Nova LifeStyle, Inc. Reports First Quarter 2014 Results - WFSB 3 Connecticut

Nova LifeStyle, Inc. Reports First Quarter 2014 Results

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SOURCE Nova LifeStyle, Inc.

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

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


$              --









 

Investor Contact:

ICR, Inc.
Anne Rakunas
Tel: (310) 954-1113
Anne.Rakunas@icrinc.com

 

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