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) 
---------------------------------------------------------------------------- 
 
                                             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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