XMax Inc.

Previous wording

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, 2024 (the “2024 Form 10-K”). All references to the second quarter and first six months of 2025 and 2024 mean the three and six-month periods ended June 30, 2025 and 2024. 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 2024 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 consolidated financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”). All references to the third quarter and first nine months of 2025 and 2024 mean the three and nine-month periods ended September 30, 2025 and 2024. 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 2024 Form 10-K.

Previous wording

Nova LifeStyle, Inc. is a distributor of contemporary styled residential and commercial furniture incorporated into a dynamic marketing and sales platform offering retail as well as online selection and global purchase fulfillment. We monitor popular trends and products to create design elements that are then integrated into our product lines that can be used as both stand-alone or whole-room and home furnishing solutions. Through our global network of retailers, e-commerce platforms, stagers and hospitality providers, Nova LifeStyle also sells (through an exclusive third-party manufacturing partner) a managed variety of high quality bedding foundation components.

Current wording

XMax Inc. (the “Company”), formerly known as Nova LifeStyle, Inc., is a distributor of contemporary styled residential and commercial furniture incorporated into a dynamic marketing and sales platform offering retail as well as online selection and global purchase fulfillment. We monitor popular trends and products to create design elements that are then integrated into our product lines that can be used as both stand-alone or whole-room and home furnishing solutions. Through its global network of retailers, e-commerce platforms, stagers and hospitality providers, the Company also sells (through an exclusive third-party manufacturing partner) a managed variety of high quality bedding foundation components.

Previous wording

Nova LifeStyle’s brand family currently includes Nova LifeStyle, Diamond Sofa (www.diamondsofa.com) and Nova Living.

Current wording

The Company’s brand family currently includes Nova LifeStyle, Diamond Sofa (www.diamondsofa.com) and Nova Living.

Previous wording

Our customers principally consist of distributors and retailers with specific geographic territories that deploy middle to high end private label home furnishings which have very little competitive overlap with our specific furnishing products or product lines. Nova LifeStyle is constantly seeking to integrate new sources of distribution and manufacturing that are properly aligned with our growth strategy. This allows us to continually focus on building both our overall distribution and manufacturing relationships through a deployment of popular, as well as trend-based, furnishing solutions worldwide.

Current wording

Our customers principally consist of distributors and retailers with specific geographic territories that deploy middle to high end private label home furnishings which have very little competitive overlap with our specific furnishing products or product lines. the Company is constantly seeking to integrate new sources of distribution and manufacturing that are properly aligned with our growth strategy. This allows us to continually focus on building both our overall distribution and manufacturing relationships through a deployment of popular, as well as trend-based, furnishing solutions worldwide.

Previous wording

We are a U.S. holding company with no material assets in the U.S. other than the ownership interests of our wholly owned subsidiaries through which we market, design and sell residential and commercial furniture worldwide: Nova Furniture Limited domiciled in the British Virgin Islands (“Nova Furniture”), Nova Furniture Ltd. domiciled in Samoa (“Nova Samoa”), Diamond Bar Outdoors, Inc. domiciled in California (“Diamond Bar”), Nova Living (M) SDN. BHD. domiciled in Malaysia (“Nova Malaysia”) and Nova Living (HK) Group Limited domiciled in Hong Kong (“Nova HK”). The Company had three former subsidiaries Bright Swallow International Group Limited domiciled in Hong Kong (“Bright Swallow” or “BSI”) which was sold in January 2020, and Nova Furniture Macao Commercial Offshore Limited domiciled in Macao (“Nova Macao”) which was de-registration and liquidation in January 2021. In February 2022, Nova HK entered a de-registration process and transferred all its assets and business to Nova Malaysia. The process of de-registration and liquidation of Nova HK was completed in February 2023.

