novalife-corresp080911.htm

NOVA LIFESTYLE, INC.

6451 E. Washington Blvd.

Commerce, CA 90040

(323) 888-9999

August 9, 2011

VIA EDGAR

Pamela Long

Assistant Director

Division of Corporation Finance

Mail Stop 4631

U.S. Securities and Exchange Commission

100 F. Street, N.E.

Washington, DC 20549

Re:	Nova Lifestyle, Inc.
	Current Report on Form 8-K
	Filed June 30, 2011
	File No. 333-163019

Dear Ms. Long:

This letter is in response to the comment letter of the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”), dated July 27, 2011, to Nova Lifestyle, Inc. (the “Company”) regarding the above-captioned filing of the Company (the “Original Filing”). Please note that the Staff’s comments are restated below along with the Company’s responses.

Form 8-K filed on June 30, 2011

General

1.	Please amend your Form 8-K to address the comments below.

Response:

The Company has filed Amendment No. 1 to the above-captioned filing (“Amendment No. 1”) to address the comments below.

Please provide the disclosure required by Item 14 of Form 10, Changes in and Disagreements with Accountants on Accounting and Financial Disclosure, relating to your dismissal of Kyle L. Tingle, LLC, on July 13, 2010. You may identify the Form 8K in which the required disclosure is included instead of including separate disclosure in this filing. See Item 2.01(f) of Form 8-K.

Response:

On June 30, 2011, the Company filed a Form 8-K disclosing its change in independent accountant to Marcum Bernstein and Pinchuk LLP from Goldman Kurland and Mohidin, LLP, as of June 30, 2011. This concurrent disclosure was filed separate from the Original Filing because of EDGAR limitations on the number of Form 8-K items allowed per individual filing.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 56 of Amendment No. 1.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 2 of 16

Item 1.01 Entry into a Material Definitive Agreement

3.	Please revise your disclosure to name all of the parties to the Share Exchange Agreement and Plan of Reorganization, including the shareholders of Nova Furniture Holdings Limited and St. Joyal and the number of shares received by each shareholder. See Item 1.01(a)(1) of Form 8-K.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 3 of Amendment No. 1.

Item 2.01 Completion of Acquisition or Disposition of Assets

Our Company, page 4

We note your disclosure that you are a “manufacturer of choice for leading global furniture distributors and large national retailers.” Please disclose the standard you used to determine that such distributors were “leading global furniture distributors” and how you determined that you were a “manufacturer of choice” for such distributors. Please revise your disclosure accordingly.

Response:

The Company has revised the disclosure to remove these statements. Please see page 4 of Amendment No. 1.

Our History, page 4

We note your disclosure that St. Joyal is committed pursuant to a shareholder agreement to pay $2.4 million by January 1, 2014 for its 18.75% equity interest in Nova Furniture, and that pursuant to such agreement, it has agreed to help you expand into the U.S. market by establishing show rooms, a logistic center, sales team and a sales network. Please revise your disclosure to discuss whether (1) St. Joyal has paid any of the $2.4 million to Nova Furniture, and if so, the total amount paid to date; and (2) St. Joyal was considered the beneficial owner of such shares of Nova Furniture prior to its payment of the $2.4 million, and how such shares were treated in connection with the Share Exchange Agreement.

Response:

Pursuant to the Shareholder Agreement dated January 1, 2011 (the “Shareholder Agreement”), by and between Nova Furniture Limited and St. Joyal, St. Joyal was considered the beneficial owner of 1,875 shares of Nova Furniture Limited as of the date of the Shareholder Agreement in exchange for its commitment to pay $2.4 million to Nova Furniture by January 1, 2014. St. Joyal has not paid any amounts due under the Shareholder Agreement as of June 30, 2011, and is not in default of its obligations.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 4 of Amendment No. 1.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 3 of 16

6.	Please revise your structure chart on page five to show the percentage holdings of each of Nova Holdings and St. Joyal.

