Nova Lifestyle, Inc. Reports Third Quarter 2011 Revenue Up 61%, Net Income Up 94%, Provides 2012 Financial Guidance

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Nov 15, 2011, 07:00 ET

COMMERCE, Calif., Nov. 15, 2011 /PRNewswire/ -- Nova Lifestyle, Inc. ("Nova" or "Nova Lifestyle") (OTCBB: STVS)(website: www.novalifestyle.com), an innovative global designer and modern lifestyle furniture company headquartered in California, today announced its financial results for the third quarter ended September 30, 2011, as reported on its quarterly report on Form 10-Q filed on November 14, 2011.

THIRD QUARTER 2011 HIGHLIGHTS

Record revenue of $11.2 million, an increase of 61% year-over-year
Gross profit increased 102% to $3.19 million
Gross margin increased to 29% from 23% in the same period last year
Record net income of $1.7 million, an increase of 94% year-over-year
Net margins increased to 15% from 12% in the same period 2010
Acquired Diamond Sofa (www.diamondsofa.com), an urban contemporary national furniture brand sold to major U.S. furniture companies
2012 Guidance: Anticipate revenue of between $73 and $75 million and net income of between $13 and $14 million from organic growth


	Three Months Ended September 30, 2011		Three Months Ended September 30, 2010		YoY% Change
Revenue	$	11,187,474	$	6,945,017		61%
Gross Profit	$	3,192,702	$	1,583,374		102%
Gross Profit Margin		29%		23%
Operating Income	$	2,000,388	$	1,057,594		89%
Operating Margin		18%		15%
Net Income	$	1,681,589	$	865,218		94%
Net Income Margin		15%		12%
Diluted EPS	$	0.10	$	0.09		11%

MANAGEMENT COMMENTS

Tawny Lam, President of Nova Lifestyle, commented: "We are pleased with our strong growth and performance in the third quarter of 2011. Our acquisition of Diamond Sofa, a well-recognized brand in the U.S. with a niche in the urban contemporary furniture market, provides us with a strong distribution channel to the top 100 U.S. furniture companies. We look forward to expanding our e-commerce business and continuing to market our Nova-branded products to the international markets. Our strong revenue and net income growth, as well as our increase in margins, demonstrate consumers' appetite for our modern contemporary products. We look forward to a year of record revenue and earnings in 2011."

REVENUE

Revenue was $11.19 million in the third quarter 2011, an increase of $4.24 million or 61% year-over-year. The increase in revenue was due to a 66% increase in sales volume as well as our acquisition of the Diamond Sofa brand, which contributed $1.04 million in additional sales for the quarter. Our largest selling product categories for the third quarter 2011 were chairs, sofas and cupboards, which accounted for approximately 19%, 18% and 17% of sales. Sales to international markets increased $4.00 million year-over-year to $8.5 million in the third quarter 2011, principally as a result of our increased sales in North America. Overall sales in China also increased, with sales of $2.69 million in the third quarter 2011 compared to $2.44 million in 2010. Sales from franchisees selling Nova-branded products in China contributed approximately $1.49 million, constituting 58% of total China sales during the third quarter 2011, compared to $0.44 million or 18% in the same period of 2010. Nova commenced sales through branded franchise stores in the first half of 2010 and anticipates increasing sales volume in China as we continue to expand our franchise network.

GROSS PROFIT

Gross profit increased 102% to $3.19 million in the third quarter 2011. Gross profit margin increased to 29% in third quarter 2011 from 23% in the same period last year, primarily as a result of increased sales volume and changes in our sales and marketing strategy to expand in the U.S. and China markets. Management believes that gross profit margin will stabilize at approximately 30% going forward as our product mix broadens, sales volume increases and Nova adjusts pricing based on rising raw material costs.

