Nova LifeStyle(NVFY) - 2024 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended June 30, 2024 were $2.69 million, a decrease of 40$4.46 million for the same period in 2023, primarily due to a 69% decrease in sales volume[195]. - Gross profit was $1.19 million for the three months ended June 30, 2024, compared to$1.45 million for the same period in 2023, representing a decrease of $0.25 million, while the gross profit margin increased to 44$1.69 million for the three months ended June 30, 2024, a decrease of 7.2% from $1.83 million for the same period in 2023, primarily due to a 28$0.56 million, compared to a net loss of $0.54 million for the same period in 2023[203]. - For the six months ended June 30, 2024, net sales were$5.06 million, a decrease of 20% from $6.34 million for the same period in 2023, mainly due to a 52$2.21 million, an increase of $0.10 million from$2.11 million for the same period in 2023, with a gross profit margin of 44% compared to 33%[208]. - Operating expenses for the six months ended June 30, 2024 were $4.20 million, an increase of 14.4$3.67 million for the same period in 2023, driven by a significant increase in research and development expenses[209]. - Net loss for the six months ended June 30, 2024, was $2.03 million, compared to a net loss of$1.76 million for the same period in 2023[212]. Compliance and Legal Matters - The company is currently not in compliance with NASDAQ listing rules, failing to maintain a minimum of $2,500,000 in stockholders' equity[157]. - The company submitted a compliance plan to NASDAQ on May 28, 2024, and received an extension until October 14, 2024, to regain compliance[158]. - The company settled a class action lawsuit for$750,000 without admitting liability[229]. - The Company is not currently involved in any legal proceedings that could materially affect its business or financial condition[234]. Inventory and Sales - The company reported a liquidation sale of jade mats inventory for $2.00 million in June 2023, marking its exit from the jade mats business[155]. - Sales to Asia decreased by 100$0 million for the three months ended June 30, 2024, compared to $1.99 million for the same period in 2023, due to liquidation sales of jade mats[196]. - Sales to North America increased by$0.76 million to $4.96 million for the six months ended June 30, 2024, from$4.19 million for the same period in 2023, primarily due to more sales orders received[206]. Financing and Cash Flow - The company received loan proceeds of approximately $139,802 under the Paycheck Protection Program (PPP) and an additional loan of$176,294 from Cathay Bank[156]. - Net cash used in operating activities was $690,415 for the six months ended June 30, 2024, an increase in cash outflow of$2.12 million from $1.43 million cash provided in the same period of 2023[215]. - Net cash provided by financing activities was$760,000 for the six months ended June 30, 2024, compared to $0 for the same period in 2023[217]. - The company plans to meet liquidity requirements primarily through cash flow from operations and collections of accounts receivable[213]. Operational Changes - The company has shifted a portion of its manufacturing from China to other Asian countries, such as Vietnam and India, to mitigate the impact of U.S. tariffs[161]. - The company launched its Summer 2024 Collection in Las Vegas and High Point Markets, focusing on attracting higher-end customers[161]. - The company operates in a single reportable segment focused on the design and sale of furniture, with operations in the U.S. and Malaysia[186]. Accounting and Financial Reporting - The company adopted ASU 2017-04 for goodwill impairment tests beginning January 1, 2023, with no impact on financial statements[188]. - The company recognizes revenues when control of goods is obtained, following a five-step model under ASU No. 606[178]. - As of June 30, 2024, the company maintained an allowance for expected credit losses of$449, down from $532 as of December 31, 2023[166]. - The expected credit losses provision for the six months ended June 30, 2024, was a reversal of ($83), compared to a reversal of ($196) for the same period in 2023[166]. - The gross accounts receivable as of June 30, 2024, was$44,918, with none over 90 days past due[166]. - The income tax expense for the six months ended June 30, 2024, was $4,876, compared to$2,400 for the same period in 2023[169]. - The company had accumulated undistributed earnings from foreign subsidiaries of approximately $25.2 million as of June 30, 2024[175]. - Unrecognized tax benefits were approximately$0 as of June 30, 2024, indicating no anticipated significant changes in the next 12 months[175]. Shareholder and Equity Matters - The company completed a registered direct offering of common stock in July 2021, raising gross proceeds of $3,120,622[156]. - The company increased its authorized shares from 3,000,000 to 250,000,000 as part of an amendment to its Articles of Incorporation[164]. - Advances to suppliers were$50,793 as of June 30, 2024, down from $93,740 at December 31, 2023[218]. - Long-term taxes payable recorded as of June 30, 2024, amounted to$640,000, primarily from a one-time transition tax[219]. - As of June 30, 2024, 77.1% of accounts receivable outstanding had been collected[217]. Other Financial Information - Other expenses, net decreased by $96,995 to$60,949 for the three months ended June 30, 2024, compared to $157,944 for the same period in 2023, mainly due to a decrease in foreign exchange loss[201]. - Other expenses decreased by$161,335 to $35,314 for the six months ended June 30, 2024, primarily due to a foreign exchange gain increase of$204,310[210]. - Working capital deficit decreased by $382,527 to$322,470 as of June 30, 2024, from a net working capital of $60,057 at December 31, 2023[214]. - No insider trading arrangements were adopted or terminated by the Company's directors or executive officers during the quarterly period[234]. - There are no unregistered sales of equity securities or use of proceeds reported during the quarterly period[234].