Nova Lifestyle Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
XMAX$5.33+6.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001493152-24-032235
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045787
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 144 previous paragraphs and 131 current paragraphs.
90 unchanged; 35 reworded; 6 added; 18 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
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.
Current report
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 Staff’s determination to a Hearings Panel.
Current report
Gross Profit
Current report
Income tax expenses were $211 for the three months ended September 30, 2024, compared to income tax expense of $147,371 for the same period of 2023, representing a decrease in income tax expense of $147,160. The decrease in income tax expenses were primarily due to no taxable income from Nova Malaysia. During the three months ended September 30, 2023, the income tax expense was 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.
Current report
Comparison of Nine Months Ended September 30, 2024 and 2023
Removed paragraphs (18)
Previous report
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report
Table of Contents
Previous report
The Company intends to fully comply with the exception granted by the Staff and to regain the compliance on or before October 14, 2024.
Previous report
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Gross Profit (Loss)
Previous report
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Comparison of Six Months Ended June 30, 2024 and 2023
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Gross Profit (Loss)
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Reworded paragraphs (35)
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 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.
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 third quarter and first nine months of 2024 and 2023 mean the three and nine-month periods ended September 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 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.
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 liabilities, 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 $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.
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 $1,281 and $532 as of September 30, 2024 and December 31, 2023, respectively. During the nine months ended September 30, 2024 and 2023, expected credit losses provision (reversal) was $749 and ($2,222), respectively; ($832) and ($2,026) for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had gross receivable of $128,081 of which $2,546 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 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.
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 nine months ended September 30, 2024 and 2023 are $5,087 and $149,771, respectively; and $211 and $147,371 for the three months ended September 30, 2024 and 2023, respectively.
Previous wording
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, 2023, 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.
Current wording
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 nine months ended September 30, 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.
Previous 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.
Current wording
As of September 30, 2024 and December 31, 2023, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately $25.4 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 six months ended June 30, 2024 and 2023, is as follows:
Current wording
A reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) for the nine months ended September 30, 2024 and 2023, is as follows:
Previous 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.
Current wording
At September 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 nine and three ended September 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 six and three months ended June 30, 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 nine and three months ended September 30, 2024 and 2023.
Previous 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.
Current wording
Net sales for the three months ended September 30, 2024 were $2.62 million, an increase of 6% from $2.48 million for the same period of 2023. This increase in net sales resulted primarily from 19% increase in average selling price, while partially offset by 11% decrease in sales volume. Our three largest selling product categories for the three months ended September 30, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 8% of sales, respectively. For the three months ended September 30, 2023, the three largest selling categories were sofas, beds and chairs, which accounted for approximately 44%, 17% and 10% of sales, respectively.
Previous 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.
Current wording
The $0.14 million increase in net sales for the three months ended September 30, 2024, compared to the same period of 2023, was mainly due to increased sales to North America. Sales to North America increased by 5% to $2.55 million for the three months ended September 30, 2024, compared to $2.43 million for the same period of 2023, such increase mainly due to more sales order received from our customers in North America. Also, sales to other countries increased by $29,330 to $64,208 for the three months ended September 30, 2024, from $34,878 for the same period of 2023, primary due to more direct container sales in other countries. However, the increase in net sales was partially offset by the decrease in sales to Asia. Sales to Asia decreased by 100% to $0 million for the three months ended September 30, 2024, compared to $0.01 million for the same period of 2023, such decreased mainly due to our liquidation sales of the entire inventory of jade mats by Nova Malaysia for $1.99 million in Malaysia during the second quarter of 2023.
Previous 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.
Current wording
Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales increased by 2% to $1.44 million for the three months ended September 30, 2024, compared to $1.41 million for the same period of 2023. Cost of sales as a percentage of sales decreased to 55% for the three months ended September 30, 2024, compared to 57% 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) we sold less direct containers which came with low profit margin since we shift to focus on high quality product with high profit margin; and (b) our decreased inventory write down (reversal) of ($2,618) for the three months ended September 30, 2024, compared to inventory write down of $23,544 for the same period of 2023.
