10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2017
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 011-36259

NOVA LIFESTYLE, INC.

(Exact name of registrant as specified in its charter)

Nevada	90-0746568
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

6565 E. Washington Blvd. Commerce, CA	90040
(Address of principal executive offices)	(Zip Code)

(323) 888-9999

(Registrant’s telephone number, including area code)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.

YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  ☐   NO  ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 27,383,648 shares of common stock outstanding as of November 9, 2017.

Nova LifeStyle, Inc.

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	1
	Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the nine and three months ended September 30, 2017 and 2016 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements for the nine and three months ended September 30, 2017 and 2016 (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	34
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	(Removed and Reserved)
Item 5.	Other Information
Item 6.	Exhibits	35
	Signatures	36
	Exhibit Index	37

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NOVA LIFESTYLE, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016

	September 30,		December 31,
	2017		2016
Assets
Current Assets
Cash and cash equivalents	$	802,037	$	2,587,743
Accounts receivable, net		36,938,819		42,102,761
Advance to suppliers		21,951,040		13,669,752
Inventories		6,720,649		2,781,123
Assignment fee receivable (Note 3)		--		1,250,000
Receivable from an unrelated party (Note 7)		--		7,000,000
Prepaid expenses and other receivables		315,833		642,891
Taxes receivable		14,094		14,893
Total Current Assets		66,742,472		70,049,163
Noncurrent Assets
Plant, property and equipment, net		158,412		171,276
Lease deposit		43,260		43,260
Goodwill		218,606		218,606
Intangible assets, net		4,573,612		5,686,623
Deferred tax asset		1,498,631		874,759
Total Noncurrent Assets		6,492,521		6,994,524
Total Assets	$	73,234,993	$	77,043,687

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

NOVA LIFESTYLE, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016

	September 30,		December 31,
	2017		2016
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	162,147	$	2,368,775
Line of credit		-		7,977,841
Advance from customers		19,298		513,880
Accrued liabilities and other payables		726,501		780,960
Total Current Liabilities		907,946		11,641,456
Noncurrent Liabilities
Line of credit		3,322,040		-
Income tax payable		2,009,825		2,136,788
Total Noncurrent Liabilities		5,331,865		2,136,788
Total Liabilities		6,239,811		13,778,244
Contingencies and Commitments
Stockholders’ Equity
Common stock, $0.001 par value; 75,000,000 shares authorized, 27,909,843 and 27,309,695 shares issued and outstanding; as of September 30, 2017 and December 31, 2016, respectively		27,910		27,309
Additional paid-in capital		38,309,891		36,885,462
Statutory reserves		6,241		6,241
Retained earnings		28,651,140		26,346,431
Total Stockholders’ Equity		66,995,182		63,265,443
Total Liabilities and Stockholders’ Equity	$	73,234,993	$	77,043,687

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

NOVA LIFESTYLE, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

	Nine Months Ended September 30,						Three Months Ended September 30,
	2017			2016			2017			2016
	(Unaudited)						(Unaudited)
Net Sales	$	70,813,414		$	72,748,972		$	33,222,625		$	30,538,918
Cost of Sales		58,741,122			62,091,435			27,323,972			25,935,832
Gross Profit		12,072,292			10,657,537			5,898,653			4,603,086
Operating Expenses
Selling expenses		2,690,342			4,358,206			1,003,906			2,050,201
General and administrative expenses		7,608,323			4,756,118			2,124,614			1,491,684
Total Operating Expenses		10,298,665			9,114,324			3,128,520			3,541,885
Income From Operations		1,773,627			1,543,213			2,770,133			1,061,201
Other Income (Expenses)
Non-operating income (expense, net)		797			40,994			--			16,623
Foreign exchange transaction loss		(324	)		(5,578	)		(94	)		(3,281	)
Interest expense, net		(133,093	)		(241,202	)		(40,932	)		(96,535	)
Financial expense		(86,335	)		(88,098	)		(34,508	)		(33,733	)
Total Other Expenses, Net		(218,955	)		(293,884	)		(75,534	)		(116,926	)
Income Before Income Taxes and Discontinued Operations		1,554,672			1,249,329			2,694,599			944,275
Income Tax (Benefit) Expense		(750,037	)		60,063			(262,034	)		(100,656	)
Income From Continuing Operations		2,304,709			1,189,266			2,956,633			1,044,931
Loss From Discontinued Operations, net of tax		--			(1,476,572	)		--			(743,594	)
Net Income (Loss)		2,304,709			(287,306	)		2,956,633			301,337
Other Comprehensive Loss
Foreign currency translation		--			(420,752	)		--			(98,638	)
Comprehensive Income (Loss)	$	2,304,709		$	(708,058	)	$	2,956,633		$	202,699
Basic weighted average shares outstanding		27,570,425			24,937,069			27,846,921			25,558,604
Diluted weighted average shares outstanding		27,704,406			24,937,069			27,980,629			25,558,604
Income from continuing operations per share of common stock
Basic	$	0.08		$	0.05		$	0.11		$	0.04
Diluted	$	0.08		$	0.05		$	0.11		$	0.04
Loss from discontinued operations per share of common stock
Basic	$	--		$	(0.06	)	$	--		$	(0.03	)
Diluted	$	--		$	(0.06	)	$	--		$	(0.03	)
Net income (loss) per share of common stock
Basic	$	0.08		$	(0.01	)	$	0.11		$	0.01
Diluted	$	0.08		$	(0.01	)	$	0.11		$	0.01

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

NOVA LIFESTYLE, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

	Nine Months Ended September 30,
	2017			2016
	(Unaudited)
Cash Flows From Operating Activities
Net income from continuing operations	$	2,304,709		$	1,189,266
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		1,143,319			462,194
Deferred tax benefit		(623,872	)		--
Stock compensation expense		1,773,537			1,216,765
Changes in bad debt allowance		203,905			33,818
Changes in operating assets and liabilities:
Accounts receivable		4,960,037			(558,573	)
Advance to suppliers		(8,281,288	)		(3,613,765	)
Inventories		(3,939,526	)		241,611
Other current assets		(21,452	)		(711,727	)
Accounts payable		(2,206,628	)		129,278
Advance from customers		(494,582	)		584,968
Accrued liabilities and other payables		(54,458	)		(325,799	)
Taxes payable		(126,163	)		52,864
Net Cash Used in Continuing Operations		(5,362,462	)		(1,299,100	)
Net Cash Used in Discontinued Operations		--			(166,148	)
Net Cash Used in Operating Activities		(5,362,462	)		(1,465,248	)
Cash Flows From Investing Activities
Assignment fee received		1,250,000			--
Purchase of property and equipment		(17,443	)		(7,272	)
Cash received from Buyer		--			5,500,000
Advances to unrelated parties		(8,835,000	)
Repayment from unrelated parties		15,835,000			--
Net Cash Provided by Continuing Operations		8,232,557			5,492,728
Net Cash Used in Discontinued Operations		--			(218,170	)
Net Cash Provided by Investing Activities		8,232,557			5,274,558
Cash Flows From Financing Activities
Proceeds from line of credit and bank loan		36,881,842			29,828,074
Repayment to line of credit and bank loan		(41,537,643	)		(29,301,699	)
Proceeds from warrants exercised		--			203,250
Net Cash (Used in) Provided by Continuing Operations		(4,655,801	)		729,625
Net Cash Provided by Discontinued Operations		-			319,762
Net Cash (Used in) Provided by Financing Activities		(4,655,801	)		1,049,387

4

NOVA LIFESTYLE, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

	Nine Months Ended September 30,
	2017			2016
Effect of Exchange Rate Changes on Cash and Cash Equivalents		--			(3,128	)
Net (decrease) increase in cash and cash equivalents		(1,785,706	)		4,855,569
Cash and cash equivalents, beginning of period		2,587,743			988,029
Cash and cash equivalents, end of period	$	802,037		$	5,843,598
Analysis of cash and cash equivalents
Included in cash and cash equivalents per consolidated balance sheets	$	802,037		$	5,718,601
Included in assets of discontinued operations		-			124,997
Cash and cash equivalents, end of period	$	802,037		$	5,843,598
Supplemental Disclosure of Cash Flow Information
Continuing operations:
Cash paid during the period for:
Income tax payments	$	--		$	7,200
Interest expense	$	159,686		$	371,036
Discontinued operations:
Cash paid during the period for:
Income tax payments	$	--		$	--
Interest expense	$	--		$	--

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

NOVA LIFESTYLE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

Note 1 - Organization and Description of Business

Nova LifeStyle, Inc. (“Nova LifeStyle” or the “Company”), formerly known as Stevens Resources, Inc., was incorporated in the State of Nevada on September 9, 2009.

The Company is a U.S. holding company with no material assets other than the ownership interests of our subsidiaries through which we market, design and sell furniture worldwide: Nova Furniture Limited in the British Virgin Islands (“Nova Furniture”), Nova Furniture Ltd. in Samoa (“Nova Samoa”), Bright Swallow International Group Limited (“Bright Swallow” or “BSI”), Nova Furniture Macao Commercial Offshore Limited (“Nova Macao”), and Diamond Bar Outdoors, Inc. (“Diamond Bar”).

Nova Macao was organized under the laws of Macao on May 20, 2006, and is a wholly owned subsidiary of Nova Furniture.  Diamond Bar, doing business as Diamond Sofa, was incorporated in California on June 15, 2000.  Nova Macao is a trading company, importing, marketing and selling products designed and manufactured by Nova Furniture (Dongguan) Co., Ltd. (“Nova Dongguan”) and third party manufacturers for the U.S. and international markets. Diamond Bar markets and sells products manufactured by third party manufacturers under the Diamond Sofa brand to distributors and retailers principally in the U.S. market.  On April 24, 2013, the Company completed the acquisition of Bright Swallow, an established furniture company with a global client base.  

The sale of three of the Company’s former subsidiaries, Nova Dongguan, Nova Dongguan Chinese Style Furniture Museum (“Nova Museum”), and Dongguan Ding Nuo Household Products Co., Ltd. (“Ding Nuo”), was consummated on October 25, 2016, and as a result, they are now accounted for as discontinued operations in the accompanying consolidated financial statements for all periods presented. Accordingly, assets and liabilities, revenues and expenses, and cash flows related to the business of these subsidiaries have been appropriately reclassified in the accompanying consolidated financial statements as discontinued operations for all periods presented. Additional information with respect to the sale of these subsidiaries is presented at Note 3.

Before its divestment, Nova Dongguan was a wholly foreign-owned enterprise, or WFOE, and was incorporated under the laws of the PRC on June 6, 2003. Nova Dongguan organized Nova Museum on March 17, 2011 as a non-profit organization under the laws of the PRC engaged in the promotion of the culture and history of furniture in China. Nova Dongguan markets and sells products in China to stores in our former franchise network and to wholesalers and agents for domestic retailers and exporters. At the time of sale, Nova Dongguan also provided design expertise and facilities to manufacture branded products and products for international markets under original design manufacturer and original equipment manufacturer agreements, or ODM and OEM agreements. On October 24, 2013, Nova Dongguan incorporated Ding Nuo under the laws of the PRC.

The “Company” and “Nova” collectively refer to Nova LifeStyle, the U.S. parent, and its subsidiaries, Nova Furniture, Nova Samoa, Nova Macao, Diamond Bar, and BSI.  The “Company” may also from time to time in these Notes include the Company’s former subsidiaries, Nova Furniture BVI, Nova Dongguan, Nova Museum and Ding Nuo.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The 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, 2017 and for the nine and three month periods ended September 30, 2017 and 2016 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 not been included. 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, 2016, previously filed with the SEC on April 14, 2017.

6

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, 2017, its interim condensed consolidated results of operations and cash flows for the nine and three month periods ended September 30, 2017 and 2016, 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 consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, the allowance for bad debt, valuation of inventories, unrecognized tax benefits, valuation allowance for deferred tax assets, assumptions used in assessing impairment of long-lived assets and goodwill. Actual results could differ from those estimates.

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, 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 asset 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 Diamond Bar reporting unit.  Accordingly, as of September 30, 2017 and 2016, the Company concluded there was no impairment of goodwill of Diamond Bar.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

7

Accounts Receivable

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:

Balance at January 1, 2017	$	3,019,931
Provision for the period		203,905
Write off		(3,106,474	)
Balance at September 30, 2017	$	117,362

During the nine months ended September 30, 2016, bad debt (reversal) expense from continuing operations and discontinued operations were $33,818 and $552,611, respectively. During the three months ended September 30, 2016, bad debt expense from continuing operations and discontinued operations were $55,294 and $539,327, 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 actual practice, the Company always received goods within 5 to 9 months from the date the advance payment is made. As such, no reserve on supplier prepayments had been made or recorded by the Company. Any provisions for allowance for advance to suppliers, if deemed necessary, will be included in general and administrative expenses in the consolidated statements of income.

Inventories

Inventories are stated at the lower of cost and net realizable value with cost determined on a weighted-average basis. Management compares the cost of inventories with the net realizable value and an allowance is made for writing down their inventories to market value, if lower. The Company did not record any write-downs of inventory at September 30, 2017 and 2016.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330) - Simplifying the Measurement of Inventory,” which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted ASU 2015-11 effective January 1, 2017 and it did not have a material effect on the Company’s consolidated financial statements.

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 10% salvage value and estimated lives as follows:

Computer and office equipment	5 years
Decoration and renovation	10 years

Depreciation of plant, property and equipment attributable to manufacturing activities is capitalized as part of inventories, and expensed to cost of goods sold when inventories are sold.

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.

8

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.

Based on its review, the Company believes that, as of September 30, 2017 and December 31, 2016, there was no significant impairment of its long-lived assets.

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 expense from continuing operations was $364,105 and $94,839 for the nine months ended September 30, 2017 and 2016, respectively; and $0 and $35,174 for the three months ended September 30, 2017 and 2016, respectively.  Research and development expense from the Company’s discontinued operations was $588,790 and $179,643 for the nine and three months ended September 30, 2016, respectively.

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 actual effective tax rate of continuing operations of 48.24% for the nine months ended September 30, 2017 differs from the U.S. federal statutory tax rate, primarily as a result of tax liability reserves from uncertain tax positions.

During the nine months ended September 30, 2017 and 2016, the Company recorded income tax (benefit) and expense from its continuing operations of approximately ($750,000) and ($60,000), respectively.  During the three months ended September 30, 2017 and 2016, the Company recorded income tax (benefit) and expense of approximately ($262,000) and ($101,000) from its continuing operations.  

During the nine and three months ended September 30, 2016, the Company recorded income tax (benefit) expense from its discontinued operations of approximately ($26,000) and $36,000, respectively.  

Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture Limited and Bright Swallow are incorporated in the BVI. Nova Macao is incorporated in Macao. Nova Samoa is incorporated in Oceania. There is no income tax for companies domiciled in the BVI, Oceania or Macao. Accordingly, the Company’s consolidated financial statements do not present any income tax provision related to the BVI and Macao tax jurisdiction where Nova Furniture BVI, BSI and Nova Macao are domiciled. Nova Macao is an income tax-exempt entity incorporated and domiciled in Macao.

As of September 30, 2017, unrecognized tax benefits were approximately $1.4 million.  The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $1.4 million as of September 30, 2017. As of September 30, 2016, unrecognized tax benefits were approximately $4.6 million.  The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $4.6 million as of September 30, 2016.

A reconciliation of the January 1, 2017, through September 30, 2017, amount of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) is as follows:

	Gross UTB
Beginning Balance – January 1, 2017	$	1,642,381
Decrease in unrecorded tax benefits related to the Company’s continuing operations		(160,230	)
Exchange rate adjustment		(85,881	)
Ending Balance – September 30, 2017	$	1,396,270

9

As of September 30, 2017, the Company had cumulatively accrued approximately $567,000 for estimated interest and penalties related to unrecognized tax benefits, of which $567,000 were related to the Company’s continuing operations. At December 31, 2016, the Company had cumulatively accrued approximately $494,000 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 expense, which totaled approximately $73,000 and $331,000 for the nine months ended September 30, 2017 and 2016, respectively, of which $73,000 and $82,000 were related to the Company’s continuing operations; and totaled approximately $7,000 and $98,000 for the three months ended September 30, 2017 and 2016, respectively, of which $7,000 and $15,000 were 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.

Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2011-2016 remain open to examination by tax authorities in the U.S.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with ASC Topic 605, “Revenue Recognition.” Sales revenue is recognized when a formal arrangement exists, the price is fixed or determinable, the delivery is completed and no other significant obligations of the Company exist and collectability is reasonably assured. No revenue is recognized if there are significant uncertainties regarding the recovery of the consideration due, or the possible return of the goods. Payments received before all of the relevant criteria for revenue recognition are recorded as unearned revenue.

Sales revenue represents the invoiced value of goods, net of value-added taxes (“VAT”). All of the Company’s products sold in China are subject to the PRC VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials purchased in China and included in the cost of producing the finished product. The Company records VAT payable and VAT receivable net of payments in the consolidated financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government.

The Company’s sales policy allows for the return of product within the warranty period if the product is defective and the defects are the Company’s fault.  As alternatives for the product return option, the customers have options of asking a discount from the Company for the products with quality issues or receiving replacement parts from the Company at no cost. The amount for return of products, the discount provided to the Company’s customers and the costs for replacement parts were immaterial for the nine and three months ended September 30, 2017 and 2016.

Franchise Arrangements 

In 2010, the Company’s former subsidiaries in China began entering into area product franchise agreements with franchisees who operated specialty furniture stores carrying only Nova-branded products. The product franchise agreement provided for the franchisee to retail Nova-brand furniture products for a period of one year from the date of the agreement. The franchisee was required to pay a deposit of RMB 30,000 at the signing of the agreement, which is used as payment for future purchases and is deferred on the Company’s balance sheet as a customer deposit. The franchisee was required to guarantee a minimum purchase amount from the Company during the contract period. The Company had the right to terminate the agreement should the franchisee fail to meet the minimum purchase amount. The Company previously provided the franchisee with store images and designs, signage, floor plan product information and training. In addition, the Company would rebate a per square meter subsidy to the franchisee for the store build-out within 12 months from the agreement date.  Under the program, the Company established standard renovation amounts (the “Renovation Subsidy”) for various cities in China.  The franchisee was able to obtain, in the form of credits against purchase orders, percentages of the Renovation Subsidy applicable in the city in which the franchisee is located, as follows: 0% to 30% of the Renovation Subsidy applied to the first purchase order and 5% of each purchase order thereafter until the aggregate of all credits equals 100% of the Renovation Subsidy, or 12 months from the date of the franchise agreement, whichever occurs first. In accordance with ASC 605-50, as the Company does not receive an identifiable benefit from these rebates, the rebates are recorded as a reduction of revenue on sales to the franchisees.  All of the franchise agreements relating to the Company’s operations were divested in connection with its discontinued operations (see Note 3 – Discontinued Operations).

Cost of Sales

Cost of sales consists primarily of finished goods purchased from other manufacturers, material costs, labor costs and related overhead that are directly attributable to the production of the products. Write-downs of inventory to the lower of cost or net realizable value is also recorded in the cost of sales.

10

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, 2017 and 2016, shipping and handling costs from continuing operations were $1,576 and $2,033, respectively; and $623 and $313 for the three months ended September 30, 2017 and 2016, respectively.  During the nine and three months ended September 30, 2016, shipping and handling costs from discontinued operations were $373,123 and $137,308, respectively.

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 from continuing operations was $847,177 and $2,156,451 for the nine months ended September 30, 2017 and 2016, respectively; and $186,381 and $841,345 for the three months ended September 30, 2017 and 2016, respectively. Advertising expense from discontinued operations was $60,379 and $59,286 for the nine and three months ended September 30, 2016, respectively.

Share-based compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Share-based compensation associated with the issuance of equity instruments to non-employees is measured at the fair value of the equity instrument issued or committed to be issued, as this is more reliable than the fair value of the services received. The fair value is measured at the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.

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).

11

The following table presents a reconciliation of basic and diluted (loss) earnings per share for the nine and three months ended September 30, 2017 and 2016: 

	Nine Months Ended September 30,					Three Months Ended September 30,
	2017		2016			2017			2016
Income from continuing operations	$	2,304,709	$	1,189,266			$	2,956,633		$	1,044,931
Loss from discontinued operations		-		(1,476,572	)			-			(743,594	)
Net income (loss)		2,304,709		(287,306	)			2,956,633			301,337
Weighted average shares outstanding – basic		27,570,425		24,937,069				27,846,921			25,558,604
Dilutive unvested restricted stock		126,828		-				112,480			-
Dilutive vested stock options		7,153						21,228
Weighted average shares outstanding – diluted		27,704,406		2,493,7069		27,980,629					25,558,604
(Loss) income from continuing operations per share
– basic	$	0.08	$	0.05			$	0.11		$	0.04
– diluted	$	0.08	$	0.05			$	0.11		$	0.04
Loss from discontinued operations per share
– basic	$	0.08	$	(0.06	)		$	-		$	(0.03	)
– diluted	$	0.08	$	(0.06	)		$	-		$	(0.03	)
Net income (loss) per share
– basic	$	0.08	$	(0.01	)		$	0.11		$	0.01
– diluted	$	0.08	$	(0.01	)		$	0.11		$	0.01

* Including 571,533 and 337,114 shares that were granted and vested but not yet issued for the nine months ended September 30, 2017 and 2016, respectively.

For the nine and three months ended September 30, 2017 and 2016, 858,334 and 1,925,001 shares purchasable under warrants were excluded from EPS, respectively, as their effects were anti-dilutive. For the nine and three month periods ended September 30, 2016, the unvested restricted stock were anti-dilutive.

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.

A customer accounted for 35% and 10% of the Company’s sales for the nine months ended September 30, 2017 and 2016, respectively. A customer accounted for 54% and 10% of the Company’s sales for the three months ended September 30, 2017 and 2016, respectively. Accounts receivable from this customer were $21,812,355 and $5,216,213 as of September 30, 2017 and December 31, 2016, respectively.

The Company purchased its products from five major vendors during the nine and three months ended September 30, 2017, accounting for a total of 82% (26%, 19%, 15%, 12% and 10% for each) and 80% (30%, 16%, 12%, 11% and 11% for each) of the Company’s purchases, respectively.

The Company purchased its products from four and five major vendors during the nine and three months ended September 30, 2016, accounting for a total of 59% (20%, 15%, 12% and 12% for each) and 89% (22%, 17%, 17%, 17%, and 16% for each) of the Company’s purchases, respectively.

12

Advances made and accounts payable to these vendors were $13,237,351 and $0 as of September 30, 2017, respectively. Advances made and accounts payable to these vendors were $1,561,381 and $481,455 as of December 31, 2016, respectively.

Prior to its divestment of its PRC subsidiaries, the operations of the Company were located principally in China and the U.S. Accordingly, the Company’s Chinese subsidiaries’ business, financial condition and results of operations were, from time to time, influenced by the political, economic and legal environments in China, as well as by the general state of the PRC economy.

Statement of Cash Flows

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

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, advance to suppliers, other receivables, accounts payable, line of credit, advance from customers, other payables and accrued liabilities approximate estimated fair values because of their short maturities.  The estimated fair value of the long-term lines of credit approximated the carrying amount as of September 30, 2017, as the interest rates are considered as approximate to the current rate for comparable loans at the respective balance sheet dates.

Foreign Currency Translation and Transactions

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

The functional currency of Nova Dongguan, Nova Museum and Ding Nuo is RMB. The functional currencies of the Company’s foreign operations are translated into USD for balance sheet accounts using the current exchange rates in effect as of the balance sheet date, except for the equity account using the historical exchange rate, and for revenue and expense accounts using the weighted-average exchange rate during the fiscal year. The translation adjustments are recorded in the consolidated statements of income and comprehensive income, captioned “Accumulated other comprehensive income.” Gains and losses resulting from transactions denominated in foreign currencies are included in “Other income (expenses)” in the consolidated statements of income and comprehensive income. There have been no significant fluctuations in the exchange rate for the conversion of RMB to USD after the balance sheet date.

The RMB to USD exchange rates in effect as of September 30, 2016, was RMB6.6778 = USD$1.00. The weighted-average RMB to USD exchange rates in effect for the nine months ended September 30, 2016 was RMB6.5771= USD$1.00. The exchange rates used in translation from RMB to USD were published by the People’s Bank of the People’s Republic of China.

Comprehensive Income

The Company follows FASB ASC 220 “Reporting Comprehensive Income.” Comprehensive income is comprised of net income and all changes to the consolidated statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the nine and three months ended September 30, 2017 and 2016 included net income and foreign currency translation adjustments. 

13

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 business and industry segment: the design and sale of furniture.

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 US, Bright Swallow is a furniture distributor based in Hong Kong focusing on customers in Canada, and Nova Macao is a furniture distributor based in Macao focusing on international customers. They are all operated under the same senior management of the Company, and management views the operations of Diamond Bar, Bright Swallow and Nova Macao as a whole for making business decisions

Prior to the disposal of Nova Dongguan, the Company’s furniture products sold through Nova Dongguan, Nova Macao, and Ding Nuo were created with similar production processes, in the same facilities, under the same regulatory environment and sold to customers using similar distribution systems. Although Nova Museum was principally engaged in the dissemination of the culture and history of furniture in China, it also served a function of promoting and marketing the Company’s image and products by providing a platform and channel for consumers to be exposed to the Company and its products, it was operated under the same management with the same resources and in the same location as Nova Dongguan, and it was an additive and supplemental unit to the Company’s main operations, the design and sale of furniture.

Until the disposal of Nova Dongguan and its subsidiaries, all of the Company’s long-lived assets for production were located at its facilities in Dongguan, Guangdong Province, China, and operated within the same environmental, safety and quality regulations governing furniture manufacturers. After the disposal of Nova Dongguan and its subsidiaries, all of the Company’s long-lived assets are mainly property, plant and equipment located in the United States for administrative purposes.

Net sales to customers by geographic area are determined by reference to the physical locations of the Company’s customers. For example, if the products are delivered to a customer in the US, the sales are recorded as generated in the U.S.

New Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements.

In May 2014, the FASB issued No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients. These ASUs clarify the implementation guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606. The Company is evaluating the effect that these ASUs will have on its consolidated financial statements and related disclosures.

14

On March 30, 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes at settlement, forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public companies for fiscal years beginning after December 31, 2016, and interim periods within those annual periods. The Company adopted this new guidance on January 1, 2017 and this standard does not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures.

In October 2016, the FASB issued ASU No. 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. The Company will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions or disposals of assets or businesses.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

Note 3 - Discontinued Operations

On September 23, 2016, Nova Furniture, a wholly-owned subsidiary of the Company (the “Seller”), entered into a Share Transfer Agreement (the “Agreement”) with Kuka Design Limited, an unrelated company incorporated in British Virgin Islands (“Kuka Design BVI” or “Buyer”). Pursuant to the terms of the Agreement, the Seller sold all of the outstanding equity interests in Nova Dongguan, a wholly owned subsidiary of the Seller, to the Buyer for a total of $8,500,000 (the “Transaction”), which such value was primarily derived from Nova Dongguan and Nova Donguan’s wholly owned subsidiary, Nova Museum, and 90.97% owned subsidiary, Ding Nuo. Upon consummation of the Transaction on October 25, 2016, the Buyer became the sole owner of Nova Dongguan. The purchase price of $8,500,000 was fully paid on October 6, 2016.

15

On November 10, 2016, Nova Furniture entered into a Trademark Assignment Agreement with Kuka Design BVI.  Pursuant to the terms of the Trademark Assignment Agreement, Nova Furniture agreed to assign to Kuka Design BVI its full right to, and title in, the NOVA trademark in China for $6,000,000 (the “Assignment Fee”).  Kuka Design BVI was to pay the Assignment Fee in two installments: $1,000,000 on or before November 30, 2016, and $5,000,000 on or before December 31, 2016.  As the result of the assignment of NOVA trademark in China, Nova Furniture and its affiliated companies, including Nova Macao, have ceased to use the NOVA trademark and brand in their business in China. A portion of the Assignment Fee in the amount of $4,750,000 was received in 2016, and the remaining balance of $1,250,000 was fully paid in January 2017.

As a result, the operations of Nova Dongguan, Nova Museum and Ding Nuo are now accounted for as discontinued operations in the accompanying consolidated financial statements for all periods presented. The following table presents the components of discontinued operations reported in the consolidated statements of operations:

	Nine Months ended September 30,					Three Months Ended September 30
	2017		2016			2017		2016
Sales from external customers	$	-	$	15,351,105		$	-	$	6,111,494
Cost of goods sold		-		(13,338,316	)		-		(5,284,100	)
Operating expenses		-		(3,231,788	)		-		(907,016	)
Loss before income taxes		-		(1,450,487	)		-		(780,545	)
Income tax (expense) benefit		-		26,085			-		(36,951	)
Loss from discontinued operations	$	-	$	(1,476,572	)	$	-	$	(743,594	)

Note 4 - Inventories

The inventories as of September 30, 2017 and December 31, 2016 totaled $6,720,649 and $2,781,123, respectively, and were all finished goods.

