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Business Acquisition and Unaudited Pro Forma Information
 9 Months Ended 12 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Mergers, Acquisitions and Dispositions Disclosures [Text Block]

Note 18 - Business Acquisition and Unaudited Pro Forma Information

On August 31, 2011, Nova LifeStyle acquired all the outstanding capital stock of Diamond Bar for $0.45 million paid in full at the closing pursuant to a stock purchase agreement entered into with the sole shareholder of Diamond Bar. Diamond Bar, doing business as Diamond Sofa, is engaged in the import, marketing and sale of furniture in the U.S. market. The acquisition was accounted as a business combination in accordance with ASC Topic 805 “Business Combination.”

According to ASC Topic 805, the allocation of Diamond Bar’s purchase price among assets acquired and liabilities assumed is based on estimates of the fair values. Under purchase method of accounting, the total purchase price is allocated to tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values with the excess changed to goodwill.

In accordance with SEC regulation S-X Rule 3-05, Diamond Bar was not a significant subsidiary as of the acquisition date. Therefore, no separate audited financial statements are presented.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Cash
 
$
141,231
 
Accounts receivable
   
986,145
 
Inventory
   
786,776
 
Property and equipment
   
164,913
 
Customer relationship
   
50,000
 
Goodwill
   
218,606
 
Accounts payable
   
(1,742,540
)
Other payable and accrued expenses
   
(138,131
)
Deferred tax liability
   
(17,000
)
Purchase price
 
$
450,000
 

The following unaudited pro forma consolidated results of operations of Nova LifeStyle and Diamond Bar for the nine and three months ended September 30, 2011, presents the operations of Nova LifeStyle and Diamond Bar as if the acquisition of Diamond Bar occurred on January 1, 2011. The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisition been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.

   
For the nine
months ended
September 30,
   
For the three
months ended
September 30,
 
   
2011
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
Net sales
 
$
30,627,291
   
$
12,462,962
 
                 
Net income
 
$
3,147,306
   
$
1,640,614
 
                 
Basic weighted average shares outstanding
   
13,451,350
     
16,431,723
 
Diluted weighted average shares outstanding
   
13,522,150
     
16,641,815
 
                 
Basic net earnings per share
 
$
0.23
   
$
0.10
 
Diluted net earnings per share
 
$
0.23
   
$
0.10
 

Net sales and net income of Diamond Bar included in the consolidated income statement for the nine months ended September 30, 2012, were $12,451,742 and $1,230,494, respectively; net sales and net income for the three months ended September 30, 2012 were $5,870,045 and $892,302, respectively.

Note 18 - Business Acquisition and Unaudited Pro Forma Information

On August 31, 2011, Nova LifeStyle acquired all the outstanding capital stock of Diamond Bar for $0.45 million paid in full at the closing pursuant to a stock purchase agreement entered into with the sole shareholder of Diamond Bar. Diamond Bar, doing business as Diamond Sofa, is engaged in the import, marketing and sale of furniture in the U.S. market. The acquisition was accounted as a business combination in accordance with ASC Topic 805 “Business Combination.”

According to ASC Topic 805, the allocation of Diamond Bar’s purchase price among assets acquired and liabilities assumed is based on estimates of the fair values. Under purchase method of accounting, the total purchase price is allocated to tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values with the excess changed to goodwill.

In accordance with SEC regulation S-X Rule 3-05, Diamond Bar was not a significant subsidiary as of the acquisition date. Therefore, no separate audited financial statements are presented. The results of operations of Diamond Bar for the period from acquisition date to December 31, 2011, are consolidated into the Company’s consolidated financial statements for the year ended December 31, 2011.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Cash
 
$
141,231
 
Accounts receivable
   
986,145
 
Inventory
   
786,776
 
Property and equipment
   
164,913
 
Customer relationship
   
50,000
 
Goodwill
   
218,606
 
Accounts payable
   
(1,742,540
)
Other payable and accrued expenses
   
(138,131
)
Deferred tax liability
   
(17,000
)
Purchase price
 
$
450,000
 

Net sales and net income of Diamond Bar included in the consolidated income statement for the period from the acquisition date through December 31, 2011, was $6,217,196 and $589,656, respectively.

The following unaudited pro forma consolidated results of operations of Nova LifeStyle and Diamond Bar for the years ended December 31, 2011 and 2010, presents the operations of Nova LifeStyle and Diamond Bar as if the acquisition of Diamond Bar occurred on January 1, 2011 and 2010, respectively. The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisition been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.

   
For years ended December 31,
 
   
2011
   
2010
 
   
(Unaudited)
 
Net sales
  $ 47,710,088     $ 30,094,554  
                 
Net income
  $ 5,250,294     $ 4,172,385  
                 
Basic weighted average shares outstanding
    14,506,915       9,685,000  
Diluted weighted average shares outstanding
    14,697,206       9,685,000  
                 
Basic net earnings per share
  $ 0.36     $ 0.43  
Diluted net earnings per share
  $ 0.36     $ 0.43