OPERATING EXPENSES

Operating expenses, consisting of selling, general and administrative expenses, were $1.19 million for the third quarter 2011, an increase of 127% compared to the same period last year, as expected. Selling expense increased as we continued expanding in the China retail market by hiring additional sales staff and increasing advertising and promotional marketing. General and administration expense increased because of costs associated with workforce expansion in China and expense related to our acquisitions in 2011 of Nova Furniture and the Diamond Sofa brand.

NET INCOME

Net income was $1.68 million in the third quarter 2011, an increase of 94% year-over-year. Net profit margin was 15%, an increase of 3% from the 2010 period.

ABOUT NOVA LIFESTYLE, INC.

Nova Lifestyle, Inc., a U.S. company headquartered in California, is an innovative designer and modern lifestyle furniture company. Nova's products are made in the U.S. and Asia, and marketed worldwide. Nova's collections of lifestyle furniture brands include Diamond Sofa (www.diamondsofa.com), Colorful World, Giorgio Mobili and others. Nova's products feature urban contemporary styles with comfort and functionality in matching furniture collections and upscale luxury designs appealing to lifestyle-conscious middle and upper middle-income consumers. To learn more about Nova Lifestyle, Inc., please visit 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.

CORPORATE CONTACT:
Tawny Lam
President, Nova Lifestyle, Inc.
Tel: (323) 888-9999
Email: [email protected]
www.novalifestyle.com
www.diamondsofa.com

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2011 (UNAUDITED) AND DECEMBER 31, 2010
	September 30, 2011		December 31, 2010
	(Unaudited)
Assets

Current Assets
Cash and cash equivalents	$	4,175,068	$	985,004
Accounts receivable		12,070,744		5,921,872
Accounts receivable - related party		263,678		565,170
Advance to suppliers		352,201		277,081
Inventory		1,513,444		1,017,704
Other current assets		246,479		175,323
Deferred tax asset		120,093		115,237


Total Current Assets		18,741,707		9,057,391


Noncurrent Assets
Heritage and cultural assets		127,859		--
Plant, property and equipment, net		8,659,805		8,192,937
Construction in progress		--		75,498
Other assets		631,772		--
Goodwill		218,606		--
Intangible assets, net		730,685		471,812


Total Noncurrent Assets		10,368,727		8,740,247


Total Assets	$	29,110,434	$	17,797,638

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) SEPTEMBER 30, 2011 (UNAUDITED) AND DECEMBER 31, 2010
	September 30, 2011		December 31, 2010
	(Unaudited)
Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable	$	4,377,464	$	1,160,634
Advance from customers		--		25,016
Accrued expenses and other payables		780,423		1,065,421
Taxes payable		635,349		197,785
Due to related party		--		197,776

Total Current Liabilities		5,793,236		2,646,632

Noncurrent Liabilities
Deferred rent payable		55,083		43,169
Deferred tax liability, net		18,329		1,274
Income tax payable		2,586,224		2,368,795

Total Noncurrent Liabilities		2,659,636		2,413,238

Total Liabilities		8,452,872		5,059,870

Contingencies and Commitments

Stockholders' Equity
Common stock, $0.001 par value; 75,000,000 shares authorized, 17,898,267 and 11,920,000 shares issued and outstanding as of September 30, 2011, and December 31, 2010, respectively		17,898		11,920
Additional paid-in capital		17,074,535		10,900,580
Subscription receivable		(1,950,000)		--
Statutory reserves		6,241		6,241
Accumulated other comprehensive income		2,034,960		1,611,756
Retained earnings		3,473,928		207,271

Total Stockholders' Equity		20,657,562		12,737,768

Total Liabilities and Stockholders' Equity	$	29,110,434	$	17,797,638

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
	Nine Months Ended September 30,				Three Months Ended September 30,
	2011		2010		2011		2010

Net Sales (Including sales to related party of $902,638 and $1,154,971 during the nine months ended September 30, 2011 and 2010; and $277,056 and $414,335 during the three months ended September 30, 2011 and 2010, respectively)	$	26,079,694	$	22,040,134	$	11,187,474	$	6,945,017

