XMax Inc.

Previous wording

On December 7, 2017, we incorporated i Design Blockchain Technology, Inc. (“i Design”) under the laws of the State of California. The purpose of i Design is to build our own blockchain technology team. i Design is in the planning stage and has had minimum operations to date. On December 12, 2019, we became the sole shareholder of Nova Living (M) SDN. BHD. (“Nova Malaysia”), a company incorporated on July 26, 2019 under the laws of Malaysia. Nova Malaysia markets and sells high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia.

Current wording

On December 7, 2017, we incorporated i Design Blockchain Technology, Inc. (“i Design”) under the laws of the State of California. The purpose of i Design is to build our own blockchain technology team. i Design is in the planning stage and has had minimum operations to date. On December 12, 2019, we became the sole shareholder of Nova Living (M) SDN. BHD. (“Nova Malaysia”), a company incorporated on July 26, 2019 under the laws of Malaysia. Nova Malaysia marketed and sold high-end physiotherapeutic jade mats for use in therapy clinics, hospitality, and real estate projects in Malaysia and other regions in Southeast Asia.

Previous wording

In 2019, we developed a line of high-end physiotherapeutic jade mats with China-based manufacturing partners for use in therapy clinics, hospitality, and real estate projects in Asia. We launched our first flagship showroom/retail store in Kuala Lumpur, Malaysia in late 2019, which, after a COVID-19 related closing, was reopened in May 2020. On August 28, 2020, after few months reopening, Malaysia government extended Movement Control Order to prohibit the businesses to open to public until March 5, 2021 to contain the spread of COVID-19. After the re-opening on March 5, 2021, Malaysia imposed a new nationwide lockdown on May 12, 2021 until early June 2021 which was subsequently extended to early October 2021. In October 2021, the Order was lifted for people who are fully vaccinated and our store has been reopened since. In April 2022, Malaysia has reopened the border for foreign visitors. In June 2023, everything is back to normal in Malaysia. Due to the negative impact caused by COVID-19 from 2020 to 2022, the Company eventually sold the entire jade mats inventory for $2.00 million in liquidation sales in June 2023. We existed from Jade Mats business in 2023. We have limited experience with operations in Southeast Asia and considerable management attention and resources may be required to manage these new markets and product lines. We may be subject to additional risks including credit risk, inflation, currency exchange rate fluctuations, foreign exchange controls, import and export requirements, potentially adverse tax consequences and higher costs associated with doing business internationally.

Current wording

In 2019, we developed a line of high-end physiotherapeutic jade mats with China-based manufacturing partners for use in therapy clinics, hospitality, and real estate projects in Asia. We launched our first flagship showroom/retail store in Kuala Lumpur, Malaysia in late 2019, which, after a COVID-19 related closing, was reopened in May 2020. On August 28, 2020, after few months reopening, Malaysia government extended Movement Control Order to prohibit the businesses to open to public until March 5, 2021 to contain the spread of COVID-19. After the re-opening on March 5, 2021, Malaysia imposed a new nationwide lockdown on May 12, 2021 until early June 2021 which was subsequently extended to early October 2021. In October 2021, the Order was lifted for people who are fully vaccinated and our store has been reopened since. In April 2022, Malaysia has reopened the border for foreign visitors. In June 2023, everything is back to normal in Malaysia. Due to the negative impact caused by COVID-19 from 2020 to 2022, the Company eventually sold the entire jade mats inventory for $2.00 million in liquidation sales in June 2023. We exited from Jade Mats business in 2023. Nova Malaysia has engaged in the development of an innovative home decoration design, showroom and payment IT software systems. We have limited experience with operations in Southeast Asia and considerable management attention and resources may be required to manage these new markets and product lines. We may be subject to additional risks including credit risk, inflation, currency exchange rate fluctuations, foreign exchange controls, import and export requirements, potentially adverse tax consequences and higher costs associated with doing business internationally.

