# EDGAR Filing Document

**Accession Number:** 0001473334
**File Stem:** 0001493152-25-023548
**Filing Date:** 2025-11
**Character Count:** 227291
**Document Hash:** 22776c992efd2f9c825e2bb9e016fe9f
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-25-023548.hdr.sgml**: 20251114

**ACCESSION NUMBER**: 0001493152-25-023548

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 86

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251114

**DATE AS OF CHANGE**: 20251114

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** XMax Inc.
- **CENTRAL INDEX KEY:** 0001473334
- **STANDARD INDUSTRIAL CLASSIFICATION:** HOUSEHOLD FURNITURE [2510]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 270991837
- **STATE OF INCORPORATION:** NV
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-36259
- **FILM NUMBER:** 251487186

**BUSINESS ADDRESS:**
- **STREET 1:** 6565 E. WASHINGTON BLVD.
- **CITY:** COMMERCE
- **STATE:** CA
- **ZIP:** 90040
- **BUSINESS PHONE:** (323) 888-9999

**MAIL ADDRESS:**
- **STREET 1:** 6565 E. WASHINGTON BLVD.
- **CITY:** COMMERCE
- **STATE:** CA
- **ZIP:** 90040

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Nova Lifestyle, Inc.
- **DATE OF NAME CHANGE:** 20110629

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Stevens Resources, Inc.
- **DATE OF NAME CHANGE:** 20090929

?xml version='1.0' encoding='ASCII'?

**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, 2025**

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**Commission file number: <u>001-36259</u>**

**<u>XMAX INC.</u>**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Nevada** | **90-0746568** |
| (State or other jurisdiction<br> of incorporation or organization) | (IRS Employer<br> Identification No.) |

---

---

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

---

---

| |
|:---|
| **<u>(323) 888-9999</u>** |
| (Registrant's telephone number, including area code) |
| **Nova LifeStyle, Inc.** |
| (Former name, former address and former fiscal year, if changed since last report) |

---

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, par value $0.001 per share | XWIN | Nasdaq Stock Market |

---

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 every Interactive Data File required to be submitted 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 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 ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> 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: 41,871,727 shares of common stock outstanding as of November 13, 2025.

**XMax Inc.**

**Table of Contents**

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
| [**PART I. FINANCIAL INFORMATION**](#gg_001) | [**PART I. FINANCIAL INFORMATION**](#gg_001) |  |
| Item 1. | [Financial Statements](#gg_002) | 1 |
|  | [Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024](#gg_003) | 1 |
|  | [Condensed Consolidated Statements of Loss and Comprehensive Loss for the nine months and three months ended September 30, 2025 and 2024 (unaudited)](#gg_004) | 3 |
|  | [Condensed Consolidated Statements of Stockholders' Equity for the nine months and three months ended September 30, 2025 and 2024 (unaudited)](#gg_005) | 4 |
|  | [Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited)](#gg_006) | 6 |
|  | [Notes to Condensed Consolidated Financial Statements for the nine months and three months ended September 30, 2025 and 2024 (unaudited)](#gg_007) | 7 |
| Item 2. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#gg_008) | 34 |
| Item 3. | [Quantitative and Qualitative Disclosures about Market Risk](#gg_009) | 48 |
| Item 4. | [Controls and Procedures](#gg_010) | 48 |
| [**PART II. OTHER INFORMATION**](#gg_011) | [**PART II. OTHER INFORMATION**](#gg_011) |  |
| Item 1. | [Legal Proceedings](#gg_012) | 49 |
| Item 1A. | [Risk Factors](#gg_013) | 49 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#gg_014) | 49 |
| Item 5. | [Other Information](#gg_015) | 49 |
| Item 6. | [Exhibits](#gg_016) | 49 |
|  | [Signatures](#gg_017) | 50 |

---

i

[**Table of Contents**](#TOC)

**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**XMAX INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**AS OF SEPTEMBER 30, 2025 AND DECEMBER 31, 2024**

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br> **2025** | **December 31,**<br> **2024** |
|  | **UNAUDITED** | **AUDITED** |
| **Assets** |  |  |
| **Current Assets** |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $1714382 | $161902 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 7935938 | 36371 |
| &nbsp;&nbsp;&nbsp;Advance to suppliers | 183924 | 4689148 |
| &nbsp;&nbsp;&nbsp;Inventories | 2254098 | 2824353 |
| &nbsp;&nbsp;&nbsp;Financing lease right-of-use assets, current | 20363 | 20363 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses | 150170 | 202294 |
| &nbsp;&nbsp;&nbsp;Other receivables | 10508 | 17415 |
| **Total Current Assets** | 12269383 | 7951846 |
| **Non-current Assets** |  |  |
| &nbsp;&nbsp;&nbsp;Property, plant, property and equipment, net | 220388 | 252186 |
| &nbsp;&nbsp;&nbsp;Financing lease right of use assets, non-current | 22060 | 37332 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets, net | 721508 | 1401801 |
| &nbsp;&nbsp;&nbsp;Intangible assets, net |  | 3109 |
| &nbsp;&nbsp;&nbsp;Investment in fund | 5000000 |  |
| &nbsp;&nbsp;&nbsp;Lease deposit | 53103 | 52523 |
| &nbsp;&nbsp;&nbsp;Goodwill | – | 218606 |
| **Total Non-current Assets** | 6017059 | 1965557 |
| **Total Assets** | $18286442 | $9917403 |

---

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

[**Table of Contents**](#TOC)

**XMAX INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS (CONT**'**D)**

**AS OF SEPTEMBER 30, 2025 AND DECEMBER 31, 2024**

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br> **2025** | **December 31,**<br> **2024** |
|  | **UNAUDITED** | **AUDITED** |
| **Liabilities and Stockholders' Equity** |  |  |
| **Current Liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $623602 | $728546 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities, current | 703928 | 716602 |
| &nbsp;&nbsp;&nbsp;Finance lease liabilities - current | 20295 | 32585 |
| &nbsp;&nbsp;&nbsp;Advance from customers | 349675 | 413583 |
| &nbsp;&nbsp;&nbsp;Loan from shareholders | 389714 | 385147 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities and other payables | 934335 | 1683033 |
| &nbsp;&nbsp;&nbsp;Other loan | 8773 | 13424 |
| &nbsp;&nbsp;&nbsp;Security deposit | 50000 |  |
| &nbsp;&nbsp;&nbsp;Income tax payable | 1333149 | 1852399 |
| **Total Current Liabilities** | 4413471 | 5825319 |
| **Non-current Liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Other loan | 204105 | 197828 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities, non-current | 59882 | 730291 |
| &nbsp;&nbsp;&nbsp;Finance lease liabilities - non-current | 25125 | 40451 |
| **Total Non-current Liabilities** | 289112 | 968570 |
| **Total Liabilities** | 4702583 | 6793889 |
| **Contingencies and Commitments** |  |  |
| **Stockholders' Equity** |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.001 par value; 250,000,000 shares authorized, 34,242,373 and 7,301,206 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively | 34242 | 7301 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 64801042 | 52585582 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income | 495262 | 522146 |
| &nbsp;&nbsp;&nbsp;Accumulated deficits | (51746687) | (49991515) |
| **Total Stockholders' Equity** | 13583859 | 3123514 |
| **Total Liabilities and Stockholders' Equity** | $18286442 | $9917403 |

---

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

[**Table of Contents**](#TOC)

**XMAX INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS**

**FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (UNAUDITED)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Three Months Ended September 30,** | **Three Months Ended September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| **Net Sales** | $14953032 | $7680733 | $9761091 | $2615807 |
| **Cost of Sales** | 11480948 | 4290351 | 8777288 | 1436552 |
| **Gross Profit** | 3472084 | 3390382 | 983803 | 1179255 |
| **Operating Expenses** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Selling expenses | 984529 | 1380585 | 347754 | 415903 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 3366250 | 4430790 | 1125800 | 1948988 |
| &nbsp;&nbsp;&nbsp;Research and development | 1182 | 1971929 | 272 | 1221231 |
| **Total Operating Expenses** | 4351961 | 7783304 | 1473826 | 3586122 |
| **Loss From Operations** | (879877) | (4392922) | (490023) | (2406867) |
| **Other Income (Expenses)** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-operating (expense) income | (509544) | 2944 | (586813) | 201 |
| &nbsp;&nbsp;&nbsp;Loss on impairment of goodwill | (218606) |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign exchange transaction income (loss) | (32731) | 70575 | (681) | (74) |
| &nbsp;&nbsp;&nbsp;Interest expense, net | (28925) | (21360) | (10236) | (8792) |
| &nbsp;&nbsp;&nbsp;Financial expense | (149503) | (146459) | (39398) | (50321) |
| **Total Other Expenses, Net** | (939309) | (94300) | (637128) | (58986) |
| **Loss Before Income Taxes** | (1819186) | (4487222) | (1127151) | (2465853) |
| **Income Tax Benefit (Expense)** | 64014 | (5087) | 757 | (211) |
| **Net Loss** | (1755172) | (4492309) | (1126394) | (2466064) |
| **Other Comprehensive Loss** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation | (26884) | (146004) | (178) | (63404) |
| **Net Loss and Comprehensive Loss** | (1782056) | (4638313) | (1126572) | (2529468) |
| Weighted average shares outstanding - Basic and Diluted | 13886979 | 2743021 | 18059407 | 3446032 |
| Net loss per share of common stock |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic and Diluted | $(0.13) | $(1.64) | $(0.06) | $(0.72) |

---

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

[**Table of Contents**](#TOC)

**XMAX INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**

**FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024**

**Three Months Ended September 30, 2025**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common stock** | **Common stock** | | | | |
|  | **Shares** | **Amount** |<br>**Additional**<br>**Paid-in**<br>**Capital** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Income** |<br>**(Accumulated**<br>**Deficits)** |<br>**Total**<br>**Stockholders'**<br>**Equity** |
| **Balance at beginning of period** | 13772822 | $13773 | $56657801 | $495440 | $(50620293) | $6546721 |
| &nbsp;&nbsp;&nbsp;Stock issued to employees | 1500 | 1 | 1469 |  |  | 1470 |
| &nbsp;&nbsp;&nbsp;Stock issued to consultants | 12500 | 12 | 12238 |  |  | 12250 |
| &nbsp;&nbsp;&nbsp;Stock issued to investors | 9836054 | 9836 | 8140154 |  |  | 8149990 |
| &nbsp;&nbsp;&nbsp;Warrant Exercise | 10619497 | 10620 | (10620) |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation loss |  |  |  | (178) |  | (178) |
| &nbsp;&nbsp;&nbsp;Net loss | – | – | – | – | (1126394) | (1126394) |
| **Balance at end of period** | 34242373 | $34242 | $64801042 | $495262 | $(51746687) | $13583859 |

---

**Three Months Ended September 30, 2024**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common stock** | **Common stock** | | | | |
|  | **Shares** | **Amount** |<br>**Additional**<br>**Paid-in**<br>**Capital** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Income** |<br>**(Accumulated**<br>**Deficits)** |<br>**Total**<br>**Stockholders'**<br>**Equity** |
| **Balance at beginning of period** | 2672427 | $2672 | $46062766 | $438825 | $(46456055) | $48208 |
| &nbsp;&nbsp;&nbsp;Stock issued to employees | 1500 | 2 | 3224 |  |  | 3226 |
| &nbsp;&nbsp;&nbsp;Stock issued to consultants | 87500 | 88 | 140037 |  |  | 140125 |
| &nbsp;&nbsp;&nbsp;Stock issued to designer | 19350 | 19 | 29981 |  |  | 30000 |
| &nbsp;&nbsp;&nbsp;Acquisition of Nova Living DesignXperience | 400000 | 400 | 659600 |  |  | 660000 |
| &nbsp;&nbsp;&nbsp;Acquisition of Payment IT System | 460000 | 460 | 551540 |  |  | 552000 |
| &nbsp;&nbsp;&nbsp;Stocks issued to an investor | 125000 | 125 | 199875 |  |  | 200000 |
| &nbsp;&nbsp;&nbsp;Foreign currency translation loss |  |  |  | (63404) |  | (63404) |
| &nbsp;&nbsp;&nbsp;Net loss | – | – | – | – | (2466064) | (2466064) |
| **Balance at end of period** | 3765777 | $3766 | $47647023 | $375421 | $(48922119) | $(895909) |

---

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

[**Table of Contents**](#TOC)

**XMAX INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**

**FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024**

**Nine Months Ended September 30, 2025**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common stock** | **Common stock** | | | | |
|  | **Shares** | **Amount** |<br>**Additional**<br>**Paid-in**<br>**Capital** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Income** |<br>**(Accumulated**<br>**Deficits)** |<br>**Total**<br>**Stockholders'**<br>**Equity** |
| **Balance at beginning of period** | 7301206 | $7301 | $52585582 | $522146 | $(49991515) | $3123514 |
| &nbsp;&nbsp;&nbsp;Stock issued to employees | 4500 | 5 | 4405 |  |  | 4410 |
| &nbsp;&nbsp;&nbsp;Stock issued to consultants | 137500 | 138 | 179612 |  |  | 179750 |
| &nbsp;&nbsp;&nbsp;Stock issued to creditor | 434000 | 434 | 216566 |  |  | 217000 |
| &nbsp;&nbsp;&nbsp;Stock issued to suppliers | 4909616 | 4909 | 3186341 |  |  | 3191250 |
| &nbsp;&nbsp;&nbsp;Stock issued to investors | 10836054 | 10835 | 8639156 |  |  | 8649991 |
| &nbsp;&nbsp;&nbsp;Warrant Exercise | 10619497 | 10620 | (10620) |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation loss |  |  |  | (26884) |  | (26884) |
| &nbsp;&nbsp;&nbsp;Net loss | - | - | - | - | (1755172) | (1755172) |
| **Balance at end of period** | 34242373 | $34242 | $64801042 | $495262 | $(51746687) | $13583859 |

