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Nova LifeStyle Reports Fourth Quarter and Full Year 2016 Financial Results

LOS ANGELES, April 14, 2017 (GLOBE NEWSWIRE) -- Nova LifeStyle, Inc. (NASDAQ:NVFY), a U.S. based fast-growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture, today announced financial results for the fourth quarter and twelve months ended December 31, 2016.

/EIN News/ -- Full Year 2016 Financial Highlights:

  • For the twelve-month period ended December 31, 2016, Net Sales were $92.65 million, an increase of 3% compared to the prior year.  Sales growth was driven primarily by a 52% increase in average selling prices, which offset a 32% decrease in sales volume.
  • For the full year 2016, gross profit was $13.5 million, a decrease of 11.5% versus the prior year period. 
  • Gross Profit and Gross Margin both decreased due to an increase in cost of sales as a percentage of net sales, caused by an increase in the cost of high quality products purchased from third parties.
  • For the full year 2016, Net loss was $(1.1) million, or $(0.04) per diluted share based on 25.4 million shares outstanding, compared to net income of $2.2 million or $0.10 per diluted share based on 22.8 million shares outstanding in the prior year period.

 Fourth Quarter 2016 Financial Highlights:

  • Fourth quarter Net Sales were $19.9 million compared to $23.2 million in the prior year period.
  • Gross profit for the fourth quarter was $2.9 million, a decrease of 23.2% from the prior year period.      
  • Fourth quarter Gross Margin was 14.4%, compared to 16.1% in the prior year period while full year 2016 Gross Margin was 15%, compared to 17% in the prior year period.  Fourth quarter sales mix was more heavily weighted to lower price products which also yield lower margins for the Company.
  • Net loss was $830,947, or $(0.03) per diluted share based on 25.4 million shares outstanding in the fourth quarter of 2016, compared to net income of $684,503 or $0.03 per diluted share based on 22.8 million shares outstanding in the prior year period. 

Subsequent Events

  • Nova LifeStyle Launches Blockchain-Based Site to Enhance E-Commerce Strategy in January 2017

Management Commentary
Tawny Lam, Chief Executive Officer of Nova LifeStyle, stated, "Our 2016 results were highlighted by our partnership with Future World Lifestyle and the launch of our www.nova-mart.com website in early 2017, which demonstrate our commitment to expanding our e-commerce channels in order to create the greatest opportunity for consumers to choose Nova Lifestyle products and services.  This capped a number of strategic changes we made during the year, including the sale of our Chinese manufacturing operations, in order to best position the Company for future success.  In addition to these strategic changes, we also refocused our product line to emphasize higher-margin products.  As a result, we saw a marked increase in our average selling prices for the year, although those gains were tempered by an expected reduction in volumes.  The net impact was a 3% increase in revenues versus 2015.”

Ms. Lam continued, “With the strategic changes made toward the end of the year, coupled with our shift to higher-margin products, we feel we are well-positioned for success in 2017.  We are also excited to announce that Nova LifeStyle has embraced the blockchain trend in China and has transitioned more towards a blockchain based model. With the introduction of www.nova-mart.com, Nova LifeStyle’s flagship training school, the Company is poised to be a leader in this emergent technology.”

Operational Overview

Product Category
Nova LifeStyle’s largest selling product categories in the twelve months ended December 31, 2016 and 2015 were sofas, beds and dining tables, which accounted for approximately 61%, 11% and 7% of sales, respectively, for the twelve months ended December 31, 2016, versus 36%, 14% and 15% of sales in the prior year period.

In order to drive growth, the Company is focused on the adoption of new image standards along with continued expansion of its product lines.  The Company intends to enrich its product lines to include a bedroom series, which would include beds, bed side tables, mattresses (which could be imported or purchased in China) and bedding sets including bed sheets, pillowcases, quilt covers, and other items (which can be purchased within China).

Geographic Breakdown
North America
Sales to North America were $58.2 million in the twelve months ended December 31, 2016, a decrease of 23% from $75.5 million in the same period of 2015, driven by an aggressive change in the product mix.  As a percentage of total revenue, North American sales remain the largest for Nova LifeStyle at 62.8%.

Asia
Sales to Asia, excluding Hong Kong, overall sales increased by 63% to $4.4 million in the twelve months ended December 31, 2016, as compared to $2.7 million in the same period of 2015, driven by increased sales orders from one customer in the Middle East.

