UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-36259

NOVA LIFESTYLE, INC.

(Exact name of registrant as specified in its charter)

Nevada

90-0746568

(State or other jurisdiction

of incorporation or organization)

(IRS Employer

Identification No.)

6565 E. Washington Blvd. Commerce, CA		90040
(Address of principal executive offices)		(Zip Code)

(323) 888-9999

(Registrant’s telephone number, including area code)

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

Indicate by checkmark 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 last 90 days.

YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically 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, smaller reporting company, or an emerging growth company. See 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,882,021 shares of common stock outstanding as of August 10, 2022.

Nova LifeStyle, Inc.

Table of Contents

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	1
	Condensed Consolidated Statements of Loss and Comprehensive Loss for the six months and three months ended June 30, 2022 and 2021 (unaudited)	3
	Condensed Consolidated Statements of Stockholders’ Equity for the six months and three months ended June 30, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements for the six months and three months ended June 30, 2022 and 2021 (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	42
Item 6.	Exhibits	44

	Signatures	45

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021

	June 30, 2022		December 31, 2021
	(Unaudited)
Assets

Current Assets
Cash and cash equivalents	$	4,682,698	$	6,276,106
Accounts receivable, net		208,255		103,397
Advance to suppliers		302,721		707,264
Inventories		13,469,887		17,656,175
Prepaid expenses		406,457		406,366
Other receivables		26,376		120,634
Tax receivable		—		299,011

Total Current Assets		19,096,394		25,568,953

Noncurrent Assets
Plant, property and equipment, net		414,810		510,680
Operating lease right-of-use assets, net		2,768,825		3,158,734
Lease deposit		71,100		72,651
Goodwill		218,606		218,606

Total Noncurrent Assets		3,473,341		3,960,671

Total Assets	$	22,569,735	$	29,529,624

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONT’D)

AS OF JUNE 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021

	June 30, 2022			December 31, 2021
	(Unaudited)
Liabilities and Stockholders’ Equity

Current Liabilities
Accounts payable	$	375,976		$	358,362
Operating lease liability, current		701,661			731,284
Advance from customers		344,139			394,376
Accrued liabilities and other payables		537,008			326,679
Other loan interest payable		2,149			3,696
Income tax payable		204,847			—

Total Current Liabilities		2,165,780			1,814,397

Noncurrent Liabilities
Other Loan		150,000			150,000
Operating lease liability, non-current		2,222,349			2,577,567
Income tax payable		1,157,604			1,543,472

Total Noncurrent Liabilities		3,529,953			4,271,039

Total Liabilities		5,695,733			6,085,436

Contingencies and Commitments		-

Stockholders’ Equity
Common stock, $0.001 par value; 15,000,000 shares authorized, 6,891,313 and 6,836,742 shares issued and outstanding; as of June 30, 2022 and December 31, 2021, respectively		6,892			6,837
Additional paid-in capital		42,974,288			42,660,383
Accumulated other comprehensive income		87,258			381,850
Accumulated deficits		(26,194,436	)		(19,604,882	)

Total Stockholders’ Equity		16,874,002			23,444,188

Total Liabilities and Stockholders’ Equity	$	22,569,735		$	29,529,624

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)


	Six Months Ended June 30,						Three Months Ended June 30,
	2022			2021			2022			2021
	(Unaudited)						(Unaudited)

Net Sales	$	7,478,993		$	6,881,583		$	3,813,047		$	3,550,016

Cost of Sales		9,498,842			9,508,404			7,361,224			7,557,149

Gross Loss		(2,019,849	)		(2,626,821	)		(3,548,177	)		(4,007,133	)

Operating Expenses
Selling expenses		1,538,544			1,646,842			770,211			878,757
General and administrative expenses		2,952,737			2,771,043			1,364,328			1,392,713
Loss on disposal of fixed assets		36,549			—			—			—

Total Operating Expenses		4,527,830			4,417,885			2,134,539			2,271,470

Loss From Operations		(6,547,679	)		(7,044,706	)		(5,682,716	)		(6,278,603	)

