UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form 10-Q




x
              
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the Quarterly Period Ended June 30, 2009ORo
              
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934





For
the transition period
from            to





Commission
File No. 000-52933





NIVS
IntelliMedia Technology Group, Inc.


(Exact
name of Registrant as specified in its charter)




Delaware
            
            20-8057809(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)





NIVS
Industry Park, No. 29-31, Shuikou Road, Huizhou, Guangdong, China
516006


(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)





86-752-3125862


(COMPANY’S
TELEPHONE NUMBER, INCLUDING AREA CODE)





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x
    No o





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).    Yes o    No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” as defined in Rule 12b-2 of the Exchange
Act.




Large
      accelerated filer o
              Accelerated
      filer oNon-accelerated
      filer  x
              Smaller
      reporting company  o





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o
    No x





The number of shares outstanding of the
registrant’s Common Stock, par value $0.0001 per share, was 40,675,347 as of
August 12, 2009.








NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC.





FORM 10-Q





For
the Quarterly Period Ended June 30, 2009





INDEX




PagePart I
              
              Financial
      InformationItem
      1.
              Financial
      Statements
              1a)
              Consolidated
      Balance Sheets as of June 30, 2009 (Unaudited) and December 31,
      2008
              1b)
              Consolidated
      Statements of Operations for the Three Months and Six Months Ended June
      30, 2009 and 2008 (Unaudited)
              2c)
              Consolidated
      Statements of Changes in Equity and Comprehensive Income For The Six
      Months Ended June 30, 2009 (Unaudited)
              3d)
              Consolidated
      Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008
      (Unaudited)
              4e)
              Notes
      to Consolidated Financial Statements (Unaudited)
              5Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              28Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              36Item
      4.
              Controls
      and Procedures
              36Part II
              
              Other
      InformationItem
      1.
              Legal
      Proceedings
              38Item 1A.
              Risk
      Factors
              38Item
      2.
              Unregistered
      Sale of Equity Securities and Use of Proceeds
              38Item
      3.
              Default
      Upon Senior Securities
              38Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              38Item
      5.
              Other
      Information
              38Item
      6.
              Exhibits
              39Signatures
              39





Part I.
Financial Information





ITEM
      1.
            FINANCIAL
      STATEMENTS





NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Consolidated
Balance Sheets


(In US
Dollars)





June 30,
                      
                      
                      December 31,2009
                      
                      
                      2008(Unaudited)AssetsCurrent
      AssetsCash
      and cash equivalents
                      
                      $
                      281,638
                      
                      
                      $
                      461,504Trade
      receivables, net (Note 3)
                      
                      
                      23,083,224
                      
                      
                      
                      20,364,356VAT
      refundable
                      
                      
                      128,820
                      
                      
                      
                      1,094,090Inventories,
      net (Note 5)
                      
                      
                      20,594,280
                      
                      
                      
                      11,279,832Restricted
      cash (Note 10)
                      
                      
                      14,603,721
                      
                      
                      
                      11,681,595Prepaid
      expenses and deposits
                      
                      
                      27,255
                      
                      
                      
                      81,690Total
      current assets
                      
                      
                      58,718,938
                      
                      
                      
                      44,963,067Property
      and equipment, net (Note 6)
                      
                      
                      56,649,040
                      
                      
                      
                      56,331,487Advances
      to suppliers (Note 4)
                      
                      
                      13,068,347
                      
                      
                      
                      15,286,028Intangible
      assets, net (Note 7)
                      
                      
                      2,321,199
                      
                      
                      
                      2,343,383Total
      Assets
                      
                      $
                      130,757,524
                      
                      
                      $
                      118,923,965Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesAccounts
      payable - trade
                      
                      $
                      2,939,609
                      
                      
                      $
                      2,020,363Customer
      deposit (Note 8)
                      
                      
                      402,421
                      
                      
                      
                      1,393,171Accrued
      liabilities and other payable
                      
                      
                      1,036,401
                      
                      
                      