Note 5 - Plant, Property and Equipment, Net

As of September 30, 2017 and December 31, 2016, plant, property and equipment consisted of the following:

	September 30, 2017			December 31, 2016
Computer and office equipment	$	283,336		$	274,735
Decoration and renovation		118,858			110,015
Less: accumulated depreciation		(243,782	)		(213,474	)
	$	158,412		$	171,276

Depreciation expense from continuing operations was $30,307 and $33,217 for the nine months ended September 30, 2017 and 2016, respectively; and $10,164 and $11,128 for the three months ended September 30, 2017 and 2016, respectively.  Depreciation expense from discontinued operations was $1,011,125 and $331,323 for the nine and three months ended September 30, 2016, respectively.

Note 6 - Intangible Assets

The Company acquired a customer relationship with a fair value of $50,000 on August 31, 2011, as part of its acquisition of Diamond Bar. Concurrently with its acquisition of Diamond Bar, the Company entered into a trademark purchase and assignment agreement for all rights, title and interest in two trademarks (Diamond Sofa and Diamond Furniture) for $200,000 paid in full at the closing. Amortization of said customer relationship and the trademarks is provided using the straight-line method and estimated lives were 5 years for each.

The Company acquired a customer relationship with a fair value of $6,100,559 on April 24, 2013, as part of its acquisition of Bright Swallow. Amortization of said customer relationship is provided using the straight-line method and estimated life was 15 years. 

16

The Company’s eCommerce platform is a website through which customers are able to browse and place orders online for the Company’s products. For the downloadable mobile application, customers are able to download the application onto their own mobile devices to browse the Company’s product offerings. The Nova sales kit application is used on mobile devices to enable the Company’s sales representatives to display the Company’s products and inventory to customers. The total cost associated with the development, programming, design and roll-out of the Company’s eCommerce platform, downloadable mobile application, and Nova sales kit application is approximately $1.20 million. The Company’s eCommerce platform, downloadable mobile application, and Nova sales-kit application were completed and put into operation in 2015. These intangible assets are amortized using the straight-line method with an original estimated life of 10 years for each and are revised to 1 year in the quarter ended March 31, 2017.  The effect of the change in estimate is accounted for on a prospective basis.  

Intangible assets consisted of the following as of September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
eCommerce platform	$	1,208,200		$	1,208,200
Customer relationship		6,150,559			6,150,559
Trademarks		200,000			200,000
Less: accumulated amortization		(2,985,147	)		(1,872,136	)
	$	4,573,612		$	5,686,623

Amortization of intangible assets from continuing operations was $1,113,011 and $428,977 for the nine months ended September 30, 2017 and 2016, respectively; and $371,004 and $140,215 for the three months ended September 30, 2017 and 2016, respectively. Amortization of intangible assets from discontinued operations was $28,164 and $9,305 for the nine and three months ended September 30, 2016, respectively.

Estimated amortization expense relating to the existing intangible assets with finite lives for each of the next five years is as follows:

12 months ending September 30,
2018	$	676,032
2019		406,704
2020		406,704
2021		406,704
2022		406,704

Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables

(a) On September 22, 2016, in order to promote the Company’s image and extend its customer reach, the Company entered into a memorandum of understating with an unrelated party (“MOU”) whereby the Company agreed to pay a total fee of $16,000,000 for a period of twelve months, commencing on December 31, 2016, to finance the establishment and promotion of the unrelated party’s Academic E-commerce platform and integrated training center in Hong Kong (the “Platform”). As of September 30, 2017 and December 31, 2016, the Company prepaid $0 and $7,000,000 to the unrelated party, respectively.

However, having considered the recent market situation and the status of the establishment and promotion of the Platform, the Company does not wish to continue to finance the promotion of the Platform. On March 20, 2017, the Company and the unrelated party terminated the MOU and released both parties from all the obligations and liabilities under the MOU. The Company agreed to bear the costs of $800,000 incurred by the unrelated party on the Platform, which were charged as expenses in the first quarter of fiscal year 2017. The Company collected a total of approximately $13 million, which was prepaid previously, as of September 30, 2017, and no further balance was owed by the unrelated party.

(b)          Prepaid Expenses and Other Receivables consisted of the following at September 30, 2017 and December 31, 2016: 

	September 30, 2017			December 31, 2016
Prepaid expenses		$	288,784		$	573,005
Other receivables			27,049			69,886
Total		$	315,833		$	642,891

17

On March 23, 2017, the Company made a short-term advance of $2,000,000 to an unrelated party. The advance is unsecured and bears interest of 5% per annum. The unrelated party agreed to pay the whole amount of $2,000,000 back to the Company by May 31, 2017. During the nine months ended September 30, 2017, the Company collected full payment of the principal and interest of $26,575 from the unrelated party.

Note 8 - Accrued Liabilities and Other Payables

Accrued liabilities and other payables consisted of the following as of September 30, 2017 and December 31, 2016:

	September 30, 2017		December 31, 2016
Other payables	$	18,462	$	47,790
Salary payable		42,909		30,207
Financed insurance premiums		128,891		66,314
Accrued rents		84,659		102,269
Accrued commission		360,630		494,108
Accrued expenses, others		90,950		40,272
Total	$	726,501	$	780,960

As of September 30, 2017 and December 31, 2016, other accrued expenses mainly included legal and professional fees, transportation expenses and utilities.  Other payables represented other tax payable and meal expenses.

Note 9 - Lines of Credit

Diamond Bar entered into an agreement with a bank in California for a line of credit of up to $5,000,000 with annual interest of 4.25% and maturity on June 1, 2015. On June 8, 2015, the bank extended and modified the terms of the loan agreement to extend the line of credit up to a maximum of $6,000,000 until July 31, 2015 and $5,000,000 thereafter with an annual interest rate of 4.25% and maturity on September 1, 2015 (the term of which the bank allowed to extend until the renewal described in the following sentence while the bank conducted its own audit associated therewith). On September 28, 2015, Diamond Bar extended the line of credit up to a maximum of $6,000,000 with annual interest of 3.75% (4% from December 17, 2015) and maturity on June 1, 2017. On January 20, 2016, Diamond Bar increased the line of credit up to a maximum of $8,000,000 with annual interest of 4%.  On June 22, 2017, Diamond Bar extended the line of credit to maturity on September 1, 2017. On September 19, 2017, Diamond Bar extended the line of credit to maturity on June 1, 2019. The annual interest was 4.25% as of September 30, 2017. The line of credit is secured by all of the assets of Diamond Bar and is guaranteed by Nova LifeStyle. As of September 30, 2017 and December 31, 2016, Diamond Bar had $3,322,040 and $6,129,841 outstanding on the line of credit, respectively.  During the nine months ended September 30, 2017 and 2016, the Company recorded interest expense of $145,857 and $167,381, respectively; and $40,932 and $61,127 for the three months ended September 30, 2017 and 2016, respectively.  As of September 30, 2017, Diamond Bar had $4,677,960 available for borrowing without violating any covenants.

The Diamond Bar loan has the following covenants: (i) maintain a minimum tangible net worth of not less than $10 million; (ii) maintain a ratio of debt to tangible net worth not in excess of 2.500 to 1.000; (iii) the pre-tax income must be not less than 1.000% of total revenue quarterly; and (iv) maintain a current ratio in excess of 1.250 to 1.000. As of September 30, 2017, Diamond Bar was in compliance with the stated covenants.  

On January 22, 2015, Nova Macao renewed a line of credit, with an annual interest rate of 4.25% and principal of up to $6,500,000, with a commercial bank in Hong Kong to extend the maturity date to January 29, 2016. On February 16, 2016, Nova Macao extended the maturity date of line of credit to January 31, 2017, with an annual interest rate of 4% and principal of up to $6,500,000. The loan requires monthly payment of interest and that the interest rate will be adjusted annually. The loan was secured by assignment of Sinosure (China Export and Credit Insurance Company) credit insurance and was guaranteed by Nova LifeStyle and Diamond Bar. The Company did not extend the line of credit and paid it off in February 2017. As of September 30, 2017 and December 31, 2016, Nova Macao had $0 and $1,848,000 outstanding on the line of credit, respectively. During the nine months ended September 30, 2017 and 2016, Nova Macao paid interest of $13,828 and $57,304, respectively; and $0 and $18,890 for the three months ended September 30, 2017 and 2016, respectively.

Note 10 - Related Party Transactions

On September 30, 2011, Diamond Bar leased a showroom in High Point, North Carolina from the Company’s president who is currently also our Chief Executive Officer and Chairman of the Board. The lease is to be renewed and has been renewed each year since 2011. On March 16, 2017, the Company renewed the lease for an additional one year term. The lease was $32,916 for one year and only for use during two furniture exhibitions to be held between April 1, 2017 and March 31, 2018. During the nine and three months ended September 30, 2017, the Company paid rental amounts of $32,916 and $16,458 that are included in selling expenses from continuing operations.

18

During the nine and three months ended September 30, 2016, the Company paid rental amounts of $32,916 that are included in selling expenses from continuing operations.

Note 11 - Stockholders’ Equity

Warrants

Following is a summary of the warrant activity for the nine months ended September 30, 2017: 

	Number of Warrants		Average Exercise Price		Weighted Average Remaining Contractual Term in Years
Outstanding at January 1, 2017		858,334	$	2.71		3.92
Exercisable at January 1, 2017		858,334		2.71		3.92
Granted		-		-		-
Exercised / surrendered		-		-		-
Expired		-		-		-
Outstanding at September 30, 2017		858,334	$	2.71		3.17
Exercisable at September 30, 2017		858,334	$	2.71		3.17

Shares Issued to Consultants 

On December 1, 2014, the Company entered into a consulting agreement with a consulting firm for management consulting services effective on December 1, 2014. The Company agreed to issue 60,000 shares of the Company’s common stock to the firm for three years of consulting services. The shares will be issued according to the following vesting schedule set forth as follows: The initial 10,000 shares were required to be issued within 30 days upon signing of the agreement; for the remaining 50,000 shares, the Company issued to the consultant 10,000 shares of common stock on or before each of June 1, 2015, December 1, 2015, June 1, 2016, December 1, 2016 and June 1, 2017. The Company or the consultant may terminate the agreement at any time by 90 days’ written notice to the other party. The fair value of the 60,000 shares was $224,400, which was calculated based on the stock price of $3.74 per share on December 1, 2014 and will be amortized over the service term. During each of the nine-month and three-month periods ended September 30, 2017 and 2016, the Company amortized $56,100 and $18,700 as consulting expenses, respectively. 

On March 1, 2015, the Company entered into a marketing agreement with a consultant for marketing and product promotion services effective on March 1, 2015. The Company agreed to grant the consultant $100,000 worth of shares of the Company’s common stock for 12 months of consulting services starting on March 1, 2015. The shares vested immediately on March 1, 2015. The share price was calculated as the average closing price per share for ten trading days immediately prior to the execution of the agreement and was amortized over the service term. On March 9, 2015, the Company issued 38,745 shares at an average price of $2.581 per share to the consultant. During the nine months ended September 30, 2017 and 2016, the Company amortized $0 and $16,667 as consulting expenses, respectively; and $0 for each of the three month periods ended September 30, 2017 and 2016. 

On September 14, 2015, the Company entered into a business marketing advisory agreement with a consultant for marketing and general consulting services effective on August 15, 2015. The Company agreed to pay the consultant a monthly fee of $5,000 and also granted 18,348 shares of the Company’s common stock to the consultant for 12 months of services starting on August 15, 2015. Twenty-five percent (25%) of those shares vested on November 15, 2015, 25% on February 15, 2016, 25% on May 15, 2016 and the remaining 25% vested on August 15, 2016. The fair value of the 18,348 shares was $45,870, which was calculated based on the stock price of $2.50 per share on August 15, 2015 and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $0 and $28,669 as consulting expenses, respectively; and $0 and $5,734 for the three months ended September 30, 2017 and 2016, respectively.

On February 1, 2016, the Company entered into a marketing agreement with a consultant for marketing development strategies and consulting services for 15 months. The Company agreed to grant the consultant 10,000 unregistered restricted shares of the Company’s common stock per month, for a total commitment of 150,000 shares of common stock. The fair value of the 150,000 shares was $204,000, which was calculated based on the stock price of $1.36 per share on February 1, 2016, the date the agreement was executed, and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $54,400 and $108,800 as consulting expenses, respectively; and $0 and $40,800 for the three months ended September 30, 2017 and 2016 as consulting expenses, respectively.

19

On February 1, 2016, the Company entered into an agreement with a consultant for E-Commerce consulting service with a term of 24 months. The Company agreed to grant the consultant 10,000 shares of the Company’s common stock per month, for a total commitment of 240,000 shares. Twelve and half percent (12.5%) of those shares vested or will vest on April 30, 2016, 12.5% on July 30, 2016, 12.5% on October 31, 2016, 12.5% on January 31, 2017, 12.5% on April 30, 2017, 12.5% on July 30, 2017, 12.5% on October 31, 2017, and the remaining 12.5% on January 31, 2018. The fair value of the 240,000 shares was $326,400, which was calculated based on the stock price of $1.36 per share on February 1, 2016, the date the agreement was executed, and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $122,400 and $108,800 as consulting expenses, respectively; and $40,800 for the three months ended September 30, 2017 and 2016.

On February 1, 2016, the Company entered into a consulting agreement with a consultant for planning, coordinating and strategy implementation services for a term of 6 months. The Company agreed to grant the consultant $10,000 worth of shares of the Company’s common stock per month. During each of the nine month periods ended September 30, 2017 and 2016, 83,386 shares vested, based on the stock prices as of the end of each month commencing February 2016 and concluding September 2016. During the nine months ended September 30, 2017 and 2016, the Company amortized $0 and $60,000 as consulting expense, respectively; and $0 and $10,000 for the three month ended September 30, 2017 and 2016, respectively.

On November 15, 2016, the Company entered into a consulting and strategy service agreement with a consultant for marketing and general consulting services effective on November 14, 2016. The Company agreed to grant 100,000 shares of the Company’s common stock to the consultant for 12 months of services starting on November 14, 2016. The shares would be issued pursuant to Nova LifeStyle, Inc. 2014 Omnibus Long-Term Incentive Plan (the “Plan”) approved by the Board of Directors (“Board”) of the Company on May 13, 2014 and ratified at the annual shareholder meeting on June 30, 2014. The Plan was registered under Form S-8 on July 30, 2014. Twenty-five percent (25%) of those shares vested on December 15, 2016, 25% on February 15, 2017, 25% on May 15, 2017, and the remaining 25% will vest on August 15, 2017. The fair value of the 100,000 shares was $294,000, which was calculated based on the stock price of $2.94 per share on November 15, 2016 and will be amortized over the service term. During the nine and three months ended September 30, 2017, the Company amortized $219,896 and $74,104 as consulting expenses, respectively.

On November 15, 2016, the Company entered into a consulting agreement with a consultant for business development and financial advisory service for a term of 12 months. The Company agreed to grant the consultant 100,000 shares of the Company’s common stock. The shares would be issued pursuant to the Plan. The fair value of the 100,000 shares was $294,000, which was calculated based on the stock price of $2.94 per share on November 15, 2016 and will amortized over the service term. During the nine and three months ended September 30, 2017, the Company amortized $220,500 and $73,500 as consulting expense, respectively.

On November 15, 2016, the Company entered into a consulting agreement with a consultant for business advisory service for a term of 12 months. The Company agreed to compensate the consultant a one-time amount of $20,000 worth of shares of the Company’s common stock based on the price per share on November 15, 2016. The Company also granted the consultant $15,000 worth of shares of the Company’s common stock per month starting from December 1, 2016 for 12 months. The shares would be issued pursuant to the Plan. During the nine and three months ended September 30, 2017, the Company amortized $150,000 and $50,000 as consulting expense, respectively.

On June 30, 2017, the Company entered into a consulting agreement with a consultant for business advisory service for a term of 12 months. The Company agreed to compensate the consultant a one-time amount of $10,000 worth of shares of the Company’s common stock based on the price per share on June 30, 2017. The Company also granted the consultant $10,000 worth of shares of the Company’s common stock per month starting from July 1, 2017 for a period of 12 months. The shares would be issued pursuant to the Plan. During the nine and three months ended September 30, 2017, the Company amortized $32,500 as consulting expense.

Shares and Warrants Issued through Private Placement

Private Placement on May 28, 2015

On May 28, 2015, the Company entered into a Securities Purchase Agreement with certain purchasers (the “Purchasers”) pursuant to which the Company offered to the Purchasers, in a registered direct offering, an aggregate of 2,970,509 shares of common stock, par value $0.001 per share. Of these, 2,000,001 shares were sold to the Purchasers at a negotiated purchase price of $2.00 per share, for aggregate gross proceeds to the Company of $4,000,002, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. In accordance with the terms of the Securities Purchase Agreement entered on April 14, 2014, the outstanding 2014 Series A Warrants were exchanged for 660,030 shares of common stock, and the outstanding 2014 Series C Warrants were exchanged for 310,478 shares of common stock.

In a concurrent private placement, the Company also sold to the Purchasers a warrant to purchase one share of the Company’s common stock for each share purchased for cash in the offering, pursuant to that certain Common Stock Purchase Warrant, by and between the Company and each Purchaser (the “2015 Warrants”). The 2015 Warrants became exercisable beginning on the six month anniversary of the date of issuance (the “Initial Exercise Date”) at an exercise price of $2.71 per share and will expire on the five year anniversary of the Initial Exercise Date. The purchase price of one share of the Company’s common stock under the 2015 Warrants is equal to the exercise price. 

20

The warrants issued in the private placement described above are exercisable for a fixed number of shares, and are classified as equity instruments under ASC 815-40-25-10. The Company accounted for the warrants issued in the 2015 private placement based on the fair value method under ASC Topic 505, and the fair value of the warrants was calculated using the Black-Scholes model under the following assumptions: estimated life of 5 years, volatility of 107%, risk-free interest rate of 1.55% and dividend yield of 0%. No estimate of forfeitures was made as the Company has a short history of granting options and warrants. The fair value of the warrants issued to investors at grant date was $3,147,530.

Shares and Options Issued to Independent Directors

In March 2015, the Company entered into restricted stock award agreements under the 2014 Omnibus Long-Term Incentive Plan with three independent directors of the Board. The Company agreed to grant 12,195 shares of the Company’s common stock to each of these independent directors with a grant date of March 24, 2015. The restricted period lapses as to 25% of the restricted stock on September 30, 2015, December 31, 2015, March 31, 2016 and September 30, 2016, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date. The fair value of these shares was $119,999, which was calculated based on the stock price of $3.28 per share on March 24, 2015. During the nine and three months ended September 30, 2016, the Company amortized $26,959 and $0 as directors’ stock compensation expenses, respectively.

In May 2015, the Company entered into a restricted stock award agreement under the 2014 Omnibus Long-Term Incentive Plan with a new independent director. The Company agreed to grant 12,195 shares of the Company’s common stock to the new independent director with a grant date of May 19, 2015. The restricted period lapsed as to 25% of the restricted stock on September 30, 2015, December 31, 2015, March 31, 2016 and September 30, 2016, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date. The fair value of these shares was $38,292, which was calculated based on the stock price of $3.14 per share on May 19, 2015. During the nine and three months ended September 30, 2016, the Company amortized $14,478 and $0 as directors’ stock compensation expenses, respectively.

On August 9, 2016, the Board approved a restricted stock award agreement under the 2014 Omnibus Long-Term Incentive Plan with four independent directors. The Company agreed to grant $40,000 worth of stocks to each of its four independent directors. The restricted period lapses as to 25% of the restricted stock granted vested on September 30, 2016 based on the closing price of common stock on Nasdaq as of August 9, 2016, 25% of the restricted stock granted vested on December 31, 2016 based on the closing price of common stock on Nasdaq as of September 30, 2016, 25% of the restricted stock granted vested on March 31, 2017 based on the closing price of common stock on Nasdaq as of December 31, 2016, and 25% of the restricted stock granted vested on June 30, 2017 based on the closing price of common stock on Nasdaq as of March 31, 2017. During the nine and three months ended September 30, 2017, the Company amortized $96,438 and $17,096 as directors’ stock compensation expenses, respectively. During the nine and three months ended September 30, 2016, the Company amortized $23,233 as directors’ stock compensation expenses.

On April 10, 2017, the Company entered into restricted stock award agreements under 2014 Omnibus Long-Term Incentive Plan with a new independent director of the Board. The Company agreed to grant $20,000 worth of stock to the independent director with a grant date on April 10, 2017. The restricted period lapses as of 50% of the restricted stock granted vested on April 10, 2017 based on the closing price of common stock on Nasdaq as of April 10, 2017, and 50% of the restricted stock granted vested on June 30, 2017 based on the closing price of common stock on Nasdaq as of June 30, 2017. During the nine and three months ended September 30, 2017, the Company amortized $13,699 and $5,041 as directors’ stock compensation expenses, respectively.

On September 26, 2017 (the “Grant Date”), the Company entered into stock option agreements under the 2014 Omnibus Long-Term Incentive Plan with the three independent members of the board of directors. The Company agreed to grant the Company’s three independent directors options to purchase an aggregate of 300,000 shares of the Company’s common stock at an exercise price of $1.65 per shares, with a term of 5 years. Twenty-five percent (25%) of those stock options vested or will vest on the September 30, 2017, 25% on December 31, 2017, 25% on March 31, 2018, and the remaining 25% will vest on June 30, 2018, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date.

The fair value of the stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model (“BSOPM”). The BSOPM has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk-free interest rate is based upon market yields for United States Treasury debt securities at a maturity near the term remaining on the option. Dividend rates are based on the Company’s dividend history. The stock volatility factor is based on the historical volatility of the Company’s stock price. The expected life of an option grant is based on management’s estimate as no options have been exercised in the Plan to date. The fair value of the option granted to of the independent directors is recognized as director fee over the vesting period of the stock option award. The fair value of the options was calculated using the following assumptions, estimated life of five years, volatility of 84%, risk free interest rate of 0.15%, and dividend yield of 0%. The fair value of 300,000 stock options was $324,907 at the grant date. During the nine and three months ended September 30, 2017, the Company recorded $81,227 as directors’ stock compensation expenses.

21

Shares Issued to Employees and Service Providers

On May 18, 2016, the Company entered into agreements with three designers for product design services for a term of 24 months. The Company agreed to grant each designer 240,000 shares of the Company’s common stock. Twenty five percent (25%) of those shares vested or will vest on May 31, 2016, 25% on December 18, 2016, 25% on June 18, 2017 and the remaining 25% on December 18, 2017. The fair value of these shares was $388,800, which was calculated based on the stock price of $0.54 per share on May 18, 2016, the date the agreement was executed, and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $145,401 and $72,434 as stock compensation expenses, respectively; and $48,999 for the three months ended September 30, 2017 and 2016.

On November 14, 2016, the Company entered into an employment agreement with an executive for one year. The Company agreed to grant an award of 30,000 restricted Stock Units to the executive pursuant to the Company’s 2014 Omnibus Long-Term Incentive Plan. The fair value of these shares was $92,100, which was calculated based on the stock price of $3.07 per share on November 11, 2016, the date the awards were determined by the Compensation Committee of the Board. Twenty-five percent (25%) of those shares vested on December 30, 2016, 25% on March 31, 2017, 25% on June 30, 2017 and the remaining 25% vest on September 30, 2017. During the nine and three months ended September 30, 2017, the Company amortized $68,886 and $23,214 as stock compensation, respectively.

On November 15, 2016, the Company entered into an agreement with a designer for furniture design services effective on November 15, 2016 for 1 year. The Company agreed to grant the designer 100,000 shares of the Company’s common stock. The fair value of the 100,000 shares was $294,000, which was calculated based on the stock price of $2.94 per share on November 15, 2016 and will be amortized over the service term. Twenty-five percent (25%) of those shares vested on February 15, 2017, 25% on May 15, 2017, 25% will vest on August 15, 2017 and the remaining 25% will vest on November 15, 2017. During the nine and three months ended September 30, 2017, the Company amortized $220,500 and $73,500 as stock compensation, respectively.

Options Issued to Employees

On August 29, 2017 (the “Grant Date”), the Board approved option grants to the Company’s employees to purchase an aggregate of 780,000 shares of the Company’s common stock (including options to purchase 100,000 shares and 35,000 shares to the Company’s President and CFO, respectively) at an exercise price of $1.26 per shares, with a term of 5 years, pursuant to the Company’s 2014 Omnibus Long-Term Incentive Plan. Fifty percent (50%) of those stock options vested immediately, and the remaining 50% will vest on the six-month anniversary of the Grant Date.

The fair value of the stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model (“BSOPM”) as described in options to independent directors above. The fair value of the option granted to employees is recognized as compensation expense over the vesting period of the stock option award. The fair value of the options was calculated using the following assumptions, estimated life of ten years, volatility of 84%, risk free interest rate of 0.16%, and dividend yield of 0%. The fair value of 780,000 stock options was $643,182 at the grant date. During the nine and three months ended September 30, 2017, the Company recorded $321,591 as stock compensation.

	Number of Shares		AverageExercise Price per Share		Aggregate IntrinsicValue(1)		WeightedAverageRemainingContractual Term in Years
Granted		1,080,000	$	1.37				5.00
Exercised		-		-				-
Forfeited				-				-
Outstanding at September 30, 2017		1,080,000	$	1.37		315,000		4.93
Exercisable at September 30, 2017		465,000	$	1.32		156,750		4.92

(1) The intrinsic value of the stock options at September 30, 2017 is the amount by which the market value of the Company’s common stock of $1.66 as of September 30, 2017 exceeds the exercise price of the option.

22

Note 12 - Statutory Reserves

As a U.S. holding company, the Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiary, Nova Macao, only out of the subsidiary’s retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Nova Macao. Pursuant to the corporate laws of the PRC and Macao, including the PRC Regulations on Enterprises with Foreign Investment, Nova Macao is required to maintain a statutory reserve by appropriating from after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained earnings. As a result of the PRC laws and regulations described below that require such annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as a general statutory reserve fund, Nova Macao is restricted in its ability to transfer a portion of its net assets to the Company as a dividend.

Surplus Reserve Fund

Prior to the Company’s divestment of Nova Dongguan and Ding Nuo, such subsidiaries were required to transfer 10% of net income, as determined under PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the subsidiary’s registered capital. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholdings or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issuance is not less than 25% of the registered capital.

At September 30, 2017 and December 31, 2016, Nova Macao had surplus reserves of $6,241, representing 50% of its registered capital.

Common Welfare Fund

The common welfare fund is a voluntary fund to which Nova Macao can elect to transfer 5% to 10% of its net income. This fund can only be utilized on capital items for the collective benefit of the subsidiary’s employees, such as construction of dormitories, cafeteria facilities, and other staff welfare facilities. This fund is non-distributable other than upon liquidation. Nova Macao does not participate in this voluntary fund.

Note 13 - Geographical Sales

Geographical distribution of sales consisted of the following for the nine and three months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,				Three Months Ended September 30,
Geographical Areas	2017		2016		2017		2016
North America	$	37,158,028	$	52,539,699	$	11,900,592	$	22,529,655
Europe		3,456,045		10,739,127		-		2,932,288
Australia		24,690,606		3,445,635		17,992,912		1,356,201
Asia*		5,020,746		3,596,850		3,329,121		1,748,750
Hong Kong		461,943		2,194,115		-		1,897,420
Other countries		26,046		233,546		-		74,604
	$	70,813,414	$	72,748,972	$	33,222,625	$	30,538,918

* excluding Hong Kong

Note 14 - Commitments and Contingencies

Lease Commitments

On June 17, 2013, the Company entered into a lease agreement for office, warehouse, storage, and distribution space with a five year term, commencing on November 1, 2013 and expiring on October 31, 2018. The lease agreement also provides an option to extend the term for an additional six years. The monthly rental payment is $42,000 with an annual 3% increase.  The rent is recorded on a straight-line basis over the term of the lease. 

23

On January 7, 2014, the Company entered into a sublease agreement with Diamond Bar for warehouse space with a five-year term commencing on November 1, 2013 and expiring on October 31, 2018. The Company subleased a portion of its warehouse space to one of its customers with a one-year term commencing on December 1, 2013 and expiring on November 30, 2014, which has been renewed every year with the current term expiring on October 31, 2017.  On October 24, 2017, the Company renewed the sublease agreement with this customer for another one-year term commencing on November 1, 2017 and expiring on October 31, 2018. The sublease income of $5,400 per month was recorded against the rental expense. During the nine months ended September 30, 2017 and 2016, the Company recorded $48,600 and $60,231 sublease income, respectively; and $16,200 and $20,077 for the three months ended September 30, 2017 and 2016, respectively.

