Company Eyes Another Year of Record Growth Based on Strong Global Consumer Demand for Its Urban Contemporary Designs

COMMERCE, CA, - Nova LifeStyle, Inc. (otcqb:STVS) /quotes/zigman/11137089/quotes/nls/stvsSTVS0.00% (website: www.novalifestyle.com ), a rapidly growing U.S. based designer, manufacturer and global distributor of urban contemporary furniture, today reported its continuing aggressive worldwide expansion generated record results in the second quarter and six months ended June 30, 2012.

Sales in the second quarter grew 74% to $16.15 million, up from $9.26 million in the same period last year, on a 15% increase in sales volume and an approximately 53% increase in average selling price. Net income increased 146% to $1.42 million compared with $0.58 million in the prior year period. Through the first half of 2012, sales were up 82% to $27.15 million, from $14.89 million a year earlier, on a 12% increase in sales volume and an approximately 62% increase in average selling prices. Net income in the first six months of 2012 grew to $2.40 million, up 11% from $1.59 million in the comparable period in 2011.

On a per share basis, 2012 second quarter diluted EPS was $0.08 compared with $0.05 in the same period last year, while 2012 first half diluted EPS was $0.13, compared with $0.13 in the prior year period. Diluted weighted average shares outstanding in last year's second quarter and first half respectively were 11,952,747 and 11,788,314 shares. In the second quarter and first half this year they increased to 18,491,138 and 18,589,410 shares respectively. The increase primarily is a consequence of two successful private placements completed in late 2011 and early 2012 which netted the Company a combined $5.61 million to finance further growth.

U.S. Led Growth

Mr. Jeffrey Wong, CEO, Chairman and Co-Founder of the Company, commented, "In the short time since we have been a public company, following our acquisition of Diamond Sofa in the U.S. in 2011, our progress has been dramatic, setting the stage for continuing strong, balanced global growth. Thus far, our growth has been led by our outstanding performance in the North American market, which produced a year over year sales gain in the second quarter of 129%, to $5.74 million, bolstered by increasing Internet sales and growing penetration of our target 'Top 100' furniture retailers and distributors."

Strong Global Growth As Well

Company President, and Co-Founder of Diamond Sofa, Ms. Tawny Lam, added, "We also have been focused on expanding direct sales of our branded furniture lines in China where year over year sales in the quarter grew 69%, to $4.85 million and we expanded our independently owned furniture franchise stores to more than 100 locations throughout the country. Starting in 2013, this will be complemented by an anticipated major boost in our OEM sales from our recently announced manufacturing agreement with IKEA. Further, in the quarter we saw a 34% sales increase in Europe, to $4.24 million, where despite a tougher economic environment, lifestyle conscious consumers remain highly attracted to the look, feel and perceived value of our urban contemporary furniture lines."

Sale of U.S. Luxury Mattresses in China Underway

"While it is an initiative we have focused on for some time," Ms. Lam added, "after the end of the second quarter, we announced in July what we believe could result in a further significant boost to our sales in China, namely, our first shipment of Ultra Premium 'Made in the USA' organic latex mattresses to our franchise network in China."

The Company said the significant growth potential it sees for these products lies not just in their comfort or the fact that they are made with the highest quality natural latex foam. Of special significance to China's upscale consumers, they are custom manufactured in the U.S. to size standards in China and are generating a strong initial response.

30% Gross Margin Target

During the second quarter and first half of 2012, the Company said that strong demand for its products necessitated increased utilization of third party manufacturers under the Company's supervision. This factor, in combination with increasing raw material prices, especially in China, had an impact on gross profit margins, which in the first half of 2012 were 25% compared with 28% a year earlier. Going forward, management believes gross profit margins will stabilize at approximately 30% as the Company's product mix broadens and more raw material costs are passed along to customers.

Factory Expansion

Additionally, the Company said construction was proceeding on the Phase II expansion of its manufacturing plant in Dongguan. It continues to anticipate completion before the end of the year, which will allow for increased self manufacturing during the course of 2013 in conjunction with its supply agreement with IKEA.

Strong Growth Outlook

Looking ahead, Mr. Wong stated, "We have charted a very aggressive growth course with our primary focus currently on the U.S. and China given the somewhat slower economic recovery we see in Europe. While consumers in the U.S. and China also are exhibiting caution, there nevertheless has been continuing growth in spending on refurbishing their homes to reflect their lifestyles. We believe this will continue to support the growth of our popular lifestyle conscious products, and lead to another year of substantial record growth in 2012 in line with our earlier forecasts."

About Nova LifeStyle, Inc.

Nova LifeStyle, Inc., a U.S. company headquartered in California, is a fast growing, innovative designer and manufacturer of modern LifeStyle furniture, primarily sofas, dining rooms, cabinets and bedrooms in matching collections. Nova's products are made in the U.S., Asia and its state of the art factory completed in 2011 in Dongguan, China 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 and 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 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
            CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                         (UNAUDITED)
        
                            Six Months Ended June 30,   Three Months Ended June 30,
                            -------------------------   ---------------------------
                                2012          2011          2012           2011
                            -----------   -----------   -----------   -------------
                                   (Unaudited)                  (Unaudited)
                            -------------------------   ---------------------------
        
        Net Sales
        (Including sales
         to related party
         of $0 and
         $625,582 during
         the six months
         ended June 30,
         2012 and 2011;
         and $0 and
         $261,180 during
         the three months
         ended June 30,
         2012 and 2011,
         respectively)      $27,146,315   $14,892,220   $16,147,061   $   9,259,430
        
        Cost of Sales        20,320,386    10,650,433    12,331,407       6,806,804
                            -----------   -----------   -----------   -------------
        
        Gross Profit          6,825,929     4,241,787     3,815,654       2,452,626
                            -----------   -----------   -----------   -------------
        