Previous wording

We do not have access to a revolving credit facility. On May 4, 2020, the Company received loan proceeds in the amount of approximately $139,802 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. On May 5, 2020, Diamond Bar Outdoors Inc. (“Diamond Bar”) was granted a loan from Cathay Bank in the aggregate amount of $176,294, pursuant to the Paycheck Protection Program. In June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan. In July 2021, we completed a registered direct offering of our shares of common stock and received offering gross proceeds of $3,120,622. We currently believe that our financial resources will be adequate to finance our operations in the next 12 months. However, in the event that we do need to raise capital in the future, the instability in the securities markets could adversely affect our ability to raise additional capital.

Current wording

We do not have access to a revolving credit facility. On May 4, 2020, the Company received loan proceeds in the amount of approximately $139,802 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. On May 5, 2020, Diamond Bar Outdoors Inc. (“Diamond Bar”) was granted a loan from Cathay Bank in the aggregate amount of $176,294, pursuant to the Paycheck Protection Program. On June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan. In July 2021, we completed a registered direct offering of our shares of common stock and received offering gross proceeds of $3,120,622. In May 2024, August 2024 and October 2024, we completed three private placements for gross proceeds of $750,000. We currently believe that our financial resources will be adequate to finance our operations in the next 12 months. However, in the event that we do need to raise capital in the future, the instability in the securities markets could adversely affect our ability to raise additional capital.

Previous wording

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 product. 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 tariffs imposed by the United States on certain products manufactured in China; and (iv) the consequences of the COVID-19 outbreak throughout the world; and (v) 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 certain products manufactured in China, we are in the process of 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 unaffected by the tariffs. Implementation of a relocation of manufacturing (which by necessity includes an assessment of the factory’s ability to deliver the quantity of the product, in accordance with the Company’s specifications, and in accordance with the Company’s quality control requirements) is time-consuming, but a portion of our manufacturing has been transitio…

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. 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 tariffs imposed by the United States on certain products manufactured in China; 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 are in the process of 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 unaffected by the tariffs. Implementation of a relocation of manufacturing (which by necessity includes an assessment of the factory’s ability to deliver the quantity of the product, in accordance with the Company’s specifications, and in accordance with the Company’s quality control requirements) is time-consuming, but a portion of suppliers manufacturing our products has been transitioned to Malaysia and India starting in 2020 and we expect…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

While our significant accounting policies are described more fully in Note 2 to our accompanying consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this Management’s Discussion and Analysis.

Current wording

While our significant accounting policies are described more fully in Note 2 to our accompanying audited consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this Management’s Discussion and Analysis.

Previous wording

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for Nova LifeStyle and its subsidiaries, Diamond Bar, i Design, Nova Furniture, Nova Samoa, Nova Malaysia and its former subsidiary, Nova HK.

Current wording

The accompanying audited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for Nova LifeStyle and its subsidiaries, Diamond Bar, i Design, Nova Furniture, Nova Samoa, Nova Malaysia and its former subsidiary, Nova HK.

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 $532 and $2,914 as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, expected credit losses (reversal) provision from continuing operations was ($2,382) and $1,870, respectively. During the years ended December 31, 2023 and 2022, provision for allowance for expected credit losses from discontinued operations were $0. As of December 31, 2023, we had gross receivable of $47,530 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 $367 and $532 as of December 31, 2024 and December 31, 2023, respectively. During the years ended December 31, 2024 and 2023, expected credit losses provision (reversal) was ($165) and ($2,382), respectively. As of December 31, 2024, we had gross receivable of $36,738 of which $12,796 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

Nova Lifestyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI and Nova Samoa was incorporated in Samoa. There is no income tax for companies domiciled in the BVI and Samoa. Accordingly, the Company’s condensed consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled. Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%. Nova Living (HK) Group Limited (“Nova HK”) is incorporated in Hong Kong and is subject to Hong Kong income taxes at the statutory rate of 16.5%. In February 2022, Nova HK was deregistered.