On September 19, 2013, Bright Swallow entered into a lease agreement for office space in Hong Kong with a two year term, commencing on October 1, 2013 and expiring on September 30, 2015.  On September 15, 2015, Bright Swallow renewed the lease for another two year term, commencing on October 1, 2015 and expiring on September 30, 2017. On September 13, 2017, Bright Swallow renewed the lease for another two year term, commencing on October 1, 2017 and expiring on September 30, 2019. The monthly rental payment is 20,000 Hong Kong Dollars ($2,560).  

The Company has entered into several lease agreements for office and warehouse space in Commerce, California and showroom space in Las Vegas, Nevada and High Point, North Carolina on monthly or annual terms.

Total rental expense from continuing operations for the nine months ended September 30, 2017 and 2016 was $597,103 and $510,018, respectively; and $224,349 and $180,528 for the three months ended September 30, 2017 and 2016. The rental expense is recorded on a straight-line basis over the term of the lease.

The total minimum future lease payments are as follows:

12 Months Ending September 30,	Amount
2018	$	596,600
2019		77,991
2020		-
2021		-
2022		-
Thereafter		-
Total	$	674,591

Employment Agreements

On May 3, 2013, the Company entered into an amended and restated employment agreement with Thanh H. Lam to serve as the Company’s president for a five-year term. The agreement provides for an annual salary of $80,000, a grant of 200,000 shares of the Company’s common stock and an annual bonus at the sole discretion of the Board. The 200,000 shares to be issued to Ms. Lam are subject to the terms of a stock award agreement. The first 50,000 shares of common stock were vested immediately, and the remaining shares vest at 50,000 shares per year for three years on each anniversary of the effective date of the stock award agreement. The fair value of the shares was based on the stock price of $3.82 per share on May 3, 2013. During the nine months ended September 30, 2017 and 2016, the Company recorded $0 and $64,626, as stock-based compensation to Ms. Lam, respectively. During the three months ended September 30, 2017 and 2016, the Company recorded $0, as stock compensation to Ms. Lam, respectively. On July 24, 2017, the Company and Thanh H. Lam entered into an amendment (the “Amendment”) to her amended and restated employment agreement, pursuant to which she serves as the Company’s Chief Executive Officer and President.  The Amendment increased the annual salary of Ms. Lam from $80,000 to $100,000.

On March 21, 2016, the Company granted Restricted Stock Units to Ya Ming (Jeffrey) Wong (the Company’s former CEO), Yuen Ching (Sammy) Ho, the Company’s former CFO, and Thanh H. Lam, the Company’s President. Each of them will receive a grant of 100,000 Restricted Stock Units (“RSU”). The fair value of the 300,000 shares of RSU was $360,000, which was calculated based on the stock price of $1.20 per share on March 21, 2016. The RSU grants, to the extent not forfeited, have fully vested. During the nine months ended September 30, 2017 and 2016, the Company recorded $0 and $270,000, as stock-based compensation to the officers, respectively. During the three months ended September 30, 2017 and 2016, the Company recorded $0 and $90,000, as stock-based compensation to the officers, respectively.

On March 25, 2016, the Company entered into one-year employment agreements, effective as of November 11, 2015, with Mr. Ya Ming (Jeffrey) Wong and Mr. Yuen Ching (Sammy) Ho to serve as the Company’s CEO and CFO, respectively. These agreements were in substantially the same form as the previous one-year employment agreements entered into on March 25, 2015 (which expired by their terms), and provide for annual salaries of $100,000 for Mr. Wong and $80,000 for Mr. Ho, and annual bonuses at the sole discretion of the Board of Directors. The employment agreements also reflect the RSU grants described in the immediately preceding paragraph. On October 3, 2016, Mr. Wong resigned his position as CEO, terminated his employment agreement, and forfeited 25,000 RSUs granted to him under such agreement. On August 15, 2017, Mr. Ho resigned his position as CFO and terminated his employment agreement.

24

On August 22, 2017, the Company entered into a one-year employment agreement, effective as of August 22, 2017, with Jeffery Chuang, the Company’s new CFO. The employment agreement provided for an annual salary of $50,000 to CFO and annual bonuses at the sole discretion of the Board of Directors. The employment agreement also provides for a grant of options to purchase 35,000 shares of the Company’s common stock, which was described in the Note 11 – Stockholders’ equity.

Note 15 - Subsequent Events

The Company has evaluated all events that have occurred subsequent to September 30, 2017 through the issuance of the consolidated financial statements and the following subsequent event has been identified.

On October 24, 2017, the Company renewed the sublease agreement with its one of its customers for a one-year term commencing on November 1, 2017 and expiring on October 31, 2018.

25

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” the negatives of such terms and other terms of similar meaning typically identify forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our 2016 Form 10-K. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report and in our 2016 Form 10-K. Unless the context otherwise requires, references in this report to “we,” “us,” “Nova,” “Nova Lifestyle” or the “Company” refer to Nova Lifestyle, Inc. and its subsidiaries.

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

Safe Harbor Declaration

The following discussion and analysis is 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 2016 Form 10-K. All references to the third quarter and first nine months of 2017 and 2016 mean the three and nine-month periods ended September 30, 2017 and 2016, respectively.  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. 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 2016 Form 10-K.

Overview

Nova LifeStyle, Inc. is a broad based distributor and retailer of contemporary styled residential furniture incorporated into a dynamic marketing and sales platform offering retail as well as online selection and purchase fulfillment globally.  We monitor popular trending and work 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, Nova LifeStyle also sells (through an exclusive third party manufacturing partner) a managed variety of high quality bedding foundation components.

Nova LifeStyle’s brand family currently includes Diamond Sofa (www.diamondsofa.com), Colorful World, Giorgio Mobili, and Bright Swallow.

Our customers principally consist of distributors and retailers having specific geographic coverages that deploy middle to high end private label home furnishings having very little competitive overlap within our specific furnishings 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, thus allowing us to continually focus on building both same store sales growth as well as drive the expansion of our overall distribution and manufacturing relationships through a deployment of popular, as well as trend-based, furnishing solutions worldwide.

We are a U.S. holding company with no material assets other than the ownership interests of our wholly owned subsidiaries through which we market, design and sell residential furniture worldwide: Nova Macao, Bright Swallow, and Diamond Bar. Nova Macao was organized under the laws of Macao on May 20, 2006. Nova Macao is a wholly owned subsidiary of Nova Lifestyle.  Diamond Bar is a California corporation organized on June 15, 2000, which we acquired pursuant to a stock purchase agreement on August 31, 2011.  On April 24, 2013, we acquired all of the outstanding stock of Bright Swallow; the purchase price was $6.5 million in cash and was fully paid at the closing of the acquisition.  

Our experience developing and marketing products for international markets has enabled us to develop the scale, logistics, marketing, manufacturing efficiencies and design expertise that serve as the foundation for us to expand aggressively into the highly attractive U.S., Canadian, European, Australian, Asian and Middle Eastern markets. 

26

Discontinued Operations

On October 24, 2013, Nova Dongguan incorporated Ding Nuo under the laws of the PRC and contributed capital of RMB 1 million ($162,994). Nova Dongguan made an additional capital contribution of RMB 0.1 million ($16,305) on November 27, 2013 through one of Nova Dongguan’s officers, Mr. Gu Xing Chang, who acted as the nominee shareholder of Ding Nuo. 

On September 23, 2016, Nova Furniture, a wholly-owned subsidiary of the Company (the “Seller”), entered into a Share Transfer Agreement (the “Agreement”) with Kuka Design Limited, an unrelated company incorporated in British Virgin Islands (“Kuka Design BVI” or “Buyer”). Pursuant to the terms of the Agreement, the Seller sold all of the outstanding equity interests in Nova Dongguan, a wholly owned subsidiary of the Seller, to the Buyer for a total of $8,500,000 (the “Transaction”), which such value was primarily derived from Nova Dongguan and Nova Donguan’s wholly owned subsidiary, Nova Museum, and 90.97% owned subsidiary, Ding Nuo. Upon consummation of the Transaction on October 25, 2016, the Buyer became the sole owner of Nova Dongguan.  The purchase price of $8,500,000 was fully paid on October 6, 2016.

On November 10, 2016, Nova Furniture (“Assignor”) entered into a Trademark Assignment Agreement with Kuka Design BVI (“Assignee”).  Pursuant to the terms of the Trademark Assignment Agreement, Assignor agreed to assign to the Assignee its full right to, and title in, the NOVA trademark in China for $6,000,000 (the “Assignment Fee”).  Assignee was to pay the Assignment Fee in two installments: $1,000,000 on or before November 30, 2016, and $5,000,000 on or before December 31, 2016. As of December 31, 2016, $4,750,000 had been received, and the remaining balance of $1,250,000 was fully paid in January 2017.

As a result, the operations of Nova Dongguan, Nova Museum and Ding Nuo are now accounted for as discontinued operations in the accompanying consolidated financial statements for all periods presented.

Principal Factors Affecting Our Financial Performance

Significant factors that we believe could affect our operating results are the (i) prices of our products to our international retailer and wholesaler customers and their markups to end consumers; (ii) consumer acceptance of our new brands and product collections; and (iii) general economic conditions in the U.S., Canadian, European and other international markets. We believe most of our customers are willing to pay higher prices for our high quality and stylish products, timely delivery and strong production capacity, which we expect will allow us to maintain high gross profit margins for our products. We have diversified our products by acquiring the Diamond Sofa brand in the U.S. market and developing higher-margin products for the U.S. and international markets, and acquiring Bright Swallow for the Canadian market. Consumer preference trends favoring high quality and stylish products and lifestyle-based furniture suites also should allow us to maintain our high gross profit margins. Some markets remain challenging because such markets are experiencing a slower than anticipated recovery since the international financial crisis that began in 2008. However, we believe that discretionary purchases of furniture by middle to upper middle-income consumers, our target global consumer market, will increase along with expected growth in the worldwide furniture trade and the recovery of housing markets. Furthermore, we believe that our expansion of direct sales in the U.S. will have a positive impact on our net sales and net income, while helping to diversify our customer base and end consumer markets. 

Critical Accounting Policies

Our condensed consolidated financial information has been prepared in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of our assets and liabilities, (2) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (3) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Changes in Accounting Standards

Please refer to note 2 to our condensed consolidated financial statements, “Summary of Significant Accounting Policies – New Accounting Pronouncements,” for a discussion of relevant pronouncements.

27

Results of Operations

Comparison of three months Ended September 30, 2017 and 2016

The following table sets forth the results of our operations for the three months ended September 30, 2017 and 2016. Certain columns may not add due to rounding.

	Three Months Ended September 30,
	2017						2016
	$			% of Sales			$			% of Sales
Net sales		33,222,625						30,538,918
Cost of sales		(27,323,972	)		(82	%)		(25,935,832	)		(85	%)
Gross profit		5,898,653			18	%		4,603,086			15	%
Operating expenses		(3,128,520	)		(9	%)		(3,541,885	)		(12	%)
Income from operations		2,770,133			8	%		1,061,201			3	%
Other expenses, net		(75,534	)		(-	%)		(116,926	)		(-	%)
Income tax benefit		(262,034	)		(1	%)		(100,656	)		(-	%)
Income from continuing operations		2,956,633			9	%		1,044,931			3	%
Loss from discontinued operations		-			-			(743,594	)		(2	%)
Net income		2,956,633			9	%		301,337			1	%

Net Sales

Net sales for the three months ended September 30, 2017, were $33.22 million, an increase of 9% from $30.54 million in the same period of 2016. This increase in net sales resulted primarily from an 82% increase in average selling price, which was partially offset by a 40% decrease in sales volume. Our largest selling product categories in the three months ended September 30, 2017 were television cabinets, sofas and dining tables, which accounted for approximately 48%, 32% and 6% of sales, respectively. Our largest selling product categories in the three months ended September 30, 2016 were sofas, beds and dining tables, which accounted for approximately 57%, 15% and 6% of sales, respectively.

The $2.68 million increase in net sales in the three months ended September 30, 2017, compared to the same period of 2016, was mainly due to increased sales to Australia and Asia.  Australia sales increased by 1,227% to $17.99 million in the three months ended September 30, 2017, compared to $1.36 million in the same period of 2016, primarily as a result of increased sales orders from one of our customers who was involved in projects in many hotels and apartments during the third quarter of 2017. We do not anticipate that such significant sales orders will continue in the near future from this client. North American sales decreased 47% to $11.90 million in the three months ended September 30, 2017, compared to $22.53 million in the same period of 2016, primarily due to the abandonment of sales of lower price and quality products after the sale of our factory in China in connection with our discontinued operations. We aggressively changed our product mix and our sales and marketing strategies to offer high margin products to customers. Sales to Asia, excluding Hong Kong, were $3.33 million in the three months ended September 30, 2017, an increase of 90% from $1.75 million in the same period of 2016, primarily due to the increases of sales orders from customers in the region. We had no sales to Europe, Hong Kong, and other countries in the three months ended September 30, 2017, compared to $4.90 million in the same period of 2016, primarily due to the fact that we stopped selling low margin products to customers. We aggressively changed our sales strategy to aim for sales of high margin products. We will continue to pursue marketing efforts in these regions and we anticipate that sales to these regions will increase in near future.

Cost of Sales

Cost of sales consists primarily of finished goods purchased from other manufacturers. Total cost of sales increased by 5% to $27.32 million in the three months ended September 30, 2017, compared to $25.94 million in the same period of 2016, due primarily to the increase in net sales. Cost of sales as a percentage of sales decreased to 82% in the three months ended September 30, 2017, compared to 85% in the same period of 2016. The decrease in cost of sales as a percentage of sales resulted primarily from the decreased cost of products purchased from third parties. 

Gross Profit 

Gross profit increased by 28% to $5.90 million in the three months ended September 30, 2017, compared to $4.60 million in the same period of 2016. Our gross profit margin increased to 18% in the three months ended September 30, 2017, compared to 15% in the same period of 2016. The increase in gross profit margin resulted primarily from decreased cost of sales as a percentage of net sales, which was mainly due to a decreased cost of products purchased from third parties.  

28

Operating Expenses

Operating expenses consist of selling and general and administrative expenses and research and development expenses. Operating expenses were $3.13 million in the three months ended September 30, 2017, compared to $3.54 million in the same period of 2016. Selling expenses decreased by 51% or $1.05 million to $1.00 million in the three months ended September 30, 2017, from $2.05 million in the same period of 2016, due primarily to decreased sales and marketing expense since we decreased advertising on shows and television in the U.S. General and administrative expense increased by 42%, or $0.63 million, to $2.12 million in the three months ended September 30, 2017, from $1.49 million in the same period of 2016, primarily due to increases in stock compensation of approximately $477,000 and amortization expense of approximately $231,000 on our intangible assets (see note 6 to our condensed consolidated financial statements), notwithstanding a decrease in bad debt expense of approximately $274,000.

Other Expenses, Net

Other expenses, net was $75,534 in the three months ended September 30, 2017, compared with $116,926 in the same period of 2016, representing a decrease in other expense of $0.04 million. The decrease in other expense was due primarily to the decreased interest expense on our lines of credit to $40,932 in the three months ended September 30, 2017 from $96,535 in the same period of 2016, which was partially offset by a decrease in non-operating income of $16,623 to $0 in the three month ended September 30, 2017 from $16,623 in the same period of 2016.

Income Tax Benefit

Income tax benefit was $262,034 in the three months ended September 30, 2017, compared with $100,656 of income tax benefit in the same period of 2016.  The increase of income tax benefit was mainly due to the reversal of our prior year ASC 740-10 (FIN 48) reverses due to the expiration of the statute of limitation.

Loss from Discontinued Operations 

The subsidiaries that were sold on October 25, 2016, Nova Dongguan, Nova Museum, and Ding Nuo, are reported as discontinued operations in our condensed consolidated financial statements. Loss from discontinued operations, net of tax, was approximately $0.74 million for the three months ended September 30, 2016.

Net Income

As a result of the foregoing, our net income was $2.96 million in the three months ended September 30, 2017, compared with $0.30 million in the same period of 2016. Our net profit margin from continuing operations was 8.90% in the three months ended September 30, 2017, as compared with 3.42% of net profit margin from continuing operations and 1% of net profit margin in the same period of 2016.

Comparison of Nine Months Ended September 30, 2017 and 2016

The following table sets forth the results of our operations for the nine months ended September 30, 2017 and 2016. Certain columns may not add due to rounding.

	Nine Months Ended September 30,
	2017						2016
	$			% of Sales			$			% of Sales
Net sales		70,813,414						72,748,972
Cost of sales		(58,741,122	)		(83	%)		(62,091,435	)		(85	%)
Gross profit		12,072,292			17	%		10,657,537			15	%
Operating expenses		(10,298,665	)		(15	%)		(9,114,324	)		(13	%)
Income from operations		1,773,627			3	%		1,543,213			2	%
Other expenses, net		(218,955	)		(-	%)		(293,884	)		(-	%)
Income tax (benefit) expense		(750,037	)		(1	%)		60,063			-	%
Income from continuing operations		2,304,709			3	%		1,189,266			2	%
Loss from discontinued operations		-			-			(1,476,572	)		(2	%)
Net income (loss)		2,304,709			3	%		(287,306	)		(-	%)

29

Net Sales

Net sales for the nine months ended September 30, 2017, were $70.81 million, a decrease of 3% from $72.75 million in the same period of 2016. This decrease in net sales resulted primarily from a 40% decrease in sales volume, which was partially offset by a 64% increase in average selling price.   Our largest selling product categories in the nine months ended September 30, 2017 were sofas, television cabinets and beds, which accounted for approximately 56%, 22% and 9% of sales, respectively, for the nine months ended September 30, 2017. In the nine months ended September 30, 2016, the largest three selling categories were sofas, beds and dining tables, which accounted for 59%, 9% and 8% of sales, respectively, for the nine months ended September 30, 2016.

The $1.94 million decrease in net sales in the nine months ended September 30, 2017, compared to the same period of 2016, includes a $15.38 million decrease in sales in North America and $7.28 million decrease in sales in Europe, partially offset by a $21.24 million increase in sales in Australia. North American sales decreased by 29% to $37.16 million in the nine months ended September 30, 2017, compared to $52.54 million in the same period of 2016, primarily due to the abandonment of sales of lower price and quality products after the sale of our factory in China in connection with our discontinued operations. We aggressively changed to our product mix and our sales and marketing strategies targeted at high-end products and customers. Sales to Europe were $3.46 million in the nine months ended September 30, 2017, a decrease of 68% from $10.74 million in the same period of 2016 and Hong Kong sales decreased by 79% to $0.46 million in the nine months ended September 30, 2017, compared to $2.19 million in the same period of 2016. Sales in these regions decreased as we gradually stopped selling low margin products to customers. We changed our sale strategy to selling high margin products. We will continue to maintain our marketing efforts in those regions. Sales to Australia increased to $24.69 million in the nine months ended September 30, 2017, compared to $3.45 million in the same period of 2016, primarily as a result of increased sales orders from one of our customers who was involved in projects in many hotels and apartments during the third quarter of 2017. We do not anticipate that such significant sales orders will continue in the near future from that customer. Sales to Asia, excluding Hong Kong, increased by 40% to $5.02 million in the nine months ended September 30, 2016, compared to $3.60 million in the same period of 2016, primarily due to the increases of sales orders of our products. 

Cost of Sales

Cost of sales consists primarily of finished goods purchased from other manufacturers. Total cost of sales decreased by 5% to $58.74 million in the nine months ended September 30, 2017, compared to $62.09 million in the same period of 2016. The decrease of products purchased from third party manufacturers is primarily due to the decrease of our sales orders in the nine months ended September 30, 2017. Cost of sales as a percentage of sales decreased to 83% in the nine months ended September 30, 2017, compared to 85% in the same period of 2016. The decrease in cost of sales as a percentage of sales from the nine months ended September 30, 2017 compared to the same period during 2016 resulted primarily from the decreased cost of products purchased from third parties.

Gross Profit

Gross profit increased by 13% to $12.07 million in the nine months ended September 30, 2017, compared to $10.66 million in the same period of 2016. Our gross profit margin increased to 17% in the nine months ended September 30, 2017, compared to 15% in the same period of 2016. The increase in gross profit margin resulted primarily from decreased cost of sales as a percentage of net sales, which was due primarily to a decreased cost of products purchased from third parties.  

Operating Expenses

Operating expenses consist of selling, general and administrative expenses and research and development expenses. Operating expenses were $10.30 million in the nine months ended September 30, 2017, compared to $9.11 million in the same period of 2016. Selling expenses decreased by 38% or $1.67 million to $2.69 million in the nine months ended September 30, 2017, from $4.36 million in the same period of 2016, due primarily to decreased sales and marketing expense since we decreased advertising on shows and television in the U.S. General and administrative expense increased by 60% or $2.85 million to $7.61 million in the nine months ended September 30, 2017, from $4.76 million in the same period of 2016, primarily due to changes in increased bad debt expense of approximately $169,000, share-based compensation of approximately $557,000, amortization expense of approximately $684,000 on our intangible assets (see note 6 to our condensed consolidated financial statements), and termination cost on Academic E-commerce platform of approximately $800,000 (see note 7 to our condensed consolidated financial statements).

Other Expenses, Net

Other expenses, net, was $218,955 in the nine months ended September 30, 2017, compared with other expense, net, of $293,884 in the same period of 2016, representing a decrease in other expense of $0.07 million. The decrease in other expense was due primarily to the decreased interest expense on our lines of credit to $133,093 in the nine months ended September 30, 2017 from $241,202 of interest expense in the same period of 2016, partially offset by a decrease of non-operating income of $40,197.

30

Income Tax Benefit (Expense)

Income tax benefit was $750,037 in the nine months ended September 30, 2017, compared with $60,063 of income tax expense in the same period of 2016.  The income tax benefit in 2017 was mainly due to net loss of the parent company, partially offset by net income of Diamond Bar. The income tax benefit in 2017 also resulted from the reversal of our prior year ASC 740-10 (FIN 48) reserves due the expiration of the statute of limitations.

Loss from Discontinued Operations 

The subsidiaries that were sold on October 25, 2016, Nova Dongguan, Nova Museum, and Ding Nuo, are reported as discontinued operations in our condensed consolidated financial statements. Loss from discontinued operations, net of tax, was approximately $1.48 million for the nine months ended September 30, 2016.

Net Income (Loss)

Net income was $2.30 million in the nine months ended September 30, 2017, as compared with $0.29 million of net loss for the same period of 2016. This increase in net income was mainly due to the loss from discontinued operations of $1.48 million in the nine months ended September 30, 2016, and the income tax benefit of $0.75 million in the nine month ended September 30, 2017, compared with $60,063 of income tax expense in the same period of 2016. Our net profit margin from continuing operations was 3% in the nine months ended September 30, 2017, as compared with 2% of net profit margin from continuing operations and 0.4% of net loss margin for the same period of 2016.

Liquidity and Capital Resources

Our principal demands for liquidity related to our efforts to increase sales, to purchase inventory, and for expenditures related to sales distribution and general corporate purposes. We intend to meet our liquidity requirements, including capital expenditures related to purchase of inventories and the expansion of our business, primarily through cash flow provided by operations and collections of accounts receivable, and credit facilities from banks.

As we continue to execute our growth strategy focused on aggressively expanding sales, particularly in the U.S., we remain focused on improving net margins and bottom line growth.  As noted above, we have in recent periods found it necessary to increase reliance on third party providers in order to meet demand for particular products required by certain of our customers. We also believe that there is elasticity in pricing our higher end products and an ongoing opportunity to improve our product mix, which should help us to stay in step with cost increases.  

We rely primarily on internally generated cash flow and proceeds under our existing credit facilities to support growth.  We may seek additional financing in the form of bank loans or other credit facilities or funds raised through future offerings of our equity or debt, if and when we determine such offerings are required. During 2016, we raised approximately $3.09 million from exercise of warrants.

We had net working capital of $65,834,526 at September 30, 2017, an increase of $7.43 million from net working capital of $58,407,707 at December 31, 2016. The ratio of current assets to current liabilities was 73.51-to-1 at September 30, 2017.

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, 2017 and 2016: 

	2017				2016
Cash (used in) provided by:
Operating activities		$	(5,362,462	)		$	(1,465,248	)
Investing activities			8,232,557				5,274,558
Financing activities			(4,655,801	)			1,409,387

Net cash used in operating activities was $5.36 million in the nine months ended September 30, 2017, an increase of cash outflow of $3.90 million from $1.47 million of cash used in operating activities in the same period of 2016. The increase in cash outflow was attributable primarily to an increased cash outflow of $8.28 million from advances to suppliers, compared with $3.61 million inflow in the same period of 2016 due to strategic prepayments for inventory purchases to receive vendor discounts. We increased the prepayment amount by approximately $8.49 million to one of our mattress suppliers who is manufacturer in U.S., comparing with the same period of 2016, due to we would like to sell more mattress in U.S. market because of higher profit margin comparing with our other products.  We also had increased cash outflow from inventories of $3.94 million in the nine months ended September 30, 2017, compared to $0.24 million of cash inflow in the same period of 2016, and an increased cash outflow for accounts payable of $2.21 million during the nine months ended September 30, 2017, compared to $0.13 million inflow in the same period of 2016. We had cash inflow from accounts receivable of $4.96 million during the nine months ended September 30, 2017, compared to $0.56 million outflow in the same period of 2016.  This increase was mainly due to the improved collection of accounts receivable. Net operating cash outflow from our discontinued operations was $0.17 million in the nine months ended September 30, 2016.

31

Net cash provided by investing activities was $8.23 million in the nine months ended September 30, 2017, an increase of cash inflow of $2.96 million from $5.27 million inflow in the same period of 2016. In the nine months ended September 30, 2017, we received a cash inflow of $15.84 million from debt repayment from unrelated parties, an inflow of $1.25 million on collection of an assignment fee, which were partially offset by a cash outflow from advances to unrelated parties of $8.84 million, and a cash outflow of $17,443 from purchase of property and equipment. In the nine months ended September 30, 2016, we had cash received of $5.50 million from buyer, and paid $7,272 for purchasing property and equipment. Net investing cash outflow from our discontinued operations was $218,170 in the nine months ended September 30, 2016.

Net cash used in financing activities was $4.66 million in the nine months ended September 30, 2017, an increase of cash outflow of $5.71 million from cash inflow of $1.05 million in the same period of 2016. In the nine months ended September 30, 2017, we repaid $41.54 million on bank loans, and borrowed $36.88 million from bank loans.  In the nine months ended September 30, 2016, we repaid $29.30 million for bank loans, borrowed $29.83 million from bank loans, and had $0.20 million cash received from warrant exercises.  Net financing cash inflow from discontinued operations was $0.32 million in the nine months ended September 30, 2016.

As of September 30, 2017, we had gross accounts receivable of $37,056,181, of which $31,040,535 was not yet past due, $5,981,718 was less than 90 days past due, $8,660 was over 90 days but within 180 days past due and $25,268 over 180 days past due. We had an allowance for bad debt of $117,362 for accounts receivable. As of October 30, 2017, $2,198,458 accounts receivable outstanding at September 30, 2017 had been collected.

As of October 30, 2017, $45,144,487, or 100%, of accounts receivable outstanding at December 31, 2016 had been collected.

As of September 30, 2017 and December 31, 2016, we had advances to suppliers of $21,951,040 and $13,699,752, respectively. The nature of these supplier prepayments is the payment that is made for goods before we actually receive them. The balances of advances to suppliers have kept increasing in order to secure our purchasing power over new materials and priority position of our production lines with our suppliers, especially when we are introducing eight new product lines in 2017. Also, the decision for such advances is to establish long term relationship with our suppliers.

With the tighten regulations and enforcement on environmental issues in recent years in China where our suppliers are located, many factories have been affected with limited production hours. These advances can secure our products being treated as priorities and lock in the raw material prices with our suppliers. We do not foresee additional risk with the increase of the advances as we have contracts with the suppliers and our QC team is on site to monitor daily production of our suppliers. Based on our past experience, all products and projects have been delivered as promised with the existing suppliers.

For a brand new product, the normal lead time from new product R&D, prototype, 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 five months after our advance payment. We will consider the need for a reserve when any suppliers fail to fulfill the orders within the time frame as stipulated in the purchase contracts. As of September 30, 2017 and December 31, 2016, no reserve on supplier prepayments had been made or recorded by us.