Current wording

We are a U.S. holding company with no material assets in the U.S. other than the ownership interests of our wholly owned subsidiaries through which we market, design and sell residential and commercial furniture worldwide: Nova Furniture Limited domiciled in the British Virgin Islands (“Nova Furniture”), Nova Furniture Ltd. domiciled in Samoa (“Nova Samoa”), Diamond Bar Outdoors, Inc. domiciled in California (“Diamond Bar”), Nova Living (M) SDN. BHD. domiciled in Malaysia (“Nova Malaysia”), Nova Living (HK) Group Limited domiciled in Hong Kong (“Nova HK”). We also have a wholly owned subsidiary Xmax Capital Ltd. domiciled in Samoa and its wholly owned subsidiaries Xmax Alpha Holdings Ltd. (the “Xmax Alpha”), Xmax Beta Holdings Ltd., Xmax Delta Holdings Ltd. and Xmax Sigma Holdings Ltd., all domiciled in the Cayman Islands. The Company had three former subsidiaries Bright Swallow International Group Limited domiciled in Hong Kong (“Bright Swallow” or “BSI”) which was sold in January 2020, and Nova Furniture Macao Commercial Offshore Limited domiciled in Macao (“Nova Macao”) which was de-registration and liquidation in January 2021. In February 2022, Nova HK entered a de-registration process and transferred all its assets and business to Nova Malaysia. The process of de-registration and liquidation of Nova HK was completed in February 2023.

Previous wording

On September 5, 2023, the Company filed the Certificate of Change (the “Amendment”) with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to increase the amount of authorized shares of its common stock, par value $0.001 per share, from 3,000,000 to 250,000,000. The Amendment was approved by the Company’s Board of Directors (the “Board”) on June 28, 2023 and by the shareholders at a special meeting of the Company’s shareholders held on August 31, 2023. The Amendment does not affect the rights of the Company’s shareholders and was effective immediately upon filing.

Current wording

On November 3, 2025, the Company filed a Certificate of Change (the “Share Increase Amendment”) with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to increase the amount of authorized shares of its common stock, par value $0.001 per share, from 250,000,000 shares to 5,000,000,000 shares. The Share Increase Amendment was approved by the Company’s Board of Directors (the “Board”) on September 15, 2025 and by the shareholders at a special meeting of the Company’s shareholders held on October 31, 2025. The Share Increase Amendment does not affect the rights of the Company’s shareholders and was effective immediately upon filing.

