Nova Lifestyle Inc

Previous wording

Item 2. Management**’s Discussion and Analysis of Financial Condition and Results of Operations

Current wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Previous wording

The following discussion and analysis are based upon our financial statements as of the dates and for the periods presented in this section. You should read this discussion and analysis in conjunction with the financial statements and notes thereto found in Part I, Item 1 of this Form 10-Q and our consolidated financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”). All references to the first quarter and first three months of 2024 and 2023 mean the three-month periods ended March 31, 2024 and 2023. In addition to historical information, the following discussion and other parts of this report contain certain forward-looking information. When used in this discussion, the words, “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from projected results, due to a number of risks, uncertainties and factors beyond our control. We do not undertake to publicly update or revise any of these forward-looking statements, even if experience or future changes show that the indicated results or events will not be realized. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Readers also are urged to carefully review and consider our discussions regarding the various factors that affect the company’s business, which are described in this section and elsewhere in this report. For more information, see our discussion of risk factors located at Part I, Item 1A of our 2023 Form 10-K.

Current wording

The following discussion and analysis are based upon our financial statements as of the dates and for the periods presented in this section. You should read this discussion and analysis in conjunction with the financial statements and notes thereto found in Part I, Item 1 of this Form 10-Q and our condensed consolidated financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”). All references to the second quarter and first six months of 2024 and 2023 mean the three and six-month periods ended June 30, 2024 and 2023. In addition to historical information, the following discussion and other parts of this report contain certain forward-looking information. When used in this discussion, the words, “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from projected results, due to a number of risks, uncertainties and factors beyond our control. We do not undertake to publicly update or revise any of these forward-looking statements, even if experience or future changes show that the indicated results or events will not be realized. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Readers also are urged to carefully review and consider our discussions regarding the various factors that affect the company’s business, which are described in this section and elsewhere in this report. For more information, see our discussion of risk factors located at Part I, Item 1A of our 2023 Form 10-K.

Previous wording

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 existed from Jade Mats business in 2023. 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.

Current wording

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.

Previous wording

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. In 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. 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.

Current wording

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 and August 2024, we completed two private placements for gross proceeds of $600,000. 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.

Previous wording

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.

Current wording

In preparing condensed 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 condensed 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.

Previous wording

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 $1,373 and $532 as of March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024 and 2023, expected credit losses provision (reversal) was $841 and ($261), respectively. As of March 31, 2024, we had gross receivable of $137,264 of which none 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.

Current wording

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 $449 and $532 as of June 30, 2024 and December 31, 2023, respectively. During the six months ended June 30, 2024 and 2023, expected credit losses provision (reversal) was ($83) and ($196), respectively; ($924) and $65 for the three months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had gross receivable of $44,918 of which none 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.

Previous wording

In its interim financial statements, the Company follows the guidance in ASC 270 “Interim Reporting” and ASC 740 “Income Taxes” whereby the Company utilizes the expected annual effective rate in determining its income tax provision. The income tax expense for the three months ended March 31, 2024 and 2023 are $0, respectively.

Current wording

In its interim financial statements, the Company follows the guidance in ASC 270 “Interim Reporting” and ASC 740 “Income Taxes” whereby the Company utilizes the expected annual effective rate in determining its income tax provision. The income tax expense for the six months ended June 30, 2024 and 2023 are $4,876 and $2,400, respectively; and $4,876 and $2,400 for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

As of March 31, 2024 and December 31, 2023, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately $25.3 million and $25.4 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.

Current wording

As of June 30, 2024 and December 31, 2023, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately $25.2 million and $25.4 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.

Previous wording

A reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) for the year ended March 31, 2024 and 2023, is as follows:

Current wording

A reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) for the six months ended June 30, 2024 and 2023, is as follows:

Previous wording

At March 31, 2024 and December 31, 2023, the Company had cumulatively accrued approximately $0 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 $0 and $0 for the years ended March 31, 2024 and 2023, respectively, related to the Company’s continuing operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months.

Current wording

At June 30, 2024 and December 31, 2023, the Company had cumulatively accrued approximately $0 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 $0 and $0 for the six and three ended June 30, 2024 and 2023, respectively, related to the Company’s continuing operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months.

Previous wording

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 three months ended March 31, 2024 and 2023.

