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 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 | |