniture pieces. We classify our products by room, designation or series, such as living room, dining room, bedroom and home office series, and by category or product types such as sofas, chairs, dining tables, beds, entertainment consoles, cabinets and cupboards. Our largest selling product categories for the year ended December 31, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 8% of sales from continuing operations, respectively. For the year ended December 31, 2023, our largest selling product categories were sofas, beds and chairs, which accounted for approximately 37%, 18% and 13% of sales from continuing operations, respectively. Our products are manufactured primarily from medium-density fiberboard, or MDF board, and particleboard covered with veneers or lacquers and combined with other materials, including steel, glass, marble, leather, jade and fabrics. Our product offerings consist of a mix of furnishings designed by us, and sourced from third party manufacturers that are supervised under our rigorous quality control processes. Through market research, customer feedback, and ongoing design development, we identify the latest trends and customer needs in target markets to develop new products, collections and brands. Our product collections are designed to appeal to consumer preferences in specific markets. We develop both individual furniture pieces and complete furniture collections that equip an entire home which feature matching furniture suites, providing convenient home furnishing options for lifestyle-conscious consumers. We introduce new collections and launch new design styles at international furniture exhibitions or trade fairs. Our products are displayed in our showrooms. We further support our new product launches with product brochures and online marketing campaigns. Our staff collects customer feedback and collaborates with customers worldwide to design store and showroom layouts. In marketing materials, we highlight matching furniture collections by displaying complete and fully accessorized whole-room settings instead of individual furniture pieces. We believe that such in-store presentations provide convenient, one-stop solutions to customers, and thus incentivize clients to purchase an entire room of furniture from us instead of shopping for individual pieces offered by different brands or manufacturers. Our products are mainly designed by our own designers and we also used independent designers in the past for product design. Customer orders are filled by third party manufacturers under our direct quality control. We believe that our products feature superior materials, attractive appearances, superb functionalities and satisfying price points generally desired by todays middle to upper middle-income consumers worldwide. | 3 | | | Table of Contents | | **International Markets** We have been selling products to the U.S., Canada, Honduras, Jamaica, Puerto Rico, Colombia, Mexico, Cayman Islands, Saudi Arabia, Kuwait, and Middle Eastern markets under the Diamond Sofa brand and selling our Jade Mats in Malaysia through Nova Malaysia. We believe that discretionary purchases of furniture by middle to upper middle-income consumers will continue to increase in the furniture markets worldwide. We also believe that furniture products that feature contemporary design styles such as ours will continue to attract significant customer demand. In 2024, our products were sold in 11 countries worldwide, with North America as our principal international market. Sales to North America accounted for 97.4% and 79.1% of our total sales for 2024 and 2023, respectively. Sales to other regions accounted for 2.6% and 20.9% of our total sales for 2024 and 2023, respectively. In 2023, via our subsidiary, Nova Malaysia, we marketed and sold high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia. Due to the negative impact caused by COVID-19 in 2021 and 2022, we eventually sold the entire jade mats inventory for $2.00 million in liquidation sales in June 2023 and existed from Jade Mats business. As we continue to broaden our distribution network, increase direct sales and grow in the emerging markets, we believe that we are well positioned to respond to changing market conditions that will allow us to take advantage of any upturns in the global and local economies of the markets that we serve. Our expansion in Malaysia with health line products was disrupted due to COVID-19. Our initial plan was to establish showrooms in which consumers can interact with our products. Through research, we found that consumers were becoming more self-aware about their health and were willing to improve their lifestyles. Our showrooms were stocked and ready for local consumers to visit, however, due to government regulations these operations have been suspended until quarantines and travel restrictions are lifted. In October 2021, the Order was lifted for people who are fully vaccinated and our store has reopened since. We started the online sales of our jade mats products in Malaysia since 2021. In April 2022, Malaysia reopened the border for foreign visitors. In June 2023, everything is back to normal in Malaysia. Due to the negative impact caused by COVID-19 from 2020 to 2022, the Company eventually sold the entire jade mats inventory for $2.00 million in liquidation sales in June 2023 and existed from Jade Mats business. The furniture wholesale business faces several risks that can impact its operations and profitability. Some common risks include: (i) Economic Instability: Fluctuations in the economy can affect consumer spending on furniture, leading to decreased demand for products; (ii) Competition: Intense competition from other wholesalers, retailers, and online platforms can impact market share and pricing strategies; (iii) Supply Chain Disruptions: Interruptions in the supply chain, such as delays in shipping or shortages of raw materials or finished products, can hinder production and delivery schedules; (iv) Changing Consumer Preferences: Shifts in consumer preferences towards sustainable, trendy, or customized furniture may require wholesalers to adapt their product offerings; (v) Seasonal Demand: The furniture industry often experiences seasonal peaks and troughs, which can impact cash flow and inventory management; (vi) Tariff and Regulatory Challenges: Increase of import tariff for furniture products and compliance with regulations related to product safety, environmental standards, and labor practices can add complexity and costs to operations. In order to mitigate these risks, we will continue to diversify our product range, build strong relationships with suppliers, closely monitor market trends and changes in tariffs and regulations, invest in technology for efficiency, and maintain a robust risk management strategy. Our global logistics and delivery capabilities provide our customers with the flexibility to select from our extensive furniture collections to address their respective needs. We design and supply our products under our own brands. We also design and ship products for other major brands as their OEM designer or supplier. We offer a wide selection of stand-alone furniture pieces across a variety of product categories and approximately over 63 products developed exclusively for the international markets. We also sell products under the Diamond Sofa brand to distributors and retailers in North America, South America, Asia and Middle East and to end-user U.S. consumers our own online orders or through third-party shopping portals. Reflecting market demand, our research and development team works closely with customers to timely modify our existing product designs. We also offer custom-designed styles for specific market segments. **Sales and Marketing** Our sales and marketing strategies target middle and upper middle class, urban consumers, including: (1) direct sales to the U.S. and international customers; (2) internet sales and online marketing campaigns; and (3) participation in exhibitions and trade shows. We diversify our customer base by increasing direct sales to a broad range of retailers and chain stores across the U.S. and international markets. We plan to continue to expand our direct sales and marketing efforts in North America, and in particular the U.S., which historically is the largest market worldwide for imported furniture. We intend to expand the Diamond Sofa brand and introduce new brands for direct sales in the U.S. and international markets while continuing to offer custom-made products under private label. Diamond Bar also currently sells products under the Diamond Sofa brand in the U.S. through third party shopping portals, shipping orders received online directly to the end customer. We believe that our planned direct-to-consumer online sales and marketing strategies will increase our sales in the U.S. by building our brand awareness and acting as an effective advertising vehicle. We also support new product collections and brand launches with print and online advertising campaigns, participation in furniture exhibitions and by offering product brochures and samples. We provide samples and brochures of new products for international markets to distributors and buyers, as is common in the furniture industry. | 4 | | | Table of Contents | | We gain new customers by attending many international furniture trade shows throughout the years. During these events, we introduce new product offerings and launch new design collections. We believe this marketing process helps us to develop and detect the latest-trends in the marketplace, allowing us to better understand the challenges and opportunities facing distributors and buyers with whom we have longstanding customer relationships. We exhibit new products under the Diamond Sofa brand during the Las Vegas Market (U.S.) and the High Point Market (U.S.) trade shows. Internationally, we participate in trade fairs in collaboration with our customers. We plan to expand our business in the Middle East by attending several furniture exhibitions in those markets, such as trade show in Dubai. To highlight our latest design collections, we maintain year-round showrooms at the Companys headquarters in California as well as the High Point Market and Las Vegas Market. In 2023, via our subsidiary Nova Malaysia, we sold our entire high-end physiotherapeutic jade mats to an unrelated party and existed the jade mats business in Malaysia. **Suppliers and Manufacturers** We source finished goods from third-party manufacturers to fulfill orders placed by customers through Diamond Bar and Nova Malaysia for the U.S. and international markets. One of our principal suppliers of finished goods in 2024 accounted for approximately 16% of our total purchases from operations for 2024. By maintaining relationships with multiple suppliers, generally we benefit from a more stable supply chain and better pricing. Under ordinary circumstances, if a change of suppliers is necessary, we believe that we can quickly fulfill our requirements from other suppliers without interruptions in order fulfillment. We monitor our suppliers ability to meet our product needs and we participate in quality assurance activities to reinforce our high-quality standards. Our third-party manufacturing contracts are generally of annual or shorter term durations. We issue production orders to manufacturers based on individual purchase orders. Our manufacturing relationships are non-exclusive, and we are permitted to procure products from other sources at our discretion. None of our manufacturing contracts include production volume or purchase commitments on the part of either party. Our third-party manufacturers are responsible for sourcing raw materials, agreeing to produce parts and finished products to our specifications. We hold our suppliers to high quality standards and delivery deadlines. Our quality control procedures may extend to stringent requirements for raw material suppliers. **Customers** Our target end customer is the middle and upper middle-income consumer of residential and commercial furniture. In the U.S. and international markets, our sales principally are to furniture distributors and retailers who in turn offer our products under their own brands or under our Diamond Sofa brand. No customer accounted for greater than 10% of our total sales in 2024 and one customer accounted for 18% of our total sales in 2023, respectively. We will increase direct sales to retailers and chain stores worldwide as we continue to diversify our customer base from global furniture distributors. | 5 | | | Table of Contents | | We are focusing on establishing and growing long-term relationships with our customers. We believe that the majority of our customers view us as a strategic long-term supplier and value the quality of our products, our timely delivery and design capabilities. We generally negotiate renewable supplier agreements with firm pricing on our products, typically for a term of one year, as is customary in the furniture industry, with individual orders made on standard purchase orders. In 2024, we sold products into approximately 11 countries worldwide, with North America as our principal international market, while we expanded our sales in other regions. Sales to North America accounted for 97.4% and 79.1% of our total sales from continuing operations for 2024 and 2023, respectively. The change was attributed principally to our changing sales and marketing strategy to focus on sales in the U.S. Sales to other regions accounted for 2.6% and 20.9% of our total sales from continuing operations for 2024 and 2023, respectively. We expect that a majority of our revenues will continue to come from our sales to the U.S. Diamond Bar has driven expansion of our sales to the U.S., Mexico, and South America through Diamond Bars longstanding customer relationships and distribution capabilities. Diamond Bars revenues accounted for 100.0% and 82.4% of our total sales for 2024 and 2023, respectively, and Nova Malaysias revenues accounted for 0.0% and 17.6% of our total sales for 2024 and 2023, respectively. In addition, we anticipate increasing internet sales under the Diamond Sofa brand through third-party shopping portals and Nova Malaysias website. We believe that as we expand our broad network of distributors and increase direct sales, we will be better positioned to capitalize on emerging market trends. We typically used to experience stronger fourth calendar quarters as our product sales are subject to the seasonality and fluctuations typical of the furniture industry. This industry-based seasonality was generally caused by shipping lead-times to international markets combined with the real estate market slowdown and decrease in furniture consumption commonly experienced during the summer months in the Northern Hemisphere markets in which the majority of our customers are located and our products sell at retail. We believe that consumer demand for furniture generally reflects sensitivity to overall economic conditions, including, but not limited to, tariffs, unemployment rates, housing market conditions and consumer confidence. **Competition** The furniture industry is large and highly competitive. The industry consists of many manufacturers, distributors and retailers, none of which dominates the fragmented and diverse market. Our products principally compete in the U.S., Canada, Honduras, Jamica, Puerto Rico, Colombia, Mexico, Cayman Islands, Saudi Arabia, Kuwait and Malaysia and Middle Eastern markets. The primary competitive factors in these markets for our products and target consumers are price, quality, style, marketing, functionality and availability. In the U.S. and international markets, we compete against other furniture distributors and wholesalers which are mostly located in China and other Southeast Asian countries. We also compete against traditional distributors in North America and Europe. We believe that we have significant competitive advantages over North American and European distributors due to our superb customer service and a history of prompt delivery of high-quality products. Our contemporary product designs have styles and functionality that are better than, or at least comparable to, those offered by our higher-priced competitors. Our design team closely coordinates with our sales and marketing staff to include customer feedback as part of their ongoing R&D improvement process, thus allows the Company to develop and timely modify products to meet the changing stylistic and functional demands from our worldwide customers. We believe that our decades of product experience and proven performance record offer competitive edges over many other suppliers. In addition to our design and logistical capabilities, we believe that our experience from sourcing custom-made products for distributors presents significant benefits to our customers. **Trade and Tariff** On February 1, 2025, President Trump issued executive orders imposing a 25% tariff on products imported from Canada and Mexico (initially suspended for 30 days) and a 10% tariff on products imported from China, effective February 4, 2025. An additional 10% increase in the China tariffs became effective March 4, 2025. Tariffs on imports from Canada and Mexico became effective March 4, 2025, but were later subject to broad exemptions effective March 7, 2025. While previous tariffs on Chinese goods and modifications to trade agreements have resulted in a material impact on our business and where we purchase our finished products, these new tariffs or any additional actions, such as reciprocal tariffs on U.S. trading partners to address trade imbalances, could negatively impact our ability and the ability of our third-party vendors and suppliers to source products from foreign jurisdictions, which could lead to an increase in the cost of goods and adversely affect the Companys profitability. Tariffs passed on to consumers through higher prices can also negatively impact consumer confidence and discretionary spending. We continue to evaluate the impact of currently effective tariffs, including potential future retaliatory tariffs, as well as other recent changes in foreign trade policy and the U.S. Administration on our supply chain, costs, sales and profitability, and are working through strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and merchants. At this time, it is unknown how long U.S. tariffs on Chinese goods will remain in effect or whether additional tariffs will be imposed. Depending upon their duration and implementation, as well as our ability to mitigate their impact, these changes in foreign trade policy and any recently enacted, proposed and future tariffs on products imported by us from China, as well as general uncertainty in the tariff environment, could negatively impact our business, results of operations and liquidity if they seriously disrupt the movement of products through our supply chain or increase their cost. **Environmental and Regulatory Matters** Our operations are subject to various laws and regulations both domestically and abroad. In the U.S., federal, state and local regulations impose standards on our workplace and our relationship with the environment. For example, the U.S. Environmental Protection Agency, Occupational Safety and Health Administration and other federal agencies have the authority to promulgate regulations that may impact our operations. In particular, we are subject to legislation placing restrictions on our generation, emission, treatment, storage and disposal of materials, substances and wastes. Such legislation includes: the Toxic Substances Control Act; the Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Safe Drinking Water Act; and the Comprehensive Environmental Response and the Compensation and Liability Act (also known as Superfund). We are also subject to the requirements of the Consumer Product Safety Commission and the Federal Trade Commission, in addition to regulations concerning employee health and safety matters. We believe the Company has complied with the relevant federal, state, local and international requirements for environmental protection. | 6 | | | Table of Contents | | **Intellectual Property** We rely on the trademark protection laws in the U.S. to protect our intellectual property and maintain our competitive position in the marketplace. The Company and our subsidiaries currently hold two trademarks registered in the U.S. related to the Diamond Sofa brand. In addition, we have registered and maintained numerous internet domain names related to our business, including novalifestyle.com, novaliving.com.my and diamondsofa.com. **Research and Development** We believe that new product designs are important to our continued success. We actively seek to protect our product designs and brand names under the trademark protection laws in the U.S., but the copying of a products appearance is a common and ongoing issue in the furniture industry as manufacturers seek to capitalize on popular designs and features by copying those of their competitors and making subtle changes to avoid infringement claims. To remain competitive, we believe that we must constantly innovate to stay ahead of competitors. We have developed a design process that enables us to better manage the short product life cycles for furniture designs by anticipating and responding quickly to changing consumer preferences. Ordinarily, we strive to attend furniture exhibitions worldwide, conduct market research and solicit customer feedback to help us identify new trends and customer needs in our target markets. We then incorporate customer feedback into new product designs. We normally introduce new product collections annually for the U.S. and international markets. We anticipate introducing new products under the Diamond Sofa brand on a quarterly basis for the U.S. market. At least annually, we assess the marketing results for new designs in order to decide whether to continue with a particular line. We use in-house designers and computer-aided modeling systems to generate design and related development work. We have used independent designers in the past for product design, from which we built prototype furniture pieces for refinement and testing. During 2024 and 2023, Nova Malaysia spent $2.00 million and $3.12 million on developing Virtual and Augmented reality software and AI system for potential consulting business. The entire system is far from complete as it requires to integrate with other components in order to be functional. It is still in development stage and not in operation. In 2024 and 2023, we invested $2.00 million and $3.12 million, respectively, on research and development expense. We may increase future investments in R&D based on our growth needs. **Furniture Industry Regulations and Standards** We and our products are subject to U.S. and international regulations related to the furniture industry. Our products are subject to the mandatory and voluntary furniture test standards of the U.S. and international markets in which our products are distributed to end consumers, including those developed by the American National Standards Institute, or ANSI, Business and Institutional Furniture Manufacturers Association, or BIFMA, ASTM International, California Air Resources Board, or CARB, Furniture Industry Research Association, or FIRA, and the International Organization for Standardization, or ISO. These environmental, ecological and formaldehyde emission standards and source of origin labeling requirements are national or international, with the U.S. and European Union typically having the strictest standards for their markets. We source products from third party manufacturers and we rely on them to meet all local manufacturing standards. **Employees** As of December 31, 2024, we had 27 full time employees worldwide. Our U.S. corporate office and operations employed 24 full-time employees, our location in Malaysia employed 3 full-time employees, respectively. We believe that relations with our employees are satisfactory. We have no collective bargaining agreements with our employees. **Item 1A. Risk Factors** Our business and an investment in our securities are subject to a variety of risks. The following risk factors describe the most significant events, facts or circumstances that could have a material adverse effect upon our business, financial condition, results of operations, ability to implement our business plan and the market price for our securities. Additional risks and uncertainties that presently are not considered material or are not known to us, and therefore are not mentioned herein, may impair our business operations. Many of these events are outside of our control. If any of these risks actually occurs, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.* | 7 | | | Table of Contents | | **Risks Related to Our Business** **Changes in economic conditions in the industries and markets served by our customers could adversely affect demand for our products.** The furniture industry is subject to cyclical variations in the global economy and to uncertainty regarding future economic prospects. Our business is affected by the number of orders we are able to secure from our customers, which is determined by the level of our customers business activity. Our customers level of business activity is in turn determined by the level of consumer spending in the markets our customers serve. Economic downturns could affect discretionary consumer spending habits by decreasing the overall demand for residential and commercial furniture. Any significant or prolonged decline of the economy or inflation in U.S., Malaysia, China or other international markets in which our products are sold will affect disposable income and spending by consumers in these markets, and may lead to a decrease in demand for our products. To the extent that decrease in demand for consumer products translates into a decline in the demand for residential and commercial furniture, our sales and financial performance could be adversely affected. Any economic downturn also could negatively impact our primary customers, furniture wholesalers, distributors and retailers, possibly resulting in a decrease in our sales or earnings. Changes in interest rates, consumer confidence, new housing starts, existing home sales, inflation, the availability of consumer creditincrease of tariff and geopolitical factors could have particularly significant effects on our consolidated financial condition, results of operations and cash flows. Any decline in economic activity and conditions in the industries and markets served by our customers and in which we operate may reduce demand for our products and could adversely affect our financial condition and results of operations. The COVID-19 pandemic materially adversely impacted the global economy and cause interruption of supply chain which in turn adversely affected our business operation and financial results during the outbreaks. The international trade disputes, trade policy changes or tariffs and other import-related taxes, fees and controls would significantly adversely impact the cost of, demand for, and profitability of our business in the U.S. market. **We historically have derived a substantial part of our sales from a limited number of customers. If we lose any of these customers, or any of these customers reduce the amount of business they do with us, our sales may be adversely affected.** Historically, a substantial part of our sales was attributed to a limited number of customers. But we had no sales to a customer greater than 10% of our total sales in 2024 and one customer accounted for 18% of our total sales in 2023. If the demand for our products decreases in one or more of the markets supplied by our largest customers, or if there are any material social or regulatory changes in these markets, our sales could decline and we could lose market share, any of which could materially harm our business. We do not foresee relying on these same customers for sales generation as we expand our business to increase our internet sales and direct sales to the U.S. and other international markets. We cannot assure you, however, that we will be able to successfully implement these plans. **Our decision to move away from low margin products and to eliminate customers who generate low margin sales and that have slow payment histories could result in a decrease in our future sales and earnings.** As we implement our plan to transition to high profit margin products and fast paying clients, we cannot assure that the transition will be successful and that we will eventually develop enough new business to make up the loss of sales from the existing low margin products and slow paying clients. If we are unable to develop enough new clients for our high profit margin products, our sales and net income will be negatively impacted. **If we lose our key personnel, or are unable to attract and retain additional qualified personnel, the quality of our services may decline and our business may be adversely affected.** We rely heavily on the expertise, experience and continued services of our senior management, including our Chief Executive Officer, President, Director and Chairperson, Ms. Lam, and our Chief Financial Officer, Mr. Chuang. Loss of their services could adversely affect our ability to achieve our business objectives. Ms. Lam and Mr. Chuang are key factors in our success at establishing relationships within the furniture industry in the U.S. and international market and capital market because of their extensive industry and financial experience. The continued development of our business depends upon their continued employment. We have entered into employment agreements with Ms. Lam and Mr. Chuang that include provisions for non-competition and confidentiality. We believe our future success will depend upon our ability to retain key employees and our ability to attract and retain other skilled personnel. We cannot guarantee that any employee will remain employed by us for any period of time or that we will be able to attract, train or retain qualified personnel in the future. Such loss of personnel could have a material adverse effect on our business and company. Furthermore, we will need to employ additional personnel to expand our business. Qualified employees are in great demand and may be unavailable in the time frame required to satisfy our customers requirements. There is no assurance we will be able to attract and retain sufficient numbers of highly skilled employees in the future. The loss of personnel or our inability to hire or retain sufficient personnel at competitive rates could impair the growth of our business. | 8 | | | Table of Contents | | **We may not be able to keep pace with competition in our industry, which could adversely affect our market share and result in a decrease in our future sales and earnings.