                      1,441,922Various
      taxes payable
                      
                      
                      1,862,788
                      
                      
                      
                      470,860Short-term
      loans (Note 9)
                      
                      
                      37,839,638
                      
                      
                      
                      35,871,715Wages
      payable
                      
                      
                      543,111
                      
                      
                      
                      800,744Bank
      notes payable (Note 10)
                      
                      
                      18,486,077
                      
                      
                      
                      18,849,201Corporate
      tax payable
                      
                      
                      4,017,046
                      
                      
                      
                      2,744,518Total
      current liabilities
                      
                      
                      67,127,091
                      
                      
                      
                      63,592,494Due
      to shareholder (Note 11)
                      
                      
                      -
                      
                      
                      
                      7,842,780Total
      liabilities
                      
                      
                      67,127,091
                      
                      
                      
                      71,435,274Stockholders'
      EquityPreferred
      stock, $0.0001 par value, 10,000,000 shares authorized,none
      outstanding at June 30, 2009 and December 31, 2008(Note
      1)
                      
                      
                      -
                      
                      
                      
                      -Common
      stock, stock $0.0001 par value, 100,000,000 shares
    authorized,40,675,347
      and 36,855,714 shares issued and outstanding atJune
      30, 2009 and December 31, 2008, respectively (Note 1)
                      
                      
                      4,068
                      
                      
                      
                      3,686Additional
      paid-in capital
                      
                      
                      21,717,239
                      
                      
                      
                      12,663,513Accumulated
      other comprehensive income
                      
                      
                      3,867,825
                      
                      
                      
                      3,960,012Statutory
      surplus reserve fund (Note 13)
                      
                      
                      3,568,869
                      
                      
                      
                      3,568,869Retained
      earnings (unrestricted)
                      
                      
                      33,157,323
                      
                      
                      
                      26,193,371Total
      Stockholders' Equity
                      
                      
                      62,315,324
                      
                      
                      
                      46,389,451Noncontrolling
      interest
                      
                      
                      1,315,109
                      
                      
                      
                      1,099,240Total
      Liabilities and Stockholders' Equity
                      
                      $
                      130,757,524
                      
                      
                      $
                      118,923,965





The accompanying notes are an integral
part of these consolidated financial statements.


1





NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Operations


(In US
Dollars)





For The Three Months Ended
                          
                          
                          For The Six Months EndedJune 30,
                          
                          
                          June 30,2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008(Unaudited)
                          
                          
                          (Unaudited)
                          
                          
                          (Unaudited)
                          
                          
                          (Unaudited)Revenue
                          
                          $
                          40,859,722
                          
                          
                          $
                          24,860,574
                          
                          
                          $
                          70,116,450
                          
                          
                          $
                          51,636,895Other
      Sales
                          
                          
                          61,377
                          
                          
                          
                          93,182
                          
                          
                          
                          152,449
                          
                          
                          
                          156,053Cost
      of Goods Sold
                          
                          
                          (31,173,544
                          )
                          
                          
                          (19,207,711
                          )
                          
                          
                          (54,270,324
                          )
                          
                          
                          (39,590,833
                          )Gross
      Profit
                          
                          
                          9,747,555
                          
                          
                          
                          5,746,045
                          
                          
                          
                          15,998,575
                          
                          
                          
                          12,202,115Selling
      Expenses
                          
                          
                          2,126,889
                          
                          
                          
                          742,892
                          
                          
                          
                          3,268,112
                          
                          
                          
                          1,363,104General
      and administrativeAmortization
                          
                          
                          18,348
                          
                          
                          
                          16,988
                          
                          
                          
                          35,793
                          
                          
                          
                          33,488Depreciation
                          
                          
                          83,054
                          
                          
                          
                          65,729
                          
                          
                          
                          164,324
                          
                          
                          
                          161,209Bad
      debts
                          
                          
                          -
                          
                          
                          
                          (68,199
                          )
                          