---

**Nine Months Ended September 30, 2024**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common stock** | **Common stock** | | | | |
|  | **Shares** | **Amount** |<br>**Additional**<br>**Paid-in**<br>**Capital** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Income** | **Retained**<br>**Earnings**<br>**(Accumulated**<br>**Deficits)** |<br>**Total**<br>**Stockholders'**<br>**Equity** |
| **Balance at beginning of period** | 1917706 | $1918 | $44402821 | $521425 | $(44429810) | $496354 |
| &nbsp;&nbsp;&nbsp;Stock issued to employees | 4500 | 5 | 9670 |  |  | 9675 |
| &nbsp;&nbsp;&nbsp;Stock issued to consultants | 312500 | 312 | 584063 |  |  | 584375 |
| &nbsp;&nbsp;&nbsp;Stock issued to designer | 46071 | 46 | 89954 |  |  | 90000 |
| &nbsp;&nbsp;&nbsp;Acquistion of AI-Calculation Engine | 300000 | 300 | 749700 |  |  | 750000 |
| &nbsp;&nbsp;&nbsp;Acquistion of Nova Living DesignXperience | 400000 | 400 | 659600 |  |  | 660000 |
| &nbsp;&nbsp;&nbsp;Acquisiton of Payment IT System | 460000 | 460 | 551540 |  |  | 552000 |
| &nbsp;&nbsp;&nbsp;Stock issued to an investor | 325000 | 325 | 599675 |  |  | 600000 |
| &nbsp;&nbsp;&nbsp;Foreign currency translation loss |  |  |  | (146004) |  | (146004) |
| &nbsp;&nbsp;&nbsp;Net loss | – | – | – | – | (4492309) | (4492309) |
| **Balance at end of period** | 3765777 | $3766 | $47647023 | $375421 | $(48922119) | $(895909) |

---

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

[**Table of Contents**](#TOC)

**XMAX INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOW**S

**FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024**

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** |
| **Cash Flows From Operating Activities** |  |  |
| Net loss | $(1755172) | $(4492309) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 47613 | 44512 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of operating lease right-of-use assets | 534331 | 534710 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write down of inventories | 5840 | 41635 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock based compensation expense | 259280 | 622930 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development |  | 1962000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on impairment of goodwill | 218606 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in bad debt - (credit loss) /allowance | (203) | 749 |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (7899364) | (80551) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advance to suppliers | 7696474 | (38938) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | 564415 | (273198) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets | 179170 | 895015 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | (549465) | (534266) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (104944) | 30637 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advance from customers | (77224) | 185403 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities and other payables | (692608) | (26659) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes payable | (564013) | – |
| **Net Cash Used in Operating Activities** | (2137264) | (1128330) |
| **Cash Flows From Investing Activity** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment in fund of Preamble Capital LLC | (5000000) | – |
| **Net Cash Used in Investing Activity** | (5000000) |  |
| **Cash Flows From Financing Activities** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayment to loan from a shareholder | (217000) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceed from loan from a shareholder | 200000 | 360000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceed from equity financing | 8149990 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceed from issuing common stocks | 500000 | 600000 |
| **Net Cash Provided by Financing Activities** | 8632990 | 960000 |
| **Effect of Exchange Rate Changes on Cash and Cash Equivalents** | $56754 | $(38522) |
| **Net Increase (Decrease) in Cash and Cash Equivalents** | 1552480 | (206852) |
| **Cash and Cash Equivalents, Beginning of Period** | 161902 | 369137 |
| **Cash and Cash Equivalents, Ending of Period** | $1714382 | $162285 |
| **Supplemental Disclosure of Cash Flow Information** |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid during period for: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax payments | $500000 | $5087 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense | $22579 | $4860 |

---

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

[**Table of Contents**](#TOC)

**XMAX INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (UNAUDITED)**

**Note 1 - Organization and Description of Business**

***Organization and Business***

XMax Inc. ("XMAX" or the "Company"), formerly known as Nova LifeStyle, Inc. or 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 its subsidiaries through which it markets, designs and sells furniture worldwide: Nova Furniture Limited domiciled in the British Virgin Islands ("Nova Furniture"), Nova Furniture Ltd. domiciled in Samoa ("Nova Samoa"), Diamond Bar Outdoors, Inc. domiciled in California ("Diamond Bar"), i Design Blockchain Technology, Inc. domiciled in California ("i Design") and Nova Living (M) SDN. BHD. domiciled in Malaysia ("Nova Malaysia"). The Company had three former subsidiaries Bright Swallow International Group Limited domiciled in Hong Kong ("Bright Swallow" or "BSI") which was sold in January 2020, Nova Furniture Macao Commercial Offshore Limited domiciled in Macao ("Nova Macao") which was de-registered and liquidated in January 2021 and Nova Living (HK) Group Limited domiciled in Hong Kong ("Nova HK") which was de-registered and liquidated in February 2023.

Nova Macao was organized under the laws of Macao on May 20, 2006, and was a wholly owned subsidiary of Nova Furniture. Nova Macao was a trading company, importing, marketing and selling products designed and manufactured by third-party manufacturers for the international market. Diamond Bar was incorporated in California on June 15, 2000. 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 December 7, 2017, Nova LifeStyle incorporated i Design Blockchain Technology, Inc. ("i Design") under the laws of the State of California. The purpose of i Design is to build the Company's own blockchain technology team. This company will focus on the application of blockchain technology in the furniture industry, including encouraging and facilitating interactions among designers and customers, and building a blockchain-powered platform that enables designers to showcase their products, including current and future furniture designs. This company is in the planning stage and has had minimal operations through June 30, 2025.

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On December 12, 2019, Nova LifeStyle acquired Nova Malaysia at cost of $1.00 which was incorporated in Malaysia on July 26, 2019. The purpose of this acquisition was to market and sell high-end physiotherapeutic jade mats in Malaysia.

On January 7, 2020, the Company transferred its entire interest in Bright Swallow to Y-Tone (Worldwide) Limited, an unrelated third party, for cash consideration of $2,500,000, pursuant to a formal agreement entered into on January 7, 2020. The Company received the payment on May 11, 2020.

On October 14, 2020, the Macao Trade and Investment Promotion Institute invalidated licenses for offshore companies under an Order of Repeal of Legal Regime of the Offshore Services by Macao Special Administrative Region. Nova Macao then entered into a de-registration process and its business was taken over by Nova HK. Nova Macao completed the de-registration and liquidation process in January 2021.

On November 5, 2020, Nova LifeStyle acquired Nova HK at cost of $1,290 which was incorporated in Hong Kong on November 6, 2019. This company had minimal operations other than to take over the business of Nova Macao. On February 15, 2022, the Company transferred its entire assets and business in Nova HK to Nova Malaysia, a subsidiary of the Company. In February 2023, Nova HK completed the process of de-registration and liquidation.

The "Company" and "Nova" collectively refer to XMax Inc., formerly known as Nova LifeStyle, the U.S. parent, and its subsidiaries, Nova Furniture, Nova Samoa, Diamond Bar, i Design, Nova HK and Nova Malaysia.

**Note 2 - Summary of Significant Accounting Policies**

***Basis of Presentation***

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

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***Reverse split***

On May 22, 2023, the Company filed a Certificate of Change with the Secretary of State of Nevada with an effective date of May 22, 2023, at which time a 1-for-5 reverse stock split of the Company's authorized shares of common stock, par value $0.001, accompanied by a corresponding decrease in the Company's issued and outstanding shares of common stock (the "Reverse Stock Split"). All references to shares and per share data have been retroactively restated to reflect such split.

***Amendments to Articles of Incorporation***

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

***Use of Estimates***

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

***Business Combination***

For a business combination, the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree are recognized at the acquisition date and measured at their fair values as of that date. In a business combination achieved in stages, the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, are recognized at the full amounts of their fair values. In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree, that excess in earnings is recognized as a gain attributable to the acquirer.

Deferred tax liability and assets are recognized for the deferred tax consequences of differences between the tax bases and the recognized values of assets acquired and liabilities assumed in a business combination in accordance with Accounting Standards Codification ("ASC") Topic 740-10.

***Goodwill***

Goodwill is the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. In accordance with ASC Topic 350, "Intangibles-Goodwill and Other," goodwill is not amortized but is tested for impairment, annually or more frequently when circumstances indicate a possible impairment may exist. Impairment testing is performed at a reporting unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds its fair value, with the fair value of the reporting unit determined using discounted cash flow ("DCF") analysis. A number of significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return and projections of realizations and costs to produce. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated.

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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 single 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. The Company completed the required testing of goodwill for impairment as of September 30, 2025, and determined that goodwill was impaired because of the current financial condition of the Company and the Company's inability to generate future operating income without substantial sales volume increases, which are highly uncertain. Furthermore, the Company anticipates future cash flows indicate that the recoverability of goodwill is not reasonably assured.

The goodwill write-down was reflected as an impairment loss, $218,606, in non-operating expenses in the statement of operation and comprehensive loss.

***Intangible Assets***

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

***Cash and Cash Equivalents***

For purposes of the statement of cash flows, the Company considers cash, money market funds, investments in interest bearing demand deposit accounts, time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents.

***Accounts Receivable***

The Company's accounts receivable arises from product sales. The Company does not adjust its receivables for the effects of a significant financing component at contract inception if it expects to collect the receivables in one year or less from the time of sale. The Company does not expect to collect receivables greater than one year from the time of sale.

The Company's policy is to maintain an allowance for expected 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.

Accounts receivable consisted of the following as of the date indicated:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
| Accounts receivable | $7936102 | 36738 |
| Less: allowance for credit losses | (164) | (367) |
| Total accounts receivable, net | $7935938 | 36371 |

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Expected credit losses (reversal) provision consisted for the following as of the dated indicated:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
| Balance **– January 1** | $367 | 532 |
| Expected credit losses reversal | (203) | (165) |
| Balance **– September 30** | $164 | 367 |

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The expected credit (reversal) losses provision for the nine months ended September 30, 2025 and 2024 was ($203) and $749 respectively; and ($197) and $832 for the three months ended September 30, 2025 and 2024, respectively.

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***Advances to Suppliers***

Advances to suppliers represent amounts paid to suppliers in advance for goods that are yet to be delivered and from which future economic benefits are expected to flow to the Company within the normal operating cycle. Based on its historical record and in normal circumstances, the Company receives goods within 4 to 6 months from the date the advance payment is made. During the nine months ended September 30, 2025 and December 31, 2024, no provision was made on advances to suppliers.

***Inventories***

Inventories are stated at the lower of cost and net realizable value, with cost determined on a weighted-average basis. Write-down of potential obsolete or slow moving inventories is recorded based on management's assumptions about future demands and market conditions. For the nine months ended September 30, 2025 and 2024, the Company wrote down (reversal) $5,840 and $41,635 of slow-moving inventory, respectively and $1,169 and ($2,618) for the three months ended June 30, 2025 and 2024, respectively. The inventory write-down is included in "Cost of Sales" from continuing operations in the unaudited condensed consolidated statements of loss and comprehensive loss.

***Property, Plant, and Equipment***

Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Expenditures for maintenance and repairs are expensed as incurred, while additions, renewals and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with no salvage value and estimated lives as follows:

Computer and office equipment 5 - 10 years <br> Decoration and renovation 5 - 10 years

***Impairment of Long-Lived Assets***

Long-lived assets, which include property, plant and equipment and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, "Impairment or Disposal of Long-Lived Assets." ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group asset group exceeds its fair value based on discounted cash flow analysis or appraisals. As of September 30, 2025, the Company determined that goodwill was impaired because of the current financial condition of the Company and the Company's inability to generate future operating income without substantial sales volume increases, which are highly uncertain. Furthermore, the Company anticipates future cash flows indicate that the recoverability of goodwill is not reasonably assured.

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***Research and Development***

Research and development costs are related primarily to the Company designing and testing its new products during the development stage. Since 2023, the Company has been developing Virtual and Augmented reality software and AI system for potential consulting business. In addition, since 2024, the Company acquired IT systems for AI-Calculation Engine, Nova Living DesignXperience System and Payment IT System which were integrated into our current IT system (see Note 11). The entire system is far from complete as it requires to integrate with other components in order to be functional. It is still in development stage and not in operation. Research and development costs are recognized in general and administrative expenses and expensed as incurred. Research and development expenses were $1,182 and $1.97 million for the nine months ended September 30, 2025 and 2024, respectively; and $272 and $1.22 million for the three months ended September 30, 2025 and 2024, 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 income tax (benefit) expense for the nine months ended September 30, 2025 and 2024 are ($64,014) and $5,087; and ($757) and $211 for the three months ended September 30, 2025 and 2024, respectively, which are mainly attributable to California state taxes. The income tax expense for the nine and three months ended September 30, 2024 is $0 which is primarily related to quarter-to-date loss generated from domestic and foreign operations. Since the projected annual tax expense of $1,776 is not material to the financial statements, management has decided to pass on recording it for the nine months ended September 30, 2025.

Income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

Under the provisions of ASC Topic 740, when tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

XMax Inc. (Nova Lifestyle, Inc.) and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI and Nova Samoa was incorporated in Samoa. There is no income tax for companies domiciled in the BVI and Samoa. Accordingly, the Company's unaudited condensed consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled. Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%.

The Tax Cuts and Jobs Act of 2017 (the "Act") created new taxes on certain foreign-sourced earnings such as global intangible low-taxed income ("GILTI") under IRC Section 951A, which is effective for the Company for tax years beginning after January 1, 2018. For the six months ended June 30, 2025, the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing.

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On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses (NOLs) arising in taxable years beginning after December 31, 2017.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years. While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed. Furthermore, in anticipation of the new provision taking effect, we have analyzed the provision and worked with our advisors to evaluate its application to our business. Since all research and development expenditures were incurred within the U.S. and the amount is immaterial, we do not anticipate it having any material impact to our provision.

As of September 30, 2025 and December 31, 2024, the accumulated undistributed loss generated by its foreign subsidiaries were approximately $22.6 million and $22.2 million of which substantially all was previously subject to U.S. tax, the one-time transition tax on foreign unremitted earnings required by the Tax Act, or GILTI. Those earnings are considered to be permanently reinvested and accordingly, no deferred tax expense is recorded for U.S. federal and state income tax or applicable withholding taxes.

As of September 30, 2025 and 2024, unrecognized tax benefits were approximately nil and nil, respectively. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was nil as of September 30, 2025 and 2024.

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

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| | | |
|:---|:---|:---|
|  | **Gross UTB** | **Gross UTB** |
|  | **2025** | **2024** |
| Balance **– January 1** | - | - |
| Foreign exchange adjustment | - | - |
| Balance **– September 30** | $- | $- |

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At September 30, 2025 and December 31, 2024, the Company had cumulatively accrued approximately nil and nil for estimated interest and penalties related to unrecognized tax benefits. The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax benefit, which totaled nil and nil for the nine and three months ended September 30, 2025 and 2024, respectively, related to the Company's operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months.