Current wording

Nova Lifestyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI and Nova Samoa was incorporated in Samoa. Accordingly, the Company’s consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled. Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%. Nova Living (HK) Group Limited (“Nova HK”) is incorporated in Hong Kong and is subject to Hong Kong income taxes at the statutory rate of 16.5%. In February 2022, Nova HK was deregistered.

Previous wording

As of December 31, 2023 and 2022, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately $25.4 million and $25.6 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 December 31, 2024, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately 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

As of December 31, 2023 and 2022, unrecognized tax benefits were approximately $0. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $0 as of December 31, 2023 and 2022.

Current wording

As of December 31, 2024 and 2023, unrecognized tax benefits were approximately niland nil, respectively. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was nil as of December 31, 2024 and 2023.

Previous wording

A reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) for theyears ended December 31, 2023 and 2022, is as follows:

Current wording

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

Previous wording

As of December 31, 2023 and 2022, 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 for theyears ended December 31, 2023 and 2022, 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 December 31, 2024 and 2023, 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 years ended December 31, 2024 and 2023, 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

Intangible assets consist primarily of computer software acquired for internal use. Acquired intangible assets are initially recorded at the acquisition-date fair value. Intangible assets are amortized on a straight-line basis over their estimated useful lives and are carried at cost less accumulated amortization. The estimated useful life of computer software are generally from 5 years.

Current wording

Intangible assets consist primarily of computer software acquired for internal use. Acquired intangible assets are initially recorded at the acquisition-date fair value. Intangible assets are amortized on a straight-line basis over their estimated useful lives and are carried at cost less accumulated amortization. The estimated useful life of computer software is generally 5 years.

Previous wording

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling expenses on our consolidated statements of operations.

Current wording

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling expenses on our audited consolidated statements of operations.

Previous wording

The accompanying 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, Nova HK and i Design.

Current wording

The accompanying audited 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.

Previous wording

The financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in retained earnings during the period, which is translated using the historical exchange rates used to translate each period’s income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the balance sheets.

Current wording

The financial statements are presented in U.S. dollars. Assets and liabilities are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated at the average of the exchange rates in effect during the reporting period. Stockholders’ equity accounts are translated using the historical exchange rates at the date the entry to stockholders’ equity was recorded, except for the change in accumulated deficits during the period, which is translated using the historical exchange rates used to translate each period’s income statement. Differences resulting from translating functional currencies to the reporting currency are recorded in accumulated other comprehensive income in the balance sheets.

Previous wording

We concluded that we had one reportable segment under ASC 280 because Diamond Bar is a furniture distributor based in California focusing on customers in the US, Nova HK was a furniture distributor based in Hong Kong focusing on international customers and Nova Malaysia is a furniture retailer and distributor focusing on customers primarily in Malaysia. Each of our subsidiaries is operated under the same senior management of our company, and we view the operations of Diamond Bar, Nova HK and Nova Malaysia as a whole for making business decisions. Our long-lived assets are mainly property, plant and equipment located in the United States and Malaysia for administrative purposes.

Current wording

We concluded that we had one reportable segment under ASC 280 because Diamond Bar is a furniture distributor based in California focusing on customers in the US and Nova Malaysia is a furniture retailer and distributor focusing on customers primarily in Malaysia and Asia. Each of our subsidiaries is operated under the same senior management of our company, and we view the operations of Diamond Bar and Nova Malaysia as a whole for making business decisions. Our long-lived assets are mainly property, plant and equipment located in the United States and Malaysia for administrative purposes.

Previous wording

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 of the two-step goodwill impairment test, under which a goodwill impairment loss was measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss is measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). This Update is effective for smaller reporting companies for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022, which is required to be applied prospectively from the date of adoption. The Company adopted ASU 2017-04 for its interim and annual goodwill impairment tests beginning January 1, 2023. The adoption of ASU 2017-04 did not have any impact on our condensed consolidated financial statements.