Response:

The Company issued its common stock pursuant to the Share Exchange Agreement and Plan of Reorganization dated June 30, 2011 (the “Share Exchange Agreement”), to the designee shareholders of Nova Holdings, Messrs. Wong and Ho, and St. Joyal, Messrs. Jiang and Liu, in proportion to their ownership of the respective companies, and not to Nova Holdings and St. Joyal.

The Company has revised the structure chart to show the percentage holdings of such individual shareholders in accordance with the Staff’s comment. Please see page 5 of Amendment No. 1.

Our Products, page 5

We note your use of various industry statistics on pages seven and nine. Please tell us whether the sources you cite are available to the public for no or nominal fee. If the reports are not publicly available or if you commissioned the report please either file consents or explain to us why you are not required to do so under Rule 436 of Regulation C and Section 7 of the Securities Act. To expedite our review, please provide us with copies of each source, clearly marked to highlight the portion or section that contains this information and cross-reference it to the appropriate location in your filing.

Response:

The industry statistics referenced in the Original Filing are from abstracts, press releases and publications that are publicly available online and at no charge. None of the industry statistics or publications cited in the Original Filing were prepared on the Company’s behalf. Copies of each source marked to highlight the referenced information and a cross-reference to the pages of the Original Filing referencing such information are enclosed herewith.

The Company has revised the average GDP growth information for China to show a corrected calculation based on the International Monetary Fund’s “World Economic Outlook Database, April 2011” for the years 2006-2010, which reflect corrected calculations of China’s GDP growth for those years. The source information is enclosed herewith. Please see page 7 of Amendment No. 1.

8.	We note your disclosure on page seven that your sales to consumers in China have been small compared to sales to the U.S. and international markets. Please provide the percentage of your sales to each market in this section.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see pages 7 and 9 of Amendment No. 1.

9.	We note that you anticipate launching the Ming Ma, ISOFA and Wo Zhi Bao collections in 2011. Please revise your disclosure to specify when this year you anticipate launching such collections, and whether you already have commitments from customers to purchase such products.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 4 of 16

Response:

The Company plans to exhibit its Ming Ma, 1SOFA and Wo Zhi Bao brands at the International Famous Furniture Fair in Dongguan, China in September 2011. If market reaction is favorable, the Company anticipates launching the three brands in China during the fourth quarter of 2011 and entering into product franchise agreements with store operators to retail the three brands.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see pages 7, 10 and 12 of Amendment No. 1.

10.

We note your disclosure on page 10 regarding your relationship with St. Joyal. Please revise your disclosure to explain your relationship with St. Joyal, including its investment in your company. Please also provide additional disclosure regarding St. Joyal’s “investment and development relationships,” and disclose how St. Joyal plans to help you expand into the U.S. market, including a summary of any services provided by St. Joyal to date.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 10 of Amendment No. 1.

Production, page 11

11.

We note that you plan to expand your facilities and production capacity in 2012. Please provide additional disclosure regarding such expansion, including the scope of such expansion, the estimated increase in your production capacity and how you plan to finance such expansion. We note your similar disclosure on page 35.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see pages 11, 17 and 36 of Amendment No. 1.

Customers, page 12

12.	Please file any written agreements with Actona Company A/S and Dongguan Metals and Minerals Import and Export Company as exhibits to the Form 8-K, or explain why you are not required to do so. See Item 601(b)(10)(ii)(B) of Regulation S-K.

Response:

The Company respectfully submits that the supplier agreements with Actona Company A/S (“Actona”) and Dongguan Metals and Minerals Import and Export Company (“Dongguan Metals and Minerals”) are not material to the Company within the meaning of Item 601(b)(10)(ii)(B) of Regulation S-K, which would require their disclosure despite the fact that the contracts were made in the ordinary course of the Company’s business, and therefore are not required to be filed as exhibits. As is standard in the furniture industry, we have entered into renewable supplier agreements with the wholesalers Actona and Dongguan Metals and Minerals that set forth the general order process, labeling and packaging requirements, delivery terms and other supplier requirements common to agreements between trading companies and wholesalers. These supplier agreements do not set forth specific product pricing terms or firm orders for our products, serving instead as general letters of intent. Pricing terms are negotiated separately based on our current product list for the international markets and typically for a period of six to twelve months. Orders for our products by wholesalers such as Actona and Dongguan Metals and Minerals are made in the ordinary course of business and on individual purchase orders, averaging $20,000 to $25,000 per purchase order. The Company typically receives up to 30 purchase orders per week from its customers for the international markets. Accordingly, the Company believes that the written supplier agreements with Actona and Dongguan Metals and Minerals are not required to be filed as exhibits.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 5 of 16