** The furniture industries in the U.S. and international markets are very competitive and fragmented. Our business is subject to risks associated with competition from new or existing industry participants who may have more resources and better access to capital. Many of our competitors and potential competitors may have substantially greater financial and government support, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we do. Among other things, these industry participants compete with us based upon price, quality, style, functionality and availability. We cannot be sure we will have the resources or expertise to compete successfully in the future. Some of our competitors may also be able to provide customers with additional benefits at lower overall costs to increase market share. We cannot be sure we will be able to match cost reductions by our competitors or that we will be able to succeed in the face of current or future competition. Also, due to the large number of competitors and their wide range of product offerings, we may not be able to continue to differentiate our products through value, styling or functionality from those of our competitors. In addition, some of our customers are also performing more manufacturing services themselves. We may face competition from our customers as they seek to become more vertically integrated. As a result, we are continually subject to the risk of losing market share, which may lower our sales and earnings. We will face different market dynamics and competition as we develop new products to expand our presence in our target markets. In some markets, our future competitors may have greater brand recognition and broader distribution than we currently enjoy. We may not be as successful as our competitors in generating revenues in those markets due to the lack of recognition of our brands, lack of customer acceptance, lack of product quality history and other factors. As a result, any new expansion efforts could be more costly and less profitable than our efforts in our existing markets. If we are not as successful as our competitors are in our target markets, our sales could decline, our margins could be impacted negatively and we could lose market share, any of which could materially harm our business. **We may lose U.S. market share due to competition and our dependence on production facilities located outside the U.S., which would result in a decrease in our future sales and earnings.** We compete in the U.S. market principally through our sales under the Diamond Sofa brand. The furniture industry in the U.S. is very competitive and fragmented. We compete with many domestic U.S. and international furniture sources, including national department stores, regional or independent specialty stores, dedicated franchises of furniture manufacturers and retailers marketing products through catalogs and over the internet. There are few barriers to entry in the U.S. furniture market, and new competitors may enter this market at any time. Some of our competitors have greater financial resources than we have and often offer extensively advertised and well-recognized branded products. We may not be able to meet price competition or otherwise respond to competitive pressures in the U.S. market. We also may not be able to continue to differentiate our products from those of our competitors in the U.S. through value, styling and functionality because of the large number of competitors and their wide range of product offerings. Furthermore, some large furniture retailers in the U.S. are sourcing products directly from furniture manufacturers located in China and other Southeast Asian countries instead of through distributors like us. Over time, this practice may expand to smaller retailers in the U.S. Accordingly, we are continually subject to the risk of losing U.S. market share, which may decrease our future sales and earnings. Because we source products from third party manufacturers that are located outside the U.S. and we are subject to risks caused by disruption of international transportation such as COVID-19 and other health pandemics as well as the increase of tariffs imposed by the U.S. customs. We might loss business and our reputation might be damaged if there is delay of delivery and shipment from our suppliers. **Failure to anticipate or timely respond to changes in fashion and consumer preferences could adversely impact our business.** Furniture is a styled product and is subject to rapidly changing fashion trends and consumer preferences, as well as to increasingly shorter product life cycles. We believe our past performance has been based on, and our future success will depend, in part, upon our ability to continue to improve our existing products through product innovation and to develop, market and produce new products. We cannot assure you that we will be successful in introducing, marketing and producing any new products or product innovations, or that we will develop and introduce in a timely manner innovations in our existing products that satisfy customer needs or achieve market acceptance. Our success also depends upon our ability to anticipate and respond in a timely manner to fashion trends related to residential and commercial furniture. If we fail to identify and respond to these changes, our sales could decline and we could lose market share, any of which could materially harm our business. **If we are unable to manage our growth, we may not be profitable.** Our continued success depends, in part, upon our ability to manage and expand our operations and facilities in the face of continued growth. This planned growth includes the expansion of our internet sales and diversifying our international sales by expanding our broad network of distributors, increasing direct sales in the U.S. and other international markets and entering emerging growth markets. The growth in our operations has placed, and may continue to place, significant demands on our management, operational and financial infrastructure. If we do not manage our growth effectively, the quality of our products and services could suffer, which could negatively affect our operating results. To manage this growth effectively, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. We cannot assure you that we will be able to fulfill our staffing requirements for our business, successfully train and assimilate new employees, or expand our management base and enhance our operating and financial systems. Failure to achieve any of these goals will prevent us from managing our growth in an effective manner and could have a material adverse effect on our business, financial condition or results of operations. | 9 | | | Table of Contents | | **We may need additional capital to execute our business plan and fund operations and may not be able to obtain such capital on acceptable terms or at all.** In connection with the development and expansion of our business, we may incur significant capital and operational expenses. We believe that we can increase our sales and net income by implementing a growth strategy that focuses on (i) increasing online sales and (ii) diversifying our international sales. We plan to increase and diversify our sales to the U.S. and international markets by establishing new brands for the international markets and to increase our online sales presence. In the event that available funds are not sufficient to meet our operating needs and our plans for expansion, we intend to pursue alternative financing arrangements, including additional bank loans based on our good credit rating or funds raised through additional offerings of our equity or debt, if and when we determine such offerings are required. Our ability to obtain additional capital on acceptable terms or at all is subject to a variety of uncertainties, including: | | Investors perceptions of, and demand for, companies in our industry; | | | | Investors perceptions of, and demand for, companies sourcing from China and other Asian countries; | | | | Conditions of the U.S. and other capital markets in which we may seek to raise funds; | | | | Our future results of operations, financial condition and cash flows; | | | | Governmental regulation of foreign investment in companies in particular countries; | | | | Economic, political and other conditions in the U.S., China, and other countries; and | | | | Governmental policies relating to foreign currency. | | There is no assurance we will be successful in locating a suitable financing transaction in a timely fashion or at all. In addition, there is no assurance we will obtain the capital we require by any other means. Future financings through equity investments are likely to be dilutive to our existing shareholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly-issued securities may include preferences or superior voting rights, be combined with the issuance of warrants or other derivative securities, which may have additional dilutive effects. Furthermore, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition. If we cannot raise additional funds on favorable terms or at all, we may not be able to carry out all or parts of our strategy to maintain our growth and competitiveness. **We may experience material disruptions to our ability to acquire sufficient inventory from third-party suppliers that could result in material delays, quality control issues, increased costs and loss of business opportunities, which may negatively impact our sales and financial results.** We rely upon our third-party suppliers to produce our products and maintain sufficient inventory to meet customer demand. A material disruption at our suppliers manufacturing facilities could prevent us from meeting customer demand, reduce our sales and negatively impact our financial results. We may also experience quality control issues as we seek out new suppliers or are forced to contract with new suppliers to meet customer demand. Any such material disruption may prevent us from shipping our products on a timely basis, reduce our sales and market share and negatively impact our financial results. Our third-party supplier contracts are generally of annual or shorter duration, or manufactured products are sourced on the basis of individual purchase orders. There is no assurance that we will be able to maintain our current relationships with these parties or, if necessary, establish future arrangements with other third-party suppliers on commercially reasonable terms. Further, while we maintain an active quality control program, we cannot assure that their manufacturing and quality control processes will be maintained at a level sufficient to meet our inventory needs or prevent the inadvertent sale of substandard products. While we believe that products manufactured by our current third-party suppliers could generally be procured from alternative sources, temporary or permanent loss of services from a significant manufacturer could cause disruption in our supply chain and operations. | 10 | | | Table of Contents | | **** **Our dependence on foreign suppliers and our increased global operations subject us to a variety of risks and uncertainties that could impact our operations and financial results.** In 2024 and 2023, the majority of our products were purchased from foreign suppliers and manufacturers, predominantly in Asia. Our dependence on foreign suppliers means that we may be affected by changes in the value of the U.S. dollar relative to other foreign currencies. For example, any upward valuation in the Chinese yuan or any other foreign currency against the U.S. dollar may result in higher costs to us for those goods. Declines in foreign currencies and currency exchange rates might negatively affect the profitability and business prospects of one or more of our foreign suppliers. This, in turn, might cause such foreign vendors to demand higher prices for products in their effort to offset any lost profits associated with any currency devaluation, delay product shipments to us, or discontinue selling to us, any of which could ultimately reduce our sales or increase our costs. We, and our foreign suppliers, are also subject to other risks and uncertainties associated with changing economic and political conditions worldwide. These risks and uncertainties include import duties and quotas, compliance with anti-dumping regulations, port congestion, supply chain disruption, work stoppages, economic uncertainties and adverse economic conditions (including inflation and recession), government regulations, employment and labor matters, wars and fears of war, political unrest, natural disasters, public health issues, regulations to address climate change and other trade restrictions. We cannot predict whether any of the countries from which our raw materials or products are sourced, or in which our products are currently manufactured or may be manufactured in the future, will be subject to trade restrictions imposed by the U.S. or foreign governments or the likelihood, type or effect of any such restrictions. Any event causing a disruption or delay of imports from foreign suppliers, including labor disputes resulting in work disruption, the imposition of additional import restrictions, restrictions on the transfer of funds and/or increased tariffs or quotas, or both, could increase the cost, reduce the supply of merchandise available to us, or result in excess inventory if merchandise is received after the planned or appropriate selling season, all of which could adversely affect our business, financial condition and operating results. **A delay in getting non-U.S.-sourced products through port operations and customs in a timely manner could result in reduced sales, canceled sales orders and unanticipated inventory accumulation.** Our business depends on our ability to source and distribute products in a timely manner. As a result, we rely on the free flow of goods through open and operational ports worldwide. Supply chain disruption and port congestions caused by COVID-19 have caused delay of shipment and delivery of our products. Any disruptions at ports create significant risks for our business, particularly if work slowdowns, quarantines, lockdowns, strikes or other disruptions occur during our peak importing seasons. Any of these factors could result in reduced sales, canceled sales orders and unanticipated inventory accumulation and have a material adverse effect on our operating results, financial position and cash flows. **We depend on vendors and suppliers outside the U.S. Our business has been and could in the future continue to be affected by increase of tariff associated with our products sourced by foreign countries.** We depend on vendors for timely and efficient access to products we sell. We source our products from manufacturers located outside the U.S., primarily Asia. Since 2017, the U.S. and China have been engaged in a trade dispute that has involved a number of actions against China including the imposition of tariffs on Chinese imports. On February 1, 2025, President Trump issued executive orders imposing a 25% tariff on products imported from Canada and Mexico (initially suspended for 30 days) and a 10% tariff on products imported from China, effective February 4, 2025. An additional 10% increase in the China tariffs became effective March 4, 2025. Tariffs on imports from Canada and Mexico became effective March 4, 2025, but were later subject to broad exemptions effective March 7, 2025. The previous tariffs on products from Chinese have resulted in a material impact on our business and results of operations, and we have switched to source certain products from the suppliers in other Asia countries than China, these new tariffs or any additional actions, such as reciprocal tariffs on U.S. trading partners to address trade imbalances, could negatively impact our ability and the ability of our third-party vendors and suppliers to source products from foreign jurisdictions, which could lead to an increase in the cost of goods and adversely affect the Companys profitability. Tariffs passed on to consumers through higher prices can also negatively impact consumer confidence and discretionary spending. We continue to evaluate the impact of currently effective tariffs as well as other recent changes in foreign trade policy and the U.S. Administration on our supply chain, costs, sales and profitability, and are working through strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and suppliers. At this time, it is unknown how long U.S. tariffs on Chinese goods will remain in effect or whether additional tariffs will be imposed. Depending upon their duration and implementation, as well as our ability to mitigate their impact, these changes in foreign trade policy and any recently enacted, proposed and future tariffs on products imported by us from China, as well as general uncertainty in the tariff environment, could negatively impact our business, results of operations and liquidity if they seriously disrupt the movement of products through our supply chain or increase their cost. | 11 | | | Table of Contents | | Additional changes in the U.S. tax regime or in how U.S. corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations. We are also subject to regular reviews, examinations and audits by the IRS and other taxing authorities with respect to income and non-income based taxes both within and outside the United States. Economic and political pressures to increase tax revenues in jurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, may make resolving tax disputes more difficult and the final resolution of tax audits and any related litigation could differ from our historical provisions and accruals, resulting in an adverse impact on our business, financial condition or results of operations. In addition, in connection with the Organization for Economic Co-operation and Development Base Erosion and Profit Shifting project, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in various countries. **We are subject to warranty claims for our products, which could result in unexpected expense.** Many of our products carry warranties for defects in quality and workmanship. Historically, the amount for return of products, the discount provided to the customers due to defects and cost for the replacement parts has been immaterial. However, we may experience significant expense as the result of future product quality issues, product recalls or product liability claims which may have a material adverse effect on our business. The actual costs of servicing future warranty claims may exceed our expectations and have a material adverse effect on our results of operations, financial condition and cash flows. **We are subject to periodic litigation, product liability risk and other regulatory proceedings, which could result in unexpected expense of time and resources.** From time to time, we may be a defendant in lawsuits and regulatory actions relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse effect on our business, financial condition and results of operations. In addition, any significant litigation, regardless of its merits, could divert managements attention from our operations and may result in substantial legal costs. The Company has been named in a putative securities class action case and two derivatives cases, details See *Item 3 Legal Proceedings.*While the Company believes it has adequate defenses, the defense of those cases are costly and could significantly divert management attention from its business. **We may not be able to protect our product designs and other proprietary rights adequately, which could adversely affect our competitive position and reduce the value of our products and brands, and litigation to protect our intellectual property rights may be costly.** We attempt to strengthen and differentiate our product portfolio by developing new and innovative brands and product designs and functionality. As a result, our trademarks and other intellectual property rights are important assets to our business. Our success will depend in part on our ability to obtain and protect our products, methods, processes and other technologies, to preserve our trade secrets, and to operate without infringing on the proprietary rights of third parties in China, the U.S. and other international markets. Despite our efforts, any of the following may reduce the value of our owned and used intellectual property: | | Issued and trademarks that we own or have the right to use may not provide us with any competitive advantages; | | | | Our efforts to protect our proprietary rights may not be effective in preventing misappropriation of our intellectual property or that of those from whom we license our rights to use; | | | | Our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we use or develop; or | | | | Another party may obtain a blocking patent and we or our licensors would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products. | | Effective protection of intellectual property rights may be unavailable or limited in China or certain other countries. Policing the unauthorized use of our proprietary technology can be difficult and expensive. Litigation might be necessary to protect our intellectual property rights, which may be costly and may divert our managements attention away from our core business. Furthermore, there is no guarantee that litigation would result in an outcome favorable to us. If we are unable to protect our proprietary rights adequately, it would have a negative impact on our operations. | 12 | | | Table of Contents | | **We, or the owners of the intellectual property rights licensed to us, may be subject to claims that we or such licensors have infringed the proprietary rights of others, which could require us and our licensors to obtain a license or change designs.** Although we do not believe any of our products infringe upon the proprietary rights of others, there is no assurance that infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against us or those from whom we have licenses or that any such assertions or prosecutions will not have a material adverse effect on our business. Regardless of whether any such claims are valid or can be asserted successfully, defending against such claims could cause us to incur significant costs and could divert resources away from our other activities. In addition, assertion of infringement claims could result in injunctions that prevent us from distributing our products. If any claims or actions are asserted against us or those from whom we have licenses, we may seek to obtain a license to the intellectual property rights that are in dispute. Such a license may not be available on reasonable terms, or at all, which could force us to change our designs. **We incur significant costs as a result of our operating as a public company and our management is required to devote substantial time to compliance with the regulatory requirements placed on a public company.** As a public company with substantial operations, we incur significant legal, accounting and other expenses. The costs of preparing and filing annual, quarterly and current reports, proxy statements and other information with the SEC and furnishing audited reports to shareholders is time-consuming and costly. It has also been time-consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and this remains an ongoing process. Certain members of our management have limited or no experience operating a company whose securities are listed on a national securities exchange or with the rules and reporting practices required by the federal securities laws as applied to a publicly traded company. We have needed to recruit, hire, train and retain additional financial reporting, internal control and other personnel in order to develop and implement appropriate internal controls and reporting procedures. **Our ongoing investment in new products is inherently risky, and could disrupt our current operations.** We have invested and expect to continue to invest in new products. Our plan to market and sell high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia is a reflection of our ongoing efforts to innovate and provide useful products in new geographical markets. Such endeavors including the investment of jade mats in Malaysia involve significant risks and uncertainties, including insufficient revenues from such investments to offset any new liabilities assumed and expenses associated with these new investments, inadequate return of capital on our investments, distraction of management from current operations, and risks and competition not discovered in our due diligence and decision making of such strategy plans could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities. Due to the negative impact caused by COVID-19 in 2021 and 2022, we eventually sold the entire jade mats inventory for $2.00 million in liquidation sales and existed from Jade Mats business in June 2023. Because the development and investment in new products and markets are inherently risky, no assurance can be given that such plans will be successful and will not adversely affect our reputation, financial condition, and operating results. **Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations.** Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats. While we employ measures to prevent, detect, address and mitigate these threats (including access controls, data encryption, vulnerability assessments, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. While no cybersecurity attack to date has had a material impact on our financial condition, results of operations or liquidity, the threat remains and the potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results of operations. **If we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately. Any inability to report and file our financial results accurately and timely could harm our business and adversely affect the trading price of our common stock.** We are required to establish and maintain internal controls over financial reporting and disclosure controls and procedures and to comply with other requirements of the Sarbanes-Oxley Act and the rules promulgated by the SEC. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2024. See Item 9A. Controls and Procedures. However, our management, including our Chief Executive Officer and Chief Financial Officer, cannot guarantee that our internal controls and disclosure controls and procedures will prevent all possible errors. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the possibility that judgments in decision-making can be faulty and subject to simple error or mistake. Furthermore, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, measures of control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. | 13 | | | Table of Contents | | **We are a holding company that depends on cash flow from our wholly owned subsidiaries to meet our obligations, and any inability of our subsidiaries to pay us dividends or make other payments to us when needed could disrupt or have a negative impact on our business.** We are a holding company with no material assets other than the stock of our wholly owned subsidiaries, Diamond Bar, Nova Furniture, Nova Samoa and Nova Malaysia. We rely on dividends paid by our subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If our subsidiaries are unable to pay us dividends and make other payments to us when needed because of regulatory restrictions or otherwise, we may be materially and adversely limited in our ability to make investments or acquisitions that could be beneficial to our business, pay dividends or otherwise fund and conduct our business. **If relations between the U.S. and China worsen, our business could be adversely affected as we have to find new suppliers and manufacturers out of China.** Political tensions between the United States and China have escalated due to, among other things, trade disputes and tariffs, the COVID-19 outbreak, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the executive orders issued by then U.S. President that prohibit certain transactions with certain Chinese companies and their applications. Rising political tensions could reduce levels of trades, investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations. Controversies may arise in the future between these two countries. These controversies also could make it more difficult for us to provide our products to our customers in the U.S. and China. The international trade policies of China and the U.S. could adversely affect our business, and the imposition of trade sanctions relating to imports, taxes, import duties and other charges on imports from China, including those applied specifically to furniture products, or the imposition of taxes, import duties or other charges on exports to the U.S. will increase our costs and decrease our earnings. Due to an increase in tariffs imposed by the U.S., some customers are seeking alternative resources instead of China, which has negatively affected the purchase orders and our sales as we mainly resource our products from China. In order to avoid these new tariffs, the market has shifted towards an uncertain era. The Company started to source certain of its new products from manufacturers in India in 2020. Sales during this stage may also be impacted by this shift in behavior. The U.S. government previously has the increased tariffs of 25% for the furniture products from China, and it also imposed a 10% tariff on products imported from China, effective February 4, 2025. An additional 10% increase in the China tariffs became effective March 4, 2025. These new tariffs or any additional actions, such as reciprocal tariffs on U.S. trading partners to address trade imbalances, could negatively impact our ability and the ability of our third-party vendors and suppliers to source products from foreign jurisdictions, which could lead to an increase in the cost of goods and adversely affect the Companys profitability. Tariffs passed on to consumers through higher prices can also negatively impact consumer confidence and discretionary spending. During this time period we will continue to seek alternatives and new resources to increase the revenue. If and to the extent we are not able to mitigate the effects of such trade or tariff policies, our operations may be adversely affected. **Our compliance with the Foreign Corrupt Practices Act may put us at a competitive disadvantage, while our failure to comply with the Foreign Corrupt Practices Act may result in substantial penalties.** We are required to comply with the United States Foreign Corrupt Practices Act, or the FCPA, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties. Non-U.S. companies, including some of our competitors, are not subject to the provisions of the FCPA. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time to time in Asian countries that we conduct business. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. | 14 | | | Table of Contents | | **Risks Related to Our Securities** **Our shares may be delisted under the HFCA Act and related regulations if the PCAOB is unable to inspect our auditor, and the delisting of our shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.