In addition, we noticed the increasing demands in antique home furnishing and decorating market such as reclaimed wood flooring and one of the kind antique furniture. Due to the nature of antique furnishing business, funds are required up front in order for suppliers to source and secure these products whenever they are available in the market.

As of October 31, 2017, $13,669,300, or almost 100%, of our advance to suppliers outstanding at December 31, 2016 had been delivered to us in the form of inventory purchase.

The balance of $21,951,040 advance to suppliers outstanding at September 30, 2017 is expected to be delivered to us in the form of inventory purchase through the third quarter in 2018.

Private Placements

On April 14, 2014, we entered into a Securities Purchase Agreement (the “2014 Purchase Agreement”) with certain purchasers (the “Buyers”) pursuant to which we sold to the Buyers, in a registered direct offering, an aggregate of 1,320,059 shares of common stock, par value $0.001 per share, at a negotiated purchase price of $6.78 per share, for aggregate gross proceeds to us of $8.95 million,before deducting fees to the placement agent of $716,000 and other estimated offering expenses of $20,000 payable by us.

32

As part of the transaction, the Buyers also received (i) Series A warrants to purchase up to 660,030 shares of common stock in the aggregate at an exercise price of $8.48 per share (the “Series A Warrants”); (ii) Series B warrants to purchase up to 633,628 shares of common stock in the aggregate at an exercise price of $6.82 per share (the “Series B Warrants”); and (iii) Series C warrants to purchase up to 310,478 shares of common stock in the aggregate at an exercise price of $8.53 per share (the “Series C Warrants” and together with the Series A Warrants and the Series B Warrants, the “Warrants”). The Series A Warrants had a term of four years and were exercisable by the holders at any time after the date of issuance. The Series B Warrants had a term of six months and were exercisable by the holders at any time after the date of issuance. The Series C Warrants had a term of four years and were exercisable by the holders at any time after the date of issuance. After the six month anniversary of the issuance date of the Series C Warrants, to the extent that a holder of Series C Warrant had exercised less than 70% of such holder’s Series B Warrants and the closing sale price of the common stock was equal to or greater than $9.81 for a period of ten consecutive trading days, then we were entitled to purchase the entire then-remaining portion of such holder’s Series C Warrants for $1,000.  The shares and warrants were registered on a takedown of our shelf registration statement described below. The Series B Warrants expired on October 14, 2014, and none of the Series B Warrants were exercised prior to such expiration.

On May 28, 2015, we entered into a Securities Purchase Agreement (the “2015 Purchase Agreement”) with certain purchasers (the “Purchasers”) pursuant to which we offered to the Purchasers, in a registered direct offering, an aggregate of 2,970,509 shares of common stock, par value $0.001 per share. Of these shares, 2,000,001 shares were sold to the Purchasers at a negotiated purchase price of $2.00 per share, for aggregate gross proceeds to us of $4,000,002, before deducting fees to the placement agent and other estimated offering expenses payable by us. In accordance with the terms of the 2015 Purchase Agreement, the outstanding Series A Warrants described above and issued in connection with the transactions contemplated by the 2014 Purchase Agreement were exchanged for 660,030 shares of our common stock, and the outstanding Series C Warrants described above and issued in connection with the transactions contemplated by the 2014 Purchase Agreement were exchanged for 310,478 Shares of our common stock.

As contemplated under the 2015 Purchase Agreement and pursuant to a concurrent private placement, we also sold to the Purchasers a warrant to purchase one share of our common stock for each share purchased for cash in the offering, pursuant to that certain common stock Purchase Warrant, by and between us and each Purchaser (the “2015 Warrants”). The 2015 Warrants are exercisable beginning on the six month anniversary of the date of issuance (the “Initial Exercise Date”) at an exercise price of $2.71 per share and will expire on the five year anniversary of the Initial Exercise Date. The purchase price of one share of our common stock under the 2015 Warrants is equal to the exercise price.

Lines of Credit

Diamond Bar entered into an agreement with a bank in California for a line of credit of up to $5,000,000 with annual interest of 4.25% and maturity on June 1, 2015. On June 8, 2015, the bank extended and modified the terms of the loan agreement to extend the line of credit up to a maximum of $6,000,000 until July 31, 2015 and $5,000,000 thereafter with an annual interest rate of 4.25% and maturity on September 1, 2015 (the term of which the bank allowed to extend until the renewal described in the following sentence while the bank conducted its own audit associated therewith). On September 28, 2015, Diamond Bar extended the line of credit up to a maximum of $6,000,000 with annual interest of 3.75% (4% from December 17, 2015) and maturity on June 1, 2017. On January 20, 2016, Diamond Bar increased the line of credit up to a maximum of $8,000,000 with annual interest of 4%. On June 22, 2017, Diamond Bar extended the line of credit to maturity on September 1, 2017. On September 19, 2017, Diamond Bar extended the line of credit to maturity on June 1, 2019. The annual interest was 4.25% as of September 30, 2017. The line of credit is secured by all of the assets of Diamond Bar and is guaranteed by Nova LifeStyle. As of September 30, 2017 and 2016, Diamond Bar had $3,322,040 and $6,129,841 outstanding on the line of credit, respectively.  During the nine months ended September 30, 2017 and 2016, the Company recorded interest expense of $145,857 and $167,381, respectively; and $40,932 and $61,127 for the three months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, Diamond Bar had $4,677,960 available for borrowing without violating any covenants.

The Diamond Bar loan has the following covenants: (i) maintain a minimum tangible net worth of not less than $10 million; (ii) maintain a ratio of debt to tangible net worth not in excess of 2.500 to 1.000; (iii) the pre-tax income must be not less than 1.000% of total revenue quarterly; and (iv) maintain a current ratio in excess of 1.250 to 1.000. As of September 30, 2017, Diamond Bar was in compliance with the stated covenants. 

On January 22, 2015, Nova Macao renewed a line of credit, with an annual interest rate of 4.25% and principal of up to $6,500,000, with a commercial bank in Hong Kong to extend the maturity date to January 29, 2016. On February 16, 2016, Nova Macao extended the maturity date of its line of credit to January 31, 2017, with an annual interest rate of 4% and principal of up to $6,500,000. The loan requires monthly payment of interest and that the interest rate will be adjusted annually. The loan was secured by assignment of Sinosure (China Export and Credit Insurance Company) credit insurance and was guaranteed by Nova LifeStyle and Diamond Bar.  The Company did not extend the line of credit and paid it off in February 2017. As of September 30, 2017 and 2016, Nova Macao had $0 and $1,848,000 outstanding on the line of credit, respectively. During the nine months ended September 30, 2017 and 2016, the Company paid interest of $13,828 and $57,304, respectively; and $0 and $18,890 for the three months ended September 30, 2017 and 2016, respectively.

33

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, our principal executive officer and principal financial officer, respectively, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2017, our disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting

The material weakness previously disclosed in our annual report for the year ended December 31, 2016 and the quarterly reports for the quarters ended March 31, 2017 and June 30, 2017 in our internal control over financial reporting was that we lacked sufficient accounting personnel with the appropriate level of knowledge, experience and training in U.S. GAAP and SEC reporting requirements. This material weakness has been remediated since Jeffery Chuang has joined Nova as our CFO since August 22, 2017. Mr. Chuang received his Bachelor of Science in Finance from California State University, Northridge in 1997 and his Master of Science in Taxation from Golden Gate University in 2006. Mr. Chuang is a Certified Public Accountant and is a member of California Society of Certified Public Accountants.

We believe that our remediation measures have significantly remediated the material weakness and management concluded that we have effective internal control over financial reporting as of September 30, 2017. 

34

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We may occasionally become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters that may arise from time to time could have an adverse effect on our business, financial condition or operating results. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Item 6. Exhibits

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NOVA LIFESTYLE, INC.
		(Registrant)
Date: November 13, 2017	By:	/s/ Thanh H. Lam
		Thanh H. Lam Chairperson and Chief Executive Officer (Principal Executive Officer)
Date: November 13, 2017		/s/ Jeffery Chuang
		Jeffery Chuang Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

36

EXHIBIT INDEX

Exhibit No.	Document Description
10.1	Employment Agreement by and between Nova LifeStyle, Inc. and Jeffery Chuang, dated August 22, 2017.*
31.1 †	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 †	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 ‡	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by the Chief Executive Officer
32.2 ‡	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by the Chief Financial Officer
101.INS†	XBRL Instance Document
101.SCH†	XBRL Schema Document
101.CAL†	XBRL Calculation Linkbase Document
101.DEF†	XBRL Definition Linkbase Document
101.LAB†	XBRL Label Linkbase Document
101.PRE†	XBRL Presentation Linkbase Document

† Filed herewith

‡ Furnished herewith

* Indicates management contract, compensatory agreement or arrangement, in which our directors or executive officers may participate.

37

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of this 22nd day of August, 2017 (the “Effective Date”), by and between Nova Lifestyle lnc., a Nevada corporation (the “Company”), and Jeffery Chuang (the “Executive”).

WITNESSETH:

WHEREAS, the parties desire to enter into this Agreement setti ng forth the terms and conditions of the employment relationship between the Executive and the Company.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows:

1.  EMPLOYMENT.

1.1 Agreement to Employ. The Company hereby agrees to employ Executive, and Executive hereby agrees to serve, subject to the provisions of this Agreement. as an officer and employee of the Company.

1.2 Duties and Schedule. Executive shall serve as the Company’s Chief Financial Officer, and be the Principal Financial Officer and Principal Accounting Officer of the Company and responsible for all financial matters and management of the Company. The Executive shall report directly to the Company’s Chief Executive Officer and Board of Directors (the “Board”) and shall have such responsibilities as designated by the Chief Executive Officer or Board to the extent that such responsibilities are not inconsistent with all applicable laws, regulations and rules. Executive shall devote his best efforts and all of his business time to his position with the Company and shall have no other employment with a third party during the Term.

2.  TERM OF EMPLOYMENT. Unless Executive’s employment shall sooner terminate pursuant to Section 4, the Company shall employ Executive for a one-year term commencing on the Effective Date (the “Term”), which Term shall be renewable upon mutual agreement of the Company and the Executive, as approved by the Board.

3.  COMPENSATION.

3.1  Salary. Executive’s salary during the Term shall be $50,000 per year (the “Salary”), payable monthly.

3.2  Bonus. At the sole discretion of the Board, or any comm ittee duly designated by the Board and authorized to act thereto, the Executive shall be eligible for an annual cash bonus.

3.3 Vacation. Executive shall be entitled to 8 days of paid vacation per year . In the event that Executive remains employed by the Company for 3 years or more. Executive shall be entitled to 12 days of paid vacation.

3.4 Business Expenses. Executive shall be reimbursed by the Company for all ordinary and necessary expenses incurred by Executive; provided that they are incurred and approved in writing in accordance wi th the Company’s expense policy.

4.  TERMINATION.

4.1  Death. This Agreement shall terminate immediately upon the death of Executive, and Executive’s estate or Executive’s legal representative, as the case may be, shall be entitled to Executive’s accrued and unpaid Salary as of the date of Executive’s death, plus all other compensation and benefits that were vested through the date of Executive’s death.

4.2  Disability. ln the event of Executive’s Disability, this Agreement shall terminate and Executive shall be entitled to (a) accrued and unpai d Salary and vacation through the first date that a Disability is determined; and (b) all other compensation and benefits that were vested through the first date that a Disability has been determined.

4.3  Termination by Company for Cause. The Company may terminate the Executive for Cause and such termination shall take effect upon the receipt by Executive of the Notice of Termination. Upon the effective date of the termination for Cause, Executive shall be solely entitled to accrued and unpaid Salary through such effective date. “Cause” shall mean the commission of any act of fraud, embezzlement or dishonesty by the Executive, any act or omission by the Executive constituting a breach or default under any written or oral

1

agreement between the Executive and the Company or its affiliates, any unauthorized use or disclosure by Executive of confidential information or trade secrets of the Company or its affiliates. or any other intentional act by the Executive adversely affecting the business or affairs of the Company or its affiliates in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Company may consider as grounds for the dismissal or discharge of the Executive in the service of the Company.

4.4  Voluntary Termination by Executive. The Executive may voluntarily terminate his employment for any reason and such termination shall take effect 30 days after the receipt by Company of the Notice of Termination. Upon the effective date of such termination, Executive shall be entitled to (a) accrued and unpaid Salary and vacation through such termination date;and (b) all other compensation and benefits that were vested through such termination date. In the event Executive is temtinated without notice, it shall be deemed a termination by the Company for Cause.

4.5  Notice of Termination. Any termination of the employment by the Company or the Executive shall be communicated by a notice in accordance with Section 8.4 of this Agreement (the “Notice of Termination”).  Such notice shall (a) indicate the specific tennination provision in this Agreement relied upon and (b) if the termination is for Cause, the date on which the Executive’s employment is to be terminated.

4.6  Severance. The Executive shall not be entitled to severance payments upon any termination provided in Section 4 herein.

5.  EMPLOYEE’S REPRESENTATION. The Executive represents and warrants to the Company that: (a) he is subject to no contractual , fiduciary or other obligation which may affect the performance of his duties under this Agreement ;(b) he has terminated, in accordance with their terms, any contractual obligation which may affect his performance under this Agreement; and (c) his employment with the Company will not require him to use or disclose proprietary or confidential information of any other person or entity.

6.  CONFIDENTIAL INFORMATION Except as permitted or directed by the Board of Directors of the Company in writing, during the time the Executive is employed by the Company or at any time thereafter, the Executive shall not use for his personal purposes nor divulge, furnish, or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret information or knowledge of the Company, whether developed by himself or by others. Such confidential and/or secret information encompassed by this Section 6 includes, but is not limited to, the Company’s customer and supplier lists, business plans, software, systems,and financial , markering , and personnel information. The Executive agrees to refrain from any acts or omissions that would reduce the value of any confidential or secret knowledge or information to the Company, both during his employment hereunder and at any time after the termination of his employment. The Executive’s obligations of confidentiality under this Section 6 shall not apply to any knowledge or information that is now published publicly or that subsequently becomes generally publicly known, other than as a direct or indirect result of a breach of this Agreement by the Executive.

7.  NON-COMPETITION: NON-SOLICITATION: INVENTIONS.

7.1  Non-Competition. During the employment of the Executive under this Agreement and for a period of six (6) months after termination of such employment, the Executive shall not at any time compete on his own behalf, or on behalf of any other person or entity, with the Company or any of its affiliates within all territories in which the Company does business with respect to the business  of the Company or any of its affiliates as such business shall be conducted on the date hereof or during the employment of the Executive under this Agreement. The ownership by the Executive of nor more than 5% of a corporation, partnership or other enterprise shall not constitute a violation hereof.

7.2  Non-Solicitation. During the employment of the Executive under this Agreement and thereafter Executive shall not at any time (i) solicit or induce, on his own behalf or on behalf of any other person or entity, any employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates; or (ii) solicit or indu ce, on his own behalf or on behalf of any other person or entity, any customer or Prospective Customer of the Company or any of their respective affiliates to reduce its business with the Company or any of its affiliates. For the purposes of this Agreement, “Prospective Customer” shall mean any individual, corporation, trust or other business entity which has either (a) entered into a nondisclosure agreement with the Company or any Company subsidiary or affiliate or (b) has within the preceding 12 months received a currently pending and not rejected written proposal in reasonable detail from the Company or any of the Company ‘s subsidiary or affiliate.

2

7.3  Inventions and Patents. The Company shall be entitled to the sole benefit and exclusive ownership of any inventions or improvements in products , processes, or other things that may be made or discovered by Executive while he is in the service of the Company , and all paten ts for the same. During the Term, Executive shall do all acts necessary or required by the Company to give effect to th is section and, following the Term, Executive shall do all acts reasonably necessary or required by the Company to give effect to this section. In all cases, the Company shall pay all costs and fees associated with such acts by Executive.

7.4  Return of Property. The Executive agrees that all property in the Executive’s possession that he obtains or is assigned in the course of his employment with the Company, including, without limitation, all documents, reports, manuals, memoranda, customer lists, credit cards, keys, access cards, and all other property relating in any way to the business of the Company , is the exclusive property of the Company, even if the Executive authored , created , or assisted in authoring or creating such properly. The Executive shall return to the Company all such property immediately upon termination of employment or at such earlier time as the Company may request.

7.5  Court Ordered Revisions. If any portion of this Section 7 is found by a court of competent jurisdiction to be invalid or unenforceable, but would be valid and enforceable if modified, this Section 7 shall apply with such modifications necessary to make this Section 7 valid and enforceable. Any portion of this Section 7 not required to be so modified shall remain in full force and effect and not be affected thereby.

7.6  Specific Performance. The Executive acknowledges that the remedy at law for any breach of any of the provisions of Section 7 will be inadequate, and that the Company shall be entitled , in addition to any remedy at law or in equity, to preliminary and permanent injunctive relief and specific performance.

8.  MISCELLANEOUS.

8.l Indemnification. The Company and each of its subsidiaries shall. to the maximum extent provided under applicable law, indemnify and hold Executive harmless from and against any expenses , including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“Losses”), incurred  in connection with any proceeding arising out of, or related to, Executive’s employment by the Company, other than any such Losses incurred as a result of Executives negligence or willful misconduct. The Company shall, or shall cause a subsidiary thereof to, advance to Executive any expenses, including attorney’s fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by Executive in defense of any such proceeding shall be paid by the Company or applicable subsidiary in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment ; (b) appropriate documentation evidencing the incurrence , amount and nature of the costs and expenses for which payment is being sought;and (c) an undertaking adequate under applicable law made by or on behalf of Executive to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that Executive is not entitled to be indemnified by the Company or any subsidiary thereof. The Company will provide Executive with coverage under all directors and officers liability insurance policies that it has in effect during the Term, with no deductible to Executive.

8.2  Applicable Law. Except as may be otherwise provided herein, this Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, applied without reference to principles of conflict of laws. Any legal action or proceeding arising out of or relating to this Agreement shall be brought in the courts in the State of Nevada.

8.3  Amendments. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors or legal representatives.

8.4  Notices. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, by an international mail courier,or by registered or certified mail, return receipt requested. postage prepaid , addressed as follows:

If to the Executive:

Jeffery Chuang

3

If to the Company:

6565 East Washington Blvd.

Commerce, CA 90040

Attn: Board of Directors

Or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when delivered to the addressee.

8.5  Withholding. The Company may withhold from any amounts payable under the Agreement, such federal, state and local income, unemployment , social security and similar employment related taxes and similar employment related withholdings as shall be required to be withheld pursuant to any applicable law or regulation.

8.6  Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement and any such provision which is not valid or enforceable in whole shall be enforced to the maximum extent permitted by law.

8.7  Captions. The captions of this Agreement are not part of the provisions and shall have no force or effect.

8.8 Entire Agreement. This Agreement contains the entire agreement among the parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings , whether written or oral, between the parties with respect thereto.

8.9  Survival. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement or the Executive’s employment hereunder to the extent necessary to the intended preservation of such rights and obligations .

8.10  Waiver. Either Party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

8.11  Successors. This Agreement is personal to Executive and, without the prior express written consent of the Company, shall not be assignable by Executive. This Agreement shall inure to the benefit of and be enforceable by Executive’s estate, heirs, beneficiaries, and/or legal representatives. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

8.12  Joint Efforts/Counterparts. Preparation of this Agreement shall be deemed to be the joint effort of the parties hereto and shall not be construed more severely against any party. This Agreement may be signed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

8.13  Representation by Counsel. Each Party hereby represents that it has had the opportunity to be represented by legal counsel of its choice in connection with the negotiation and execution of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written .

EMPLOYEE:	NOVA LIFESTYLE, INC.
/s/ Jeffery Chuang	/s/ Thanh H. Lam
Jeffery Chuang	Thanh H. Lam
	Chief Executive Officer

4

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302(a)

OF THE SARBANES-OXLEY ACT OF 2002

I, Thanh H. Lam, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2017, of Nova Lifestyle, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2017	By:	/s/ Thanh H. Lam
		Thanh H. Lam Chairperson and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302(a)

OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffery Chuang, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2017, of Nova Lifestyle, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2017	By:	/s/ Jeffery Chuang
		Jeffery Chuang Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Nova Lifestyle, Inc. (the “Company”) for the quarter ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Thanh H. Lam, Chairperson and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 13, 2017	By:	/s/ Thanh H. Lam
		Thanh H. Lam Chairperson and Chief Executive Officer

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Nova Lifestyle, Inc. (the “Company”) for the quarter ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jeffery Chuang, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 13, 2017	By:	/s/ Jeffery Chuang
		Jeffery Chuang Chief Financial Officer (Principal Financial Officer)

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 09, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	Nova Lifestyle, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		27,383,648
Amendment Flag	false
Entity Central Index Key	0001473334
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current Assets
Cash and cash equivalents	$ 802,037	$ 2,587,743
Accounts receivable, net	36,938,819	42,102,761
Advance to suppliers	21,951,040	13,669,752
Inventories	6,720,649	2,781,123
Assignment fee receivable (Note 3)	0	1,250,000
Receivable from an unrelated party (Note 7)	0	7,000,000
Prepaid expenses and other receivables	315,833	642,891
Taxes receivable	14,094	14,893
Total Current Assets	66,742,472	70,049,163
Noncurrent Assets
Plant, property and equipment, net	158,412	171,276
Lease deposit	43,260	43,260
Goodwill	218,606	218,606
Intangible assets, net	4,573,612	5,686,623
Deferred tax asset	1,498,631	874,759
Total Noncurrent Assets	6,492,521	6,994,524
Total Assets	73,234,993	77,043,687
Current Liabilities
Accounts payable	162,147	2,368,775
Line of credit	0	7,977,841
Advance from customers	19,298	513,880
Accrued liabilities and other payables	726,501	780,960
Total Current Liabilities	907,946	11,641,456
Noncurrent Liabilities
Line of credit	3,322,040	0
Income tax payable	2,009,825	2,136,788
Total Noncurrent Liabilities	5,331,865	2,136,788
Total Liabilities	6,239,811	13,778,244
Contingencies and Commitments
Stockholders’ Equity
Common stock, $0.001 par value; 75,000,000 shares authorized, 27,909,843 and 27,309,695 shares issued and outstanding; as of September 30, 2017 and December 31, 2016, respectively	27,910	27,309
Additional paid-in capital	38,309,891	36,885,462
Statutory reserves	6,241	6,241
Retained earnings	28,651,140	26,346,431
Total Stockholders’ Equity	66,995,182	63,265,443
Total Liabilities and Stockholders’ Equity	$ 73,234,993	$ 77,043,687

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	27,909,843	27,309,695
Common stock, shares outstanding	27,909,843	27,309,695

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Net Sales	$ 33,222,625	$ 30,538,918	$ 70,813,414	$ 72,748,972
Cost of Sales	27,323,972	25,935,832	58,741,122	62,091,435
Gross Profit	5,898,653	4,603,086	12,072,292	10,657,537
Operating Expenses
Selling expenses	1,003,906	2,050,201	2,690,342	4,358,206
General and administrative expenses	2,124,614	1,491,684	7,608,323	4,756,118
Total Operating Expenses	3,128,520	3,541,885	10,298,665	9,114,324
Income From Operations	2,770,133	1,061,201	1,773,627	1,543,213
Other Income (Expenses)
Non-operating income (expense, net)	0	16,623	797	40,994
Foreign exchange transaction loss	(94)	(3,281)	(324)	(5,578)
Interest expense, net	(40,932)	(96,535)	(133,093)	(241,202)
Financial expense	(34,508)	(33,733)	(86,335)	(88,098)
Total Other Expenses, Net	(75,534)	(116,926)	(218,955)	(293,884)
Income Before Income Taxes and Discontinued Operations	2,694,599	944,275	1,554,672	1,249,329
Income Tax (Benefit) Expense	(262,034)	(100,656)	(750,037)	60,063
Income From Continuing Operations	2,956,633	1,044,931	2,304,709	1,189,266
Loss From Discontinued Operations, net of tax	0	(743,594)	0	(1,476,572)
Net Income (Loss)	2,956,633	301,337	2,304,709	(287,306)
Other Comprehensive Loss
Foreign currency translation	0	(98,638)	0	(420,752)
Comprehensive Income (Loss)	$ 2,956,633	$ 202,699	$ 2,304,709	$ (708,058)
Basic weighted average shares outstanding (in Shares)	27,846,921	25,558,604	27,570,425	24,937,069
Diluted weighted average shares outstanding (in Shares)	27,980,629	25,558,604	27,704,406	24,937,069
Income from continuing operations per share of common stock
Basic (in Dollars per share)	$ 0.11	$ 0.04	$ 0.08	$ 0.05
Diluted (in Dollars per share)	0.11	0.04	0.08	0.05
Loss from discontinued operations per share of common stock
Basic (in Dollars per share)	0	(0.03)	0	(0.06)
Diluted (in Dollars per share)	0	(0.03)	0	(0.06)
Net income (loss) per share of common stock
Basic (in Dollars per share)	0.11	0.01	0.08	(0.01)
Diluted (in Dollars per share)	$ 0.11	$ 0.01	$ 0.08	$ (0.01)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash Flows From Operating Activities
Net income from continuing operations	$ 2,304,709	$ 1,189,266
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	1,143,319	462,194
Deferred tax benefit	(623,872)	0
Stock compensation expense	1,773,537	1,216,765
Changes in bad debt allowance	203,905	33,818
Changes in operating assets and liabilities:
Accounts receivable	4,960,037	(558,573)
Advance to suppliers	(8,281,288)	(3,613,765)
Inventories	(3,939,526)	241,611
Other current assets	(21,452)	(711,727)
Accounts payable	(2,206,628)	129,278
Advance from customers	(494,582)	584,968
Accrued liabilities and other payables	(54,458)	(325,799)
Taxes payable	(126,163)	52,864
Net Cash Used in Continuing Operations	(5,362,462)	(1,299,100)
Net Cash Used in Discontinued Operations	0	(166,148)
Net Cash Used in Operating Activities	(5,362,462)	(1,465,248)
Cash Flows From Investing Activities
Assignment fee received	1,250,000	0
Purchase of property and equipment	(17,443)	(7,272)
Cash received from Buyer	0	5,500,000
Advances to unrelated parties	(8,835,000)	0
Repayment from unrelated parties	15,835,000	0
Net Cash Provided by Continuing Operations	8,232,557	5,492,728
Net Cash Used in Discontinued Operations	0	(218,170)
Net Cash Provided by Investing Activities	8,232,557	5,274,558
Cash Flows From Financing Activities
Proceeds from line of credit and bank loan	36,881,842	29,828,074
Repayment to line of credit and bank loan	(41,537,643)	(29,301,699)
Proceeds from warrants exercised	0	203,250
Net Cash (Used in) Provided by Continuing Operations	(4,655,801)	729,625
Net Cash Provided by Discontinued Operations	0	319,762
Net Cash (Used in) Provided by Financing Activities	(4,655,801)	1,049,387
Effect of Exchange Rate Changes on Cash and Cash Equivalents	0	(3,128)
Net (decrease) increase in cash and cash equivalents	(1,785,706)	4,855,569
Cash and cash equivalents, beginning of period	2,587,743	988,029
Cash and cash equivalents, end of period	802,037	5,843,598
Analysis of cash and cash equivalents
Included in assets of discontinued operations	0	124,997
Cash and cash equivalents, end of period	2,587,743	988,029
Continuing operations:
Income tax payments	0	7,200
Interest expense	159,686	371,036
Discontinued operations:
Income tax payments	0	0
Interest expense	$ 0	$ 0

XML

Note 1 - Organization and Description of Business

9 Months Ended

Sep. 30, 2017

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 - Organization and Description of Business

Nova LifeStyle, Inc. (“Nova LifeStyle” or the “Company”), formerly known as Stevens Resources, Inc., was incorporated in the State of Nevada on September 9, 2009.

The Company is a U.S. holding company with no material assets other than the ownership interests of our subsidiaries through which we market, design and sell furniture worldwide: Nova Furniture Limited in the British Virgin Islands (“Nova Furniture”), Nova Furniture Ltd. in Samoa (“Nova Samoa”), Bright Swallow International Group Limited (“Bright Swallow” or “BSI”), Nova Furniture Macao Commercial Offshore Limited (“Nova Macao”), and Diamond Bar Outdoors, Inc. (“Diamond Bar”).