Europe 
Sales to Europe were $12.5 million in the twelve months ended December 31, 2016, an increase of 18% from $10.6 million in the same period of 2015 as a result of the continued renewal of growth in European economies.

Geographical distribution of sales is set out as follows:

(US$ in millions)   For twelve months ended December 31,
   2016
2015
  Sales   % of Total   Sales   % of Total  
North America   58,203,291        62.8 %     75,447,905        83.9 %  
Asia**   4,349,661   4.7 %     2,676,669   3.0 %  
Europe   12,488,328   13.5 %     10,579,444   11.8 %  
Australia   4,871,892   5.3 %     535,145   0.6 %  
Hong Kong   2,499,418   2.7 %     384,832   0.4 %  
China   10,002,059   10.8 %     - -  
Other countries   233,546   0.3 %     319,420   0.4 %  
  $ 92,648,195     $ 89,943,415    
                 

Notable Achievements and Highlights During 2016

  • January: Attended Las Vegas Market Winter exposition.
  • February: Announced partnership with China Vanke.
  • March: Announced expansion of the Company’s relationship with IKEA in China.
  • April: Attended the High Point Market Spring exposition.
  • July/August: Attended the Las Vegas Market Summer exposition.
  • September: Announced the sale of the Company’s Chinese manufacturing business.
  • October: Announced leadership change. Ms. Tawny Lam replaced Mr. Ya Ming “Jeffrey” Wong as Chief Executive Officer.
  • November: Announced partnership with Inno International Trading, which allowed the Company to begin establishing itself on Inno’s reward point platform.
  • December: Announced partnership with Future World LifeStyle, which will feature Diamond Sofa Smart Furniture on its weilai178.com website. This partnership offers the Company 3 million plus members of weilai178.com a reward redemption program that is used for products listed on its website.

Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents were $2.6 million at December 31, 2016, as compared to $920,227 as of December 31, 2015. 
  • Working capital at December 31, 2016 was $58.4 million, as compared to $48.6 million at December 31, 2015.
  • The current ratio at December 31, 2016 was 6.02 to 1.0.

The following is a summary of cash provided by or used in each of the indicated types of activities during the twelve months ended December 31, 2016 and 2015:

    2016     2015  
Cash (used in) provided by:              
Operating activities   $ (6,421,503   $ (4,229,308
Investing activities     6,098,402       (2,473,664 )
Financing activities     1,925,654       6,452,072  
                 

Net cash used in operating activities was $6.4 million in the twelve months ended December 30, 2016, an increase of cash outflow of $2.2 million from $4.2 million of cash used in operating activities in the same period of 2015.  The increase in cash outflow was impacted by increased advances to suppliers, which totaled $5.7 million during 2016, versus an inflow of $0.2 million in the prior year.

About Nova LifeStyle
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. In November 2016, Nova Lifestyle announced entry into asset-light e-commerce and service related businesses. 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 STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
  Years Ended December 31,   Three Months Ended December 31,
     2016       2015        2016       2015  
  (audited)   (audited)   (unaudited)   (Unaudited)
               
Net Sales $ 92,648,195     $ 89,943,415     $ 19,899,223     $ 23,217,604  
Cost of Sales   79,124,451       74,664,644       17,033,016       19,487,924  
Gross Profit   13,523,744       15,278,771       2,866,207       3,729,680  
               
Operating Expenses              
Selling expenses   5,324,270       4,631,758       966,064       1,922,597  
General and administrative expenses   8,965,566       6,016,805       4,209,448       1,210,523  
Total Operating Expenses   14,289,836       10,648,563       5,175,512       3,133,120  
Income (Loss) From Operations   (766,092 )     4,630,208       (2,309,305 )     596,560  
               
Other Income (Expenses)              
Non-operating (income) expense, net   46,717       43,237       5,723       4,411  
Foreign exchange transaction loss   (6,386 )     (7,003 )     (808 )     (1,795 )
Loss on change in fair value and extinguishment of warrant liability   --       (767,096 )     --       --  
Interest expense   (283,795 )     (275,630 )     (42,593 )     (70,306 )
Financial expense   (119,100 )     (57,866 )     (31,002 )     (15,796 )
Total Other Expenses, Net   (362,564 )     (1,064,358 )     (68,680 )     (83,486 )
               
