| Summary of Significant Accounting Policies | Note
2 - Summary of Significant Accounting Policies Basis
of Presentation The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange
Commission (“SEC”) regarding interim financial reporting. The unaudited condensed consolidated financial statements include
the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated
in consolidation. The
interim condensed consolidated financial information as of September 30, 2021 and for the nine and three months ended September 30,
2021 and 2020 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote
disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been
condensed or omitted pursuant to such rules and regulations. The interim condensed consolidated financial information should be read
in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2020, previously filed with the SEC on March 29, 2021. In
the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair
statement of the Company’s interim condensed consolidated financial position as of September 30, 2021, its interim condensed consolidated
results of operations and cash flows for the nine months ended September 30, 2021 and 2020, as applicable, have been made. The interim
results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods Use
of Estimates In
preparing condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the condensed
consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant
estimates and assumptions made by management include, but are not limited to, revenue recognition, the allowance for bad debt, valuation
of inventories, the valuation of stock-based compensation, income taxes and unrecognized tax benefits, valuation allowance for deferred
tax assets, assumptions used in assessing impairment of long-lived assets and goodwill, and loss contingencies. Actual results could
differ from those estimates. The
COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further
business slowdowns or shutdowns, supply chain disruption, depress demand for the Company’s products, and adversely impact
its results of operations. During the nine months ended September 30, 2021, the Company continued to face increasing uncertainties around
its estimates of revenue collectability, accounts receivable credit losses and valuation of inventories. The Company expects uncertainties
around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19
pandemic. Its estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed
in its unaudited condensed consolidated financial statements. Business
Combination For
a business combination, the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree are recognized at
the acquisition date and measured at their fair values as of that date. In a business combination achieved in stages, the identifiable
assets and liabilities, as well as the noncontrolling interest in the acquiree, are recognized at the full amounts of their fair values.
In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of
the consideration transferred plus any noncontrolling interest in the acquiree, that excess in earnings is recognized as a gain attributable
to the acquirer. Deferred
tax liability and assets are recognized for the deferred tax consequences of differences between the tax bases and the recognized values
of assets acquired and liabilities assumed in a business combination in accordance with Accounting Standards Codification (“ASC”)
Topic 740-10. Goodwill Goodwill
is the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses
acquired. In accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is tested for
impairment, annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed
at a reporting unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds its
fair value, with the fair value of the reporting unit determined using discounted cash flow (“DCF”) analysis. A number of
significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including
the discount rate, the internal rate of return and projections of realizations and costs to produce. Management considers historical
experience and all available information at the time the fair values of its reporting units are estimated. ASC
Topic 350 also permits an entity to first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood
of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If it is more
likely than not that the fair value of a reporting unit is less than its carrying amount, then the two-step goodwill impairment test
is required to be performed. Otherwise, no further testing is required. Performing the qualitative assessment involved identifying the
relevant drivers of fair value, evaluating the significance of all identified relevant events and circumstances, and weighing the factors
to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. After evaluating
and weighing all these relevant events and circumstances, it was concluded that a positive assertion can be made from the qualitative
assessment that it is more likely than not that the fair value of Diamond Bar is greater than its carrying amount. As such, it is not
necessary to perform the two-step goodwill impairment test for the Diamond Bar reporting unit. Accordingly, as of September 30, 2021
and December 31, 2020, the Company concluded there was no Cash
and Cash Equivalents For
purposes of the statement of cash flows, the Company considers cash, money market funds, investments in interest bearing demand deposit
accounts, time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts
Receivable The
Company’s accounts receivable arises from product sales. The Company does not adjust its receivables for the effects of a significant
financing component at contract inception if it expects to collect the receivables in one year or less from the time of sale. The Company
does not expect to collect receivables greater than one year from the time of sale. The
Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition
of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends
and changes in customer payment patterns to evaluate the adequacy of these reserves. An analysis of the allowance for doubtful accounts
