Nova LifeStyle, Inc. Takes Action to Reinstate Investor Confidence Damaged By Malicious Research Report and Discloses Initi...
January 02 2019 - 7:00AM
Nova LifeStyle, Inc. (NASDAQ:
NVFY) today responded to a
document published by Seeking Alpha on December 21, 2018. The
document is a self-styled research report regarding the Company
(the “Purported Research Report”). The Purported Research
Report was apparently generated by an Eastern European firm
apparently formed in 2017 and called Andri Capital. The
Purported Research Report contains a “Sell” recommendation, and
purports to present evidence that a substantial portion of the
Company’s sales to four of the Company’s largest customers during
the relevant past is not legitimate, and it posits that as a
consequence the Company’s operating results have been substantially
overstated. Exactly one month earlier Andri Capital issued a report
on Seeking Alpha concluding that the Company’s Common Stock was
significantly undervalued with a “Buy” recommendation. Within
the month preceding the Purported Research Report and before Andri
Capital published the reversal in its advice that the stock was
substantially undervalued, Andri Capital accumulated a large short
position which Andri Capital disclosed in its December 21, 2018
Purported Research Report. Following the publication of the
Purported Research Report, the market price of the Company’s Common
Stock suffered a rapid decline, and a number of putative class
action complaints that largely parrot the assertions set forth in
the Purported Research Report have followed. To date the
Company is aware that the following complaints have been
filed: George Barney, Individually and on behalf of all
others similarly situated v Nova Lifestyle, Inc., Thanh H. Lam, Ya
Ming Wong, Jeffery Chuang, and Yuen Ching Ho, Defendants. Case No.
Case 2:18-cv-10725 (US District Court for the Central District of
California).
Management believes that the conclusions set forth in the
Purported Research Report are baseless; and further that the report
is malicious and manipulative, intended to serve the interests of
the author (and his organization) who disclosed that he accumulated
a short position in advance of the publication of the report. The
complaints that have been filed are based largely upon the
insidious claims set forth in the Purported Research Report, and
are baseless. The Company will defend those lawsuits.
The Company is also considering the assertion of direct claims
against anyone that has caused damage to the Company.
The Audit Committee has acted promptly to address the concerns
raised in the Purported Research Report, and to reinstate the
market confidence that the Purported Research Report so severely
undermined. The Audit Committee has engaged independent
counsel, expert in addressing such matters, to advise it, and it
has engaged the Company’s auditor to perform special procedures to
confirm the reported sales. Those procedures include but are
not limited to the examination and testing of relevant
documentation relating to the sales made by the Company to the
customers identified in the Purported Research Report for the
periods 2015-2018. Those procedures will include 100%
sampling of all transactions between the Company and the subject
customers. Once the special procedures are completed,
reviewed, and to the extent necessary supplemented by the Audit
Committee with the advice of its independent counsel, the Audit
Committee will disclose the results of that work. The Audit
Committee expects that this process will take approximately two
months.
About Nova LifeStyle Nova LifeStyle, Inc., a
NASDAQ Global Market listed company headquartered in California, is
a fast growing, innovative designer 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 that include LifeStyle brands such as
Diamond Sofa, Nova QwiK, and Bright Swallow International. Nova's
products feature urban contemporary styles that integrate comfort
and functionality, incorporating upscale luxury designs appeals to
middle and upper middle-income consumers in the USA, China, Europe,
and elsewhere in the world. Visit Nova LifeStyle’s website
at www.NovaLifeStyle.com.
Contact: Investor Relations Nova LifeStyle,
Inc. info@novalifestyle.com
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