13.	Please provide the geographic breakdown of sales to your customers as required by Item 101(d) of Regulation S-K.

Response:

The Company respectfully submits that as a “smaller reporting company,” as defined by Item 10(f)(1) of Regulation S-K, it need not provide the geographic breakdown of sales to customers under Item 101(d) of Regulation S-K pursuant to the exception provided smaller reporting companies by Item 101(h) of Regulation S-K. The Company has provided geographical distribution of sales in the notes to its consolidated financial statements, however, and has revised the disclosure in accordance with the Staff’s comment. Please see the response to Comment 8 above and pages 7 and 9 of Amendment No. 1.

Properties, page 17

14.	Please file the leases you reference in this section as exhibits to the Form 8-K, or explain why you are not required to do so. See Item 601(b)(10)(ii)(D) of Regulation S-K.

Response:

The Company respectfully submits that the leases for its offices in the U.S. and Macao are not material to the Company within the meaning of Item 601(b)(10)(ii)(D) of Regulation S-K. The leases for the Company’s offices in the U.S. and Macao currently are immaterial in amount of total rental expense and significance. The Company’s lease in Macao has total rental expense of approximately $1,100 per month, or $13,200 annually. The Company’s lease in Commerce, California, has total rental expense of $2,500 per month, or $30,000 annually. Similar office space is readily obtainable in each of these locations upon termination of the respective leases without significant expense. The Company acknowledges the requirement to file any material leases as exhibits and, as it expands its operations in the U.S. and Macao, the Company affirms its ongoing duty to assess new leases for their materiality.

15.	Please disclose the location of the Nova Museum. See Item 102 of Regulation S-K.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 17 of Amendment No. 1.

Risk Factors, page 17

General

16.	We note that some of your risk factor subheadings merely state facts about your business rather than describing the particular risk that is being discussed:

·	We may not be able to keep pace with competition in our industry, page 19;

·	We face risks associated with managing operations in China, page 21;

·	We may experience material disruptions to our manufacturing operations, page 21;

·	Our bank accounts in China are not insured or protected against loss, page 22; and

·	China’s economic policies could affect our business, page 26.

These are just examples. Please revise your risk factor subheadings to ensure that they reflect the risk you describe in the text and disclose how this risk relates specifically to your business.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 6 of 16

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see the “Risk Factors” section beginning on page 18 of Amendment No. 1.

17.

Descriptions of risks that describe circumstances that could apply equally to other businesses that are similarly situated are generic risks that should not be included in your risk factor section. Please either eliminate these generic risks, or revise them to state specific material risks to your company. For example, we note that the following risk factors appear to contain generic disclosures:

·	Changes in economic conditions could adversely affect demand . . ., page 17;

·	We may need additional capital to execute our business plan . . ., page 20;

·	China’s economic policies could affect our business, page 26;

·	The PRC government has introduced certain policy and regulatory measures to control the rapid increase in housing prices . . . , page 26;

·	If relations between the U.S. and China worse . . ., page 27;

·	The nature and application of many laws in China . . ., page 27;

·	Tax laws and regulations in China are subject to substantial revision . . ., page 30.

These are just examples. Please review your risk factors and revise accordingly.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see the “Risk Factors” section beginning on page 18 of Amendment No. 1.