Current wording

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 of the two-step goodwill impairment test, under which a goodwill impairment loss was measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 requires only a one-step quantitative impairment test, whereby a goodwill impairment loss is measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). This Update is effective for smaller reporting companies for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022, which is required to be applied prospectively from the date of adoption. The Company adopted ASU 2017-04 for its interim and annual goodwill impairment tests beginning January 1, 2023. The adoption of ASU 2017-04 did not have any impact on our audited consolidated financial statements.

Previous wording

The following table sets forth the results of our operations for the years ended December 31, 2023 and 2022. Certain columns may not add due to rounding.

Current wording

The following table sets forth the results of our operations for the years ended December 31, 2024 and 2023.

Previous wording

Net sales from continuing operations for the year ended December 31, 2023 were $11.09 million, a decrease of 13% from $12.74 million for 2022. This decrease in net sales resulted primarily from a 33% decrease in average selling price, partially offset by a 31% increase in sales volume. Our three largest selling product categories for the year ended December 31, 2023 were sofas, jade mats and beds, which accounted for approximately 37%, 18% and 13% of sales from continuing operations, respectively. For the year ended December 31, 2022, the three largest selling categories were sofas, beds and chairs, which accounted for approximately 41%, 15% and 11% of sales from continuing operations, respectively.

Current wording

Net sales for the year ended December 31, 2024 were $9.69 million, a decrease of 13% from $11.09 million for the same year of 2023. This decrease in net sales resulted primarily from 39% decrease in sales volume, while partially offset by 43% increase in average selling price. Our three largest selling product categories for the year ended December 31, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 8% of sales, respectively. For the year ended December 31, 2023, the three largest selling categories were sofa, jade mats, and beds, which accounted for approximately 37%, 18% and 13% of sales, respectively.

Previous wording

The $1.66 million decrease in net sales from continuing operations for the year ended December 31, 2023, compared to the year of 2022, was mainly due to decreased sales to North America and other countries. Sales to North America decreased by 27% to $8.77 million for the year ended December 31, 2023, compared to $12.01 million for 2022, such decrease mainly due to inflation, U.S. tightening monetary policy, reducing the purchasing power of the customers and thus making them less willing to spend in nonfood categories. Sales to other countries decreased by $344,849 to $330,159 for the year ended December 31, 2023, from $675,008 for 2022, primarily due to less direct container sales in other countries. However, the decrease in net sales from continuing operations was partially offset by the increase in sales to Asia. Sales to Asia increased by $1.93 million to $1.99 million for the year ended December 31, 2023, compared to $0.06 million for 2022, such increase mainly due to our liquidation sales of the entire inventory of jade mats in Nova Malaysia for $1.95 million.

Current wording

The $1.40 million decrease in net sales for the year ended December 30, 2024, compared to the same year of 2023, was mainly due to decreased sales to Asia. Sales to Asia decreased by 100% to nil for the year ended December 31, 2024, compared to $2.00 million for the same year of 2023, such decrease mainly due to our liquidation sales of the entire inventory of jade mats by Nova Malaysia for approximately $1.95 million in Malaysia for the year ended December 31, 2023. Also, sales to other countries decreased by $79,120 to $251,039 for the year ended December 31, 2024, from $330,159 for the same year 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 $0.66 million to $9.44 million for the year ended December 31, 2024, from $8.77 million for the same year of 2023, primary due to more sales order received from our customers in North America.

Previous wording

Cost of sales from continuing operations consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales from continuing operations decreased by 66% to $6.91 million for the year ended December 31, 2023, compared to $20.53 million for 2022. Cost of sales as a percentage of sales decreased to 62% for the year ended December 31, 2023, compared to 161% for 2022. The decrease in cost of sales in dollar term and cost of sales as a percentage of sales was mainly a result of our decreased inventory write down of $0.14 million, primarily for the products in U.S., for the year ended December 31, 2023, compared to $12.90 million of inventory write down, primarily for the jade mats in Malaysia, for 2022.