                          
                          -
                          
                          
                          
                          384,102Other
      general and administrative (Note 12)
                          
                          
                          822,075
                          
                          
                          
                          272,310
                          
                          
                          
                          1,964,990
                          
                          
                          
                          1,033,707Total
      general and administrative
                          
                          
                          923,477
                          
                          
                          
                          286,828
                          
                          
                          
                          2,165,107
                          
                          
                          
                          1,612,506Research
      and development
                          
                          
                          762,940
                          
                          
                          
                          252,410
                          
                          
                          
                          1,335,475
                          
                          
                          
                          407,182Total
      operating expenses
                          
                          
                          3,813,306
                          
                          
                          
                          1,282,130
                          
                          
                          
                          6,768,694
                          
                          
                          
                          3,382,792Income
      from operations
                          
                          
                          5,934,249
                          
                          
                          
                          4,463,915
                          
                          
                          
                          9,229,881
                          
                          
                          
                          8,819,323Other
      income (expenses)Government
      grant
                          
                          
                          66,923
                          
                          
                          
                          -
                          
                          
                          
                          66,923
                          
                          
                          
                          -Interest
      income
                          
                          
                          5
                          
                          
                          
                          139
                          
                          
                          
                          5
                          
                          
                          
                          139Interest
      expense
                          
                          
                          (324,162
                          )
                          
                          
                          (513,735
                          )
                          
                          
                          (886,225
                          )
                          
                          
                          (1,045,237
                          )Imputed
      interest
                          
                          
                          -
                          
                          
                          
                          (109,194
                          )
                          
                          
                          -
                          
                          
                          
                          (299,333
                          )Sundry
      income (expense), net
                          
                          
                          -
                          
                          
                          
                          (6,559
                          )
                          
                          
                          9,981
                          
                          
                          
                          9,174Total
      other income (expenses)
                          
                          
                          (257,234
                          )
                          
                          
                          (629,349
                          )
                          
                          
                          (809,316
                          )
                          
                          
                          (1,335,257
                          )Income
      before noncontrolling interest and income taxes
                          
                          
                          5,677,015
                          
                          
                          
                          3,834,566
                          
                          
                          
                          8,420,565
                          
                          
                          
                          7,484,066Income
      taxes (Note 14)
                          
                          
                          (961,914
                          )
                          
                          
                          (469,571
                          )
                          
                          
                          (1,275,869
                          )
                          
                          
                          (975,084
                          )Net
      income before noncontrolling interest
                          
                          
                          4,715,101
                          
                          
                          
                          3,364,995
                          
                          
                          
                          7,144,696
                          
                          
                          
                          6,508,982Noncontrolling
      interest
                          
                          
                          (119,616
                          )
                          
                          
                          (79,482
                          )
                          
                          
                          (180,744
                          )
                          
                          
                          (163,555
                          )Net
      income attributable NIVS IntelliMedia Technology Group,
    Inc.
                          
                          $
                          4,595,485
                          
                          
                          $
                          3,285,513
                          
                          
                          $
                          6,963,952
                          
                          
                          $
                          6,345,427Basic
      earnings per share
                          
                          $
                          0.11
                          
                          
                          $
                          0.12
                          
                          
                          $
                          0.18
                          
                          
                          $
                          0.23Weighed-average
      shares outstanding, Basic
                          
                          
                          40,648,149
                          
                          
                          
                          27,546,667
                          
                          
                          
                          39,028,629
                          
                          
                          
                          27,546,667Diluted
      earnings per share
                          
                          $
                          0.11
                          
                          
                          $
                          0.12
                          
                          
                          $
                          0.18
                          
                          
                          $
                          0.23Weighed-average
      shares outstanding, Diluted
                          
                          
                          40,648,149
                          
                          
                          
                          27,546,667
                          
                          
                          
                          39,028,629
                          
                          
                          
                          27,546,667





The
accompanying notes are an integral part of these consolidated financial
statements.