18.	Please add a risk factor disclosing the material risks, if any, relating to the State Intellectual Property Office of the PRC’s pending approval of the intellectual property ownership transfer from Mr. Wong to Nova Dongguan.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 24 of Amendment No. 1.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 7 of 16

Our accounts receivable remain outstanding . . ., page 21

19.	Please disclose the total amount of accounts receivable, including a breakdown of the number of days past due for such accounts. In particular, we note the data you provide on page 43.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 22 of Amendment No. 1.

We may not be able to obtain regulatory approval for our products . . ., page 22

20.	Please disclose whether there are any regulatory approvals that are currently pending or that you still need to obtain to conduct your business.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 23 of Amendment No. 1.

If we fail to satisfy our additional capital contribution requirements to Nova Dongguan . . ., page 29

21.

We note that you are required to contribute $9.1 million as a capital contribution to Nova Dongguan by November 2011. Please prominently disclose this requirement in your Business section. Please disclose how you anticipate funding such requirement, including any specific financing activities you anticipate undertaking. Further, please disclose in both the risk factor subheading and your Business section the impact of failing to make such capital contribution, including an estimate of any penalty you may be required to pay, and the fact that your business license may be revoked. We note your related disclosure on page 44.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see pages 17, 30 and 45 of Amendment No. 1.

Future sales of shares of our common stock . . ., page 32

22.

We note your statement that the lockup period for certain shareholders is generally three years from the date the company becomes listed on a national securities exchange. We note that this period appears to be substantially longer than many of the typical lockup periods. Please advise as to how you determined that the general lockup period is three years, including whether you plan to impose such a lockup period following any listing on a national securities exchange.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 8 of 16

Response:

The Company has entered into lockup agreements, dated June 30, 2011 (the “Lockup Agreements”), with the four shareholders issued shares of the Company’s common stock pursuant to the Share Exchange Agreement. The Lockup Agreements demonstrate to investors during this difficult economic environment management’s long-term commitment to the Company and its operations. The lockup period under the Lockup Agreements runs until the earliest to occur of (i) three years following the date the Company’s securities are listed on a national securities exchange or (ii) if the closing of an offering of the Company’s securities does not occur within one year from the date of the Lockup Agreements, then two years from the date of the Lockup Agreements.

The Company has filed the lockup agreements as Exhibits 10.9, 10.10, 10.11 and 10.12 to Amendment No. 1 and revised the disclosure. Please see pages 33 and 60 of Amendment No. 1.

Provisions in our Amended and Restated Bylaws could make it very difficult for you to bring any legal actions . . ., page 34

23.	We note your disclosure that your directors and officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances. Please revise your disclosure to discuss whether this is consistent with Nevada law.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 35 of Amendment No. 1.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 34

General

24.

Please provide a discussion of the business reasons for changes in the various line items, and in cases where there is more than one business reason for the change, please quantify the incremental impact of each individual business reason on the overall change in the line item. For example, on page 40, you note that a number of factors contributed to the loss in net sales, such as Chinese New Year, changes in your sales and marketing strategy, and cancellation of certain contracts, but you do not quantify the effects of these various factors. Similarly, on page 41, you note that the increase in net sales was primarily due to sales to your franchise network, however you do not disclose the other business reasons for the 33% increase in sales or whether there were any offsetting amounts. See Item 303 of Regulation S-K and SEC Release No. 33-8350.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see pages 40 and 42 of Amendment No. 1.

Results of Operations: Comparison of Three Months Ended March 31, 2011 and 2010, page 39

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 9 of 16

Net Sales, page 40

25.	Please revise to expand your discussion of the substantial drop in sales in the first quarter to fully address the underlying reasons for the change. For example:

·	Quantify the impact from each of the different reasons given.

·	Explain how the Chinese New Year vacation in the current period differed from the first quarter of 2010.

·	Provide more analysis of how the vacation impacted the quantities sold, including how you managed your inventory to anticipate the vacation, whether pent up demand resulted in an increase in sales following the vacation, the reasons inventory increased overall in the first quarter, etc.

·	Provide specific, detailed information of the canceled contracts to give an investor a clear understanding of the potential and expected impact to future operations.