** The Holding Foreign Companies Accountable Act was enacted on December 18, 2020. The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On June 22, 2021, the U.S. Senate passed the AHFCA Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuers securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. On December 29, 2022, a legislation entitled the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCA Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two, thus reducing the time period before our securities may be prohibited from trading or delisted if our auditor is unable to meet the PCAOB inspection requirement. Our financial statements contained in the annual report on Form 10-K for the year ended December 31, 2021 have been audited by Centurion ZD CPA & Co. (Centurion ZD), an independent registered public accounting firm that is headquartered in Hong Kong. Centurion ZD, is a firm registered with the PCAOB, and is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. However, because Centurion ZD. is based in Hong Kong, a jurisdiction where the PCAOB was unable to conduct inspections without the approval before December 2022, Centurion ZD and its audit work were not inspected independently and fully by the PCAOB. On December 16, 2021, the PCAOB issued its determinations (the Determination) that they are unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong. The Determination includes lists of public accounting firms headquartered in mainland China and Hong Kong that the PCAOB is unable to inspect or investigate completely. Centurion ZD is headquartered in Hong Kong and was included in the PCAOB Determinations. On October 7, 2022, the Company dismissed its independent accountant, Centurion ZD. On October 6, 2022, the Audit Committee of the Board of Directors of the Company and the Board of Directors of the Company, resolved to, and did, cause the Company to engage WW as the Companys independent auditor for the fiscal year ending December 31, 2022. WWC is located in the United States and has not been identified by the PCAOB as a firm that the PCAOB is unable to fully inspect and investigate. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOBs access in the future, the PCAOB Board will consider the need to issue a new determination. If PCAOB is unable to inspect or investigate completely our auditor, it could cause the trading in our securities to be prohibited under the Holding Foreign Companies Accountable Act and related regulations, and as a result Nasdaq may delist our securities. If our securities are unable to be listed on another securities exchange, such a delisting would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our ordinary shares. Further, new laws and regulations or changes in laws and regulations could affect our ability to list our securities on Nasdaq, which could materially impair the market for and market price for our securities. | 15 | | | Table of Contents | | **The market price for our common stock may be volatile, which could make it more difficult or impossible for an investor to sell our common stock for a positive return on their investment.** The trading price of our common stock may fluctuate widely in response to various factors, some of which are beyond our control. These factors include, but are not limited to, our quarterly operating results or the operating results of other companies in our industry, announcements by us or our competitors of acquisitions, new products, product improvements, commercial relationships, intellectual property, legal, regulatory or other business developments and changes in financial estimates or recommendations by stock market analysts regarding us or our competitors. In addition, the stock market in general, and the market for companies that became public by means of a reverse acquisition with a public shell company in particular, has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated or disproportionate to their operating performance. These broad market fluctuations may materially affect our stock price, regardless of our operating results. Furthermore, the market for our common stock historically has been limited and we cannot assure you that a larger market will ever be developed or maintained. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, these factors may make it more difficult or impossible for you to sell our common stock for a positive return on your investment. **Shares of our common stock lack a significant trading market, which could make it more difficult for an investor to sell our common stock.** Our common stock is traded on The NASDAQ Stock Market LLC. However, there is no assurance that an active trading market in our common stock will be sustained. As a result, an investor may find it more difficult to dispose of our common stock. **If we fail to continue to meet the listing standards of NASDAQ, our common stock may be delisted, which could have a material adverse effect on the liquidity of our common stock.** Our common stock is currently listed on the Nasdaq Capital Market. The NASDAQ Stock Market LLC has requirements that a company must meet in order to remain listed on NASDAQ. In particular, NASDAQ rules require us to maintain a minimum bid price of $1.00 per share of our common stock. On December 27, 2024, the Company received a letter from Nasdaq notifying the Company that, because the closing bid price for the Companys common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share (the Minimum Bid Price Requirement). The Company has a period of 180 calendar days from the date of notification, until June 25, 2025 (the Compliance Period), to regain compliance with the Minimum Bid Price Requirement. If at any time before the expiration of the Compliance Period the bid price of the Companys common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement. If the Company does not regain compliance by the end of the Compliance Period, the Company may be eligible for an additional 180 calendar day period to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that the Companys securities will be subject to delisting. The Company intends to continue actively monitoring the bid price for its common stock between now and the expiration of the Compliance Period and will consider all available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. | 16 | | | Table of Contents | | On April 18, 2024, the Company received written notice from the NASDAQ stating that the Company does not meet the requirement of maintaining a minimum of $2,500,000 in stockholders equity for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5550(b)(1), the Company also does not meet the alternative of market value of listed securities of $35 million under NASDAQ Listing Rule 5550(b)(2) or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years under NASDAQ Listing Rule 5550(b)(3), and the Company is no longer in compliance with the NASDAQ Listing Rules. The NASDAQ notification letter provided the Company until June 6, 2024 to submit a plan to regain compliance. If the plan is accepted, NASDAQ can grant the Company an extension up to 180 calendar days from the date of NASDAQ letter to demonstrate compliance. The Company submitted its plan of compliance on May 28, 2024 and a supplemental letter to the plan of compliance on June 20, 2024. Based on the review of the letters submitted by the Company, Staff has determined to grant the Company an extension until October 14, 2024 to regain compliance with the Rule and the Company must complete its initiatives and provide evidences for the compliance with the Rule as required by Nasdaq. On October 11, 2024, the Company and Nova Samoa have entered into orders to purchase inventories in total amount of $4,600,000, which will be paid in 3,321,429 shares (Shares) of common stock of the Company at US$1.40 per share. As of the date of the report, the Company believes it has regained compliance with the stockholders equity requirement based upon the specific transaction referenced. Nasdaq will continue to monitor the Companys ongoing compliance with the stockholders equity requirement and, if at the time of this annual report the Company does not evidence compliance, that it may be subject to delisting. If our common stock were to be delisted, the liquidity of our common stock would be materially adversely affected and the market price of our common stock could decrease. **We may issue additional shares of our common stock or debt securities to raise capital or complete acquisitions, which would reduce the equity interest of our shareholders.** Our Articles of Incorporation, as amended, authorize the issuance of up to 250,000,000 shares of common stock, par value $0.001 per share. As of March 28, 2025, there were 236,792,678 authorized and unissued shares of our common stock available for future issuance, based on 13,207,322 shares of our common stock issued and outstanding. Although we have no commitments as of the date of this report to issue our securities, we may issue a substantial number of additional shares of our common stock or debt securities to complete a business combination or to raise capital. On October 13, 2023, we renewed a shelf registration statement on Form S-3 under which we may, from time to time, sell securities in one or more offerings up to a total dollar amount of $55,000,000. The shelf registration statement was declared effective as of October 23, 2023. The issuance of additional shares of our common stock may significantly reduce the equity interest of our existing shareholders and adversely affect prevailing market prices for our common stock. **We do not expect to pay dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.** We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the Board of Directors may consider relevant. We are a holding company that depends on cash flow from our wholly owned subsidiaries to meet our obligations, and any inability of our subsidiaries to pay us dividends or make other payments to us when needed could disrupt or have a negative impact on our business. Our management intends to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates. | 17 | | | Table of Contents | | **** **Provisions in the Nevada Revised Statutes and our Amended and Restated Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.** Members of our Board of Directors and our officers may have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances, pursuant to provisions in the Nevada Revised Statutes and our Amended and Restated Bylaws as authorized by the Nevada Revised Statutes. Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its shareholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that (1) the directors or officers act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud or a knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their potential liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly, you may be unable to prevail in a legal action against our directors or officers even if they have breached their duty of care. In addition, our Amended and Restated Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and expenses resulting from their acting in such capacities with us. This means that if you were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and any judgment or settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely affect prevailing market prices for our common stock. **Short sellers of our stock may be manipulative and may drive down the market price of our common stock.** Short selling is the practice of selling securities that the seller does not own but rather has borrowed or intends to borrow from a third party with the intention of buying identical securities at a later date to return to the lender. A short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. Since it is in the short sellers interest for the price of the stock to decline, some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer, its business prospects and similar matters calculated to or which may create negative market momentum, which may permit them to obtain profits for themselves as a result of selling the stock short. Issuers whose securities have historically had limited trading volumes and/or have been susceptible to relatively high volatility levels can be particularly vulnerable to such short seller attacks. On December 21, 2018, Seeking Alpha published a report that contained various false allegations against the Company, which has driven down the market price of our common stock. The author of that article disclosed that he had accumulated a short position in the Companys common stock prior to the publication of the article. As of December 31, 2018, the closing price of our common stock as reported on the NASDAQ Stock Market was $2.30 per share, representing a decrease of $1.55 per share compared to $3.85 per share, the closing price of our common stock as of December 20, 2018. The stock prices are all before our reverse stock splits in 2019 and 2023. Although we have timely responded to the false allegations set forth in the Seeking Alpha article, we cannot assure you that false, misleading and/or defamatory articles will not be published again in the future. The publication of any such commentary regarding us in the future may bring about a temporary, or long term, decline in the market price of our common stock. No assurances can be made that similar declines in the market price of our common stock will not occur in the future, in connection with such commentary by short sellers or otherwise. **Item 1B. Unresolved Staff Comments** Not applicable. **Item 1C. Cybersecurity** Information technology (IT) is critical to many of our operating activities and is subject to security threats and increasingly sophisticated cyber-attacks. As a result, we have policies and processes in place to assess, identify, and manage the strategic and operational IT-related risks as an integrated part of our overall risk management system. These risks include the risk of cyber-attacks on IT infrastructure and intellectual property, as well as on cybersecurity for our online product offerings. The Company has adopted Risk Assessment Methodology Policy, Information Security Policy and Incident Response Plan Policy to managing material risks from cybersecurity threats and hired IT consultant to help managing cybersecurity risks. When the Company uses a third party service provider and shares sensitive data such service provider, it must adhere to the compliance requirements in the Service Agreement which includes an acknowledgement that the service provider is responsible for safeguard and the security of the sensitive data. As of date of this report, there has been no previous cybersecurity incidents, have materially affected the Company yet. The independent director of the Board Charlie La is responsible for the oversight of risks from cybersecurity threats on behalf of the Board. Mr. Teng Ai Leng, our IT consultant and Tawny Lam, Chief Executive Officer of the Company report to Mr. Charlie La and Board of Directors for cybersecurity risks and incidents. Teng AI Leng has 30 years of working experience in the Information technology industry. The Company has adopted Incident response plan policy, including Roles and Responsibilities, Incident Categories, Categories of Event, Incident Severity, Escalation Levels, and Incident Response Life Cycle, so that the weakness, events, alerts and incidents can be appropriately managed and escalated from IT personnel, IT consultant, Chief Executive Officer to independent director and the Board. **Item 2. Properties** Our principal executive offices and those of Diamond Bar are in leased office space with showroom, distribution and warehouse space in Commerce, California. Diamond Bar also maintains showrooms in leased space at Las Vegas Market in Nevada and High Point Market in North Carolina. Nova Malaysia is in leased office space with showroom, service center and warehouse space in Kuala Lumpur, Malaysia. We believe that our existing office and distribution facilities are adequate for current and presently foreseeable operations. In general, our properties are well maintained, considered adequate and being utilized for their intended purposes. See Note 15 to our consolidated financial statements contained herein, which discloses lease agreements. | 18 | | | Table of Contents | | **** **Item 3. Legal Proceedings** On March 8, 2019, Jie Yuan (the Jie Action) filed a putative shareholder derivative lawsuit in the United States District Court for the Central District of California, purportedly on behalf of the Company against its former and current CEOs and CFOs (Thanh H. Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) and directors (Charlie Huy La, Bin Liu, Umesh Patel, and Min Su) and vice president (Steven Qiang Liu) (collectively, the Defendants). In this action, the putative derivative plaintiffs seek to recover any losses the Company sustains as a result of alleged securities violations that were alleged in the matter of*Barney v. Nova Lifestyle, Inc.*, United States District Court for the Central District of California. It is allegedthat the Defendants caused the Company to make the alleged false and/or misleading statements giving rise to the*Barney*Action. The Plaintiff also alleges that President and CEO Lam engaged in self-dealing transactions by leasing her property to Diamond Bar, a Company subsidiary, and asserts, in conclusory fashion, that Lam, former CEO and director Ya Ming Wong, former CFO and director Yuen Ching Ho, and director Umesh Patel sold securities during the period of time when the alleged false and/or misleading statements were made with knowledge of material non-public information. In the *Barney* action, the putative class plaintiffs alleged that the Company artificially inflated its share price by issuing a press release announcing a strategic relationship with Shanxi Winqing Senior Care Service Group, claiming in the Companys Annual Statements on Form 10-Ks for the 2017 and 2018 fiscal years that Shanxi Winqing and Merlino Lewis LLP were among the Companys largest customers, and reporting revenues from sales transactions with these entities. Plaintiffs claimed that Shanxi Winqing was a fictitious entity and Merlno Lewis LLP dissolved in 2013, so that the announcement of a strategic alliance was false and the reported revenues non-existent. The Company denied these allegations and all liability. It asserted that the entities referenced in its public disclosures were actual companies and the revenues booked from those entities were genuine and actually collected. The Company alleged that no registration exists for Shanxi Winqing because the Company slightly mistranslated its Chinese name in its public disclosures. Similarly, the Company claimed to have previously sold products to Merlino Lewis LLP and failed to update its customer name when the customer restructured its business. On May 15, 2019, Wilson Samuels (the Samuels Action) filed a largely duplicative putative derivative complaint purportedly on behalf of the Company against the same current and former directors and officers named in the *Jie* Action other than Steven Qiang Liu. That action was filed in the United States District Court for the Central District of California. Samuels repeats the allegations of the Complaint in the*Jie*Action. Additionally, Samuels claims that, in announcing its change of auditing firms in September 2016, the Company asserted that it made this move because its existing auditor ceased auditing public companies subject to regulation in the United States without disclosing that its new auditing firm was created in a merger of three accounting firms, including a firm whose registration was revoked by the Public Company Accounting Oversight Board. Samuels also claims that the Company redeemed its stock in reliance upon the same purported fraudulent recognition of revenues claimed in the putative class action. Samuels purports to state direct claims under Sections 10(b) and 20 of the Exchange Act and SEC Rule 10b-5. On March 3, 2020, the defendants filed motions to stay the derivative actions until the Barney Action is resolved or alternatively to dismiss on the grounds that plaintiffs failure to make demand upon the Board of Directors was not excused and the Complaints otherwise fail to state a claim upon which relief can be granted. By Order entered April 7, 2020, the Court granted defendants Motion to Stay and stayed the Jie Action until the Barney Action is resolved. The Court subsequently entered a similar Order in the Samuels Action. As previously reported, the parties have now settled the Barney Action. The agreed $750,000 settlement payment was entirely funded by the Companys insurance carrier and has been tendered to a claims facility. With the final settlement of the Barney Action, the conditions for the stay in the Derivative Actions expired. The parties accordingly filed a stipulation to lift the stay and consolidate the actions. The Stipulation also set deadlines for plaintiffs to file a consolidated amended complaint and for defendants to respond to this complaint. By January 7, 2025 Orders, the Court adopted the Stipulation. On February 6, 2025, the deadline for filing an amended complaint, plaintiffs filed a Notice of Dismissal without prejudice. While plaintiffs should have sought Court approval, the Clerk accepted the Notice of Dismissal and the lead case has been marked closed. Other than the above, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations. **Item 4. Mine Safety Disclosures** Not applicable. **** | 19 | | | Table of Contents | | **** **PART II** **Item 5. Market for Registrant****s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities** **Market Information** Since January 17, 2014, our common stock has been quoted on The NASDAQ Stock Market under the symbol NVFY. On March 28, 2025, the closing price for our common stock as reported on the NASDAQ Stock Market was $0.71 per share. **Holders of Record** On March 28, 2025, there were approximately 60 holders of record based on information provided by our transfer agent. Many of our shares of common stock are held in street or nominee name by brokers and other institutions on behalf of shareholders and we are unable to estimate the total number of shareholders represented by these record holders. **Dividend Policy** Dividends may be declared and paid out of legally available funds at the discretion of our Board of Directors. We do not anticipate or contemplate paying dividends on our common stock in the foreseeable future. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors. We currently intend to utilize all available funds to develop our business. **Item 6.****[Reserved]** **** **Item 7. Management****s Discussion and Analysis of Financial Condition and Results of Operations** **Safe Harbor Declaration** *The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly under the heading**Risk Factors.* **Overview** Nova LifeStyle, Inc. is a distributor of contemporary styled residential and commercial furniture incorporated into a dynamic marketing and sales platform offering retail as well as online selection and global purchase fulfillment. We monitor popular trends and products to create design elements that are then integrated into our product lines that can be used as both stand-alone or whole-room and home furnishing solutions. Through our global network of retailers, e-commerce platforms, stagers and hospitality providers, Nova LifeStyle also sells (through an exclusive third-party manufacturing partner) a managed variety of high quality bedding foundation components. Nova LifeStyles brand family currently includes Nova LifeStyle, Diamond Sofa (www.diamondsofa.com) and Nova Living. | 20 | | | Table of Contents | | Our customers principally consist of distributors and retailers with specific geographic territories that deploy middle to high end private label home furnishings which have very little competitive overlap with our specific furnishing products or product lines. Nova LifeStyle is constantly seeking to integrate new sources of distribution and manufacturing that are properly aligned with our growth strategy. This allows us to continually focus on building both our overall distribution and manufacturing relationships through a deployment of popular, as well as trend-based, furnishing solutions worldwide. We are a U.S. holding company with no material assets in the U.S. other than the ownership interests of our wholly owned subsidiaries through which we market, design and sell residential and commercial furniture worldwide: Nova Furniture Limited domiciled in the British Virgin Islands (Nova Furniture), Nova Furniture Ltd. domiciled in Samoa (Nova Samoa), Diamond Bar Outdoors, Inc. domiciled in California (Diamond Bar), Nova Living (M) SDN. BHD. domiciled in Malaysia (Nova Malaysia) and Nova Living (HK) Group Limited domiciled in Hong Kong (Nova HK). The Company had three former subsidiaries Bright Swallow International Group Limited domiciled in Hong Kong (Bright Swallow or BSI) which was sold in January 2020, and Nova Furniture Macao Commercial Offshore Limited domiciled in Macao (Nova Macao) which was de-registration and liquidation in January 2021. In February 2022, Nova HK entered a de-registration process and transferred all its assets and business to Nova Malaysia. The process of de-registration and liquidation of Nova HK was completed in February 2023. On December 7, 2017, we incorporated i Design Blockchain Technology, Inc. (i Design) under the laws of the State of California. The purpose of i Design is to build our own blockchain technology team. i Design is in the planning stage and has had minimum operations to date. On December 12, 2019, we became the sole shareholder of Nova Living (M) SDN. BHD. (Nova Malaysia), a company incorporated on July 26, 2019 under the laws of Malaysia. Nova Malaysia marketed and sold high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia. On November 5, 2020, Nova LifeStyle, Inc. acquired Nova Living (HK) Group Limited (Nova HK) which was incorporated in Hong Kong on November 6, 2019. This company had minimal operations. In February 2022, Nova HK entered a de-registration process and transferred all its assets and business to Nova Malaysia. The process of de-registration and liquidation of Nova HK was completed in February 2023. Our experience developing and marketing products for international markets has enabled us to develop the scale, logistics, marketing, manufacturing efficiencies and design expertise that serve as the foundation for us to expand aggressively into the highly attractive U.S., Canada, South America, Asia and Middle Easter markets. In 2019, we developed a line of high-end physiotherapeutic jade mats with China-based manufacturing partners for use in therapy clinics, hospitality, and real estate projects in Asia. We launched our first flagship showroom/retail store in Kuala Lumpur, Malaysia in late 2019, which, after a COVID-19 related closing, was reopened in May 2020. On August 28, 2020, after few months reopening, Malaysia government extended Movement Control Order to prohibit the businesses to open to public until March 5, 2021 to contain the spread of COVID-19. After the re-opening on March 5, 2021, Malaysia imposed a new nationwide lockdown on May 12, 2021 until early June 2021 which was subsequently extended to early October 2021. In October 2021, the Order was lifted for people who are fully vaccinated and our store has been reopened since. In April 2022, Malaysia has reopened the border for foreign visitors. In June 2023, everything is back to normal in Malaysia. Due to the negative impact caused by COVID-19 from 2020 to 2022, the Company eventually sold the entire jade mats inventory for $2.00 million in liquidation sales in June 2023. We exited from Jade Mats business in 2023. Nova Malaysia has engaged in the development of an innovative home decoration design, showroom and payment IT software systems. We have limited experience with operations in Southeast Asia and considerable management attention and resources may be required to manage these new markets and product lines. We may be subject to additional risks including credit risk, inflation, currency exchange rate fluctuations, foreign exchange controls, import and export requirements, potentially adverse tax consequences and higher costs associated with doing business internationally. | 21 | | | Table of Contents | | We do not have access to a revolving credit facility. On May 4, 2020, the Company received loan proceeds in the amount of approximately $139,802 under the Paycheck Protection Program (PPP). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. On May 5, 2020, Diamond Bar Outdoors Inc. (Diamond Bar) was granted a loan from Cathay Bank in the aggregate amount of $176,294, pursuant to the Paycheck Protection Program. On June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan. In July 2021, we completed a registered direct offering of our shares of common stock and received offering gross proceeds of $3,120,622. In May 2024, August 2024 and October 2024, we completed three private placements for gross proceeds of $750,000. We currently believe that our financial resources will be adequate to finance our operations in the next 12 months. However, in the event that we do need to raise capital in the future, the instability in the securities markets could adversely affect our ability to raise additional capital. On April 18, 2024, the Company received written notice from the NASDAQ stating that the Company does not meet the requirement of maintaining a minimum of $2,500,000 in stockholders equity for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5550(b)(1), the Company also does not meet the alternative of market value of listed securities of $35 million under NASDAQ Listing Rule 5550(b)(2) or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years under NASDAQ Listing Rule 5550(b)(3), and the Company is no longer in compliance with the NASDAQ Listing Rules. The NASDAQ notification letter provided the Company until June 6, 2024 to submit a plan to regain compliance. If the plan is accepted, NASDAQ can grant the Company an extension up to 180 calendar days from the date of NASDAQ letter to demonstrate compliance. The Company submitted its plan of compliance on May 28, 2024 and a supplemental letter to the plan of compliance on June 20, 2024. Based on the review of the letters submitted by the Company, Staff has determined to grant the Company an extension until October 14, 2024 to regain compliance with the Rule and the Company must complete its initiatives and provide evidences for the compliance with the Rule as required by Nasdaq. On October 11, 2024, the Company and Nova Samoa have entered into orders to purchase inventories in total amount of $4,600,000, which will be paid in 3,321,429 shares (Shares) of common stock of the Company at US$1.40 per share. As of the date of the report, the Company believes it has regained compliance with the stockholders equity requirement based upon the specific transaction referenced. Nasdaq will continue to monitor the Companys ongoing compliance with the stockholders equity requirement and, if at the time of this annual report the Company does not evidence compliance, that it may be subject to delisting. On December 27, 2024, the Company received a letter from Nasdaq notifying the Company that, because the closing bid price for the Companys common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share (the Minimum Bid Price Requirement). The Company has a period of 180 calendar days from the date of notification, until June 25, 2025 (the Compliance Period), to regain compliance with the Minimum Bid Price Requirement. If at any time before the expiration of the Compliance Period the bid price of the Companys common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement. If the Company does not regain compliance by the end of the Compliance Period, the Company may be eligible for an additional 180 calendar day period to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that the Companys securities will be subject to delisting. The Company intends to continue actively monitoring the bid price for its common stock between now and the expiration of the Compliance Period and will consider all available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. **Principal Factors Affecting Our Financial Performance** Since 2019, we have moved away from low margin products and this move was intended to improve our gross profit margin, receivable collections and net profitability, and to increase our return on long-term equity. We terminated sales and marketing efforts to customers that represented a high purchase volume but low profit margin, and we adjusted our product line, which included the launch of our Summer 2023 Collection in the Las Vegas and High Point Markets, with a view to attracting a higher-end ultimate customer. The core focus of the Companys direction today is entirely centered on our products. Identifying a fashion-driven generational shift in the general perception and consumption of furniture and being more aware of actual consumer tastes and how best to fulfill and engage that need. Closely integrating product development alongside marketing results in appealing products that adheres to the scope of our target demographic of decision makers in the design, staging and retail fields. A process that is continually refined upon each release cycle, maintaining a singular, cohesive vision. In short, we have better identified our customers and how to cater to them in the process gaining greater traction with every product launch considerably more so on an international level than ever previous. We believe these new strategies, will provide us with significant long term growth opportunities. Significant factors that we believe could affect our operating results are the (i) prices of our products to our domestic and international retailer and wholesaler customers and their markups to end consumers; (ii) general economic conditions in the U.S., Chinese, and other international markets; and (iii) trade tariffs imposed by the United States on certain products manufactured in China; and (iv) high interest rate, inflation and slow- down in real estate market. We believe most of our customers are willing to pay for our high quality and stylish products, timely delivery, and strong production capacity at price levels which we expect will allow us to maintain a relatively high gross profit margin for our products. We do not manufacture our products, but instead we utilize third-party manufacturers. In response to the tariffs imposed by the United States on products manufactured in China, we are in the process of shifting a portion of our product manufacturing from third-party manufacturers located in China to third-party manufacturers located in other parts of Asia, such as Vietnam, India and/or Malaysia, countries unaffected by the tariffs. Implementation of a relocation of manufacturing (which by necessity includes an assessment of the factorys ability to deliver the quantity of the product, in accordance with the Companys specifications, and in accordance with the Companys quality control requirements) is time-consuming, but a portion of suppliers manufacturing our products has been transitioned to Malaysia and India starting in 2020 and we expect that more of our manufacturing will be transitioned to one or more of these venues. Some of our manufacturing will continue to be performed in China because the intellectual know-how necessary to manufacture certain products is not generally available in other Asian countries. Consumer preference trends favoring high quality and stylish products and lifestyle-based furniture suites should also allow us at least to maintain our gross profit margins. The markets in North America is challenging because such markets are experiencing a slow-down and may be entering a recession due to high interest rate and inflation. | 22 | | | Table of Contents | | **Critical Accounting Policies** While our significant accounting policies are described more fully in Note 2 to our accompanying audited consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this Managements Discussion and Analysis. There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. **Basis of Presentation** The accompanying audited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) for Nova LifeStyle and its subsidiaries, Diamond Bar, i Design, Nova Furniture, Nova Samoa, Nova Malaysia and its former subsidiary, Nova HK. **Reverse Split** On May 22, 2023, the Company filed a Certificate of Change with the Secretary of State of Nevada with an effective date of May 22, 2023, at which time a 1-for-5 reverse stock split of the Companys authorized shares of common stock, par value $0.001, accompanied by a corresponding decrease in the Companys issued and outstanding shares of common stock (the Reverse Stock Split), was effected. All references to shares and per share data have been retroactively restated to reflect such split. **Amendments to Articles of Incorporation** On September 5, 2023, the Company filed the Certificate of Change (the Amendment) with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to increase the amount of authorized shares of its common stock, par value $0.001 per share, from 3,000,000 to 250,000,000. The Amendment was approved by the Companys Board of Directors (the Board) on June 28, 2023 and by the shareholders at a special meeting of the Companys shareholders held on August 31, 2023. The Amendment does not affect the rights of the Companys shareholders and was effective immediately upon filing. **Use of Estimates** In preparing consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition, the allowance for bad debt, valuation of inventories, the valuation of stock-based compensation, income taxes and unrecognized tax benefits, valuation allowance for deferred tax assets, assumptions used in assessing impairment of long-lived assets and goodwill, and loss contingencies. Actual results could differ from those estimates. **Accounts Receivable** Our accounts receivable arises from product sales. We do not adjust receivables for the effects of a significant financing component at contract inception if we expect to collect the receivables in one year or less from the time of sale. We do not expect to collect receivables greater than one year from the time of sale. Our policy is to maintain an allowance for expected credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. We maintained an allowance for expected credit loss of $367 and $532 as of December 31, 2024 and December 31, 2023, respectively. During the years ended December 31, 2024 and 2023, expected credit losses provision (reversal) was ($165) and ($2,382), respectively. As of December 31, 2024, we had gross receivable of $36,738 of which $12,796 was over 90 days past due. The allowance for expected credit losses is our best estimate of the amount of expected credit losses in our existing trade accounts receivable. We determine the allowance based on historical bad debt experience, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns. **** | 23 | | | Table of Contents | | **** **Advances to Suppliers** Advances to suppliers represent amounts paid to suppliers in advance for goods that are yet to be delivered and from which future economic benefits are expected to flow to the Company within the normal operating cycle. Based on our historical records and in normal circumstances, we generally receive goods within 4 to 6 months from the date the advance payment is made. **Income Taxes** Income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Under the provisions of ASC Topic 740, when tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Nova Lifestyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI and Nova Samoa was incorporated in Samoa. Accordingly, the Companys consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled. Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%. Nova Living (HK) Group Limited (Nova HK) is incorporated in Hong Kong and is subject to Hong Kong income taxes at the statutory rate of 16.5%. In February 2022, Nova HK was deregistered. The Tax Cuts and Jobs Act of 2017 (the Act) created new taxes on certain foreign-sourced earnings such as global intangible low-taxed income (GILTI) under IRC Section 951A, which is effective for the Company for tax years beginning after January 1, 2018. For the year ended December 31, 2024, the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. | 24 | | | Table of Contents | | On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses (NOLs) arising in taxable years beginning after December 31, 2017. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years. While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed. Furthermore, in anticipation of the new provision taking effect, we have analyzed the provision and worked with our advisors to evaluate its application to our business. Since all research and development expenditures were incurred within the U.S. and the amount is immaterial, we do not anticipate it having any material impact to our provision. As of December 31, 2024, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately 22.2 million of which substantially all was previously subject to U.S. tax, the one-time transition tax on foreign unremitted earnings required by the Tax Act, or GILTI. Those earnings are considered to be permanently reinvested and accordingly, no deferred tax expense is recorded for U.S. federal and state income tax or applicable withholding taxes. As of December 31, 2024 and 2023, unrecognized tax benefits were approximately nil and nil, respectively. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was nil as of December 31, 2024 and 2023. A reconciliation of unrecognized tax benefits excluding interest and penalties (Gross UTB) for the nine months ended December 31, 2024 and 2023, is as follows: | | | | Gross UTB | | | | | | | 2024 | | | | 2023 | | | | | | | | | | | | | | | Balance January 1 | | | | | | | | Foreign exchange adjustment | | | | | | | | | | | Balance December 31 | | $ | - | | | $ | - | | | At December 31, 2024 and 2023, the Company had cumulatively accrued approximately nil and nil for estimated interest and penalties related to unrecognized tax benefits. The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax benefit, which totaled nil and nil for the years ended December 31, 2024 and 2023, respectively, related to the Companys operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months. Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2020-2024 remain open to examination by tax authorities in the U.S. **Intangible Assets** Intangible assets consist primarily of computer software acquired for internal use. Acquired intangible assets are initially recorded at the acquisition-date fair value. Intangible assets are amortized on a straight-line basis over their estimated useful lives and are carried at cost less accumulated amortization. The estimated useful life of computer software is generally 5 years. **Revenue Recognition** We recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. We recognize revenues following the five step model prescribed under ASU No. 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. Revenue from product sales is recognized when the customer obtains control of our product, which typically occurs upon shipment to the customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. | 25 | | | Table of Contents | | Revenue from product sales is recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers. Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable as the amount is payable to our customer. Our sales policy allows for the return of product within the warranty period if the product is defective and the defects are our fault. As alternatives for the product return option, the customers have the option of asking us for a discount for products with quality issues, or of receiving replacement parts from us at no cost. The amount of reserves for return of products, the discount provided to the customers, and cost for the replacement parts were immaterial for the years ended December 31, 2024 and 2023. The Company considers itself acting as a principal for sales of goods which is evidenced by (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods, (ii) the Company has inventory risk before the specified goods have been transferred to a customer or after transfer of control to the customer, (iii) the Company has discretion in establishing the price for the specified good. Thus, the Companys revenue is recognized at a point in time when a promised good is delivered to a customer. We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling expenses on our audited consolidated statements of operations. **Foreign Currency Translation and Transactions** The accompanying audited consolidated financial statements are presented in United States Dollar ($ or USD), which is also the functional currency of Nova LifeStyle, Nova Furniture, Nova Samoa, Diamond Bar, and i Design. The Companys subsidiary with operations in Malaysia uses its local currency, Malaysian Ringgit (RM), as its functional currency. An entitys functional currency is the currency of the primary economic environment in which it operates, which is normally the currency of the environment in which the entity primarily generates and expends cash. Managements judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of operations. The financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders equity accounts are translated using the historical exchange rates at the date the entry to stockholders equity was recorded, except for the change in accumulated deficits during the period, which is translated using the historical exchange rates used to translate each periods income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the balance sheets. Translation of amounts from RM into U.S. dollars has been made at the following exchange rates: | Balance sheet items, except for equity accounts | | | | | | | December 31, 2024 | | | RM4.47 to 1 | | | | December 31, 2023 | | | RM4.59 to 1 | | | | | | | | | | | Income statement and cash flow items | | | | | | | For the year ended December 31, 2024 | | | RM4.57 to 1 | | | | For the year ended December 31, 2023 | | | RM4.56 to 1 | | | | 26 | | | Table of Contents | | **Segment Reporting** ASC Topic 280, Segment Reporting, requires use of the management approach model for segment reporting. The management approach model is based on the way a companys chief operating decision maker organizes segments within the company for making operating decisions, assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. We determined that our operations constitute a single reportable segment in accordance with ASC 280. We operate exclusively in one business and industry segment: the design and sale of furniture. We concluded that we had one reportable segment under ASC 280 because Diamond Bar is a furniture distributor based in California focusing on customers in the US and Nova Malaysia is a furniture retailer and distributor focusing on customers primarily in Malaysia and Asia. Each of our subsidiaries is operated under the same senior management of our company, and we view the operations of Diamond Bar and Nova Malaysia as a whole for making business decisions. Our long-lived assets are mainly property, plant and equipment located in the United States and Malaysia for administrative purposes. Net sales to customers by geographic area are determined by reference to the physical product shipment delivery locations requested by our customers. For example, if the products are delivered to a customer in the U.S., the sales are recorded as generated in the U.S.; if the customer directs us to ship its products to China, the sales are recorded as sold in China. **New Accounting Pronouncements** *Recently Adopted Accounting Standards* In January 2017, the FASB issued ASU 2017-04, Intangibles Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 eliminates Step 2 of the two-step goodwill impairment test, under which a goodwill impairment loss was measured by comparing the implied fair value of a reporting units goodwill with the carrying amount of that goodwill. ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss is measured as the excess of a reporting units carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). This Update is effective for smaller reporting companies for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022, which is required to be applied prospectively from the date of adoption. The Company adopted ASU 2017-04 for its interim and annual goodwill impairment tests beginning January 1, 2023. The adoption of ASU 2017-04 did not have any impact on our audited consolidated financial statements. *Recently Issued But Not Yet Adopted Accounting Pronouncements* In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our consolidated financial statement presentations and disclosures. | 27 | | | Table of Contents | | ln December 2023, the FASB issued Accounting Standards Update No.2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation,(2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3)income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual period beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its audited consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASBs intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. We do not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on our financial statement presentation or disclosures. **Results of Operations** **Comparison of Years Ended December 31, 2024 and 2023** The following table sets forth the results of our operations for the years ended December 31, 2024 and 2023. | | | Years Ended December 31, | | | | | | 2024 | | | 2023 | | | | | | $ | | | % of Sales | | | $ | | | % of Sales | | | | Net sales | | $ | 9,686,975 | | | | | | | $ | 11,087,459 | | | | | | | | Cost of sales | | | (5,437,484 | ) | | | (56 | )% | | | (6,913,902 | ) | | | (62 | )% | | | Gross profit | | | 4,249,491 | | | | 44 | % | | | 4,173,557 | | | | 38 | % | | | Operating expenses | | | (9,612,846 | ) | | | (99 | )% | | | (10,592,105 | ) | | | (96 | )% | | | Loss from operations | | | (5,363,355 | ) | | | (55 | )% | | | (6,418,548 | ) | | | (58 | )% | | | Other expenses, net | | | (195,736 | ) | | | (2 | )% | | | (573,617 | ) | | | (5 | )% | | | Income tax expenses | | | (2,614 | ) | | | - | | | (731,092 | ) | | | (7 | )% | | | Net loss | | | (5,561,705 | ) | | | (57 | )% | | | (7,723,257 | ) | | | (70 | )% | | **Net Sales** Net sales for the year ended December 31, 2024 were $9.69 million, a decrease of 13% from $11.09 million for the same year of 2023. This decrease in net sales resulted primarily from 39% decrease in sales volume, while partially offset by 43% increase in average selling price. Our three largest selling product categories for the year ended December 31, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 8% of sales, respectively. For the year ended December 31, 2023, the three largest selling categories were sofa, jade mats, and beds, which accounted for approximately 37%, 18% and 13% of sales, respectively. The $1.40 million decrease in net sales for the year ended December 30, 2024, compared to the same year of 2023, was mainly due to decreased sales to Asia. Sales to Asia decreased by 100% to nil for the year ended December 31, 2024, compared to $2.00 million for the same year of 2023, such decrease mainly due to our liquidation sales of the entire inventory of jade mats by Nova Malaysia for approximately $1.95 million in Malaysia for the year ended December 31, 2023. Also, sales to other countries decreased by $79,120 to $251,039 for the year ended December 31, 2024, from $330,159 for the same year of 2023, primarily due to less direct container sales in other countries. However, the decrease in net sales in Asia and other countries was partially offset by the increase in sales to North America. Sales to North America increased by $0.66 million to $9.44 million for the year ended December 31, 2024, from $8.77 million for the same year of 2023, primary due to more sales order received from our customers in North America. | 28 | | | Table of Contents | | **Cost of Sales** Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales decreased by 21% to $5.44 million for the year ended December 31, 2024, compared to $6.91 million for the same year of 2023. Cost of sales as a percentage of sales decreased to 56% for the year ended December 31, 2024, compared to 62% for the same year of 2023. The decrease in cost of sales in dollar term was mainly due to decreased net sales. The decrease in cost of sales as a percentage of sales is a result of the liquidation sales of the jade mats in Malaysia which came with high cost and low profit margin in the second quarter of 2023. We sold our jade mats in the cost of $1.49 million (after impairment) for $1.95 million entirely in 2023. **Gross Profit** Gross profit was $4.25 million for the year ended December 31, 2024, compared to $4.17 million for the same year of 2023, representing an increase in gross profit of $0.08 million. Our gross profit margin was 44% for the year ended December 31, 2024, compared to 38% for the same year of 2023. The increase in gross profit and gross profit margin was mainly a result of the liquidation sales of the jade mats in Malaysia which came with low profit margin during the year ended December 31, 2023 **Operating Expenses** Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $9.61 million for the year ended December 31, 2024, compared to $10.59 million for the same year of 2023. Selling expenses decreased by 36%, or $0.86 million, to $1.56 million for the year ended December 31, 2024, from $2.42 million for the same year of 2023, primarily due to decreased marketing and advertising expenses. On the other hand, general and administrative expenses increased by 20%, or $1.00 million, to $6.06 million for the year ended December 31, 2024, from $5.06 million for the same year of 2023, primarily due to an increase in consulting fee of $1.17 million and professional fees of $0.05 million, while the increase was partially offset by a decrease in bad debt of $0.19 million and depreciation of $0.30 million. In addition, research and development decreased by 36%, or $1.12 million to $2.00 million for the year ended December 31, 2024, from $3.11 million for the same year of 2023, primary due to our spending less on our AI and IT system. **Other Expenses, Net** Other expenses, net was $195,736 for the year ended December 31, 2024, compared to other expenses, net of $573,617 for the same period of 2023, representing a decrease in other expenses of $377,881. The decrease in other expenses was due primarily to an increase in foreign exchange gain by $430,971 to $13,281 for the year ended December 31, 2024, from foreign exchange loss of $417,690 for the same year of 2023. The increase in foreign exchange gain in 2024 from foreign exchange in 2023 loss was mainly a result of the appreciation of U.S. dollar against Malaysian Ringgit on acquisition of AI and IT systems in U.S. dollars during the year ended December 31, 2024. **Income Tax Expenses** Income tax expenses were $2,614 and $731,092 for the year ended December 31, 2024 and 2023, respectively. The income tax benefits for the year ended December 31, 2024 were mainly due to minimum tax in California for our subsidiaries in U.S. The income tax expenses for the year ended December 31, 2023 were primarily due to the net taxable income from Nova Malaysia. The net taxable income was resulted from the income from debt forgiveness to Nova Malaysia from Nova HK, while offset with inventory impairment loss incurred in Malaysia, current operating loss and prior year net operating loss in Nova Malaysia. **Net Loss** As a result of the foregoing, our net loss was $5.56 million for the year ended December 31, 2024, compared to $7.72 million for the same year of 2023. | 29 | | | Table of Contents | | **Liquidity and Capital Resources** Our principal demands for liquidity are related to our efforts to increase sales and purchase inventory, and for expenditures related to sales distribution and general corporate purposes. We intend to meet our liquidity requirements, including capital expenditures related to purchase of inventories and the expansion of our business, primarily through cash flow provided by operations, collections of accounts receivable, and credit facilities from banks. We rely primarily on internally generated cash flow and available working capital to support growth. We may seek additional financing in the form of bank loans or other credit facilities or funds raised through offerings of our equity or debt, if and when we determine such offerings are required. As of December 31, 2024, we do not have any credit facilities. We believe that our current cash and cash equivalents and anticipated cash receipts from sales of products will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We had working capital of $2,849,236 at December 31, 2024, an increase of $2,789,179 from net working capital of $60,057 at December 31, 2023. The ratio of current assets to current liabilities was 1.56-to-1 at December 31, 2024. The following is a summary of cash provided by or used in each of the indicated types of activities during the year ended December 31, 2024 and 2023: | | | 2024 | | | 2023 | | | | Cash (used in) provided by: | | | | | | | | | | | Operating activities | | $ | (1,391,779 | ) | | $ | (1,580,247 | ) | | | Investing activities | | | (14,121 | ) | | | 18,643 | | | | Financing activities | | | 1,175,578 | | | | - | | | Net cash used in operating activities was $1.39 million for the year ended December 31, 2024, a decrease in cash outflow by $0.19 million from $1.58 million of cash used in operating activities for the same year of 2023. The decrease in cash outflow was attributable primarily to an increase in cash inflow of $1.29 million for research and development to $1.96 million cash inflow for the year ended December 31, 2024, from $0.68 million cash inflow for the same year of 2023, such increase in cash inflow being mainly due to issued our common stocks instead of cash to purchase various IT systems which are integrated with our current existing IT system. The decrease in cash outflow was partially offset by increase in cash outflow of $3.19 million for inventories to $0.67 million cash outflow for the year ended December 31, 2024, from $2.53 million cash inflow for the same year of 2023, such increase in cash outflow being mainly due to more purchases were made from our suppliers for the year ended December 31, 2024. Net cash used in investing activities was $14,121 for the year ended December 31, 2024, an increase in cash outflow of $32,764 from $18,643 of cash provided by investing activities for the same year of 2023. We incurred cash outflow of $14,121 from the purchase of forklift in Nova Malaysia for the year ended December 31, 2024. For the year ended December 31, 2023, we incurred cash inflow of $18,643 due to disposal of our fixed assets. Net cash provided by financing activities was $1.18 million for the year ended December 31, 2024, compared to nil for the same year of 2023. During the year ended December 31, 2024, we borrowed $0.07 million from an unrelated party and $0.36 million from a shareholder. We also sold 450,000 shares of common stock with the proceeds of $0.75 million for our working capital. As of December 31, 2024, we had gross accounts receivable of $36,738 of which $4,143 was not yet past due and $3,212 was less than 90 days past due. We had an allowance for expected credit losses of $367. As of March 18, 2025, 93.4% of accounts receivable outstanding as of December 31, 2024 had been collected. | 30 | | | Table of Contents | | 100% of our accounts receivable outstanding at December 31, 2023 had been collected during the year ended December 31, 2024. As of December 31, 2024 and 2023, we had advances to suppliers of $4,689,148 and $93,740, respectively. These supplier prepayments are made for goods before we actually receive them. For a new product, the normal lead time from new product R&D, prototype, and mass production to delivery of goods from our suppliers to us is approximately six to nine months after we make advance payments to our suppliers. For other products, the typical time is 4-6 months after our advance payment. We will consider the need for a reserve when and if a supplier fails to fulfill our orders within the time frame as stipulated in the purchase contracts. As of March 18, 2025, $28,924 or 0.6% and $93,740 or 100% of our advances to suppliers outstanding at December 31, 2024 and 2023 had been delivered to us in the form of purchases of furniture. **Other Long-Term Liabilities** As of December 31, 2024, we recorded long-term taxes payable of nil million, consisting of an income tax payable of nil, primarily arising from a one-time transition tax recognized in the fourth quarter of 2017 on our post-1986 foreign unremitted earnings, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. We elected to pay the one-time transition tax over the eight years commencing April 2018. **Off-Balance Sheet Arrangements** There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders. We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. **Item 7A Quantitative and Qualitative Disclosures about Market Risk** Not required. **Item 8. Financial Statements and Supplementary Data** Our financial statements, together with the report thereon, appear in a separate section of this Annual Report beginning on page F-1. **Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure** None. **Item 9A. Controls and Procedures** **Evaluation of Disclosure Controls and Procedures** We have evaluated, under the supervision of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act) as of December 31, 2024. Based on this evaluation, our CEO and CFO concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and (b) is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above. | 31 | | | Table of Contents | | **Management****s Report on Internal Control over Financial Reporting** Our management, with oversight from our audit committee, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting includes those policies and procedures that: (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements. In designing and evaluating internal controls, management recognizes that any internal controls, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of control systems must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Tread way Commission (COSO) in the 2014 Internal Control-Integrated Framework. Based on this assessment, our management concluded that, as of December 31, 2024, our internal control over financial reporting was effective. **Changes in Internal Control over Financial Reporting** There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during or subsequent to the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. **Item 9B. Other Information.