Nova LifeStyle, Inc. Reports First Quarter 2014 Results
First Quarter Net Sales Increased 19.2%
First Quarter EPS of $0.02
LOS ANGELES, May 15, 2014 /PRNewswire/ -- Nova LifeStyle, Inc. (NASDAQ-GM: NVFY), a U.S.-based fast growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture, today announced financial results for the first quarter ended March 31, 2014.
"I am pleased with our net sales growth of over 19% in the first quarter, which reflects increasing demand for our urban, contemporary furniture. We continued to invest in the long-term growth of our business as we took the appropriate steps to expand our distribution with key retailers, which we believe will lead to improved profitability in the future," stated Tawny Lam, President of Nova LifeStyle, Inc. "Subsequent to the close of the quarter, we commenced development of our e-Commerce platform designed to capitalize on a growing middle class and the rapidly increasing online demand for furniture and home furnishings in China. We also successfully completed a direct placement in April, which has allowed us to further expand our investor base and has provided sufficient capital to support our key growth initiatives of expanding our global distribution and increasing our sales of higher-margin branded products, as well as the development of our e-Commerce platform. We continue to expect these initiatives to contribute significantly to both our sales and profitability in the current and next fiscal year, and to increase our net income in fiscal year 2014 over last year."
For the first quarter ended March 31, 2014:
- Net sales were $17.9 million, an increase of 19.2% compared to the prior year period. Growth was primarily driven by a 43% increase in sales in North America and included a contribution of $1.7 million from the Company's subsidiary, Bright Swallow, which was acquired in April 2013. This was offset by a decline in sales in Europe, as that region continues to recover, as well as a decline in sales in China. Sales in China continue to be impacted by the transition to new image standards as well as product lines for the Company's franchise operations that are expected to improve sales and profitability in the longer-term.
- Gross profit was $3.3 million, an increase of 0.2% compared to the prior year period. Gross margin was 18.2% compared to 21.6% in the prior year period, which is primarily due to strategic changes in our sales and marketing plans as we increased sourcing from third party vendors to supply our growing distribution as we increase our market share.
- Operating income was $0.6 million compared to $1.5 million in the prior year period, primarily reflecting higher general and administrative expenses including research and development expenses to advance our growth initiatives, as well as public company costs associated with our NASDAQ listing in January, 2014. This was partially offset by a 70 basis point improvement in selling expenses as a percentage of net sales.
- Net income was $0.3 million, or $0.02 per diluted share, based on a weighted average diluted share count of 19.5 million shares.
Subsequent Events
On April 17, 2014, the Company completed an $8.95 million registered direct placement of common stock and warrants with several institutional investors, and received $8.2 million in net proceeds to fund its strategic growth initiatives. The Company sold 1,320,059 shares of common stock to the institutional investors at a price of $6.78 per share. As part of the transaction, the Company issued to the investors: Series A Warrants for the purchase of up to 660,030 shares of common stock in the aggregate at an exercise price of $8.48 per share, which warrants have a term of 48 months from the date of issuance; Series B warrants for the purchase of up to 633,628 shares of common stock in the aggregate at an exercise price of $6.82 per share, which warrants have a term of 6 months from the date of issuance; and Series C warrants for the purchase of up to 310,478 shares of common stock in the aggregate at an exercise price of $ 8.53 per share which warrants have a term of 48 months from the date of issuance. Should all of the above warrants be exercised in cash, the Company could potentially raise up to an additional $12,566,774.70 in gross proceeds.
About Nova LifeStyle, Inc.
Nova LifeStyle, Inc., a NASDAQ Global Markets Exchange listed company headquartered in California, is a fast growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture; primarily sofas, dining rooms, cabinets, office furniture and related components, bedrooms, and various accessories in matching collections. Nova's products are made in the US, Europe, and Asia and include LifeStyle brands such as Diamond Sofa, Colorful World, Giorgio Mobili, Nova QwiK, and Bright Swallow International. Nova's products feature urban contemporary styles that integrate comfort and functionality incorporating upscale luxury designs appealing to LifeStyle-conscious middle and upper middle-income consumers in the U.S., China, Europe, and elsewhere in the world. To learn more about Nova LifeStyle, Inc., please visit our website at www.NovaLifeStyle.com.
Safe Harbor Statement
All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect Nova's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in Nova's filings with the Securities and Exchange Commission.
NOVA LIFESTYLE, INC. AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEETS |
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MARCH 31, 2014 (UNAUDITED) AND DECEMBER 31, 2013 |
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March 31, |
December 31, |
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2014 |
2013 |
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(Unaudited) |
|||
Assets |
|||
Current Assets |
|||
Cash and cash equivalents |
$ 2,062,951 |
$ 2,323,338 |
|
Accounts receivable, net |
25,228,012 |
27,967,831 |
|
Advance to suppliers |
7,159,053 |
3,535,100 |
|
Inventories |
3,045,662 |
3,353,634 |
|
Prepaid expenses and other receivables |
634,836 |
648,620 |
|
Income tax receivable |
-- |
38,654 |
|
Deferred tax asset |
242,419 |
243,682 |
|
Total Current Assets |
38,372,933 |
38,110,859 |
|
Noncurrent Assets |
|||
Heritage and cultural assets |
131,800 |
132,993 |
|
Plant, property and equipment, net |
13,098,286 |
13,146,638 |
|
Construction in progress |
809,463 |
1,024,645 |
|
Lease deposit |
104,199 |
103,122 |
|
Equipment deposit |
64,693 |
- |
|
Goodwill |
1,027,124 |
1,027,124 |
|
Intangible assets, net |
6,848,021 |
6,976,991 |
|
Deferred tax asset, net |
-- |
44,334 |
|
Total Noncurrent Assets |
22,083,586 |
22,455,847 |
|
Total Assets |
$ 60,456,519 |
$ 60,566,706 |
|
Current Liabilities |
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Accounts payable |
$ 5,905,764 |
$ 6,895,254 |
|
Line of credit |
2,660,731 |
820,089 |
|
Advance from customers |
75,736 |
43,077 |
|
Accrued liabilities and other payables |
1,786,005 |
1,458,157 |
|
Taxes payable |
62,204 |
- |
|
Total Current Liabilities |
10,490,440 |
9,216,577 |
|
Noncurrent Liabilities |
|||
Line of credit |
4,506,727 |
6,602,258 |
|
Deferred rent payable |
69,833 |
74,152 |
|
Deferred tax liability |
10,978 |
-- |
|
Income tax payable |
5,957,063 |
5,944,424 |
|
Total Noncurrent Liabilities |
10,544,601 |
12,620,834 |
|
Total Liabilities |
21,035,041 |
21,837,411 |
|
Contingencies and Commitments |
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Stockholders' Equity |
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Common stock, $0.001 par value; 75,000,000 shares authorized, 19,394,357 and 19,206,024 shares issued and outstanding as of March 31, 2014 and December 31, 2013 |
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19,394 |
19,206 |
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Additional paid-in capital |
21,497,000 |
20,977,058 |
|
Subscription receivable |
(750,000) |
(750,000) |
|
Statutory reserves |
6,241 |
6,241 |
|
Accumulated other comprehensive income |
2,471,511 |
2,603,010 |
|
Retained earnings |
16,177,332 |
15,873,780 |
|
Total Stockholders' Equity |
39,421,478 |
38,729,295 |
|
Total Liabilities and Stockholders' Equity |
$ 60,456,519 |
$ 60,566,706 |
|
NOVA LIFESTYLE, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
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FOR THE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED) |
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Three Months Ended March 31, |
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2014 |
2013 |
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(Unaudited) |
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Net Sales |
$ 17,882,892 |
$ 14,996,951 |
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Cost of Sales |
14,630,017 |
11,750,848 |
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Gross Profit |
3,252,875 |
3,246,103 |
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Operating Expenses |
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Selling expenses |
735,345 |
721,796 |
||
General and administrative expenses |
1,962,629 |
1,044,959 |
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Total Operating Expenses |
2,697,974 |
1,766,755 |
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Income From Operations |
554,901 |
1,479,348 |