Response:

During the first quarter of 2011, because of the earlier timing and slightly longer vacation period for the Chinese New Year compared to 2010, and in connection with our transition in product inventory, more orders for international markets were delayed and rescheduled than in the first quarter of 2010. The Chinese New Year in 2011 was from February 2 to February 9, around which the Company took a 10-day vacation for this holiday, not including weekends, compared to the 2010 holiday that was from February 14 to February 19, around which the Company took a 9-day vacation, not including weekends. The Company’s production period on orders for international markets typically is 35 to 45 days from receipt of order, which includes the sourcing and purchasing of raw materials specific to the order. Commencement of sourcing of raw materials and production on orders received during or just prior to the vacation period is necessarily delayed during the vacation period, resulting in the deferred completion and delivery of such orders, which is when the Company recognizes revenue, until the second quarter. Management has revised its assessment and determined that the impact of the Chinese New Year vacation in the first quarter of 2011 was not as significant compared to the other business reasons for the change in sales between the 2011 and 2010 periods, including a transition in product inventory for international markets, economic climate in the markets of certain customers and strategic rejection of orders that did not meet our profit margin requirements.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 41 of Amendment No. 1.

Gross profit, page 42

26.	You disclose on page 42 that you expect gross margin to increase in future periods, in part, because more of the increased raw materials costs will be passed through to customers. Please provide a discussion of how you plan to pass raw material increases to customers.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 10 of 16

Response:

The Company does not maintain fixed supply contracts nor does it engage in hedging transactions to protect against raw material price fluctuations. Instead, we attempt to negotiate pricing commitments from suppliers for three to six-month long periods. Concurrently with these pricing negotiations with our suppliers, we negotiate pricing terms for our current product list with our customers in the international markets typically for a period of six to twelve months. We attempt to adjust our product pricing terms with these customers to account for and pass-through to the customer the raw material price fluctuations and current supplier pricing commitments. We may not be able to pass all increases in raw material costs to our customers in the international markets in a timely manner, however, given the difference in duration of negotiated pricing terms. Accordingly, there may be a time lag as we renegotiate pricing with our customers on existing products and introduce new product collections. We attempt to mitigate further the short-term risks of raw material price swings in between customer price negotiations by purchasing some raw materials in advance based on forecasted production needs. In the China retail market, we are less susceptible to these short-term raw material price swing risks because we reserve the right under our franchise agreements to adjust our wholesale and retail product pricing based on raw material price fluctuations, providing franchisees with at least one month’s notice prior to price adjustment.

Liquidity and Capital Resources, page 42

27.	Please describe your material commitments for capital expenditures as of the end of the latest fiscal period, and indicate the general purpose of such commitments and the anticipated source of funds needed to fulfill such commitments. See Item 303(a)(2)(i) of Regulation S-K.

Response:

The Company does not have any material commitments for capital expenditures as of the end of the latest fiscal period.

28.	Please elaborate on your internal and external sources of liquidity, and your ability to generate adequate cash to meet your needs for cash, both on a short–term and long-term basis.

Response:

The Company anticipates generating cash for working capital needs primarily from the organic growth of its business, including the expansion of its franchise network in China, and collections of accounts receivable. The Company currently is in the process of conducting a private placement offering of its equity that will be disclosed subsequently upon its closing as required on a Form 8-K. This private placement offering was not planned at the time of the filing of the Original Filing. The Company may seek additional financing in the form of bank loans based on the Company’s good credit rating, or funds raised through offerings of its equity or debt, if and when the Company determines such offerings are required.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 43 of Amendment No. 1.

29.

You disclose in the risk factor section on page 29 that you are required to contribute $9.1 million as additional contribution of capital to Nova Dongguan by November 2011. You disclose on page 44 that you plan to fund the remaining registered capital requirement of Nova Dongguan through financing activities. Paragraph (A)(1) of Item 303 of Regulation S-K requires that you identify any known events that will result in or that are reasonably likely to result in your liquidity increasing or decreasing in any material way. Please revise your filing to fully describe the financing activities (i.e. bank loan, public/private equity/debt offering, etc.) so that an investor can assess the future impact to your operations and liquidity as a result of your intended financing activities.