2


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Changes in Equity and Comprehensive Income


For the
Six Months Ended June 30, 2009


(In US
Dollars)





AccumulatedAdditional
                
                
                Statutory
                
                
                Other
                
                
                Retained
                
                
                TotalCommon Stock
                
                
                Paid-in
                
                
                Reserve
                
                
                Comprehensive
                
                
                Earnings
                
                
                Stockholders'
                
                
                Noncontrolling
                
                
                Comprehensive
                
                
                TotalShares
                
                
                Amount
                
                
                Capital
                
                
                Fund
                
                
                Income
                
                
                (Unrestricted)
                
                
                Equity
                
                
                Interest
                
                
                Income
                
                
                EquityBalance
      at December 31, 2008
                
                
                36,855,714
                
                
                $
                3,686
                
                
                $
                12,663,513
                
                
                $
                3,568,869
                
                
                $
                3,960,012
                
                
                $
                26,193,371
                
                
                $
                46,389,451
                
                
                
                1,099,240
                
                
                
                -
                
                
                $
                47,488,691Issuance
      of 550,000 shares at $3.50 in IPO, net of issuance coat of
      $916,509
                
                
                550,000
                
                
                
                55
                
                
                
                1,008,436
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,008,491
                
                
                
                -
                
                
                
                -
                
                
                
                1,008,491Issuance
      of 2,240,493 shares at $3.50 in  exchange for "Li
      Debt"
                
                
                2,240,493
                
                
                
                224
                
                
                
                7,841,502
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                7,841,726
                
                
                
                -
                
                
                
                -
                
                
                
                7,841,726Issuance
      of 946,640 shares upon exercise of 946,667 cashless
    warrants
                
                
                946,640
                
                
                
                95
                
                
                
                (95
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Issuance
      of 2,240,493 shares at $3.50 net of issuance coat of
    $84,859
                
                
                82,500
                
                
                
                8
                
                
                
                203,883
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                203,891
                
                
                
                -
                
                
                
                -
                
                
                
                203,891Capital
      contributed from  noncontrolling interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                37,489
                
                
                
                -
                
                
                
                37,489Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (92,187
                )
                
                
                -
                
                
                
                (92,187
                )
                
                
                (2,364
                )
                
                $
                (94,551
                )
                
                
                (94,551
                )Net
      income for the six months ended June 30, 2009 (unaudited)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                6,963,952
                
                
                
                6,963,952
                
                
                
                180,744
                
                
                
                7,144,696
                
                
                
                7,144,696Comprehensive
      Income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                $
                7,050,145
                
                
                
                -Balance
      at June 30, 2009 (unaudited)
                
                
                40,675,347
                
                
                $
                4,068
                
                
                $
                21,717,239
                
                
                $
                3,568,869
                
                
                $
                3,867,825
                
                
                $
                33,157,323
                
                
                $
                62,315,324
                
                
                
                1,315,109
                
                
                
                
                
                
                $
                63,630,433





For The Six Months EndedJune 30,2009
                
                
                2008(Unaudited)
                
                
                (Unaudited)Net
      Income
                
                $
                7,144,696
                
                
                $
                6,508,982Other
      comprehensive income, net of tax:Unrealized
      gain (loss) on foreign currency translation, net of tax
                
                
                (94,551
                )
                
                
                1,249,836Total
      other comprehensive income, net of tax
                
                
                7,050,145
                
                
                
                7,758,818Comprehensive
      incomeComprehensive
      income attributable to the noncontrolling interest
                
                
                (2,364
                )
                
                
                32,047Comprehensive
      income attributable to NIVS's common shareholders
                
                $
                7,047,781
                
                
                $
                7,790,865





The
accompanying notes are an integral part of these consolidated financial
statements.


