LOS ANGELES - Nova LifeStyle Inc. (NASDAQ-GM: 'NVFY'), a U.S.-based  designer, manufacturer and distributor of modern furniture, says sales rose 16 percent third quarter, and that it shipped to IKEA and fulfills orders from Alibaba, China's answer to Amazon.

Third Quarter Corporate Highlights and Progress on Growth Initiatives:

  • Rang Closing Bell at NASDAQ
  • Agreement to Furnish Ping An Insurance Group's Expansive Offices
  • Purchase Order Fulfilled with IKEA China
  • Growth in China Online Sales via Alibaba's B2C Site, TMall and JD.com
  • Expanded Franchise Network in Partnership with Franchise Builder, Ablejoy

Third Quarter Financial Highlights:

  • Third Quarter Net Sales Increased 16% Y-o-Y
  • Third Quarter Gross Profit Increase 34% Y-o-Y
  • Third Quarter Diluted EPS of $0.15 Y-o-Y

Corporate achievements for the third quarter ended September 30, 2014:

"We began this quarter with a trip to NASDAQ to ring the opening bell and continued on to deliver a strong third quarter," stated Tawny Lam, President of Nova LifeStyle, Inc.  "We were successful on our commitment to grow sales in China with a signed agreement with Ping An, number 62 on Forbes Global 2000 list of the largest companies in the world; in September, we shipped the first of three monthly shipments to IKEA's distribution center in Shanghai; and we expanded our franchise network by partnering with Ablejoy, one of China's largest franchise builders.  We made good on our initiative to grow eCommerce sales and are thrilled with the 200% increase that we experienced for the whole of the third quarter via the online sales venues of Alibaba's B2C site, TMall and JD.com.  We stayed true to our mission to create innovative designs, offer a diversified product line and maintained a leading-edge, fully integrated design-to-production business model, which for us, is the fundamental strength of our business and will allow us to drive long-term shareholder value."

  • The Company continued to execute on its growth initiative to increase sales in China with the signing of an agreement with Ping An Insurance Group of China, Ltd. ("Ping An") to furnish their new offices in China.  The first shipment of the initial, first-year commitment was received during the third quarter of this year.   Ping An is engaged in providing integrated financial services within three core businesses of life insurance, property & casualty insurance and banking, securities and corporate insurance.  With over 200,000 employees, Ping An is publicly traded on both the Hong Kong and the Shanghai Stock Exchanges and is an industry leader, posting consolidated total assets of RMB3.36 trillion as at December 31, 2013.
  • The Company has commenced production shipments to IKEA under its supply agreement to manufacture IKEA products for sale in China and Asia.  The first of three monthly shipments was received in September at IKEA's distribution center in Shanghai, China.  Production of the furniture is ongoing at the 15,000 square meter production line, which meets IKEA's stringent manufacturing specifications at Nova's factory in Dongguan, China.  In August, the Company reported beginning production and the samples shipment in preparation for September purchase order fulfillment.
  • The Company continues the development of Nova LifeStyle's dedicated e-Commerce platform, which will exclusively offer furniture and home furnishings of many popular major brands to consumers in China, and still plans for completion of an initial launch by the end of the fourth quarter of 2014.
  • The Company's plan to launch a new Mobile Device Application remains on track to launch during the fourth quarter 2014.

Financial results for the third quarter ended September 30, 2014:

  • Net sales were $25.9 million, an increase of 16% compared to $22.3 million from the prior year period, and is primarily the result of a 6% increase in sales volume and 9% increase in average selling price.  North American sales continued to drive growth contributing a 45% increase up from a 43% increase the previous quarter.  Sales to China increased marginally to $4.44 million in the three months ended September 30, 2014 from $4.39 million in the same period of 2013.  Sales to Asia, including Hong Kong, and other countries, increased 2.81% to $1.20 million in the three months ended September 30, 2014 compared to $1.17 million in the same period of 2013.  Sales in Europe were $1.9 million and continued a year over year contraction as result of the sluggish European economy. 
  • Gross profit was $5.9 million, an increase of 34% compared to the prior year.  Gross profit margin increased to 23% in the three months ended September 30, 2014, compared to 20% in the same period of 2013. The increase in gross profit margin resulted primarily from decreased cost of sales as a percentage of net sales, which was due primarily to increased sales and decreased cost of direct materials for self-produced products.  Additionally, the Company attracted more sales orders from large trading company customers by conducting trade shows in United States.
  • Operating income was $2.6 million compared to $1.7 million in the prior year period, primarily reflecting higher general and administrative expenses including research and development expenses to advance the Company's growth initiatives and amortization associated with the acquisition of Bright Swallow. This was partially offset by a 100 basis point improvement in selling expenses as a percentage of net sales. Overall SG&A expenses as a percentage of net sales declined by 170 basis points.
  • Net income was $3.1 million, an increase of 156% from $1.22 million for the same period of 2013, or $0.15 per diluted share, based on a weighted average diluted share count of 20.9 million shares. 