Current wording

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 six and three months ended June 30, 2024 and 2023.

Previous wording

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. 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.

Current wording

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.

Previous wording

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.

Current wording

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 condensed consolidated financial statement presentations and disclosures.

Previous wording

Net sales for the three months ended March 31, 2024 were $2.38 million, an increase of 27% from $1.87 million for the same period of 2023. This increase in net sales resulted primarily from 30% increase in sales volume, while partially offset by 3% decrease in average selling price. Our three largest selling product categories for the three months ended March 31, 2024 were sofas, beds and chairs, which accounted for approximately 53%, 12% and 8% of sales, respectively. For the three months ended March 31, 2023, the three largest selling categories were sofas, beds and chairs, which accounted for approximately 42%, 19% and 13% of sales, respectively.

Current wording

Net sales for the three months ended June 30, 2024 were $2.69 million, a decrease of 40% from $4.46 million for the same period of 2023. This decrease in net sales resulted primarily from 69% decrease in sales volume, while partially offset by 96% increase in average selling price. Our three largest selling product categories for the three months ended June 30, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 10% of sales, respectively. For the three months ended June 30, 2023, the three largest selling categories were jade mats, sofas and beds, which accounted for approximately 45%, 25% and 8% of sales, respectively.

Previous wording

The $0.50 million increase in net sales for the three months ended March 31, 2024, compared to the same period of 2023, was mainly due to increased sales to North America. Sales to North America increased by 32% to $2.33 million for the three months ended March 31, 2024, compared to $1.76 million for the same period of 2023, such increase mainly due to more sales order received from our customers in North America. However, the increase in net sales was partially offset by the decrease in sales to other countries. Sales to other countries decreased by $67,237 to $50,663 for the three months ended March 31, 2024, from $117,900 for the same period of 2023, primarily due to less direct container sales in other countries.

Current wording

The $1.77 million decrease in net sales for the three months ended June 30, 2024, compared to the same period of 2023, was mainly due to decreased sales to Asia. Sales to Asia decreased by 100% to $0 million for the three months ended June 30, 2024, compared to $1.99 million for the same period of 2023, such decrease mainly due to our liquidation sales of the entire inventory of jade mats by Nova Malaysia for $1.99 million in Malaysia during the three months ended June 30, 2023. However, the decrease in net sales was partially offset by the increase in sales to North America and other countries. Sales to North America increased by $0.20 million to $2.63 million for the three months ended June 30, 2024, from $2.44 million for the same period of 2023, primarily due to more sales order received from our customers in North America. Sales to other countries increased by $23,888 to $57,205 for the three months ended June 30, 2024, from $33,317 for the same period of 2023, primary due to more direct container sales in other countries.

Previous wording

Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales increased by 12% to $1.36 million for the three months ended March 31, 2024, compared to $1.21 million for the same period of 2023. Cost of sales as a percentage of sales decreased to 57% for the three months ended March 31, 2024, compared to 65% for the same period of 2023. The increase in cost of sales in dollar term was mainly due to increased net sales. The decrease in cost of sales as a percentage of sales is a result of two factors: (a) the decrease in average purchase cost; and (b) our decreased inventory write down of $38,982 for the three months ended March 31, 2024, compared to inventory write down of $85,672 for the same period of 2023.

Current wording

Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales decreased by 50% to $1.49 million for the three months ended June 30, 2024, compared to $3.02 million for the same period of 2023. Cost of sales as a percentage of sales decreased to 57% for the three months ended June 30, 2024, compared to 65% for the same period 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 two factors: (a) the decrease in average purchase cost; and (b) the liquidation sales of the jade mats in Malaysia which came with high cost and low profit margin during the three months ended June 30, 2023.

Previous wording

Other income, net was $25,635 for the three months ended March 31, 2024, compared to other expenses, net of $38,705 for the same period of 2023, representing an increase in other income of $64,340. The increase in other income was due primarily to an increase in foreign exchange gain by $78,415 to $73,032 for the three months ended March 31, 2024, from foreign exchange loss of $5,383 for the same period of 2023. The increase in foreign exchange gain was mainly a result of the appreciation of U.S. dollar against Malaysian Ringgit on acquisition of AI-Calculation engine in U.S. dollars.