Previous wording
Gross profit was $1.19 million for the three months ended June 30, 2024, compared to $1.45 million for the same period of 2023, representing a decrease in gross profit of $0.25 million. Our gross profit margin was 44% for the three months ended June 30, 2024, compared to 32% for the same period of 2023. The decrease in gross profit and increase gross profit margin was mainly a result of the liquidation sales of the jade mats in Malaysia which came with a large amount of sales but low profit margin during the three months ended June 30, 2023.
Current wording
Gross profit was $1.18 million for the three months ended September 30, 2024, compared to $1.06 million for the same period of 2023, representing an increase in gross profit of $0.11 million. Our gross profit margin was 45% for the three months ended September 30, 2024, compared to 43% for the same period of 2023. The increase in gross profit and gross profit margin was mainly a result of sales of high-quality products which came with high profit margin during the three months ended September 30, 2024.
Previous wording
Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $1.69 million for the three months ended June 30, 2024, compared to $1.83 million for the same period of 2023. Selling expenses decreased by 28%, or $0.16 million, to $0.41 million for the three months ended June 30, 2024, from $0.57 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 3%, or $0.04 million, to $1.29 million for the three months ended June 30, 2024, from $1.25 million for the same period of 2023, primarily due to an increase in consulting fees of $0.04 million and stock compensation of $0.16 million, while the increase was partially offset by a decrease in insurance of $0.03 million, rent of $0.02 million, travel of $0.05 million and utilities of $0.02 million. In addition, research and development decreased by 105%, or $0.01 million to ($518) for the three months ended June 30, 2024, from $10,026 for the same period of 2023, primarily due to less research and development expenses incurred during the three months ended June 30, 2024.
Current wording
Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $3.59 million for the three months ended September 30, 2024, compared to $2.12 million for the same period of 2023. Selling expenses decreased by 30%, or $0.18 million, to $0.42 million for the three months ended September 30, 2024, from $0.59 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 28%, or $0.43 million, to $1.95 million for the three months ended September 30, 2024, from $1.52 million for the same period of 2023, primarily due to an increase in consulting fees of $0.93 million and travel of $0.04 million, while the increase was partially offset by a decrease in bad debt of $0.19 million, depreciation of $0.12 million and stock compensation of $0.16 million. In addition, research and development increased by $1.22 million to $1.22 million for the three months ended September 30, 2024, from $0 million for the same period of 2023, primarily due to acquisitions of IT systems for integrating with our existing IT system during the three months ended September 30, 2024.
Previous 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.
Current wording
Other expenses, net was $58,986 for the three months ended September 30, 2024, compared to other expenses, net of $90,321 for the same period of 2023, representing a decrease in other expenses of $31,335. The decrease in other expenses was due primarily to a decrease in foreign exchange loss by $43,664 to $74 for the three months ended September 30, 2024, from foreign exchange loss of $43,738 for the same period of 2023. The decrease in foreign exchange loss was mainly a result of the depreciation of U.S. dollar against Malaysian Ringgit on acquisition of two IT systems in U.S. dollars.
Previous 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.
Current wording
As a result of the foregoing, our net loss was $2.47 million for the three months ended September 30, 2024, compared to $1.29 million for the same period of 2023.
Previous wording
The following table sets forth the results of our operations for the six months ended June 30, 2024 and 2023.
Current wording
The following table sets forth the results of our operations for the nine months ended September 30, 2024 and 2023.
Previous wording
Net sales for the six months ended June 30, 2024 were $5.06 million, a decrease of 20% from $6.34 million for the same period of 2023. This decrease in net sales resulted primarily from 52% decrease in sales volume, while partially offset by 65% increase in average selling price. Our three largest selling product categories for the six months ended June 30, 2024 were sofas, beds and chairs, which accounted for approximately 51%, 12% and 8% of sales, respectively. For the six months ended June 30, 2023, the three largest selling categories were jade mats, sofa and beds, which accounted for approximately 31%, 30% and 11% of sales, respectively.