Cost of Sales		18,645,205		16,856,588		7,994,772		5,361,643

Gross Profit		7,434,489		5,183,546		3,192,702		1,583,374

Operating Expenses
Selling expenses		1,216,546		722,119		421,437		246,354
General and administrative expenses		2,187,875		795,379		770,877		279,426

Total Operating Expenses		3,404,421		1,517,498		1,192,314		525,780

Income From Operations		4,030,068		3,666,048		2,000,388		1,057,594

Other Income (Expenses)
Non-operating income		21,719		12,654		11,245		11,950
Foreign exchange transaction gain (loss)		(79,450)		16,890		(18,721)		19,029
Financial expense		(49,821)		(15,849)		(33,499)		(4,085)

Total Other Expenses, Net		(107,552)		13,695		(40,975)		26,894

Income Before Income Tax		3,922,516		3,679,743		1,959,413		1,084,488

Income Tax Expense		655,859		732,108		277,824		219,270

Net Income		3,266,657		2,947,635		1,681,589		865,218

Other Comprehensive Income
Foreign currency translation		423,204		201,567		187,219		135,480

Comprehensive Income	$	3,689,861	$	3,149,202	$	1,868,808	$	1,000,698

Basic weighted average shares outstanding		13,451,350		9,685,000		16,431,723		9,685,000
Diluted weighted average shares outstanding		13,522,150		9,685,000		16,641,815		9,685,000

Basic net earnings per share	$	0.24	$	0.30	$	0.10	$	0.09
Diluted net earnings per share	$	0.24	$	0.30	$	0.10	$	0.09

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)
	2011		2010

Cash Flows From Operating Activities
Net Income	$	3,266,657	$	2,947,635
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		477,996		273,056
Changes in operating assets and liabilities:
Accounts receivable		(4,903,096)		(3,378,842)
Accounts receivable - related party		250,573		6,940
Advance to suppliers		(62,051)		(1,178,648)
Inventory		325,593		1,474,721
Other current assets		(68,076)		87,429
Accounts payable		1,412,664		721,682
Advance from customers		(25,498)		61,647
Accrued expenses and other payables		(457,172)		119,352
Deferred rent payable		9,873		3,607
Taxes payable		539,340		832,587

Net Cash Provided by Operating Activities		766,803		1,971,166

Cash Flows From Investing Activities
Deposit on factory construction		(617,906)		--
Cash received from acquired subsidiary		141,231		--
Acquisition of Diamond Bar Outdoors, Inc.		(450,000)		--
Acquisition of intangible assets		(200,000)		--
Acquisition of heritage and cultural assets		(125,053)		--
Acquisition of property and equipment		(348,488)		(632,280)
Construction in progress		--		(2,783,614)

Net Cash Used in Investing Activities		(1,600,216)		(3,415,894)

Cash Flows From Financing Activities
Advance to related parties		(1,556,901)		(759,814)
Proceeds from subscription receivable		450,000		--
Repayment from related parties		1,355,314		830,243
Proceeds from private placement		3,859,933		--
Payment for note payable		(80,000)		--
Contribution by cash		--		500,000
Dividend paid		--		(712,370)

Net Cash Provided by (Used in) Financing Activities	$	4,028,346	$	(141,941)

NOVA LIFESTYLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)
	2011		2010

Effect of Exchange Rate Changes on Cash and Cash Equivalents	$	(4,869)	$	14,178

Net increase (decrease) in cash and cash equivalents		3,190,064		(1,572,491)

Cash and cash equivalents, beginning of the period		985,004		2,172,266

Cash and cash equivalents, ending of the period	$	4,175,068	$	599,775


Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:
Income tax payments	$	122,746	$	61,210


Supplemental Disclosure of Non-Cash Financing Activities

Subscription receivable from sales of common stock	$	2,400,000	$	--