3


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows


(In US
Dollars)





For The Six Months EndedJune 30,2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Unaudited)Cash
      Flows From Operating ActivitiesNet
      Income
                    
                    $
                    6,963,952
                    
                    
                    $
                    6,345,427Adjustments
      to reconcile net income to net cash provided (used) by operating
      activities:Noncontrolling
      interest
                    
                    
                    180,744
                    
                    
                    
                    163,555Imputed
      interest
                    
                    
                    -
                    
                    
                    
                    299,333Bad
      debts
                    
                    
                    -
                    
                    
                    
                    384,102Depreciation
                    
                    
                    2,896,131
                    
                    
                    
                    2,347,467Amortization
                    
                    
                    35,793
                    
                    
                    
                    33,488Changes
      in operating assets and liabilities:Account
      receivable-trade
                    
                    
                    (2,718,868
                    )
                    
                    
                    (1,290,015
                    )Advance
      to suppliers for purchases
                    
                    
                    2,217,681
                    
                    
                    
                    (13,789,120
                    )Prepaid
      expenses and deposits
                    
                    
                    54,435
                    
                    
                    
                    (64,169
                    )Inventories,
      net
                    
                    
                    (9,314,448
                    )
                    
                    
                    (1,483,490
                    )Restricted
      cash
                    
                    
                    (2,922,126
                    )
                    
                    
                    (1,617,120
                    )VAT
      refundable
                    
                    
                    965,270
                    
                    
                    
                    -Accounts
      payable and accrued liabilities
                    
                    
                    (477,025
                    )
                    
                    
                    10,548,123Various
      taxes payable
                    
                    
                    1,391,928
                    
                    
                    
                    46,964Wages
      payable
                    
                    
                    (257,633
                    )
                    
                    
                    (201,190
                    )Corporate
      tax payable
                    
                    
                    1,272,528
                    
                    
                    
                    1,114,778Net
      cash provided by operating activities
                    
                    
                    288,362
                    
                    
                    
                    2,838,133Cash
      Flows From Investing ActivitiesPurchases
      of property and equipment
                    
                    
                    (3,270,839
                    )
                    
                    
                    (2,899,305
                    )Purchases
      of intangible assets
                    
                    
                    (16,973
                    )
                    
                    
                    -Net
      cash used by investing activities
                    
                    
                    (3,287,812
                    )
                    
                    
                    (2,899,305
                    )Cash
      Flows From Financing ActivitiesIncrease
      (decrease) in loans payable
                    
                    
                    1,967,923
                    
                    
                    
                    (1,449,192
                    )Increase
      (decrease) in notes payable
                    
                    
                    (363,124
                    )
                    
                    
                    6,908,728Net
      proceeds of share issuance
                    
                    
                    1,212,374
                    
                    
                    
                    -Due
      to shareholder
                    
                    
                    -
                    
                    
                    
                    (1,165,113
                    )Due
      from related parties
                    
                    
                    -
                    
                    
                    
                    (5,453,546
                    )Net
      cash provided (used) by financing activities
                    
                    
                    2,817,173
                    
                    
                    
                    (1,159,123
                    )Effect
      of exchange rate changes on cash
                    
                    
                    2,411
                    
                    
                    
                    766,625Net
      decrease in cash and cash equivalents
                    
                    
                    (179,866
                    )
                    
                    
                    (453,670
                    )Cash
      and cash equivalents, beginning of period
                    
                    
                    461,504
                    
                    
                    
                    1,438,651Cash
      and cash equivalents, end of period
                    
                    $
                    281,638
                    
                    
                    $
                    984,981Supplemental
      disclosure information:Interest
      expense paid
                    
                    $
                    886,225
                    
                    
                    $
                    1,045,237Income
      taxes paid
                    
                    $
                    1,275,869
                    
                    
                    $
                    975,084Supplemental
      financial activities:Exchange
      of Li debt for common stock
                    
                    $
                    (7,841,726
                    )
                    
                    $
                    -Issuance
      of shares for warrants exercise
                    
                    $
                    94
                    
                    
                    $
                    -Issuance
      of shares
                    
                    $
                    275,265
                    
                    
                    $
                    -





The
accompanying notes are an integral part of these consolidated financial
statements.


