Nova Lifestyle, Inc.
- Company Name
- Nova Lifestyle, Inc.
- Stock Symbol
- Class Period
- December 3, 2015 to December 20, 2018
- Motion Deadline
- February 26, 2019
- Central District of California
The complaint charges Nova LifeStyle and certain of its current and former officers with violations of the Securities Exchange Act of 1934. Nova LifeStyle designs, manufactures and sells residential and commercial furniture to consumers worldwide.
The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Nova LifeStyle’s business and operations. Specifically, defendants failed to disclose that Nova LifeStyle had overstated its purported “strategic alliance” with Shanxi Wangqing Senior Care Services (“Shanxi Wangqing”) to operate as lead designer and manufacturer for all furnishings in Shanxi Wangqing’s planned $460 million senior care center in China, and that Nova LifeStyle had inflated its reported sales in 2016 and 2017 by booking sales to Shanxi Wangqing and Merlino Lewis LLP, a dissolved company. As a result of defendants’ false statements and/or omissions, the price of Nova LifeStyle shares was artificially inflated to $5 per share during the Class Period.
Then on December 21, 2018, Seeking Alpha issued a report regarding Nova LifeStyle, which stated that the Company’s revenues in 2016 and 2017 were overstated because it had booked sales to dissolved and non-existent companies. According to Seeking Alpha, it had found “evidence of serious irregularities that suggest Nova LifeStyle has reported fictitious financials since 2011 – inflating sales for the years 2016 and 2017, totalling approximately $50.5 million” and “possibly over $100 million when accounting” for certain other companies. “The Company has done this by booking sales to both a dissolved company (Merlino Lewis LLP) and a nonexistent one (Shanxi Wangqing) (possibly creating a shell company to deceive investors).” Seeking Alpha also reported that other concerns, including “high levels of accounts receivable, reverse merger listing, a significant shareholder, questionable auditors, and more, raise red flags that further shine a light on the questionable practices of Nova LifeStyle.” On this news, the price of Nova LifeStyle shares fell over 41% to close at $0.46 per share on December 21, 2018.