** *Insider Trading Arrangements* ** During the fiscal quarter ended December 31, 2024, none of the Companys directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements. **Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections** Not applicable. | 32 | | | Table of Contents | | **PART III** **Item 10. Directors, Executive Officers and Corporate Governance** Information relating to nominees for director of Nova LifeStyle, compliance with Section 16(a) of the Securities Exchange Act of 1934, and the Companys code of ethics is set forth under the captions Proposal 1Election of Directors, Section 16(a) Beneficial Ownership Reporting Compliance, Corporate Governance, and Code of Ethics, respectively, in the Proxy Statement for the 2025 Annual Meeting of Stockholders. The information required by this item regarding delinquent Section 16(a) reports, if applicable, is set forth under Delinquent Section 16(a) Reports in the Proxy Statement and incorporated herein by reference. The information required by this item regarding our insider trading policies and procedures is set forth under Insider Trading Policies in the Proxy Statement and incorporated herein by reference. Such information is incorporated herein by reference. The definitive Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2024. **Item 11. Executive Compensation** Information required by this Item 11 relating to executive compensation and other matters is set forth under the captions Executive Compensation, Non-Employee Director Compensation, and Corporate Governance in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference. **Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters** Information related to ownership of common stock of Nova LifeStyle by certain persons is set forth under the caption Security Ownership of Certain Beneficial Owners and Management in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference. **Item 13. Certain Relationships and Related Transactions, and Director Independence** Information relating to existing or proposed relationships or transactions between Nova LifeStyle and any affiliate of Nova LifeStyle, as well as matters related to director independence, is set forth under the caption Certain Relationships and Related Transactions in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference. **Item 14. Principal Accounting Fees and Services** Information relating to Nova LifeStyles principal accountants fees and services is set forth under the caption Principal Accountant Fees and Services in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference. | 33 | | | Table of Contents | | **PART IV** **Item 15. Exhibits, Financial Statement Schedules** The following documents are filed as part of or are included in this Annual Report: | 1. | Financial statements listed in the Index to Financial Statements, filed as part of this Annual Report beginning on page F-1; and | | | | | | | 2. | Exhibits | | | Exhibit No. | | Description | | | 2.1 | | Agreement and Plan of Merger by and between Stevens Resources, Inc. and Nova LifeStyle, Inc., dated June 14, 2011 (Incorporated herein by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 2.2 | | Share Exchange Agreement and Plan of Reorganization by and between Nova Furniture Limited and Nova LifeStyle, Inc., dated June 30, 2011 (Incorporated herein by reference to Exhibit 2.2 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 2.3 | | Return to Treasury Agreement by and between Nova LifeStyle, Inc. and Alex Li, dated June 30, 2011 (Incorporated herein by reference to Exhibit 2.3 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 3.1 | | Articles of Incorporation (Incorporated herein by reference to Exhibit 3.1 to the Companys Registration Statement on Form S-1 (File No. 333-163019) filed on November 10, 2009) | | | 3.2 | | Amended and Restated Bylaws (Incorporated herein by reference to Exhibit 3.2 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 3.3 | | Certificate of Amendment to Articles of Incorporation filed with the Secretary of the State of Nevada on December 15, 2009, and effective as of September 9, 2009 (Incorporated herein by reference to Exhibit 3.3 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 3.4 | | Articles of Merger between Stevens Resources, Inc. and Nova LifeStyle, Inc. amending the Articles of Incorporation filed with the Secretary of State of the State of Nevada on June 14, 2011, and effective as of June 27, 2011 (Incorporated herein by reference to Exhibit 3.4 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 3.5 | | Articles of Exchange of Nova Furniture Limited and Nova LifeStyle, Inc. filed with the Secretary of State of the State of Nevada on June 30, 2011 (Incorporated herein by reference to Exhibit 3.5 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 3.6 | | First Amendment to the Amended and Restated Bylaws of Nova Lifestyle, Inc. (Incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K (File No. 001-36259) filed on February 28, 2018) | | | 3.7 | | Certificate of Change to Authorized Shares of Nova Lifestyle, Inc. (Incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K (File No. 001-36259) filed on December 20, 2019) | | | 3.8 | | Certificate of Change filed with the Nevada Secretary of State on May 22, 2023 (Incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed on May 23, 2023) | | | 3.9 | | Certificate of Change to the Articles of Incorporation of Nova LifeStyle Inc. filed with the Nevada Secretary of State on September 5, 2023 (Incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed on September 6, 2023) | | | 4.1 | | Specimen Stock Certificate (Incorporated herein by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 4.2 | | Form of Investor Warrant (Incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed on July 26, 2021) | | | 4.3 | | Form of Placement Agent Warrant (Incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed on July 26, 2021) | | | 4.4 | | Description of Securities registered under Section 12 of the Securities Exchange Act of 1934, as amended | | | 10.1 | | Shareholder Agreement by and between Nova Furniture Limited and St. Joyal, dated January 1, 2011 (Incorporated herein by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 30, 2011) | | | 10.2# | | Form of Director Agreement (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 3, 2013) | | | 34 | | | Table of Contents | | | Exhibit No. | | Description | | | 10.3# | | Nova LifeStyle, Inc. 2014 Omnibus Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K/A (File No. 333-163019) filed on July 10, 2014) | | | 10.4# | | Nova LifeStyle, Inc. Form of Restricted Stock Award Agreement (Incorporated herein by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K/A (File No. 333-163019) filed on July 10, 2014) | | | 10.5# | | Employment Agreement by and between Nova Lifestyle Inc. and Thanh H. Lam dated May 8, 2018 (Incorporated herein by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed on May 14, 2018) | | | 10.6 | | Sales Representative Agreement by and between Diamond Bar Outdoors, Inc. and Tawny Lam Consulting, Inc. dated January 4, 2020 (Incorporated herein by reference to Exhibit 10.17 to the Companys Annual Report on Form 10-K filed on May 12, 2020) | | | 10.7 | | Nova LifeStyle, Inc. 2021 Omnibus Equity Plan (Incorporated herein by reference to Annex A to the Companys Definitive Proxy on Schedule 14A filed on April 13, 2021) | | | 10.8 | | Form of Securities Purchase Agreement dated July 23, 2021 (Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on July 26, 2021) | | | 10.9# | | Employment Agreement by and between Nova Lifestyle Inc. and Jeffery Chuang dated August 11, 2021 (Incorporated herein by reference to Exhibit 10.13 to the Companys Annual Report on Form 10-K filed on April 8, 2022) | | | 10.10# | | Amendment to Employment Agreement by and between Nova Lifestyle Inc. and Thanh H. Lam dated December 30, 2021 (Incorporated herein by reference to Exhibit 10.14 to the Companys Annual Report on Form 10-K filed on April 8, 2022) | | | 10.11# | | Employment Agreement by and between Nova Lifestyle Inc. and Thanh H. Lam dated May 8, 2023 (Incorporated herein by reference to Exhibit 10.11 to the Companys Annual Report on Form 10-K filed on April 15, 2024) | | | 10.12# | | Employment Agreement by and between Nova Lifestyle Inc. and Jeffery Chuang dated September 1, 2023 (Incorporated herein by reference to Exhibit 10.12 to the Companys Annual Report on Form 10-K filed on April 15, 2024) | | | 10.13 | | Sale and Purchase Agreement by and among Nova LifeStyle Inc., Nova Living (M) Sdn Bhd and Web 3.0 Sdh Bhd dated November 16, 2023(Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on November 22, 2023) | | | 10.14# | | Amendment to Employment Agreement by and between Nova Lifestyle Inc. and Jeffery Chuang dated December 22, 2023 (Incorporated herein by reference to Exhibit 10.14 to the Companys Annual Report on Form 10-K filed on April 15, 2024) | | | 10.15 | | Sale and Purchase Agreement by and among Nova LifeStyle Inc., Nova Living (M) Sdn Bhd and ATS Brand Sdh Bhd dated January 23, 2024 (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on January 26, 2024) | | | 10.16 | | Securities Purchase Agreement dated May 16, 2024. (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on May 21, 2024) | | | 10.17 | | Sale and Purchase Agreement by and among Nova LifeStyle Inc., Nova Living (M) Sdn Bhd and Hong Sheng Sdn Bhd dated July 5, 2024 (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on July 11, 2024) | | | 10.18 | | Securities Purchase Agreement dated July 30, 2024. (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on August 2, 2024) | | | 10.19 | | Sale and Purchase Agreement by and among Nova LifeStyle Inc., Nova Living (M) Sdn Bhd and VT Conceptone Sdn Bhd dated August 7, 2024 (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on August 12, 2024) | | | 10.20 | | Form of Purchase Order, dated October 11, 2024 (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on October 11, 2024) | | | 10.21 | | Securities Purchase Agreement dated October 25, 2024. (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on October 28, 2024) | | | 10.22 | | Securities Purchase Agreement dated January 6, 2025. (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on January 10, 2025) | | | 10.23 | | Securities Purchase Agreement dated February 10, 2025. (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on February 11, 2025) | | | 10.24 | | Debt Repayment Agreement by and between the Company and the Creditor dated February 20, 2025. (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on February 24, 2025) | | | 10.25 | | Form of Purchase Order (Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on March 4, 2025) | | | 10.26 | | Securities Purchase Agreement dated March 13, 2025.(Incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on March 18, 2025) | | | 14.1 | | Code of Business Conduct and Ethics of Nova Lifestyle, Inc. (Incorporated herein by reference to Exhibit 14.1 to the Companys Current Report on Form 8-K (File No. 333-163019) filed on June 10, 2013) | | | 19.1 | | Insider Trading Policy (Incorporated herein by reference to Exhibit 19.1 to the Companys Annual Report on Form 10-K filed on April 15, 2024) | | | 21.1 | | Subsidiaries of the Registrant | | | 23.1 | | Consent of WWC, P.C. | | | 23.2 | | Consent of Enrome LLP | | | 24.1 | | Power of Attorney (Included on the Signature Page of this Annual Report on Form 10-K) | | | 31.1 | | Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | 31.2 | | Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | 32.1 | | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | 32.2 | | Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | 97.1 | | Clawback Policy (Incorporated herein by reference to Exhibit 97.1 to the Companys Annual Report on Form 10-K filed on April 15, 2024) | | | | | | | | 101.INS | | Inline XBRL Instance Document. | | | | | | | | 101.SCH | | Inline XBRL Taxonomy Extension Schema Document. | | | | | | | | 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | | | | | | | 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. | | | | | | | | 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | | | | | | | 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | | | | | | | 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) | | # Indicates management contract or compensatory plan, contract or arrangement. Filed herewith. Furnished herewith. | 35 | | | Table of Contents | | **NOVA LIFESTYLE, INC.** **Consolidated Financial Statements** **Years Ended December 31, 2024 and 2023** **Index** | | Page | | | Report of Independent Registered Public Accounting Firm (PCAOB ID: 6907) | F-2 | | | Report of Independent Registered Public Accounting Firm (PCAOB ID: 1171) | F-4 | | | Consolidated Financial Statements | | | | Consolidated Balance Sheets as of December 31, 2024 and 2023 | F-6 to F-7 | | | Consolidated Statements of Loss and Comprehensive Loss for the years ended December 31, 2024 and 2023 | F-8 | | | Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2024 and 2023 | F-9 | | | Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 | F-10 | | | Notes to Consolidated Financial Statements for the years ended December 31, 2024 and 2023 | F-11 | | | F-1 | | | Table of Contents | | * **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Shareholders of Nova Lifestyle, Inc. **Opinion on the Financial Statements** **** We have audited the accompanying consolidated balance sheets of Nova Lifestyle, Inc. and its subsidiaries (the Company) as of December 31, 2024 and the related consolidated statements of loss and comprehensive loss, stockholders equity, and cash flows for the year ended December 31, 2024 and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and the results of its operations and its cash flows for the year ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). **Material Uncertainty Related to Going Concern** **** The accompanying consolidated financial statements have been prepared assuming that the Company will continue as going concern. As discussed in Note 1 to the financial statements, the Company incurred a net loss and operating cash outflow of $5,561,705 and $1,391,779 respectively for the year ended December 31, 2024 and accumulated deficit of $49,991,515 for the year ended December 31, 2024. These factors, raise substantial doubt about its ability to continue as going concern. Managements plan in regards to these matters are described in Note 1. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. **Basis for Opinion** **** These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. **Critical Audit Matter** **** Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. | Enrome LLP | 143 Cecil Street #19-03/04 | admin@enrome-group.com | | | | GB Building Singapore 069542 | www.enrome-group.com | | | F-2 | | | Table of Contents | | * ** ** *Goodwill* ** We assessed the carrying value of goodwill as a critical audit matter. As discussed in Note 2 to the consolidated financial statements of December 31, 2024, the Companys goodwill balance was $ 218,606. The account required challenging, subjective, and complex judgement and assumptions regarding the estimation of future cash flow and finding the appropriate weighted average cost of capital to determine the balance is reasonable, properly disclosed, and not material misstated. Our principal audit procedures performed to address the goodwill impairment included the following: | | | Evaluated management of significant assumptions and estimate which is particularly related to future revenue growth rates, capital expenditures, operating margins on evaluating the impact on the fair values according to the changes in assumptions. | | | | | | | | | | Assessing the appropriateness of the methodology applied in estimating the fair values of the Companys goodwill and evaluating the reasonableness of certain ratios and assumption used in analysis. | | | | | | | | | | Performed quantitative analysis by using the valuation model to evaluate the fair value and test whether impairment exists. | | The accounts relevant to this critical audit matter include the gross value of the goodwill, and related impairment expense, and related disclosure in the accompanying Note 2 to the consolidated financial statements. /s/ Enrome LLP We have served as the Companys auditor since 2024 Singapore Mar 31, 2025 | Enrome LLP | 143 Cecil Street #19-03/04 | admin@enrome-group.com | | | | GB Building Singapore 069542 | www.enrome-group.com | | | F-3 | | | Table of Contents | | ***** **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** | To: | The Board of Directors and Shareholders of Nova Lifestyle, Inc. | | **Opinion on the Financial Statements** We have audited the accompanying consolidated balance sheet of Nova Lifestyle, Inc. and subsidiaries (collectively the Company) as of December 31, 2023, and the related consolidated statements of loss and comprehensive loss, stockholders equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. **Emphasis Matter Going Concern** The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred a net loss for the years ended December 31, 2023, and the accumulated deficit increased from $36.71 million to $44.43 million from 2022 to 2023. These factors, raise substantial doubt about its ability to continue as a going concern. Managements plan in regards to these matters are described in Note 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. **Basis for Opinion** These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal controls over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal controls over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. **Critical Audit Matter** **** Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. | F-4 | | | Table of Contents | | Goodwill* We assessed the carrying value of goodwill as a critical audit matter. As discussed in Note 2 to the consolidated financial statements, the Companys goodwill balance was $218,606 as of December 31, 2023. The account requires challenging, subjective, and complex judgment and assumptions regarding the estimation of future cash flows and finding the appropriate weighted average cost of capital to determine that the balance is reasonable, properly disclosed, and not materially misstated. Our principal audit procedures performed to address the goodwill impairment included the following: | | | Evaluated management of significant assumptions and estimates which is particularly related to future revenue growth rates, capital expenditures, operating margins on evaluating the impact on the fair values according to the changes in the assumptions. | | | | | Assessing the appropriateness of the methodology applied in estimating the fair values of the Companys goodwill and evaluating the reasonableness of certain ratios and assumptions used in analysis. | | | | | Performed quantitative analysis by using valuation model to evaluate the fair value and test whether impairment exists. | | The accounts relevant to this critical audit matter include the gross value of the goodwill, and related impairment expense, and the related disclosure in the accompanying note 2 to the financial statements. *Inventory Impairment* We assessed the carrying value of inventory as a critical audit matter. As described in Note 4 to the consolidated financial statements, as of December 31, 2023, the Companys inventories balance was $2,213,311, which was an amount that was quantitatively material to the financial statements as a whole, and the account required challenging, subjective and complex judgement and assumptions in regards to the estimation of the net realizable value of those assets to determine that the balance was reasonable, and not materially misstated. The Companys inventories are stated at the lower of cost or net realizable value, with cost determined on a weighted-average basis. The write-down of potential obsolete or slow-moving inventories is recorded based on managements assumptions about future demands derived and market conditions. For the year ended December 31, 2023, the Company wrote down $140,131 of slow-moving inventory. Inventories have been written down to the Companys best estimate of their realizable value, which includes consideration of various factors. Our principal audit procedures performed to address the net realizable value of the inventories and related the impairment expense included the following: | | | Observing the physical condition of the inventories during inventory counts. Performing independent analysis of significant assumptions provided by management, by researching wholesale and retail market prices, gaining an understanding of demand for the product by searching for comparable products in the market place. | | | | | Inquired with Company personnel to understand managements model of estimates on selling price and cost of completion to calculate net realizable value and assess the appropriateness of the methodology applied in developing those estimates. | | | | | Performed quantitative analysis and recalculation on net realizable value to test if any impairment exists, and developed a range of independent estimates for assumptions for the valuation models and compared those estimates with those employed by management. | | The accounts relevant to this critical audit matter include the inventories and cost of sales, and the related disclosure in the accompanying notes 4 to the financial statements. * WWC, P.C. Certified Public Accountants PCAOB ID No.1171 We have served as the Companys auditor since 2022. San Mateo, California April 12, 2024 | F-5 | | | Table of Contents | | **** **NOVA LIFESTYLE, INC. AND SUBSIDIARIES** **CONSOLIDATED BALANCE SHEETS** **** | AS OF DECEMBER 31, 2024 AND 2023 | | | | | 2024 | | | 2023 | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | | | | Current Assets | | | | | | | | | | | Cash and cash equivalents | | $ | 161,902 | | | $ | 369,137 | | | | Accounts receivable, net | | | 36,371 | | | | 46,998 | | | | Advance to suppliers | | | 4,689,148 | | | | 93,740 | | | | Inventories | | | 2,824,353 | | | | 2,213,311 | | | | Prepaid expenses | | | 202,294 | | | | 984,934 | | | | Other receivables | | | 17,415 | | | | 41,265 | | | | | | | | | | | | | | | Total Current Assets | | | 7,931,483 | | | | 3,749,385 | | | | | | | | | | | | | | | Noncurrent Assets | | | | | | | | | | | Property, plant and equipment, net | | | 252,186 | | | | 287,673 | | | | Right-of-use assets, net | | | 1,459,496 | | | | 1,904,349 | | | | Intangible assets, net | | | 3,109 | | | | 8,473 | | | | Lease deposit | | | 52,523 | | | | 69,992 | | | | Goodwill | | | 218,606 | | | | 218,606 | | | | | | | | | | | | | | | Total Noncurrent Assets | | | 1,985,920 | | | | 2,489,093 | | | | | | | | | | | | | | | Total Assets | | $ | 9,917,403 | | | $ | 6,238,478 | | | | F-6 | | | Table of Contents | | **NOVA LIFESTYLE, INC. AND SUBSIDIARIES** **CONSOLIDATED BALANCE SHEETS (CONTD)** | AS OF DECEMBER 31, 2024 AND 2023 | | | | | 2024 | | | 2023 | | | | | | | | | | | | | Liabilities and Stockholders Equity | | | | | | | | | | | | | | | | | | | | | | Current Liabilities | | | | | | | | | | | Accounts payable | | $ | 728,546 | | | $ | 430,045 | | | | Operating lease liabilities, current | | | 716,602 | | | | 701,985 | | | | Finance lease liabilities, current | | | 32,585 | | | | - | | | | Contract liabilities | | | 413,583 | | | | 306,532 | | | | Loan from shareholders | | | 385,147 | | | | - | | | | Accrued liabilities and other payables | | | 1,683,033 | | | | 1,100,661 | | | | Other loan | | | 13,424 | | | | - | | | | Income tax payable | | | 1,852,399 | | | | 1,150,105 | | | | | | | | | | | | | | | Total Current Liabilities | | | 5,825,319 | | | | 3,689,328 | | | | | | | | | | | | | | | Noncurrent Liabilities | | | | | | | | | | | Other Loan | | | 197,828 | | | | 147,428 | | | | Operating lease liabilities, non-current | | | 730,291 | | | | 1,262,256 | | | | Finance lease liabilities, non-current | | | 40,451 | | | | - | | | | Income tax payable | | | - | | | | 643,112 | | | | | | | | | | | | | | | Total Noncurrent Liabilities | | | 968,570 | | | | 2,052,796 | | | | | | | | | | | | | | | Total Liabilities | | | 6,793,889 | | | | 5,742,124 | | | | | | | | | | | | | | | Contingencies and Commitments | | | - | | | | - | | | | | | | | | | | | | | | Stockholders Equity | | | | | | | | | | | Common stock, $0.001 par value; 250,000,000 shares authorized, 7,301,206 and 1,917,706 shares issued and outstanding as of December 31, 2024 and 2023, respectively | | | 7,301 | | | | 1,918 | | | | Additional paid-in capital | | | 52,585,582 | | | | 44,402,821 | | | | Accumulated other comprehensive income | | | 522,146 | | | | 521,425 | | | | Accumulated deficits | | | (49,991,515 | ) | | | (44,429,810 | ) | | | | | | | | | | | | | | Total Stockholders Equity | | | 3,123,514 | | | | 496,354 | | | | | | | | | | | | | | | Total Liabilities and Stockholders Equity | | $ | 9,917,403 | | | $ | 6,238,478 | | | **** | F-7 | | | Table of Contents | | **** **NOVA LIFESTYLE, INC. AND SUBSIDIARIES** **CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS** **** | FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 | | | | | 2024 | | | 2023 | | | | | | | | | | | | | Net Sales | | $ | 9,686,975 | | | $ | 11,087,459 | | | | | | | | | | | | | | | Cost of Sales | | | 5,437,484 | | | | 6,913,902 | | | | | | | | | | | | | | | Gross Profit | | | 4,249,491 | | | | 4,173,557 | | | | | | | | | | | | | | | Operating Expenses | | | | | | | | | | | Selling expenses | | | 1,557,508 | | | | 2,417,479 | | | | General and administrative expenses | | | 6,057,477 | | | | 5,056,500 | | | | Research and development | | | 1,997,861 | | | | 3,118,126 | | | | | | | | | | | | | | | Total Operating Expenses | | | 9,612,846 | | | | 10,592,105 | | | | | | | | | | | | | | | Loss From Operations | | | (5,363,355 | ) | | | (6,418,548 | ) | | | | | | | | | | | | | | Other Income (Expenses) | | | | | | | | | | | Non-operating income | | | 4,496 | | | | 19,979 | | | | Foreign exchange transaction income (loss) | | | 13,281 | | | | (417,690 | ) | | | Interest expense, net | | | (31,244 | ) | | | (9,495 | ) | | | Financial expense | | | (182,269 | ) | | | (166,411 | ) | | | | | | | | | | | | | | Total Other Expenses, Net | | | (195,736 | ) | | | (573,617 | ) | | | | | | | | | | | | | | Loss Before Income Taxes | | | (5,559,091 | ) | | | (6,992,165 | ) | | | | | | | | | | | | | | Income Tax Expense | | | (2,614 | ) | | | (731,092 | ) | | | | | | | | | | | | | | Net Loss | | | (5,561,705 | ) | | | (7,723,257 | ) | | | | | | | | | | | | | | Other Comprehensive Loss | | | | | | | | | | | Foreign currency translation | | | 721 | | | | 444,183 | | | | | | | | | | | | | | | Net Loss and Comprehensive Loss | | | (5,560,984 | ) | | | (7,279,074 | ) | | | | | | | | | | | | | | Weighted average shares outstanding - Basic and Diluted | | | 3,765,727 | | | | 1,556,555 | | | | | | | | | | | | | | | Net loss per share of common stock | | | | | | | | | | | Basic and Diluted | | $ | (1.48 | ) | | $ | (4.96 | ) | | **** | F-8 | | | Table of Contents | | **** **NOVA LIFESTYLE, INC. AND SUBSIDIARIES** **CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY** **** | FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 | | | | | Shares | | | Amount | | | Capital | | | Income | | | Deficits) | | | Equity | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | | Additional | | | Other | | | | | | Total | | | | | | Common stock | | | Paid-in | | | Comprehensive | | | (Accumulated | | | Stockholders | | | | | | Shares | | | Amount | | | Capital | | | Income | | | Deficits) | | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of January 1, 2023 | | | 1,438,268 | | | $ | 1,440 | | | $ | 43,239,701 | | | $ | 77,242 | | | $ | (36,706,553 | ) | | $ | 6,611,830 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to employees | | | 2,400 | | | | 2 | | | | 5,878 | | | | - | | | | - | | | | 5,880 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to consultants | | | 15,000 | | | | 15 | | | | 45,985 | | | | - | | | | - | | | | 46,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to designer | | | 45,491 | | | | 45 | | | | 119,918 | | | | - | | | | - | | | | 119,963 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to IT consultant | | | 150,000 | | | | 150 | | | | 317,850 | | | | - | | | | - | | | | 318,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition of AI IT System | | | 270,000 | | | | 270 | | | | 674,730 | | | | - | | | | - | | | | 675,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Rounding due to 1:5 reversed stock split | | | (3,453 | ) | | | (4 | ) | | | (1,241 | ) | | | - | | | | - | | | | (1,245 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation loss | | | - | | | | - | | | | - | | | | 444,183 | | | | - | | | | 444,183 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | | - | | | | - | | | | - | | | | - | | | | (7,723,257 | ) | | | (7,723,257 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2023 | | | 1,917,706 | | | $ | 1,918 | | | $ | 44,402,821 | | | $ | 521,425 | | | $ | (44,429,810 | ) | | $ | 496,354 | | | | Balance | | | 1,917,706 | | | $ | 1,918 | | | $ | 44,402,821 | | | $ | 521,425 | | | $ | (44,429,810 | ) | | $ | 496,354 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to employees | | | 6,000 | | | | 6 | | | | 11,139 | | | | - | | | | - | | | | 11,145 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to consultants | | | 400,000 | | | | 400 | | | | 724,599 | | | | - | | | | - | | | | 724,999 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to designer | | | 46,071 | | | | 46 | | | | 89,954 | | | | - | | | | - | | | | 90,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition of AI and IT Systems | | | 1,160,000 | | | | 1,160 | | | | 1,960,840 | | | | - | | | | - | | | | 1,962,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to suppliers | | | 3,321,429 | | | | 3,321 | | | | 4,646,679 | | | | - | | | | - | | | | 4,650,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock issued to an investor | | | 450,000 | | | | 450 | | | | 749,550 | | | | - | | | | - | | | | 750,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation loss | | | - | | | | - | | | | - | | | | 721 | | | | - | | | | 721 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | | - | | | | - | | | | - | | | | - | | | | (5,561,705 | ) | | | (5,561,705 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of December 31, 2024 | | | 7,301,206 | | | $ | 7,301 | | | $ | 52,585,582 | | | $ | 522,146 | | | $ | (49,991,515 | ) | | $ | 3,123,514 | | | | Balance | | | 7,301,206 | | | $ | 7,301 | | | $ | 52,585,582 | | | $ | 522,146 | | | $ | (49,991,515 | ) | | $ | 3,123,514 | | | **** | F-9 | | | Table of Contents | | **** **NOVA LIFESTYLE, INC. AND SUBSIDIARIES** **CONSOLIDATED STATEMENTS OF CASH FLOWS** | FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 | | | | | 2024 | | | 2023 | | | | | | | | | | | | | Cash Flows From Operating Activities | | | | | | | | | | | Net loss | | $ | (5,561,705 | ) | | $ | (7,723,257 | ) | | | | | | | | | | | | | | Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | | | | | | | | | Depreciation and amortization | | | 60,853 | | | | 55,446 | | | | Amortization of right-of-use assets | | | 449,349 | | | | 748,344 | | | | Write down of inventories | | | 56,583 | | | | 140,131 | | | | Stock based compensation expense | | | 757,692 | | | | 499,631 | | | | Research and development | | | 1,962,000 | | | | 675,000 | | | | Changes in allowance for credit losses | | | (165 | ) | | | (2,382 | ) | | | Changes in operating assets and liabilities: | | | | | | | | | | | Accounts receivable | | | 10,792 | | | | 243,862 | | | | Advance to suppliers | | | 54,592 | | | (72,567 | ) | | | Inventories | | | (667,626 | ) | | | 2,525,732 | | | | Prepaid expenses | | | 885,171 | | | | 468,223 | | | | Other receivables | | | 23,850 | | | | 37,910 | | | | Operating lease liabilities | | | (521,844 | ) | | | (735,151 | ) | | | Financing lease liabilities | | | 73,036 | | | | - | | | | Accounts payable | | | 298,501 | | | | 108,784 | | | | Contract liabilities | | | 101,793 | | | | 137,172 | | | | Accrued liabilities and other payables | | | 585,722 | | | | 672,715 | | | | Taxes payable | | | 39,627 | | | 640,160 | | | | | | | | | | | | | | | Net Cash Used in Operating Activities | | | (1,391,779 | ) | | | (1,580,247 | ) | | | | | | | | | | | | | | Cash Flows From Investing Activities | | | | | | | | | | | Disposal of property, plant, and equipment | | | - | | | | 18,643 | | | | Purchase of property, plant, and equipment | | | (14,121 | ) | | | - | | | | | | | | | | | | | | | Net Cash (Used in) Provided by Investing Activities | | | (14,121 | ) | | | 18,643 | | | | | | | | | | | | | | | Cash Flows From Financing Activities | | | | | | | | | | | Proceed from a unrelated party | | | 65,578 | | | | - | | | | Proceed from loan from a shareholder | | | 360,000 | | | | - | | | | Proceed from issuing common stocks | | | 750,000 | | | | - | | | | | | | | | | | | | | | Net Cash Provided by Financing Activities | | | 1,175,578 | | | | - | | | | | | | | | | | | | | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | | $ | 23,087 | | | $ | 556,574 | | | | | | | | | | | | | | | Net Decrease in Cash and Cash Equivalents | | | (207,235 | ) | | | (1,005,030 | ) | | | | | | | | | | | | | | Cash and Cash Equivalents, Beginning of Year | | | 369,137 | | | | 1,374,167 | | | | | | | | | | | | | | | Cash and Cash Equivalents, Ending of Year | | $ | 161,902 | | | $ | 369,137 | | | | | | | | | | | | | | | Supplemental Disclosure of Cash Flow Information | | | | | | | | | | | | | | | | | | | | | | Cash paid during period for: | | | | | | | | | | | Income tax payments | | $ | 5,854 | | | $ | 90,931 | | | | Interest expense | | $ | 32,477 | | | $ | 6,176 | | | | | | | | | | | | | | | Supplemental Disclosure of Non-Cash Activities | | | | | | | | | | | Obtained new right of use of autos | | | 69,700 | | | | | | | **** | F-10 | | | Table of Contents | | **** **NOVA LIFESTYLE, INC. AND SUBSIDIARIES** **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS** **FOR THE YEAR ENDED DECEMBER 31, 2024 AND 2023** **Note 1 - Organization and Description of Business** **Organization and Business** Nova LifeStyle, Inc. (Nova LifeStyle or the Company), formerly known as Stevens Resources, Inc., was incorporated in the State of Nevada on September 9, 2009. The Company is a U.S. holding company with no material assets other than the ownership interests of its subsidiaries through which it markets, designs and sells furniture worldwide: Nova Furniture Limited domiciled in the British Virgin Islands (Nova Furniture), Nova Furniture Ltd. domiciled in Samoa (Nova Samoa), Diamond Bar Outdoors, Inc. domiciled in California (Diamond Bar), i Design Blockchain Technology, Inc. domiciled in California (i Design) and Nova Living (M) SDN. BHD. domiciled in Malaysia (Nova Malaysia). The Company had three former subsidiaries Bright Swallow International Group Limited domiciled in Hong Kong (Bright Swallow or BSI) which was sold in January 2020, Nova Furniture Macao Commercial Offshore Limited domiciled in Macao (Nova Macao) which was de-registered and liquidated in January 2021 and Nova Living (HK) Group Limited domiciled in Hong Kong (Nova HK) which was de-registered and liquidated in February 2023. Nova Macao was organized under the laws of Macao on May 20, 2006, and was a wholly owned subsidiary of Nova Furniture. Nova Macao was a trading company, importing, marketing and selling products designed and manufactured by third-party manufacturers for the international market. Diamond Bar was incorporated in California on June 15, 2000. Diamond Bar markets and sells products manufactured by third-party manufacturers under the Diamond Sofa brand to distributors and retailers principally in the U.S. market. On December 7, 2017, Nova LifeStyle incorporated i Design Blockchain Technology, Inc. (i Design) under the laws of the State of California. The purpose of i Design is to build the Companys own blockchain technology team. This company will focus on the application of blockchain technology in the furniture industry, including encouraging and facilitating interactions among designers and customers, and building a blockchain-powered platform that enables designers to showcase their products, including current and future furniture designs. This company is in the planning stage and has had minimal operations through December 31, 2024. On December 12, 2019, Nova LifeStyle acquired Nova Malaysia at cost of $1.00 which was incorporated in Malaysia on July 26, 2019. The purpose of this acquisition was to market and sell high-end physiotherapeutic jade mats in Malaysia. On January 7, 2020, the Company transferred its entire interest in Bright Swallow to Y-Tone (Worldwide) Limited, an unrelated third party, for cash consideration of $2,500,000, pursuant to a formal agreement entered into on January 7, 2020. The Company received the payment on May 11, 2020. On October 14, 2020, the Macao Trade and Investment Promotion Institute invalidated licenses for offshore companies under an Order of Repeal of Legal Regime of the Offshore Services by Macao Special Administrative Region. Nova Macao then entered into a de-registration process and its business was taken over by Nova HK. Nova Macao completed the de-registration and liquidation process in January 2021. On November 5, 2020, Nova LifeStyle acquired Nova HK at cost of $1,290 which was incorporated in Hong Kong on November 6, 2019. This company had minimal operations other than to take over the business of Nova Macao. On February 15, 2022, the Company transferred its entire assets and business in Nova HK to Nova Malaysia, a subsidiary of the Company. In February 2023, Nova HK was completed the process of de-registration and liquidation. The Company and Nova collectively refer to Nova LifeStyle, the U.S. parent, and its subsidiaries, Nova Furniture, Nova Samoa, Diamond Bar, i Design, Nova HK and Nova Malaysia. | F-11 | | | Table of Contents | | **Going Concern** The accompanying audited consolidated financial statements have been prepared on a going concern basis and following GAAP in the U.S. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company incurred a net loss and operating cash outflow of $5.56 million and $1.39 million, respectively for the years ended December 31, 2024. The accumulated deficit of the Company was $49.99 million for the year ended December 31, 2024. Continuation as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due and ultimately upon its ability to achieve profitable operations. The outcome of these matters cannot be predicted with any certainty at this time and raises substantial doubt that the Company will be able to continue as a going concern. The Company has faced ongoing losses from operations, and significant cash outflows from cash used in operating activities in past years. The Company lacks assurance regarding its ability to achieve profitability or secure essential financing for its operations. Considering these principal conditions, the Companys management has determined that it is probable the Company might encounter challenges in meeting its obligations within one year after the issuance of financial statements, primarily due to insufficient cash flow. Therefore, the Company must assess the probability that its plans will effectively alleviate the substantial doubt. The Company management has the following plans to alleviate the substantial doubt: the Company will participate in four major U.S. furniture fairs every year to seek new customers to increase the Companys sales. To augment diversified revenue streams, the Companys subsidiary Nova Malaysia has engaged in the development of an innovative home decoration design IT software systems. The Company plans to raise money from the market to increase cash flow and investment capital in addition to the private placement during the next year. **Note 2 - Summary of Significant Accounting Policies** **Basis of Presentation** The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding financial reporting. The audited consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. **Reverse split** On May 22, 2023, the Company filed a Certificate of Change with the Secretary of State of Nevada with an effective date of May 22, 2023, at which time a 1-for-5 reverse stock split of the Companys authorized shares of common stock, par value $0.001, accompanied by a corresponding decrease in the Companys issued and outstanding shares of common stock (the Reverse Stock Split), shall be effected. All references to shares and per share data have been retroactively restated to reflect such split. **Amendments to Articles of Incorporation** On September 5, 2023, the Company filed the Certificate of Change (the Amendment) with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to increase the amount of authorized shares of its common stock, par value $0.001 per share, from 3,000,000 to 250,000,000. The Amendment was approved by the Companys Board of Directors (the Board) on June 28, 2023 and by the shareholders at a special meeting of the Companys shareholders held on August 31, 2023. The Amendment does not affect the rights of the Companys shareholders and was effective immediately upon filing. | F-12 | | | Table of Contents | | **Use of Estimates** In preparing consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition, the allowance for expected credit losses, valuation of inventories, the valuation of stock-based compensation, income taxes and unrecognized tax benefits, valuation allowance for deferred tax liabilities, assumptions used in assessing impairment of long-lived assets and goodwill, and loss contingencies. Actual results could differ from those estimates. **Business Combination** For a business combination, the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree are recognized at the acquisition date and measured at their fair values as of that date. In a business combination achieved in stages, the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, are recognized at the full amounts of their fair values. In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree, that excess in earnings is recognized as a gain attributable to the acquirer. Deferred tax liability and assets are recognized for the deferred tax consequences of differences between the tax bases and the recognized values of assets acquired and liabilities assumed in a business combination in accordance with Accounting Standards Codification (ASC) Topic 740-10. **Goodwill** Goodwill is the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. In accordance with ASC Topic 350, Intangibles-Goodwill and Other, goodwill is not amortized but is tested for impairment, annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds its fair value, with the fair value of the reporting unit determined using discounted cash flow (DCF) analysis. A number of significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return and projections of realizations and costs to produce. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. ASC Topic 350 also permits an entity to first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the single step goodwill impairment test is required to be performed. Otherwise, no further testing is required. Performing the qualitative assessment involved identifying the relevant drivers of fair value, evaluating the significance of all identified relevant events and circumstances, and weighing the factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. After evaluating and weighing all these relevant events and circumstances, it was concluded that a positive assertion can be made from the qualitative assessment that it is more likely than not that the fair value of Diamond Bar is greater than its carrying amount. As such, it is not necessary to perform the single step goodwill impairment test for the Diamond Bar reporting unit. Accordingly, as of December 31, 2024 and 2023, the Company concluded there was no impairment of goodwill of Diamond Bar. **Intangible Assets** Intangible assets consist primarily of computer software acquired for internal use. Acquired intangible assets are initially recorded at the acquisition-date fair value. Intangible assets are amortized on a straight-line basis over their estimated useful lives and are carried at cost less accumulated amortization. The estimated useful life of computer software are generally from 5 years. | F-13 | | | Table of Contents | | **Cash and Cash Equivalents** For purposes of the statement of cash flows, the Company considers cash, money market funds, investments in interest bearing demand deposit accounts, time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. **Accounts Receivable** The Companys accounts receivable arises from product sales. The Company does not adjust its receivables for the effects of a significant financing component at contract inception if it expects to collect the receivables in one year or less from the time of sale. The Company does not expect to collect receivables greater than one year from the time of sale. The Companys policy is to maintain an allowance for expected credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Accounts receivable consisted of the following as of the date indicated: Schedule of Allowance for Credit Losses | | | December 31, 2024 | | | December 31, 2023 | | | | | | | | | | | | | Accounts receivable | | $ | 36,738 | | | | 47,530 | | | | Less: allowance for credit losses | | | (367 | ) | | | (532 | ) | | | Total accounts receivable, net | | $ | 36,371 | | | | 46,998 | | | Expected credit losses (reversal) provision consisted for the following as of the dated indicated: Schedule of Expected Credit Losses | | | December 31, 2024 | | | December 31, 2023 | | | | | | | | | | | | | Balance January 1 | | $ | 532 | | | | 2,914 | | | | Balance, beginning | | $ | 532 | | | | 2,914 | | | | Expected credit losses (reversal) provision | | | (165 | ) | | | (2,382 | ) | | | Balance December 31 | | $ | 367 | | | | 532 | | | | Balance, ending | | $ | 367 | | | | 532 | | | The expected credit losses (reversal) provision for the years ended December 31, 2024 and 2023 was ($165) and ($2,382) respectively. **Advances to Suppliers** Advances to suppliers represent amounts paid to suppliers in advance for goods that are yet to be delivered and from which future economic benefits are expected to flow to the Company within the normal operating cycle. Based on its historical record and in normal circumstances, the Company receives goods within 4 to 6 months from the date the advance payment is made. During the year ended December 31, 2024 and 2023, no provision was made on advances to suppliers. **Inventories** Inventories are stated at the lower of cost and net realizable value, with cost determined on a weighted-average basis. Write-down of potential obsolete or slow moving inventories is recorded based on managements assumptions about future demands and market conditions. For the year ended December 31, 2024 and 2023, the Company wrote down $56,583 and $140,131 of slow-moving inventory. The inventory write-down is included in Cost of Sales from continuing operations in the consolidated statements of loss and comprehensive loss. **Property, plant, and Equipment** Property, plant, and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Expenditures for maintenance and repairs are expensed as incurred, while additions, renewals and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with no salvage value and estimated lives as follows: Schedule of Plant, Property and Equipment Estimated Lives Under Straight - line Method | Computer and office equipment | 5 - 10 years | | | Decoration and renovation | 5 - 10 years | | | F-14 | | | Table of Contents | | **** **Impairment of Long-Lived Assets** Long-lived assets, which include property, plant and equipment and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group asset group exceeds its fair value based on discounted cash flow analysis or appraisals. There was no impairment of long-lived assets for the years ended December 31, 2024 and 2023. **Research and Development** Research and development costs are related primarily to the Company designing and testing its new products during the development stage. During 2023, the Company has been developing Virtual and Augmented reality software and AI system for potential consulting business. In addition, during 2024, the Company acquired IT systems for AI-Calculation Engine, Nova Living DesignXperience System and Payment IT System which were integrated into our current IT system (see Note 12). The entire system is far from complete as it requires to integrate with other components in order to be functional. It is still in development stage and not in operation. Research and development costs are recognized in general and administrative expenses and expensed as incurred. Research and development expenses were $2.00 million and $3.11 million the years ended December 31, 2024 and 2023, respectively. **Income Taxes** Income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Under the provisions of ASC Topic 740, when tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. | F-15 | | | Table of Contents | | Nova Lifestyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI and Nova Samoa was incorporated in Samoa Accordingly, the Companys consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled. Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%. Nova Living (HK) Group Limited (Nova HK) is incorporated in Hong Kong and is subject to Hong Kong income taxes at the statutory rate of 16.5%. In February 2022, Nova HK was deregistered. The Tax Cuts and Jobs Act of 2017 (the Act) created new taxes on certain foreign-sourced earnings such as global intangible low-taxed income (GILTI) under IRC Section 951A, which is effective for the Company for tax years beginning after January 1, 2018. For the year ended December 31, 2024, the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses (NOLs) arising in taxable years beginning after December 31, 2017. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years. While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed. Furthermore, in anticipation of the new provision taking effect, we have analyzed the provision and worked with our advisors to evaluate its application to our business. Since all research and development expenditures were incurred within the U.S. and the amount is immaterial, we do not anticipate it having any material impact to our provision. As of December 31, 2024, the accumulated undistributed loss generated by its foreign subsidiaries were approximately $million and $22.2 million of which substantially all was previously subject to U.S. tax, the one-time transition tax on foreign unremitted earnings required by the Tax Act, or GILTI. Those earnings are considered to be permanently reinvested and accordingly, no deferred tax expense is recorded for U.S. federal and state income tax or applicable withholding taxes. As of December 31, 2024 and 2023, unrecognized tax benefits were approximately nil and nil, respectively. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was nil as of December 31, 2024 and 2023. A reconciliation of unrecognized tax benefits excluding interest and penalties (Gross UTB) for the year ended December 31, 2024 and 2023, is as follows: Schedule of Unrecognized Tax Benefits | | | Gross UTB | | | | | | 2024 | | | 2023 | | | | Balance January 1 | | | | | | | | | | Foreign exchange adjustment | | | | | | | | | | | Balance December 31 | | $ | - | | | $ | - | | | | F-16 | | | Table of Contents | | At December 31, 2024 and 2023, the Company had cumulatively accrued approximately nil and nil for estimated interest and penalties related to unrecognized tax benefits. The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax benefit, which totaled nil and nil for the years ended December 31, 2024 and 2023, respectively, related to the Companys operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months. Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2020-2023 remain open to examination by tax authorities in the U.S. **Revenue Recognition** The Company recognizes revenues when its customers obtain control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASC-606: (i) identifies contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenues when (or as) it satisfies the performance obligation. Revenues from product sales are recognized when the customer obtains control of the Companys product, which occurs at a point in time, typically upon shipment to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with the Companys customers. Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable as the amount is payable to the Companys customer. The Companys sales policy allows for product returns within the warranty period if the product is defective and the defects are the Companys fault. As alternatives to the product return option, the customers have the option of requesting a discount from the Company for products with quality issues or of receiving replacement parts from the Company at no cost. The amount for product returns, the discount provided to the Companys customers, and the costs for replacement parts were immaterial for the years ended December 31, 2024 and 2023. The Company considers itself acting as a principal for sales of goods which is evidenced by (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods, (ii) the Company has inventory risk before the specified goods have been transferred to a customer or after transfer of control to the customer, (iii) the Company has discretion in establishing the price for the specified good. Thus, the Companys revenue is recognized at a point in time when a promised good is delivered to a customer. In February 2023, the Company entered into a sales contract to transfer its entire inventory of Jade Mats, with the net realized value of $1.54 million to Shopants Sdn Bhd, an unrelated third party, for cash consideration of $2.00 million. The Company agreed to deliver the Jade Mats on May 20, 2023, May 31, 2023 and June 15, 2023. On June 30, 2023, the Company delivered all the Jade Mats to Shopants Sdn Bhd and recorded as revenue accordingly. **Cost of Sales** Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers and write-downs of inventory. **Shipping and Handling Costs** Shipping and handling costs related to delivery of finished goods are included in selling expenses. During the years ended December 31, 2024 and 2023, shipping and handling costs were $5,256 and 1,682 respectively; **Advertising** Advertising expenses consist primarily of costs of promotion and marketing for the Companys image and products, and costs of direct advertising, and are included in selling expenses. The Company expenses all advertising costs as incurred. Advertising expense was $272,497 and $1,053,197 for the years ended December 31, 2024 and 2023, respectively. | F-17 | | | Table of Contents | | **Share-based Compensation** The Company accounts for share-based compensation awards to officers, directors, employees, and for acquiring goods and services from nonemployees in accordance with FASB ASC Topic 718, Compensation Stock Compensation, which requires that share-based payment transactions be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the vesting period. The Company accounts for forfeitures when they occur. **Earnings per Share (EPS)** Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares pertaining to warrants, stock options, and similar instruments had been issued and if the additional common shares were dilutive. Diluted earnings per share are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding unvested restricted stock, options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). The following table presents a reconciliation of basic and diluted loss per share for the years ended December 31, 2024 and 2023: Schedule of Reconciliations of Basic and Diluted Loss Per Share | | | 2024 | | | 2023 | | | | | | | | | | | | | Net loss | | $ | (5,561,705 | ) | | $ | (7,723,257 | ) | | | | | | | | | | | | | | Weighted average shares outstanding Basic and Diluted * | | | 3,765,727 | | | | 1,556,555 | | | | | | | | | | | | | | | Net loss per share of common stock | | | | | | | | | | | Basic and Diluted | | $ | (1.48 | ) | | $ | (4.96 | ) | | | * | Including 1,500 and 0 shares that were granted and vested but not yet issued for the years ended December 31, 2024 and 2023, respectively. | | For the year ended December 31, 2024, 4,500 shares of unvested restricted stock shares of the Companys common stock, and 245,192 shares exercisable under warrants were excluded from the EPS calculation, as their effect were anti-dilutive. For the year ended December 31, 2023, 4500 shares of unvested restricted stock, vested stock options to purchase 13,400 shares of common stock of the Company, and 245,192 shares exercisable under warrants were excluded from the EPS calculation, as their effects were anti-dilutive. **Concentration of Credit Risk** Financial instruments that potentially subject the Company to credit risk consist primarily of accounts receivable and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable. | F-18 | | | Table of Contents | | The following table sets forth information as to the Companys customers that accounted for 10% or more of the Companys sales and accounts receivable for the years ended December 31, 2024 and 2023. Schedule of Concentration Credit Risk | Year Ended December 31, 2024 | | As of December 31, 2024 | | | | Customer | | Percentage of Total Sales | | | Percentage of accounts receivable | | | | A | | | 2 | % | | | 41 | % | | | B | | | 0 | % | | | 27 | % | | | C | | | 0 | % | | | 0 | % | | | D | | | 0 | % | | | 0 | % | | | Year Ended December 31, 2023 | | As of December 31, 2023 | | | | Customer | | Percentage of total Sales | | | Percentage of accounts receivable | | | | A | | | 2 | % | | | 17 | % | | | B | | | 0 | % | | | 0 | % | | | C | | | 1 | % | | | 20 | % | | | D | | | 18 | % | | | 0 | % | | No customer accounted for 10% or more of the Companys sales for the year ended December 31, 2024. One customer accounted for 18% of the Companys sales for the year ended December 31, 2023. Two customers accounted for 41% and 27%, respectively, of the Companys gross accounts receivable as of December 31, 2024. Two customers accounted for 20% and 17%, respectively, of the Companys gross accounts receivable as of December 31, 2023. The following table sets forth information as to the Companys suppliers that accounted for 10% or more of the Companys total purchases, accounts payable and advance to suppliers for the years ended December 31, 2024 and 2023. | Year Ended December 31, 2024 | | As of December 31, 2024 | | | As of December 31, 2024 | | | | Supplier | | Percentage of Total Purchase | | | Supplier | | | Balance of Accounts Payable | | | Balance of Advance to Supplier | | | | A | | | 16 | % | | | A | | | | 192,363 | | | | - | | | | B | | | 7 | % | | | B | | | | 128,141 | | | | - | | | | Year Ended December 31, 2023 | | As of December 31, 2023 | | | As of December 31, 2023 | | | | Supplier | | Percentage of Total Purchase | | | Suppler | | | Balance of Accounts Payable | | | Balance of Advance to Supplier | | | | A | | | 15 | % | | | A | | | | 75,842 | | | | - | | | | B | | | 21 | % | | | B | | | | 190,810 | | | | - | | | The Company purchased its products from one and two major vendors during the years ended December 31, 2024 and 2023, respectively, accounting for a total of 16% for 2024 (21% and 15%) for 2023 of the Companys purchases, respectively. Accounts payable to these major vendors were $320,504 and $266,652 as of December 31, 2024 and 2023, respectively. Advances made to these major vendors were nil as of December 31, 2024 and 2023, respectively. | F-19 | | | Table of Contents | | **Fair Value of Financial Instruments** ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, Financial Instruments, defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows: | | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | | | | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | | | | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. | | The carrying value of cash, accounts receivable, advances to suppliers, other receivables, accounts payable, advance from customers, other payables and accrued liabilities approximate estimated fair values because of their short maturities. **Foreign Currency Translation and Transactions** The accompanying consolidated financial statements are presented in United States Dollar ($ or USD), which is also the functional currency of Nova LifeStyle, Nova Furniture, Nova Samoa, Diamond Bar, and i Design. The Companys subsidiary with operations in Malaysia uses its local currency, the Malaysian Ringgit (RM), as its functional currency. An entitys functional currency is the currency of the primary economic environment in which it operates, which is the currency of the environment in which the entity primarily generates and expends cash. Managements judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of operations. The financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders equity accounts are translated using the historical exchange rates at the date the entry to stockholders equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each periods income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the balance sheets. Translation of amounts from RM into U.S. dollars has been made at the following exchange rates: Schedule of Exchange Rates | Balance sheet items, except for equity accounts | | | | | | December 31, 2024 | | | RM 4.47 to 1 | | | December 31, 2023 | | | RM 4.59 to 1 | | | | | | | | | Income Statement and cash flow items | | | | | | For the year ended December 31, 2024 | | | RM 4.57 to 1 | | | For the year ended December 31, 2023 | | | RM 4.56 to 1 | | | F-20 | | | Table of Contents | | **Segment Reporting** ASC Topic 280, Segment Reporting, requires use of the management approach model for segment reporting. The management approach model is based on the way a companys chief operating decision maker organizes segments within the company for making operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined that the Companys operations constitute a single reportable segment in accordance with ASC 280. The Company operates exclusively in one business and industry segment: the design and sale of furniture. Management concluded that the Company had one reportable segment under ASC 280 because Diamond Bar is a furniture distributor based in California focusing on customers in the United States and Nova Malaysia is a furniture retailer and distributor focusing on customers primarily in Malaysia. They are all operated under the same senior management of the Company, and management views the operations of Diamond Bar and Nova Malaysia as one entity for making business decisions. All of the Companys long-lived assets are mainly property, plant and equipment located in the United States and Malaysia and are utilized for administrative purposes. Net sales to customers by geographic area are determined by reference to the physical product shipment delivery locations requested by the customers. For example, if the products are delivered to a customer in the United States, the sales are recorded as generated in the United States; if the customer directs us to ship its products to China, the sales are recorded as sold in China. **Leases** The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (ROU assets) assets represent the Companys right to control the use of an identified asset for the lease term and lease liabilities represent the Companys obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets. ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU assets as of December 31, 2024 and 2023. The operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current on the consolidated balance sheets at December 31, 2024 and 2023. **Reclassification** Certain prior period accounts have been reclassified in conformity with current periods presentation. | F-21 | | | Table of Contents | | **New Accounting Pronouncements** Recently Adopted Accounting Standards* In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 replaces the probable, incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost basis. Am entity should apply ASU 2016-13 on a modified-retrospective transition approach that would require a cumulative-effect adjustment to the opening retained earnings in the balance sheets as of the date of adoption. In March 2022, the FASB issued ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for trouble debt restructurings by creditors and enhances the disclosure requirements for modifications of loans to borrowers experiencing financial difficulty. Additionally, ASU 2022-02 requires disclosure of gross write-offs by year of origination for receivables within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost, which should be applied prospectively. Both ASU 2016-13 and ASU 2022-02 are effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 and ASU 2022-02 beginning January 1, 2023. The adoption of ASU 2016-13 and ASU 2022-02 did not have any material impact on our consolidated financial statement presentation or disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 eliminates Step 2 of the two-step goodwill impairment test, under which a goodwill impairment loss was measured by comparing the implied fair value of a reporting units goodwill with the carrying amount of that goodwill. ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss is measured as the excess of a reporting units carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). This Update is effective for smaller reporting companies for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022, which is required to be applied prospectively from the date of adoption. The Company adopted ASU 2017-04 for its interim and annual goodwill impairment tests beginning January 1, 2023. The adoption of ASU 2017-04 did not have any impact on our audited consolidated financial statements. *Recently Issued But Not Yet Adopted Accounting Pronouncements* In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our audited consolidated financial statement presentations and disclosures. ln December 2023, the FASB issued Accounting Standards Update No.2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation,(2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3)income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual period beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its audited consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASBs intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. | F-22 | | | Table of Contents | | The Companys management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Companys financial statement presentation or disclosures. **Note 3 - Inventories** The inventories as of December 31, 2024 and 2023 totaled $2,824,353 and $2,213,311, respectively, and consisted entirely of finished goods. Inventories are stated at the lower of cost and net realizable value, with cost determined on a weighted-average basis. Write-down of potential obsolete or slow moving inventories is recorded based on managements assumptions about future demands and market conditions. For the year ended December 31, 2024 and 2023, the Company wrote-down $56,583 and $140,131 of slow-moving inventory, respectively. The inventory write-down is included in Cost of Sales in the consolidated statements of operations. **Note 4 - Property, plant, and Equipment, Net** As of December 31, 2024 and 2023, Property, plant, and equipment consisted of the following: Schedule of Plant, Property and Equipment | | | December 31, 2024 | | | December 31, 2023 | | | | Computer and office equipment | | $ | 271,415 | | | $ | 255,352 | | | | Decoration and renovation | | | 387,288 | | | | 378,237 | | | | Property plant and equipment gross | | | 658,703 | | | | 633,589 | | | | Less: accumulated depreciation | | | (406,517 | ) | | | (345,916 | ) | | | Property plant and equipment net | | $ | 252,186 | | | $ | 287,673 | | | Depreciation expense was $55,489 and $68,401 for the years ended December 31, 2024 and 2023, respectively. **Note 5 Intangible Assets** As of December 31, 2024and 2023, intangible assets consisted of the following: Schedule of Intangible Assets | | | December 31, 2024 | | | December 31, 2023 | | | | Accounting software | | $ | 26,800 | | | $ | 26,800 | | | | Less: accumulated amortization | | | (23,691 | ) | | | (18,327 | ) | | | Intangible assets, net | | $ | 3,109 | | | $ | 8,473 | | | Amortization expense was $5,364 and $ 5,364 for the years ended December 31, 2024 and 2023, respectively. **Note 6 Advances to Suppliers** The Company makes advances to certain vendors for inventory purchases. The advances on inventory purchases were $4,689,148 and $ 93,740 as of December 31, 2024 and 2023, respectively. No impairment charges were made on advances to suppliers for the years ended December 31, 2024 and 2023. | F-23 | | | Table of Contents | | **Note 7 Prepaid Expenses and Other Receivables** Prepaid expenses and other receivables consisted of the following as of December 31, 2024 and 2023: Schedule of Prepaid Expenses and Other Receivable | | | December 31, 2024 | | | December 31, 2023 | | | | | | | | | | | | | Prepaid expenses | | $ | 202,294 | | | $ | 984,934 | | | | Other receivables | | | 17,415 | | | | 41,265 | | | | Prepaid expenses and other receivables | | $ | 219,709 | | | $ | 1,026,199 | | | As of December 31, 2024 and 2023, prepaid expenses and other receivables mainly represented prepaid insurance, prepaid rent, refund receivable from suppliers, prepaid advertising expense, and Celero and Cardknox account balances. In October 2022, Nova Malaysia entered into a business agreement with an I.T. firm to develop a virtual reality and augmented reality development project and related works. The project was originally intended to be used internally to promote the sales. Nova Malaysia agreed to pay 10,000,000 Malaysia Ringgit ($2,110,640) for developing the project. The payment would be paid as first phase for 40% of total payment, second phase for 20% of total payment, third phase for 20% of total payment and fourth phase for 20% of total payment. On April 20, 2023, the Company entered into an amended agreement to update and test the project for additional 1,000,000 Malaysia Ringgit ($217,851). On May 10, 2023, the virtual reality and augmented reality development project was completed as a prototype testing model. Up to that point, the company believes this project could be utilized not only internally to promote sales, but also go external licensing for direct subscription in the future, which might help the company to convert to a software or APP provider. However, it is just a part of the ultimate software product to be functional. The ultimate software is still in development stage and not currently feasible to be functional. The total payment to IT firm was 11,000,000 Malyaia Ringgit ($2,413,498) and was recorded as research and development. **Note 8 Accrued Liabilities and Other Payables** Accrued liabilities and other payables consisted of the following as of December 31, 2024 and December 31, 2023: Schedule of Accrued Liabilities and Other Payables | | | December 31, 2024 | | | December 31, 2023 | | | | | | | | | | | | | Other payables | | $ | 986,945 | | | $ | 139,722 | | | | Salary payable | | | 8,727 | | | | 7,511 | | | | Marketing | | | 10,000 | | | | - | | | | Financed insurance premiums | | | 62,531 | | | | 69,337 | | | | Auditing fee | | | 190,000 | | | | 125,000 | | | | Warranty liability | | | 15,103 | | | | 27,545 | | | | Accrued commission | | | 47,466 | | | | 58,669 | | | | Accrued expenses, others | | | 362,261 | | | | 672,877 | | | | Total accrued liabilities and other payable | | $ | 1,683,033 | | | $ | 1,100,661 | | | As of December 31, 2024 and 2023, other accrued expenses mainly included legal and professional fees, utilities and unpaid operating expenses incurred in Malaysia. Other payables represented balance on credit card, other taxes payable, 401(k) payable and payable for marketing, shipping, director and showroom. On September 12, 2023, Nova Malaysia entered into an agreement with a consulting firm to deliver consultancy service for AI Trends and Tools. Nova Malaysia agreed to pay 5,000,000 Malaysia Ringgit ($1,065,235) for the service. During 2024, Nova Malaysia paid 4,100,000 Malyaia Ringgit ($896,234) to the consultant and was recorded as consulting expense. The remaining balance was recorded as accrued expenses. **Note 9 Other Loans** On June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan. The Loan, which was in the form of a promissory note dated June 19, 2020, matures on June 19, 2050 and bears interest at a rate of 3.75% per annum, payable monthly beginning 12 months from the date of the promissory note. Funds from the Loan may only be used for working capital. The loan was secured by all tangible and intangible property of Diamond Bar and has accumulated interest of $5,473 and $ 5,580 for the years ended December 31, 2024 and 2023, respectively. On November 14, 2024, Nova Malaysia entered into a loan agreement in the aggregate amount of $65,784 (equivalent to Malaysia Ringgit 300,000) with an unrelated third party. The loan was in the form of a promissory note dated on November 14, 2024, matures on November 13, 2030, and bears no interest. The proceed of the loan is used for working capital. | F-24 | | | Table of Contents | | **Note 10 Income Taxes** Taxes recoverable (payable) consisted of the following at December 31, 2024 and 2023: Schedule of Taxes Payable | | | 2024 | | | 2023 | | | | Income tax receivable current | | $ | - | | | $ | - | | | | Income tax payable - current | | | (1,852,399 | ) | | | (1,150,105 | ) | | | Income tax payable noncurrent | | $ | - | | | $ | (643,112 | ) | | As of December 31, 2024 and 2023, current tax payable were $1.85 million and $1.15 million, respectively. For 2024, current tax payable, $1.85 million was arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below). As of December 31, 2024 and 2023, noncurrent tax payable were nil million and $0.64 million, respectively, arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below). The (benefit) provision for income taxes on loss from continuing operations consisted of the following: Schedule of Components of Income Tax Expense (Benefit) | | | 2024 | | | 2023 | | | | Current: | | | | | | | | | | | Federal | | $ | - | | | $ | - | | | | State | | | 2,400 | | | | 2,400 | | | | Malaysia | | | 214 | | | 728,692 | | | | Income tax expense current | | | 2,614 | | | 731,092 | | | | | | | | | | | | | | | Deferred: | | | | | | | | | | | Federal | | | - | | | | - | | | | State | | | - | | | | - | | | | Total provision expense for income taxes | | $ | 2,614 | | $ | 731,092 | | | The following is a reconciliation of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes from continuing operations: Schedule of Effective Income Tax Rate Reconciliation | | | 2024 | | | 2023 | | | | Tax at federal statutory rate | | $ | (1,167,410 | ) | | $ | (1,468,355 | ) | | | Foreign rate differential | | | (128,754 | ) | | | 607,758 | | | | ASC 740-10 uncertain tax position | | | - | | | | - | | | | Tax exemption | | | - | | | | - | | | | Global Intangible Low-Taxed Income | | | - | | | | - | | | | Stock based compensation | | | 123,077 | | | | 66,045 | | | | Non-deductible Expenses | | | - | | | | 3,767,680 | | | | Others | | | (779,043 | ) | | | (204,526 | ) | | | Valuation allowance | | | 1,954,744 | | | | (2,037,510 | ) | | | Total provision for income taxes | | $ | 2,614 | | $ | 731,092 | | | | F-25 | | | Table of Contents | | The following presents the aggregate dollar effects of the Companys tax exemption from its continuing operations: Schedule of Aggregate Dollar Effects of the Companys Tax Exemption | | | | 2024 | | | 2023 | | | | Aggregate dollar effect of tax holiday | | $ | - | | | $ | - | | | **Deferred Tax Assets and Liabilities** Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are comprised of the following: Schedule of Deferred Tax Assets And Liabilities | | | 2024 | | | 2023 | | | | Non-Current Deferred Tax Assets: | | | | | | | | | | | Accrued liabilities | | $ | 57,773 | | | $ | 15,898 | | | | Accrued Warranty Liability | | | 3,796 | | | | - | | | | Fed & CA amortization | | | 5,587 | | | | 9,832 | | | | Stock compensation | | | 143,960 | | | | 160,522 | | | | ASC 842 lease liability | | | 335,645 | | | | 522,840 | | | | Inventory | | | - | | | | - | | | | U.S. NOL | | | 5,374,809 | | | | 4,213,883 | | | | Capital loss | | | 734,976 | | | | 734,766 | | | | Charitable Contribution | | | 1,129 | | | | 1,748 | | | | R&D Capitalization | | | 794,736 | | | | 3,658 | | | | Interest | | | 1,944 | | | | 3,587 | | | | | | | | | | | | | | | Non-Current Deferred Tax Liabilities: | | | | | | | | | | | Prepaid expenses | | | (18,940 | ) | | | (423 | ) | | | Fed & CA depreciation | | | (7,926 | ) | | | (7,744 | ) | | | ASC 842- ROU Asset | | | (320,454 | ) | | | (506,280 | ) | | | | | | | | | | | | | | Net Non-Current Deferred Tax Assets before Valuation Allowance | | | 7,107,035 | | | | 5,152,289 | | | | Less: Valuation Allowance | | | (7,107,035 | ) | | | (5,152,289 | ) | | | Non-Current Deferred Tax Assets, Net: | | | - | | | | - | | | | Total Deferred Assets, Net: | | $ | - | | | $ | - | | | Nova LifeStyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI is incorporated in the BVI. There is no income tax for a company domiciled in the BVI. Accordingly, the Companys consolidated financial statements do not present any income tax provision related to the BVI tax jurisdiction where Nova Furniture BVI is domiciled. For U.S. Federal income tax purpose, the Company has net operating loss, or NOL carryforwards of approximately $15.1 million and $ 13.6 million at December 31, 2024 and 2023, respectively. The Company has capital loss carryforwards of approximately $3.5 million at December 31, 2024. For U.S. California income tax purpose, the Company has net operating loss, or NOL carryforwards of approximately $20.6 million and $19.5 million, at December 31, 2024 and 2023, respectively. Malaysia has net operating loss, or NOL carryforwards of approximately $3.2 million at December 31, 2024. The Company has disposed prior years inventory and utilized all prior years NOL. The Company has approximately $0.72 million income tax benefit at December 31, 2024. Corporate income tax in Malaysia is calculated at the statutory rate of 24% of the estimated taxable profit for the year ended December 31, 2024. | F-26 | | | Table of Contents | | **Note 11 Related Party Transactions** On September 30, 2011, Diamond Bar leased a showroom in High Point, North Carolina from the Companys President who is currently also the Chief Executive Officer and Chairperson of the Board. The lease is renewable and has been renewed each year since 2011. On April 10, 2024, the Company renewed the lease for an additional one year term at a cost of $41,000. During the years ended December 31, 2024 and 2023, the Company recorded rental amounts of $39,390 and $34,561, respectively, which were included in selling expenses. On January 4, 2018, the Company entered into a sales representative agreement with a consulting firm, which is owned by the President, Chief Executive Officer and Chairperson of the Board, for sales representative service for a term of two years. On January 4, 2020, the Company renewed the agreement for an additional two years which was amended in July 2020. If not terminated during the first year, the agreement will continue until one party or the other terminates the agreement with 30 days written notice. The Company agreed to compensate the consulting firm via commission at predetermined rates of the relevant sales amount. During the years ended December 31, 2024 and 2023, the Company recorded $331,106 and $$321,030 as commission expense to this consulting firm, respectively. In February 2024, the Company entered into a loan agreement in the aggregate amount of $200,000 with a shareholder of the Company. The loan was in the form of a promissory note dated on February 21, 2024, matures on February 20, 2025, and bears interest at a rate of 8.5% per annum. The proceed of the loan is used for working capital. During the year ended December 31, 2024, the Company accrued $15,068 as interest expense. On February 21, 2025, the Company repaid the loan in the form of shares of common stock. On April 11, 2024, the Company entered into a loan agreement in the aggregate amount of $160,000 with a shareholder of the Company. The loan was in the form of a promissory note dated on April 11, 2024, matures on April 10, 2025, and bears interest at a rate of 8.5% per annum. The proceed of the loan is used for working capital. During the year ended December 31, 2024, the Company accrued $10,078 as interest expense. **Note 12 Stockholders Equity** On May 28, 2021, the Companys stockholders approved the Companys 2021 Equity Incentive Plan (the 2021 Plan) at its annual shareholders meeting. The 2021 Plan was approved by the Board of Directors of the Company on April 12, 2021 and has a total of 600,000 shares of the Companys common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Companys business. On June 16, 2021, the Company filed Form S-8 to register the 600,000 shares of the Companys common stock under the 2021 Plan. On August 31, 2023, the Companys stockholders approved the Companys 2023 Equity Incentive Plan (the 2023 Plan) at its special shareholders meeting. The 2023 Plan was approved by the Board of Directors of the Company on June 28, 2023 and has a total of 800,000 shares of the Companys common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Companys business. On December 15, 2023, the Company filed Form S-8 to register the 800,000 shares of the Companys common stock under the 2023 Plan. On May 31, 2024, the Companys stockholders approved the Companys 2024 Equity Incentive Plan (the 2024 Plan) at its annual shareholders meeting. The 2024 Plan was approved by the Board of Directors of the Company on April 19, 2024 and has a total of 3,000,000 shares of the Companys common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Companys business. | F-27 | | | Table of Contents | | On April 18, 2024, the Company received written notice from the NASDAQ Stock Market (NASDAQ) stating that the Company does not meet the requirement of maintaining a minimum of $2,500,000 in stockholders equity for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5550(b)(1), the Company also does not meet the alternative of market value of listed securities of $35 million under NASDAQ Listing Rule 5550(b)(2) or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years under NASDAQ Listing Rule 5550(b)(3), and the Company is no longer in compliance with the NASDAQ Listing Rules. The NASDAQ notification letter provides the Company until June 6, 2024 to submit a plan to regain compliance. If the plan is accepted, NASDAQ can grant the Company an extension up to 180 calendar days from the date of NASDAQ letter to demonstrate compliance. If NASDAQ does not accept the Companys compliance plan, the Company will have the opportunity to appeal that decision to a Hearing Panel per NASDAQ Listing Rule 5815(a). The Company submitted its plan of compliance on May 28, 2024 and a supplemental letter to the plan of compliance on June 20, 2024. On June 27, 2024, the Company received a notification letter from NASDAQ Listing Qualification Staff (Staff). Based on the review of the letters submitted by the Company, Staff has determined to grant the Company an extension until October 14, 2024 to regain compliance with the Rule and the Company must complete its initiatives and provide evidences for the compliance with the Rule as required by NASDAQ. The Company and Nova Samoa have entered into orders to purchase inventories in total amount of $4,650,000, which will be paid in 3,321,429 shares (Transaction) of common stock of the Company at US$1.40 per share, as disclosed in the Form 8-K filed by the Company with SEC on October 11, 2024 (the Form 8-K). The Company believes it has regained compliance with the stockholders equity requirement based upon the Transaction. Based on the Form 8-K, staff of NASDAQ (Staff) has determined that the Company complies with the Listing Rule 5550(b)(1). However, as noted in its letter dated, June 27, 2024, if the Company fails to evidence compliance upon filing its next periodic report covering the period of the Transaction, it may be subject to delisting. At that time, Staff will provide written notification to the Company, which may then appeal Staffs determination to a Hearings Panel. On May 16, 2024, the Company entered into a Securities Purchase Agreement with an investor to sell 200,000 shares of the Companys common stock at a purchase price of $2.00 per share for an aggregate price of $400,000 (the Private Placement). The Private Placement was completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. On July 30, 2024, the Company entered into a Securities Purchase Agreement with the same investor to sell 125,000 shares of the Companys common stock at a purchase price of $1.60 per share for an aggregate price of $200,000 (the Private Placement). The Private Placement will be completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. On October 11, 2024, Nova LifeStyle, Inc. (the Company) and Nova Furniture Limited (Samoa), a wholly owned subsidiary of the Company (Nova Samoa) entered into five purchase orders (POs) to purchase certain furniture products (the Products) from Iconic Tech SDN BHD (Iconic Tech), Onefull Technologies SDN. BHD. (Onefull Technologies), Skyvip SDH BHD (Skyvip), United Poles SDH BHD (United Poles) and Teclutions System SDN. BHD (Teclutions, collectively with Iconic Tech, Onefull Technologies, Skyvip and United Poles as the Sellers). Pursuant to the POs, the Company, Nova Samoa and Sellers agree that (i) Nova Samoa will purchase Background Light Slabs from Iconic Tech for a total of $945,000 (the Iconic Order Price); (ii) Nova Samoa will purchase Porcelin Slabs from Onefull Technologies for a total of $925,000 (the Onefull Order Price); (iii) Nova Samoa will purchase Transparent Marble Slabs from Skyvip for a total of $900,000 (the Skyvip Order Price); (iv) Nova Samoa will purchase Ultrathinstone from United Poles for a total of $940,000 (the United Order Price) (v) the Nova Samoa will purchase Light Transmitting Slate Stone from Teclutions for a total of $940,000 (the Teclutions Order Price, collectively with Iconic Order Price, Onefull Order Price, Skyvip Order Price and United Order Price as the Order Prices); (vi) the Order Prices shall be paid up to the Sellers in 3,321,429 shares (Shares) of common stock of the Company at US$1.40 per share. The Shares will be issued pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. | F-28 | | | Table of Contents | | On October 25, 2024, Nova LifeStyle, Inc. (the Company) entered into a Securities Purchase Agreement (the Agreement) with certain purchaser identified on the signature page thereto (the Purchaser), pursuant to which the Company agreed to sell to the Purchaser in a private placement 125,000 shares (the Shares) of the Companys common stock, par value $0.001 per share (the Common Stock), at a purchase price of $1.20 per share for an aggregate price of $150,000 (the Private Placement). The Private Placement will be completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. **Shares and Warrants issued through Private Placement** On July 23, 2021, the Company conducted a registered direct offering of 222,902 shares of common stock. The shares were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, which was filed with the Securities and Exchange Commission (the SEC) on October 8, 2020 and subsequently declared effective on October 15, 2020. Additionally, the Company issued to the investors unregistered warrants to purchase up to an aggregate of 222,902 shares of common stock in a concurrent private placement. The combined purchase price for one share of common stock and a warrant to purchase one share of common stock was $14.00. The warrants have an exercise price of $17.50 per share, are exercisable beginning six-months from the date of issuance, and will expire five and a half years from the date of issuance. The offering gross proceeds were $3,120,622 before deducting placement agents commissions and other offering costs, and the net proceeds of the offering were approximately $2,760,000. The offering closed on July 27, 2021. In conjunction with this offering, the Company issued warrants to purchase 22,290 shares of common stock at an exercise price of $17.50 per share to the placement agent and its designees. The placement agent warrants are exercisable on the six-month anniversary of the issuance date. The placement agent warrants are exercisable for four and a half years from the initial exercise date. The placement agent warrants have piggy-back registration rights and have a termination date of July 23, 2026. The warrants issued in the private placement described above are exercisable for a fixed number of shares, and are classified as equity instruments under ASC 815-40-25-10. The Company accounted for the warrants issued in the private placement based on the fair value method under ASC Topic 505, and the fair value of the warrants was calculated using the Black-Scholes model under the following assumptions: estimated life of 5.5 years, volatility of 107%, risk-free interest rate of 0.71% and dividend yield of 0%. No estimate of forfeitures was made as the Company has a short history of granting options and warrants. The fair value of the warrants issued to investors and placement agent at grant date was $2,018,597. **Warrants** The following is a summary of the warrant activity for the year ended December 31, 2024: Summary of Warrant Activity | | | Number of Warrants | | | Average Exercise Price | | | Weighted Average Remaining Contractual Term in Years | | | | | | | | | | | | | | | | Outstanding at January 1, 2024 | | | 245,192 | | | $ | 17.50 | | | | 3.02 | | | | Exercisable at January 1, 2024 | | | 245,192 | | | $ | 17.50 | | | | 3.02 | | | | Granted | | | - | | | | - | | | | - | | | | Exercised / surrendered | | | - | | | | - | | | | - | | | | Expired | | | - | | | | - | | | | - | | | | Outstanding at December 31, 2024 | | | 245,192 | | | $ | 17.50 | | | | 2.02 | | | | Exercisable at December 31, 2024 | | | 245,192 | | | $ | 17.50 | | | | 2.02 | | | **Shares Issued to Consultants** On January 28, 2022, the Company entered into an advisory service agreement with a designer for advising furniture design concept and development effective on February 1, 2022 for twelve months. The Company shall pay the designer $10,000 per month starting from February 1, 2022 for twelve months, in the form of the Companys Common Stock, calculated based on the closing stock price on the first trading day of the corresponding month. The shares were issued pursuant to the 2021 Plan. During the years ended December 31, 2024 and 2023, the Company issued 0 and 4,347 shares to the designer and charged nil and $ 10,000, respectively to operations as designer fee. | F-29 | | | Table of Contents | | On July 1, 2022, the Company entered into a consulting agreement with a consultant for consulting and strategy services effective on July 1, 2022 for a one-year term. The Company agreed to grant the consultant 10,000 shares of the Companys common stock, vesting 25% on July 1, 2022, 25% on October 1, 2022, 25% on January 1, 2023 and 25% on April 1, 2023. The fair value of the 10,000 shares was $36,000, which was calculated based on the stock price of $3.60 per share on July 1, 2022 and has been amortized over the service term. The shares were issued pursuant to the 2021 Plan. During the years ended December 31, 2024 and 2023, the Company charged nil and $18,000 to operations as consulting expenses, respectively. On November 16, 2022, the Company entered into a consulting agreement with a consultant for consulting and strategy services effective on November 16, 2022 for a one-year term. The Company agreed to grant the consultant 10,000 shares of the Companys common stock, vesting 25% on February 15, 2023, 25% on May 15, 2023, 25% on August 15, 2023 and 25% on November 15, 2023. The fair value of the 10,000 shares was $28,000, which was calculated based on the stock price of $2.80 per share on November 16, 2022. The shares were issued pursuant to the 2021 Plan. During the years ended December 31, 2024 and 2023, the Company charged nil and $ 28,000, respectively, to operations as consulting expenses. On January 28, 2023, the Company entered into an advisory service agreement with a designer for advising furniture design concept and development effective on February 1, 2023 for twelve months. The Company shall pay the designer $10,000 per month starting from February 1, 2023 for twelve months, in the form of the Companys Common Stock, calculated based on the closing stock price on the first trading day of the corresponding month. The shares were issued pursuant to the 2021 Plan. During the years ended December 31, 2024 and 2023, the