Current wording
Net sales for the nine months ended September 30, 2024 were $7.68 million, a decrease of 13% from $8.81 million for the same period of 2023. This decrease in net sales resulted primarily from 43% decrease in sales volume, while partially offset by 53% increase in average selling price. Our three largest selling product categories for the nine months ended September 30, 2024 were sofas, beds and coffee tables, which accounted for approximately 51%, 13% and 8% of sales, respectively. For the nine months ended September 30, 2023, the three largest selling categories were sofa, jade mats, and beds, which accounted for approximately 34%, 22% and 13% of sales, respectively.
Previous wording
The $1.27 million decrease in net sales for the six 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 six 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 six months ended June 30, 2023. Also, sales to other countries decreased by $43,349 to $107,868 for the six months ended June 30, 2024, from $151,217 for the same period 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 $0.76 million to $4.96 million for the six months ended June 30, 2024, from $4.19 million for the same period of 2023, primary due to more sales order received from our customers in North America.
Current wording
The $1.13 million decrease in net sales for the nine months ended September 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 nine months ended September 30, 2024, compared to $2.00 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 $2.00 million in Malaysia during nine months ended September 30, 2023. Also, sales to other countries decreased by $14,019 to $172,076 for the nine months ended September 30, 2024, from $186,095 for the same period 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 $0.89 million to $7.51 million for the nine months ended September 30, 2024, from $6.62 million for the same period of 2023, primary due to more sales order received from our customers in North America.
Previous wording
Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales decreased by 20% to $2.85 million for the six months ended June 30, 2024, compared to $4.23 million for the same period of 2023. Cost of sales as a percentage of sales decreased to 56% for the six months ended June 30, 2024, compared to 67% 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 six months ended June 30, 2023.
Current wording
Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales decreased by 24% to $4.29 million for the nine months ended September 30, 2024, compared to $5.64 million for the same period of 2023. Cost of sales as a percentage of sales decreased to 56% for the nine months ended September 30, 2024, compared to 64% 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 in the second quarter of 2023.
Previous 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
Current wording
Gross profit was $3.39 million for the nine months ended September 30, 2024, compared to $3.17 million for the same period of 2023, representing an increase in gross profit of $0.22 million. Our gross profit margin was 44% for the nine months ended September 30, 2024, compared to 36% 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 nine months ended September 30, 2023.
Previous 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.
Current wording
Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $7.78 million for the nine months ended September 30, 2024, compared to $5.79 million for the same period of 2023. Selling expenses decreased by 26%, or $0.49 million, to $1.38 million for the nine months ended September 30, 2024, from $1.87 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 13%, or $0.05 million, to $4.43 million for the nine months ended September 30, 2024, from $3.90 million for the same period of 2023, primarily due to an increase in consulting fee of $0.95 million and stock compensation of $0.17 million, while the increase was partially offset by a decrease in bad debt of $0.19 million and depreciation of $0.16 million. In addition, research and development increased by 193%, or $1.96 million to $1.97 million for the nine months ended September 30, 2024, from $10,144 for the same period of 2023, primary due to our spending on two IT systems and AI-Calculation engine which are for integrating with our AI and IT system.
Previous wording
Other expenses, net was $35,314 for the six months ended June 30, 2024, compared to other expenses, net of $196,649 for the same period of 2023, representing a decrease in other expenses of $161,335. The decrease in other expenses was due primarily to an increase in foreign exchange gain by $204,310 to $70,649 for the six months ended June 30, 2024, from foreign exchange loss of $133,661 for the same period 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-Calculation engine in U.S. dollars during the six months ended June 30, 2024.
Current wording
Other expenses, net was $94,300 for the nine months ended September 30, 2024, compared to other expenses, net of $286,970 for the same period of 2023, representing a decrease in other expenses of $192,670. The decrease in other expenses was due primarily to an increase in foreign exchange gain by $247,974 to $70,575 for the September months ended September 30, 2024, from foreign exchange loss of $177,399 for the same period 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 two IT systems and AI-Calculation engine in U.S. dollars during the nine months ended September 30, 2024.
Previous wording
Income tax expenses were $4,876 and $2,400 for the three months ended June 30, 2024 and 2023, respectively due to minimum California state tax incurred in US subsidiaries.