Current wording

Other expenses, net was $60,949 for the three months ended June 30, 2024, compared to other expenses, net of $157,944 for the same period of 2023, representing a decrease in other expenses of $96,995. The decrease in other expenses was due primarily to a decrease in foreign exchange loss by $125,895 to $2,383 for the three months ended June 30, 2024, from foreign exchange loss of $128,278 for the same period of 2023. The decrease in foreign exchange loss was mainly a result of the appreciation of U.S. dollar against Malaysian Ringgit on acquisition of AI-Calculation engine in U.S. dollars.

Previous wording

As a result of the foregoing, our net loss was $1.46 million for the three months ended March 31, 2024, compared to $1.22 million for the same period of 2023.

Current wording

As a result of the foregoing, our net loss was $0.56 million for the three months ended June 30, 2024, compared to $0.54 million for the same period of 2023.

Previous wording

Gross profit was $1.02 million for the three months ended March 31, 2024, compared to $0.66 million for the same period of 2023, representing an increase in gross profit of $0.35 million. Our gross profit margin was 43% for the three months ended March 31, 2024, compared to 35% for the same period of 2023. The increase in gross profit and gross profit margin was mainly a result of our increased sales of products with lower per-unit costs.

Current wording

Gross profit was $2.21 million for the six months ended June 30, 2024, compared to $2.11 million for the same period of 2023, representing an increase in gross profit of $0.10 million. Our gross profit margin was 44% for the six months ended June 30, 2024, compared to 33% for the same period 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 six months ended June 30, 2023

Previous wording

Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $2.50 million for the three months ended March 31, 2024, compared to $1.84 million for the same period of 2023. Selling expenses decreased by 22%, or $0.16 million, to $0.56 million for the three months ended March 31, 2024, from $0.71 million for the same period of 2023, primarily due to decreased marketing and advertising expenses. On the other hand, general and administrative expenses increased by 6%, or $0.06 million, to $1.19 million for the three months ended March 31, 2024, from $1.13 million for the same period of 2023, primarily due to an increase in consulting fees of $0.14 million, while the increase was partially offset by a decrease in auditing fee of $0.02 million and payroll of $0.02 million. In addition, research and development increased by 636,524%, or $0.75 million to $0.75 million for the three months ended March 31, 2024, from $118 for the same period of 2023, primary due to our spending on AI-Calculation engine which is for integrating with our AI and IT system.

Current wording

Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $4.20 million for the six months ended June 30, 2024, compared to $3.67 million for the same period of 2023. Selling expenses decreased by 25%, or $0.31 million, to $0.96 million for the six months ended June 30, 2024, from $1.28 million for the same period of 2023, primarily due to decreased marketing and advertising expenses. On the other hand, general and administrative expenses increased by 4%, or $0.10 million, to $2.48 million for the six months ended June 30, 2024, from $2.38 million for the same period of 2023, primarily due to an increase in stock compensation of $0.32 million, while the increase was partially offset by a decrease in payroll of $0.04 million and rent of $0.04 million. In addition, research and development increased by 7300%, or $0.74 million to $0.75 million for the six months ended June 30, 2024, from $10,144 for the same period of 2023, primary due to our spending on AI-Calculation engine which is for integrating with our AI and IT system.

Previous wording

We had working capital deficit of $441,348 at March 31, 2024, a decrease of $501,405 from net working capital of $60,057 at December 31, 2023. The ratio of current assets to current liabilities was 0.90-to-1 at March 31, 2024.

Current wording

We had working capital deficit of $322,470 at June 30, 2024, a decrease of $382,527 from net working capital of $60,057 at December 31, 2023. The ratio of current assets to current liabilities was 0.92-to-1 at June 30, 2024.

Previous wording

The following is a summary of cash provided by or used in each of the indicated types of activities during the three months ended March, 2024 and 2023:

Current wording

The following is a summary of cash provided by or used in each of the indicated types of activities during the six months ended June 30, 2024 and 2023:

Previous wording

Net cash used in operating activities was $0.22 million for the three months ended March 31, 2024, a decrease in cash outflow by $0.51 million from $0.73 million of cash used in operating activities for the same period of 2023.

Current wording

Net cash used in operating activities was $0.69 million for the six months ended June 30, 2024, an increase in cash outflow by $2.12 million from $1.43 million of cash provided by operating activities for the same period of 2023.