XMax Inc. (Nova Lifestyle) and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2021-2024 remain open to examination by tax authorities in the U.S.

***Revenue Recognition***

The Company recognizes revenues when its customers obtain control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASC-606: (i) identifies contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenues when (or as) it satisfies the performance obligation.

Revenues from product sales are recognized when the customer obtains control of the Company's product, which occurs at a point in time, typically upon shipment to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial.

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Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with the Company's customers.

Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable as the amount is payable to the Company's customer.

The Company's sales policy allows for product returns within the warranty period if the product is defective and the defects are the Company's fault. As alternatives to the product return option, the customers have the option of requesting a discount from the Company for products with quality issues or of receiving replacement parts from the Company at no cost. The amount for product returns, the discount provided to the Company's customers, and the costs for replacement parts were immaterial for the nine and three months ended September 30, 2025 and 2024.

The Company considers itself acting as a principal for sales of goods which is evidenced by (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods, (ii) the Company has inventory risk before the specified goods have been transferred to a customer or after transfer of control to the customer, (iii) the Company has discretion in establishing the price for the specified good. Thus, the Company's' revenue is recognized at a point in time when a promised good is delivered to a customer.

***Cost of Sales***

Cost of sales consists primarily of costs of finished goods purchased from third-party manufacturers and write-downs of inventory.

***Shipping and Handling Costs***

Shipping and handling costs related to delivery of finished goods are included in selling expenses. During the nine months ended September 30, 2025 and 2024, shipping and handling costs were $2,422 and $1,593 respectively; and $2,699 and $78 for the three months ended September 30, 2025 and 2024, 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 was $189,430 and $272,199 for the nine months ended September 30, 2025 and 2024, respectively; and $85,710 and $16,324 for the three months ended September 30, 2025 and 2024, respectively.

***Share-based Compensation***

The Company accounts for share-based compensation awards to officers, directors, employees, and for acquiring goods and services from nonemployees in accordance with FASB ASC Topic 718, "Compensation – Stock Compensation", which requires that share-based payment transactions be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the vesting period. The Company accounts for forfeitures when they occur.

***Earnings per Share (EPS)***

Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares pertaining to warrants, stock options, and similar instruments had been issued and if the additional common shares were dilutive. Diluted earnings per share are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding unvested restricted stock, options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

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The following table presents a reconciliation of basic and diluted loss per share for the nine and three months ended September 30, 2025 and 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Three Months Ended September 30,** | **Three Months Ended September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Net loss | $(1755172) | $(4492309) | (1126394) | (2466064) |
| Weighted average shares outstanding – Basic and Diluted \* | 13886979 | 2743021 | 18059407 | 3446032 |
| Net loss per share of common stock |  |  |  |  |
| Basic and Diluted | $(0.13) | $(1.64) | (0.06) | (0.72) |

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\* Including 1,500 and 0 shares that were granted and vested but not yet issued for the nine and three months ended September 30, 2025 and 2024, respectively.

For the nine months ended September 30, 2025 and 2024, 1,500 and 1,500 shares of unvested restricted stock, vested stock options to purchase of 0 and 12,000 shares of the Company's common stock, and 6,384,200 and 245,192 shares exercisable under warrants were excluded from the EPS calculation, as their effect were anti-dilutive.

For the three months ended June 30, 2025 and 2024, 1,500 and 600 shares of unvested restricted stock, vested stock options to purchase 0 and 25,400 shares of common stock of the Company, and 6,384,200 and 245,192 shares exercisable under warrants were excluded from the EPS calculation, as their effect were anti-dilutive.

***Concentration of Credit Risk***

Financial instruments that potentially subject the Company to credit risk consist primarily of accounts receivable 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.

The following table sets forth information as to the Company's customers that accounted for 10% or more of the Company's sales and accounts receivable for the nine and three months ended September 30, 2025 and 2024.

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|:---|:---|:---|:---|
| **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Three Months Ended September 30, 2025** | **As of September 30, 2025** |
| **Customer** | **Percentage of**<br> **Total Sales** | **Percentage of**<br> **Total Sales** | **Percentage of<br> accounts receivable** |
| A | 1% A | &nbsp;&nbsp;&nbsp;&nbsp; -% | &nbsp;&nbsp;&nbsp;&nbsp; -% |
| B | 1% B | 2% | -% |
| C | &nbsp;&nbsp;&nbsp;&nbsp; -% C | -% | -% |
| D | 53% D | 81% | 100% |

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|:---|:---|:---|:---|
| **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Three Months Ended September 30, 2024** | **As of September 30, 2024** |
| **Customer** | **Percentage of**<br> **Total Sales** | **Percentage of**<br> **Total Sales** | **Percentage of<br> accounts receivable** |
| A | 3% A | 2% | 17% |
| B | 2% B | 3% | 59% |
| C | &nbsp;&nbsp;&nbsp;&nbsp; -% C | &nbsp;&nbsp;&nbsp;&nbsp; –% | 10% |
| D | -% D | -% | -% |

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One and no customer accounted for 10% or more of the Company's sales for the nine months ended September 30, 2025 and 2024, respectively. One and no customer account for 10% or more of the Company's sales for the three months ended September 30, 2025 and 2024, respectively.

One and three customers accounted for 100% and 86% (59%, 17% and 10%), respectively, of the Company's gross accounts receivable as of September 30, 2025 and 2024.

The following table sets forth information as to the Company's suppliers that accounted for 10% or more of the Company's total purchases, accounts payable and advance to suppliers for the nine and three months ended September 30, 2025 and 2024.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Nine Months Ended<br> September 30, 2025** | **Nine Months Ended<br> September 30, 2025** | **Three Months Ended<br> September 30, 2025** | **As of**<br> **September 30, 2025** | **As of**<br> **September 30, 2025** |
| **Supplier** | **Percentage of**<br> **Total Purchases** | **Percentage of**<br> **Total Purchases** | **Balance of**<br> **Accounts Payable** | **Balance of<br> Advance to Supplier** |
| A | &nbsp;&nbsp;&nbsp;&nbsp; 16% A | &nbsp;&nbsp;&nbsp;&nbsp; 17% | $114584 |  |
| B | 10% B | 11% | 137155 |  |
| C | 8% C | 10% | 127563 | 23924 |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Nine Months Ended<br> September 30, 2024** | **Nine Months Ended<br> September 30, 2024** | **Three Months Ended<br> September 30, 2024** | **As of<br> September 30, 2024** | **As of<br> September 30,<br> 2024** |
| **Supplier** | **Percentage of**<br> **Total Purchases** | **Percentage of**<br> **Total Purchases** | **Balance of**<br> **Accounts Payable** | **Balance of<br> Advance to Supplier** |
| A | &nbsp;&nbsp;&nbsp;&nbsp; 16% A | &nbsp;&nbsp;&nbsp;&nbsp; 21% | $151609 |  |
| B | 2% B | 2% |  |  |
| C | 7% C | 4% |  | 23924 |

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The Company purchased its products from two and one major vendors during the nine months ended September 30, 2025 and 2024, respectively, accounting for a total of 26% (16% and 10%) for 2025 and 16% for 2024 of the Company's purchases, respectively.

The Company purchased its products from three and one major vendors during the three months ended September 30, 2025 and 2024, respectively, accounting for a total of 38% (17%, 11% and 10%) for 2025 and 21% for 2024 of the Company's purchases, respectively.

Accounts payable to these major vendors were $379,302 and $151,609 as of September 30, 2025 and 2024, respectively.

Advances made to these major vendors were $23,924 as of September 30, 2025 and 2024, respectively.

***Fair Value of Financial Instruments***

ASC Topic 820, "Fair Value Measurements and Disclosures," requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, "Financial Instruments," defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the condensed 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.

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● 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 and cash equivalents, accounts receivable, other receivables, accounts payable, other payables and accrued liabilities approximate estimated fair values because of their short maturities.

***Foreign Currency Translation and Transactions***

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

The Company's subsidiary with operations in Malaysia uses its local currency, the Malaysian Ringgit ("RM"), as its functional currency. An entity's functional currency is the currency of the primary economic environment in which it operates, which is the currency of the environment in which the entity primarily generates and expends cash. Management's judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements.

Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of operations.

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

Translation of amounts from RM into U.S. dollars has been made at the following exchange rates:

---

| | |
|:---|:---|
| Balance sheet items, except for equity accounts |  |
| &nbsp;&nbsp;&nbsp;September 30, 2025 | RM 4.21 to 1 |
| &nbsp;&nbsp;&nbsp;December 31, 2024 | RM 4.47 to 1 |
| Income Statement and cash flow items |  |
| &nbsp;&nbsp;&nbsp;For the nine months ended September 30, 2025 | RM 4.32 to 1 |
| &nbsp;&nbsp;&nbsp;For the nine months ended September 30, 2024 | RM 4.63 to 1 |

---

***Segment Reporting***

ASC Topic 280, "Segment Reporting," requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's chief operating decision maker organizes segments within the company for making operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

Management determined that the Company's operations constitute a single reportable segment in accordance with ASC 280. The Company operates exclusively in one 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 United States and Nova Malaysia is a furniture retailer and distributor focusing on customers primarily in Malaysia. They are all operated under the same senior management of the Company, and management views the operations of Diamond Bar and Nova Malaysia as one entity for making business decisions.

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All of the Company's long-lived assets are mainly property, plant and equipment located in the United States and Malaysia and are utilized for administrative purposes.

Net sales to customers by geographic area are determined by reference to the physical product shipment delivery locations requested by the customers. For example, if the products are delivered to a customer in the United States, the sales are recorded as generated in the United States; if the customer directs us to ship its products to China, the sales are recorded as sold in China.

***Leases***

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use ("ROU assets") assets represent the Company's right to control the use of an identified asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term.

ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.

ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

The Company recognized no impairment of ROU assets as of September 30, 2025 and December 31, 2024.

The operating lease is included in operating lease right-of-use assets, operating lease liabilities-current and operating lease liabilities-non-current on the condensed consolidated balance sheets at September 30, 2025 and December 31, 2024.

***Reclassification***

Certain prior period accounts have been reclassified in conformity with current period's presentation.

In November 2023, the FASB, issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant expenses that are regularly provided to the chief operating officer decision maker ("CODM"), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. The ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim period within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted the ASU during the year ended December 31, 2024. The adoption did not have a material impact on the financial statements.

ln December 2023, the FASB issued Accounting Standards Update No.2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3)income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company adopted the ASU in 2025. The adoption did not have a material impact on the financial statements.

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In March 2025, the FASB issued ASU 2025-02—Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. The amendments in this Update are effective immediately and on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company adopted the ASU in 2025. The adoption did not have a material impact on the financial statements.

*Recently Issued But Not Yet Adopted Accounting Pronouncements*

In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our unaudited condensed consolidated financial statement presentations and disclosures.

ln December 2023, the FASB issued Accounting Standards Update No.2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation,(2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3)income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual period beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its unaudited condensed consolidated financial statements and related disclosures.

On November 4, 2024, the FASB issued an ASU No. 2024-03, Disaggregation of Income Statement Expenses ("ASU 2024 03") to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales; selling, general, and administrative expenses; and research and development). The amendments in the ASU require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: 1. Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e). 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same tabular disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4) Disclose the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Clarifying the Effective Date ("ASU 2025-01"). The amendments, as clarified by ASU 2025-01, are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its consolidated financial statement presentation or disclosures.

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In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASB's intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquirer in the Acquisition of a Variable Interest Entity. The amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting period within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

In May 2025, the FASB issued ASU 2025-04, Compensation - Stock Compensation (Topic 18) and Revenue from contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. The amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments clarify the accounting for share-based consideration payable to a customer under Topic 718 and Topic 606. The amendments are effective for annual reporting periods, including interim reporting period within those annual periods, beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient and, if applicable, an accounting policy election to simplify the measurement of credit losses for certain receivables and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in any interim or annual period in which financial statements have not been issued or made available for issuance. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

The Company's management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company's financial statement presentation or disclosures.

**Note 3 - Inventories**

The inventories as of September 30, 2025 and December 31, 2024 totaled $2,254,098 and $2,824,353, respectively, and consisted entirely of finished goods.

Inventories are stated at the lower of cost and net realizable value, with cost determined on a weighted-average basis. Write-down of potential obsolete or slow moving inventories is recorded based on management's assumptions about future demands and market conditions. For the nine months ended September 30, 2025 and 2024, the Company wrote-down (reversed) $5,840 and $41,635 of slow-moving inventory, respectively; and $1,169 and ($2,618) of slow-moving inventory for the three months ended June 30, 2025 and 2024, respectively. The inventory write-down is included in "Cost of Sales" in the consolidated statements of operations.

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**Note 4 – Property, plant, and Equipment, Net**

As of September 30, 2025 and December 31, 2024, Property, plant, and equipment consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
| Computer and office equipment | $276150 | $271415 |
| Decoration and renovation | 408832 | 387288 |
|  | 684982 | 658703 |
| Less: accumulated depreciation | (464594) | (406517) |
| Property plant and equipment, net | $220388 | $252186 |

---

Depreciation expense was $44,504 and $40,489 for the nine months ended September 30, 2025 and 2024, respectively; and $15,128 and $13,480 for the three months ended September 30, 2025 and 2024, respectively.

**Note 5 – Intangible Assets**

As of September 30, 2025 and December 31, 2024, intangible assets consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
| Accounting software | $26800 | $26800 |
| Less: accumulated amortization | (26800) | (23691) |
| Intangible assets, net | $- | $3109 |

---

Amortization expense was $3,109 and $4,023 for the nine months ended September 30, 2025 and 2024, respectively and $427 and $1,341 for the three months ended September 30, 2025 and 2024, respectively.

**Note 6 – Investment in Fund**

On September 25, 2025, Nova Furniture Limited (the "Nova BVI"), a company incorporated in the British Virgin Islands and a wholly owned subsidiary of Nova LifeStyle, Inc. entered into a Subscription Agreement (the "Agreement") with Preamble Capital, A Series of CGF2021 LLC (the "Fund"), a Delaware Limited Liability Company. Pursuant to the Agreement, Nova BVI subscribes 99.815% interest in the Fund in an amount equal to $5,664,500. (the "Subscription Amount") and will become a member of the Fund and be bound by the LLC Agreement as a member of the Fund. Sydecar LLC, a Delaware limited liability company, is the administrator of the Fund. The applicable management fee percentage for the Company is 0%. The Fund will use the Subscription Amount to subscribe approximately 6.667% interest of certain fund that holds an aggregate of 353,772 shares of Common Stock of Space Exploration Technologies Corp., a Texas corporation ("SpaceX"), comprising of 121,805 shares of Class A Common Stock and 231,967 shares of Class C Common Stock of Space X.