Previous wording

Since 2019, we have moved away from low margin products and this move was intended to improve our gross profit margin, receivable collections and net profitability, and to increase our return on long-term equity. We terminated sales and marketing efforts to customers that represented a high purchase volume but low profit margin, and we adjusted our product line, which included the launch of our Summer 2023 Collection in the Las Vegas and High Point Markets, with a view to attracting a higher-end ultimate customer. The core focus of the Company’s direction today is entirely centered on our products. Identifying a fashion-driven generational shift in the general perception and consumption of furniture and being more aware of actual consumer tastes and how best to fulfill and engage that need. Closely integrating product development alongside marketing results in appealing products that adheres to the scope of our target demographic of decision makers in the design, staging and retail fields. A process that is continually refined upon each release cycle, maintaining a singular, cohesive vision. In short, we have better identified our customers and how to cater to them – in the process gaining greater traction with every product launch considerably more so on an international level than ever previous. We believe these new strategies, will provide us with significant long term growth opportunities. Significant factors that we believe could affect our operating results are the (i) prices of our products to our domestic and international retailer and wholesaler customers and their markups to end consumers; (ii) general economic conditions in the U.S., Chinese, and other international markets; and (iii) trade war and tariffs imposed by the United States on products manufactured in China and other Asian countries where we purchase our products; and (iv) high interest rate, inflation and slow- down in real estate market. We believe most of our customers are willing to pay for our high quality and stylish products, timely delivery, and strong production capacity at price levels which we expect will allow us to maintain a relatively high gross profit margin for our products. We do not manufacture our products, but instead we utilize third-party manufacturers. In response to the tariffs imposed by the United States on products manufactured in China, we have been in the process of seeking and shifting a portion of our product manufacturing from third-party manufacturers located in China to third-party manufacturers located in other parts of Asia, such as Vietnam, India and/or Malaysia, countries with lower tariffs. However, due to the quality issue and recent increaseof tariff announced by President Trump on products from India and other southeastern Asian countries, we still purchase most of our products from China. Implementation of a relocation of manufacturing (which by necessity includes an assessment of the factory’s ability to deliver the quantity of th…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Since 2019, we have moved away from low margin products and this move was intended to improve our gross profit margin, receivable collections and net profitability, and to increase our return on long-term equity. We terminated sales and marketing efforts to customers that represented a high purchase volume but low profit margin, and we adjusted our product line, which included the launch of our Summer 2023 Collection in the Las Vegas and High Point Markets, with a view to attracting a higher-end ultimate customer. The core focus of the Company’s direction today is entirely centered on our products. Identifying a fashion-driven generational shift in the general perception and consumption of furniture and being more aware of actual consumer tastes and how best to fulfill and engage that need. Closely integrating product development alongside marketing results in appealing products that adheres to the scope of our target demographic of decision makers in the design, staging and retail fields. A process that is continually refined upon each release cycle, maintaining a singular, cohesive vision. In short, we have better identified our customers and how to cater to them – in the process gaining greater traction with every product launch considerably more so on an international level than ever previous. Also, we're now focusing on AI-driven smart living solutions. Through the integration of advanced technologies such as virtual reality (VR), augmented reality (AR), and artificial intelligence (AI), we plan to provide tailored solutions that enhance our core furniture business and expand its capabilities into intelligent systems and immersive customer experiences. We believe these new strategies will provide us with significant long term growth opportunities. Significant factors that we believe could affect our operating results are the (i) prices of our products to our domestic and international retailer and wholesaler customers and their markups to end consumers; (ii) general economic conditions in the U.S., Chinese, and other international markets; and (iii) trade war and tariffs imposed by the United States on products manufactured in China and other Asian countries where we purchase our products; and (iv) high interest rate, inflation and slow- down in real estate market. We believe most of our customers are willing to pay for our high quality and stylish products, timely delivery, and strong production capacity at price levels which we expect will allow us to maintain a relatively high gross profit margin for our products. We do not manufacture our products, but instead we utilize third-party manufacturers. In response to the tariffs imposed by the United States on products manufactured in China, we have been in the process of seeking and shifting a portion of our product manufacturing from third-party manufacturers located in China to third-party manufacturers located in other parts of Asia, such as Vietnam, India and/or Malaysia, countries with …

Excerpt shortened here; the source contains the full paragraph.

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 $361 and $367 as of June 30, 2025 and December 31, 2024, respectively. During the six months ended June 30, 2025 and 2024, expected credit losses provision (reversal) was ($6) and ($83), respectively; $293 and ($924) for the three months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had gross receivable of $36,115 of which $2,419 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 $164 and $367 as of September 30, 2025 and December 31, 2024, respectively. During the nine months ended September 30, 2025 and 2024, expected credit losses provision (reversal) was ($203) and $749, respectively; (197) and $832 for the three months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had gross receivable of $36,115 of which $2,419 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 (benefit) expense for the six months ended June 30, 2025 and 2024 are ($63,257) and $4,876, respectively; and ($997) and $4,876 for the three months ended June 30, 2025 and 2024, respectively, which are mainly attributable to California state taxes. The income tax expense for the three months ended June 30, 2024 is $9,571 which is primarily related to forecasted annual income generated from foreign operation. Since the projected annual tax expense of $1,116 is not material to the financial statements, management has decided to pass on recording it for the six months ended June 30, 2025.

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 (benefit) expense for the nine months ended September 30, 2025 and 2024 are ($64,014) and $50,87; and ($757) and $211 for the three months ended September 30, 2025 and 2024, respectively, which are mainly attributable to California state taxes. The income tax expense for the nine and three months ended September 30, 2024 is $0 which is primarily related to quarter-to-date loss generated from domestic and foreign operations. Since the projected annual tax expense of $1,776 is not material to the financial statements, management has decided to pass on recording it for the nine months ended September 30, 2025.