Income (Loss) Before Income Taxes and Discontinuing operations   (1,128,656 )     3,565,850       (2,377,985 )     513,074  
Income Tax (Benefit) Expense   (836,620 )     161,443       (896,683 )     49,507  
Income (Loss) From Continuing Operations   (292,036 )     3,404,407       (1,481,302 )     463,567  
               
Loss from Discontinued Operations, net of tax   (826,217 )     (1,204,165 )     650,355       220,936  
Net Income (Loss)   (1,118,253 )     2,200,242       (830,947 )     684,503  
               
Other Comprehensive Income (Loss)              
Release of foreign currency translation adjustments upon disposal of subsidiaries     836,014       -       836,014       -  
Foreign currency translation   (734,520 )     (1,004,633 )     (313,768 )     (349,463 )
Comprehensive Income (Loss) $ (1,016,759 )   $ 1,195,609     $ (308,701 )   $ 335,040  
               
Basic weighted average shares outstanding   25,432,037       22,825,652       25,432,037       22,825,652  
Diluted weighted average shares outstanding   25,432,037       22,825,652       25,432,037       22,825,652  
               
Income (loss) from continuing operations per share of common stock              
Basic $ (0.01 )   $ 0.15     $ (0.06 )   $ 0.02  
Diluted $ (0.01 )   $ 0.15     $ (0.06 )   $ 0.02  
Income (loss) from discontinuing operations per share of common stock              
Basic $ (0.03 )   $ (0.05 )   $ 0.03     $ 0.01  
Diluted $ (0.03 )   $ (0.05 )   $ 0.03     $ 0.01  
Net Income (loss) per share of common stock              
Basic $ (0.04 )   $ 0.10     $ (0.03 )   $ 0.03  
Diluted $ (0.04 )   $ 0.10     $ (0.03 )   $ 0.03  
                               


NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2016 AND 2015
       
       
    2016     2015
  (Audited)   (Audited)
       
Assets      
       
Current Assets      
Cash and cash equivalents $   2,587,743   $   920,227
Accounts receivable, net     42,102,761       42,684,259
Advance to suppliers     13,669,752       7,936,141
Inventories     2,781,123       2,514,319
Assignment fee receivable   1,250,000     -
Receivable from an unrelated party   7,000,000     -
Prepaid expenses and other receivables     642,891       508,999
Taxes receivable     14,893       8,494
Assets of discontinued operations   -     11,260,606
       
Total Current Assets      70,049,163       65,833,045
       
Noncurrent Assets      
Heritage and cultural assets     --    
Plant, property and equipment, net     171,276       200,077
Lease deposit     43,260       43,260
Deposits for equipment and factory construction       --       --
Goodwill     218,606       218,606
Intangible assets, net     5,686,623       6,247,481
Deferred tax asset     874,759       61,000
Assets of discontinued operations, non-current   -     17,144,538
       
Total Noncurrent Assets     6,994,524       23,914,962
       
Total Assets  $   77,043,687   $   89,748,007
           




NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 2016 AND 2015
       
    2016     2015
  (Audited)   (Audited)
Liabilities and Stockholders' Equity      
       
Current Liabilities      
Accounts payable $ 2,368,775   $ 5,708,259
Line of credit   7,977,841     1,848,000
Advance from customers   513,880     63,789
Accrued liabilities and other payables   780,960     1,438,105
Taxes payable   --     -
Liabilities of discontinued operations   -     8,147,018
       
Total Current Liabilities   11,641,456     17,205,171
       
Noncurrent Liabilities      
Line of credit   --     5,659,357
Deferred rent payable   --     -
Income tax payable   2,136,788     2,160,449
Liabilities of discontinued operations, non-current   -     4,731,348
       
Total Noncurrent Liabilities   2,136,788     12,551,154
       
Total Liabilities   13,778,244     29,756,325
       
Contingencies and Commitments      
       
Stockholders' Equity      
Common stock, $0.001 par value; 75,000,000 shares authorized,        
  27,309,695 and 24,254,160 shares issued and outstanding;   27,309     24,254
  as of December 31, 2016 and 2015, respectively  
Additional paid-in capital   36,885,462     31,761,983
Statutory reserves   6,241     6,241
Accumulated other comprehensive income   -     1,570,534
Retained earnings   26,346,431     26,628,670
       
