novalife20210331

10-Q 1 novalife20210331_10q.htm FORM 10-Q novalife20210331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended March 31, 2021

☐

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: 5,567,544 shares of common stock outstanding as of May 14, 2021.

Nova LifeStyle, Inc.

Table of Contents

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	1
	Condensed Consolidated Statements of Loss and Comprehensive Loss for the three months ended March 31, 2021 and 2020 (unaudited)	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements for the three months ended March 31, 2021 and 2020 (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 6.	Exhibits	38

	Signatures	39

	March 31, 2021		December 31, 2020

Assets

Current Assets
Cash and cash equivalents	$	7,641,276	$	8,744,784
Accounts receivable, net		172,346		514,939
Advance to suppliers		351,088		381,894
Inventories		32,940,465		32,814,520
Prepaid expenses and other receivables		219,361		349,746
Tax receivable		479,413		489,020

Total Current Assets		41,803,949		43,294,903

Noncurrent Assets
Plant, property and equipment, net		426,247		453,518
Operating lease right-of-use assets, net		2,120,657		2,319,742
Lease deposit		72,863		73,801
Goodwill		218,606		218,606
Deferred tax asset		117,952		117,952

Total Noncurrent Assets		2,956,325		3,183,619

Total Assets	$	44,760,274	$	46,478,522

	March 31, 2021			December 31, 2020

Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable	$	490,623		$	743,785
Operating lease liability, current		663,257			688,082
Advance from customers		34,218			266,243
Accrued liabilities and other payables		260,780			327,173

Total Current Liabilities		1,448,878			2,025,283

Noncurrent Liabilities
Other Loan		150,000			150,000
Operating lease liability, non-current		1,583,733			1,746,070
Income tax payable		1,628,702			1,628,694

Total Noncurrent Liabilities		3,362,435			3,524,764

Total Liabilities		4,811,313			5,550,047

Contingencies and Commitments

Stockholders' Equity
Common stock, $0.001 par value; 15,000,000 shares authorized, 5,602,734 and 5,596,234 shares issued and outstanding; as of March 31, 2021 and December 31, 2020, respectively		5,602			5,596
Additional paid-in capital		39,779,842			39,766,978
Statutory reserves		-			6,241
Accumulated other comprehensive income		569,443			798,290
(Accumulated deficits) Retained earnings		(405,926	)		351,370

Total Stockholders' Equity		39,948,961			40,928,475

Total Liabilities and Stockholders' Equity	$	44,760,274		$	46,478,522

	Three Months Ended March 31,
	2021			2020
	(Unaudited)

Net Sales	$	3,331,567		$	2,203,220

Cost of Sales		1,951,255			1,424,191

Gross Profit		1,380,312			779,029

Operating Expenses
Selling expenses		768,085			317,416
General and administrative expenses		1,378,330			1,282,719

Total Operating Expenses		2,146,415			1,600,135

Loss From Operations		(766,103	)		(821,106	)

Other Income (Expenses)
Foreign exchange transaction gain (loss)		68,984			(156,013	)
Interest (expense) income, net		(2,390	)		20,825
Financial expense		(54,352	)		(32,740	)

Total Other Income (Expenses), Net		12,242			(167,928	)

Loss Before Income Taxes and Discontinued operations		(753,861	)		(989,034	)

Income Tax Expense		(9,676	)		(23,879	)

Loss From Continuing Operations		(763,537	)		(1,012,913	)

Loss From Discontinued Operations		-			(326,531	)

Net Loss		(763,537	)		(1,339,444	)

Other Comprehensive (Loss) Income
Foreign currency translation		(228,847	)		158,215

Net Loss and Comprehensive Loss		(992,384	)		(1,181,229	)


Basic and Diluted weighted average shares outstanding		5,598,678			5,572,196

Loss from continuing operations per share of common stock
Basic and Diluted	$	(0.14	)	$	(0.18	)

Loss from discontinued operations per share of common stock
Basic and Diluted	$	-		$	(0.06	)

Net loss per share of common stock
Basic and Diluted	$	(0.14	)	$	(0.24	)

							Accumulated						(Accumulated
					Additional		Other						deficits)			Total
	Common stock				Paid in		Comprehensive			Statutory			Retained			Stockholders’
	Shares		Amount		Capital		Income			Reserve			Earnings			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		1,500		1		2,969		-			-			-			2,970

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

Closure of Nova Macau		-		-		-		-			(6,241	)		6,241			-

Foreign currency translation loss		-		-		-		(228,847	)		-			-			(228,847	)

Net loss		-		-		-		-			-			(763,537	)		(763,537	)

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

Balance at January 1, 2021	$	5,201
Reversal		(3,460	)
Balance at March 31, 2021	$	1,741

Computer and office equipment	5 - 10 years
Decoration and renovation	5 - 10 years