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 six months ended June 30, 2025, 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, 2025, 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, 2025 and December 31, 2024, the accumulated undistributed loss generated by its foreign subsidiaries were approximately $22.2 million and $22.2 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, 2025 and December 31, 2024, the accumulated undistributed loss generated by its foreign subsidiaries were approximately $22.6 million and $22.2 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, 2025 and 2024, is as follows:

Current wording

A reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) for the nine months ended September 30, 2025 and 2024, is as follows:

Previous wording

At June 30, 2025 and December 31, 2024, the Company had cumulatively accrued approximately nil and nil 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 nil and nil for the six and three months ended June 30, 2025 and 2024, respectively, related to the Company’s operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months.

Current wording

At September 30, 2025 and December 31, 2024, the Company had cumulatively accrued approximately nil and nil 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 nil and nil for the nine and three months ended September 30, 2025 and 2024, respectively, related to the Company’s 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 June 30, 2025 and 2024.

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, 2025 and 2024.

Previous wording

The accompanying unaudited consolidated financial statements are presented in United States Dollar (“$” or “USD”), which is also the functional currency of Nova LifeStyle, Nova Furniture, Nova Samoa, Diamond Bar, and i Design.

Current wording

The accompanying unaudited consolidated financial statements are presented in United States Dollar (“$” or “USD”), which is also the functional currency of XMax Inc. (Nova LifeStyle), XMax Alpha, Nova Furniture, Nova Samoa, Diamond Bar, and i Design.

Previous wording

Net sales for the three months ended June 30, 2025 were $2.56 million, a decrease of 5% from $2.69 million for the same period of 2024. This decrease in net sales resulted primarily from 26% increase in average selling price, while partially offset by 12% decrease in sales volume. Our three largest selling product categories for the three months ended June 30, 2025 were sofas, coffee tables and beds, which accounted for approximately 54%, 10% and 9% of sales, respectively. 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.

Current wording

Net sales for the three months ended September 30, 2025 were $9.76 million, an increase of 273% from $2.62 million for the same period of 2024. This increase in net sales resulted primarily from 12% increase in sales volume and 232% increase in average selling price. Our three largest selling product categories for the three months ended September 30, 2025 were marble slabs, sofas and coffee tables, which accounted for approximately 81%, 11% and 2% of sales, respectively. 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.

Previous wording

The $0.13 million increase in net sales for the six months ended June 30, 2025, compared to the same period of 2024, was mainly due to increased sales to North America. Sales to North America increased by 4% to $5.17 million for the six months ended June 30, 2025, compared to $4.96 million for the same period of 2024, such increase mainly due to increase our average selling price by 32% from the customers in North America. However, the increase in net sales in North America was partially offset by the decrease in sales to other countries. Sales to other countries decreased by $0.09 million to $0.02 million for the six months ended June 30, 2025, from $0.11 million for the same period of 2024, primary due to less sales order received from our customers in other countries.

Current wording

The $7.15 million increase in net sales for the three months ended September 30, 2025, compared to the same period of 2024, was mainly due to increased sales to Hong Kong. Sales to Hong Kong increased by 100% to $7.92 million for the three months ended September 30, 2025, compared to $0 million for the same period of 2024, such increase mainly due to we sold marble slabs to one customer in Hong Kong. The increase in sales was partially offset by decrease in sales to North America and other countries. Sales to North America decreased by 29% to $1.82 million for the three months ended September 30, 2025, compared with $2.55 million for the same period of 2024, such decrease mainly due to decrease our sales volume by 43% from the customer in North America. In addition, Sales to other countries decreased by $0.05 million to $0.02 million for the three months ended September 30, 2025, from $0.06 million for the same period of 2024, primary due to less sales order received from our customers in other countries.

Previous wording

Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales decreased by 15% to $1.27 million for the three months ended June 30, 2025, compared to $1.49 million for the same period of 2024. Cost of sales as a percentage of sales decreased to 50% for the three months ended June 30, 2025, compared to 56% for the same period of 2024. 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 selling more products with higher profit margin.

Current wording

Cost of sales consists primarily of costs of finished goods and materials purchased from third-party manufacturers. Total cost of sales increased by 511% to $8.78 million for the three months ended September 30, 2025, compared to $1.44 million for the same period of 2024. Cost of sales as a percentage of sales increased to 90% for the three months ended September 30, 2025, compared to 55% for the same period of 2024. 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 selling the marble slabs with low profit margin.