On September 25, 2025, Nova BVI closed its subscription of 99.815% interest in Preamble Capital, A Series of CGF2021 LLC (the "Preamble Capital"), a Delaware Limited Liability Company for $5,664,500.

On September 26, 2025, Preamble Capital entered into a Subscription Agreement (the "Subscription Agreement") with a certain fund that holds an aggregate of 353,772 shares of Common Stock of SpaceX, comprising of 121,805 shares of Class A Common Stock and 231,967 shares of Class C Common Stock of Space X. Pursuant to the Subscription Agreement, Preamble Capital subscribed approximately 6.667% interest of such fund for an amount of $5,660,000 (the "Transaction"). On September 29, 2025, Preamble Capital closed the Transaction.

The Company recorded $5.00 million to investment in fund with $664,500 as subscription fee in other expense for the above transactions.

**Note 7 – Advances to Suppliers**

The Company makes advances to certain vendors for inventory purchases. The advances on inventory purchases were $183,924 and $4,689,148 as of September 30, 2025 and December 31, 2024, respectively. No impairment charges were made on advances to suppliers for the nine months ended September 30, 2025 and the twelve months ended December 31, 2024.

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**Note 8 – Prepaid Expenses and Other Receivables**

Prepaid expenses and other receivables consisted of the following as of September 30, 2025 and December 31, 2024:

---

| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
| Prepaid expenses | $150170 | $202294 |
| Other receivables | 10508 | 17415 |
| Prepaid expenses and other receivables | $160678 | $219709 |

---

As of September 30, 2025 and December 31, 2024, prepaid expenses and other receivables mainly represented prepaid insurance, prepaid rent, refund receivable from suppliers, prepaid advertising expense, and Celero and Cardknox account balances.

**Note 9 – Accrued Liabilities and Other Payables**

Accrued liabilities and other payables consisted of the following as of September 30, 2025 and December 31, 2024:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
| Other payables | $466158 | $986945 |
| Salary payable | 4688 | 8727 |
| Marketing |  | 10000 |
| Financed insurance premiums | 115833 | 62531 |
| Auditing fee |  | 190000 |
| Warranty liability | 10558 | 15103 |
| Accrued commission | 385 | 47466 |
| Accrued expenses, others | 336713 | 362261 |
| Total accrued liabilities and other payable | $934335 | $1683033 |

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As of September 30, 2025 and December 31, 2024, other accrued expenses mainly included legal and professional fees, utilities and unpaid operating expenses incurred in Malaysia. Other payables represented balance on credit card, other taxes payable, 401(k) payable and payable for marketing, shipping, director and showroom.

On September 12, 2023, Nova Malaysia entered into an agreement with a consulting firm to deliver consultancy service for AI Trends and Tools. Nova Malaysia agreed to pay 5,000,000 Malaysia Ringgit ($1,065,235) for the service. During 2024, Nova Malaysia paid 4,100,000 Malyaia Ringgit ($896,234) to the consultant and was recorded as consulting expense. The remaining balance was recorded as accrued expenses.

**Note 10 – Other Loans**

On June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan. The Loan, which was in the form of a promissory note dated June 19, 2020, matures on June 19, 2050 and bears interest at a rate of 3.75% per annum, payable monthly beginning 12 months from the date of the promissory note. Funds from the Loan may only be used for working capital. The loan was secured by all tangible and intangible property of Diamond Bar and has accumulated interest of $4,000 and $4,109 for the nine months ended September 30, 2025 and 2024, respectively; and $1,340 and $1,372 for the three months ended September 30, 2025 and 2024, respectively.

On November 14, 2024, Nova Malaysia entered into a loan agreement in the aggregate amount of $71,286 (equivalent to Malaysia Ringgit 300,000) with an unrelated third party. The loan was in the form of a promissory note dated on November 14, 2024, matures on November 13, 2030, and bears no interest. The proceed of the loan is used for working capital.

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**Note 11 – Related Party Transactions**

On September 30, 2011, Diamond Bar leased a showroom in High Point, North Carolina from the Company's former President and Chief Executive Officer who is currently the Chairperson of the Board. The lease is renewable and has been renewed each year since 2011. On April 1, 2025, the Company renewed the lease for an additional one year term at a cost of $41,000. During the nine months ended September 30, 2025 and 2024, the Company recorded rental amounts of $30,750 and $29,140, respectively; and $10,250 and $10,250 for the three months ended September 30, 2025 and 2024, respectively, which were included in selling expenses.

On January 4, 2018, the Company entered into a sales representative agreement with a consulting firm, which is owned by the former President and Chief Executive Officer and currently the Chairperson of the Board, for sales representative service for a term of two years. On January 4, 2020, the Company renewed the agreement for an additional two years which was amended in July 2020. If not terminated during the first year, the agreement will continue until one party or the other terminates the agreement with 30 days written notice. The Company agreed to compensate the consulting firm via commission at predetermined rates of the relevant sales amount. During the nine months ended September 30, 2025 and 2024, the Company recorded $257,267 and $249,960; and $83,475 and $96,917 for the three months ended June 30, 2025 and 2024 as commission expense to this consulting firm, respectively.

In February 2024, the Company entered into a loan agreement in the aggregate amount of $200,000 with a shareholder of the Company. The loan was in the form of a promissory note dated on February 21, 2024, matures on February 20, 2025, and bears interest at a rate of 8.5% per annum. The proceed of the loan is used for working capital. On February 21, 2025, the Company repaid the loan in the form of shares of common stock. During the nine months ended September 30, 2025 and 2024, the Company accrued $1,932 and $10,509; and $0 and $4,368 for the three months ended June 30, 2025 and 2024, as interest expense, respectively.

On April 11, 2024, the Company entered into a loan agreement in the aggregate amount of $160,000 with a shareholder of the Company. The loan was in the form of a promissory note dated on April 11, 2024, matures on April 10, 2025, and bears interest at a rate of 8.5% per annum. The proceed of the loan is used for working capital. On April 10, 2025, the Company extended the loan to April 9, 2026. During the nine months ended September 30, 2025 and 2024, the Company accrued $11,290 and $6,093; and $3,840 and $3,075 for the three months ended September 30, 2025 and 2024, as interest expense, respectively.

On April 11, 2025, the Company entered into a loan agreement in the aggregate amount of $200,000 with a shareholder of the Company. The loan was in the form of a promissory note dated on April 11, 2025, matures on April 10, 2026, and bears interest at a rate of 8.5% per annum. The proceed of the loan is used for working capital. During the nine and three months ended September 30, 2025 and 2024, the Company accrued $8,345 and $4,438as interest expense, respectively.

**Note 12 – Stockholders' Equity**

On May 28, 2021, the Company's stockholders approved the Company's 2021 Equity Incentive Plan (the "2021 Plan") at its annual shareholders' meeting. The 2021 Plan was approved by the Board of Directors of the Company on April 12, 2021 and has a total of 600,000 shares of the Company's common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Company's business. On June 16, 2021, the Company filed Form S-8 to register the 600,000 shares of the Company's common stock under the 2021 Plan.

On August 31, 2023, the Company's stockholders approved the Company's 2023 Equity Incentive Plan (the "2023 Plan") at its special shareholders' meeting. The 2023 Plan was approved by the Board of Directors of the Company on June 28, 2023 and has a total of 800,000 shares of the Company's common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Company's business. On December 15, 2023, the Company filed Form S-8 to register the 800,000 shares of the Company's common stock under the 2023 Plan.

On May 31, 2024, the Company's stockholders approved the Company's 2024 Equity Incentive Plan (the "2024 Plan") at its annual shareholders' meeting. The 2024 Plan was approved by the Board of Directors of the Company on April 19, 2024 and has a total of 3,000,000 shares of the Company's common stock which may be granted as stock reward to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of the Company's business.

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On April 18, 2024, the Company received written notice from the NASDAQ Stock Market ("NASDAQ") stating that the Company does not meet the requirement of maintaining a minimum of $2,500,000 in stockholders' equity for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5550(b)(1), the Company also does not meet the alternative of market value of listed securities of $35 million under NASDAQ Listing Rule 5550(b)(2) or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years under NASDAQ Listing Rule 5550(b)(3), and the Company is no longer in compliance with the NASDAQ Listing Rules.

The NASDAQ notification letter provides the Company until June 6, 2024 to submit a plan to regain compliance.

The Company submitted its plan of compliance on May 28, 2024 and a supplemental letter to the plan of compliance on June 20, 2024. On June 27, 2024, the Company received a notification letter from NASDAQ Listing Qualification Staff ("Staff"). Based on the review of the letters submitted by the Company, Staff has determined to grant the Company an extension until October 14, 2024 to regain compliance with the Rule and the Company must complete its initiatives and provide evidences for the compliance with the Rule as required by NASDAQ.

The Company and Nova Samoa have entered into orders to purchase inventories in total amount of $4,650,000, which were be paid in 3,321,429 shares ("Transaction") of common stock of the Company at US$1.40 per share, as disclosed in the Form 8-K filed by the Company with SEC on October 11, 2024 (the "Form 8-K"). The Company believes it has regained compliance with the stockholders' equity requirement based upon the Transaction.

Based on the Form 8-K, staff of NASDAQ ("Staff") has determined that the Company complies with the Listing Rule 5550(b)(1). However, as noted in its letter dated, June 27, 2024, if the Company fails to evidence compliance upon filing its next periodic report covering the period of the Transaction which is the annual report for the year ended December 31, 2024 ("2024 Form 10-K"), it may be subject to delisting. At that time, Staff will provide written notification to the Company, which may then appeal Staff's determination to a Hearings Panel. The Company filed its 2024 Form 10-K on March 31, 2025 and has not received any written notification from Nasdaq as of the day of this report.

On May 16, 2024, the Company entered into a Securities Purchase Agreement with an investor to sell 200,000 shares of the Company's common stock at a purchase price of $2.00 per share for an aggregate price of $400,000 (the "Private Placement"). The Private Placement was completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On July 30, 2024, the Company entered into a Securities Purchase Agreement with the same investor to sell 125,000 shares of the Company's common stock at a purchase price of $1.60 per share for an aggregate price of $200,000 (the "Private Placement"). The Private Placement was completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On October 11, 2024, Nova LifeStyle, Inc. (the "Company") and Nova Furniture Limited (Samoa), a wholly owned subsidiary of the Company ("Nova Samoa") entered into five purchase orders ("POs") to purchase certain furniture products (the "Products") from Iconic Tech SDN BHD ("Iconic Tech"), Onefull Technologies SDN. BHD. ("Onefull Technologies"), Skyvip SDH BHD ("Skyvip"), United Poles SDH BHD ("United Poles") and Teclutions System SDN. BHD ("Teclutions", collectively with Iconic Tech, Onefull Technologies, Skyvip and United Poles as the Sellers). Pursuant to the POs, the Company, Nova Samoa and Sellers agree that (i) Nova Samoa will purchase Background Light Slabs from Iconic Tech for a total of $945,000 (the "Iconic Order Price"); (ii) Nova Samoa will purchase Porcelin Slabs from Onefull Technologies for a total of $925,000 (the "Onefull Order Price"); (iii) Nova Samoa will purchase Transparent Marble Slabs from Skyvip for a total of $900,000 (the "Skyvip Order Price"); (iv) Nova Samoa will purchase Ultrathinstone from United Poles for a total of $940,000 (the "United Order Price") (v) the Nova Samoa will purchase Light Transmitting Slate Stone from Teclutions for a total of $940,000 (the "Teclutions Order Price", collectively with Iconic Order Price, Onefull Order Price, Skyvip Order Price and United Order Price as the Order Prices); (vi) the Order Prices shall be paid up to the Sellers in 3,321,429 shares ("Shares") of common stock of the Company at US$1.40 per share. The Shares were issued pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

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On October 25, 2024, Nova LifeStyle, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Agreement") with certain purchaser identified on the signature page thereto (the "Purchaser"), pursuant to which the Company agreed to sell to the Purchaser in a private placement 125,000 shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), at a purchase price of $1.20 per share for an aggregate price of $150,000 (the "Private Placement"). The Private Placement was completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On January 6, 2025, Nova LifeStyle, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Agreement") with certain purchaser identified on the signature page thereto (the "Purchaser"), pursuant to which the Company agreed to sell to the Purchaser in a private placement 250,000 shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), at a purchase price of $0.60 per share for an aggregate price of $150,000 (the "Private Placement"). The Private Placement was be completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On February 10, 2025, Nova LifeStyle, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Agreement") with certain purchaser identified on the signature page thereto (the "Purchaser"), pursuant to which the Company agreed to sell to the Purchaser in a private placement 250,000 shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), at a purchase price of $0.60 per share for an aggregate price of $150,000 (the "Private Placement"). The Private Placement was be completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On February 20, 2025, Nova LifeStyle, Inc. (the "<u>Company</u>") entered into a Debt Repayment Agreement (the "<u>Agreement</u>") with Huge Energy International Limited, a company incorporated in Hong Kong and a creditor of the Company (the "<u>Creditor</u>"), pursuant to which the Company agreed to repay $217,000 debt owed to the Creditor in the form of shares of Common Stock of the Company for an aggregate of 434,000 shares at a price of $0.50 per share (the "<u>Debt Repayment</u>"). The Debt Repayment was completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On February 26, 2025, Nova LifeStyle, Inc. (the "Company") and Nova Furniture Limited (Samoa), a wholly owned subsidiary of the Company ("Nova Samoa") entered into four purchase orders ("POs") to purchase certain furniture products (the "Products") from Flyguy Resources Sdn Bhd ("Flyguy Resources"), Twenty Nine Business Solutions Sdn Bhd. ("Twenty Nine Business"), Chialing Enterprise ("Chialing") and Macro IT Solutions SDH BHD ("Macro IT Solutions", collectively with Flyguy Resources, Twenty Nine Business, and Chialing as the "Sellers"). Pursuant to the POs, the Company, Nova Samoa and Sellers agree that (i) Nova Samoa will purchase Transparent Marble Slabs from Flyguy Resources for a total of $810,000 (the "Flyguy Order Price"); (ii) Nova Samoa will purchase Background Light Slabs from Twenty Nine Business for a total of $742,500 (the "Twenty Nine Order Price"); (iii) Nova Samoa will purchase Light Transmitting Slate Stone from Chialing for a total of $825,000 (the "Chialing Order Price"); and (iv) Nova Samoa will purchase Ultrathinstone from Macro IT Solutions for a total of $813,750 (the "Macro Order Price", collectively with Flyguy Order Price, Twenty Nine Order Price, Chialing Order Price as "Order Prices"); (vi) the Order Prices shall be paid to the Sellers in 4,909,616 shares ("Shares") of common stock of the Company at US$0.65 per share. The Shares were issued pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On March 13, 2025, Nova LifeStyle, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Agreement") with certain purchaser identified on the signature page thereto (the "Purchaser"), pursuant to which the Company agreed to sell to the Purchaser in a private placement 500,000 shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), at a purchase price of $0.40 per share for an aggregate price of $200,000 (the "Private Placement"). The Private Placement was completed pursuant to the exemption from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.