Nova Macao was organized under the laws of Macao on May 20, 2006, and is a wholly owned subsidiary of Nova Furniture.  Diamond Bar, doing business as Diamond Sofa, was incorporated in California on June 15, 2000.  Nova Macao is a trading company, importing, marketing and selling products designed and manufactured by Nova Furniture (Dongguan) Co., Ltd. (“Nova Dongguan”) and third party manufacturers for the U.S. and international markets. Diamond Bar markets and sells products manufactured by third party manufacturers under the Diamond Sofa brand to distributors and retailers principally in the U.S. market.  On April 24, 2013, the Company completed the acquisition of Bright Swallow, an established furniture company with a global client base.  

The sale of three of the Company’s former subsidiaries, Nova Dongguan, Nova Dongguan Chinese Style Furniture Museum (“Nova Museum”), and Dongguan Ding Nuo Household Products Co., Ltd. (“Ding Nuo”), was consummated on October 25, 2016, and as a result, they are now accounted for as discontinued operations in the accompanying consolidated financial statements for all periods presented. Accordingly, assets and liabilities, revenues and expenses, and cash flows related to the business of these subsidiaries have been appropriately reclassified in the accompanying consolidated financial statements as discontinued operations for all periods presented. Additional information with respect to the sale of these subsidiaries is presented at Note 3.

Before its divestment, Nova Dongguan was a wholly foreign-owned enterprise, or WFOE, and was incorporated under the laws of the PRC on June 6, 2003. Nova Dongguan organized Nova Museum on March 17, 2011 as a non-profit organization under the laws of the PRC engaged in the promotion of the culture and history of furniture in China. Nova Dongguan markets and sells products in China to stores in our former franchise network and to wholesalers and agents for domestic retailers and exporters. At the time of sale, Nova Dongguan also provided design expertise and facilities to manufacture branded products and products for international markets under original design manufacturer and original equipment manufacturer agreements, or ODM and OEM agreements. On October 24, 2013, Nova Dongguan incorporated Ding Nuo under the laws of the PRC.

The “Company” and “Nova” collectively refer to Nova LifeStyle, the U.S. parent, and its subsidiaries, Nova Furniture, Nova Samoa, Nova Macao, Diamond Bar, and BSI.  The “Company” may also from time to time in these Notes include the Company’s former subsidiaries, Nova Furniture BVI, Nova Dongguan, Nova Museum and Ding Nuo.

XML

Note 2 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The 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, 2017 and for the nine and three month periods ended September 30, 2017 and 2016 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 not been included. 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, 2016, previously filed with the SEC on April 14, 2017.

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, 2017, its interim condensed consolidated results of operations and cash flows for the nine and three month periods ended September 30, 2017 and 2016, 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 consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, the allowance for bad debt, valuation of inventories, unrecognized tax benefits, valuation allowance for deferred tax assets, assumptions used in assessing impairment of long-lived assets and goodwill. Actual results could differ from those estimates.

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, 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 asset 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 Diamond Bar reporting unit.  Accordingly, as of September 30, 2017 and 2016, the Company concluded there was no impairment of goodwill of Diamond Bar.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

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:

Balance at January 1, 2017	$	3,019,931
Provision for the period		203,905
Write off		(3,106,474	)
Balance at September 30, 2017	$	117,362

During the nine months ended September 30, 2016, bad debt (reversal) expense from continuing operations and discontinued operations were $33,818 and $552,611, respectively. During the three months ended September 30, 2016, bad debt expense from continuing operations and discontinued operations were $55,294 and $539,327, 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 actual practice, the Company always received goods within 5 to 9 months from the date the advance payment is made. As such, no reserve on supplier prepayments had been made or recorded by the Company. Any provisions for allowance for advance to suppliers, if deemed necessary, will be included in general and administrative expenses in the consolidated statements of income.

Inventories

Inventories are stated at the lower of cost and net realizable value with cost determined on a weighted-average basis. Management compares the cost of inventories with the net realizable value and an allowance is made for writing down their inventories to market value, if lower. The Company did not record any write-downs of inventory at September 30, 2017 and 2016.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330) - Simplifying the Measurement of Inventory,” which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted ASU 2015-11 effective January 1, 2017 and it did not have a material effect on the Company’s consolidated financial statements.

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 10% salvage value and estimated lives as follows:

Computer and office equipment	5 years
Decoration and renovation	10 years

Depreciation of plant, property and equipment attributable to manufacturing activities is capitalized as part of inventories, and expensed to cost of goods sold when inventories are sold.

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.

Based on its review, the Company believes that, as of September 30, 2017 and December 31, 2016, there was no significant impairment of its long-lived assets.

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 expense from continuing operations was $364,105 and $94,839 for the nine months ended September 30, 2017 and 2016, respectively; and $0 and $35,174 for the three months ended September 30, 2017 and 2016, respectively.  Research and development expense from the Company’s discontinued operations was $588,790 and $179,643 for the nine and three months ended September 30, 2016, respectively.

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 actual effective tax rate of continuing operations of 48.24% for the nine months ended September 30, 2017 differs from the U.S. federal statutory tax rate, primarily as a result of tax liability reserves from uncertain tax positions.

During the nine months ended September 30, 2017 and 2016, the Company recorded income tax (benefit) and expense from its continuing operations of approximately ($750,000) and ($60,000), respectively.  During the three months ended September 30, 2017 and 2016, the Company recorded income tax (benefit) and expense of approximately ($262,000) and ($101,000) from its continuing operations.  

During the nine and three months ended September 30, 2016, the Company recorded income tax (benefit) expense from its discontinued operations of approximately ($26,000) and $36,000, respectively.  

Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture Limited and Bright Swallow are incorporated in the BVI. Nova Macao is incorporated in Macao. Nova Samoa is incorporated in Oceania. There is no income tax for companies domiciled in the BVI, Oceania or Macao. Accordingly, the Company’s consolidated financial statements do not present any income tax provision related to the BVI and Macao tax jurisdiction where Nova Furniture BVI, BSI and Nova Macao are domiciled. Nova Macao is an income tax-exempt entity incorporated and domiciled in Macao.

As of September 30, 2017, unrecognized tax benefits were approximately $1.4 million.  The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $1.4 million as of September 30, 2017. As of September 30, 2016, unrecognized tax benefits were approximately $4.6 million.  The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $4.6 million as of September 30, 2016.

A reconciliation of the January 1, 2017, through September 30, 2017, amount of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) is as follows:

	Gross UTB
Beginning Balance – January 1, 2017	$	1,642,381
Decrease in unrecorded tax benefits related to the Company’s continuing operations		(160,230	)
Exchange rate adjustment		(85,881	)
Ending Balance – September 30, 2017	$	1,396,270

As of September 30, 2017, the Company had cumulatively accrued approximately $567,000 for estimated interest and penalties related to unrecognized tax benefits, of which $567,000 were related to the Company’s continuing operations. At December 31, 2016, the Company had cumulatively accrued approximately $494,000 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 expense, which totaled approximately $73,000 and $331,000 for the nine months ended September 30, 2017 and 2016, respectively, of which $73,000 and $82,000 were related to the Company’s continuing operations; and totaled approximately $7,000 and $98,000 for the three months ended September 30, 2017 and 2016, respectively, of which $7,000 and $15,000 were 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.

Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2011-2016 remain open to examination by tax authorities in the U.S.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with ASC Topic 605, “Revenue Recognition.” Sales revenue is recognized when a formal arrangement exists, the price is fixed or determinable, the delivery is completed and no other significant obligations of the Company exist and collectability is reasonably assured. No revenue is recognized if there are significant uncertainties regarding the recovery of the consideration due, or the possible return of the goods. Payments received before all of the relevant criteria for revenue recognition are recorded as unearned revenue.

Sales revenue represents the invoiced value of goods, net of value-added taxes (“VAT”). All of the Company’s products sold in China are subject to the PRC VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials purchased in China and included in the cost of producing the finished product. The Company records VAT payable and VAT receivable net of payments in the consolidated financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government.

The Company’s sales policy allows for the return of product within the warranty period if the product is defective and the defects are the Company’s fault.  As alternatives for the product return option, the customers have options of asking a discount from the Company for the products with quality issues or receiving replacement parts from the Company at no cost. The amount for return of products, the discount provided to the Company’s customers and the costs for replacement parts were immaterial for the nine and three months ended September 30, 2017 and 2016.

Franchise Arrangements 

In 2010, the Company’s former subsidiaries in China began entering into area product franchise agreements with franchisees who operated specialty furniture stores carrying only Nova-branded products. The product franchise agreement provided for the franchisee to retail Nova-brand furniture products for a period of one year from the date of the agreement. The franchisee was required to pay a deposit of RMB 30,000 at the signing of the agreement, which is used as payment for future purchases and is deferred on the Company’s balance sheet as a customer deposit. The franchisee was required to guarantee a minimum purchase amount from the Company during the contract period. The Company had the right to terminate the agreement should the franchisee fail to meet the minimum purchase amount. The Company previously provided the franchisee with store images and designs, signage, floor plan product information and training. In addition, the Company would rebate a per square meter subsidy to the franchisee for the store build-out within 12 months from the agreement date.  Under the program, the Company established standard renovation amounts (the “Renovation Subsidy”) for various cities in China.  The franchisee was able to obtain, in the form of credits against purchase orders, percentages of the Renovation Subsidy applicable in the city in which the franchisee is located, as follows: 0% to 30% of the Renovation Subsidy applied to the first purchase order and 5% of each purchase order thereafter until the aggregate of all credits equals 100% of the Renovation Subsidy, or 12 months from the date of the franchise agreement, whichever occurs first. In accordance with ASC 605-50, as the Company does not receive an identifiable benefit from these rebates, the rebates are recorded as a reduction of revenue on sales to the franchisees.  All of the franchise agreements relating to the Company’s operations were divested in connection with its discontinued operations (see Note 3 – Discontinued Operations).

Cost of Sales

Cost of sales consists primarily of finished goods purchased from other manufacturers, material costs, labor costs and related overhead that are directly attributable to the production of the products. Write-downs of inventory to the lower of cost or net realizable value is also recorded in the cost of sales.

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, 2017 and 2016, shipping and handling costs from continuing operations were $1,576 and $2,033, respectively; and $623 and $313 for the three months ended September 30, 2017 and 2016, respectively.  During the nine and three months ended September 30, 2016, shipping and handling costs from discontinued operations were $373,123 and $137,308, respectively.

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 from continuing operations was $847,177 and $2,156,451 for the nine months ended September 30, 2017 and 2016, respectively; and $186,381 and $841,345 for the three months ended September 30, 2017 and 2016, respectively. Advertising expense from discontinued operations was $60,379 and $59,286 for the nine and three months ended September 30, 2016, respectively.

Share-based compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Share-based compensation associated with the issuance of equity instruments to non-employees is measured at the fair value of the equity instrument issued or committed to be issued, as this is more reliable than the fair value of the services received. The fair value is measured at the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.

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) earnings per share for the nine and three months ended September 30, 2017 and 2016: 

	Nine Months Ended September 30,					Three Months Ended September 30,
	2017		2016			2017			2016
Income from continuing operations	$	2,304,709	$	1,189,266			$	2,956,633		$	1,044,931
Loss from discontinued operations		-		(1,476,572	)			-			(743,594	)
Net income (loss)		2,304,709		(287,306	)			2,956,633			301,337
Weighted average shares outstanding – basic		27,570,425		24,937,069				27,846,921			25,558,604
Dilutive unvested restricted stock		126,828		-				112,480			-
Dilutive vested stock options		7,153						21,228
Weighted average shares outstanding – diluted		27,704,406		2,493,7069		27,980,629					25,558,604
(Loss) income from continuing operations per share
– basic	$	0.08	$	0.05			$	0.11		$	0.04
– diluted	$	0.08	$	0.05			$	0.11		$	0.04
Loss from discontinued operations per share
– basic	$	0.08	$	(0.06	)		$	-		$	(0.03	)
– diluted	$	0.08	$	(0.06	)		$	-		$	(0.03	)
Net income (loss) per share
– basic	$	0.08	$	(0.01	)		$	0.11		$	0.01
– diluted	$	0.08	$	(0.01	)		$	0.11		$	0.01

* Including 571,533 and 337,114 shares that were granted and vested but not yet issued for the nine months ended September 30, 2017 and 2016, respectively.

For the nine and three months ended September 30, 2017 and 2016, 858,334 and 1,925,001 shares purchasable under warrants were excluded from EPS, respectively, as their effects were anti-dilutive. For the nine and three month periods ended September 30, 2016, the unvested restricted stock were anti-dilutive.

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.

A customer accounted for 35% and 10% of the Company’s sales for the nine months ended September 30, 2017 and 2016, respectively. A customer accounted for 54% and 10% of the Company’s sales for the three months ended September 30, 2017 and 2016, respectively. Accounts receivable from this customer were $21,812,355 and $5,216,213 as of September 30, 2017 and December 31, 2016, respectively.

The Company purchased its products from five major vendors during the nine and three months ended September 30, 2017, accounting for a total of 82% (26%, 19%, 15%, 12% and 10% for each) and 80% (30%, 16%, 12%, 11% and 11% for each) of the Company’s purchases, respectively.

The Company purchased its products from four and five major vendors during the nine and three months ended September 30, 2016, accounting for a total of 59% (20%, 15%, 12% and 12% for each) and 89% (22%, 17%, 17%, 17%, and 16% for each) of the Company’s purchases, respectively.

Advances made and accounts payable to these vendors were $13,237,351 and $0 as of September 30, 2017, respectively. Advances made and accounts payable to these vendors were $1,561,381 and $481,455 as of December 31, 2016, respectively.

Prior to its divestment of its PRC subsidiaries, the operations of the Company were located principally in China and the U.S. Accordingly, the Company’s Chinese subsidiaries’ business, financial condition and results of operations were, from time to time, influenced by the political, economic and legal environments in China, as well as by the general state of the PRC economy.

Statement of Cash Flows

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

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, advance to suppliers, other receivables, accounts payable, line of credit, advance from customers, other payables and accrued liabilities approximate estimated fair values because of their short maturities.  The estimated fair value of the long-term lines of credit approximated the carrying amount as of September 30, 2017, as the interest rates are considered as approximate to the current rate for comparable loans at the respective balance sheet dates.

Foreign Currency Translation and Transactions

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

The functional currency of Nova Dongguan, Nova Museum and Ding Nuo is RMB. The functional currencies of the Company’s foreign operations are translated into USD for balance sheet accounts using the current exchange rates in effect as of the balance sheet date, except for the equity account using the historical exchange rate, and for revenue and expense accounts using the weighted-average exchange rate during the fiscal year. The translation adjustments are recorded in the consolidated statements of income and comprehensive income, captioned “Accumulated other comprehensive income.” Gains and losses resulting from transactions denominated in foreign currencies are included in “Other income (expenses)” in the consolidated statements of income and comprehensive income. There have been no significant fluctuations in the exchange rate for the conversion of RMB to USD after the balance sheet date.

The RMB to USD exchange rates in effect as of September 30, 2016, was RMB6.6778 = USD$1.00. The weighted-average RMB to USD exchange rates in effect for the nine months ended September 30, 2016 was RMB6.5771= USD$1.00. The exchange rates used in translation from RMB to USD were published by the People’s Bank of the People’s Republic of China.

Comprehensive Income

The Company follows FASB ASC 220 “Reporting Comprehensive Income.” Comprehensive income is comprised of net income and all changes to the consolidated statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the nine and three months ended September 30, 2017 and 2016 included net income and foreign currency translation adjustments. 

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 business and industry segment: the design and sale of furniture.

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 US, Bright Swallow is a furniture distributor based in Hong Kong focusing on customers in Canada, and Nova Macao is a furniture distributor based in Macao focusing on international customers. They are all operated under the same senior management of the Company, and management views the operations of Diamond Bar, Bright Swallow and Nova Macao as a whole for making business decisions

Prior to the disposal of Nova Dongguan, the Company’s furniture products sold through Nova Dongguan, Nova Macao, and Ding Nuo were created with similar production processes, in the same facilities, under the same regulatory environment and sold to customers using similar distribution systems. Although Nova Museum was principally engaged in the dissemination of the culture and history of furniture in China, it also served a function of promoting and marketing the Company’s image and products by providing a platform and channel for consumers to be exposed to the Company and its products, it was operated under the same management with the same resources and in the same location as Nova Dongguan, and it was an additive and supplemental unit to the Company’s main operations, the design and sale of furniture.

Until the disposal of Nova Dongguan and its subsidiaries, all of the Company’s long-lived assets for production were located at its facilities in Dongguan, Guangdong Province, China, and operated within the same environmental, safety and quality regulations governing furniture manufacturers. After the disposal of Nova Dongguan and its subsidiaries, all of the Company’s long-lived assets are mainly property, plant and equipment located in the United States for administrative purposes.

Net sales to customers by geographic area are determined by reference to the physical locations of the Company’s customers. For example, if the products are delivered to a customer in the US, the sales are recorded as generated in the U.S.

New Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements.

In May 2014, the FASB issued No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients. These ASUs clarify the implementation guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606. The Company is evaluating the effect that these ASUs will have on its consolidated financial statements and related disclosures.

On March 30, 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes at settlement, forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public companies for fiscal years beginning after December 31, 2016, and interim periods within those annual periods. The Company adopted this new guidance on January 1, 2017 and this standard does not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures.

In October 2016, the FASB issued ASU No. 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. The Company will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions or disposals of assets or businesses.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

XML

Note 3 - Discontinued Operations

9 Months Ended

Sep. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 3 - Discontinued Operations

On September 23, 2016, Nova Furniture, a wholly-owned subsidiary of the Company (the “Seller”), entered into a Share Transfer Agreement (the “Agreement”) with Kuka Design Limited, an unrelated company incorporated in British Virgin Islands (“Kuka Design BVI” or “Buyer”). Pursuant to the terms of the Agreement, the Seller sold all of the outstanding equity interests in Nova Dongguan, a wholly owned subsidiary of the Seller, to the Buyer for a total of $8,500,000 (the “Transaction”), which such value was primarily derived from Nova Dongguan and Nova Donguan’s wholly owned subsidiary, Nova Museum, and 90.97% owned subsidiary, Ding Nuo. Upon consummation of the Transaction on October 25, 2016, the Buyer became the sole owner of Nova Dongguan. The purchase price of $8,500,000 was fully paid on October 6, 2016.

On November 10, 2016, Nova Furniture entered into a Trademark Assignment Agreement with Kuka Design BVI.  Pursuant to the terms of the Trademark Assignment Agreement, Nova Furniture agreed to assign to Kuka Design BVI its full right to, and title in, the NOVA trademark in China for $6,000,000 (the “Assignment Fee”).  Kuka Design BVI was to pay the Assignment Fee in two installments: $1,000,000 on or before November 30, 2016, and $5,000,000 on or before December 31, 2016.  As the result of the assignment of NOVA trademark in China, Nova Furniture and its affiliated companies, including Nova Macao, have ceased to use the NOVA trademark and brand in their business in China. A portion of the Assignment Fee in the amount of $4,750,000 was received in 2016, and the remaining balance of $1,250,000 was fully paid in January 2017.

As a result, the operations of Nova Dongguan, Nova Museum and Ding Nuo are now accounted for as discontinued operations in the accompanying consolidated financial statements for all periods presented. The following table presents the components of discontinued operations reported in the consolidated statements of operations:

	Nine Months ended September 30,					Three Months Ended September 30
	2017		2016			2017		2016
Sales from external customers	$	-	$	15,351,105		$	-	$	6,111,494
Cost of goods sold		-		(13,338,316	)		-		(5,284,100	)
Operating expenses		-		(3,231,788	)		-		(907,016	)
Loss before income taxes		-		(1,450,487	)		-		(780,545	)
Income tax (expense) benefit		-		26,085			-		(36,951	)
Loss from discontinued operations	$	-	$	(1,476,572	)	$	-	$	(743,594	)

XML

Note 4 - Inventories

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 4 - Inventories

The inventories as of September 30, 2017 and December 31, 2016 totaled $6,720,649 and $2,781,123, respectively, and were all finished goods.

XML

Note 5 - Plant, Property and Equipment, Net

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 5 - Plant, Property and Equipment, Net

As of September 30, 2017 and December 31, 2016, plant, property and equipment consisted of the following:

	September 30, 2017			December 31, 2016
Computer and office equipment	$	283,336		$	274,735
Decoration and renovation		118,858			110,015
Less: accumulated depreciation		(243,782	)		(213,474	)
	$	158,412		$	171,276

Depreciation expense from continuing operations was $30,307 and $33,217 for the nine months ended September 30, 2017 and 2016, respectively; and $10,164 and $11,128 for the three months ended September 30, 2017 and 2016, respectively.  Depreciation expense from discontinued operations was $1,011,125 and $331,323 for the nine and three months ended September 30, 2016, respectively.

XML

Note 6 - Intangible Assets

9 Months Ended

Sep. 30, 2017

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

Note 6 - Intangible Assets

The Company acquired a customer relationship with a fair value of $50,000 on August 31, 2011, as part of its acquisition of Diamond Bar. Concurrently with its acquisition of Diamond Bar, the Company entered into a trademark purchase and assignment agreement for all rights, title and interest in two trademarks (Diamond Sofa and Diamond Furniture) for $200,000 paid in full at the closing. Amortization of said customer relationship and the trademarks is provided using the straight-line method and estimated lives were 5 years for each.

The Company acquired a customer relationship with a fair value of $6,100,559 on April 24, 2013, as part of its acquisition of Bright Swallow. Amortization of said customer relationship is provided using the straight-line method and estimated life was 15 years. 

The Company’s eCommerce platform is a website through which customers are able to browse and place orders online for the Company’s products. For the downloadable mobile application, customers are able to download the application onto their own mobile devices to browse the Company’s product offerings. The Nova sales kit application is used on mobile devices to enable the Company’s sales representatives to display the Company’s products and inventory to customers. The total cost associated with the development, programming, design and roll-out of the Company’s eCommerce platform, downloadable mobile application, and Nova sales kit application is approximately $1.20 million. The Company’s eCommerce platform, downloadable mobile application, and Nova sales-kit application were completed and put into operation in 2015. These intangible assets are amortized using the straight-line method with an original estimated life of 10 years for each and are revised to 1 year in the quarter ended March 31, 2017.  The effect of the change in estimate is accounted for on a prospective basis.  

Intangible assets consisted of the following as of September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
eCommerce platform	$	1,208,200		$	1,208,200
Customer relationship		6,150,559			6,150,559
Trademarks		200,000			200,000
Less: accumulated amortization		(2,985,147	)		(1,872,136	)
	$	4,573,612		$	5,686,623

Amortization of intangible assets from continuing operations was $1,113,011 and $428,977 for the nine months ended September 30, 2017 and 2016, respectively; and $371,004 and $140,215 for the three months ended September 30, 2017 and 2016, respectively. Amortization of intangible assets from discontinued operations was $28,164 and $9,305 for the nine and three months ended September 30, 2016, respectively.

Estimated amortization expense relating to the existing intangible assets with finite lives for each of the next five years is as follows:

12 months ending September 30,
2018	$	676,032
2019		406,704
2020		406,704
2021		406,704
2022		406,704

XML

Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables

(a) On September 22, 2016, in order to promote the Company’s image and extend its customer reach, the Company entered into a memorandum of understating with an unrelated party (“MOU”) whereby the Company agreed to pay a total fee of $16,000,000 for a period of twelve months, commencing on December 31, 2016, to finance the establishment and promotion of the unrelated party’s Academic E-commerce platform and integrated training center in Hong Kong (the “Platform”). As of September 30, 2017 and December 31, 2016, the Company prepaid $0 and $7,000,000 to the unrelated party, respectively.

However, having considered the recent market situation and the status of the establishment and promotion of the Platform, the Company does not wish to continue to finance the promotion of the Platform. On March 20, 2017, the Company and the unrelated party terminated the MOU and released both parties from all the obligations and liabilities under the MOU. The Company agreed to bear the costs of $800,000 incurred by the unrelated party on the Platform, which were charged as expenses in the first quarter of fiscal year 2017. The Company collected a total of approximately $13 million, which was prepaid previously, as of September 30, 2017, and no further balance was owed by the unrelated party.

(b)          Prepaid Expenses and Other Receivables consisted of the following at September 30, 2017 and December 31, 2016: 

	September 30, 2017			December 31, 2016
Prepaid expenses		$	288,784		$	573,005
Other receivables			27,049			69,886
Total		$	315,833		$	642,891

On March 23, 2017, the Company made a short-term advance of $2,000,000 to an unrelated party. The advance is unsecured and bears interest of 5% per annum. The unrelated party agreed to pay the whole amount of $2,000,000 back to the Company by May 31, 2017. During the nine months ended September 30, 2017, the Company collected full payment of the principal and interest of $26,575 from the unrelated party.

XML

Note 8 - Accrued Liabilities and Other Payables

9 Months Ended

Sep. 30, 2017

Disclosure Text Block Supplement [Abstract]

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

Note 8 - Accrued Liabilities and Other Payables

Accrued liabilities and other payables consisted of the following as of September 30, 2017 and December 31, 2016:

	September 30, 2017		December 31, 2016
Other payables	$	18,462	$	47,790
Salary payable		42,909		30,207
Financed insurance premiums		128,891		66,314
Accrued rents		84,659		102,269
Accrued commission		360,630		494,108
Accrued expenses, others		90,950		40,272
Total	$	726,501	$	780,960

As of September 30, 2017 and December 31, 2016, other accrued expenses mainly included legal and professional fees, transportation expenses and utilities.  Other payables represented other tax payable and meal expenses.

XML

Note 9 - Lines of Credit

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 9 - Lines of Credit

Diamond Bar entered into an agreement with a bank in California for a line of credit of up to $5,000,000 with annual interest of 4.25% and maturity on June 1, 2015. On June 8, 2015, the bank extended and modified the terms of the loan agreement to extend the line of credit up to a maximum of $6,000,000 until July 31, 2015 and $5,000,000 thereafter with an annual interest rate of 4.25% and maturity on September 1, 2015 (the term of which the bank allowed to extend until the renewal described in the following sentence while the bank conducted its own audit associated therewith). On September 28, 2015, Diamond Bar extended the line of credit up to a maximum of $6,000,000 with annual interest of 3.75% (4% from December 17, 2015) and maturity on June 1, 2017. On January 20, 2016, Diamond Bar increased the line of credit up to a maximum of $8,000,000 with annual interest of 4%.  On June 22, 2017, Diamond Bar extended the line of credit to maturity on September 1, 2017. On September 19, 2017, Diamond Bar extended the line of credit to maturity on June 1, 2019. The annual interest was 4.25% as of September 30, 2017. The line of credit is secured by all of the assets of Diamond Bar and is guaranteed by Nova LifeStyle. As of September 30, 2017 and December 31, 2016, Diamond Bar had $3,322,040 and $6,129,841 outstanding on the line of credit, respectively.  During the nine months ended September 30, 2017 and 2016, the Company recorded interest expense of $145,857 and $167,381, respectively; and $40,932 and $61,127 for the three months ended September 30, 2017 and 2016, respectively.  As of September 30, 2017, Diamond Bar had $4,677,960 available for borrowing without violating any covenants.

The Diamond Bar loan has the following covenants: (i) maintain a minimum tangible net worth of not less than $10 million; (ii) maintain a ratio of debt to tangible net worth not in excess of 2.500 to 1.000; (iii) the pre-tax income must be not less than 1.000% of total revenue quarterly; and (iv) maintain a current ratio in excess of 1.250 to 1.000. As of September 30, 2017, Diamond Bar was in compliance with the stated covenants.  

On January 22, 2015, Nova Macao renewed a line of credit, with an annual interest rate of 4.25% and principal of up to $6,500,000, with a commercial bank in Hong Kong to extend the maturity date to January 29, 2016. On February 16, 2016, Nova Macao extended the maturity date of line of credit to January 31, 2017, with an annual interest rate of 4% and principal of up to $6,500,000. The loan requires monthly payment of interest and that the interest rate will be adjusted annually. The loan was secured by assignment of Sinosure (China Export and Credit Insurance Company) credit insurance and was guaranteed by Nova LifeStyle and Diamond Bar. The Company did not extend the line of credit and paid it off in February 2017. As of September 30, 2017 and December 31, 2016, Nova Macao had $0 and $1,848,000 outstanding on the line of credit, respectively. During the nine months ended September 30, 2017 and 2016, Nova Macao paid interest of $13,828 and $57,304, respectively; and $0 and $18,890 for the three months ended September 30, 2017 and 2016, respectively.

XML

Note 10 - Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 10 - Related Party Transactions

On September 30, 2011, Diamond Bar leased a showroom in High Point, North Carolina from the Company’s president who is currently also our Chief Executive Officer and Chairman of the Board. The lease is to be renewed and has been renewed each year since 2011. On March 16, 2017, the Company renewed the lease for an additional one year term. The lease was $32,916 for one year and only for use during two furniture exhibitions to be held between April 1, 2017 and March 31, 2018. During the nine and three months ended September 30, 2017, the Company paid rental amounts of $32,916 and $16,458 that are included in selling expenses from continuing operations.