Previous wording

Gross profit was $1.28 million for the three months ended June 30, 2025, compared to $1.19 million for the same period of 2024, representing an increase in gross profit of $0.09 million. Our gross profit margin was 50% for the three months ended June 30, 2025, compared to 44% for the same period of 2024. The increase in gross profit and gross profit margin was mainly a result of selling more products with higher profit margin.

Current wording

Gross profit was $0.98 million for the three months ended September 30, 2025, compared to $1.18 million for the same period of 2024, representing a decrease in gross profit of $0.20 million. Our gross profit margin was 10% for the three months ended September 30, 2025, compared to 45% for the same period of 2024. The decrease in gross profit and gross profit margin was mainly a result of selling marble slabs with low profit margin.

Previous wording

Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $1.48 million for the three months ended June 30, 2025, compared to $1.69 million for the same period of 2024. Selling expenses decreased by 24%, or $0.10 million, to $0.31 million for the three months ended June 30, 2025, from $0.41 million for the same period of 2024, primarily due to decreased marketing and advertising expenses. Also, general and administrative expenses decreased by 9%, or $0.12 million, to $1.17 million for the three months ended June 30, 2025, from $1.29 million for the same period of 2024, primarily due to a decrease in stock compensation of $0.16 million, travel expense of $0.03 million and designer fee of $0.03 million, while the decrease was partially offset by an increase in legal and professional fee of $0.09 million and insurance of $0.02 million.

Current wording

Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $1.47 million for the three months ended September 30, 2025, compared to $3.59 million for the same period of 2024. Selling expenses decreased by 16%, or $0.07 million, to $0.35 million for the three months ended September 30, 2025, from $0.42 million for the same period of 2024, primarily due to decreased marketing and advertising expenses. Also, general and administrative expenses decreased by 42%, or $0.82 million, to $1.13 million for the three months ended September 30, 2025, from $1.95 million for the same period of 2024, primarily due to a decrease in consulting fee of $0.91 million, insurance expense of $0.11 million, and designer fee of $0.03 million, while the decrease was partially offset by an increase in legal and professional fee of $0.18 million. In addition, research and development expenses decreased by 100%, or $1.22 million to $272 for the three months ended September 30, 2025, from $1.22 million for the same period of 2024, primary due to our spending less on our AI and IT system.

Previous wording

Income tax benefit was $997 for the three months ended June 30, 2025, compared with income tax expense of $4,876 for the same period of 2024. The income tax benefit for the three months ended June 30, 2025 was mainly due the net loss before income tax for the three months ended June 30, 2025.

Current wording

Income tax benefit was $757 for the three months ended September 30, 2025, compared with income tax expense of $211 for the same period of 2024. The income tax benefit for the three months ended September 30, 2025 was mainly due to the net loss in the third quarter of 2025.

Previous wording

As a result of the foregoing, our net loss was $0.29 million for the three months ended June 30, 2025, compared to $0.56 million of net loss for the same period of 2024.

Current wording

As a result of the foregoing, our net loss was $1.13 million for the three months ended September 30, 2025, compared to $2.47 million of net loss for the same period of 2024.

Previous wording

The following table sets forth the results of our operations for the six months ended June 30, 2025 and 2024.

Current wording

The following table sets forth the results of our operations for the nine months ended September 30, 2025 and 2024.

Previous wording

Net sales for the six months ended June 30, 2025 were $5.19 million, an increase of 3% from $5.06 million for the same period of 2024. This increase in net sales resulted primarily from 32% increase in average selling price, while partially offset by 22% decrease in sales volume. Our three largest selling product categories for the six months ended June 30, 2025 were sofas, beds and coffee tables, which accounted for approximately 54%, 13% and 10% of sales, respectively. For the six months ended June 30, 2024, the three largest selling categories were sofas, beds and chairs, which accounted for approximately 51%, 12% and 8% of sales, respectively.