Current wording

Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers. Total cost of sales decreased by 21% to $5.44 million for the year ended December 31, 2024, compared to $6.91 million for the same year of 2023. Cost of sales as a percentage of sales decreased to 56% for the year ended December 31, 2024, compared to 62% for the same year 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 the liquidation sales of the jade mats in Malaysia which came with high cost and low profit margin in the second quarter of 2023. We sold our jade mats in the cost of $1.49 million (after impairment) for $1.95 million entirely in 2023.

Previous wording

Gross profit from continuing operations was $4.17 million for the year ended December 31, 2023, compared to gross loss of $7.78 million for 2022, representing an increase in gross profit of $11.96 million. Our gross profit margin was 38% for the year ended December 31, 2023, compared to a gross loss margin of 61% for 2022. The increase in gross profit and gross profit margin was mainly a result of our decreased inventory write down of $0.14 million for the year ended December 31, 2023, compared to $12.90 million of inventory write down for 2022.

Current wording

Gross profit was $4.25 million for the year ended December 31, 2024, compared to $4.17 million for the same year of 2023, representing an increase in gross profit of $0.08 million. Our gross profit margin was 44% for the year ended December 31, 2024, compared to 38% for the same year 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 year ended December 31, 2023

Previous wording

Other expenses, net, from continuing operations were $573,617 for the year ended December 31, 2023, compared to $851,166 for 2022, representing a decrease in other expenses of $277,549. The decrease in other expenses was due primarily to a decrease in foreign exchange loss of $221,742 to $417,690 for the year ended December 31, 2023, from $639,432 for 2022. The decrease in foreign exchange loss was mainly a result of the appreciation of U.S. dollar against Malaysian Ringgit on liquidation sales of jade mats in Malaysia as partial sales were collected in U.S. dollars.

Current wording

Other expenses, net was $195,736 for the year ended December 31, 2024, compared to other expenses, net of $573,617 for the same period of 2023, representing a decrease in other expenses of $377,881. The decrease in other expenses was due primarily to an increase in foreign exchange gain by $430,971 to $13,281 for the year ended December 31, 2024, from foreign exchange loss of $417,690 for the same year 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 and IT systems in U.S. dollars during the year ended December 31, 2024.

Previous wording

As a result of the foregoing, our net loss was $7.72 million for the year ended December 31, 2023, compared to $17.10 million for 2022.

Current wording

As a result of the foregoing, our net loss was $5.56 million for the year ended December 31, 2024, compared to $7.72 million for the same year of 2023.

Previous wording

We had net working capital of $60,057 at December 31, 2023, a decrease of $6,497,572 from net working capital of $6,557,629 at December 31, 2022. The ratio of current assets to current liabilities was 1.02-to-1 at December 31, 2023.

Current wording

We had working capital of $2,849,236 at December 31, 2024, an increase of $2,789,179 from net working capital of $60,057 at December 31, 2023. The ratio of current assets to current liabilities was 1.56-to-1 at December 31, 2024.

Previous wording

The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2023 and 2022:

Current wording

The following is a summary of cash provided by or used in each of the indicated types of activities during the year ended December 31, 2024 and 2023:

Previous wording

Net cash used in operating activities was $1.58 million for the year ended December 31, 2023, an increase in cash inflow of $3.79 million from $5.37 million of cash used in operating activities for 2022.

Current wording

Net cash used in operating activities was $1.39 million for the year ended December 31, 2024, a decrease in cash outflow by $0.19 million from $1.58 million of cash used in operating activities for the same year of 2023.