During the nine and three months ended September 30, 2016, the Company paid rental amounts of $32,916 that are included in selling expenses from continuing operations.

XML

Note 11 - Stockholders' Equity

9 Months Ended

Sep. 30, 2017

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 11 - Stockholders’ Equity

Warrants

Following is a summary of the warrant activity for the nine months ended September 30, 2017: 

	Number of Warrants		Average Exercise Price		Weighted Average Remaining Contractual Term in Years
Outstanding at January 1, 2017		858,334	$	2.71		3.92
Exercisable at January 1, 2017		858,334		2.71		3.92
Granted		-		-		-
Exercised / surrendered		-		-		-
Expired		-		-		-
Outstanding at September 30, 2017		858,334	$	2.71		3.17
Exercisable at September 30, 2017		858,334	$	2.71		3.17

Shares Issued to Consultants 

On December 1, 2014, the Company entered into a consulting agreement with a consulting firm for management consulting services effective on December 1, 2014. The Company agreed to issue 60,000 shares of the Company’s common stock to the firm for three years of consulting services. The shares will be issued according to the following vesting schedule set forth as follows: The initial 10,000 shares were required to be issued within 30 days upon signing of the agreement; for the remaining 50,000 shares, the Company issued to the consultant 10,000 shares of common stock on or before each of June 1, 2015, December 1, 2015, June 1, 2016, December 1, 2016 and June 1, 2017. The Company or the consultant may terminate the agreement at any time by 90 days’ written notice to the other party. The fair value of the 60,000 shares was $224,400, which was calculated based on the stock price of $3.74 per share on December 1, 2014 and will be amortized over the service term. During each of the nine-month and three-month periods ended September 30, 2017 and 2016, the Company amortized $56,100 and $18,700 as consulting expenses, respectively. 

On March 1, 2015, the Company entered into a marketing agreement with a consultant for marketing and product promotion services effective on March 1, 2015. The Company agreed to grant the consultant $100,000 worth of shares of the Company’s common stock for 12 months of consulting services starting on March 1, 2015. The shares vested immediately on March 1, 2015. The share price was calculated as the average closing price per share for ten trading days immediately prior to the execution of the agreement and was amortized over the service term. On March 9, 2015, the Company issued 38,745 shares at an average price of $2.581 per share to the consultant. During the nine months ended September 30, 2017 and 2016, the Company amortized $0 and $16,667 as consulting expenses, respectively; and $0 for each of the three month periods ended September 30, 2017 and 2016. 

On September 14, 2015, the Company entered into a business marketing advisory agreement with a consultant for marketing and general consulting services effective on August 15, 2015. The Company agreed to pay the consultant a monthly fee of $5,000 and also granted 18,348 shares of the Company’s common stock to the consultant for 12 months of services starting on August 15, 2015. Twenty-five percent (25%) of those shares vested on November 15, 2015, 25% on February 15, 2016, 25% on May 15, 2016 and the remaining 25% vested on August 15, 2016. The fair value of the 18,348 shares was $45,870, which was calculated based on the stock price of $2.50 per share on August 15, 2015 and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $0 and $28,669 as consulting expenses, respectively; and $0 and $5,734 for the three months ended September 30, 2017 and 2016, respectively.

On February 1, 2016, the Company entered into a marketing agreement with a consultant for marketing development strategies and consulting services for 15 months. The Company agreed to grant the consultant 10,000 unregistered restricted shares of the Company’s common stock per month, for a total commitment of 150,000 shares of common stock. The fair value of the 150,000 shares was $204,000, which was calculated based on the stock price of $1.36 per share on February 1, 2016, the date the agreement was executed, and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $54,400 and $108,800 as consulting expenses, respectively; and $0 and $40,800 for the three months ended September 30, 2017 and 2016 as consulting expenses, respectively.

On February 1, 2016, the Company entered into an agreement with a consultant for E-Commerce consulting service with a term of 24 months. The Company agreed to grant the consultant 10,000 shares of the Company’s common stock per month, for a total commitment of 240,000 shares. Twelve and half percent (12.5%) of those shares vested or will vest on April 30, 2016, 12.5% on July 30, 2016, 12.5% on October 31, 2016, 12.5% on January 31, 2017, 12.5% on April 30, 2017, 12.5% on July 30, 2017, 12.5% on October 31, 2017, and the remaining 12.5% on January 31, 2018. The fair value of the 240,000 shares was $326,400, which was calculated based on the stock price of $1.36 per share on February 1, 2016, the date the agreement was executed, and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $122,400 and $108,800 as consulting expenses, respectively; and $40,800 for the three months ended September 30, 2017 and 2016.

On February 1, 2016, the Company entered into a consulting agreement with a consultant for planning, coordinating and strategy implementation services for a term of 6 months. The Company agreed to grant the consultant $10,000 worth of shares of the Company’s common stock per month. During each of the nine month periods ended September 30, 2017 and 2016, 83,386 shares vested, based on the stock prices as of the end of each month commencing February 2016 and concluding September 2016. During the nine months ended September 30, 2017 and 2016, the Company amortized $0 and $60,000 as consulting expense, respectively; and $0 and $10,000 for the three month ended September 30, 2017 and 2016, respectively.

On November 15, 2016, the Company entered into a consulting and strategy service agreement with a consultant for marketing and general consulting services effective on November 14, 2016. The Company agreed to grant 100,000 shares of the Company’s common stock to the consultant for 12 months of services starting on November 14, 2016. The shares would be issued pursuant to Nova LifeStyle, Inc. 2014 Omnibus Long-Term Incentive Plan (the “Plan”) approved by the Board of Directors (“Board”) of the Company on May 13, 2014 and ratified at the annual shareholder meeting on June 30, 2014. The Plan was registered under Form S-8 on July 30, 2014. Twenty-five percent (25%) of those shares vested on December 15, 2016, 25% on February 15, 2017, 25% on May 15, 2017, and the remaining 25% will vest on August 15, 2017. The fair value of the 100,000 shares was $294,000, which was calculated based on the stock price of $2.94 per share on November 15, 2016 and will be amortized over the service term. During the nine and three months ended September 30, 2017, the Company amortized $219,896 and $74,104 as consulting expenses, respectively.

On November 15, 2016, the Company entered into a consulting agreement with a consultant for business development and financial advisory service for a term of 12 months. The Company agreed to grant the consultant 100,000 shares of the Company’s common stock. The shares would be issued pursuant to the Plan. The fair value of the 100,000 shares was $294,000, which was calculated based on the stock price of $2.94 per share on November 15, 2016 and will amortized over the service term. During the nine and three months ended September 30, 2017, the Company amortized $220,500 and $73,500 as consulting expense, respectively.

On November 15, 2016, the Company entered into a consulting agreement with a consultant for business advisory service for a term of 12 months. The Company agreed to compensate the consultant a one-time amount of $20,000 worth of shares of the Company’s common stock based on the price per share on November 15, 2016. The Company also granted the consultant $15,000 worth of shares of the Company’s common stock per month starting from December 1, 2016 for 12 months. The shares would be issued pursuant to the Plan. During the nine and three months ended September 30, 2017, the Company amortized $150,000 and $50,000 as consulting expense, respectively.

On June 30, 2017, the Company entered into a consulting agreement with a consultant for business advisory service for a term of 12 months. The Company agreed to compensate the consultant a one-time amount of $10,000 worth of shares of the Company’s common stock based on the price per share on June 30, 2017. The Company also granted the consultant $10,000 worth of shares of the Company’s common stock per month starting from July 1, 2017 for a period of 12 months. The shares would be issued pursuant to the Plan. During the nine and three months ended September 30, 2017, the Company amortized $32,500 as consulting expense.

Shares and Warrants Issued through Private Placement

Private Placement on May 28, 2015

On May 28, 2015, the Company entered into a Securities Purchase Agreement with certain purchasers (the “Purchasers”) pursuant to which the Company offered to the Purchasers, in a registered direct offering, an aggregate of 2,970,509 shares of common stock, par value $0.001 per share. Of these, 2,000,001 shares were sold to the Purchasers at a negotiated purchase price of $2.00 per share, for aggregate gross proceeds to the Company of $4,000,002, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. In accordance with the terms of the Securities Purchase Agreement entered on April 14, 2014, the outstanding 2014 Series A Warrants were exchanged for 660,030 shares of common stock, and the outstanding 2014 Series C Warrants were exchanged for 310,478 shares of common stock.

In a concurrent private placement, the Company also sold to the Purchasers a warrant to purchase one share of the Company’s common stock for each share purchased for cash in the offering, pursuant to that certain Common Stock Purchase Warrant, by and between the Company and each Purchaser (the “2015 Warrants”). The 2015 Warrants became exercisable beginning on the six month anniversary of the date of issuance (the “Initial Exercise Date”) at an exercise price of $2.71 per share and will expire on the five year anniversary of the Initial Exercise Date. The purchase price of one share of the Company’s common stock under the 2015 Warrants is equal to the exercise price. 

The warrants issued in the private placement described above are exercisable for a fixed number of shares, and are classified as equity instruments under ASC 815-40-25-10. The Company accounted for the warrants issued in the 2015 private placement based on the fair value method under ASC Topic 505, and the fair value of the warrants was calculated using the Black-Scholes model under the following assumptions: estimated life of 5 years, volatility of 107%, risk-free interest rate of 1.55% and dividend yield of 0%. No estimate of forfeitures was made as the Company has a short history of granting options and warrants. The fair value of the warrants issued to investors at grant date was $3,147,530.

Shares and Options Issued to Independent Directors

In March 2015, the Company entered into restricted stock award agreements under the 2014 Omnibus Long-Term Incentive Plan with three independent directors of the Board. The Company agreed to grant 12,195 shares of the Company’s common stock to each of these independent directors with a grant date of March 24, 2015. The restricted period lapses as to 25% of the restricted stock on September 30, 2015, December 31, 2015, March 31, 2016 and September 30, 2016, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date. The fair value of these shares was $119,999, which was calculated based on the stock price of $3.28 per share on March 24, 2015. During the nine and three months ended September 30, 2016, the Company amortized $26,959 and $0 as directors’ stock compensation expenses, respectively.

In May 2015, the Company entered into a restricted stock award agreement under the 2014 Omnibus Long-Term Incentive Plan with a new independent director. The Company agreed to grant 12,195 shares of the Company’s common stock to the new independent director with a grant date of May 19, 2015. The restricted period lapsed as to 25% of the restricted stock on September 30, 2015, December 31, 2015, March 31, 2016 and September 30, 2016, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date. The fair value of these shares was $38,292, which was calculated based on the stock price of $3.14 per share on May 19, 2015. During the nine and three months ended September 30, 2016, the Company amortized $14,478 and $0 as directors’ stock compensation expenses, respectively.

On August 9, 2016, the Board approved a restricted stock award agreement under the 2014 Omnibus Long-Term Incentive Plan with four independent directors. The Company agreed to grant $40,000 worth of stocks to each of its four independent directors. The restricted period lapses as to 25% of the restricted stock granted vested on September 30, 2016 based on the closing price of common stock on Nasdaq as of August 9, 2016, 25% of the restricted stock granted vested on December 31, 2016 based on the closing price of common stock on Nasdaq as of September 30, 2016, 25% of the restricted stock granted vested on March 31, 2017 based on the closing price of common stock on Nasdaq as of December 31, 2016, and 25% of the restricted stock granted vested on June 30, 2017 based on the closing price of common stock on Nasdaq as of March 31, 2017. During the nine and three months ended September 30, 2017, the Company amortized $96,438 and $17,096 as directors’ stock compensation expenses, respectively. During the nine and three months ended September 30, 2016, the Company amortized $23,233 as directors’ stock compensation expenses.

On April 10, 2017, the Company entered into restricted stock award agreements under 2014 Omnibus Long-Term Incentive Plan with a new independent director of the Board. The Company agreed to grant $20,000 worth of stock to the independent director with a grant date on April 10, 2017. The restricted period lapses as of 50% of the restricted stock granted vested on April 10, 2017 based on the closing price of common stock on Nasdaq as of April 10, 2017, and 50% of the restricted stock granted vested on June 30, 2017 based on the closing price of common stock on Nasdaq as of June 30, 2017. During the nine and three months ended September 30, 2017, the Company amortized $13,699 and $5,041 as directors’ stock compensation expenses, respectively.

On September 26, 2017 (the “Grant Date”), the Company entered into stock option agreements under the 2014 Omnibus Long-Term Incentive Plan with the three independent members of the board of directors. The Company agreed to grant the Company’s three independent directors options to purchase an aggregate of 300,000 shares of the Company’s common stock at an exercise price of $1.65 per shares, with a term of 5 years. Twenty-five percent (25%) of those stock options vested or will vest on the September 30, 2017, 25% on December 31, 2017, 25% on March 31, 2018, and the remaining 25% will vest on June 30, 2018, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date.

The fair value of the stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model (“BSOPM”). The BSOPM has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk-free interest rate is based upon market yields for United States Treasury debt securities at a maturity near the term remaining on the option. Dividend rates are based on the Company’s dividend history. The stock volatility factor is based on the historical volatility of the Company’s stock price. The expected life of an option grant is based on management’s estimate as no options have been exercised in the Plan to date. The fair value of the option granted to of the independent directors is recognized as director fee over the vesting period of the stock option award. The fair value of the options was calculated using the following assumptions, estimated life of five years, volatility of 84%, risk free interest rate of 0.15%, and dividend yield of 0%. The fair value of 300,000 stock options was $324,907 at the grant date. During the nine and three months ended September 30, 2017, the Company recorded $81,227 as directors’ stock compensation expenses.

Shares Issued to Employees and Service Providers

On May 18, 2016, the Company entered into agreements with three designers for product design services for a term of 24 months. The Company agreed to grant each designer 240,000 shares of the Company’s common stock. Twenty five percent (25%) of those shares vested or will vest on May 31, 2016, 25% on December 18, 2016, 25% on June 18, 2017 and the remaining 25% on December 18, 2017. The fair value of these shares was $388,800, which was calculated based on the stock price of $0.54 per share on May 18, 2016, the date the agreement was executed, and will be amortized over the service term. During the nine months ended September 30, 2017 and 2016, the Company amortized $145,401 and $72,434 as stock compensation expenses, respectively; and $48,999 for the three months ended September 30, 2017 and 2016.

On November 14, 2016, the Company entered into an employment agreement with an executive for one year. The Company agreed to grant an award of 30,000 restricted Stock Units to the executive pursuant to the Company’s 2014 Omnibus Long-Term Incentive Plan. The fair value of these shares was $92,100, which was calculated based on the stock price of $3.07 per share on November 11, 2016, the date the awards were determined by the Compensation Committee of the Board. Twenty-five percent (25%) of those shares vested on December 30, 2016, 25% on March 31, 2017, 25% on June 30, 2017 and the remaining 25% vest on September 30, 2017. During the nine and three months ended September 30, 2017, the Company amortized $68,886 and $23,214 as stock compensation, respectively.

On November 15, 2016, the Company entered into an agreement with a designer for furniture design services effective on November 15, 2016 for 1 year. The Company agreed to grant the designer 100,000 shares of the Company’s common stock. The fair value of the 100,000 shares was $294,000, which was calculated based on the stock price of $2.94 per share on November 15, 2016 and will be amortized over the service term. Twenty-five percent (25%) of those shares vested on February 15, 2017, 25% on May 15, 2017, 25% will vest on August 15, 2017 and the remaining 25% will vest on November 15, 2017. During the nine and three months ended September 30, 2017, the Company amortized $220,500 and $73,500 as stock compensation, respectively.

Options Issued to Employees

On August 29, 2017 (the “Grant Date”), the Board approved option grants to the Company’s employees to purchase an aggregate of 780,000 shares of the Company’s common stock (including options to purchase 100,000 shares and 35,000 shares to the Company’s President and CFO, respectively) at an exercise price of $1.26 per shares, with a term of 5 years, pursuant to the Company’s 2014 Omnibus Long-Term Incentive Plan. Fifty percent (50%) of those stock options vested immediately, and the remaining 50% will vest on the six-month anniversary of the Grant Date.

The fair value of the stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model (“BSOPM”) as described in options to independent directors above. The fair value of the option granted to employees is recognized as compensation expense over the vesting period of the stock option award. The fair value of the options was calculated using the following assumptions, estimated life of ten years, volatility of 84%, risk free interest rate of 0.16%, and dividend yield of 0%. The fair value of 780,000 stock options was $643,182 at the grant date. During the nine and three months ended September 30, 2017, the Company recorded $321,591 as stock compensation.

	Number of Shares		AverageExercise Price per Share		Aggregate IntrinsicValue(1)		WeightedAverageRemainingContractual Term in Years
Granted		1,080,000	$	1.37				5.00
Exercised		-		-				-
Forfeited				-				-
Outstanding at September 30, 2017		1,080,000	$	1.37		315,000		4.93
Exercisable at September 30, 2017		465,000	$	1.32		156,750		4.92

(1) The intrinsic value of the stock options at September 30, 2017 is the amount by which the market value of the Company’s common stock of $1.66 as of September 30, 2017 exceeds the exercise price of the option.

XML

Note 12 - Statutory Reserves

9 Months Ended

Sep. 30, 2017

Statutory Reserves [Abstract]

Statutory Reserves [Text Block]

Note 12 - Statutory Reserves

As a U.S. holding company, the Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiary, Nova Macao, only out of the subsidiary’s retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Nova Macao. Pursuant to the corporate laws of the PRC and Macao, including the PRC Regulations on Enterprises with Foreign Investment, Nova Macao is required to maintain a statutory reserve by appropriating from after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained earnings. As a result of the PRC laws and regulations described below that require such annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as a general statutory reserve fund, Nova Macao is restricted in its ability to transfer a portion of its net assets to the Company as a dividend.

Surplus Reserve Fund

Prior to the Company’s divestment of Nova Dongguan and Ding Nuo, such subsidiaries were required to transfer 10% of net income, as determined under PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the subsidiary’s registered capital. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholdings or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issuance is not less than 25% of the registered capital.

At September 30, 2017 and December 31, 2016, Nova Macao had surplus reserves of $6,241, representing 50% of its registered capital.

Common Welfare Fund

The common welfare fund is a voluntary fund to which Nova Macao can elect to transfer 5% to 10% of its net income. This fund can only be utilized on capital items for the collective benefit of the subsidiary’s employees, such as construction of dormitories, cafeteria facilities, and other staff welfare facilities. This fund is non-distributable other than upon liquidation. Nova Macao does not participate in this voluntary fund.

XML

Note 13 - Geographical Sales

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 13 - Geographical Sales

Geographical distribution of sales consisted of the following for the nine and three months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,				Three Months Ended September 30,
Geographical Areas	2017		2016		2017		2016
North America	$	37,158,028	$	52,539,699	$	11,900,592	$	22,529,655
Europe		3,456,045		10,739,127		-		2,932,288
Australia		24,690,606		3,445,635		17,992,912		1,356,201
Asia*		5,020,746		3,596,850		3,329,121		1,748,750
Hong Kong		461,943		2,194,115		-		1,897,420
Other countries		26,046		233,546		-		74,604
	$	70,813,414	$	72,748,972	$	33,222,625	$	30,538,918

* excluding Hong Kong

XML

Note 14 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 14 - Commitments and Contingencies

Lease Commitments

On June 17, 2013, the Company entered into a lease agreement for office, warehouse, storage, and distribution space with a five year term, commencing on November 1, 2013 and expiring on October 31, 2018. The lease agreement also provides an option to extend the term for an additional six years. The monthly rental payment is $42,000 with an annual 3% increase.  The rent is recorded on a straight-line basis over the term of the lease. 

On January 7, 2014, the Company entered into a sublease agreement with Diamond Bar for warehouse space with a five-year term commencing on November 1, 2013 and expiring on October 31, 2018. The Company subleased a portion of its warehouse space to one of its customers with a one-year term commencing on December 1, 2013 and expiring on November 30, 2014, which has been renewed every year with the current term expiring on October 31, 2017.  On October 24, 2017, the Company renewed the sublease agreement with this customer for another one-year term commencing on November 1, 2017 and expiring on October 31, 2018. The sublease income of $5,400 per month was recorded against the rental expense. During the nine months ended September 30, 2017 and 2016, the Company recorded $48,600 and $60,231 sublease income, respectively; and $16,200 and $20,077 for the three months ended September 30, 2017 and 2016, respectively.

On September 19, 2013, Bright Swallow entered into a lease agreement for office space in Hong Kong with a two year term, commencing on October 1, 2013 and expiring on September 30, 2015.  On September 15, 2015, Bright Swallow renewed the lease for another two year term, commencing on October 1, 2015 and expiring on September 30, 2017. On September 13, 2017, Bright Swallow renewed the lease for another two year term, commencing on October 1, 2017 and expiring on September 30, 2019. The monthly rental payment is 20,000 Hong Kong Dollars ($2,560).  

The Company has entered into several lease agreements for office and warehouse space in Commerce, California and showroom space in Las Vegas, Nevada and High Point, North Carolina on monthly or annual terms.

Total rental expense from continuing operations for the nine months ended September 30, 2017 and 2016 was $597,103 and $510,018, respectively; and $224,349 and $180,528 for the three months ended September 30, 2017 and 2016. The rental expense is recorded on a straight-line basis over the term of the lease.

The total minimum future lease payments are as follows:

12 Months Ending September 30,	Amount
2018	$	596,600
2019		77,991
2020		-
2021		-
2022		-
Thereafter		-
Total	$	674,591

Employment Agreements

On May 3, 2013, the Company entered into an amended and restated employment agreement with Thanh H. Lam to serve as the Company’s president for a five-year term. The agreement provides for an annual salary of $80,000, a grant of 200,000 shares of the Company’s common stock and an annual bonus at the sole discretion of the Board. The 200,000 shares to be issued to Ms. Lam are subject to the terms of a stock award agreement. The first 50,000 shares of common stock were vested immediately, and the remaining shares vest at 50,000 shares per year for three years on each anniversary of the effective date of the stock award agreement. The fair value of the shares was based on the stock price of $3.82 per share on May 3, 2013. During the nine months ended September 30, 2017 and 2016, the Company recorded $0 and $64,626, as stock-based compensation to Ms. Lam, respectively. During the three months ended September 30, 2017 and 2016, the Company recorded $0, as stock compensation to Ms. Lam, respectively. On July 24, 2017, the Company and Thanh H. Lam entered into an amendment (the “Amendment”) to her amended and restated employment agreement, pursuant to which she serves as the Company’s Chief Executive Officer and President.  The Amendment increased the annual salary of Ms. Lam from $80,000 to $100,000.

On March 21, 2016, the Company granted Restricted Stock Units to Ya Ming (Jeffrey) Wong (the Company’s former CEO), Yuen Ching (Sammy) Ho, the Company’s former CFO, and Thanh H. Lam, the Company’s President. Each of them will receive a grant of 100,000 Restricted Stock Units (“RSU”). The fair value of the 300,000 shares of RSU was $360,000, which was calculated based on the stock price of $1.20 per share on March 21, 2016. The RSU grants, to the extent not forfeited, have fully vested. During the nine months ended September 30, 2017 and 2016, the Company recorded $0 and $270,000, as stock-based compensation to the officers, respectively. During the three months ended September 30, 2017 and 2016, the Company recorded $0 and $90,000, as stock-based compensation to the officers, respectively.

On March 25, 2016, the Company entered into one-year employment agreements, effective as of November 11, 2015, with Mr. Ya Ming (Jeffrey) Wong and Mr. Yuen Ching (Sammy) Ho to serve as the Company’s CEO and CFO, respectively. These agreements were in substantially the same form as the previous one-year employment agreements entered into on March 25, 2015 (which expired by their terms), and provide for annual salaries of $100,000 for Mr. Wong and $80,000 for Mr. Ho, and annual bonuses at the sole discretion of the Board of Directors. The employment agreements also reflect the RSU grants described in the immediately preceding paragraph. On October 3, 2016, Mr. Wong resigned his position as CEO, terminated his employment agreement, and forfeited 25,000 RSUs granted to him under such agreement. On August 15, 2017, Mr. Ho resigned his position as CFO and terminated his employment agreement.

On August 22, 2017, the Company entered into a one-year employment agreement, effective as of August 22, 2017, with Jeffery Chuang, the Company’s new CFO. The employment agreement provided for an annual salary of $50,000 to CFO and annual bonuses at the sole discretion of the Board of Directors. The employment agreement also provides for a grant of options to purchase 35,000 shares of the Company’s common stock, which was described in the Note 11 – Stockholders’ equity.

XML

Note 15 - Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 15 - Subsequent Events

The Company has evaluated all events that have occurred subsequent to September 30, 2017 through the issuance of the consolidated financial statements and the following subsequent event has been identified.

On October 24, 2017, the Company renewed the sublease agreement with its one of its customers for a one-year term commencing on November 1, 2017 and expiring on October 31, 2018.

XML

Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The 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, 2017 and for the nine and three month periods ended September 30, 2017 and 2016 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 not been included. 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, 2016, previously filed with the SEC on April 14, 2017.

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, 2017, its interim condensed consolidated results of operations and cash flows for the nine and three month periods ended September 30, 2017 and 2016, 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, Policy [Policy Text Block]

Use of Estimates

In preparing consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, the allowance for bad debt, valuation of inventories, unrecognized tax benefits, valuation allowance for deferred tax assets, assumptions used in assessing impairment of long-lived assets and goodwill. Actual results could differ from those estimates.

Business Combinations Policy [Policy Text Block]

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, 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 asset 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 and Intangible Assets, Goodwill, Policy [Policy Text Block]

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 Diamond Bar reporting unit.  Accordingly, as of September 30, 2017 and 2016, the Company concluded there was no impairment of goodwill of Diamond Bar.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Accounts Receivable

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:

Balance at January 1, 2017	$	3,019,931
Provision for the period		203,905
Write off		(3,106,474	)
Balance at September 30, 2017	$	117,362

During the nine months ended September 30, 2016, bad debt (reversal) expense from continuing operations and discontinued operations were $33,818 and $552,611, respectively. During the three months ended September 30, 2016, bad debt expense from continuing operations and discontinued operations were $55,294 and $539,327, respectively.

Advances to Suppliers Policy [PolicyTextBlock]

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 actual practice, the Company always received goods within 5 to 9 months from the date the advance payment is made. As such, no reserve on supplier prepayments had been made or recorded by the Company. Any provisions for allowance for advance to suppliers, if deemed necessary, will be included in general and administrative expenses in the consolidated statements of income.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost and net realizable value with cost determined on a weighted-average basis. Management compares the cost of inventories with the net realizable value and an allowance is made for writing down their inventories to market value, if lower. The Company did not record any write-downs of inventory at September 30, 2017 and 2016.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330) - Simplifying the Measurement of Inventory,” which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted ASU 2015-11 effective January 1, 2017 and it did not have a material effect on the Company’s consolidated financial statements.

Property, Plant and Equipment, Policy [Policy Text Block]

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 10% salvage value and estimated lives as follows:

Computer and office equipment	5 years
Decoration and renovation	10 years

Depreciation of plant, property and equipment attributable to manufacturing activities is capitalized as part of inventories, and expensed to cost of goods sold when inventories are sold.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

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.

Based on its review, the Company believes that, as of September 30, 2017 and December 31, 2016, there was no significant impairment of its long-lived assets.

Research and Development Expense, Policy [Policy Text Block]

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 expense from continuing operations was $364,105 and $94,839 for the nine months ended September 30, 2017 and 2016, respectively; and $0 and $35,174 for the three months ended September 30, 2017 and 2016, respectively.  Research and development expense from the Company’s discontinued operations was $588,790 and $179,643 for the nine and three months ended September 30, 2016, respectively.

Income Tax, Policy [Policy Text Block]

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 actual effective tax rate of continuing operations of 48.24% for the nine months ended September 30, 2017 differs from the U.S. federal statutory tax rate, primarily as a result of tax liability reserves from uncertain tax positions.

During the nine months ended September 30, 2017 and 2016, the Company recorded income tax (benefit) and expense from its continuing operations of approximately ($750,000) and ($60,000), respectively.  During the three months ended September 30, 2017 and 2016, the Company recorded income tax (benefit) and expense of approximately ($262,000) and ($101,000) from its continuing operations.  

During the nine and three months ended September 30, 2016, the Company recorded income tax (benefit) expense from its discontinued operations of approximately ($26,000) and $36,000, respectively.  

Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture Limited and Bright Swallow are incorporated in the BVI. Nova Macao is incorporated in Macao. Nova Samoa is incorporated in Oceania. There is no income tax for companies domiciled in the BVI, Oceania or Macao. Accordingly, the Company’s consolidated financial statements do not present any income tax provision related to the BVI and Macao tax jurisdiction where Nova Furniture BVI, BSI and Nova Macao are domiciled. Nova Macao is an income tax-exempt entity incorporated and domiciled in Macao.

As of September 30, 2017, unrecognized tax benefits were approximately $1.4 million.  The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $1.4 million as of September 30, 2017. As of September 30, 2016, unrecognized tax benefits were approximately $4.6 million.  The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was $4.6 million as of September 30, 2016.

A reconciliation of the January 1, 2017, through September 30, 2017, amount of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) is as follows:

	Gross UTB
Beginning Balance – January 1, 2017	$	1,642,381
Decrease in unrecorded tax benefits related to the Company’s continuing operations		(160,230	)
Exchange rate adjustment		(85,881	)
Ending Balance – September 30, 2017	$	1,396,270

As of September 30, 2017, the Company had cumulatively accrued approximately $567,000 for estimated interest and penalties related to unrecognized tax benefits, of which $567,000 were related to the Company’s continuing operations. At December 31, 2016, the Company had cumulatively accrued approximately $494,000 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 expense, which totaled approximately $73,000 and $331,000 for the nine months ended September 30, 2017 and 2016, respectively, of which $73,000 and $82,000 were related to the Company’s continuing operations; and totaled approximately $7,000 and $98,000 for the three months ended September 30, 2017 and 2016, respectively, of which $7,000 and $15,000 were 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.

Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2011-2016 remain open to examination by tax authorities in the U.S.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company’s revenue recognition policies are in compliance with ASC Topic 605, “Revenue Recognition.” Sales revenue is recognized when a formal arrangement exists, the price is fixed or determinable, the delivery is completed and no other significant obligations of the Company exist and collectability is reasonably assured. No revenue is recognized if there are significant uncertainties regarding the recovery of the consideration due, or the possible return of the goods. Payments received before all of the relevant criteria for revenue recognition are recorded as unearned revenue.

Sales revenue represents the invoiced value of goods, net of value-added taxes (“VAT”). All of the Company’s products sold in China are subject to the PRC VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials purchased in China and included in the cost of producing the finished product. The Company records VAT payable and VAT receivable net of payments in the consolidated financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government.

The Company’s sales policy allows for the return of product within the warranty period if the product is defective and the defects are the Company’s fault.  As alternatives for the product return option, the customers have options of asking a discount from the Company for the products with quality issues or receiving replacement parts from the Company at no cost. The amount for return of products, the discount provided to the Company’s customers and the costs for replacement parts were immaterial for the nine and three months ended September 30, 2017 and 2016.

Revenue Recognition, Services, Franchise Fees [Policy Text Block]

Franchise Arrangements 

In 2010, the Company’s former subsidiaries in China began entering into area product franchise agreements with franchisees who operated specialty furniture stores carrying only Nova-branded products. The product franchise agreement provided for the franchisee to retail Nova-brand furniture products for a period of one year from the date of the agreement. The franchisee was required to pay a deposit of RMB 30,000 at the signing of the agreement, which is used as payment for future purchases and is deferred on the Company’s balance sheet as a customer deposit. The franchisee was required to guarantee a minimum purchase amount from the Company during the contract period. The Company had the right to terminate the agreement should the franchisee fail to meet the minimum purchase amount. The Company previously provided the franchisee with store images and designs, signage, floor plan product information and training. In addition, the Company would rebate a per square meter subsidy to the franchisee for the store build-out within 12 months from the agreement date.  Under the program, the Company established standard renovation amounts (the “Renovation Subsidy”) for various cities in China.  The franchisee was able to obtain, in the form of credits against purchase orders, percentages of the Renovation Subsidy applicable in the city in which the franchisee is located, as follows: 0% to 30% of the Renovation Subsidy applied to the first purchase order and 5% of each purchase order thereafter until the aggregate of all credits equals 100% of the Renovation Subsidy, or 12 months from the date of the franchise agreement, whichever occurs first. In accordance with ASC 605-50, as the Company does not receive an identifiable benefit from these rebates, the rebates are recorded as a reduction of revenue on sales to the franchisees.  All of the franchise agreements relating to the Company’s operations were divested in connection with its discontinued operations (see Note 3 – Discontinued Operations).

Cost of Sales, Policy [Policy Text Block]

Cost of Sales

Cost of sales consists primarily of finished goods purchased from other manufacturers, material costs, labor costs and related overhead that are directly attributable to the production of the products. Write-downs of inventory to the lower of cost or net realizable value is also recorded in the cost of sales.

Shipping and Handling Cost, Policy [Policy Text Block]

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, 2017 and 2016, shipping and handling costs from continuing operations were $1,576 and $2,033, respectively; and $623 and $313 for the three months ended September 30, 2017 and 2016, respectively.  During the nine and three months ended September 30, 2016, shipping and handling costs from discontinued operations were $373,123 and $137,308, respectively.

Advertising Costs, Policy [Policy Text Block]

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 from continuing operations was $847,177 and $2,156,451 for the nine months ended September 30, 2017 and 2016, respectively; and $186,381 and $841,345 for the three months ended September 30, 2017 and 2016, respectively. Advertising expense from discontinued operations was $60,379 and $59,286 for the nine and three months ended September 30, 2016, respectively.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-based compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Share-based compensation associated with the issuance of equity instruments to non-employees is measured at the fair value of the equity instrument issued or committed to be issued, as this is more reliable than the fair value of the services received. The fair value is measured at the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.

Earnings Per Share, Policy [Policy Text Block]

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) earnings per share for the nine and three months ended September 30, 2017 and 2016: 

	Nine Months Ended September 30,					Three Months Ended September 30,
	2017		2016			2017			2016
Income from continuing operations	$	2,304,709	$	1,189,266			$	2,956,633		$	1,044,931
Loss from discontinued operations		-		(1,476,572	)			-			(743,594	)
Net income (loss)		2,304,709		(287,306	)			2,956,633			301,337
Weighted average shares outstanding – basic		27,570,425		24,937,069				27,846,921			25,558,604
Dilutive unvested restricted stock		126,828		-				112,480			-
Dilutive vested stock options		7,153						21,228
Weighted average shares outstanding – diluted		27,704,406		2,493,7069		27,980,629					25,558,604
(Loss) income from continuing operations per share
– basic	$	0.08	$	0.05			$	0.11		$	0.04
– diluted	$	0.08	$	0.05			$	0.11		$	0.04
Loss from discontinued operations per share
– basic	$	0.08	$	(0.06	)		$	-		$	(0.03	)
– diluted	$	0.08	$	(0.06	)		$	-		$	(0.03	)
Net income (loss) per share
– basic	$	0.08	$	(0.01	)		$	0.11		$	0.01
– diluted	$	0.08	$	(0.01	)		$	0.11		$	0.01

* Including 571,533 and 337,114 shares that were granted and vested but not yet issued for the nine months ended September 30, 2017 and 2016, respectively.

For the nine and three months ended September 30, 2017 and 2016, 858,334 and 1,925,001 shares purchasable under warrants were excluded from EPS, respectively, as their effects were anti-dilutive. For the nine and three month periods ended September 30, 2016, the unvested restricted stock were anti-dilutive.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

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.

A customer accounted for 35% and 10% of the Company’s sales for the nine months ended September 30, 2017 and 2016, respectively. A customer accounted for 54% and 10% of the Company’s sales for the three months ended September 30, 2017 and 2016, respectively. Accounts receivable from this customer were $21,812,355 and $5,216,213 as of September 30, 2017 and December 31, 2016, respectively.

The Company purchased its products from five major vendors during the nine and three months ended September 30, 2017, accounting for a total of 82% (26%, 19%, 15%, 12% and 10% for each) and 80% (30%, 16%, 12%, 11% and 11% for each) of the Company’s purchases, respectively.

The Company purchased its products from four and five major vendors during the nine and three months ended September 30, 2016, accounting for a total of 59% (20%, 15%, 12% and 12% for each) and 89% (22%, 17%, 17%, 17%, and 16% for each) of the Company’s purchases, respectively.

Advances made and accounts payable to these vendors were $13,237,351 and $0 as of September 30, 2017, respectively. Advances made and accounts payable to these vendors were $1,561,381 and $481,455 as of December 31, 2016, respectively.

Prior to its divestment of its PRC subsidiaries, the operations of the Company were located principally in China and the U.S. Accordingly, the Company’s Chinese subsidiaries’ business, financial condition and results of operations were, from time to time, influenced by the political, economic and legal environments in China, as well as by the general state of the PRC economy.

Statement of Cash Flows Policy [Policy Text Block]

Statement of Cash Flows

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

Fair Value of Financial Instruments, Policy [Policy Text Block]

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, advance to suppliers, other receivables, accounts payable, line of credit, advance from customers, other payables and accrued liabilities approximate estimated fair values because of their short maturities.  The estimated fair value of the long-term lines of credit approximated the carrying amount as of September 30, 2017, as the interest rates are considered as approximate to the current rate for comparable loans at the respective balance sheet dates.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation and Transactions

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

The functional currency of Nova Dongguan, Nova Museum and Ding Nuo is RMB. The functional currencies of the Company’s foreign operations are translated into USD for balance sheet accounts using the current exchange rates in effect as of the balance sheet date, except for the equity account using the historical exchange rate, and for revenue and expense accounts using the weighted-average exchange rate during the fiscal year. The translation adjustments are recorded in the consolidated statements of income and comprehensive income, captioned “Accumulated other comprehensive income.” Gains and losses resulting from transactions denominated in foreign currencies are included in “Other income (expenses)” in the consolidated statements of income and comprehensive income. There have been no significant fluctuations in the exchange rate for the conversion of RMB to USD after the balance sheet date.

The RMB to USD exchange rates in effect as of September 30, 2016, was RMB6.6778 = USD$1.00. The weighted-average RMB to USD exchange rates in effect for the nine months ended September 30, 2016 was RMB6.5771= USD$1.00. The exchange rates used in translation from RMB to USD were published by the People’s Bank of the People’s Republic of China.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

The Company follows FASB ASC 220 “Reporting Comprehensive Income.” Comprehensive income is comprised of net income and all changes to the consolidated statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the nine and three months ended September 30, 2017 and 2016 included net income and foreign currency translation adjustments.

Segment Reporting, Policy [Policy Text Block]

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 business and industry segment: the design and sale of furniture.

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 US, Bright Swallow is a furniture distributor based in Hong Kong focusing on customers in Canada, and Nova Macao is a furniture distributor based in Macao focusing on international customers. They are all operated under the same senior management of the Company, and management views the operations of Diamond Bar, Bright Swallow and Nova Macao as a whole for making business decisions

Prior to the disposal of Nova Dongguan, the Company’s furniture products sold through Nova Dongguan, Nova Macao, and Ding Nuo were created with similar production processes, in the same facilities, under the same regulatory environment and sold to customers using similar distribution systems. Although Nova Museum was principally engaged in the dissemination of the culture and history of furniture in China, it also served a function of promoting and marketing the Company’s image and products by providing a platform and channel for consumers to be exposed to the Company and its products, it was operated under the same management with the same resources and in the same location as Nova Dongguan, and it was an additive and supplemental unit to the Company’s main operations, the design and sale of furniture.

Until the disposal of Nova Dongguan and its subsidiaries, all of the Company’s long-lived assets for production were located at its facilities in Dongguan, Guangdong Province, China, and operated within the same environmental, safety and quality regulations governing furniture manufacturers. After the disposal of Nova Dongguan and its subsidiaries, all of the Company’s long-lived assets are mainly property, plant and equipment located in the United States for administrative purposes.

Net sales to customers by geographic area are determined by reference to the physical locations of the Company’s customers. For example, if the products are delivered to a customer in the US, the sales are recorded as generated in the U.S.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements.

In May 2014, the FASB issued No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients. These ASUs clarify the implementation guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606. The Company is evaluating the effect that these ASUs will have on its consolidated financial statements and related disclosures.

On March 30, 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes at settlement, forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public companies for fiscal years beginning after December 31, 2016, and interim periods within those annual periods. The Company adopted this new guidance on January 1, 2017 and this standard does not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures.

In October 2016, the FASB issued ASU No. 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. The Company will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions or disposals of assets or businesses.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

Note 2 - Summary of Significant Accounting Policies (Tables) [Line Items]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

An analysis of the allowance for doubtful accounts is as follows:

Balance at January 1, 2017	$	3,019,931
Provision for the period		203,905
Write off		(3,106,474	)
Balance at September 30, 2017	$	117,362

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

A reconciliation of the January 1, 2017, through September 30, 2017, amount of unrecognized tax benefits excluding interest and penalties (“Gross UTB”) is as follows:

	Gross UTB
Beginning Balance – January 1, 2017	$	1,642,381
Decrease in unrecorded tax benefits related to the Company’s continuing operations		(160,230	)
Exchange rate adjustment		(85,881	)
Ending Balance – September 30, 2017	$	1,396,270

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table presents a reconciliation of basic and diluted (loss) earnings per share for the nine and three months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,					Three Months Ended September 30,
	2017		2016			2017			2016
Income from continuing operations	$	2,304,709	$	1,189,266			$	2,956,633		$	1,044,931
Loss from discontinued operations		-		(1,476,572	)			-			(743,594	)
Net income (loss)		2,304,709		(287,306	)			2,956,633			301,337
Weighted average shares outstanding – basic		27,570,425		24,937,069				27,846,921			25,558,604
Dilutive unvested restricted stock		126,828		-				112,480			-
Dilutive vested stock options		7,153						21,228
Weighted average shares outstanding – diluted		27,704,406		2,493,7069		27,980,629					25,558,604
(Loss) income from continuing operations per share
– basic	$	0.08	$	0.05			$	0.11		$	0.04
– diluted	$	0.08	$	0.05			$	0.11		$	0.04
Loss from discontinued operations per share
– basic	$	0.08	$	(0.06	)		$	-		$	(0.03	)
– diluted	$	0.08	$	(0.06	)		$	-		$	(0.03	)
Net income (loss) per share
– basic	$	0.08	$	(0.01	)		$	0.11		$	0.01
– diluted	$	0.08	$	(0.01	)		$	0.11		$	0.01

Property Plant and Equipment Estimated Useful Lives [Member]

Note 2 - Summary of Significant Accounting Policies (Tables) [Line Items]

Property, Plant and Equipment [Table Text Block]

Depreciation of property and equipment is provided using the straight-line method for substantially all assets with 10% salvage value and estimated lives as follows:

Computer and office equipment	5 years
Decoration and renovation	10 years

XML

Note 3 - Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations [Table Text Block]

As a result, the operations of Nova Dongguan, Nova Museum and Ding Nuo are now accounted for as discontinued operations in the accompanying consolidated financial statements for all periods presented. The following table presents the components of discontinued operations reported in the consolidated statements of operations:

	Nine Months ended September 30,					Three Months Ended September 30
	2017		2016			2017		2016
Sales from external customers	$	-	$	15,351,105		$	-	$	6,111,494
Cost of goods sold		-		(13,338,316	)		-		(5,284,100	)
Operating expenses		-		(3,231,788	)		-		(907,016	)
Loss before income taxes		-		(1,450,487	)		-		(780,545	)
Income tax (expense) benefit		-		26,085			-		(36,951	)
Loss from discontinued operations	$	-	$	(1,476,572	)	$	-	$	(743,594	)

XML

Note 5 - Plant, Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Member]

Note 5 - Plant, Property and Equipment, Net (Tables) [Line Items]

Property, Plant and Equipment [Table Text Block]

As of September 30, 2017 and December 31, 2016, plant, property and equipment consisted of the following:

	September 30, 2017			December 31, 2016
Computer and office equipment	$	283,336		$	274,735
Decoration and renovation		118,858			110,015
Less: accumulated depreciation		(243,782	)		(213,474	)
	$	158,412		$	171,276

XML

Note 6 - Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure Text Block [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

Intangible assets consisted of the following as of September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
eCommerce platform	$	1,208,200		$	1,208,200
Customer relationship		6,150,559			6,150,559
Trademarks		200,000			200,000
Less: accumulated amortization		(2,985,147	)		(1,872,136	)
	$	4,573,612		$	5,686,623

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

Estimated amortization expense relating to the existing intangible assets with finite lives for each of the next five years is as follows:

12 months ending September 30,
2018	$	676,032
2019		406,704
2020		406,704
2021		406,704
2022		406,704

XML

Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Schedule of Other Current Assets [Table Text Block]

Prepaid Expenses and Other Receivables consisted of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Prepaid expenses		$	288,784		$	573,005
Other receivables			27,049			69,886
Total		$	315,833		$	642,891

XML

Note 8 - Accrued Liabilities and Other Payables (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure Text Block Supplement [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

Accrued liabilities and other payables consisted of the following as of September 30, 2017 and December 31, 2016:

	September 30, 2017		December 31, 2016
Other payables	$	18,462	$	47,790
Salary payable		42,909		30,207
Financed insurance premiums		128,891		66,314
Accrued rents		84,659		102,269
Accrued commission		360,630		494,108
Accrued expenses, others		90,950		40,272
Total	$	726,501	$	780,960

XML

Note 11 - Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2017

Stockholders' Equity Note [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

Following is a summary of the warrant activity for the nine months ended September 30, 2017:

	Number of Warrants		Average Exercise Price		Weighted Average Remaining Contractual Term in Years
Outstanding at January 1, 2017		858,334	$	2.71		3.92
Exercisable at January 1, 2017		858,334		2.71		3.92
Granted		-		-		-
Exercised / surrendered		-		-		-
Expired		-		-		-
Outstanding at September 30, 2017		858,334	$	2.71		3.17
Exercisable at September 30, 2017		858,334	$	2.71		3.17

Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Shares		AverageExercise Price per Share		Aggregate IntrinsicValue(1)		WeightedAverageRemainingContractual Term in Years
Granted		1,080,000	$	1.37				5.00
Exercised		-		-				-
Forfeited				-				-
Outstanding at September 30, 2017		1,080,000	$	1.37		315,000		4.93
Exercisable at September 30, 2017		465,000	$	1.32		156,750		4.92

(1) The intrinsic value of the stock options at September 30, 2017 is the amount by which the market value of the Company’s common stock of $1.66 as of September 30, 2017 exceeds the exercise price of the option.

XML

Note 13 - Geographical Sales (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

Geographical distribution of sales consisted of the following for the nine and three months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,				Three Months Ended September 30,
Geographical Areas	2017		2016		2017		2016
North America	$	37,158,028	$	52,539,699	$	11,900,592	$	22,529,655
Europe		3,456,045		10,739,127		-		2,932,288
Australia		24,690,606		3,445,635		17,992,912		1,356,201
Asia*		5,020,746		3,596,850		3,329,121		1,748,750
Hong Kong		461,943		2,194,115		-		1,897,420
Other countries		26,046		233,546		-		74,604
	$	70,813,414	$	72,748,972	$	33,222,625	$	30,538,918

* excluding Hong Kong

XML

Note 14 - Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

The total minimum future lease payments are as follows:

12 Months Ending September 30,	Amount
2018	$	596,600
2019		77,991
2020		-
2021		-
2022		-
Thereafter		-
Total	$	674,591

XML

Note 1 - Organization and Description of Business (Details)	Oct. 25, 2016
Disclosure Text Block [Abstract]
Number of Subsidiaries Sold	3

XML

Note 2 - Summary of Significant Accounting Policies (Details)	3 Months Ended		9 Months Ended			12 Months Ended
	Sep. 30, 2017 USD ($) shares	Sep. 30, 2016 USD ($) shares	Sep. 30, 2017 USD ($) shares	Sep. 30, 2017 CNY (¥) shares	Sep. 30, 2016 USD ($) shares	Dec. 31, 2016 USD ($)
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Provision for Doubtful Accounts			$ 203,905		$ 33,818
Property, Plant and Equipment, Salvage Value, Percentage	10.00%		10.00%
Research and Development Expense	$ 0	$ 35,174	$ 364,105		94,839
Income Tax Expense (Benefit)	(262,034)	(100,656)	(750,037)		60,063
Income Tax Expense (Benefit), Continuing Operations, Discontinued Operations		36,000			(26,000)
Unrecognized Tax Benefits	1,396,270	4,600,000	1,396,270		4,600,000	$ 1,642,381
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	567,000		567,000			494,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense	$ 7,000	$ 98,000	$ 73,000		$ 331,000
VAT tax rate, sales			17.00%	17.00%
Term Of Franchise Agreement			1 year	1 year
Initial Franchise Fees (in Yuan Renminbi) | ¥				¥ 30,000
Store Build out Subsidy Period			12 months	12 months
Decline in Initial Franchise Fees, Description			The franchisee was able to obtain, in the form of credits against purchase orders, percentages of the Renovation Subsidy applicable in the city in which the franchisee is located, as follows: 0% to 30% of the Renovation Subsidy applied to the first purchase order and 5% of each purchase order thereafter until the aggregate of all credits equals 100% of the Renovation Subsidy, or 12 months from the date of the franchise agreement, whichever occurs first	The franchisee was able to obtain, in the form of credits against purchase orders, percentages of the Renovation Subsidy applicable in the city in which the franchisee is located, as follows: 0% to 30% of the Renovation Subsidy applied to the first purchase order and 5% of each purchase order thereafter until the aggregate of all credits equals 100% of the Renovation Subsidy, or 12 months from the date of the franchise agreement, whichever occurs first
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements (in Shares) | shares	112,480	0	126,828	126,828	0
Accounts Receivable, Gross	$ 13,237,351		$ 13,237,351			1,561,381
Accounts Payable	0		$ 0			$ 481,455
Foreign Currency Exchange Rate, Translation						6.6778
Number of Operating Segments			1	1
Continuing Operations [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Provision for Doubtful Accounts		$ 55,294			$ 33,818
Income Tax Expense (Benefit)	(101,000)	(101,000)	$ 750,000		(60,000)
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	567,000		567,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense	7,000	15,000	73,000		82,000
Shipping, Handling and Transportation Costs	623	313	1,576		2,033
Advertising Expense	$ 186,381	841,345	$ 847,177		2,156,451
Discontinued Operations [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Provision for Doubtful Accounts		(539,327)			552,611
Research and Development Expense		179,643			588,790
Shipping, Handling and Transportation Costs		137,308			373,123
Advertising Expense		$ 59,286			$ 60,379
Restricted Stock [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements (in Shares) | shares			571,533	571,533	337,114
Warrant [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares) | shares			858,334	858,334	1,925,001
Weighted Average [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Foreign Currency Exchange Rate, Translation	6.5771		6.5771
Cost of Goods, Total [Member] | Supplier Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	80.00%	89.00%	82.00%	82.00%	59.00%
Major Custom A [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	54.00%	10.00%	35.00%	35.00%	10.00%
Major Custom A [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Accounts Receivable, Net	$ 21,812,355	$ 5,216,213	$ 21,812,355		$ 5,216,213
Diamond Bar [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Goodwill, Impairment Loss			$ 0			$ 0
Major Vendor A [Member] | Cost of Goods, Total [Member] | Supplier Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	30.00%	22.00%	26.00%	26.00%	20.00%
Major Vendor B [Member] | Cost of Goods, Total [Member] | Supplier Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	16.00%	17.00%	19.00%	19.00%	15.00%
Major Vendor C [Member] | Cost of Goods, Total [Member] | Supplier Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	12.00%	17.00%	15.00%	15.00%	12.00%
Major Vendor D [Member] | Cost of Goods, Total [Member] | Supplier Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	11.00%	17.00%	12.00%	12.00%	12.00%
Major Vendor E [Member] | Cost of Goods, Total [Member] | Supplier Concentration Risk [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	11.00%	16.00%	10.00%	10.00%

XML

Note 2 - Summary of Significant Accounting Policies (Details) - Schedule of Accounts, Notes, Loans and Financing Receivable - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Schedule of Accounts, Notes, Loans and Financing Receivable [Abstract]
Balance	$ 3,019,931
Provision for the period	203,905	$ 33,818
Write off	(3,106,474)
Balance	$ 117,362

XML

Note 2 - Summary of Significant Accounting Policies (Details) - Schedule of Estimated Useful Lives of Property and Equipment	9 Months Ended
	Sep. 30, 2017
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment	5 years
Museum Decoration and Renovation [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment	10 years

XML

Note 2 - Summary of Significant Accounting Policies (Details) - Schedule of Unrecognized Tax Benefits Roll Forward	9 Months Ended
	Sep. 30, 2017 USD ($)
Schedule of Unrecognized Tax Benefits Roll Forward [Abstract]
Beginning Balance – January 1, 2017	$ 1,642,381
Decrease in unrecorded tax benefits related to the Company’s continuing operations	(160,230)
Exchange rate adjustment	(85,881)
Ending Balance – September 30, 2017	$ 1,396,270

XML

Note 2 - Summary of Significant Accounting Policies (Details) - Schedule of Earnings per Share, Basic and Diluted - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Schedule of Earnings per Share, Basic and Diluted [Abstract]
Income from continuing operations (in Dollars)	$ 2,956,633	$ 1,044,931	$ 2,304,709	$ 1,189,266
Loss from discontinued operations (in Dollars)	0	(743,594)	0	(1,476,572)
Net income (loss) (in Dollars)	$ 2,956,633	$ 301,337	$ 2,304,709	$ (287,306)
Weighted average shares outstanding – basic (in Shares)	27,846,921	25,558,604	27,570,425	24,937,069
Dilutive unvested restricted stock (in Shares)	112,480	0	126,828	0
Dilutive vested stock options (in Shares)	21,228	0	7,153	0
Weighted average shares outstanding – diluted (in Shares)	27,980,629	25,558,604	27,704,406	24,937,069
– basic	$ 0.11	$ 0.04	$ 0.08	$ 0.05
– diluted	0.11	0.04	0.08	0.05
– basic	0	(0.03)	0.08	(0.06)
– diluted	0	(0.03)	0.08	(0.06)
– basic	0.11	0.01	0.08	(0.01)
– diluted	$ 0.11	$ 0.01	$ 0.08	$ (0.01)

XML

Note 3 - Discontinued Operations (Details) - USD ($)		1 Months Ended	12 Months Ended
	Oct. 06, 2016	Jan. 31, 2017	Dec. 31, 2016	Nov. 10, 2016	Oct. 25, 2016
Note 3 - Discontinued Operations (Details) [Line Items]
Divestiture of Consolidated Subsidiaries Sales Price					$ 8,500,000
Trademarks [Member]
Note 3 - Discontinued Operations (Details) [Line Items]
Proceeds from Sale of Intangible Assets		$ 1,250,000	$ 4,750,000
Nova Furniture BVI [Member]
Note 3 - Discontinued Operations (Details) [Line Items]
Proceeds from Divestiture of Businesses	$ 8,500,000
Total Due before December 31, 2016 [Member] | Trademarks [Member]
Note 3 - Discontinued Operations (Details) [Line Items]
Sale of Business Name Sales Price				$ 6,000,000
Amount Due before November 30, 2016 [Member] | Trademarks [Member]
Note 3 - Discontinued Operations (Details) [Line Items]
Sale of Business Name Sales Price				1,000,000
Amount due before December 31, 2016 [Member] | Trademarks [Member]
Note 3 - Discontinued Operations (Details) [Line Items]
Sale of Business Name Sales Price				$ 5,000,000

XML

Note 3 - Discontinued Operations (Details) - Schedule of Disposal Groups, Including Discontinued Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss from discontinued operations	$ 0	$ (743,594)	$ 0	$ (1,476,572)
Nova Dongguan, Nova Museum, and Nova Ding Nuo [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sales from external customers	0	6,111,494	0	15,351,105
Cost of goods sold	0	(5,284,100)	0	(13,338,316)
Operating expenses	0	(907,016)	0	(3,231,788)
Loss before income taxes	0	(780,545)	0	(1,450,487)
Income tax (expense) benefit	0	(36,951)	0	26,085
Loss from discontinued operations	$ 0	$ (743,594)	$ 0	$ (1,476,572)

XML

Note 4 - Inventories (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Inventory, Net	$ 6,720,649	$ 2,781,123

XML

Note 5 - Plant, Property and Equipment, Net (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Property, Plant and Equipment [Abstract]
Depreciation	$ 10,164	$ 11,128	$ 30,307	$ 33,217
Depreciation and Amortization, Discontinued Operations		$ 331,323		$ 1,011,125

XML

Note 5 - Plant, Property and Equipment, Net (Details) - Schedule of Property, Plant and Equipment - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation	$ (243,782)	$ (213,474)
Property, plant and equipment, net	158,412	171,276
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	283,336	274,735
Museum Decoration and Renovation [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 118,858	$ 110,015