is as follows: Schedule
of Allowance for Doubtful Accounts
Balance at January 1, 2021 $ 5,201
Reversal (3,328 )
Balance at September 30, 2021 $ 1,873 The
bad debts (reversal) expense for the nine months ended September 30, 2021 and 2020 was ($ 3,328)
and $ 2,429 ,
respectively; and $ 262
and $ 2,458
for the three months
ended September 30, 2021 and 2020, respectively. Advances
to Suppliers Advances
to suppliers are reported net of allowance when the Company determines that amounts outstanding are not likely to be collected in cash
or utilized against purchase of inventories. Based on its historical record and in normal circumstances, the Company receives goods within
5 to 9 months from the date the advance payment is made. Due to the COVID-19 pandemic, freight transportation of products from the Company’s
international suppliers has been delayed or suspended during the outbreak. Any provisions for allowance for advances to suppliers, if
deemed necessary, are included in general and administrative expenses in the consolidated statements of operations. During the nine months
and three months ended September 30, 2021 and 2020, no provision was made on advances to suppliers. Inventories Inventories
are stated at the lower of cost and net realizable value, with cost determined on a weighted-average basis. Write-down of potential obsolete
or slow moving inventories is recorded based on management’s assumptions about future demands and market conditions. Plant,
Property and Equipment Plant,
property and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Expenditures for maintenance
and repairs are expensed as incurred, while additions, renewals and improvements are capitalized. When property and equipment are retired
or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts, and any gain or loss
is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets
with no salvage value and estimated lives as follows: Schedule
of Plant, Property and Equipment Estimated Lives Under Straight-line Method
Computer
and office equipment 5 10
Decoration
and renovation 5 10 Impairment
of Long-Lived Assets Long-lived
assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability
of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows,
an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair
value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying
amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment
or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against
the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable,
an impairment charge is measured as the amount by which the carrying amount of the asset group asset group exceeds its fair value based
on discounted cash flow analysis or appraisals. Treasury
Stock Treasury
stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.
Gains and losses on the subsequent reissuance of shares are credited or charged to additional paid-in capital using the average-cost
method. Upon retirement of treasury stock, the amounts in excess of par value are charged entirely to additional paid-in capital. Research
and Development Research
and development costs are related primarily to the Company designing and testing its new products during the development stage. Research
and development costs are recognized in general and administrative expenses and expensed as incurred. Research and development expenses
were $ 110,251 19,851 105,460 458 Income
Taxes In
its interim financial statements, the Company follows the guidance in ASC 270 “Interim Reporting” and ASC 740 “Income
Taxes” whereby the Company utilizes the expected annual effective rate in determining its income tax provision. The income tax
expense for the nine months and three months ended September 30, 2021 was $ 180,593
and $ 167,532 ,
respectively, and are primarily related to
quarter-to-date income generated from foreign operations. The income tax benefit for the nine months and three months ended September
30, 2020 was approximately $ 93,000
and $ 101,400,
respectively, and
was primarily related to quarter-to-date losses generated from U.S. operations. Income
taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end
based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The
Company follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets
and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated
with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Under
the provisions of ASC Topic 740, when tax returns are filed, it is highly certain that some positions taken would be sustained upon examination
by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position
that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more
than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits
in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon
examination. Nova
Lifestyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI, Nova
Samoa was incorporated in Samoa, and Nova HK was incorporated in Hong Kong. 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 16.5 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 interim periods presented herein, 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. On
March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions,
such as relaxing limitations on the deductibility of interest and the use of net operating losses (NOLs) arising in taxable years beginning
after December 31, 2017. As
of September 30, 2021 and December 31, 2020, the accumulated undistributed earnings generated by its foreign subsidiaries were approximately
$ 21,500,000 27,900,000 A
reconciliation of unrecognized tax benefits excluding interest and penalties (“Gross UTB”), for the nine months ended September
30, 2021 and 2020 is as follows: Schedule
of Unrecognized Tax Benefits
Gross UTB
2021 2020
Balance
$ 935 12,547 At
September 30, 2021 and December 31, 2020, the Company had cumulatively accrued approximately $ 100
and $ 131,
respectively, for
estimated interest and penalties related to unrecognized tax benefits, respectively, related to the Company’s continuing operations.