Results for the first nine months ended September 30, 2014:

  • Net sales were $69.7 million, an increase of 23% from $56.5 million the prior year period. This growth was primarily driven by a 34% increase in sales volume due to a 9% decrease in average selling price. The increased sales volume of low price products in both the China domestic market and worldwide was a key factor.
  • Gross profit was $14.1 million, an increase of 23% compared to the prior year period's gross profit of $11.5 million.  The increase in gross profit was primarily the result of increase of net sales. Our gross profit margin stayed the same at 20% in the nine months ended September 30, 2014, compared with the same period of 2013.
  • Operating income was $4.7 million and was relatively unchanged compared to $4.7 million in the prior year period. 
  • Net income was $6.8 million, or $0.33 per diluted share, based on a weighted average diluted share count of 20.3 million shares, and included a non-cash, pre-tax gain of $2.8 million due to the change in the fair value of warrant liability. This compares to net income of $3.9 million, or $0.19 per diluted share, on 19.0 million weighted average shares outstanding in the prior year period.

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





SEPTEMBER 30, 2014 (UNAUDITED) AND DECEMBER 31, 2013






September 30,


December 31,


2014


2013


(Unaudited)



Assets








Current Assets




Cash and cash equivalents

$   1,867,461


$   2,323,338

Accounts receivable, net

37,730,838


27,967,831

Advance to suppliers

6,368,879


3,535,100

Inventories

6,095,466


3,353,634

Prepaid expenses and other receivables

1,018,799


648,620

Income tax receivable

--


38,654

Deferred tax asset

242,403


243,682





Total Current Assets      

53,323,846


38,110,859





Noncurrent Assets




 Heritage and cultural assets

131,791


132,993

 Plant, property and equipment, net

14,517,939


13,146,638

 Construction in progress

613,367


1,024,645

 Lease deposit

92,550


103,122

 Deposits

795,490


-

 Goodwill

218,606


1,027,124

 Intangible assets, net

6,608,218


6,976,991

 Deferred tax asset, net

--


44,334





Total Noncurrent Assets

22,977,961


22,455,847





Total Assets      

$ 76,301,807


$ 60,566,706









Liabilities and Stockholders' Equity








Current Liabilities




Accounts payable 

$   8,353,551


$   6,895,254

Line of credit

7,167,715


820,089

Advance from customers

102,055


43,077

Accrued liabilities and other payables

1,426,931


1,458,157

Warrant derivative liability

2,818,689


--

Taxes payable

87,140


-





Total Current Liabilities

19,956,081


9,216,577





Noncurrent Liabilities




 Line of credit

-


6,602,258

 Deferred rent payable

79,685


74,152

 Deferred tax liability

10,978


--

 Income tax payable

6,458,094


5,944,424





Total Noncurrent Liabilities

6,548,757


12,620,834





Total Liabilities

26,504,838


21,837,411





Contingencies and Commitments








Stockholders' Equity




Common stock, $0.001 par value; 75,000,000 shares authorized, 




20,887,316 and 19,206,024 shares issued and outstanding 

20,787


19,206

as of September 30, 2014 and December 31, 2013


Additional paid-in capital

24,183,997


20,977,058

Subscription receivable

--


(750,000)

Shares to be issued

462,000


--

Statutory reserves

6,241


6,241

Accumulated other comprehensive income 

2,473,274


2,603,010

Retained earnings 

22,650,670


15,873,780





Total Stockholders' Equity

49,796,969


38,729,295





Total Liabilities and Stockholders' Equity

$ 76,301,807


$ 60,566,706

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES









CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME









FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013 (UNAUDITED)










Nine Months Ended September 30,


Three Months Ended September 30,


2014


2013


2014


2013


 (Unaudited) 


 (Unaudited) 









Net Sales 

$ 69,708,982


$ 56,471,241


$ 25,892,872


$ 22,310,842









Cost of Sales

55,592,993


44,973,299


20,001,433


17,911,859









Gross Profit

14,115,989


11,497,942


5,891,439


4,398,983









Operating Expenses








Selling expenses

2,798,329


2,386,646


1,174,658


812,574

General and administrative expenses

5,799,195


4,381,147


2,128,469


1,880,448

Goodwill impairment

808,518


--


--


--

  Loss on disposal fixed assets

28,963


--


6,437


--








 . 