XML

Note 6 - Intangible Assets (Details)				3 Months Ended			9 Months Ended		12 Months Ended
	Apr. 24, 2013 USD ($)	Feb. 28, 2012	Aug. 31, 2011 USD ($)	Sep. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Note 6 - Intangible Assets (Details) [Line Items]
Amortization of Intangible Assets				$ 371,004		$ 140,215	$ 1,113,011	$ 428,977
Discontinued Operations [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Amortization of Intangible Assets						$ 9,305		$ 28,164
Customer Relationships [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Assets, Gross				6,150,559			6,150,559		$ 6,150,559
Trademarks [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Assets, Gross				$ 200,000			$ 200,000		$ 200,000
Computer Software, Intangible Asset [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life					1 year				10 years
Finite-Lived Intangible Assets, Period Increase (Decrease)					$ 1,200,000
Use Rights [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Assets, Amortization Method		straight-line method with an original estimated life
Diamond Bar [Member] | Customer Relationships [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Assets, Gross			$ 50,000
Finite-Lived Intangible Assets, Amortization Method			straight-line method
Finite-Lived Intangible Asset, Useful Life			5 years
Diamond Bar [Member] | Trademarks [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Number of trademarks acquired			2
Payments to Acquire Intangible Assets			$ 200,000
Finite-Lived Intangible Assets, Amortization Method			straight-line method
Finite-Lived Intangible Asset, Useful Life			5 years
Bright Swallow International Group Limited [Member] | Customer Relationships [Member]
Note 6 - Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Assets, Amortization Method	straight-line method
Finite-Lived Intangible Asset, Useful Life	15 years
Finite-lived Intangible Assets, Fair Value Disclosure	$ 6,100,559

XML

Note 6 - Intangible Assets (Details) - Schedule of Finite-Lived Intangible Assets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Less: accumulated amortization	$ (2,985,147)	$ (1,872,136)
Intangible assets, net	4,573,612	5,686,623
eCommerce Platform [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	1,208,200	1,208,200
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	6,150,559	6,150,559
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 200,000	$ 200,000

XML

Note 6 - Intangible Assets (Details) - Schedule of Finite-lived Intangible Assets Amortization Expense	Sep. 30, 2017 USD ($)
Schedule of Finite-lived Intangible Assets Amortization Expense [Abstract]
2018	$ 676,032
2019	406,704
2020	406,704
2021	406,704
2022	$ 406,704

XML

Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables (Details) - USD ($)			9 Months Ended		12 Months Ended
	Mar. 23, 2017	Mar. 20, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Dec. 31, 2016	Sep. 22, 2016
Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables (Details) [Line Items]
Contractual Obligation							$ 16,000,000
Prepaid Contractual Obligations			$ 0		$ 0	$ 7,000,000
Contract Termination Description		On March 20, 2017, the Company and the unrelated party terminated the MOU and released both parties from all the obligations and liabilities under the MOU. The Company agreed to bear the costs of $800,000 incurred by the unrelated party on the Platform, which were charged as expenses in the first quarter of fiscal year 2017.
Loss on Contract Termination		$ 800,000
Payment for Contractual Obligations					13,000,000
Payments to Acquire Notes Receivable			8,835,000	$ 0
Proceeds from Collection of Notes Receivable			15,835,000	$ 0
Loans Receivable [Member]
Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables (Details) [Line Items]
Payments to Acquire Notes Receivable	$ 2,000,000
Note Receivable, Interest Rate (in Dollars per share)	$ 0.05
Financing Receivable, Net			2,000,000		$ 2,000,000
Proceeds from Collection of Notes Receivable			$ 26,575

XML

Note 7 - Receivables from an Unrelated Party, Prepaid Expenses and Other Receivables (Details) - Schedule of Other Current Assets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Schedule of Other Current Assets [Abstract]
Prepaid expenses	$ 288,784	$ 573,005
Other receivables	27,049	69,886
Total	$ 315,833	$ 642,891

XML

Note 8 - Accrued Liabilities and Other Payables (Details) - Schedule of Accrued Liabilitites - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Schedule of Accrued Liabilitites [Abstract]
Other payables	$ 18,462	$ 47,790
Salary payable	42,909	30,207
Financed insurance premiums	128,891	66,314
Accrued rents	84,659	102,269
Accrued commission	360,630	494,108
Accrued expenses, others	90,950	40,272
Total	$ 726,501	$ 780,960

XML

Note 9 - Lines of Credit (Details) - USD ($)									3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 22, 2017	Feb. 16, 2016	Jan. 20, 2016	Sep. 28, 2015	Sep. 21, 2015	Aug. 01, 2015	Jun. 08, 2015	Jan. 22, 2015	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 17, 2015
Note 9 - Lines of Credit (Details) [Line Items]
Interest Paid											$ 159,686	$ 371,036
Line of Credit [Member] | Diamond Bar [Member]
Note 9 - Lines of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity			$ 8,000,000	$ 6,000,000		$ 5,000,000	$ 6,000,000		$ 5,000,000		$ 5,000,000
Line of Credit Facility, Interest Rate at Period End						4.25%			4.25%		4.25%			4.00%
Line of Credit Facility, Expiration Date	Sep. 01, 2017			Jun. 01, 2017		Sep. 01, 2015	Sep. 01, 2015				Jun. 01, 2015
Line of Credit Facility, Interest Rate During Period	4.25%		4.00%	3.75%
Line of Credit Facility, Collateral			The line of credit is secured by all of the assets of Diamond Bar and is guaranteed by Nova LifeStyle.
Long-term Line of Credit									$ 3,322,040		$ 3,322,040		$ 6,129,841
Interest Expense, Debt									40,932	$ 61,127	145,857	167,381
Line of Credit Facility, Remaining Borrowing Capacity									4,677,960		$ 4,677,960
Line of Credit Facility, Covenant Terms											The Diamond Bar loan has the following covenants: (i) maintain a minimum tangible net worth of not less than $10 million; (ii) maintain a ratio of debt to tangible net worth not in excess of 2.500 to 1.000; (iii) the pre-tax income must be not less than 1.000% of total revenue quarterly; and (iv) maintain a current ratio in excess of 1.250 to 1.000.
Line of Credit Facility, Covenant Compliance													Diamond Bar was in compliance with the stated covenants.
Line of Credit [Member] | Nova Macao [Member]
Note 9 - Lines of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 6,500,000						$ 6,500,000
Line of Credit Facility, Interest Rate at Period End								4.25%
Line of Credit Facility, Expiration Date		Jan. 31, 2017						Jan. 29, 2016
Line of Credit Facility, Interest Rate During Period		4.00%
Line of Credit Facility, Collateral								The loan was secured by assignment of Sinosure (China Export and Credit Insurance Company) credit insurance and was guaranteed by Nova LifeStyle and Diamond Bar.
Long-term Line of Credit									0		$ 0		$ 1,848,000
Debt Instrument, Maturity Date, Description					The Company did not extend the line of credit and paid it off in February 2017.
Interest Paid									$ 0	$ 18,890	$ 13,828	$ 57,304
Line of Credit [Member] | Line of Credit #2 [Member] | Nova Macao [Member]
Note 9 - Lines of Credit (Details) [Line Items]
Debt Instrument, Payment Terms					monthly payment of interest and that the interest rate will be adjusted annually

XML

Note 10 - Related Party Transactions (Details) - Building [Member] - President [Member] - Diamond Bar [Member] - USD ($)		3 Months Ended		9 Months Ended
	Mar. 16, 2015	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Note 10 - Related Party Transactions (Details) [Line Items]
Related Party Transaction, Description of Transaction	Diamond Bar leased a showroom in High Point, North Carolina from the Company’s president who is currently also our Chief Executive Officer and Chairman of the Board.
Lessee, Operating Lease, Renewal Term	1 year
Operating Leases, Rent Expense, Minimum Rentals	$ 32,916
Operating Leases, Rent Expense		$ 16,458	$ 32,916	$ 32,916	$ 32,916

XML

Note 11 - Stockholders' Equity (Details)													3 Months Ended		9 Months Ended
	Nov. 15, 2016 USD ($) $ / shares shares	Nov. 14, 2016 USD ($) $ / shares shares	Aug. 09, 2016 USD ($)	May 18, 2016 USD ($) $ / shares shares	Feb. 01, 2016 USD ($) $ / shares shares	Aug. 15, 2015 USD ($) $ / shares shares	May 28, 2015 USD ($) $ / shares shares	May 19, 2015 USD ($) $ / shares shares	Mar. 25, 2015 USD ($) $ / shares shares	Mar. 09, 2015 $ / shares shares	Mar. 01, 2015 USD ($)	Dec. 01, 2014 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) $ / shares	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) $ / shares shares	Sep. 30, 2016 USD ($) shares	Dec. 31, 2016 $ / shares	Mar. 21, 2016 $ / shares
Note 11 - Stockholders' Equity (Details) [Line Items]
Common Stock, Par or Stated Value Per Share (in Dollars per share) | $ / shares													$ 0.001		$ 0.001		$ 0.001
Share-based Compensation															$ 1,773,537	$ 1,216,765
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares) | shares															1,080,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share) | $ / shares															$ 1.37
Consulting Service Agreement #3 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares												60,000
Consulting Agreement, Term												3 years
Consulting Agreement Vesting Terms												The initial 10,000 shares were required to be issued within 30 days upon signing of the agreement; for the remaining 50,000 shares, the Company issued to the consultant 10,000 shares of common stock on or before each of June 1, 2015, December 1, 2015, June 1, 2016, December 1, 2016 and June 1, 2017.
Stock Issued During Period, Value, Issued for Services												$ 224,400
Share Price (in Dollars per share) | $ / shares												$ 3.74
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													$ 18,700	$ 18,700	$ 56,100	56,100
Consulting Service Agreement #4 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares										38,745
Consulting Agreement, Term											12 months
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													0	0	0	16,667
Common Stock, Shares To Be Issued											$ 100,000
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award											The share price was calculated as the average closing price per share for ten trading days immediately prior to the execution of the agreement and was amortized over the service term.
Shares Issued, Price Per Share (in Dollars per share) | $ / shares										$ 2.581
Consulting Service Agreement #5 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares						18,348
Consulting Agreement, Term						12 months
Stock Issued During Period, Value, Issued for Services						$ 45,870
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													0	5,734	0	28,669
Shares Issued, Price Per Share (in Dollars per share) | $ / shares						$ 2.50
Monthly Payment for Services						$ 5,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights						Twenty-five percent (25%) of those shares vested on November 15, 2015, 25% on February 15, 2016, 25% on May 15, 2016 and the remaining 25% vested on August 15, 2016
Consulting Service Agreement #6 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares					150,000
Consulting Agreement, Term					15 months
Stock Issued During Period, Value, Issued for Services					$ 204,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													0	40,800	54,400	108,800
Shares Issued, Price Per Share (in Dollars per share) | $ / shares					$ 1.36
Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares					240,000
Consulting Agreement, Term					24 months
Stock Issued During Period, Value, Issued for Services					$ 326,400
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													40,800	40,800	$ 122,400	$ 108,800
Shares Issued, Price Per Share (in Dollars per share) | $ / shares					$ 1.36
Consulting Service Agreement #8 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares															83,386	83,386
Consulting Agreement, Term					6 months
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													0	10,000	$ 0	$ 60,000
Consulting Service Agreement #9 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares	100,000
Consulting Agreement, Term	12 years
Stock Issued During Period, Value, Issued for Services	$ 294,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													74,104		219,896
Shares Issued, Price Per Share (in Dollars per share) | $ / shares	$ 2.94
Consulting Service Agreement #10 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares	100,000
Consulting Agreement, Term	12 months
Stock Issued During Period, Value, Issued for Services	$ 294,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													73,500		220,500
Shares Issued, Price Per Share (in Dollars per share) | $ / shares	$ 2.94
Consulting Service Agreement #11 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Consulting Agreement, Term	12 months
Stock Issued During Period, Value, Issued for Services	$ 20,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													50,000		$ 150,000
Other Commitments, Description	The Company also granted the consultant $15,000 worth of shares of the Company’s common stock per month starting from December 1, 2016 for 12 months.
Consulting Service Agreement #12 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Consulting Agreement, Term															12 years
Stock Issued During Period, Value, Issued for Services															$ 10,000
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													32,500		$ 32,500
Other Commitments, Description															The Company also granted the consultant $10,000 worth of shares of the Company’s common stock per month starting from July 1, 2017 for a period of 12 months.
Agreement with Three Furniture Designers [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares				240,000
Consulting Agreement, Term				24 months
Stock Issued During Period, Value, Issued for Services				$ 388,800
Shares Issued, Price Per Share (in Dollars per share) | $ / shares				$ 0.54
Share-based Compensation													48,999	48,999	$ 145,401	72,434
2014 Omnibus Long-Term Incentive Plan [Member] | Executive Employment Agreement [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Consulting Agreement, Term		1 year
Share Price (in Dollars per share) | $ / shares		$ 3.07
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | shares		30,000
Share-based Compensation													23,214		68,886
Stock Issued During Period, Value, Share-based Compensation, Gross		$ 92,100
2014 Omnibus Long-Term Incentive Plan [Member] | Agreement with a Furniture Designer [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares	100,000
Consulting Agreement, Term	1 year
Stock Issued During Period, Value, Issued for Services	$ 294,000
Share Price (in Dollars per share) | $ / shares	$ 2.94
Share-based Compensation													73,500		220,500
Series A Warrants [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares) | shares							660,030
Series C Warrants [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares) | shares							310,478
August 29, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													321,591		$ 321,591
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares) | shares															780,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share) | $ / shares															$ 1.26
Share Based Compensation, Options, Term															5 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term															10 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate															84.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate															0.16%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate															0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share) | $ / shares															$ 643,182
Share-based Compensation Award, Tranche One [Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche One [Member] | Consulting Service Agreement #9 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	25.00%
Share-based Compensation Award, Tranche One [Member] | Agreement with Three Furniture Designers [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage				25.00%
Share-based Compensation Award, Tranche One [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Executive Employment Agreement [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		25.00%
Share-based Compensation Award, Tranche One [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Agreement with a Furniture Designer [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	25.00%
Share-based Compensation Award, Tranche One [Member] | August 29, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															50.00%
Share-based Compensation Award, Tranche Two [Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche Two [Member] | Consulting Service Agreement #9 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	25.00%
Share-based Compensation Award, Tranche Two [Member] | Agreement with Three Furniture Designers [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage				25.00%
Share-based Compensation Award, Tranche Two [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Executive Employment Agreement [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		25.00%
Share-based Compensation Award, Tranche Two [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Agreement with a Furniture Designer [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights	25%
Share-based Compensation Award, Tranche Two [Member] | August 29, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															50.00%
Share-based Compensation Award, Tranche Three [Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche Three [Member] | Consulting Service Agreement #9 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	25.00%
Share-based Compensation Award, Tranche Three [Member] | Agreement with Three Furniture Designers [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage				25.00%
Share-based Compensation Award, Tranche Three [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Executive Employment Agreement [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		25.00%
Share-based Compensation Award, Tranche Three [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Agreement with a Furniture Designer [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights	25%
Share-based Compensation Award, Tranche Four [Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche Four [Member] | Agreement with Three Furniture Designers [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage				25.00%
Share-based Compensation Award, Tranche Four [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Executive Employment Agreement [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		25.00%
Share-based Compensation Award, Tranche Four [Member] | 2014 Omnibus Long-Term Incentive Plan [Member] | Agreement with a Furniture Designer [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights	25%
Share-based Compensation Award, Tranche Five[Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche Six[Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche Seven [Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche Eight [Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage					12.50%
Share-based Compensation Award, Tranche Four [Member] | Consulting Service Agreement #9 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	25.00%
Monthly Award [Member] | Consulting Service Agreement #6 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares					10,000
Monthly Award [Member] | Consulting Service Agreement #7 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares					10,000
Monthly Award [Member] | Consulting Service Agreement #8 [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares) | shares					10,000
Private Placement [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Private Placement Number of Shares Authorized (in Shares) | shares							2,970,509
Common Stock, Par or Stated Value Per Share (in Dollars per share) | $ / shares							$ 0.001
Stock Issued During Period, Shares, New Issues (in Shares) | shares							2,000,001
Sale of Stock, Price Per Share (in Dollars per share) | $ / shares							$ 2.00
Proceeds from Issuance of Private Placement							$ 4,000,002
Warrant Description							warrant to purchase one share of the Company’s common stock for each share purchased for cash in the offering, pursuant to that certain Common Stock Purchase Warrant, by and between the Company and each Purchaser (the “2015 Warrants”)
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share) | $ / shares							$ 2.71
Warrants, Term							5 years
Fair Value Assumptions, Expected Term							5 years
Fair Value Assumptions, Expected Volatility Rate							107.00%
Fair Value Assumptions, Risk Free Interest Rate							1.55%
Fair Value Assumptions, Expected Dividend Rate							0.00%
Warrants, Fair Value of Warrants, Granted							$ 3,147,530
Director [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Number of Directors			4
Stock Issued During Period, Value, Share-based Compensation, Gross			$ 40,000
Director [Member] | August 9, 2016 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Allocated Share-based Compensation Expense													17,096	23,233	$ 96,438	23,233
Director [Member] | April 10, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition													5,041		13,699
Stock Issued During Period, Value, Share-based Compensation, Gross															$ 20,000
Director [Member] | September 26, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Number of Directors															3
Allocated Share-based Compensation Expense													81,227		$ 81,227
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares) | shares															300,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share) | $ / shares															$ 1.65
Share Based Compensation, Options, Term															5 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term															5 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate															84.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate															0.15%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate															0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share) | $ / shares															$ 324,907
Director [Member] | Share-based Compensation Award, Tranche One [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			25.00%
Director [Member] | Share-based Compensation Award, Tranche One [Member] | April 10, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															50.00%
Director [Member] | Share-based Compensation Award, Tranche One [Member] | September 26, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															25.00%
Director [Member] | Share-based Compensation Award, Tranche Two [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			25.00%
Director [Member] | Share-based Compensation Award, Tranche Two [Member] | April 10, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															50.00%
Director [Member] | Share-based Compensation Award, Tranche Two [Member] | September 26, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															25.00%
Director [Member] | Share-based Compensation Award, Tranche Three [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			25.00%
Director [Member] | Share-based Compensation Award, Tranche Three [Member] | September 26, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															25.00%
Director [Member] | Share-based Compensation Award, Tranche Four [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			25.00%
Director [Member] | Share-based Compensation Award, Tranche Four [Member] | September 26, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage															25.00%
President [Member] | August 29, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares) | shares															100,000
Chief Financial Officer [Member] | August 29, 2017 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares) | shares															35,000
Restricted Stock [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Allocated Share-based Compensation Expense													$ 0	90,000	$ 0	270,000
Restricted Stock [Member] | Director [Member] | March 24, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share Price (in Dollars per share) | $ / shares									$ 3.28
Warrants, Fair Value of Warrants, Granted									$ 119,999
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | shares									12,195
Share-based Compensation														0		26,959
Restricted Stock [Member] | Director [Member] | May 19, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share Price (in Dollars per share) | $ / shares								$ 3.14
Warrants, Fair Value of Warrants, Granted								$ 38,292
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | shares								12,195
Share-based Compensation														$ 0		$ 14,478
Restricted Stock [Member] | Director [Member] | Share-based Compensation Award, Tranche Two [Member] | March 24, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage									25.00%
Restricted Stock [Member] | Director [Member] | Share-based Compensation Award, Tranche Two [Member] | May 19, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage								25.00%
Restricted Stock [Member] | Director [Member] | Share-based Compensation Award, Tranche Three [Member] | March 24, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage									25.00%
Restricted Stock [Member] | Director [Member] | Share-based Compensation Award, Tranche Three [Member] | May 19, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage								25.00%
Restricted Stock [Member] | Director #2 [Member] | March 24, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | shares									12,195
Restricted Stock [Member] | Director #3 [Member] | March 24, 2015 [Member] | 2014 Omnibus Long-Term Incentive Plan [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | shares									12,195
Restricted Stock [Member] | President [Member]
Note 11 - Stockholders' Equity (Details) [Line Items]
Share Price (in Dollars per share) | $ / shares																		$ 1.20

XML

Note 11 - Stockholders' Equity (Details) - Schedule of Stockholders' Equity Note, Warrants or Rights - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Schedule of Stockholders' Equity Note, Warrants or Rights [Abstract]
Number of Warrants Outstanding		858,334
Warrants Outstanding, Average Exercise Price		$ 2.71
Warrants Outstanding, Weighted Average Remaining Contractual Term in Years	3 years 62 days	3 years 335 days
Number of Warrants Exercisable	858,334	858,334
Warrants Exercisable, Average Exercise Price	$ 2.71	$ 2.71
Warrants Exercisable, Weighted Average Remaining Contractual Term in Years	3 years 62 days	3 years 335 days
Number of Warrants Granted	0
Warrants Granted, Average Exercise Price	$ 0
Number of Warrants Exercised	0
Warrants Exercised, Average Exercise Price	$ 0
Number of Warrants Expired	0
Warrants Expired, Average Exercise Price	$ 0
Number of Warrants Outstanding	858,334
Warrants Outstanding, Average Exercise Price	$ 2.71

XML

Note 11 - Stockholders' Equity (Details) - Share-based Compensation, Stock Options, Activity	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Share-based Compensation, Stock Options, Activity [Abstract]
Granted	1,080,000
Granted (in Dollars per share) | $ / shares	$ 1.37
Granted	1,080,000
Exercised	0
Forfeited	0
Outstanding at September 30, 2017	1,080,000
Outstanding at September 30, 2017 (in Dollars per share) | $ / shares	$ 1.37
Outstanding at September 30, 2017 (in Dollars) | $	$ 315,000	[1]
Exercisable at September 30, 2017	465,000
Exercisable at September 30, 2017 (in Dollars per share) | $ / shares	$ 1.32
Exercisable at September 30, 2017 (in Dollars) | $	$ 156,750	[1]

[1] The intrinsic value of the stock options at September 30, 2017 is the amount by which the market value of the Company's common stock of $1.66 as of September 30, 2017 exceeds the exercise price of the option.

XML

Note 12 - Statutory Reserves (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Note 12 - Statutory Reserves (Details) [Line Items]
Statutory Equity Reserves (in Dollars)	$ 6,241	$ 6,241
Nova Dongguan [Member]
Note 12 - Statutory Reserves (Details) [Line Items]
Statutory reserve, after-tax income percentage	10.00%
Statutory reserve, percentage of registered capital	50.00%
Statutory reserve, percentage of registered capital minimum	25.00%
Nova Dongguan [Member] | Minimum [Member]
Note 12 - Statutory Reserves (Details) [Line Items]
Common welfare fund, voluntary contribution	5%
Nova Dongguan [Member] | Maximum [Member]
Note 12 - Statutory Reserves (Details) [Line Items]
Common welfare fund, voluntary contribution	10%
Nova Macao [Member]
Note 12 - Statutory Reserves (Details) [Line Items]
Statutory reserve, after-tax income percentage	10.00%
Statutory reserve, percentage of registered capital	50.00%
Statutory reserve, percentage of registered capital minimum	25.00%
Nova Macao [Member] | Minimum [Member]
Note 12 - Statutory Reserves (Details) [Line Items]
Common welfare fund, voluntary contribution	5%
Nova Macao [Member] | Maximum [Member]
Note 12 - Statutory Reserves (Details) [Line Items]
Common welfare fund, voluntary contribution	10%

XML

Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region [Line Items]
Sales		$ 33,222,625	$ 30,538,918	$ 70,813,414	$ 72,748,972
North America [Member]
Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region [Line Items]
Sales		11,900,592	22,529,655	37,158,028	52,539,699
Europe [Member]
Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region [Line Items]
Sales		0	2,932,288	3,456,045	10,739,127
AUSTRALIA
Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region [Line Items]
Sales		17,992,912	1,356,201	24,690,606	3,445,635
Asia [Member]
Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region [Line Items]
Sales	[1]	3,329,121	1,748,750	5,020,746	3,596,850
HONG KONG
Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region [Line Items]
Sales		0	1,897,420	461,943	2,194,115
Other Countries [Member]
Note 13 - Geographical Sales (Details) - Schedule of Sales by Geographic Region [Line Items]
Sales		$ 0	$ 74,604	$ 26,046	$ 233,546

[1] excluding Hong Kong

XML

Note 14 - Commitments and Contingencies (Details)													3 Months Ended		9 Months Ended
	Sep. 13, 2017 USD ($)	Sep. 13, 2017 HKD	Jul. 24, 2017 USD ($)	Oct. 03, 2016 shares	Mar. 25, 2016 USD ($)	Mar. 21, 2016 USD ($) $ / shares shares	Sep. 15, 2015	Mar. 16, 2015 USD ($)	Jan. 07, 2014	Sep. 19, 2013	Jun. 17, 2013 USD ($)	May 03, 2013 USD ($) $ / shares shares	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Note 14 - Commitments and Contingencies (Details) [Line Items]
Description of Lessor Leasing Arrangements, Operating Leases									The Company subleased a portion of its warehouse space to one of its customers with a one-year term commencing on December 1, 2013 and expiring on November 30, 2014, which has been renewed every year with the current term expiring on October 31, 2017.
Operating Leases, Income Statement, Lease Revenue													$ 224,349	$ 180,528	$ 597,103	$ 510,018
Employment Agreement [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Other Commitments, Description					entered into one-year employment agreements, effective as of November 11, 2015, with Mr. Ya Ming (Jeffrey) Wong and Mr. Yuen Ching (Sammy) Ho to serve as the Company’s CEO and CFO
Restricted Stock [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Allocated Share-based Compensation Expense													0	90,000	0	270,000
President [Member] | Employment Agreement [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Other Commitments, Description												Company entered into an amended and restated employment agreement with Thanh H. Lam to serve as the Company’s president for a five-year term.
Officers' Compensation												$ 80,000
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | shares												200,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period (in Shares) | shares												50,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period												3 years
Share Price (in Dollars per share) | $ / shares												$ 3.82
Allocated Share-based Compensation Expense													0	0	0	64,626
Employment Agreement, Annual Increase, Amount			$ 100,000
President [Member] | Share-based Compensation Award, Tranche One [Member] | Employment Agreement [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number (in Shares) | shares												50,000
President [Member] | Share-based Compensation Award, Tranche Two [Member] | Employment Agreement [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number (in Shares) | shares												50,000
President [Member] | Share-based Compensation Award, Tranche Three [Member] | Employment Agreement [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number (in Shares) | shares												50,000
President [Member] | Restricted Stock [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Share Price (in Dollars per share) | $ / shares						$ 1.20
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in Shares) | shares						100,000
Chief Executive Officer [Member] | Employment Agreement [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Officers' Compensation					$ 100,000
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Forfeitures (in Shares) | shares				25,000
Chief Executive Officer [Member] | Restricted Stock [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in Shares) | shares						100,000
Chief Financial Officer [Member] | Employment Agreement [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Officers' Compensation					$ 80,000
Chief Financial Officer [Member] | Restricted Stock [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in Shares) | shares						100,000
CEO, CFO and President [Member] | Restricted Stock [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross (in Shares) | shares						300,000
Stock Issued During Period, Value, Restricted Stock Award, Gross						$ 360,000
Land, Buildings and Improvements [Member] | Diamond Bar [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Lessee, Operating Lease, Term of Contract											5 years
Lessee, Operating Lease, Renewal Term											6 years
Operating Leases, Rent Expense, Minimum Rentals											$ 42,000
Operating lease, annual rent expense increase											3.00%
Land, Buildings and Improvements [Member] | Bright Swallow International Group Limited [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Lessee, Operating Lease, Term of Contract	2 years	2 years					2 years			2 years
Operating Leases, Rent Expense, Minimum Rentals	$ 2,560	HKD 20,000
Building [Member] | Diamond Bar [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Rental Income, Nonoperating													$ 16,200	$ 20,077	48,600	$ 60,231
Building [Member] | Diamond Bar [Member] | Monthly Sublease Income [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Sublease Income															$ 5,400
Building [Member] | President [Member] | Diamond Bar [Member]
Note 14 - Commitments and Contingencies (Details) [Line Items]
Lessee, Operating Lease, Renewal Term								1 year
Operating Leases, Rent Expense, Minimum Rentals								$ 32,916

XML

Note 14 - Commitments and Contingencies (Details) - Schedule of Future Minimum Rental Payments for Operating Leases	Sep. 30, 2017 USD ($)
Schedule of Future Minimum Rental Payments for Operating Leases [Abstract]
2018	$ 596,600
2019	77,991
2020	0
2021	0
2022	0
Thereafter	0
Total	$ 674,591