4


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
1 – DESCRIPTION OF BUSINESS AND ORGANIZATION





NIVS
IntelliMedia Technology Group, Inc. (“NIVS USA”) was incorporated in the State
of Delaware on December 7, 2006. NIVS USA was originally organized as a “blank
check” shell company to investigate and acquire a target company or business
seeking the perceived advantages of being a publicly held corporation. On July
25, 2008, NIVS USA (i) closed a share exchange transaction pursuant to which it
became the 100% parent of Niveous Holding Company Limited (“Niveous”) (ii)
assumed the operations of Niveous and its subsidiaries, and (iii) changed its
name from SRKP 19, Inc. to NIVS IntelliMedia Technology Group, Inc.





Because
the shares issued by the NIVS USA to the shareholders of Niveous and their
designees in the aforementioned transaction represented a controlling interest,
the transaction has been accounted for as a recapitalization or reverse merger
with Niveous being considered the acquirer. The accompanying consolidated
financial statements have been restated on a retroactive basis to present the
capital structure of Niveous as though it were the reporting
entity.





Niveous
was incorporated in British Virgin Islands (BVI) on October 31,
2003.  As at June 30, 2009, Niveous had 50,000 capital shares
authorized with $1.00 par value and 10,000 shares issued and
outstanding.





In April,
2004, Niveous acquired 97.5% of ownership of NIVS (HZ) Audio & Video Tech
Company Limited (“NIVS PRC”) from its original shareholders.  NIVS PRC
is the main operating company located in Huizhou, PRC.  It engages in
research, development, production, marketing and sales of audio & video
electronic equipment for the domestic and international markets.  As
at June 30, 2009, Niveous and Mr. Li Tianfu hold 97.5% and 2.5% of total
interests of NIVS PRC, respectively.





In April,
2005, Niveous acquired 100% of ownership of NIVS International (H.K.) Limited
(“NIVS HK”) under an ownership transfer agreement.  NIVS HK is a
holding company incorporated in November 2004 in Hong Kong, PRC with the
original sole shareholder Mr. Li Tianfu.  Pursuant to the transfer
agreement, Niveous paid Mr. Li Tianfu 1M HKD for the ownership
transfer.





In
February 2006, NIVS PRC established a branch company NIVS (HZ) Audio & Video
Tech Company Limited Shenzhen Branch (“NIVS Shenzhen”) located in Shenzhen, PRC.
NIVS Shenzhen is currently performing sales and marketing for the Company’s
products.





In
November 2007, Niveous entered an ownership transfer agreement to transfer its
whole ownership of NIVS PRC to NIVS HK.  After the restructuring, NIVS
PRC became a subsidiary of NIVS HK.  As at June 30, 2009, NIVS HK and
Mr. Li Tianfu held 97.5% and 2.5% of total interests of NIVS PRC,
respectively.





In June
2008, NIVS HK entered an ownership transfer agreement to transfer its whole
ownership of NIVS PRC to Niveous.  Pursuant to the agreement, Niveous
paid NIVS HK 50M HKD. After the restructuring, NIVS PRC became a subsidiary of
Niveous.  As a result, Niveous and Mr. Li Tianfu hold 97.5% and 2.5%
of total interests of NIVS PRC, respectively.





In June 2008, Niveous
entered into entered into a share exchange agreement with SRKP 19, Inc., a
Delaware corporation, and all of the shareholders of Niveous. Pursuant to the
exchange agreement, as it was amended (the “Exchange Agreement”), SRKP 19 agreed
to issue an aggregate of27,546,667 shares of its common stock in
exchange for all of the issued andoutstanding
securities of Niveous (the “Share Exchange”).The Share Exchange closed in July
2008. Upon the closing of the Share Exchange on July 25, 2008, SRKP 19 issued an
aggregate of 27,546,667shares of its common stock to the shareholders of Niveous
and their designees in exchange for all of the issued and outstanding securities
of Niveous. Immediately after the closing of the Share Exchange, SRKP 19 changed
its corporate name from “SRKP 19, Inc.” to “NIVS IntelliMedia Technology Group,
Inc.” For accounting purposes, the Share Exchange was treated as a reverse
acquisition.