Other Income (Expenses)
Foreign exchange transaction income (loss)		63,644			34,428			45,881			(34,556	)
Interest (expense) income, net		(5,959	)		25,911			(2,885	)		28,301
Financial expense		(99,560	)		(111,636	)		(51,787	)		(57,284	)

Total Other Expenses, Net		(41,875	)		(51,297	)		(8,791	)		(63,539	)

Loss Before Income Taxes		(6,589,554	)		(7,096,003	)		(5,691,507	)		(6,342,142	)

Income Tax Expense		—			(13,061	)		—			(3,385	)

Net Loss		(6,589,554	)		(7,109,064	)		(5,691,507	)		(6,345,527	)

Other Comprehensive Loss
Foreign currency translation		(294,592	)		(392,764	)		(239,719	)		(163,917	)

Net Loss and Comprehensive Loss		(6,884,146	)		(7,501,828	)		(5,931,226	)		(6,509,444	)


Weighted average shares outstanding - Basic and Diluted		6,860,907			5,601,988			6,876,963			5,605,261

Net loss per share of common stock
Basic and Diluted	$	(0.96	)	$	(1.27	)	$	(0.83	)	$	(1.13	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)

Three Months Ended June 30, 2022


							Accumulated
					Additional		Other							Total
	Common stock				Paid-in		Comprehensive				Accumulated			Stockholders’
	Shares		Amount		Capital		Income				Deficits			Equity

Balance at beginning of period		6,856,899	$	6,857	$	42,811,695	$	326,977		-	$	(20,502,929	)	$	22,642,600

Stock issued to employees		1,500		2		3,298		-		-		-			3,300

Stock issued to consultants		32,914		33		159,295		-		-		-			159,328

Foreign currency translation loss		-		-		-		(239,719	)	-		-			(239,719	)

Net loss		-		-		-		-		-		(5,691,507	)		(5,691,507	)

Balance at end of period		6,891,313	$	6,892	$	42,974,288	$	87,258		-	$	(26,194,436	)	$	16,874,002

Three Months Ended June 30, 2021


							Accumulated
					Additional		Other							Total
	Common stock				Paid-in		Comprehensive				Accumulated			Stockholders’
	Shares		Amount		Capital		Income				Deficits			Equity

Balance at beginning of period		5,602,734	$	5,602	$	39,779,842	$	569,443		-	$	(405,926	)	$	39,948,961

Stock issued to employees		1,500		2		2,968		-		-		-			2,970

Stock issued to consultants		5,000		5		9,895		-				-			9,900

Foreign currency translation loss		-		-		-		(163,917	)			-			(163,917	)

Net loss		-		-		-		-				(6,345,527	)		(6,345,527	)

Balance at end of period		5,609,234	$	5,609	$	39,792,705	$	405,526		-	$	(6,751,453	)	$	33,452,387

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)

Six Months Ended June 30, 2022

	Shares		Amount		Capital		Income				Deficits)			Equity
							Accumulated
					Additional		Other							Total
	Common stock				Paid-in		Comprehensive				(Accumulated			Stockholders’
	Shares		Amount		Capital		Income				Deficits)			Equity

Balance at beginning of period		6,836,742	$	6,837	$	42,660,383	$	381,850		-	$	(19,604,882	)	$	23,444,188

Stock issued to employees		3,000		3		6,597		-		-		-			6,600

Stock issued to consultants		51,571		52		307,308		-		-		-			307,360

Foreign currency translation loss		-		-		-		(294,592	)			-			(294,592	)

Net loss		-		-		-		-		-		(6,589,554	)		(6,589,554	)

Balance at end of period		6,891,313	$	6,892	$	42,974,288	$	87,258		-	$	(26,194,436	)	$	16,874,002

Six Months Ended June 30, 2021

							Accumulated						Retained
					Additional		Other						Earnings			Total
	Common stock				Paid		Comprehensive			Statutory			(Accumulated			Stockholders’
	Shares		Amount		in Capital		Income			Reserve			Deficits)			Equity