Current wording

Net sales for the nine months ended September 30, 2025 were $14.95 million, an increase of 95% from $7.68 million for the same period of 2024. This increase in net sales resulted primarily from 119% increase in sales volume, while partially offset by 11% increase in average selling price. Our three largest selling product categories for the nine months ended September 30, 2025 were marbles slabs, sofa and coffee tables, which accounted for approximately 53%, 26% and 5% of sales, respectively. For the nine months ended September 30, 2024, the three largest selling categories were sofas, beds and coffee tables, which accounted for approximately 51%, 13% and 8% of sales, respectively.

Previous wording

The $0.13 million decrease in net sales for the three months ended June 30, 2025, compared to the same period of 2024, was mainly due to decreased sales to North America. Sales to North America decreased by 3% to $2.56 million for the three months ended June 30, 2025, compared to $2.63 million for the same period of 2024, such decrease mainly due to decrease our sales volume by 12% from the customers in North America. In addition, Sales to other countries decreased by $0.05 million to $0.00 million for the three months ended June 30, 2025, from $0.05 million for the same period of 2024, primary due to no sales order received from our customers in other countries.

Current wording

The $7.27 million increase in net sales for the nine months ended September 30, 2025, compared to the same period of 2024, was mainly due to increased sales to Hong Kong. Sales to Hong Kong increased by 100% to $7.92 million for the nine months ended September 30, 2025, compared to $0 million for the same period of 2024, such increase mainly due to we sold marble slabs to one customer in Hong Kong. The increase in sales was partially offset by decrease in sales to North America and other countries. Sales to North America decreased by 7% to $7.00 million for the nine months ended September 30, 2025, compared to $7.51 million for the same period of 2024, such decrease mainly due to decrease in sales volume by 29% from the customers in North America. Sales to other countries decreased by $0.14 million to $0.04 million for the nine months ended September 30, 2025, from $0.17 million for the same period of 2024, primary due to less sales order received from our customers in other countries.

Previous wording

Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales decreased by 5% to $2.70 million for the six months ended June 30, 2025, compared to $2.85 million for the same period of 2024. Cost of sales as a percentage of sales decreased to 52% for the six months ended June 30, 2025, compared to 56% for the same period of 2024. The decrease in cost of sales in dollar term and in cost of sales as a percentage of sales are a result of selling more products with higher profit margin.

Current wording

Cost of sales consists primarily of costs of finished goods and materials purchased from third-party manufacturers. Total cost of sales increased by 168% to $11.48 million for the nine months ended September 30, 2025, compared to $4.29 million for the same period of 2024. Cost of sales as a percentage of sales increased to 77% for the nine months ended September 30, 2025, compared to 56% for the same period of 2024. The increase in cost of sales in dollar term and in cost of sales as a percentage of sales are a result of selling marble slabs with low profit margin.

Previous wording

Gross profit was $2.49 million for the six months ended June 30, 2025, compared to $2.21 million for the same period of 2024, representing an increase in gross profit of $0.28 million. Our gross profit margin was 48% for the six months ended June 30, 2025, compared to 44% for the same period of 2024. The increase in gross profit and gross profit margin was mainly a result of selling more products with higher profit margin.

Current wording

Gross profit was $3.47 million for the nine months ended September 30, 2025, compared to $3.39 million for the same period of 2024, representing an increase in gross profit of $0.08 million. Our gross profit margin was 23% for the nine months ended September 30, 2025, compared to 44% for the same period of 2024. The increase in gross profit in dollar term was due to increase of net sales. The decrease in gross profit margin was mainly a result of selling the marble slabs with low profit margin.

Previous wording

Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $2.88 million for the six months ended June 30, 2025, compared to $4.20 million for the same period of 2024. Selling expenses decreased by 34%, or $0.33 million, to $0.64 million for the six months ended June 30, 2025, from $0.96 million for the same period of 2024, primarily due to decreased marketing and advertising expenses. Also, general and administrative expenses decreased by 10%, or $0.24 million, to $2.24 million for the six months ended June 30, 2025, from $2.48 million for the same period of 2024, primarily due to a decrease in stock compensation of $0.32 million and design fee of $0.06 million, while the decrease was partially offset by an increase in legal and professional fee of $0.09 million and consulting fee of $0.08 million. In addition, research and development decreased by 100%, or $0.75 million to $910 for the six months ended June 30, 2025, from $0.75 million for the same period of 2024, primary due to our spending less on our AI and IT system.