The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax benefit, which totaled
$ 21 and $ 375
for the nine months
ended September 30, 2021 and 2020, respectively; and $ 7
and $ 125
for the three months
ended September 30, 2021 and 2020, 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. As
of September 30, 2021, unrecognized tax benefits were approximately $ 900 900 12,500 12,500 Nova
Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2018-2020 remain open to examination by tax
authorities in the U.S. Revenue
Recognition The
Company recognizes revenues when its customers obtain control of promised goods or services, in an amount that reflects the consideration
which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under
ASU No. 2014-09: (i) identifies contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines
the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenues
when (or as) it satisfies the performance obligation. Revenues
from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time,
typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected
amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. Revenues
from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts
with the Company’s customers. Product
revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts,
returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified
as reductions of accounts receivable as the amount is payable to the Company’s customer. The
Company’s sales policy allows for product returns within the warranty period if the product is defective and the defects are the
Company’s fault. As alternatives to the product return option, the customers have the option of requesting a discount from the
Company for products with quality issues or of receiving replacement parts from the Company at no cost. The amount for product returns,
the discount provided to the Company’s customers, and the costs for replacement parts were immaterial for the nine months and three
months ended September 30, 2021 and 2020. Cost
of Sales Cost
of sales consists primarily of costs of finished goods purchased from third-party manufacturers and write-downs of inventory. Shipping
and Handling Costs Shipping
and handling costs related to delivery of finished goods are included in selling expenses. During the nine months ended September 30,
2021 and 2020, shipping and handling costs were $ 4,524 172,912 1,585 171,926 Advertising Advertising
expenses consist primarily of costs of promotion and marketing for the Company’s image and products, and costs of direct advertising,
and are included in selling expenses. The Company expenses all advertising costs as incurred. Advertising expense was $ 1,122,959
and $ 24,740
for the nine months
ended September 30, 2021 and 2020, respectively, and $ 299,012
and $ 5,140
for the three months
ended September 30, 2021 and 2020, respectively. Share-based
Compensation The
Company accounts for share-based compensation awards to officers, directors, employees, and for acquiring goods and services from nonemployees
in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment
transactions be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over
the vesting period. The Company accounts for forfeitures when they occur. Earnings
per Share (EPS) Basic
EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed
similar to basic net income per share except that the denominator is increased to include the number of additional common shares that
would have been outstanding if all the potential common shares pertaining to warrants, stock options, and similar instruments had been
issued and if the additional common shares were dilutive. Diluted earnings per share are based on the assumption that all dilutive convertible
shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the
outstanding unvested restricted stock, options and warrants, and the if-converted method for the outstanding convertible instruments.
Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance,
if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the
if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period
(or at the time of issuance, if later). The
following table presents a reconciliation of basic and diluted loss per share for the nine months and three months ended September 30,
2021 and 2020: Schedule
of Reconciliation of Basic and Diluted Loss Per Share
2021 2020 2021 2020
Nine Months
Ended September 30, Three
Months Ended September 30,
2021 2020 2021 2020
Net loss from continuing operations $ (8,505,696 ) $ (9,705,225 ) $ (1,396,632 ) $ (8,177,010 )
Net loss from discontinued operations - (326,531 ) - -
Net loss (8,505,696 ) (10,031,756 ) (1,396,632 ) (8,177,010 )
Weighted average shares outstanding – Basic and Diluted * 5,870,632 5,579,088 6,399,158 5,585,734
Weighted average shares outstanding – Basic 5,870,632 5,579,088 6,399,158 5,585,734
Weighted
average shares outstanding – Diluted 8,870,062 5,579,088 6,399,158 5,585,734
Net loss from continuing operations per share of common stock
Basic and Diluted $ (1.45 ) $ (1.74 ) $ (0.22 ) $ (1.46 )
Net loss from discontinued operations income per share of common stock
Basic and Diluted $ - $ (0.06 ) $ - $ -
Net loss from discontinued operations income per share of common stock
Basic and Diluted $ - $ (0.06 ) $ - $ -
Net loss per share of common stock
Basic and Diluted $ (1.45 ) $ (1.80 ) $ (0.22 ) $ (1.46 )
* Including
44,279 44,307 For
the nine months and three months ended September 30, 2021, 5,000 340,500 For
the nine months and three months ended September 30, 2020, 171,667 5,000 340,500 At