Balance at beginning of period		5,596,234	$	5,596	$	39,766,978	$	798,290		$	6,241		$	351,370		$	40,928,475

Stock issued to employees		3,000		3		5,937		-			-			-			5,940

Stock issued to consultants		10,000		10		19,790		-			-			-			19,800

De-registration and liquidation of Nova Macau		-		-		-		-			(6,241	)		6,241			--

Foreign currency translation loss		-		-		-		(392,764	)		-			-			(392,764	)

Net loss		-		-		-		-			-			(7,109,064	)		(7,109,064	)

Balance at end of period		5,609,234	$	5,609	$	39,792,705	$	405,526		$	-		$	(6,751,453	)	$	33,452,387

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOVA LIFESTYLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)


	Six Months ended June 30,
	2022			2021

Cash Flows From Operating Activities
Net loss	$	(6,589,554	)	$	(7,109,064	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		42,161			38,526
Amortization of operating lease right-of-use assets		378,403			385,816
Loss on disposal of fixed assets		36,549			—
Write down of inventories		5,119,054			5,526,307
Stock based compensation expense		313,960			25,740
Changes in bad debt allowance		1,060			(3,590	)
Changes in operating assets and liabilities:
Accounts receivable		(105,918	)		359,078
Advance to suppliers		404,543			62,921
Inventories		(932,766	)		124,171
Other current assets		86,299			(703,768	)
Operating lease liabilities		(370,841	)		(363,836	)
Accounts payable		17,614			(193,852	)
Advance from customers		(50,237	)		(3,777	)
Accrued liabilities and other payables		209,791			421,366
Taxes payable		117,990			(180,832	)

Net Cash Used in Operating Activities		(1,321,892	)		(1,614,794	)

Cash Flows From Investing Activities
Loan to an unrelated party		—			(1,220,226	)
Purchase of property and equipment		(1,487	)		(152,950	)

Net Cash Used in Investing Activities		(1,487	)		(1,373,176	)

Cash Flows From Financing Activities

Effect of Exchange Rate Changes on Cash and Cash Equivalents	$	(270,029	)	$	(251,665	)

Net decrease in cash and cash equivalents		(1,593,408	)		(3,239,635	)

Cash and cash equivalents, beginning of period		6,276,106			8,744,784

Cash and cash equivalents, ending of period	$	4,682,698		$	5,505,149

Supplemental Disclosure of Cash Flow Information
Cash paid during period for:
Income tax payments	$	42,102		$	193,948
Interest expense	$	8,013		$	2,910

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOVA LIFESTYLE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2022 AND 2021 (UNAUDITED)

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”), 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 two 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-registered and liquidated in January 2021.

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 Company’s own blockchain technology team. This new 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 June 30, 2022.

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. In February 2022, Nova HK entered a de-registration process and transferred all its assets and business to Nova Malaysia.

The “Company” and “Nova” collectively refer to Nova LifeStyle, the U.S. parent, and its subsidiaries, Nova Furniture, Nova Samoa, Nova Macao, Diamond Bar, i Design, Nova HK and Nova Malaysia.

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COVID-19

Beginning in 2020, a strain of novel coronavirus (“COVID-19”) has spread globally and, at this point, the Company’s operations has been adversely impacted by the COVID-19 pandemic. In particular, Nova Malaysia had not been able to operate in normal condition due to Malaysian government’s shut down orders which resulted in sales lagging and slow-moving inventories. The Company’s two showrooms in Kuala Lumpur were closed from March 2020 to May 2020 and closed again from August 2020 to March 5, 2021. Malaysia government imposed a new nationwide lockdown on May 12, 2021 until early June 2021, then the lockdown was extended to early October 2021. In October 2021, Malaysia government lifted lockdown order for people fully vaccinated against COVID-19 and our store has been reopened since then. In April 2022, Malaysia also has reopened the border for foreign visitors. However, COVID-19 in Malaysia increased financial vulnerability for those

SEC Form 10-Q filed by Nova Lifestyle Inc.