Current wording

Operating expenses consisted of selling, general and administrative expenses, and research and development. Operating expenses were $4.35 million for the nine months ended September 30, 2025, compared to $7.78 million for the same period of 2024. Selling expenses decreased by 29%, or $0.40 million, to $0.98 million for the nine months ended September 30, 2025, from $1.38 million for the same period of 2024, primarily due to decreased marketing and advertising expenses. Also, general and administrative expenses decreased by 24%, or $1.06 million, to $3.37 million for the nine months ended September 30, 2025, from $4.43 million for the same period of 2024, primarily due to a decrease in consulting fee of $0.83 million, stock compensation of $0.32 million, insurance of $0.13 million and design fee of $0.09 million, while the decrease was partially offset by an increase in legal and professional fee of $0.27 million and auditing fee of $0.09 million. In addition, research and development expenses decreased by 100%, or $1.97 million to $1,182 for the nine months ended September 30, 2025, from $1.97 million for the same period of 2024, primary due to our spending less on our AI and IT system.

Previous wording

Income tax benefit (expense) was $63,257 and ($4,876) for the six months ended June 30, 2025 and 2024, respectively. The income tax benefit for the six months ended June 30, 2025 was mainly due to true up the tax deduction that we wrote off Jade Mats for inventory impairment over the prior years in Nova Malaysia.

Current wording

Income tax benefit (expense) was $64,104 and ($5,087) for the nine months ended September 30, 2025 and 2024, respectively. The income tax benefit for the nine months ended September 30, 2025 was mainly due to the net loss for the nine months ended September 30, 2025.

Previous wording

As a result of the foregoing, our net loss was $0.63 million for the six months ended June 30, 2025, compared to $2.03 million of net loss for the same period of 2024.

Current wording

As a result of the foregoing, our net loss was $1.76 million for the nine months ended September 30, 2025, compared to $4.49 million of net loss for the same period of 2024.

Previous wording

We had working capital of $5,755,700 at June 30, 2025, an increase of $3,649,536 from net working capital of $2,106,164 at December 31, 2024. The ratio of current assets to current liabilities was 2.28-to-1 at June 30, 2025.

Current wording

We had working capital of $7,855,912 at September 30, 2025, an increase of $5,729,385 from net working capital of $2,106,164 at December 31, 2024. The ratio of current assets to current liabilities was 2.78-to-1 at September 30, 2025.

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, 2025 and 2024:

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, 2025 and 2024:

Previous wording

Net cash used in operating activities was $0.23 million for the six months ended June 30, 2025, a decrease in cash outflow by $0.46 million from $0.69 million of cash used in operating activities for the same period of 2024.

Current wording

Net cash used in operating activities was $2.14 million for the nine months ended September 30, 2025, an increase in cash outflow by $1.00 million from $1.13 million of cash used in operating activities for the same period of 2024.

Previous wording

The decrease in cash outflow was attributable primarily to (i) decrease in cash outflow of $1.39 million of net loss to $0.63 million for the six months ended June 30, 2025, from the net loss of $2.03 million for the same period of 2024; (ii) increase in cash inflow of $1.21 million for the inventory for the six months ended June 30, 2025, from $0.03 million cash inflow for the same period of 2024, such increase in cash inflow being mainly due to less products being purchased due to reciprocal tariff took effective in April 2025. The decrease in operating cash outflow was partially offset by an increase in cash outflow of 0.44 million for accounts payable to $0.57 million cash outflow for the six months ended June 30, 2025, from $0.13 million cash outflow for the same period of 2024, such increase in cash outflow being mainly due to we made our payments to our suppliers on time.

