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Nova LifeStyle Reports Second Quarter 2017 Financial Results

LOS ANGELES, Aug. 07, 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 second quarter ended June 30, 2017, highlighted by higher gross margins and a return to profitability.

Second Quarter 2017 Financial Highlights:

  • Second quarter Net Sales were $19.5 million, compared to $19.7 million in the prior year period.
  • Gross profit for the second quarter was $3.5 million, compared to $2.4 million in the prior year period.      
  • Second quarter Gross Margin was 17.8%, compared to 12.4% in the prior year period. 
  • Net Income of approximately $0.56 million or $0.02 per diluted share based on 27.5 million shares outstanding in the second quarter of 2017, compared to a net loss of $0.69 million or ($0.03) per diluted share based on 24.9 million shares outstanding in the prior year period.

Six Months 2017 Financial Highlights:

  • Six-month Net Sales were $37.6 million, a decrease of 10.9% compared to $42.2 million in the prior year period.
  • Gross profit for the six months ended June 30, 2017 was $6.2 million, compared to $6.1 million in the prior year period.
  • Six-month Gross Margin was 16.4%, compared to 14.3% in the prior year period.
  • Net loss of approximately $0.65 million or ($0.02) per diluted share based on 27.4 million shares outstanding in six months ended June 30, 2017, compared to a net loss of $0.59 million or ($0.02) per diluted share based on 24.6 million shares outstanding in the prior year period.

Operational Overview

Product Category
Nova LifeStyle’s largest selling product categories in the three months ended June 30, 2017 were sofas, beds and coffee tables, which accounted for approximately 74%, 15% and 4% of sales, respectively. This was compared to the prior year period where the Company’s largest selling product categories were sofas, dining tables and beds, which accounted for approximately 62%, 9% and 8% of sales respectively.

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 pursue more opportunities associated with social media and e-commerce as a way to grow the business.

/EIN News/ -- Geographic Breakdown
North America
Sales to North America were $12.7 million in the three months ended June 30, 2017, a decrease of 0.5% from $12.8 million in the same period of 2016.  As a percentage of total revenue, North American sales remain the largest for Nova LifeStyle at 65.1%.

Asia
Sales to Asia, excluding Hong Kong, decreased by 37.2% to $0.88 million in the three months ended June 30, 2017, as compared to $1.4 million in the same period of 2016. This was due to a decrease in sales orders from customers in that region.

Australia
Sales to Australia increased to $4.2 million in the three months ended June 30, 2017, an increase of 223% from $1.3 million in the same period of 2016. This was primarily because of an increase of sales orders from satisfied customers who decided to purchase more products.  

Geographical distribution of sales is set out as follows:

(US$ in millions) For three months ended June 30,
    2017
  2016
  Sales % of Total Sales % of Total  
North America $ 12,727,804 65.1 % $ 12,786,666 64.7 %  
Asia**   876,554 4.5 %   1,395,321 7.1 %  
Europe   1,193,180 6.1 %   3,907,954 19.8 %  
Australia   4,248,240 21.8 %   1,315,280 6.7 %  
Hong Kong   461,943 2.4 %   277,012 1.4 %  
Other countries   26,046 0.1 %   58,814 0.3 %  
  $  19,533,767   $  19,741,047   %  

Balance Sheet and Cash Flow Highlights

  • Working capital at June 30, 2017 was $58.7 million, compared to $58.4 million at December 31, 2016.
  • The current ratio at June 30, 2017 was 11.95 to 1.0.

The following is a summary of cash provided by or used in each of the indicated types of activities during the six months ended June 30, 2017 and 2016:

    June 30,
2017
    June 30,
2016 
Cash (used in) provided by:            
Operating activities   $ (1,992,861   $ (1,244,869
Investing activities     8,247,868       (85,271 )
Financing activities     (3,670,768     993,287  

Net cash used by operating activities was $1.99 million in the six months ended June 30, 2017, compared to a cash outflow of $1.24 million in the prior year period.  This was primarily due to a reduction in accounts payable along with advances to suppliers offset by improved collection of accounts receivable and reduction of inventory.   