Company issued 528 and 41,144 shares to the designer and charged $10,000 and $ 110,000 to operations as designer fee, respectively. On July 3, 2023, the Company entered into an IT consulting service agreement with three consultants for analyzing the Companys IT infrastructure and system effective on July 3, 2023 for twelve months. The Company agreed to grant the consultant 300,000 shares of the Companys common stock, vesting 25% on July 3, 2023, 25% on October 3, 2023, 25% on January 3, 2024 and 25% on April 3, 2024. The fair value of the 300,000 shares was $636,000, which was calculated based on the stock price of $2.12 per share on July 3, 2023. The shares were issued pursuant to the 2021 Plan. During the years ended December 31, 2024 and 2023, the Company charged $318,000 and $ 318,000 to operations as consulting expenses, respectively. On November 9, 2023, the Company entered into a consulting agreement with a consultant for consulting and strategy services effective on November 16, 2023 for a one-year term. The Company agreed to grant the consultant 50,000 shares of the Companys common stock, vesting 25% on February 15, 2024, 25% on May 15, 2024, 25% on August 15, 2024 and 25% on November 15, 2024. The fair value of the 50,000 shares was $117,500, which was calculated based on the stock price of $2.35 per share on November 16, 2023. The shares were granted pursuant to the 2021 Plan. During the years ended December 31, 2024 and 2023, the Company charged $102,692 and $ 14,808 to operations as consulting expenses, respectively. On November 16, 2023, Nova Malaysia entered into an agreement with an IT consulting firm to acquire an Artificial Intelligent powered IT System for $675,000. The Company agreed to issue 270,000 shares of common stocks at the price of $2.50 per share which was in equivalent to $675,000 (3,161,970 in Malaysia Ringgit on November 16, 2023) to the IT consulting firm. Artificial Intelligent IT System is just a part of the ultimate software product. The ultimate software is still in developing stage and not feasible to be functional. During the years ended December 31, 2024 and 2023, the Company recorded nil and $675,000 as research and development expense, respectively. On January 23, 2024, Nova Malaysia entered into a purchase agreement with an IT consulting firm to acquire an AI-Calculation Engine System, which includes Commission Management Calculation Module, Compiled and Encrypted Calculation Engine, Membership Module, Sales Module and Maintenance and Support, etc. for $750,000. The Company agreed to issue 300,000 shares of common stocks at the price of $2.50 per share which was in equivalent to $750,000 (3,544,875 in Malaysia Ringgit on January 23, 2024) to the IT consulting firm. AI-Calculation Engine System is just a part of the ultimate software product. The ultimate software is still in developing stage and not feasible to be functional. During the year ended December 31, 2024, the Company recorded $750,000 as research and development expense, respectively. | F-30 | | | Table of Contents | | On January 28, 2024, the Company entered into an advisory service agreement with a designer for advising furniture design concept and development effective on February 1, 2024 for twelve months. The Company shall pay the designer $10,000 per month starting from February 1, 2024 for twelve months, in the form of the Companys Common Stock, calculated based on the closing stock price on the first trading day of the corresponding month. The shares were granted pursuant to the 2021 Plan. During the year ended December 31, 2024, the Company issued 43,426 shares to the designer and charged $90,000 to operations as designer fee. On September 30, 2024, the Company entered into an agreement to terminate the service with the designer. On March 1, 2024, Nova Malaysia entered into a consulting agreement with a consultant for IT system related maintenance and services effective on March 1, 2024 for a one-year term. The Company agreed to grant the consultant 100,000 shares of the Companys common stock, vesting 25% on March 1, 2024, 25% on June 1, 2024, 25% on September 1, 2024 and 25% on December 1, 2024. The fair value of the 100,000 shares was $163,000, which was calculated based on the stock price of $1.63 per share on March 1, 2024. The shares were granted pursuant to the 2023 Omnibus Long-Term Incentive Plan. During the year ended December 31, 2024, the Company charged $136,094 to operations as consulting fee. On July 5, 2024, the Nova Malaysia entered into a Sale and Purchase Agreement with an IT consulting firm to acquire a Nova Living DesignXperience System for $660,000. The Company agreed to issue 400,000 shares of common stocks at the price of $1.65 per share which was in equivalent to $660,000 (3,106,620 in Malaysia Ringgit on July 5, 2024) to the IT consulting firm. The Nova Living DesignXperience System includes Virtual Interior Design Consultation, Furniture Recommendation Generation, Realistic Rendering of Virtual Products, Testing and Quality Assurance, Documentation and Support and Deployment and Maintenance. During the year ended December 31, 2024, the Company recorded $660,000 as research and development expense. On August 7, 2024, Nova Malaysia entered into a Sale and Purchase Agreement with an IT consulting firm to acquire a Payment IT System for $552,000. The Company agreed to issue 460,000 shares of common stocks at the price of $1.20 per share which was in equivalent to $552,000 (2,481,240 in Malaysia Ringgit on August 7, 2024) to the IT consulting firm. The Payment IT System includes User Registration and Management, Payment Processing, Security and Compliance, Integration and APIs, Merchant Tools, Transaction Management, Reporting and Analytics and Notification System. During the year ended December 31, 2024, the Company recorded $552,000 as research and development expense. On September 3, 2024, Nova Malaysia entered into a consulting agreement with a consultant for IT system related maintenance and services effective on September 1, 2024 for a one-year term. The Company agreed to grant the consultant 100,000 shares of the Companys common stock, vesting 25% on September 3, 2024, 25% on December 3, 2024, 25% on March 3, 2024 and 25% on June 3, 2024. The fair value of the 100,000 shares was $142,000, which was calculated based on the stock price of $1.42 per share on September 3, 2024. The shares were granted pursuant to the 2023 Omnibus Long-Term Incentive Plan. During the year ended December 31, 2024, the Company charged $46,393 to operations as consulting fee. On September 3, 2024, Nova Malaysia entered into a consulting agreement with a consultant for IT system related maintenance and services effective on September 1, 2024 for a one-year term. The Company agreed to grant the consultant 100,000 shares of the Companys common stock, vesting 25% on September 3, 2024, 25% on December 3, 2024, 25% on March 3, 2024 and 25% on June 3, 2024. The fair value of the 100,000 shares was $142,000, which was calculated based on the stock price of $1.42 per share on September 3, 2024. The shares were granted pursuant to the 2023 Omnibus Long-Term Incentive Plan. During the year ended December 31, 2024, the Company charged $46,393 to operations as consulting fee. On November 7, 2024, the Company entered into a consulting agreement with a consultant for consulting and strategy services effective on November 16, 2024 for a one-year term. The Company agreed to grant the consultant 50,000 shares of the Companys common stock, vesting 25% on February 15, 2025, 25% on May 15, 2025, 25% on August 15, 2025 and 25% on November 15, 2025. The fair value of the 50,000 shares was $49,000, which was calculated based on the stock price of $0.98 per share on November 16, 2024. The shares were granted pursuant to the 2023 Plan. During the years ended December 31, 2024, the Company charged $6,175 to operations as consulting expenses. | F-31 | | | Table of Contents | | **Shares and Options Issued to Independent Directors** On November 7, 2018 (the Grant Date), the Company entered into stock option agreements under the 2014 Omnibus Long-Term Incentive Plan with the three independent members of the board of directors. The Company agreed to grant the Companys three independent directors options to purchase an aggregate of 12,000 shares of the Companys common stock at an exercise price of $29.50 per shares, with a term of 5 years. Twenty-five percent (25%) of those stock options vested on November 30, 2018, 25% on will vest on February 28, 2019, 25% on May 31, 2019, and the remaining 25% will vest on August 31, 2019. The fair value of the stock options granted is estimated on the date of the grant using the Black-Scholes option pricing model (BSOPM) as described above. The fair value of the options was calculated using the following assumptions: estimated life of ten years, volatility of 84%, risk free interest rate of 3.07%, and dividend yield of 0%. The fair value of 60,000 stock options was $240,105 at the grant date. On November 4, 2019, the Company entered into stock option agreements under the 2014 Omnibus Long-Term Incentive Plan with the three independent members of the board of directors. The Company agreed to grant the Companys three independent directors options to purchase an aggregate of 12,000 shares of the Companys common stock at an exercise price of $14.00 per share, with a term of 5 years, vesting 25% on November 30, 2019, 25% on February 28, 2020, 25% on May 31, 2020, and 25% on August 31, 2020. The fair value of the stock options granted was estimated on the date of the grant using the Black-Scholes option pricing model. The fair value of the options was calculated using the following assumptions: estimated life of ten years, volatility of 87%, risk free interest rate of 1.60%, and dividend yield of 0%. The fair value of the 12,000 stock options was $114,740 at the grant date. **Shares Issued to Employees** On November 11, 2022, the Company extended an employment agreement with the Companys Corporate Secretary for a term of one year effective from November 14, 2022. The Company agreed to grant an award of 1,200 restricted Stock Units to the officer pursuant to the Companys 2021 Omnibus Equity Plan. The fair value of these shares was $3,540, which was calculated based on the stock price of $2.95 per share on November 11, 2022, the date the award was determined by the Compensation Committee of the Board of Directors, vesting 25% on November 11, 2022, 25% on March 31, 2023, 25% on June 30, 2023 and 25% on September 30, 2023. During the years ended December 31, 2024 and 2023, the Company record nil and $2,655 to operations as stock compensation expense, respectively. On November 9, 2023, the Company extended an employment agreement with the Companys Corporate Secretary for a term of one year effective from November 14, 2023. The Company agreed to grant an award of 6,000 restricted Stock Units to the officer pursuant to the Companys 2021 Omnibus Equity Plan. The fair value of these shares was $12,900, which was calculated based on the stock price of $2.15 per share on November 9, 2023, the date the award was determined by the Compensation Committee of the Board of Directors, vesting 25% on November 9, 2023, 25% on March 31, 2024, 25% on June 30, 2024 and 25% on September 30, 2024. During the years ended December 31, 2024 and 2023, the Company record $11,204 and $ 3,225 to operations as stock compensation expense, respectively. On November 7, 2024, the Company extended an employment agreement with the Companys Corporate Secretary for a term of one year effective from November 14, 2024. The Company agreed to grant an award of 6,000 restricted Stock Units to the officer pursuant to the Companys 2023 Omnibus Equity Plan. The fair value of these shares was $5,880, which was calculated based on the stock price of $0.98 per share on November 7, 2024, the date the award was determined by the Compensation Committee of the Board of Directors, vesting 25% on November 7, 2024, 25% on March 31, 2025, 25% on June 30, 2025 and 25% on September 30, 2025. During the years ended December 31, 2024, the Company record $741 to operations as stock compensation expense. **Options Issued to Employees** On August 24, 2018, the compensation committee of the Board approved an option grant to the Companys Chief Financial Officer to purchase an aggregate of 1,400 shares of the Companys common stock at an exercise price of $46.25 per share, with a term of 5 years, pursuant to the Companys 2014 Omnibus Long-Term Incentive Plan. Fifty percent (50%) of those stock options vested immediately, and the remaining 50% vested on the six-month anniversary of the grant date. | F-32 | | | Table of Contents | | The fair value of the option granted to the Chief Financial Officer in 2018 was recognized as compensation expense over the vesting period of the stock option award. The fair value of the option was calculated using Black-Scholes model under the following assumptions: estimated life of five years, volatility of 84%, risk free interest rate of 2.72%, and dividend yield of 0%. The fair value of the 1,400 stock options was $43,680 at the grant date. On August 12, 2019, the compensation committee of the Board approved an option grant to the Companys Chief Financial Officer to purchase an aggregate of 1,400 shares of the Companys common stock at an exercise price of $19.25 per share, with a term of 5 years, pursuant to the Companys 2014 Omnibus Long-Term Incentive Plan. Fifty percent (50%) of those stock options vested immediately, and the remaining 50% vested on the six-month anniversary of the grant date. The fair value of the option granted to the Chief Financial Officer in 2019 was recognized as compensation expense over the vesting period of the stock option award. The fair value of the option was calculated using Black-Scholes model under the following assumptions: estimated life of five years, volatility of 87%, risk free interest rate of 1.49%, and dividend yield of 0%. The fair value of the 1,400 stock options was $18,318 at the grant date. As of December 31, 2024, unrecognized share-based compensation expense was $159,910. Stock option activity under the Companys stock-based compensation plans is shown below: Schedule of Stock Option Activity | | | Number of Shares | | | Average Exercise Price per Share | | | Weighted Average Remaining Contractual Term in Years | | | | | | | | | | | | | | | | Outstanding at January 1, 2024 | | | 13,400 | | | $ | 14.55 | | | | 0.82 | | | | Exercisable at January 1, 2024 | | | 13,400 | | | | 14.55 | | | | 0.82 | | | | | | | | | | | | | | | | | | | Granted | | | - | | | | - | | | | - | | | | Exercised | | | - | | | | - | | | | - | | | | Forfeited | | | 13,400 | | | | 14.55 | | | | - | | | | Outstanding at December 31, 2024 | | | - | | | | - | | | | - | | | | Exercisable at December 31, 2024 | | | - | | | | - | | | | - | | | | (1) | The intrinsic value of the stock options at December 31, 2024 is the amount by which the market value of the Companys common stock of $0.67 as of December 31, 2024 exceeds the average exercise price of the option. As of December 31, 2024, the intrinsic value of the outstanding and exercisable stock options was nil. | | **Note 13 Geographical Analysis** Geographical distribution of sales consisted of the following for the years ended December 31, 2024 and 2023: Schedule of Revenue by Geographic Areas | | | 2024 | | | 2023 | | | | Geographical Areas | | | | | | | | | | | North America | | $ | 9,435,936 | | | $ | 8,772,170 | | | | Asia | | | - | | | | 1,985,130 | | | | Other countries | | | 251,039 | | | | 330,159 | | | | Revenues | | $ | 9,686,975 | | | $ | 11,087,459 | | | Geographical location of identifiable long-lived assets as of December 31, 2024 and December 31, 2023: Schedule of Long-lived Assets by Geographic Areas | | | 2024 | | | 2023 | | | | Geographical Areas | | | | | | | | | | | North America | | $ | 1,281,203 | | | $ | 1,873,623 | | | | Asia | | | 413,302 | | | | 318,398 | | | | Total | | $ | 1,694,505 | | | $ | 2,192,021 | | | | F-33 | | | Table of Contents | | **Note 14 Lease** On June 17, 2013, the Company entered into a lease agreement for office, warehouse, storage, and distribution space in the United States with a five year term, commencing on November 1, 2013 and expiring on October 31, 2018. The lease agreement also provided an option to extend the term for an additional six years. On April 23, 2018, the Company extended the lease for another three years with an expiration date of October 31, 2021. On October 15, 2021, the Company extended the lease for another five years with an expiration date of October 31, 2026. The initial monthly rental payment is $42,000 with an annual 3% increase. The Company has entered into several lease agreements for office and warehouse space in Commerce, California and showroom space in Las Vegas, Nevada and High Point, North Carolina (see Note 11) on monthly or annual terms. On July 15, 2019, Nova Malaysia entered into a sublease agreement for warehouse space with a two-year term, expiring on July 14, 2021. The initial monthly rental payment was 20,000 Malaysia Ringgit ($4,232) and was increased to 35,000 Malaysia Ringgit ($7,406) effective August 1, 2020. On July 15, 2021, Nova Malaysia extended the lease for another two years with an expiration date of July 31, 2023. Nova Malaysia did not extend this lease after July 31, 2023. On October 29, 2019, Nova Malaysia entered into a lease agreement for a showroom with a two-year term, commencing on December 1, 2019 and expiring on November 30, 2021. On November 26, 2021, Nova Malaysia extended the lease to November 30, 2022 with an option for renewal for another term of 24 months. On October 4, 2022, Nova Malaysia renewed the lease for two years to November 30, 2024. The monthly rental payment is 9,280 Malaysia Ringgit ($). Nova Malaysia did not extend the lease after November 30, 2024. Nova Malaysia leased the showroom in month-to-month basis. On August 20, 2020, Nova Malaysia entered into a sublease agreement for an office and service center with a two-year term, commencing on September 1, 2020 and expiring on August 31, 2022. On July 29, 2022, Nova Malaysia extended the lease for another two years with an expiration date of August 31, 2024. The monthly rental payment is 30,000 Malaysia Ringgit ($). Nova Malaysia did not extend the lease after August 31, 2024. On December 9, 2024, Nova Malaysia entered into an agreement for a warehouse with a two-year term, commencing on November 15, 2024 and expiring on November 14, 2026. The lease agreement also provided an option to extend the term for an additional two years. The monthly rental payment is 19,200 Malaysia Ringgit ($). Operating lease expense for the years ended December 31, 2024 and 2023 was as follows: Schedule of Lease Cost | | | 2024 | | | 2023 | | | | | | | | | | | | | Operating lease cost straight line | | $ | 802,044 | | | $ | 831,262 | | | The following is a schedule, by years, of maturities of operating lease liabilities as of December 31,2024: Schedule of Operating Lease Liability Maturity | | | Operating Leases | | | | 2025 | | $ | 788,186 | | | | 2026 | | | 672,549 | | | | 2027 | | | 71,881 | | | | 2028 | | | 42,958 | | | | Thereafter | | | 1,575,574 | | | | Total undiscounted cash flows | | | - | | | | Less: imputed interest | | | (55,645 | ) | | | Present value of lease liabilities | | | 1,519,929 | | | | F-34 | | | Table of Contents | | **Lease Term and Discount Rate** Schedule of Lease Term and Discount Rate | | | December 31, 2024 | | | | Weighted-average remaining lease term years | | | | | | | Operating leases USA | | | 1.87 | | | | Operating leases Malaysia | | | 3.79 | | | | | | | | | | | Weighted-average discount rate (%) | | | | | | | Operating leases USA | | | 3.49 | | | | Operating leases Malaysia | | | 2.78 | | | Supplemental cash flow information related to leases where the Company was the lessee for the year ended December 31, 2024 and 2023 was as follows: Schedule of Supplemental Cash Flow Information Related to Leases | | | 2024 | | | 2023 | | | | | | | | | | | | | Operating cash outflows from operating leases | | $ | 810,960 | | | $ | 814,230 | | | **Note 15 Commitments and Contingencies** **Legal Proceedings** The Company previously reported on a federal putative class action complaint George Barney filed against the Company and its former and current CEOs and CFOs (Thanh H. Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) in the United States District Court for the Central District of California, claiming the Company violated federal securities laws and pursuing remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. *Barney v. Nova Lifestyle, Inc.*, United States District Court for the Central District of California. (the Barney Action). That action was resolved by a January 30, 2024 Order of the Court certifying a settlement class and approving a class settlement. The agreed settlement payment of $750,000 was entirely funded by the Companys insurance carrier and has been tendered to a claims administrator. In the *Barney* action, Company shareholders sought to assert claims on behalf of all entities purchasing stock from December 21, 2015, through December 20, 2018, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 10b-5. In support of these claims, plaintiffs alleged that defendants artificially inflated the Companys share price by issuing a press release announcing a strategic relationship with Shanxi Winqing Senior Care Service Group, claiming in the Companys Annual Statements on Form 10-Ks for the 2017 and 2018 fiscal years that Shanxi Winqing and Merlino Lewis LLP were among the Companys largest customers, and reporting revenues from sales transactions with these entities. Plaintiffs claimed that Shanxi Winqing was a fictitious entity and Merlno Lewis LLP dissolved in 2013, so that the announcement of a strategic alliance was false and the reported revenues non-existent. The Company denied these allegations and all liability. It asserted that the entities referenced in its public disclosures were actual companies and the revenues booked from those entities were genuine and actually collected. The Company alleged that no registration exists for Shanxi Winqing because the Company slightly mistranslated its Chinese name in its public disclosures. Similarly, the Company claimed to have previously sold products to Merlino Lewis LLP and failed to update its customer name when the customer restructured its business. On March 8, 2019, Jie Yuan (the Jie Action) filed a putative shareholder derivative lawsuit in the United States District Court for the Central District of California, purportedly on behalf of the Company against its former and current CEOs and CFOs (Thanh H. Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) and directors (Charlie Huy La, Bin Liu, Umesh Patel, and Min Su) and vice president (Steven Qiang Liu) (collectively, the Defendants). In this action, the putative derivative plaintiffs seek to recover any losses the Company sustains as a result of alleged securities violations that were alleged in the *Barney* Action. It is alleged that the Defendants caused the Company to make the alleged false and/or misleading statements giving rise to the *Barney* Action. The Plaintiff also alleges that President and CEO Lam engaged in self-dealing transactions by leasing her property to Diamond Bar, a Company subsidiary, and asserts, in conclusory fashion, that Lam, former CEO and director Ya Ming Wong, former CFO and director Yuen Ching Ho, and director Umesh Patel sold securities during the period of time when the alleged false and/or misleading statements were made with knowledge of material non-public information. On May 15, 2019, Wilson Samuels (the Samuels Action) filed a largely duplicative putative derivative complaint purportedly on behalf of the Company against the same current and former directors and officers named in the *Jie* Action other than Steven Qiang Liu. That action was filed in the United States District Court for the Central District of California. Samuels repeats the allegations of the Complaint in the *Jie* Action. Additionally, Samuels claims that, in announcing its change of auditing firms in September 2016, the Company asserted that it made this move because its existing auditor ceased auditing public companies subject to regulation in the United States without disclosing that its new auditing firm was created in a merger of three accounting firms, including a firm whose registration was revoked by the Public Company Accounting Oversight Board. Samuels also claims that the Company redeemed its stock in reliance upon the same purported fraudulent recognition of revenues claimed in the putative class action. Samuels purports to state direct claims under Sections 10(b) and 20 of the Exchange Act and SEC Rule 10b-5. On March 3, 2020, the defendants filed motions to stay the derivative actions until the Barney Action is resolved or alternatively to dismiss on the grounds that plaintiffs failure to make demand upon the Board of Directors was not excused and the Complaints otherwise fail to state a claim upon which relief can be granted. By Order entered April 7, 2020, the Court granted defendants Motion to Stay and stayed the Jie Action until the Barney Action is resolved. The Court subsequently entered a similar Order in the Samuels Action. | F-35 | | | Table of Contents | | With the final settlement of the Barney Action, the conditions for the stay expired. The Court issued an Order requiring the parties to submit a proposed order activating the cases. The parties accordingly filed a stipulation to lift the stay and consolidate the actions. The Stipulation also set deadlines for plaintiffs to file a consolidated amended complaint and for defendants to respond to this complaint. By January 7, 2025 Orders, the Court adopted the parties Stipulation. On February 6, 2025, the deadline for filing an amended complaint, plaintiffs filed a Notice of Dismissal without prejudice. While plaintiffs should have sought Court approval, the Clerk accepted the Notice of Dismissal and the lead case has been marked closed. While these derivative actions are purportedly asserted on behalf of the Company, when they are subsequently activated, the Company likely will incur attorneys fees and costs in response to indemnity demands from the defendant directors and officers. Plaintiffs also seek to require corporate governance changes. The Company believes there is no basis to the derivative complaints and they will be vigorously defended if necessary. Other than the above, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations. **Note 16 Subsequent Events** The Company has evaluated subsequent events through March 31, 2025, the date of the issuance of the consolidated financial statements, and the following subsequent events have been identified. On January 6, 2025, Nova LifeStyle, Inc. (the Company) entered into a Securities Purchase Agreement (the Agreement) with certain purchaser identified on the signature page thereto (the Purchaser), pursuant to which the Company agreed to sell to the Purchaser in a private placement 250,000 shares (the Shares) of the Companys common stock, par value $0.001 per share (the Common Stock), at a purchase price of $0.60 per share for an aggregate price of $150,000 (the Private Placement). The Private Placement will be completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. On February 10, 2025, Nova LifeStyle, Inc. (the Company) entered into a Securities Purchase Agreement (the Agreement) with certain purchaser identified on the signature page thereto (the Purchaser), pursuant to which the Company agreed to sell to the Purchaser in a private placement 250,000 shares (the Shares) of the Companys common stock, par value $0.001 per share (the Common Stock), at a purchase price of $0.60 per share for an aggregate price of $150,000 (the Private Placement). The Private Placement will be completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. On February 20, 2025, Nova LifeStyle, Inc. (the Company) entered into a Debt Repayment Agreement (the Agreement) with Huge Energy International Limited, a company incorporated in Hong Kong and a creditor of the Company (the Creditor), pursuant to which the Company agreed to repay $217,000 debt owed to the Creditor in the form of shares of Common Stock of the Company for an aggregate of 434,000 shares at a price of $0.50 per share (the Debt Repayment). The Debt Repayment will be completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. On February 26, 2025, Nova LifeStyle, Inc. (the Company) and Nova Furniture Limited (Samoa), a wholly owned subsidiary of the Company (Nova Samoa) entered into four purchase orders (POs) to purchase certain furniture products (the Products) from Flyguy Resources Sdn Bhd (Flyguy Resources), Twenty Nine Business Solutions Sdn. (Twenty Nine Business), Chialing Enterprise (Chialing) and Macro IT Solutions SDH BHD (Macro IT Solutions, collectively with Flyguy Resources, Twenty Nine Business, and Chialing as the Sellers). Pursuant to the POs, the Company, Nova Samoa and Sellers agree that (i) Nova Samoa will purchase Transparent Marble Slabs from Flyguy Resources for a total of $810,000 (the Flyguy Order Price); (ii) Nova Samoa will purchase Background Light Slabs from Twenty Nine Business for a total of $742,500 (the Twenty Nine Order Price); (iii) Nova Samoa will purchase Light Transmitting Slate Stone from Chialing for a total of $825,000 (the Chialing Order Price); and (iv) Nova Samoa will purchase Ultrathinstone from Macro IT Solutions for a total of $813,750 (the Macro Order Price, collectively with Flyguy Order Price, Twenty Nine Order Price, Chialing Order Price as Order Prices); (vi) the Order Prices shall be paid to the Sellers in 4,909,616 shares (Shares) of common stock of the Company at US$0.65 per share. The Shares will be issued pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended. | F-36 | | | Table of Contents | | **** **SIGNATURES** Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | | | NOVA LIFESTYLE, INC. | | | | | (Registrant) | | | | | | | | Date: March 31, 2025 | By: | /s/ Thanh H. Lam | | | | | Thanh H. Lam | | | | | Chairperson and Chief Executive Officer | | | | | (Principal Executive Officer) | | **Power of Attorney** KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thanh H. Lam and Jeffery Chuang, jointly and severally, his or her attorneys-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. | Signature | | Title | | Date | | | | | | | | | | /s/ Thanh H. Lam | | Chief Executive Officer, President, Director and Chairperson | | March 31, 2025 | | | Thanh H. Lam | | (Principal Executive Officer) | | | | | | | | | | | | /s/ Jeffery Chuang | | Chief Financial Officer | | March 31, 2025 | | | Jeffery Chuang | | (Principal Financial and Accounting Officer) | | | | | | | | | | | | /s/ Min Su | | Director | | March 31, 2025 | | | Min Su | | | | | | | | | | | | | | /s/ Ming-Cherng Sky Tsai | | Director | | March 31, 2025 | | | Ming-Cherng Sky Tsai | | | | | | | | | | | | | | /s/ Umesh Patel | | Director | | March 31, 2025 | | | Umesh Patel | | | | | | | | | | | | | | /s/ Huy P. La | | Director | | March 31, 2025 | | | Huy P. La | | | | | | | 36 | |