Current wording

The increase in cash outflow was attributable primarily to (i) increase in cash outflow of $7.82 million of accounts receivable to cash outflow of $7.90 million for the nine months ended September 30, 2025, from the accounts receivable of cash outflow of $0.08 million for the same period of 2024, such increase in cash outflow being mainly due to we sold marble slabs to one customer in Hong Kong in September 2025; (ii) increase in cash outflow of $0.72 million of other current assets to cash inflow of $0.18 million for the nine months ended September 30, 2025, from the other current assets of cash inflow of $0.90 million for the same period of 2024, such increase in cash outflow being mainly due to we renewed our insurance for our independent board of directors and officers; (iii) increase in cash outflow of $0.67 million for the accrued liabilities and other payables for the nine months ended September 30, 2025, from $0.03 million cash outflow for the same period of 2024, such increase in cash outflow being mainly due to payments were made to the service providers in timely basis;(iv) increase in cash outflow of $0.56 million for the tax payable for the nine months ended September 30, 2025, from $0 million cash outflow for the same period of 2024, such increase in cash outflow being mainly due to payments were made to the Internal Revenue Service for the one-time transition tax in 2017. The increase in operating cash outflow was partially offset by (i) an increase in cash inflow of $7.74 million for advance to suppliers to $7.70 million cash inflow for the nine months ended September 30, 2025, from $0.04 million cash outflow for the same period of 2024, such increase in cash inflow being mainly due to marble slabs were delivered and sold to one of our customers in Hong Kong; (ii) an increase in cash inflow of $0.84 million for inventory to $0.56 million cash inflow for the nine months ended September 30, 2025, from $0.27 million cash outflow for the same period of 2024, such increase in cash inflow being mainly due to we purchased less products from our suppliers due to reciprocal tariff took effective in April 2025.

Previous wording

Net cash provided by financing activities was $0.48 million for the six months ended June 30, 2025, compared to $0.76 million for the same period of 2024. During the six months ended June 30, 2025, we borrowed $0.20 million from a shareholder and sold one million shares of common stock with the proceeds of $0.50 million for our working capital, while we paid off one of loans to shareholder by issued 434,000 shares of our common stocks which was equivalent in the value of $0.22 million. 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 $8.63 million for the nine months ended September 30, 2025, compared to $0.96 million for the same period of 2024. During the nine months ended September 30, 2025, we borrowed $0.20 million from a shareholder and sold one million shares of common stock with the proceeds of $0.50 million for our working capital, while we paid off one of loans to shareholder by issued 434,000 shares of our common stocks which was equivalent in the value of $0.22 million. Also, we increased our cash inflow by issued 9,836,054 shares of common stocks with the net proceeds of $8.15 million in public offering for the nine months ended September 30, 2025. 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, 2025, we had gross accounts receivable of $36,115 of which $25,520 was not yet past due and $8,177 was less than 90 days past due. We had an allowance for expected credit losses of $361. As of August 6, 2025, 93% of accounts receivable outstanding as of June 30, 2025 had been collected. As of August 6, 2025, 93% of our accounts receivable outstanding at December 31, 2024 had been collected.

Current wording

As of September 30, 2025, we had gross accounts receivable of $16,440 of which $2,709 was not yet past due, $11,312 was less than 90 days past due and $2,419 was more than 90 days past due. We had an allowance for expected credit losses of $164. As of November 6, 2025, 0.09% of accounts receivable outstanding as of September 30, 2025 had been collected. As of November 6, 2025, all% of our accounts receivable outstanding at December 31, 2024 had been collected.

Previous wording

As of June 30, 2025 and December 31, 2024, we had advances to suppliers of $7,875,174 and $4,689,148, respectively. These supplier prepayments are made for goods before we actually receive them.

Current wording

As of September 30, 2025 and December 31, 2024, we had advances to suppliers of $8,025,174 and $4,689,148, respectively. These supplier prepayments are made for goods before we actually receive them.

Previous wording

As of August 6, 2025, $0 or 0% and $33,924 or 0.7% of our advances to suppliers outstanding at June 30, 2025 and December 31, 2024 had been delivered to us in the form of purchases of furniture, respectively.

Current wording

As of November 6, 2025, $0 or 0% and $4,689,148 or 100% of our advances to suppliers outstanding at September 30, 2025 and December 31, 2024 had been delivered to us in the form of purchases of furniture, respectively.