Previous wording

Net cash provided by investing activities was $0.02 million for the year ended December 31, 2023, an increase in cash inflow of $0.03 million from $8,772 of cash used in investing activities for 2022. For the year ended December 31, 2023, we incurred cash inflow of $0.02 million from disposal of fixed assets. For the year ended December 31, 2022, we incurred cash outflow of $8,772 from purchase of office equipment.

Current wording

Net cash used in investing activities was $14,121 for the year ended December 31, 2024, an increase in cash outflow of $32,764 from $18,643 of cash provided by investing activities for the same year of 2023. We incurred cash outflow of $14,121 from the purchase of forklift in Nova Malaysia for the year ended December 31, 2024. For the year ended December 31, 2023, we incurred cash inflow of $18,643 due to disposal of our fixed assets.

Previous wording

Net cash provided by financing activities was $0 for the years ended December 31, 2023 and 2022. During the year ended December 31, 2023, we received $0 from equity financing.

Current wording

Net cash provided by financing activities was $1.18 million for the year ended December 31, 2024, compared to nil for the same year of 2023. During the year ended December 31, 2024, we borrowed $0.07 million from an unrelated party and $0.36 million from a shareholder. We also sold 450,000 shares of common stock with the proceeds of $0.75 million for our working capital.

Previous wording

As of December 31, 2023, we had gross accounts receivable of $47,530 of which $28,362 was not yet past due and $19,168 was less than 90 days past due. We had an allowance for expected credit losses of $532. As of March 19, 2024, 99.7% of accounts receivable outstanding as of December 31, 2023 had been collected.

Current wording

As of December 31, 2024, we had gross accounts receivable of $36,738 of which $4,143 was not yet past due and $3,212 was less than 90 days past due. We had an allowance for expected credit losses of $367. As of March 18, 2025, 93.4% of accounts receivable outstanding as of December 31, 2024 had been collected.

Previous wording

100% of our accounts receivable outstanding at December 31, 2022 had been collected during 2023.

Current wording

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

Previous wording

As of December 31, 2023 and 2022, we had advances to suppliers of $93,740 and $21,173, respectively. These supplier prepayments are made for goods before we actually receive them.

Current wording

As of December 31, 2024 and 2023, we had advances to suppliers of $4,689,148 and $93,740, respectively. These supplier prepayments are made for goods before we actually receive them.

Previous wording

For a new product, the normal lead time from new product R&D, prototype, and mass production to delivery of goods from our suppliers to us is approximately six to nine months after we make advance payments to our suppliers. For other products, the typical time is 4-6 months after our advance payment. During the COVID-19 pandemic, freight transportation of products from our international suppliers has been delayed or suspended during the outbreak. We will consider the need for a reserve when and if a supplier fails to fulfill our orders within the time frame as stipulated in the purchase contracts.

Current wording

For a new product, the normal lead time from new product R&D, prototype, and mass production to delivery of goods from our suppliers to us is approximately six to nine months after we make advance payments to our suppliers. For other products, the typical time is 4-6 months after our advance payment. We will consider the need for a reserve when and if a supplier fails to fulfill our orders within the time frame as stipulated in the purchase contracts.

Previous wording

As of March 19, 2024, $57,842 or 62% of our advances to suppliers outstanding at December 31, 2023 had been delivered to us in the form of purchases of furniture.

Current wording

As of March 18, 2025, $28,924 or 0.6% and $93,740 or 100% of our advances to suppliers outstanding at December 31, 2024 and 2023 had been delivered to us in the form of purchases of furniture.

Previous wording

As of December 31, 2023, we recorded long-term taxes payable of $0.64 million, consisting of an income tax payable of $0.64 million, primarily arising from a one-time transition tax recognized in the fourth quarter of 2017 on our post-1986 foreign unremitted earnings, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities.

Current wording

As of December 31, 2024, we recorded long-term taxes payable of nil million, consisting of an income tax payable of nil, primarily arising from a one-time transition tax recognized in the fourth quarter of 2017 on our post-1986 foreign unremitted earnings, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities.