Nova LifeStyle, Inc. Reports First Quarter 2014 Results

First Quarter Net Sales Increased 19.2%

First Quarter EPS of $0.02

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May 15, 2014, 04:01 ET

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
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2014 (UNAUDITED) AND DECEMBER 31, 2013

	March 31,	December 31,
	2014	2013
	(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
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

Stockholders' Equity
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
	19,394	19,206
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
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

	Three Months Ended March 31,
	2014	2013
	(Unaudited)

Net Sales	$ 17,882,892	$ 14,996,951

Cost of Sales	14,630,017	11,750,848

Gross Profit	3,252,875	3,246,103

Operating Expenses
Selling expenses	735,345	721,796
General and administrative expenses	1,962,629	1,044,959

Total Operating Expenses	2,697,974	1,766,755

Income From Operations	554,901	1,479,348

Other Income (Expenses)
Non-operating expense	19,658	(21,100)
Interest expense	(63,451)	(74,397)
Financial expense	(34,871)	(29,330)

Total Other Expenses, Net	(78,664)	(124,827)

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

Basic net earnings per share	$ 0.02	$ 0.06
Diluted net earnings per share	$ 0.02	$ 0.06

NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

	Three Months Ended March 31,
	2014	2013
	(Unaudited)

Cash Flows From Operating Activities
Net Income	$ 303,552	$ 1,178,467
Adjustments to reconcile net income to net cash used in operating activities:

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:
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
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
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
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

Cash paid during the year for:
Income tax payments	$ 399	$ 150,520
Interest expense	$ 64,380	$ 68,319

Supplemental Disclosure of Non-Cash Financing Activities

Construction in progress transfer to fixed assets	$ 207,136	$ --