Prior to
the closing of the Share Exchange, the NIVS USA’s shareholders canceled an
aggregate of 4,756,390 shares held by them such that there were 2,340,000 shares
of common stock outstanding immediately prior to the Share Exchange. The
shareholders also canceled an aggregate of 6,149,723 warrants such that the
shareholders held an aggregate of 946,667 warrants immediately after the Share
Exchange.


5


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
1 – DESCRIPTION OF BUSINESS AND ORGANIZATION (continued)





Concurrently
with the close of the Share Exchange, NIVS USA conducted an initial closing of a
private placement transaction pursuant to which NIVS USA sold an aggregate of
5,239,460 shares of common stock at $1.80 per share, for gross proceeds of
approximately $9.4 million. On August 12, 2008, NIVS USA conducted a second and
final closing of the private placement pursuant to which NIVS USA sold an
aggregate of 1,304,587 shares of common stock at $1.80 per share, for gross
proceeds of approximately $2.3 million. Accordingly, NIVS USA sold a total of
6,544,047 shares of common stock in the private placement for aggregate gross
proceeds of $11.8 million.  WestPark Capital, Inc., the placement
agent for the Private Placement, was paid a commission equal to 6.5% of the
gross proceeds from the financing, in addition to a $130,000 success fee for the
Share Exchange, for an aggregate fee of approximately $896,000. NIVS USA filed a
registration statement covering the common stock sold in the Private Placement
that was declared effective by the Securities and Exchange Commission
("SEC") in March 2009.





On
December 24, 2008, NIVS USA entered into an agreement with Mr. Li pursuant to
which the outstanding debt that it and its subsidiaries owed to Mr. Li would be
converted into shares of NIVS USA common stock.  According to the
agreement, the shares would be issued upon the closing of our public
offering.  The public offering closed on March 18, 2009 and NIVS USA
issued 2,240,493 shares of common stock to Mr. Li, which is equal to the debt
amount of approximately $7.8 million divided by the offering price of public
offering, which was $3.50 per share.  As a result of the conversion of
the debt into equity, the debt is no longer outstanding, and NIVS USA and its
subsidiaries do not have any outstanding debt owed to Mr. Li.  As a
result of the shares issued in the debt conversion, the number of shares that
Mr. Li beneficially owns increased from 12,204,667 shares to 14,445,160
shares.





In March
2009, NIVS USA completed a public offering consisting of 550,000 shares of
common stock. WestPark Capital, Inc. acted as underwriter in the public
offering.  Shares of common stock were sold to the public at a price
of $3.50 per share, for gross proceeds of approximately $1.9
million.  Compensation for WestPark Capital’s services included
discounts and commissions of $192,500, a $57,750 non-accountable expense
allowance, road show expenses of approximately of $10,000, and legal counsel
fees (excluding blue sky fees) of $40,000.  WestPark Capital also
received a warrant to purchase 55,000 shares of common stock at an exercise
price of $4.20 per share.  The warrant, which has a term of five
years, is not exercisable until at least one-year from the date of
issuance.   The warrant also carries registration
rights.





In April
2009, the underwriter to the Company’s public offering that closed in March 2009
exercised its over-allotment options to purchase an additional of 82,500 shares
of common stock. The common stock was sold to the public at a price of $3.50 per
share for a gross proceed of $288,750.  Compensation incurred in the
public offering included discounts and commissions of $28,875, an $8,663
non-accountable expense allowance, other expenses of $4,821, and legal counsel
fees of $42,500.





NIVS USA
and its subsidiaries – Niveous, NIVS HK, NIVS PRC and NIVS Shenzhen shall be
collectively referred throughout as the “Company”.





