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In a positive trend, a recent Northern California study (Karle et al. 2015) indicated that about half of dairies feed the full recommended four quarts of colostrum in the first feeding, giving calves a better chance to effectively absorb the appropriate level of colostral antibodies. Plane of nutrition We feed calves an assortment of liquid diets- from waste milk to a wide variety of milk replacers to saleable milk. As with colostrum, we need to consider the quality of the product we are feeding our investment. Survey data we collected throughout the state indicate that over half of dairies are feeding waste milk to calves, but only 29% of dairies pasteurize. Are we sure that unpasteurized waste milk is safe for our youngest calves? Quality of commercial milk replacers is also important to consider. Calf raisers should critically evaluate the formulation that is most appropriate for their calves, keeping in mind that cows milk is about 27-30% protein on a dry matter basis and a calf will suckle about 5 times per day, given the choice. Its worth evaluating if a higher protein replacer and/or adding a third feeding would be beneficial to your calves.

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For the full year 2016, gross profit was $13.5 million, a decrease of 11.5% versus the prior year period. Gross Profit and Gross Margin both decreased due to an increase in cost of sales as a percentage of net sales, caused by an increase in the cost of high quality products purchased from third parties. For the full year 2016, Net loss was $(1.1) million, or $(0.04) per diluted share based on 25.4 million shares outstanding, compared to net income of $2.2 million or $0.10 per diluted share based on 22.8 million shares outstanding in the prior year period. Fourth Quarter 2016 Financial Highlights: Fourth quarter Net Sales were $19.9 million compared to $23.2 million in the prior year period. Gross profit for the fourth quarter was $2.9 million, a decrease of 23.2% from the prior year period. Fourth quarter Gross Margin was 14.4%, compared to 16.1% in the prior year period while full year 2016 Gross Margin was 15%, compared to 17% in the prior year period. Fourth quarter sales mix was more heavily weighted to lower price products which also yield lower margins for the Company. Net loss was $830,947, or $(0.03) per diluted share based on 25.4 million shares outstanding in the fourth quarter of 2016, compared to net income of $684,503 or $0.03 per diluted share based on 22.8 million shares outstanding in the prior year period. Subsequent Events Nova LifeStyle Launches Blockchain-Based Site to Enhance E-Commerce Strategy in January 2017 Management Commentary Tawny Lam, Chief Executive Officer of Nova LifeStyle, stated, "Our 2016 results were highlighted by our partnership with Future World Lifestyle and the launch of our www.nova-mart.com website in early 2017, which demonstrate our commitment to expanding our e-commerce channels in order to create the greatest opportunity for consumers to choose Nova Lifestyle products and services. This capped a number of strategic changes we made during the year, including the sale of our Chinese manufacturing operations, in order to best position the Company for future success. In addition to these strategic changes, we also refocused our product line to emphasize higher-margin products. As a result, we saw a marked increase in our average selling prices for the year, although those gains were tempered by an expected reduction in volumes. The net impact was a 3% increase in revenues versus 2015. Ms. Lam continued, With the strategic changes made toward the end of the year, coupled with our shift to higher-margin products, we feel we are well-positioned for success in 2017. We are also excited to announce that Nova LifeStyle has embraced the blockchain trend in China and has transitioned more towards a blockchain based model. With the introduction of www.nova-mart.com , Nova LifeStyles flagship training school, the Company is poised to be a leader in this emergent technology. Operational Overview Product Category Nova LifeStyles largest selling product categories in the twelve months ended December 31, 2016 and 2015 were sofas, beds and dining tables, which accounted for approximately 61%, 11% and 7% of sales, respectively, for the twelve months ended December 31, 2016, versus 36%, 14% and 15% of sales in the prior year period. 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 enrich its product lines to include a bedroom series, which would include beds, bed side tables, mattresses (which could be imported or purchased in China) and bedding sets including bed sheets, pillowcases, quilt covers, and other items (which can be purchased within China). Geographic Breakdown North America Sales to North America were $58.2 million in the twelve months ended December 31, 2016, a decrease of 23% from $75.5 million in the same period of 2015, driven by an aggressive change in the product mix.

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