Total Stockholders' Equity   63,265,443     59,991,682
       
Total Liabilities and Stockholders' Equity $ 77,043,687   $ 89,748,007
           


NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
         
CONSOLIDATED STATEMENTS OF CASH FLOWS  
         
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015  
         
    2016       2015    
         
Cash Flows From Operating Activities        
Net income (loss) from continuing operations $ (292,036 )   $ 3,404,407    
Adjustments to reconcile net income to net cash        
  provided by (used in) operating activities:        
Depreciation and amortization   603,155       512,884    
Deferred tax expense   (813,760 )     (52,742 )  
Stock compensation expense   1,637,362       1,377,328    
Change in fair value and extinguishment of warrant liability   --       767,096    
Bad debt expenses   2,603,745       660,136    
Changes in operating assets and liabilities:        
Accounts receivable   (2,022,248 )     (8,782,341 )  
Advance to suppliers   (5,733,611 )     231,046    
Inventories   (266,804 )     (1,193,622 )  
Other current assets   298,115       (724,046 )  
Accounts payable   (3,856,326 )     (533,545 )  
Advance from customers   450,091       (58,251 )  
Accrued expenses and other payables   (710,327 )     (295,394 )  
Taxes payable   (30,060 )     115,616    
         
Net Cash Used in Continuing Operations   (8,132,704 )     (4,571,428 )  
Net Cash Provided by (Used in) Discontinuing Operations   1,711,201       342,120    
Net Cash Used in Operating Activities   (6,421,503 )     (4,229,308 )  
         
         
Cash Flows From Investing Activities        
Deposits on plant construction and equipment       (52,398 )  
Payment for land compensation fee and occupancy tax   --       --    
Purchase of property and equipment   (13,494 )     --    
Proceeds from disposal of subsidiaries, net of ($43,873) of cash disposed of     13,206,127       --    
Adavnces to an unrelated party   (7,000,000 )     --    
Construction in progress   --       (231,864 )  
         
Net Cash Used in Continuing Operations   6,192,633       (284,262 )  
Net Cash (Used in) Provided by Discontinuing Operations   (94,231 )     (2,189,402 )  
Net Cash Used in Investing Activities   6,098,402       (2,473,664 )  
         
         
Cash Flows From Financing Activities        
Proceeds from line of credit and bank loan   44,405,074       36,034,645    
Repayment to line of credit and bank loan   (43,934,591 )     (35,057,901 )  
Proceeds from warrant exercised   3,093,918       --    
Proceeds from equity financing, net of expenses of $355,000   --       3,645,002    
         
Net Cash Provided by Continuing Operations   3,564,401       4,621,746    
Net Cash (Used in) Provided by Discontinuing Operations   (1,638,747 )     1,830,326    
Net Cash Provided by Financing Activities $ 1,925,654     $ 6,452,072    
         

 

   
NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
   
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)  
   
FOR THE YEAR ENDED DECEMBER 31, 2016 AND 2015  
   
    2016     2015  
             
Effect of Exchange Rate Changes on Cash and Cash Equivalents   $ (2,839 )   $   (5,379 )
                 
Net (decrease) increase in cash and cash equivalents     1,599,714         (256,279 )
                 
Cash and cash equivalents, beginning of year     988,029         1,244,308  
                 
Cash and cash equivalents, ending of year   $ 2,587,743     $   988,029  
                 
Analysis of cash and cash equivalents                
                 
Included in cash and cash equivalents per consolidated balance sheets   $ 2,587,743     $ $ 920,227  
Included in assets of discontinued operations     -         67,802  
Cash and cash equivalents, end of year   $ 2,587,743     $   988,029  
                 
Supplemental Disclosure of Cash Flow Information                
                 
Continuing operations:                
Cash paid during the period for:                
Income tax payments   $ 7,200     $   131,292  
Interest paid   $ 282,951     $   275,860  
                 
Discontinued operations:                
Cash paid during the period for:                
Income tax payments   $ --     $   --  
Interest paid   $ 145,645     $   112,465  
                 
Supplemental Disclosure of Non-Cash Investing and Financing Activities                
                 
Construction in progress and deposits for equipment and factory construction transfer to fixed assets     $ --     $   2,406,995  
Deposit on plant construction and website design transfer to construction in progress   $ --     $   1,208,200  
Issuance of common stock in exchange of surrender and termination of warrants   $ --     $   2,232,115  

 

Company Contact:
Investor Relations:
The Equity Group Inc.
In U.S.
Adam Prior, Senior Vice President
+1 (212) 836-9606
aprior@equityny.com

In China
Katherine Yao, Senior Associate
+86-10-6587-6435
kyao@equityny.com

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