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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.

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 TotalSales% of Total
North America$12,727,80465.1%$12,786,66664.7%
Asia** 876,5544.5% 1,395,3217.1%
Europe 1,193,1806.1% 3,907,95419.8%
Australia 4,248,24021.8% 1,315,2806.7%
Hong Kong 461,9432.4% 277,0121.4%
Other countries 26,0460.1% 58,8140.3%
$ 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

Source:Nova LifeStyle, Inc.