        Operating Expenses
          Selling expenses    1,354,553       795,109       664,646         574,633
          General and
           administrative
           expenses           2,360,913     1,416,998     1,309,698       1,090,445
          Loss on disposal
           of plant,
           property and
           equipment            123,775            --            --              --
                            -----------   -----------   -----------   -------------
        
        Total Operating
         Expenses             3,839,241     2,212,107     1,974,344       1,665,078
                            -----------   -----------   -----------   -------------
        
        Income From
         Operations           2,986,688     2,029,680     1,841,310         787,548
                            -----------   -----------   -----------   -------------
        
        Other Income
         (Expenses)
          Non-operating
           income
           (expense)            (23,039)       10,474       (25,338)          5,512
          Foreign exchange
           transaction
           gain (loss)           23,975       (60,729)       15,663         (37,531)
          Financial
           expense              (46,898)      (16,322)      (36,086)         (6,933)
                            -----------   -----------   -----------   -------------
        
        Total Other
         Expenses, Net          (45,962)      (66,577)      (45,761)        (38,952)
                            -----------   -----------   -----------   -------------
        
        Income Before
         Income Tax           2,940,726     1,963,103     1,795,549         748,596
        
        Income Tax Expense      537,104       378,035       370,589         169,070
                            -----------   -----------   -----------   -------------
        
        Net Income            2,403,622     1,585,068     1,424,960         579,526
        
        Other
         Comprehensive
         Income
          Foreign currency
           translation          (49,085)      235,985       (61,930)        131,511
                            -----------   -----------   -----------   -------------
        
        Comprehensive
         Income             $ 2,354,537   $ 1,821,053   $ 1,363,030   $     711,037
                            -----------   -----------   -----------   -------------
        
        Basic weighted
         average shares
         outstanding         18,431,799    11,788,314    18,486,567      11,952,747
                            -----------   -----------   -----------   -------------
        Diluted weighted
         average shares
         outstanding         18,589,410    11,788,314    18,491,138      11,952,747
                            -----------   -----------   -----------   -------------
        
        Basic net earnings
         per share          $      0.13   $      0.13   $      0.08   $        0.05
                            ===========   ===========   ===========   =============
        Diluted net
         earnings per
         share              $      0.13   $      0.13   $      0.08   $        0.05
                            ===========   ===========   ===========   =============
        
        
                           NOVA LIFESTYLE, INC. AND SUBSIDIARIES
                           CONDENSED CONSOLIDATED BALANCE SHEETS
                      JUNE 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011
        
                                                          June 30,     December 31,
                                                            2012           2011
                                                        ------------   ------------
                                                         (Unaudited)
        Liabilities and Stockholders' Equity
        
        Current Liabilities
          Accounts payable                              $  3,339,981   $  6,758,058
          Line of credit                                   3,495,140             --
          Advance from customers                              90,755         91,021
          Accrued liabilities and other payables             825,303        834,128
          Taxes payable                                      426,620        198,984
                                                        ------------   ------------
        
        Total Current Liabilities                          8,177,799      7,882,191
                                                        ------------   ------------
        
        Noncurrent Liabilities
          Deferred rent payable                               48,792         58,949
          Income tax payable                               4,215,859      4,016,266
                                                        ------------   ------------
        
        Total Noncurrent Liabilities                       4,264,651      4,075,215
                                                        ------------   ------------
        
        Total Liabilities                                 12,442,450     11,957,406
                                                        ------------   ------------
        
        Contingencies and Commitments
        
        Stockholders' Equity
          Common stock, $0.001 par value; 75,000,000
           shares authorized, 18,486,567 and
           17,898,267 shares issued and outstanding as
           of June 30, 2012 and December 31, 2011,
           respectively                                       18,487         17,898
          Additional paid-in capital                      18,970,395     17,074,535
          Subscription receivable                         (1,950,000)    (1,950,000)
          Statutory reserves                                   6,241          6,241
          Accumulated other comprehensive income           2,089,889      2,138,974
          Retained earnings                                7,976,058      5,572,436
                                                        ------------   ------------
        
        Total Stockholders' Equity                        27,111,070     22,860,084
                                                        ------------   ------------
        
        Total Liabilities and Stockholders' Equity      $ 39,553,520   $ 34,817,490
                                                        ============   ============
        
        
                            NOVA LIFESTYLE, INC. AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011
        
                                                             June 30,   December 31,
                                                               2012         2011
                                                           -----------  ------------
                                                           (Unaudited)
        Assets
        
        Current Assets
          Cash and cash equivalents                        $ 2,136,562  $  2,505,179
          Accounts receivable, net                          22,162,058    18,974,612
          Accounts receivable - related party                       --        28,289
          Due from factor                                           --       203,351
          Advance to suppliers                               1,123,472       349,767
          Inventories                                        2,325,080     1,848,081
          Prepaid expenses and other receivable                302,468       113,853
          Deferred tax asset                                   156,514       156,974
                                                           -----------  ------------
        
        Total Current Assets                                28,206,154    24,180,106
                                                           -----------  ------------
        
        Noncurrent Assets
          Heritage and cultural assets                         128,199       128,687
          Plant, property and equipment, net                 8,668,266     8,721,186
          Construction in progress                             978,224        91,466
          Construction deposit                                      --       634,830
          Goodwill                                             218,606       218,606
          Intangible assets, net                             1,235,900       724,465
          Deferred tax asset, net                              118,171       118,144
                                                           -----------  ------------
        
        Total Noncurrent Assets                             11,347,366    10,637,384
                                                           -----------  ------------
        
        Total Assets                                       $39,553,520  $ 34,817,490
                                                           ===========  ============
        
Source: Nova LifeStyle, Inc.

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