HispanicBusiness

COMMERCE, CA -- (Marketwire) -- 05/15/12 -- Nova LifeStyle, Inc. (OTCBB: STVS) (website: www.novaLifeStyle.com), an emerging leader in the U.S. and worldwide in self designed and manufactured urban contemporary furniture which is sold under NOVA brand names, today reported results for its first quarter ended March 31, 2012.

Sales in the first quarter rose 95% year over year on a 44% increase in volume to $11.0 million, up from $5.6 million a year earlier. These increases reflect, in particular, successful implementation of plans to aggressively grow indirect sales of Nova branded furniture lines in the U.S. following last year's acquisition of Diamond Sofa (www.diamondsofa.com). The Company also plans to substantially increase direct sales in China, where as of the end of the first quarter the Company had established 59 franchise stores under its Colorful World brand out of a planned network of 200 franchises throughout China by year end.

Net Income and Per Share Results

At the same time, the Company reported net income in the first quarter declined slightly to $0.98 million, or $0.05 per share, on 18.7 million diluted average shares outstanding. This compared with $1.01 million, or $0.10 per share, on 9.7 million diluted average shares outstanding in the first quarter last year. The increase in the number of diluted average shares outstanding is primarily a consequence of two successful private placements completed in late 2011 and early 2012 which netted the Company a combined $5.61 million for future growth. If per share results in 2011 were calculated on the same number of shares in 2012, EPS in the 2011 first quarter would be approximately $0.05 per share.

Increased Sales Have Led to Increased Third Party Manufacturing

A key reason for the slight decline in net income was a decline in gross margins in the quarter to 27% compared with a year earlier 32%. This was due primarily to the need generated by rapid sales growth to purchase an increased amount of product from third party manufacturers which produced lower margins than sales of Nova's higher margin self-manufactured products. The cost of sales for self-manufactured products at the Company's recently built, highly efficient factory in Dongguan, China, declined 44 % in the first quarter this year to $1.2 million. In the same period, the cost of sales for products purchased from third parties rose nearly 300% to $6.79 million. The net result was an increase in the overall cost of sales ratio in the quarter to 73% compared with 68% in the same period of 2011.

The year over year decline in net margin from 18% to 9% in the first quarter of 2012 also was affected, in particular, by higher SG&A costs. Selling and marketing expense increased, as anticipated, in connection with the rapid sales growth in the U.S. and China. Additional cost increases stemmed from compliance costs related to becoming a U.S. public company, costs related to the successful financing in January, and acquisition costs relating to the acquisition of Diamond Sofa.