About Nova LifeStyle
Nova LifeStyle, Inc., a NASDAQ Global Market 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. Visit Nova's website: 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)
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2017 AND 2016 (UNAUDITED)
 
  Six Months Ended June 30,   Three Months Ended June 30,
     2017       2016        2017       2016  
                               
   (Unaudited)    (Unaudited)
               
Net Sales $   37,590,789     $   42,210,054     $   19,533,767     $   19,741,047  
               
Cost of Sales     31,417,150         36,155,603         16,061,903         17,291,739  
               
Gross Profit     6,173,639         6,054,451         3,471,864         2,449,308  
               
Operating Expenses              
Selling expenses     1,686,436         2,308,005         711,434         723,091  
General and administrative expenses     5,483,709         3,264,434          2,458,033         1,919,137  
               
Total Operating Expenses     7,170,145         5,572,439         3,169,467         2,642,228  
               
(Loss) Income From Operations     (996,506 )       482,012         302,397         (192,920 )
               
Other Income (Expenses)              
Non-operating income (expense), net     797         24,371         797         11,970  
Foreign exchange transaction loss     (230 )       (2,297 )     (190 )       (1,248 )
Interest expense, net     (92,161 )       (144,667 )       (37,755 )       (72,233 )
Financial expense     (51,827 )       (54,365 )       (25,767 )       (25,928 )
               
Total Other Expenses, Net     (143,421 )       (176,958 )       (62,915 )       (87,439 )
               
(Loss) Income Before Income Taxes and Discontinued operations     (1,139,927 )       305,054         239,482         (280,359 )
               
Income Tax (Benefit) Expense     (488,003 )       160,718         (317,984 )       141,677  
               
(Loss) Income From Continuing Operations     (651,924 )       144,336         557,466         (422,036 )
               
Loss From Discontinued Operations, net of tax     --         (732,979 )        --         (263,736 )
               
Net (Loss) Income     (651,924 )       (588,643 )       557,466         (685,772 )
               
Other Comprehensive Income              
Foreign currency translation     --       (322,114 )        --       (397,742 )
               
Comprehensive (Loss) Income $   (651,924 )   $   (910,757 )   $   557,466     $   (1,083,514 )
               
Basic weighted average shares outstanding     27,429,885         24,622,887         27,513,733          24,911,803  
Diluted weighted average shares outstanding     27,429,885         24,622,887          27,516,902          24,911,803  
               
Income (loss) from continuing operations per share of common stock              
Basic $   (0.02 )   $   0.01     $   0.02     $   (0.02 )
Diluted $   (0.02 )   $   0.01     $   0.02     $   (0.02 )
               
Loss from discontinued operations per share of common stock              
Basic $   --     $   (0.03 )   $   --     $    (0.01 )
Diluted $   --     $   (0.03 )   $    --     $   (0.01 )
               
Net (loss) income per share of common stock              
Basic $   (0.02 )   $   (0.02 )   $   0.02     $   (0.03 )
Diluted $   (0.02 )   $   (0.02 )   $   0.02     $   (0.03 )


 
NOVA LIFESTYLE, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016
 
  June 30,   December 31,
    2017     2016
Assets      
       
Current Assets      
Cash and cash equivalents $   5,171,982   $   2,587,743
Accounts receivable, net     31,601,120       42,102,761
Advance to suppliers     24,592,466       13,669,752
Inventories     2,013,003       2,781,123
Assignment fee receivable     --       1,250,000
Receivable from an unrelated party     --       7,000,000
Prepaid expenses and other receivables     710,929       642,891
Taxes receivable     14,894       14,893
       
Total Current Assets      64,104,394       70,049,163
       
Noncurrent Assets      
Plant, property and equipment, net     153,265       171,276
Lease deposit     43,260       43,260
Goodwill     218,606       218,606
Intangible assets, net     4,944,616       5,686,623
Deferred tax asset     1,523,720       874,759
       
Total Noncurrent Assets     6,883,467       6,994,524
       
Total Assets  $   70,987,861   $   77,043,687
       
Liabilities and Stockholders' Equity      
Current Liabilities      
Accounts payable $   71,834   $   2,368,775
Line of credit     4,307,073       7,977,841
Advance from customers     16,396       513,880
Accrued liabilities and other payables     967,041       780,960
       