You further disclose on page 29 that if you are unable to fund the remaining $9.1 million in additional contribution of capital by November 16, 2011, you may apply to the relevant PRC government agencies for an extension or reduction of the registered capital requirement and if the shareholders are unable to complete the capital contribution within the grace period, the foreign-invested enterprise may apply to the relevant PRC government agencies for a reduction of the registered capital requirement. Please revise your liquidity analysis to disclose that if the reduction of the registered capital requirement is not approved and the capital contribution remains incomplete, the foreign-invested enterprise may be required to pay a penalty and its business license may be revoked by the PRC government and quantify such penalties. Your disclosure should also disclose any other known consequences of failing to fund the $9.1 million.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 11 of 16

Please revise your liquidity analysis to disclose that until the above contribution of capital is satisfied, the foreign-invested enterprise is not allowed to repatriate profits to its shareholders, unless otherwise approved by the SAFE and if you fail to satisfy your additional capital contribution requirements, you may not be able to repatriate profits or dividends. Your disclosure should also address the impact to your operations and liquidity as it relates to this matter.

Please review all obligations and amend your disclosure as applicable to provide a robust discussion of key obligations that will have a material impact to your current and future operations and liquidity. Refer to Sections 501.03, .04 and .13 of the Financial Reporting Codification for guidance.

Response:

The Company requested and, on November 16, 2009, the Foreign Trade and Economic Cooperation Bureau of Dongguan approved an increase in the registered capital of Nova Dongguan from $8 million to $20 million, with the $12 million in additional contribution of capital to be paid within two years. As of June 30, 2011, Nova Dongguan has received $2.9 million in additional capital contributions, with $9.1 million in additional contribution to capital remaining outstanding and due by November 16, 2011. The relevant PRC government agencies may extend the contribution period for an additional six months without penalty, and, upon application by Nova Dongguan, grant a further three-month grace period without penalty. If Nova Dongguan does not receive the balance of registered capital outstanding within these grace periods, Nova Dongguan may apply to the relevant PRC government agencies for a reduction of the registered capital requirement. If the capital contribution remains incomplete after the grace periods have been exhausted or denied, Nova Dongguan may be required to pay a negotiated penalty, typically 3% to 5% of the unsatisfied contribution of capital remaining outstanding, or up to $455,000 as of June 30, 2011. After a six-month period following payment of any such penalty, Nova Dongguan may request a reduction of its registered capital to the amount already contributed with the outstanding balance waived without risk of business license revocation. Although repatriation of profits or dividends by Nova Dongguan will require approval by the SAFE until the contribution of capital is satisfied or the registered capital requirement is reduced to the amount contributed, based upon its relationship with the relevant PRC government agencies and prior requests, the Company believes that such approval would be granted.

The Company does not have any other key obligations as of the end of the latest fiscal period that will have a material impact on its current and future operations and liquidity.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 45 of Amendment No. 1.

30.

Accounts receivable is 63% of total assets as of March 31, 2011, and, compared to the reduced level of sales in the first quarter, represents approximately 111 days of sales, a substantial increase from prior periods. Please revise to provide a robust discussion of the underlying reasons for this change. This discussion should also include an analysis of the basis for not recording an allowance for doubtful accounts to date. Also, please tell us how much of the accounts receivable outstanding at December 31, 2010, remains outstanding as of the current date.

Response:

The Company expects all accounts receivable to be collected and, accordingly, management believes that recording of an allowance for doubtful accounts is not necessary based on historical collections. The Company has no history of bad debts or write-offs on its accounts receivable. The Company extends unsecured credit to some of its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company may experience payment delays from time to time, but it fully expects to receive all payments. As of December 31, 2010, the Company had accounts receivable of $6,487,042. As of July 31, 2011, the Company has collected $5,970,000 of the outstanding accounts receivable as of December 31, 2010, with $517,042 remaining outstanding. The balance of the Company’s accounts receivable was $6.93 million as of March 31, 2011, of which $1.54 million of the total outstanding balance was over 180 days. As of July 31, 2011, all accounts receivable with aging over 180 days as of March 31, 2011, have been paid.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 12 of 16

Historically, the Company has not experienced bad debts from our sales to international markets. The Company gives an extended payment term of up to 180 days to some of its major customers in international markets, and a payment term to other customers of between 30 to 120 days. Sales to international markets typically are made through letters of credit, but for some long-term, high volume customers, such as Actona Company, the Company accepts payment by telegraphic transfer with a payment term of 15 days after delivery. Our accounts receivable related to sales to international markets typically are less than three months, depending on customer shipment schedules. In 2011, the Company changed its sales and marketing strategy to cease sales of certain low-margin products, which was a principal reason for the decrease in sales during the first quarter of 2011, despite these lower-margin customers usually receiving shorter payment terms. Beginning in 2011, the Company has shortened its payment term to some of its major customers of relatively higher-margin products from 180 days to 120 days. This new sales and marketing strategy caused a temporary reduction of sales while retaining the high accounts receivable outstanding as of March 31, 2011. The Company expects the balance of accounts receivable to decrease with the new payment term to its major customers in the international markets.

The Company has a short history with its franchise stores in China, but based on subsequent collections to date, the Company also fully expects payment from new franchisees. Management assesses the financial position, credit quality, credit history and other factors such as current market conditions before entering into product franchise agreements with new store operators to help ensure the franchisee’s ability to make payment in a timely manner. The Company retains the right to review and assess the performance of franchisees annually under the product franchise agreement, enabling the Company to terminate franchises that fail to meet certain performance targets or make payments on product orders. To increase sales, expand market share and to grow its franchise network in China, the Company granted preferential payment terms to new franchise stores in 2010 and Q1 2011. Historically, we have not experienced bad debts under such preferential terms. The Company has since started phasing out the preferential payment terms, and now requires franchisees to make payment in full prior to delivery. The Company expects the balance of accounts receivable to decrease further as this new payment term for franchisees takes effect along with the new sales strategy and shortened payment term to its major customers in the international markets. For these reasons, management believes that the recording of an allowance for doubtful accounts is not necessary based on historical collections.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 45 of Amendment No. 1.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 13 of 16

Security Ownership of Certain Beneficial Owners, page 45

31.	Please revise your disclosure for “Directors and named executive officers as a group” to show that it reflects the ownership of 2 persons, as opposed to 3 persons.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 46 of Amendment No. 1.

32.	It appears from your disclosure on page 5 that Nova Holdings owns more than 5% of your common stock. Please revise the table to reflect the ownership of Nova Holdings.

Response:

The Company issued its common stock pursuant to the Share Exchange Agreement to the designee shareholders of Nova Holdings, Messrs. Wong and Ho, and St. Joyal, Messrs. Jiang and Liu, in proportion to their ownership of the respective companies. The Company did not issue any shares of its common stock to Nova Holdings and St. Joyal, and neither entity has voting or dispositive power over the common stock issued pursuant to the Share Exchange Agreement; therefore, neither entity is deemed to beneficially own of any shares of the Company’s common stock. Accordingly, the Company respectfully submits that the table of the security ownership of certain beneficial owners in the Original Filing fully and accurately discloses the beneficial ownership of all 5% shareholders and should not be revised.

Management, page 45

33.	Please discuss the specific experience, qualifications, attributes or skills that led to the conclusion that each director or director nominee should serve as a director. Please provide the enhanced disclosure on a director-by-director basis. See Item 401(e) of Regulation S-K.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 47 of Amendment No. 1.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 14 of 16

Certain Relationships and Related Party Transactions, page 49

34.	Please disclose the total dollar value of the transactions between the company and the related parties, including the total amount of the loans or advances. See Item 404(d)(1) of Regulation S-K.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 51 of Amendment No. 1.

35.

We note your disclosure that from time to time Mr. Wong made advances to Nova Dongguan for its operating needs. Please clarify whether such advances relate to the $2.9 million Nova Dongguan has received in additional capital contributions from its shareholders as well as the $0.45 million and $0.33 million advanced to the company by a related party, as disclosed on page 44. Further, please provide all information required by Item 404 of Regulation S-K relating to such capital advances by related parties and contributions.

Response:

The loans to Nova Dongguan by Mr. Wong disclosed under “Certain Relationships and Related Party Transactions” on page include the $0.33 million advanced in 2010 and $0.45 million advanced in 2009 disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 44 of the Original Filing, which was a net of cash inflow and outflow as a result of continuous advance from and repayment to Mr. Wong from time to time for the Company’s operating needs. These loans did not include the $2.9 million received by Nova Dongguan in additional contributions to capital in 2010 and 2009, which were received from its shareholders and not required to be repaid.

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 51 of Amendment No. 1.

36.	Please provide the information required by Item 404(d) of Regulation S-K for the shareholder agreement entered into with St. Joyal pursuant to which St. Joyal will assist you in expanding into the U.S. market, or explain why you are not required to do so.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 51 of Amendment No. 1.

Description of Securities, page 50

37.	Please revise your disclosure to indicate that the description is a summary of the material provisions of your common stock.

Response:

The Company respectfully submits that it provided the requested disclosure under the heading “Description of Securities” on page 50 of the Original Filing, stating:

“The following description of our securities and provisions of our Articles of Incorporation and Amended and Restated Bylaws is only a summary. You should refer to our Articles of Incorporation and Amended and Restated Bylaws, copies of which have been incorporated by reference as an exhibit to the Registration Statement on Form S-1 we filed with the SEC on November 10, 2009, and attached as an exhibit hereto, respectively. The following discussion is qualified in its entirety by reference to such exhibits.”

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 15 of 16

38.	Please disclose the approximate number of holders of your common stock as of the latest practicable date. See Item 201(b) of Regulation S-K.

Response:

The Company has revised the disclosure in accordance with the Staff’s comment. Please see page 53 of Amendment No. 1.

Consolidated Statements of Income and Comprehensive Income, page 4

39.

You disclose on page 50 that your president is the CEO of one of your customers. Please revise to separately disclose on the face of your income statement amounts earned from transactions with related parties. Refer to paragraph 1 of Rule 5.03 of Regulation S-X. Expand the footnotes to provide all disclosures required by ASC 850-10-50.

Response:

The Company’s sales to Diamond Sofa accounted for $1.49 million or 4.8% of consolidated sales in 2010 and $1.37 million or 6.9% of consolidated sales in 2009. Accordingly, as sales to Diamond Sofa did not exceed the 10% threshold of the Company’s consolidated sales in either fiscal year, the Company believes that disclosure on the face of its income statements of amounts earned from transactions with Diamond Sofa are not required by Rule 5.03 of Regulation S-X, nor are disclosures in the footnotes required by ASC 850-10-50. Furthermore, during the periods of the financial statements included in the Original Filing, Thanh H. Lam was not an officer, director or employee of the Company, and therefore Diamond Sofa was not a related party of the Company during such periods until June 30, 2011, the date of Ms. Lam’s appointment as the Company’s president. The Company intends to include all disclosures in its financial statements and footnotes regarding Diamond Sofa as a related party in accordance with Rule 5.03 of Regulation S-X and ASC 850-10-50 in its quarterly report for the three months ended June 30, 2011, and all future filings during which Diamond Sofa remains a related party of the Company.

In making its responses, the Company acknowledges that:

·	the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

·	staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·	the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Ms. Pamela Long

U.S. Securities and Exchange Commission

August 9, 2011

Page 16 of 16

Should you or others have any questions or would like additional information, please contact Robert Newman, Esq., of Newman & Morrison LLP, at (212) 227-7422 or by fax at (212) 202-6055.

Very truly yours,

/s/ Thanh H. Lam

Thanh H. Lam

President

Enclosures

cc: Robert Newman, Newman & Morrison LLP