Total Operating Expenses

9,435,005


6,767,793


3,309,564


2,693,022









Income From Operations

4,680,984


4,730,149


2,581,875


1,705,961









Other Income (Expenses)








Non-operating income (expenses), net

164,280


(46,497)


(2,721)


(9,571)

Change in fair value of warrant liability

2,841,177


--


630,264


--

Interest income (expense)

(100,917)


(218,815)


38,548


(76,349)

Financial expense

(56,323)


(106,229)


(49,458)


(39,883)









Total Other Income (Expenses), Net

2,848,217


(371,541)


616,633


(125,803)









Income Before Income Tax

7,529,201


4,358,608


3,198,508


1,580,158









Income Tax Expense

752,311


772,135


77,825


359,232









Net Income

6,776,890


3,586,473


3,120,683


1,220,926









Other Comprehensive Income








Foreign currency translation

(129,736)


313,811


(1,359)


69,909









Comprehensive Income

$   6,647,154


$   3,900,284


$   3,119,324


$   1,290,835









Basic weighted average shares outstanding

20,133,976


18,778,902


20,861,990


19,026,934

Diluted weighted average shares outstanding

20,274,325


19,038,815


20,943,076


19,276,153









Basic net earnings per share 

$            0.34


$            0.19


$            0.15


$            0.06

Diluted net earnings per share 

$            0.33


$            0.19


$            0.15


$            0.06

 

NOVA LIFESTYLE, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS



FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013 (UNAUDITED)






Nine Months Ended September 30, 


2014


2013


(Unaudited)





Cash Flows From Operating Activities




 Net Income 

$  6,776,890


$  3,586,473

Adjustments to reconcile net income to net cash provided by




 (used in) operating activities:




Depreciation and amortization

1,244,376


923,347

Deferred tax expense (benefit)

55,317


(17,179)

Stock compensation expense 

462,895


449,490

Warrants expense

76,629


48,747

    Change in fair value of warrant liability

(2,841,177)


--

Changes in bad debt allowance

76,438


22,947

Goodwill impairment

808,518


--

Loss on disposal of fixed assets

28,963


--

Changes in operating assets and liabilities:




Accounts receivable

(9,886,758)


(1,594,509)

Advance to suppliers

(2,839,808)


1,083,200

Inventories

(2,761,204)


31,344

Other current assets

(127,273)


(434,290)

Accounts payable 

1,486,895


(2,034,541)

Advance from customers

59,882


(209,094)

Accrued expenses and other payables

(64,664)


(37,491)

Deferred rent payable

6,211


6,142

Taxes payable

678,640


413,876





Net Cash (Used in) Provided By Operating Activities

(6,759,230)


2,238,462





Cash Flows From Investing Activities




    Deposit on acquisition of Bright Swallow Int'l Group Ltd.

--


(3,500,000)

    Cash acquired from acquisition of Bright Swallow

--


342,029

    Deposits on plant construction

(786,378)


--

   Purchase of property and equipment

(1,371,816)


(467,964)

   Cash received from disposition of fixed assets

11,998


--

   Construction in progress

(640,501)


(319,309)





Net Cash Used in Investing Activities

(2,786,697)


(3,945,244)





Cash Flows From Financing Activities




     Repayment to related parties

--


(1,987)

     Proceeds from line of credit and bank loan

21,417,000


12,081,000

     Repayment to line of credit and bank loan

(21,664,221)


(12,762,396)

     Proceeds from subscription receivable

750,000


--

    Cash received from warrants exercised

448,841


795,848

     Proceeds from equity financing, net of expenses of $831,000

8,139,000


--





Net Cash Provided by Financing Activities

$  9,090,620


$     112,465





Effect of Exchange Rate Changes on




 Cash and Cash Equivalents

$          (570)


$       24,221





Net decrease in cash and cash equivalents

(455,877)


(1,570,096)





Cash and cash equivalents, beginning of period

2,323,338


3,150,492





Cash and cash equivalents, ending of period

$  1,867,461


$  1,580,396





Supplemental Disclosure of Cash Flow Information





Cash paid during the year for:




Income tax payments

$       21,485


$     358,957

    Interest expense

$     227,285


$     210,303





Supplemental Disclosure of Non-Cash Financing Activities





      Construction in progress transfer to fixed assets

$  1,044,015


$  4,747,359

Source: Nova LifeStyle, Inc.

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