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Other Income (Expenses) |
||||
Non-operating expense |
19,658 |
(21,100) |
||
Interest expense |
(63,451) |
(74,397) |
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Financial expense |
(34,871) |
(29,330) |
||
Total Other Expenses, Net |
(78,664) |
(124,827) |
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Income Before Income Tax |
476,237 |
1,354,521 |
||
Income Tax Expense |
172,685 |
176,054 |
||
Net Income |
303,552 |
1,178,467 |
||
Other Comprehensive Income |
||||
Foreign currency translation |
(131,499) |
36,608 |
||
Comprehensive Income |
$ 172,053 |
$ 1,215,075 |
||
Basic weighted average shares outstanding |
19,348,479 |
18,536,699 |
||
Diluted weighted average shares outstanding |
19,548,665 |
18,638,283 |
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Basic net earnings per share |
$ 0.02 |
$ 0.06 |
||
Diluted net earnings per share |
$ 0.02 |
$ 0.06 |
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NOVA LIFESTYLE, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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FOR THE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED) |
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Three Months Ended March 31, |
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2014 |
2013 |
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(Unaudited) |
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Cash Flows From Operating Activities |
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Net Income |
$ 303,552 |
$ 1,178,467 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation and amortization |
414,153 |
230,283 |
|
Stock compensation expense |
47,775 |
34,375 |
|
Warrants expense |
38,314 |
-- |
|
Changes in bad debt allowance |
(32,544) |
(2,302) |
|
Changes in operating assets and liabilities: |
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Accounts receivable |
2,723,924 |
865,275 |
|
Advance to suppliers |
(3,629,384) |
(321,935) |
|
Inventories |
288,533 |
408,404 |
|
Other current assets |
(50,178) |
58,393 |
|
Accounts payable |
(959,552) |
(2,380,947) |
|
Advance from customers |
32,665 |
(67,670) |
|
Accrued expenses and other payables |
332,014 |
(369,397) |
|
Deferred rent payable |
(3,674) |
(5,004) |
|
Taxes payable |
208,269 |
9,190 |
|
Net Cash Used in Operating Activities |
(286,133) |
(362,868) |
|
Cash Flows From Investing Activities |
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Deposit on acquisition of Bright Swallow Int'l Group Ltd. |
-- |
(1,500,000) |
|
Purchase of property and equipment |
(154,729) |
(61,771) |
|
Construction in progress |
-- |
(234,668) |
|
Net Cash Used in Investing Activities |
(154,729) |
(1,796,439) |
|
Cash Flows From Financing Activities |
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Repayment to related parties |
-- |
(1,987) |
|
Proceed from line of credit and bank loan |
6,502,000 |
3,710,000 |
|
Repayment to line of credit and bank loan |
(6,749,531) |
(4,104,164) |
|
Cash received from warrants exercised |
434,041 |
5,948 |
|
Net Cash Provided by (Used in) Financing Activities |
$ 186,510 |
$ (390,203) |
|
Effect of Exchange Rate Changes on |
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Cash and Cash Equivalents |
$ (6,035) |
$ 265 |
|
Net decrease in cash and cash equivalents |
(260,387) |
(2,549,245) |
|
Cash and cash equivalents, beginning of period |
2,323,338 |
3,150,492 |
|
Cash and cash equivalents, ending of period |
$ 2,062,951 |
$ 601,247 |
|
Supplemental Disclosure of Cash Flow Information |
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Cash paid during the year for: |
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Income tax payments |
$ 399 |
$ 150,520 |
|
Interest expense |
$ 64,380 |
$ 68,319 |
|
Supplemental Disclosure of Non-Cash Financing Activities |
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Construction in progress transfer to fixed assets |
$ 207,136 |
$ -- |
|
Investor Contact:
ICR, Inc.
Anne Rakunas
Tel: (310) 954-1113
[email protected]
SOURCE Nova LifeStyle, Inc.
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