September 30, 2021, warrants to purchase 1,225 ,959 1,225,959 Concentration
of Credit Risk Financial
instruments that potentially subject the Company to credit risk consist primarily of accounts and other receivables. The Company does
not require collateral or other security to support these receivables. The Company conducts periodic reviews of the financial condition
and payment practices of its customers to minimize collection risk on accounts receivable. No
customer accounted for 10 %
or more of the Company’s sales for the nine months ended September 30, 2021 and 2020. One customer accounted for 15 % of the Company’s sales for the three months ended September 30, 2021, while no customer accounted for 10 %
of the Company’s sales for the three months ended September 30, 2020. Three customers accounted for 34 %,
14 %
and 13 %,
respectively, of the Company’s gross accounts receivable as of September 30, 2021. Two customers accounted for 40 %
and 27 %,
respectively, of the Company’s gross accounts receivable as of December 31, 2020. The
Company purchased its products from three and four major vendors during the nine months ended September 30, 2021 and 2020, respectively,
accounting for a total of 56 %
for 2021 ( 25 %,
18 %,
and 13 %)
and 76 %
for 2020 ( 25 %,
19 %,
16 %
and 16 %)
of the Company’s purchases. The Company purchased its products from three and four major vendors during the three months ended
September 30, 2021 and 2020, accounting for a total of 56 %
for 2021 ( 21 %,
18 %
and 17 %)
and 73 %
for 2020 ( 21 %,
21 %,
18 %
and 13 %)
of the Company’s purchases. Advances made to these vendors were $ 123,881 and $ nil
as of September 30,
2021 and December 31, 2020, respectively. Accounts payable to these vendors were $ 93,327 and $ nil
as of September 30,
2021 and December 31, 2020, respectively. Fair
Value of Financial Instruments ASC
Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held
by the Company. ASC Topic 825, “Financial Instruments,” defines fair value and establishes a three-level valuation hierarchy
for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported
in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable
estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization
and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
● Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
● Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The
carrying value of cash, accounts receivable, advances to suppliers, other receivables, accounts payable, advance from customers, other
payables and accrued liabilities approximate estimated fair values because of their short maturities. Foreign
Currency Translation and Transactions The
condensed 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, and its former subsidiaries,
Nova Macao and Bright Swallow. The
Company’s subsidiary with operations in Malaysia uses its local currency, the Malaysian Ringgit (“RM”), as its functional
currency. An entity’s functional currency is the currency of the primary economic environment in which it operates, which is the
currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine
the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company
transactions and arrangements. Foreign
currency transactions denominated in currencies other than the functional currency are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at
the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign
currency re-measurement are included in the statements of operations. 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. Translation
of amounts from RM into U.S. dollars has been made at the following exchange rates: Schedule
of Exchange Rates
Balance sheet items, except for equity accounts
September 30, 2021 RM 4.19 1
December 31, 2020 RM 4.02 1
Statement of operations and cash flow items
For the nine months ended September 30, 2021 RM 4.13 1
For the nine months ended September 30, 2020 RM 4.23 1 Segment
Reporting ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s chief operating decision maker organizes segments within the company for making
operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company. Management
determined that the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company operates
exclusively in one Management
concluded that the Company had one reportable segment under ASC 280 because Diamond Bar is a furniture distributor based in California
focusing on customers in the United States, Bright Swallow was a furniture distributor focusing on customers in Canada, and Nova Macao
was a furniture distributor based in Macao focusing on international customers, Nova HK is 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.
They are all operated under the same senior management of the Company, and management views the operations of Diamond Bar, Bright Swallow,
Nova Macao, Nova HK and Nova Malaysia as one entity for making business decisions. All
of the Company’s long-lived assets are mainly property, plant and equipment located in the United States, Hong Kong and
Malaysia and are utilized for administrative purposes. Net
sales to customers by geographic area are determined by reference to the physical product shipment delivery locations requested by the
customers. For example, if the products are delivered to a customer in the United States, the sales are recorded as generated in the
United States; if the customer directs us to ship its products to China, the sales are recorded as sold in China. Leases The
Company determines if an arrangement is a leas |