On September 4, 2025, Nova Lifestyle, Inc., a Nevada corporation (the "<u>Company</u>"), entered into a Securities Purchase Agreement (the "<u>Purchase Agreement</u>") with purchasers named therein (each, a "<u>Purchaser</u>" and collectively the "<u>Purchasers</u>"), pursuant to which the Company agreed to sell, in a best-efforts public offering, an aggregate of (i) 9,836,054 shares (the "Shares") of the Company's common stock, par value $0.001 ("Common Stock") and (ii) 19,672,108 warrants to purchase 19,672,108 shares of Common Stock (the "Warrants" and such shares of Common Stock issuable upon exercise of the Warrants, the "Warrant Shares"). Each share of Common Stock is being sold together with two Warrants, with each Warrant to purchase one share of Common Stock. The combined purchase price per Share and accompanying Warrants is $0.915.

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The Warrants are exercisable at an exercise price of $1.098 per share immediately upon issuance, and will expire five years following the date of issuance.

On September 4, 2025, the Company closed the public offering of these securities for gross proceeds of approximately $9.0 million (the "Offering"). The net proceeds to the Company from the Offering, after deducting the Placement Agent's fees and expenses and the Company's offering expenses is approximately $8.15 million. The Company intends to use the net proceeds for working capital, marketing expenditures, repayment of short-term debt and capital expenditures

American Trust Investment Services, Inc. acted as the exclusive placement agent for the Offering pursuant to the Placement Agency Agreement, dated September 3, 2025. As compensation for such placement agent services, the Company paid ATIS an aggregate cash fee equal to 7.0% of the gross proceeds received by the Company from the Offering, plus a non-accountable expense allowance equal to 1.0% of the gross proceeds received by the Company, and out-of-pocket expenses of $150,000.

The warrants issued in the public offering 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 public offering 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 5.5 years, volatility of 124%, risk-free interest rate of 3.65% 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 and placement agent at grant date was $18,308,126.

 ****

***Shares and Warrants issued through Private Placement***

On July 23, 2021, the Company conducted a registered direct offering of 222,902 shares of common stock. The shares were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, which was filed with the Securities and Exchange Commission (the "SEC") on October 8, 2020 and subsequently declared effective on October 15, 2020. Additionally, the Company issued to the investors unregistered warrants to purchase up to an aggregate of 222,902 shares of common stock in a concurrent private placement. The combined purchase price for one share of common stock and a warrant to purchase one share of common stock was $14.00. The warrants have an exercise price of $17.50 per share, are exercisable beginning six-months from the date of issuance, and will expire five and a half years from the date of issuance. The offering gross proceeds were $3,120,622 before deducting placement agent's commissions and other offering costs, and the net proceeds of the offering were approximately $2,760,000. The offering closed on July 27, 2021.

In conjunction with this offering, the Company issued warrants to purchase 22,290 shares of common stock at an exercise price of $17.50 per share to the placement agent and its designees. The placement agent warrants are exercisable on the six-month anniversary of the issuance date. The placement agent warrants are exercisable for four and a half years from the initial exercise date. The placement agent warrants have piggy-back registration rights and have a termination date of July 23, 2026.

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 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 5.5 years, volatility of 107%, risk-free interest rate of 0.71% 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 and placement agent at grant date was $2,018,597

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***Warrants***

The following is a summary of the warrant activity for the nine months ended September 30, 2025:

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| | | | |
|:---|:---|:---|:---|
|  | **Number of<br> Warrants** | **Average<br> Exercise Price** | **Weighted<br> Average<br> Remaining<br> Contractual<br> Term in Years** |
| Outstanding at January 1, 2025 | 245192 | $17.50 | 2.02 |
| Exercisable at January 1, 2025 | 245192 | $17.50 | 2.02 |
| Granted | 19672108 | 1.098 | 5 |
| Exercised / surrendered | 13533100 | 1.098 | 5 |
| Expired | - | - | - |
| Outstanding at September 30, 2025 | 6384200 | $1.73 | 4.796 |
| Exercisable at September 30, 2025 | 6384200 | $1.73 | 4.796 |

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***Shares Issued to Consultants***

On January 28, 2023, the Company entered into an advisory service agreement with a designer for advising furniture design concept and development effective on February 1, 2023 for twelve months. The Company shall pay the designer $10,000 per month starting from February 1, 2023 for twelve months, in the form of the Company's Common Stock, calculated based on the closing stock price on the first trading day of the corresponding month. The shares were issued pursuant to the 2021 Plan. During the nine months ended September 30, 2025 and 2024, the Company issued 0 and 528 shares to the designer and charged $0 and $10,000 to operations as designer fee. During the three months ended September 30, 2025 and 2024, the Company issued 0 shares and charged $0 to operations as designer fee.

On July 3, 2023, the Company entered into an IT consulting service agreement with three consultants for analyzing the Company's IT infrastructure and system effective on July 3, 2023 for twelve months. The Company agreed to grant the consultant 300,000 shares of the Company's common stock, vesting 25% on July 3, 2023, 25% on October 3, 2023, 25% on January 3, 2024 and 25% on April 3, 2024. The fair value of the 300,000 shares was $636,000, which was calculated based on the stock price of $2.12 per share on July 3, 2023. The shares were issued pursuant to the 2021 Plan. During the nine and three months ended September 30, 2024, the Company charged $318,000 and $0, respectively, to operations as consulting expenses.

On November 9, 2023, the Company entered into a consulting agreement with a consultant for consulting and strategy services effective on November 16, 2023 for a one-year term. The Company agreed to grant the consultant 50,000 shares of the Company's common stock, vesting 25% on February 15, 2024, 25% on May 15, 2024, 25% on August 15, 2024 and 25% on November 15, 2024. The fair value of the 50,000 shares was $117,500, which was calculated based on the stock price of $2.35 per share on November 16, 2023. The shares were granted pursuant to the 2021 Plan. During the nine and three months ended September 30, 2024, the Company charged $88,125 and $29,375 to operations as consulting expenses, respectively.

On January 23, 2024, Nova Malaysia entered into a purchase agreement with an IT consulting firm to acquire an AI-Calculation Engine System, which includes Commission Management Calculation Module, Compiled and Encrypted Calculation Engine, Membership Module, Sales Module and Maintenance and Support, etc. for $750,000. The Company agreed to issue 300,000 shares of common stocks at the price of $2.50 per share which was in equivalent to $750,000 (3,544,875 in Malaysia Ringgit on January 23, 2024) to the IT consulting firm. AI-Calculation Engine System is just a part of the ultimate software product. The ultimate software is still in developing stage and not feasible to be functional. During the nine and three months ended September 30, 2024, the Company recorded $750,000 and $0 as research and development expense, respectively.

On January 28, 2024, the Company entered into an advisory service agreement with a designer for advising furniture design concept and development effective on February 1, 2024 for twelve months. The Company shall pay the designer $10,000 per month starting from February 1, 2024 for twelve months, in the form of the Company's Common Stock, calculated based on the closing stock price on the first trading day of the corresponding month. The shares were granted pursuant to the 2021 Plan. During the nine and three months ended September 30, 2024, the Company issued 43,426 and 19,350 shares to the designer and charged $80,000 and $30,000 to operations as designer fee. On September 30, 2024, the Company entered into an agreement to terminate the service with the designer.

On March 1, 2024, Nova Malaysia entered into a consulting agreement with a consultant for IT system related maintenance and services effective on March 1, 2024 for a one-year term. The Company agreed to grant the consultant 100,000 shares of the Company's common stock, vesting 25% on March 1, 2024, 25% on June 1, 2024, 25% on September 1, 2024 and 25% on December 1, 2024. The fair value of the 100,000 shares was $163,000, which was calculated based on the stock price of $1.63 per share on March 1, 2024. The shares were granted pursuant to the 2023 Omnibus Long-Term Incentive Plan. During the nine months ended September 30, 2025 and 2024, the Company charged $26,906 and $95,344; and $0 and $40,750 for the three months ended September 30, 2025 and 2024 to operations as consulting fee, respectively.

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On September 3, 2024, Nova Malaysia entered into a consulting agreement with a consultant for IT system related maintenance and services effective on September 1, 2024 for a one-year term. The Company agreed to grant the consultant 100,000 shares of the Company's common stock, vesting 25% on September 3, 2024, 25% on December 3, 2024, 25% on March 3, 2024 and 25% on June 3, 2024. The fair value of the 100,000 shares was $142,000, which was calculated based on the stock price of $1.42 per share on September 3, 2024. The shares were granted pursuant to the 2023 Omnibus Long-Term Incentive Plan. During the nine and three months ended September 30, 2025, the Company charged $95,607 and $35,500; $10,893 for the nine and three months ended September 30, 2024, to operations as consulting fee, respectively.

On September 3, 2024, Nova Malaysia entered into a consulting agreement with a consultant for IT system related maintenance and services effective on September 1, 2024 for a one-year term. The Company agreed to grant the consultant 100,000 shares of the Company's common stock, vesting 25% on September 3, 2024, 25% on December 3, 2024, 25% on March 3, 2024 and 25% on June 3, 2024. The fair value of the 100,000 shares was $142,000, which was calculated based on the stock price of $1.42 per share on September 3, 2024. The shares were granted pursuant to the 2023 Omnibus Long-Term Incentive Plan. During the nine and three months ended September 30, 2025, the Company charged $95,607 and $24,607; $10,893 for the nine and three months ended September 30, 2024, to operations as consulting fee, respectively.

On November 7, 2024, the Company entered into a consulting agreement with a consultant for consulting and strategy services effective on November 16, 2024 for a one-year term. The Company agreed to grant the consultant 50,000 shares of the Company's common stock, vesting 25% on February 15, 2025, 25% on May 15, 2025, 25% on August 15, 2025 and 25% on November 15, 2025. The fair value of the 50,000 shares was $49,000, which was calculated based on the stock price of $0.98 per share on November 16, 2024. The shares were granted pursuant to the 2023 Plan. During the nine and three months ended September 30, 2025, the Company charged $36,750 and $12,250 to operations as consulting expenses, respectively.

***Shares and Options Issued to Independent Directors***

On November 7, 2018 (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 12,000 shares of the Company's common stock at an exercise price of $29.50 per shares, with a term of 5 years. Twenty-five percent (25%) of those stock options vested on November 30, 2018, 25% on will vest on February 28, 2019, 25% on May 31, 2019, and the remaining 25% will vest on August 31, 2019. The fair value of the stock options granted is estimated on the date of the grant using the Black-Scholes option pricing model ("BSOPM") as described above. 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 3.07%, and dividend yield of 0%. The fair value of 60,000 stock options was $240,105 at the grant date.

On November 4, 2019, 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 12,000 shares of the Company's common stock at an exercise price of $14.00 per share, with a term of 5 years, vesting 25% on November 30, 2019, 25% on February 28, 2020, 25% on May 31, 2020, and 25% on August 31, 2020. The fair value of the stock options granted was estimated on the date of the grant using the Black-Scholes option pricing model. The fair value of the options was calculated using the following assumptions: estimated life of ten years, volatility of 87%, risk free interest rate of 1.60%, and dividend yield of 0%. The fair value of the 12,000 stock options was $114,740 at the grant date.

All of above options to the members of the board of directors of the Company were expired during 2024 or earlier.

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***Shares Issued to Employees***

On November 9, 2023, the Company extended an employment agreement with the Company's Corporate Secretary for a term of one year effective from November 14, 2023. The Company agreed to grant an award of 6,000 restricted Stock Units to the officer pursuant to the Company's 2021 Omnibus Equity Plan. The fair value of these shares was $12,900, which was calculated based on the stock price of $2.15 per share on November 9, 2023, the date the award was determined by the Compensation Committee of the Board of Directors, vesting 25% on November 9, 2023, 25% on March 31, 2024, 25% on June 30, 2024 and 25% on September 30, 2024. During the nine and three months ended September 30, 2024, the Company recorded $9,675 and $3,225 to operations as stock compensation expense, respectively.

On November 7, 2024, the Company extended an employment agreement with the Company's Corporate Secretary for a term of one year effective from November 14, 2024. The Company agreed to grant an award of 6,000 restricted Stock Units to the officer pursuant to the Company's 2023 Omnibus Equity Plan. The fair value of these shares was $5,880, which was calculated based on the stock price of $0.98 per share on November 7, 2024, the date the award was determined by the Compensation Committee of the Board of Directors, vesting 25% on November 7, 2024, 25% on March 31, 2025, 25% on June 30, 2025 and 25% on September 30, 2025. During the nine and three months ended September 30, 2025, the Company recorded $4,410 and $1,470 to operations as stock compensation expense, respectively.

***Options Issued to Employees***

On August 24, 2018, the compensation committee of the Board approved an option grant to the Company's Chief Financial Officer to purchase an aggregate of 1,400 shares of the Company's common stock at an exercise price of $46.25 per share, 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% vested on the six-month anniversary of the grant date.

The fair value of the option granted to the Chief Financial Officer in 2018 was recognized as compensation expense over the vesting period of the stock option award. The fair value of the option was calculated using Black-Scholes model under the following assumptions: estimated life of five years, volatility of 84%, risk free interest rate of 2.72%, and dividend yield of 0%. The fair value of the 1,400 stock options was $43,680 at the grant date.