Previous wording

The decrease in cash outflow was attributable primarily to (i) an increase in cash inflow of $0.42 million for other current assets to $0.09 million cash inflow for the three months ended March 31, 2024, from $0.33 million cash outflow for the same period of 2023, such increase in cash inflow being mainly a result of less prepayments, as we made a substantial amount of prepayments for our virtual tour and web augmented reality development project during 2023; (ii) an increase in cash inflow of $0.17 million for accrued liabilities and other payables to $0.19 million cash inflow for the three months ended March 31, 2024, from $0.02 million cash inflow for the same period of 2023, such increase in cash inflow being mainly due to delay in payments to our service providers ; and (iii) an increase in cash inflow of $0.15 million for advance from customers to $0.15 million cash inflow for the three months ended March 31, 2024, from $0 for the same period of 2023, such increase in cash inflow being mainly due to more advance payments received from our customers. The decrease in operating cash outflow was partially offset by an increase in cash outflow of $1.02 million for inventories to $0.34 million cash outflow for the three months ended March 31, 2024, from $0.68 million cash inflow for the same period of 2023, such increase in cash outflow being mainly due to more purchases made from our suppliers.

Current wording

The increase in cash outflow was attributable primarily to (i) a decrease in cash inflow of $2.39 million for inventory to $0.03 million cash inflow for the six months ended June 30, 2024, from $2.42 million cash inflow for the same period of 2023, such decrease in cash inflow being mainly a result of less purchase were made during the six months ended June 30, 2024. (ii) an increase in cash outflow of $1.27 million for other current assets to $0.11 million cash outflow for the six months ended June 30, 2024, from $1.17 million cash inflow for the same period of 2023, such increase in cash outflow being mainly a result of more prepayments to operating expenses during the six months ended June 30, 2024. The increase in operating cash outflow was partially offset by an increase in cash inflow of $0.96 million for accounts receivable to $2,612 cash inflow for the six months ended June 30, 2024, from $0.96 million cash outflow for the same period of 2023, such increase in cash inflow being mainly due to we collected the payments from our customers in timely matter.

Previous wording

Net cash provided by financing activities was $0.20 million for the three months ended March 31, 2024, compared to $0 for the same period of 2023. During the three months ended March 31, 2024, we borrowed $0.20 million from an unrelated third party.

Current wording

Net cash provided by financing activities was $0.76 million for the six months ended June 30, 2024, compared to $0 for the same period of 2023. During the six months ended June 30, 2024, we borrowed $0.36 million from a shareholder and sold 200,000 shares of common stock with the proceeds of $0.40 million for our working capital.

Previous wording

As of March 31, 2024, we had gross accounts receivable of $137,264 of which $129,737 was not yet past due and $7,527 was less than 90 days past due. We had an allowance for expected credit losses of $1,373. As of May 6, 2024, 85.3% of accounts receivable outstanding as of March 31, 2024 had been collected.

Current wording

As of June 30, 2024, we had gross accounts receivable of $44,918 of which $21,570 was not yet past due and $23,348 was less than 90 days past due. We had an allowance for expected credit losses of $449. As of August 6, 2024, 77.1% of accounts receivable outstanding as of June 30, 2024 had been collected.

Previous wording

100% of our accounts receivable outstanding at December 31, 2023 had been collected during the three months ended March 31, 2024.

Current wording

100% of our accounts receivable outstanding at December 31, 2023 had been collected during the six months ended June 30, 2024.

Previous wording

As of March 31, 2024 and December 31, 2023, we had advances to suppliers of $49,458 and $93,740, respectively. These supplier prepayments are made for goods before we actually receive them.

Current wording

As of June 30, 2024 and December 31, 2023, we had advances to suppliers of $50,793 and $93,740, respectively. These supplier prepayments are made for goods before we actually receive them.

Previous wording

As of May 6, 2024, $4,583 or 9% and $92,856 or 99% of our advances to suppliers outstanding at March 31, 2024 and December 31, 2023 had been delivered to us in the form of purchases of furniture.

Current wording

As of August 6, 2024, $14,914 or 29% and $93,740 or 100% of our advances to suppliers outstanding at June 30, 2024 and December 31, 2023 had been delivered to us in the form of purchases of furniture.

Previous wording

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.

Current wording

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 condensed 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.