	Gross UTB
	2021		2020

Balance – January 1 and March 31	$	935		12,547

	March 31, 2021			March 31, 2020

Net loss from continuing operations	$	(763,537	)	$	(1,012,913	)
Net loss from discontinued operations		-			(326,531	)
Net loss		(763,537	)		(1,339,444	)

Weighted average shares outstanding – basic and diluted*		5,598,678			5,572,196

Net loss from continuing operations per share of common stock
Basic and Diluted	$	(0.14	)	$	(0.18	)

Net loss from discontinued operations income per share of common stock
Basic and Diluted	$	-		$	(0.06	)

Net loss per share of common stock
Basic and Diluted	$	(0.14	)	$	(0.24	)

●	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.

Balance sheet items, except for equity accounts
March 31, 2021			RM4.15 to 1
December 31, 2020			RM4.02 to 1

Income statement and cash flows items
For the period ended March 31, 2021			RM4.07 to 1
For the period ended March 31, 2020			RM4.18 to 1

	March 31, 2021			December 31, 2020

Customer relationship	$	50,000		$	50,000
Trademarks		200,000			200,000
Less: accumulated amortization		(250,000	)		(250,000	)
	$	-		$	-

	March 31, 2021		December 31, 2020

Other payables	$	8,890	$	6,428
Salary payable		13,462		6,731
Financed insurance premiums		-		103,104
Accrued rents		10,429		14,899
Accrued marketing		-		30,000
Accrued commission		95,269		112,673
Accrued expenses, others		132,730		53,338
	$	260,780	$	327,173

	Number of Shares		Average Exercise Price per Share		Aggregate Intrinsic Value(1)		Weighted Average Remaining Contractual Term in Years

Outstanding at January 1, 2021		340,500	$	5.97	$	-		2.33
Exercisable at January 1, 2021		340,500		5.97	$	-		2.33

Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Outstanding at March 31, 2021		340,500	$	5.97	$	-		2.08
Exercisable at March 31, 2021		340,500	$	5.97	$	-		2.08

	2021		2020

Geographical Areas
North America	$	3,006,431	$	2,184,856
Asia*		178,282		-
Other countries		146,854		18,364
	$	3,331,567	$	2,203,220

Cash and cash equivalents	$	1,462,200
Accounts receivable, net		969,841
Advance to suppliers		609,935
Accounts payable		(948	)
Advance from customers		(126,916	)
Accrued liabilities and other payables		(2,553	)
Income tax payable		(85,028	)

Net assets of Bright Swallow upon disposal		2,826,531
Cash received as of March 31, 2020		(2,500,000	)
Loss on disposal of subsidiary	$	(326,531	)

	March 31, 2020

Sales	$	-
Cost of sales		-
Operating expenses		-
Other expense, net		-
Loss on disposal of subsidiary		(326,531	)
Loss before income taxes		(326,531	)
Income tax benefit		-
Loss from discontinued operations	$	(326,531	)

	March 31, 2021		December 31, 2020

Prepaid expenses	$	99,425	$	217,591
Other receivables		119,936		132,155
	$	219,361	$	349,746

	2021		2020

Operating lease cost – straight line	$	200,794	$	176,252

Total lease expense	$	200,794	$	176,252

	Operating Leases

2022	$	757,699
2023		682,621
2024		665,826
2025		338,667
Thereafter		-
Total undiscounted cash flows		2,444,813
Less: imputed interest		(197,823	)
Present value of lease liabilities		2,246,990

	March 31, 2021
Weighted-average remaining lease term - years
Operating leases - USA		3.59
Operating leases - Malaysia		1.11

Weighted-average discount rate (%)
Operating leases - USA		5.00	%
Operating leases - Malaysia		2.88	%

	2021			2020
Cash provided by (used in):
Operating activities	$	(880,935	)	$	(672,156	)
Investing activities		-			(1,462,200	)
Financing activities		-			-

Exhibit No.		Document Description
31.1 †		Certification of Chief 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 Chief 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 ‡		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by the Chief Executive Officer
32.2 ‡		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by the Chief Financial Officer

101.INS†		XBRL Instance Document
101.SCH†		XBRL Schema Document
101.CAL†		XBRL Calculation Linkbase Document
101.DEF†		XBRL Definition Linkbase Document
101.LAB†		XBRL Label Linkbase Document
101.PRE†		XBRL Presentation Linkbase Document

		NOVA LIFESTYLE, INC.
		(Registrant)

Date: May 17, 2021	By:	/s/ Thanh H. Lam
		Thanh H. Lam Chairperson and Chief Executive Officer (Principal Executive Officer)

Date: May 17, 2021		/s/ Jeffery Chuang
		Jeffery Chuang Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

SEC Form 10-Q filed by Nova Lifestyle, Inc