On August 12, 2019, the compensation committee of the Board approved an option grant to the Company's Chief Financial Officer to purchase an aggregate of 1,400 shares of the Company's common stock at an exercise price of $19.25 per share, 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% vested on the six-month anniversary of the grant date.

The fair value of the option granted to the Chief Financial Officer in 2019 was recognized as compensation expense over the vesting period of the stock option award. The fair value of the option was calculated using Black-Scholes model under the following assumptions: estimated life of five years, volatility of 87%, risk free interest rate of 1.49%, and dividend yield of 0%. The fair value of the 1,400 stock options was $18,318 at the grant date.

All of above options to Chief Financial Officer were expired during 2024 or earlier.

As of September 30, 2025, unrecognized share-based compensation expense was $0.

**Note 13 – Geographical Analysis**

Geographical distribution of sales consisted of the following for the nine and three months ended September 30, 2025 and 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended<br> September 30,** | **Nine Months Ended<br> September 30,** | **Three Months ended<br> September 30,** | **Three Months ended<br> September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| **Geographical Areas** |  |  |  |  |
| North America | $6998033 | $7508657 | $1823963 | $2551599 |
| Hong Kong | 7919662 | - | 7919662 | - |
| Other countries | 35337 | 172076 | 17466 | 64208 |
| Revenues | $14953032 | $7680733 | $9761091 | $2615807 |

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Geographical location of identifiable long-lived assets as of September 30, 2025 and December 31, 2024:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
| **Geographical Areas** |  |  |
| North America | $832702 | $1281203 |
| Asia | 376867 | 413302 |
|  | $1209569 | $1694505 |

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**Note 14 – Lease**

On June 17, 2013, the Company entered into a lease agreement for office, warehouse, storage, and distribution space in the United States with a five year term, commencing on November 1, 2013 and expiring on October 31, 2018. The lease agreement also provided an option to extend the term for an additional six years. On April 23, 2018, the Company extended the lease for another three years with an expiration date of October 31, 2021. On October 15, 2021, the Company extended the lease for another five years with an expiration date of October 31, 2026. The initial monthly rental payment is $42,000 with an annual 3% increase.

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 (see Note 11) on monthly or annual terms.

On July 15, 2019, Nova Malaysia entered into a sublease agreement for warehouse space with a two-year term, expiring on July 14, 2021. The initial monthly rental payment was 20,000 Malaysia Ringgit ($4,232) and was increased to 35,000 Malaysia Ringgit ($7,406) effective August 1, 2020. On July 15, 2021, Nova Malaysia extended the lease for another two years with an expiration date of July 31, 2023. Nova Malaysia did not extend this lease after July 31, 2023.

On October 29, 2019, Nova Malaysia entered into a lease agreement for a showroom with a two-year term, commencing on December 1, 2019 and expiring on November 30, 2021. On November 26, 2021, Nova Malaysia extended the lease to November 30, 2022 with an option for renewal for another term of 24 months. On October 4, 2022, Nova Malaysia renewed the lease for two years to November 30, 2024. The monthly rental payment is 9,280 Malaysia Ringgit. Nova Malaysia did not extend the lease agreement after November 30, 2024 and Nova Malaysia leases the showroom on month-to-month basis.

On August 20, 2020, Nova Malaysia entered into a sublease agreement for an office and service center with a two-year term, commencing on September 1, 2020 and expiring on August 31, 2022. On July 29, 2022, Nova Malaysia extended the lease for another two years with an expiration date of August 31, 2024. The monthly rental payment is 30,000 Malaysia Ringgit. Nova Malaysia did not extend the lease after August 31, 2024.

On August 31, 2022, the Company entered into an auto lease agreement with an unrelated auto dealership with a three-year term. The lease commencement date was August 31, 2022. The required rental payment is $1,902 monthly, with payments due on the 30th day of each month, and expired on July 31, 2025. The Company did not renew the lease.

On November 8, 2024, the Company entered into an auto lease agreement with an unrelated auto dealership with a three-year term. The lease commencement date was December 23, 2024. The required rental payment is $1,849 monthly, with payments due on the 23rd day of each month, and expiring on November 23, 2027.

On December 9, 2024, Nova Malaysia entered into an agreement for a warehouse with a two-year term, commencing on November 15, 2024 and expiring on November 14, 2026. The lease agreement also provided an option to extend the term for an additional two years. The monthly rental payment is 19,200 Malaysia Ringgit. On July 1, 2025, the Company terminated the lease.

On July 1, 2025, the Company, as a sublessor, entered into a warehouse space sublease agreement with an unrelated third party with a three-month term. The sublease commencement date was July 1, 2025. The required rental payment is $26,000 monthly. The sublessee agreed to prepay totaling $78,000 for July, August and September 2025 with security deposit of $50,000 on the commencement day. The sublease expired on September 30, 2025.

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Operating lease expense for the nine and three months ended September 30, 2025 and 2024 was as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended<br> September 30,** | **Nine Months Ended<br> September 30,** | **Three Months Ended<br> September 30,** | **Three Months Ended<br> September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Operating lease cost – straight line | $577618 | $578259 | 202461 | 189429 |

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The following is a schedule, by years, of maturities of operating lease liabilities as of September 30:

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| | |
|:---|:---|
|  | **Operating Leases** |
| 2025 | $177902 |
| 2026 | 598820 |
| Thereafter | - |
| Total undiscounted cash flows | 776722 |
| Less: imputed interest | (12912) |
| Present value of lease liabilities | 763810 |

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**Lease Term and Discount Rate**

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| | |
|:---|:---|
|  | **September 30, 2025** |
| Weighted-average remaining lease term – years |  |
| Operating leases – USA | 1.08 |
| Operating leases – Malaysia | - |
| Weighted-average discount rate (%) |  |
| Operating leases – USA | 3.36 |
| Operating leases – Malaysia | - |

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Supplemental cash flow information related to leases where the Company was the lessee for the nine months ended September 30, 2025 and 2024 was as follows:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Operating cash outflows from operating leases | $28048 | $- |

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Finance lease expense for the nine and three months ended September 30, 2025 and 2024 was as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended<br> September 30,** | **Nine Months Ended<br> September 30,** | **Three Months Ended<br> September 30,** | **Three Months Ended<br> September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Finance lease cost – straight line | $28048 | $- | 5545 |  |

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The following is a schedule, by years, of maturities of finance lease liabilities as of September 30:

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| | |
|:---|:---|
|  | **Operating Leases** |
| 2025 | $5545 |
| 2026 | 22180 |
| 2027 | 20332 |
| Thereafter | - |
| Total undiscounted cash flows | 48057 |
| Less: imputed interest | (2637) |
| Present value of lease liabilities | 45420 |

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**Lease Term and Discount Rate**

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| | |
|:---|:---|
|  | **September 30,<br> 2025** |
| Weighted-average remaining lease term – years |  |
| Finance leases – USA | 2.15 |
| Weighted-average discount rate (%) |  |
| Operating leases – USA | 5.49 |

---

Supplemental cash flow information related to leases where the Company was the lessee for the nine months ended September 30, 2025 and 2024 was as follows:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Operating cash outflows from finance leases | $28048 | $- |

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**Note 15 – Commitments and Contingencies**

***Legal Proceedings***

On March 8, 2019, Jie Yuan (the "Jie Action") filed a putative shareholder derivative lawsuit in the United States District Court for the Central District of California, purportedly on behalf of the Company against its former and current CEOs and CFOs (Thanh H. Lam, Ya Ming Wong, Jeffery Chuang and Yuen Ching Ho) and directors (Charlie Huy La, Bin Liu, Umesh Patel, and Min Su) and vice president (Steven Qiang Liu) (collectively, the "Defendants"). The putative derivative plaintiffs sought to compel reimbursement of Nova for any judgment entered against the Company in the matter of *Barney v. Nova Lifestyle, Inc.*, United States District Court for the Central District of California, and for any legal fees or other costs the Company may incur in defending the *Barney* Action. The basis of the claims was that the Defendants caused the Company to make alleged false and/or misleading statements that gave rise to the *Barney* Action.

In the *Barney* action, the putative class plaintiffs alleged that the Company artificially inflated its share price by issuing a press release announcing a strategic relationship with Shanxi Winqing Senior Care Service Group, claiming in the Company's Annual Statements on Form 10-Ks for the 2017 and 2018 fiscal years that Shanxi Winqing and Merlino Lewis LLP were among the Company's largest customers, and reporting revenues from sales transactions with these entities. Plaintiffs claimed that Shanxi Winqing was a fictitious entity and Merlino Lewis LLP dissolved in 2013, so that the announcement of a strategic alliance was false and the reported revenues non-existent. The Company denied these allegations and all liability.

It was also alleged in the *Jie* Action that President and CEO Lam engaged in self-dealing transactions by leasing real estate to Diamond Bar, a Company subsidiary. Plaintiffs further alleged in conclusory fashion that Ms. Lam, former CEO and director Ya Ming Wong, former CFO and director Yuen Ching Ho, and director Umesh Patel sold securities during the period of time when the alleged false and/or misleading statements were made "with knowledge of material non-public information."

On May 15, 2019, Wilson Samuels (the "Samuels Action") filed a largely duplicative putative derivative complaint against the same current and former directors and officers named in the *Jie* Action other than Steven Qiang Liu. That action was filed in the United States District Court for the Central District of California. In addition to repeating the allegations in the Jie Complaint, Samuels claimed that the Company's announcement of a change of auditing firms in asserted that it did so because its existing auditor ceased auditing public companies subject to regulation in the United States without disclosing that its new auditing firm was created in a merger of three accounting firms, including a firm whose registration was revoked by the Public Company Accounting Oversight Board. Samuels also claimed that the Company redeemed its stock in reliance upon the same purported fraudulent recognition of revenues claimed in the *Barney* Action. Samuels purported to state direct claims under Sections 10(b) and 20 of the Exchange Act and SEC Rule 10b-5 on the Company's behalf.

Both derivative actions were stayed pending resolution of the *Barney* Action. After Barney was settled (on terms previously reported), the parties filed a stipulation to lift the stay and consolidate the derivative actions. The Stipulation also set deadlines for plaintiffs to file a consolidated amended complaint and for defendants to respond to this complaint. By January 7, 2025 Orders, the Court adopted the parties' Stipulation.

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On February 6, 2025, the deadline for filing an amended complaint, plaintiffs filed a Notice of Dismissal without prejudice. While plaintiffs should have sought Court approval, the Clerk accepted the Notice of Dismissal and the lead case has been marked closed. It appears that the Notice of Dismissal concluded these matters.

Other than the above, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations.

**Note 16 – Subsequent Events**

The Company has evaluated subsequent events through November 14, 2025, the date of the issuance of the interim condensed consolidated financial statements, and identified the following material subsequent event.

On October 13, 2025, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain purchasers identified on the signature pages thereto (the "<u>Purchasers</u>"), pursuant to which the Company will sell to the Purchasers in a registered direct offering, an aggregate of 3,708,500 shares (the "<u>Shares</u>") of its common stock, par value $0.001 per share ("<u>Common Stock</u>") at a purchase price of $3.78 per share, for aggregate gross proceeds to the Company of $14,018,130, before deducting offering expenses payable by the Company.

The Shares are being offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3 previously filed with the U.S. Securities and Exchange Commission on October 13, 2023 and declared effective on October 23, 2023 (File No. 333-274970) (the "<u>Registration Statement</u>").

On October 15, 2025, Xmax Alpha Holdings Ltd. (the "**Company**"), a company incorporated in the Cayman Islands and an indirectly wholly owned subsidiary of Nova LifeStyle, Inc. entered into a Subscription Agreement (the "**Agreement**") with Preamble Capital I, A Series of CGF2021 LLC (the "**Fund**"), a Delaware Limited Liability Company. Pursuant to the Agreement, the Company subscribed 99.82% interest in the Fund in an amount equal to $5,605,000 (the "**Subscription Amount**") and has become a member of the Fund and been bound by the LLC Agreement as a member of the Fund. Sydecar LLC, a Delaware limited liability company, is the administrator of the Fund. The applicable management fee percentage for the Company is 0%. October 15, 2025, the Company completed the subscription.

On October 16, 2025, the Fund entered into a Subscription Agreement with a certain fund to subscribe certain interest of such fund for an amount of $5,600,000, which will be used by such fund to purchase shares of common stock of Space Exploration Technologies Corp., a Texas, ("**SpaceX**").

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

On November 3, 2025, the Company filed a Certificate of Amendment (the "Name Change Amendment") with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to change the Company's name from "Nova LifeStyle, Inc." to "XMax Inc." The Name Change Amendment was approved by the Board on September 15, 2025 and by the shareholders at a special meeting of the Company's shareholders held on October 31, 2025. The Name Change Amendment was effective immediately upon filing.

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**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 Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10K"). The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report and in our 2024 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 are based upon our financial statements as of the dates and for the periods presented in this section. You should read this discussion and analysis in conjunction with the financial statements and notes thereto found in Part I, Item 1 of this Form 10-Q and our consolidated financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2024 (the "2024 Form 10-K"). All references to the third quarter and first nine months of 2025 and 2024 mean the three and nine-month periods ended September 30, 2025 and 2024. In addition to historical information, the following discussion and other parts of this report contain certain forward-looking information. When used in this discussion, the words, "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from projected results, due to a number of risks, uncertainties and factors beyond our control. We do not undertake to publicly update or revise any of these forward-looking statements, even if experience or future changes show that the indicated results or events will not be realized. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Readers also are urged to carefully review and consider our discussions regarding the various factors that affect the company's business, which are described in this section and elsewhere in this report. For more information, see our discussion of risk factors located at Part I, Item 1A of our 2024 Form 10-K.*

**Overview**

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

The Company's brand family currently includes Nova LifeStyle, Diamond Sofa (<u>www.diamondsofa.com</u>) and Nova Living.

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

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

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

On November 5, 2020, Nova LifeStyle, Inc. acquired Nova Living (HK) Group Limited ("Nova HK") which was incorporated in Hong Kong on November 6, 2019. This company had minimal operations. In February 2022, Nova HK entered a de-registration process and transferred all its assets and business to Nova Malaysia. The process of de-registration and liquidation of Nova HK was completed in February 2023.

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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., Canada, South America, Asia and Middle Easter markets.

