LOS ANGELES - 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 ourNASDAQ listing in January, 2014. This was partially offset by a 70 basispoint 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.
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)
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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 $ 207,136 $ --
fixed assets
============== ==============
Source: Nova LifeStyle
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