Total Current Liabilities     5,362,344       11,641,456
       
Noncurrent Liabilities      
Income tax payable     2,297,748       2,136,788
       
Total Noncurrent Liabilities     2,297,748       2,136,788
       
Total Liabilities     7,660,092       13,778,244
       
Contingencies and Commitments      
       
Stockholders' Equity      
Common stock, $0.001 par value; 75,000,000 shares      
  authorized; 27,767,905 and 27,309,695 shares issued and      
  outstanding as of June 30, 2017 and December 31, 2016,      
  respectively   27,768     27,309
Additional paid-in capital     37,599,253       36,885,462
Statutory reserves     6,241       6,241
Retained earnings     25,694,507       26,346,431
       
Total Stockholders' Equity     63,327,769       63,265,443
       
Total Liabilities and Stockholders' Equity $   70,987,861   $      77,043,687

 

 
NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 (UNAUDITED)
 
  Six Months Ended June 30,
    2017       2016  
                   
  (Unaudited)
Cash Flows From Operating Activities      
 Net (loss) income from continuing operations $   (651,924 )   $   144,336  
Adjustments to reconcile net income (loss) to net cash used in
 operating activities:
     
Depreciation and amortization     762,150         310,851  
Deferred tax benefit      (648,961 )        --  
Stock compensation expense     913,264         938,501  
Changes in bad debt allowance      504,324         (18,477 )
Changes in operating assets and liabilities:      
Accounts receivable     9,997,317         1,602,326  
Advance to suppliers      (10,922,714 )       (6,761,289 )
Inventories      768,120         (75,326 )
Other current assets     (267,052 )       152,260  
Accounts payable     (2,296,941 )       2,162,024  
Advance from customers     (497,484 )       926,231  
Accrued expenses and other payables      186,081         (538,652 )
Taxes payable     160,959         153,520  
       
Net Cash Used in Continuing Operations     (1,992,861 )       (1,003,695 )
Net Cash Used in Discontinued Operations     --          (241,174 )
       
Net Cash Used in Operating Activities     (1,992,861 )      (1,244,869 )
       
Cash Flows From Investing Activities      
Assignment fee received     1,250,000          --  
Purchase of property and equipment      (2,132 )       (3,544 )
Advances to unrelated parties   (8,835,000 )     --  
Repayment from unrelated parties     15,835,000         --  
       
Net Cash Provided by (Used in) Continuing Operations     8,247,868         (3,544 )
Net Cash Used in Discontinued Operations     --         (81,727 )
       
Net Cash Provided by (Used in) Investing Activities     8,247,868         (85,271 )
       
Cash Flows From Financing Activities      
  Proceeds from line of credit and bank loan     23,094,342         19,758,074  
  Repayment to line of credit and bank loan     (26,765,110 )       (19,086,365 )
       
Net Cash (Used in) Provided by Continuing Operations     (3,670,768 )       671,709  
Net Cash Provided by Discontinued Operations     --         321,578  
       
Net Cash (Used in) Provided by Financing Activities     (3,670,768 )       993,287  
       
Effect of Exchange Rate Changes on Cash and Cash Equivalents     --         (1,746    )
       
Net increase (decrease) in cash and cash equivalents     2,584,239        (338,599 )
Cash and cash equivalents, beginning of period     2,587,743         988,029    
       
Cash and cash equivalents, end of period $   5,171,982     $  649,430  


 
NOVA LIFESTYLE, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 (UNAUDITED)
 
  Six Months Ended June 30,
   2017    2016
           
       
  (Unaudited)
Analysis of cash and cash equivalents      
Included in cash and cash equivalents per consolidated balance sheets $   5,171,982   $   584,339
Included in assets of discontinued operations     -        65,091
       
Cash and cash equivalents, end of period $   5,171,982   $   649,430
       
 
Supplemental Disclosure of Cash Flow Information
Continuing operations:      
Cash paid during the period for:      
Income tax payments $   --   $   7,200
Interest expense $   118,753   $   144,668
       
Discontinued operations:      
Cash paid during the period for:      
Income tax payments $   --   $   --
Interest expense $   --   $   86,164
           
Company Contact:
Investor Relations:
The Equity Group Inc.
In U.S.
Adam Prior, Senior Vice President
+1 (212) 836-9606
aprior@equityny.com

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