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

We do not have access to a revolving credit facility. On May 4, 2020, the Company received loan proceeds in the amount of approximately $139,802 under the Paycheck Protection Program ("PPP"). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. On May 5, 2020, Diamond Bar Outdoors Inc. ("Diamond Bar") was granted a loan from Cathay Bank in the aggregate amount of $176,294, pursuant to the Paycheck Protection Program. On June 19, 2020, Diamond Bar was granted a U.S. Small Business Administration (SBA) loan in the aggregate amount of $150,000, pursuant to the Economic Injury Disaster Loan. In July 2021, we completed a registered direct offering of our shares of common stock and received offering gross proceeds of $3,120,622. In May 2024, August 2024 and October 2024, we completed three private placements for gross proceeds of $750,000. During the first six months of 2025, the Company completed three private placements for gross proceeds of $500,000. The Company also repaid $217,000 debt with its shares of common stock during the first quarter of 2025. We currently believe that our financial resources will be adequate to finance our operations in the next 12 months. However, in the event that we do need to raise capital in the future, the instability in the securities markets could adversely affect our ability to raise additional capital.

On April 18, 2024, the Company received written notice from the NASDAQ stating that the Company does not meet the requirement of maintaining a minimum of $2,500,000 in stockholders' equity for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5550(b)(1), the Company also does not meet the alternative of market value of listed securities of $35 million under NASDAQ Listing Rule 5550(b)(2) or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years under NASDAQ Listing Rule 5550(b)(3), and the Company is no longer in compliance with the NASDAQ Listing Rules. The NASDAQ notification letter provided the Company until June 6, 2024 to submit a plan to regain compliance. If the plan is accepted, NASDAQ can grant the Company an extension up to 180 calendar days from the date of NASDAQ letter to demonstrate compliance. The Company submitted its plan of compliance on May 28, 2024 and a supplemental letter to the plan of compliance on June 20, 2024. Based on the review of the letters submitted by the Company, Staff has determined to grant the Company an extension until October 14, 2024 to regain compliance with the Rule and the Company must complete its initiatives and provide evidences for the compliance with the Rule as required by Nasdaq. On October 11, 2024, the Company and Nova Samoa have entered into orders to purchase inventories in total amount of $4,600,000, which will be paid in 3,321,429 shares ("Shares") of common stock of the Company at US$1.40 per share as disclosed in the Form 8-K filed by the Company with SEC on October 11, 2024 (the "Form 8-K"). The Company believes it has regained compliance with the stockholders' equity requirement based upon the Transaction. Based on the Form 8-K, staff of NASDAQ ("Staff") has determined that the Company complies with the Listing Rule 5550(b)(1). However, as noted in its letter dated, June 27, 2024, if the Company fails to evidence compliance upon filing its next periodic report covering the period of the transaction which is the annual report of the Company for the year ended December 31, 2024 ("2024 Form 10-K"), it may be subject to delisting. At that time, Staff will provide written notification to the Company, which may then appeal Staff's determination to a Hearings Panel. The Company filed its 2024 Form 10-K on June 30, 2025 and has not received any written notification of non-compliance from Nasdaq as of the day of this report.

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On December 27, 2024, the Company received a letter from Nasdaq notifying the Company that, because the closing bid price for the Company's common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company no longer meets the minimum bid price requirement for continued listing on Nasdaq under Nasdaq Marketplace Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share (the "Minimum Bid Price Requirement"). The Company has a period of 180 calendar days from the date of notification, until June 25, 2025 (the "Compliance Period"), to regain compliance with the Minimum Bid Price Requirement. If at any time before the expiration of the Compliance Period the bid price of the Company's common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement. If the Company does not regain compliance by the end of the Compliance Period, the Company may be eligible for an additional 180 calendar day period to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that the Company's securities will be subject to delisting.

On May 27, 2025, the Company received a written notification from the NASDAQ Stock Market Listing Qualifications Staff indicating that the Company has regained compliance with the $1.00 minimum closing bid price requirement for continued listing on the NASDAQ Capital Market pursuant to NASDAQ Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement") and that the matter is now closed.

On September 25, 2025, Nova Furniture Limited (the "Nova BVI"), a company incorporated in the British Virgin Islands and a wholly owned subsidiary of Nova LifeStyle, Inc. entered into a Subscription Agreement (the "Agreement") with Preamble Capital, A Series of CGF2021 LLC (the "Fund"), a Delaware Limited Liability Company. Pursuant to the Agreement, Nova BVI subscribes 99.815% interest in the Fund in an amount equal to $5,664,500. (the "Subscription Amount") and will become a member of the Fund and be bound by the LLC Agreement as a member of the Fund. Sydecar LLC, a Delaware limited liability company, is the administrator of the Fund. The applicable management fee percentage for the Company is 0%. The Fund will use the Subscription Amount to subscribe approximately 6.667% interest of certain fund that holds an aggregate of 353,772 shares of Common Stock of Space Exploration Technologies Corp., a Texas corporation ("SpaceX"), comprising of 121,805 shares of Class A Common Stock and 231,967 shares of Class C Common Stock of Space X.

On September 25, 2025, Nova BVI closed its subscription of 99.815% interest in Preamble Capital, A Series of CGF2021 LLC (the "Preamble Capital"), a Delaware Limited Liability Company for $5,664,500.

On September 26, 2025, Preamble Capital entered into a Subscription Agreement (the "Subscription Agreement") with a certain fund that holds an aggregate of 353,772 shares of Common Stock of SpaceX, comprising of 121,805 shares of Class A Common Stock and 231,967 shares of Class C Common Stock of Space X. Pursuant to the Subscription Agreement, Preamble Capital subscribed approximately 6.667% interest of such fund for an amount of $5,660,000 (the "Transaction"). On September 29, 2025, Preamble Capital closed the Transaction.

On September 24, 2025, the Company incorporate Xmax Capital Ltd. in Samoa ("Xmax Samoa"). On October 3, 2025, Xmax Samoa incorporated Xmax Alpha Holdings Ltd. in Cayman Islands. On October 14, 2025, Xmax Samoa incorporated Xmax Beta Holdings Ltd. and Xmax Delta Holdings Ltd. in Cayman Islands. On October 15, 2025, Xmax Samoa incorporated Xmax Sigma Holdings Ltd. in Cayman Islands. Xmax Samoa is a holding company with no actual business operations. Xmax Beta Holdings Ltd., Xmax Delta Holdings Ltd. and Xmax Sigma Holdings Ltd. currently do not have any business operations.

On October 15, 2025, Xmax Alpha Holdings Ltd. (the "Xmax Alpha"), a company incorporated in the Cayman Islands and an indirectly wholly owned subsidiary of Nova LifeStyle, Inc. entered into a Subscription Agreement (the "Agreement") with Preamble Capital I, A Series of CGF2021 LLC (the "Fund"), a Delaware Limited Liability Company. Pursuant to the Agreement, Xmax Alpha subscribed 99.82% interest in the Fund in an amount equal to $5,605,000 (the "Subscription Amount") and has become a member of the Fund and been bound by the LLC Agreement as a member of the Fund. Sydecar LLC, a Delaware limited liability company, is the administrator of the Fund. The applicable management fee percentage for the Company is 0%. October 15, 2025, the Company completed the subscription.

On October 16, 2025, the Fund entered into a Subscription Agreement with a certain fund to subscribe certain interest of such fund for an amount of $5,600,000, which will be used by such fund to purchase shares of common stock of SpaceX.

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

On November 3, 2025, the Company filed a Certificate of Amendment (the "Name Change Amendment") with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to change the Company's name from "Nova LifeStyle, Inc." to "XMax Inc." The Name Change Amendment was approved by the Board on September 15, 2025 and by the shareholders at a special meeting of the Company's shareholders held on October 31, 2025. The Name Change Amendment was effective immediately upon filing.

***Principal Factors Affecting Our Financial Performance***

Since 2019, we have moved away from low margin products and this move was intended to improve our gross profit margin, receivable collections and net profitability, and to increase our return on long-term equity. We terminated sales and marketing efforts to customers that represented a high purchase volume but low profit margin, and we adjusted our product line, which included the launch of our Summer 2023 Collection in the Las Vegas and High Point Markets, with a view to attracting a higher-end ultimate customer. The core focus of the Company's direction today is entirely centered on our products. Identifying a fashion-driven generational shift in the general perception and consumption of furniture and being more aware of actual consumer tastes and how best to fulfill and engage that need. Closely integrating product development alongside marketing results in appealing products that adheres to the scope of our target demographic of decision makers in the design, staging and retail fields. A process that is continually refined upon each release cycle, maintaining a singular, cohesive vision. In short, we have better identified our customers and how to cater to them – in the process gaining greater traction with every product launch considerably more so on an international level than ever previous. Also, we're now focusing on AI-driven smart living solutions. Through the integration of advanced technologies such as virtual reality (VR), augmented reality (AR), and artificial intelligence (AI), we plan to provide tailored solutions that enhance our core furniture business and expand its capabilities into intelligent systems and immersive customer experiences. We believe these new strategies will provide us with significant long term growth opportunities. Significant factors that we believe could affect our operating results are the (i) prices of our products to our domestic and international retailer and wholesaler customers and their markups to end consumers; (ii) general economic conditions in the U.S., Chinese, and other international markets; and (iii) trade war and tariffs imposed by the United States on products manufactured in China and other Asian countries where we purchase our products; and (iv) high interest rate, inflation and slow- down in real estate market. We believe most of our customers are willing to pay for our high quality and stylish products, timely delivery, and strong production capacity at price levels which we expect will allow us to maintain a relatively high gross profit margin for our products. We do not manufacture our products, but instead we utilize third-party manufacturers. In response to the tariffs imposed by the United States on products manufactured in China, we have been in the process of seeking and shifting a portion of our product manufacturing from third-party manufacturers located in China to third-party manufacturers located in other parts of Asia, such as Vietnam, India and/or Malaysia, countries with lower tariffs. However, due to the quality issue and recent increase of tariff announced by President Trump on products from India and other southeastern Asian countries, we still purchase most of our products from China. Implementation of a relocation of manufacturing (which by necessity includes an assessment of the factory's ability to deliver the quantity of the product, in accordance with the Company's specifications, and in accordance with the Company's quality control requirements) is time-consuming and has a lot of uncertainties such as the increase of the tariff of the products from these countries, and only a small portion of suppliers manufacturing our products has been transitioned from China to Malaysia and India starting in 2020. Most of our manufacturing will continue to be performed in China because the good quality and the intellectual know-how necessary to manufacture certain products is not generally available in other Asian countries. Consumer preference trends favoring high quality and stylish products and lifestyle-based furniture suites should also allow us at least to maintain our gross profit margins. The markets in North America are challenging because such markets are experiencing a slow-down and may be entering a recession due to high interest rate and inflation.

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***Critical Accounting Policies***

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

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

***Basis of Presentation***

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

***Reverse Split***

On May 22, 2023, the Company filed a Certificate of Change with the Secretary of State of Nevada with an effective date of May 22, 2023, at which time a 1-for-5 reverse stock split of the Company's authorized shares of common stock, par value $0.001, accompanied by a corresponding decrease in the Company's issued and outstanding shares of common stock (the "Reverse Stock Split"), was effected. All references to shares and per share data have been retroactively restated to reflect such split.

***Amendments to Articles of Incorporation***

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

On November 3, 2025, the Company filed a Certificate of Amendment (the "Name Change Amendment") with the Secretary of State for the State of Nevada to amend its Articles of Incorporation to change the Company's name from "Nova LifeStyle, Inc." to "XMax Inc." The Name Change Amendment was approved by the Board on September 15, 2025 and by the shareholders at a special meeting of the Company's shareholders held on October 31, 2025. The Name Change Amendment was effective immediately upon filing.

***Use of Estimates***

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

***Accounts Receivable***

Our accounts receivable arises from product sales. We do not adjust receivables for the effects of a significant financing component at contract inception if we expect to collect the receivables in one year or less from the time of sale. We do not expect to collect receivables greater than one year from the time of sale. Our policy is to maintain an allowance for expected credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. We maintained an allowance for expected credit loss of $164 and $367 as of September 30, 2025 and December 31, 2024, respectively. During the nine months ended September 30, 2025 and 2024, expected credit losses provision (reversal) was ($203) and $749, respectively; (197) and $832 for the three months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had gross receivable of $36,115 of which $2,419 was over 90 days past due. The allowance for expected credit losses is our best estimate of the amount of expected credit losses in our existing trade accounts receivable. We determine the allowance based on historical bad debt experience, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns.

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***Advances to Suppliers***

Advances to suppliers represent amounts paid to suppliers in advance for goods that are yet to be delivered and from which future economic benefits are expected to flow to the Company within the normal operating cycle. Based on our historical records and in normal circumstances, we generally receive goods within 4 to 6 months from the date the advance payment is made.

***Income Taxes***

In its interim financial statements, the Company follows the guidance in ASC 270 "Interim Reporting" and ASC 740 "Income Taxes" whereby the Company utilizes the expected annual effective rate in determining its income tax provision. The income tax (benefit) expense for the nine months ended September 30, 2025 and 2024 are ($64,014) and $50,87; and ($757) and $211 for the three months ended September 30, 2025 and 2024, respectively, which are mainly attributable to California state taxes. The income tax expense for the nine and three months ended September 30, 2024 is $0 which is primarily related to quarter-to-date loss generated from domestic and foreign operations. Since the projected annual tax expense of $1,776 is not material to the financial statements, management has decided to pass on recording it for the nine months ended September 30, 2025.

Income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

Under the provisions of ASC Topic 740, when tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Nova Lifestyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI and Nova Samoa was incorporated in Samoa. There is no income tax for companies domiciled in the BVI and Samoa. Accordingly, the Company's unaudited condensed consolidated financial statements do not present any income tax provisions related to the BVI and Samoa tax jurisdictions where Nova Furniture BVI and Nova Samoa are domiciled. Nova Malaysia is incorporated in Malaysia and is subject to Malaysia income taxes at the statutory rate of 24%.

The Tax Cuts and Jobs Act of 2017 (the "Act") created new taxes on certain foreign-sourced earnings such as global intangible low-taxed income ("GILTI") under IRC Section 951A, which is effective for the Company for tax years beginning after January 1, 2018. For the nine months ended September 30, 2025, the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing.

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On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses (NOLs) arising in taxable years beginning after December 31, 2017.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years. While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed. Furthermore, in anticipation of the new provision taking effect, we have analyzed the provision and worked with our advisors to evaluate its application to our business. Since all research and development expenditures were incurred within the U.S. and the amount is immaterial, we do not anticipate it having any material impact to our provision.