Current wording
Income tax expenses were $5,087 and $149,771 for the nine months ended September 30, 2024 and 2023, respectively. The income tax expenses for the nine months ended September 30, 2024 were mainly due to minimum California state tax incurred in US subsidiaries. The income tax expenses for the nine months ended September 30, 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.
Previous wording
As a result of the foregoing, our net loss was $2.03 million for the six months ended June 30, 2024, compared to $1.76 million for the same period of 2023.
Current wording
As a result of the foregoing, our net loss was $4.49 million for the nine months ended September 30, 2024, compared to $3.05 million for the same period of 2023.
Previous 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.
Current wording
We had working capital deficit of $1,278,453 at September 30, 2024, a decrease of $1,338,510 from net working capital of $60,057 at December 31, 2023. The ratio of current assets to current liabilities was 0.71-to-1 at September 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 six months ended June 30, 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 nine months ended September 30, 2024 and 2023:
Previous 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.
Current wording
Net cash used in operating activities was $1.13 million for the nine months ended September 30, 2024, an increase in cash outflow by $2.65 million from $1.52 million of cash provided by operating activities for the same period of 2023.
Previous 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.
Current wording
The increase in cash outflow was attributable primarily to (i) an increase in cash inflow of $3.13 million for inventory to $0.27 million cash outflow for the nine months ended September 30, 2024, from $2.86 million cash inflow for the same period of 2023, such increase in cash outflow being mainly a result of more purchase were made during the nine months ended September 30, 2024. (ii) an increase in cash outflow of $0.32 million for accounts receivable to $0.08 million cash outflow for the nine months ended September 30, 2024, from 0.22 million cash inflow for the same period of 2023, such increase in cash outflow being mainly due tomore credit sales, especially the credit sales of the direct containers for the nine months ended September 30, 2024. The increase in operating cash outflow was partially offset by an increase in cash inflow of $1.96 million for research and development to $1.96 million cash inflow for the nine months ended September 30, 2024, from $0 million cash inflow for the same period 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.
Previous wording
Net cash used in investing activities was $0 million for the six months ended June 30, 2024, a decrease in cash outflow of $2.47 million from $2.47 million of cash used in investing activities for the same period of 2023. We incurred cash outflow of $2.47 million from the virtual tour and web augmented reality experience software project during the six months ended June 30, 2023.
Current wording
Net cash used in investing activities was $0 million for the nine months ended September 30, 2024, a decrease in cash outflow of $2.47 million from $2.47 million of cash used in investing activities for the same period of 2023. We incurred cash outflow of $2.47 million from the virtual tour and web augmented reality experience software project during the nine months ended September 30, 2023.
Previous 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.
Current wording
Net cash provided by financing activities was $0.96 million for the nine months ended September 30, 2024, compared to $0 for the same period of 2023. During the nine months ended September 30, 2024, we borrowed $0.36 million from a shareholder and sold 325,000 shares of common stock with the proceeds of $0.60 million for our working capital.
Previous 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.
Current wording
As of September 30, 2024, we had gross accounts receivable of $128,081 of which $35,682 was not yet past due and $89,852 was less than 90 days past due. We had an allowance for expected credit losses of $1,281. As of November 4, 2024, 61.6% or $78,930 of accounts receivable outstanding as of September 30, 2024 had been collected.
Previous wording
100% of our accounts receivable outstanding at December 31, 2023 had been collected during the six months ended June 30, 2024.
Current wording
100% of our accounts receivable outstanding at December 31, 2023 had been collected during the nine months ended September 30, 2024.
Previous 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.
Current wording
As of September 30, 2024 and December 31, 2023, we had advances to suppliers of $132,678 and $93,740, respectively. These supplier prepayments are made for goods before we actually receive them.
Previous 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.
Current wording
As of November 4, 2024, $32,203 or 41% and $93,740 or 100% of our advances to suppliers outstanding at September 30, 2024 and December 31, 2023 had been delivered to us in the form of purchases of furniture.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Income tax expenses were $4,876 and $2,400 for the six months ended June 30, 2024 and 2023, respectively due to minimum California state tax incurred in US subsidiaries.