As of September 30, 2025 and December 31, 2024, the accumulated undistributed loss generated by its foreign subsidiaries were approximately $22.6 million and $22.2 million of which substantially all was previously subject to U.S. tax, the one-time transition tax on foreign unremitted earnings required by the Tax Act, or GILTI. Those earnings are considered to be permanently reinvested and accordingly, no deferred tax expense is recorded for U.S. federal and state income tax or applicable withholding taxes.

As of September 30, 2025 and 2024, unrecognized tax benefits were approximately nil and nil, respectively. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate was nil as of September 30, 2025 and 2024.

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

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| | | |
|:---|:---|:---|
|  | **Gross UTB** | **Gross UTB** |
|  | **2025** | **2024** |
| **Balance – January 1** | - | - |
| Foreign exchange adjustment | - |  |
| **Balance – September 30** | $- | $- |

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At September 30, 2025 and December 31, 2024, the Company had cumulatively accrued approximately nil and nil for estimated interest and penalties related to unrecognized tax benefits. The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax benefit, which totaled nil and nil for the nine and three months ended September 30, 2025 and 2024, respectively, related to the Company's operations. The Company does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months.

Nova Lifestyle and Diamond Bar are subject to U.S. federal and state income taxes and tax years 2021-2024 remain open to examination by tax authorities in the U.S.

***Intangible Assets***

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

***Revenue Recognition***

We recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. We recognize revenues following the five step model prescribed under ASU No. 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

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Revenue from product sales is recognized when the customer obtains control of our product, which typically occurs upon shipment to the customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial.

Revenue from product sales is recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers.

Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, returns and rebates. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable as the amount is payable to our customer.

Our sales policy allows for the return of product within the warranty period if the product is defective and the defects are our fault. As alternatives for the product return option, the customers have the option of asking us for a discount for products with quality issues, or of receiving replacement parts from us at no cost. The amount of reserves for return of products, the discount provided to the customers, and cost for the replacement parts were immaterial for the nine and three months ended September 30, 2025 and 2024.

The Company considers itself acting as a principal for sales of goods which is evidenced by (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods, (ii) the Company has inventory risk before the specified goods have been transferred to a customer or after transfer of control to the customer, (iii) the Company has discretion in establishing the price for the specified good. Thus, the Company's' revenue is recognized at a point in time when a promised good is delivered to a customer.

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

***Foreign Currency Translation and Transactions***

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

The Company's subsidiary with operations in Malaysia uses its local currency, Malaysian Ringgit ("RM"), as its functional currency. An entity's functional currency is the currency of the primary economic environment in which it operates, which is normally the currency of the environment in which the entity primarily generates and expends cash. Management's judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements.

Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Gains and losses resulting from foreign currency re-measurement are included in the statements of operations.

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

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Translation of amounts from RM into U.S. dollars has been made at the following exchange rates:

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| | |
|:---|:---|
| Balance sheet items, except for equity accounts |  |
| September 30, 2025 | RM4.21 to 1 |
| December 31, 2024 | RM4.47 to 1 |
| Income statement and cash flow items |  |
| For the nine months ended September 30, 2025 | RM4.32 to 1 |
| For the nine months ended September 30, 2024 | RM4.63 to 1 |

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***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.

We determined that our operations constitute a single reportable segment in accordance with ASC 280. We operate exclusively in one business and industry segment: the design and sale of furniture.

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

Net sales to customers by geographic area are determined by reference to the physical product shipment delivery locations requested by our customers. For example, if the products are delivered to a customer in the U.S., the sales are recorded as generated in the U.S.; if the customer directs us to ship its products to China, the sales are recorded as sold in China.

**New Accounting Pronouncements**

*Recently Adopted Accounting Standards*

In November 2023, the FASB, issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant expenses that are regularly provided to the chief operating officer decision maker ("CODM"), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. The ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim period within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted the ASU during the year ended December 31, 2024. The adoption did not have a material impact on the financial statements.

ln December 2023, the FASB issued Accounting Standards Update No.2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3)income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company adopted the ASU in 2025. The adoption did not have a material impact on the financial statements.

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In March 2025, the FASB issued ASU 2025-02—Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. The amendments in this Update are effective immediately and on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company adopted the ASU in 2025. The adoption did not have a material impact on the financial statements.

*Recently Issued But Not Yet Adopted Accounting Pronouncements*

In March 2023, the FASB issued ASU 2023-01, Lease (Topic 842): Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with leases between entities under common control (hereinafter referred to as common control lease). ASU 2023-01 requires entities to amortize leasehold improvements associated with common control lease over the useful life to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset through a lease, and to account for any remaining leasehold improvements as a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the underlying asset. This ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. An entity may apply ASU 2023-01 either prospectively or retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2023-01 will have on our consolidated financial statement presentations and disclosures.

ln December 2023, the FASB issued Accounting Standards Update No.2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation,(2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3)income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual period beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its unaudited consolidated financial statements and related disclosures.

On November 4, 2024, the FASB issued an ASU No. 2024-03, Disaggregation of Income Statement Expenses ("ASU 2024 03") to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales; selling, general, and administrative expenses; and research and development). The amendments in the ASU require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: 1. Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e). 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same tabular disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4) Disclose the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Clarifying the Effective Date ("ASU 2025-01"). The amendments, as clarified by ASU 2025-01, are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its consolidated financial statement presentation or disclosures.

In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASB's intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

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In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquirer in the Acquisition of a Variable Interest Entity. The amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting period within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

In May 2025, the FASB issued ASU 2025-04, Compensation - Stock Compensation (Topic 18) and Revenue from contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. The amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments clarify the accounting for share-based consideration payable to a customer under Topic 718 and Topic 606. The amendments are effective for annual reporting periods, including interim reporting period within those annual periods, beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient and, if applicable, an accounting policy election to simplify the measurement of credit losses for certain receivables and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in any interim or annual period in which financial statements have not been issued or made available for issuance. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

We do not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on our financial statement presentation or disclosures.

**Results of Operations**

***Comparison of Three Months Ended September 30, 2025 and 2024***

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

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| | | |
|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** |
|  | **2025** | **2024** |
|  | ***% of Sales*** | ***% of Sales*** |
| Net sales |  |  |
| Cost of sales | (90)% | (55)% |
| Gross profit | 10% | 45% |
| Operating expenses | (15)% | (137)% |
| Loss from operations | (5)% | (92)% |
| Other expenses, net | (7)% | (2)% |
| Income tax benefit (expense) | -% | -% |
| Net loss | (12)% | (94)% |

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**<u>Net Sales</u>**

Net sales for the three months ended September 30, 2025 were $9.76 million, an increase of 273% from $2.62 million for the same period of 2024. This increase in net sales resulted primarily from 12% increase in sales volume and 232% increase in average selling price. Our three largest selling product categories for the three months ended September 30, 2025 were marble slabs, sofas and coffee tables, which accounted for approximately 81%, 11% and 2% of sales, respectively. For the three months ended September 30, 2024 were sofas, beds and coffee tables, which accounted for approximately 50%, 13% and 8% of sales, respectively.

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

**<u>Cost of Sales</u>**

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

**<u>Gross Profit</u>**

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

**<u>Operating Expenses</u>**

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

**<u>Other (Expenses) Income, Net</u>**

Other expenses, net was $0.64 million for the three months ended September 30, 2025, compared to other expense, net of $0.06 million for the same period of 2024, representing an increase in other expenses of $0.58 million. The increase in other expenses was due primarily to an increase in subscription fee of $0.66 million for the acquisition of the fund which subscribed approximately 6.667% interest of certain common stocks of Space X, comprising of 121,805 shares of Class A Common Stock and 231,967 shares of Class C Common Stock of Space X. during the three months ended September 30, 2025.

**<u>Income Tax Benefit (Expense)</u>**

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

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**<u>Net Income (Loss)</u>**

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

***Comparison of nine Months Ended September 30, 2025 and 2024***

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

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| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** |
|  | ***% of Sales*** | ***% of Sales*** |
| Net sales |  |  |
| Cost of sales | (77)% | (56)% |
| Gross profit | 23% | 44% |
| Operating expenses | (29)% | (101)% |
| Loss from operations | (6)% | (57)% |
| Other (expenses) income, net | (6)% | (1)% |
| Income tax benefit (expense) | -% | 0% |
| Net loss | (12)% | (58)% |

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**<u>Net Sales</u>**

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

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

**<u>Cost of Sales</u>**

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

**<u>Gross Profit</u>**

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

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**<u>Operating Expenses</u>**

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

**<u>Other (Expenses) Income, Net</u>**

Other expenses, net was $0.94 million for the three months ended September 30, 2025, compared to other expense, net of $0.09 million for the same period of 2024, representing an increase in other expenses of $0.85 million. The increase in other expenses was due primarily to an increase in subscription fee of $0.66 million for the acquisition of the fund which subscribed approximately 6.667% interest of certain common stocks of SpaceX, comprising of 121,805 shares of Class A Common Stock and 231,967 shares of Class C Common Stock of Space X during the nine months ended September 30, 2025.

**<u>Income Tax Benefit (Expense)</u>**

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

**<u>Net Income (Loss)</u>**

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

**Liquidity and Capital Resources**

Our principal demands for liquidity are related to our efforts to increase sales and 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, collections of accounts receivable, and credit facilities from banks.

We rely primarily on internally generated cash flow and available working capital to support growth. We may seek additional financing in the form of bank loans or other credit facilities or funds raised through offerings of our equity or debt, if and when we determine such offerings are required. As of September 30, 2025, we do not have any credit facilities. We believe that our current cash and cash equivalents and anticipated cash receipts from sales of products will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months.

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

The following is a summary of cash provided by or used in each of the indicated types of activities during the nine months ended September 30, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Cash (used in) provided by: |  |  |
| Operating activities | $(2137264) | $(1128330) |
| Investing activities | (5000000) |  |
| Financing activities | 8632990 | 960000 |

---

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

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

Net cash used in investing activities was $5 million for the nine months ended September 30, 2025, an increase in cash outflow of $5.00 million from $0 million of cash used in investing activities for the same period of 2024. We incurred cash outflow of $5.00 million to invest into the fund which subscribed approximately 6.667% interest of certain common stocks of SpaceX, comprising of 121,805 shares of Class A Common Stock and 231,967 shares of Class C Common Stock of Space X during the nine months ended September 30, 2025.

Net cash provided by financing activities was $8.63 million for the nine months ended September 30, 2025, compared to $0.96 million for the same period of 2024. During the nine months ended September 30, 2025, we borrowed $0.20 million from a shareholder and sold one million shares of common stock with the proceeds of $0.50 million for our working capital, while we paid off one of loans to shareholder by issued 434,000 shares of our common stocks which was equivalent in the value of $0.22 million. Also, we increased our cash inflow by issued 9,836,054 shares of common stocks with the net proceeds of $8.15 million in public offering for the nine months ended September 30, 2025. During the nine months ended September 30, 2024, we borrowed $0.36 million from a shareholder and sold 325,000 shares of common stock with the proceeds of $0.60 million for our working capital.

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

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

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

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

**Other Long-Term Liabilities**

As of September 30, 2025, we recorded long-term taxes payable of nil million, consisting of an income tax payable of nil, primarily arising from a one-time transition tax recognized in the fourth quarter of 2017 on our post-1986 foreign unremitted earnings, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities.

We elected to pay the one-time transition tax over the eight years commencing April 2018.

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**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**

**Evaluation of Disclosure Controls and Procedures**

We have evaluated, under the supervision of our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") as of September 30, 2025. Based on this evaluation, our CEO and CFO concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (b) is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as described above.

**Changes in Internal Control over Financial Reporting**

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during or subsequent to the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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**PART II. OTHER INFORMATION**

**Item 1. Legal Proceedings**

*See* Legal Proceedings in the Form 10-Q for the quarter ended March 31, 2025.

Other than the above, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations.

**Item 1A. Risk Factors**

Not Applicable

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds**

None

**Item 5. Other Information**

*Insider Trading Arrangements*

During the quarterly period covered by this report, none of the Company's directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements.

**Item 6. Exhibits**

**EXHIBIT INDEX**

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| | |
|:---|:---|
| **Exhibit No.** | **Document Description** |
| 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](ex31-1.htm) |
| 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](ex31-2.htm) |
| 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](ex32-1.htm) |
| 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](ex32-2.htm) |
| 101.INS† | Inline XBRL Instance Document |
| 101.SCH† | Inline XBRL Schema Document |
| 101.CAL† | Inline XBRL Calculation Linkbase Document |
| 101.DEF† | Inline XBRL Definition Linkbase Document |
| 101.LAB† | Inline XBRL Label Linkbase Document |
| 101.PRE† | Inline XBRL Presentation Linkbase Document |
| 104† | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

† Filed herewith

‡ Furnished herewith

[**Table of Contents**](#TOC)

**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.

---

| | | |
|:---|:---|:---|
|  | **XMAX INC.** | **XMAX INC.** |
|  | (Registrant) | (Registrant) |
| Date: November 14, 2025 | By: | */s/ Xiaohua Lu* |
|  |  | Xiaohua Lu Chief Executive Officer<br> (Principal Executive Officer) |

---

---

| | |
|:---|:---|
| Date: November 14, 2025 | */s/ Jeffery Chuang* |
|  | Jeffery Chuang, Chief Financial Officer<br> (Principal Financial Officer and Principal Accounting Officer) |

---

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**PURSUANT TO SECTION 302(a)**

**OF THE SARBANES-OXLEY ACT OF 2002**

I, Xiaohua Lu, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2025, of XMax 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 14, 2025 | By: | */s/ Xiaohua Lu* |
|  |  | Xiaohua Lu, Chief Executive Officer<br> (Principal Executive Officer) |

---

## Exhibit 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I
 have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2025, of XMax 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 14, 2025 | By: | */s/ Jeffery Chuang* |
|  |  | Jeffery Chuang<br> Chief Financial Officer<br> (Principal Financial Officer) |

---

## Exhibit 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 XMax Inc. (the "Company") for the quarter ended September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Xiaohua Lu, 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 14, 2025 | By: | */s/ Xiaohua Lu* |
|  |  | Xiaohua Lu, 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.

## Exhibit 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 XMax Inc. (the "Company") for the quarter ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, 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 14, 2025 | By: | */s/ Jeffery Chuang* |
|  |  | Jeffery Chuang<br> 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.