To
summarize the paragraphs above, the organization and ownership structure of the
Company is currently as follows:








6


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





a.
            Basis
      of preparation





The
consolidated financial statements have been prepared in accordance with US GAAP
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation SX. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company for the
year ended December 31, 2008 and notes thereto contained in the Report on Form
10-K of the Company as filed with the United States Securities and Exchange
Commission (the “SEC”). Interim results are not necessarily indicative of the
results for the full year.





The 2008
year-end balance sheet data was derived from audited financial statements, which
were revised in the current period to reflect changes in the presentation of
minority interests. Certain amounts in previously issued financial statements
were reclassified to conform to the current period presentation.





In the
opinion of the management, the consolidated financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position of the Company as of June 30, 2009 and
December 31, 2008, and the results of operations and cash flows for the three
and six months ended June 30, 2009 and 2008, respectively.





b.
            Basis
      of consolidation





The
consolidated financial statements include the accounts of the Company and its
subsidiaries.  All significant inter-company transactions have been
eliminated in consolidation.





c.
            Use
      of estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting year. Because of the use
of estimates inherent in the financial reporting process, actual results could
differ from those estimates.





d.
            Fair
      values of financial instruments





Statement
of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures About Fair Value of
Financial Instruments,” defines financial instruments and requires fair
value disclosures of those financial instruments. On January 1, 2008, the
Company adopted SFAS No. 157, “Fair Value Measurements,” which defines fair
value, establishes a three-level valuation hierarchy for disclosures of fair
value measurement and enhances disclosures requirements for fair value measures.
Current assets and current liabilities qualified as financial instruments and
management believes their carrying amounts are a reasonable estimate of fair
value because of the short period of time between the origination of such
instruments and their expected realization and if applicable, their current
interest rate is equivalent to interest rates currently
available.  The three levels are defined as follow:





·
            Level
      1 — inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.


·
            Level
      2 — inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the assets or liability, either directly or indirectly, for
      substantially the full term of the financial
  instruments.


·
            Level
      3 — inputs to the valuation methodology are unobservable and significant
      to the fair value.





As of the
balance sheet date, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented due to the
short maturities of these instruments and that the interest rates on the
borrowings approximate those that would have been available for loans of similar
remaining maturity and risk profile at respective period-ends. Determining which
category an asset or liability falls within the hierarchy requires significant
judgment. The Company evaluates the hierarchy disclosures each
quarter.


7


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





e.
            Cash
      and cash equivalents





Cash and
cash equivalents include cash on hand, demand deposits with banks and liquid
investments with an original maturity of three months or less.





f.
            Accounts
      receivable





Accounts
receivable are recognized and carried at original invoiced amount less an
allowance for uncollectible accounts, as needed.





The
Company uses the aging method to estimate the valuation allowance for
anticipated uncollectible receivable balances. Under the aging method, bad debts
percentages determined by management based on historical experience as well as
current economic climate are applied to customers’ balances categorized by the
number of months the underlying invoices have remained outstanding. The
valuation allowance balance is adjusted to the amount computed as a result of
the aging method. When facts subsequently become available to indicate that the
amount provided as the allowance was incorrect, an adjustment which classified
as a change in estimate is made.





g.
            Inventories





Inventories
are stated at the lower of cost, as determined on a weighted average basis, or
market. Costs of inventories include purchase and related costs incurred in
bringing the products to their present location and condition. Market value is
determined by reference to selling prices after the balance sheet date or to
management’s estimates based on prevailing market conditions. The management
writes down the inventories to market value if it is below cost. The management
also regularly evaluates the composition of its inventories to identify
slow-moving and obsolete inventories to determine if valuation allowance is
required.





h.
            Property
      and equipment





Property
and equipment are initially recognized and recorded at cost. Gains or losses on
disposals are reflected as gain or loss in the period of disposal. The cost of
improvements that extend the life of plant and equipment are capitalized. These
capitalized costs may include structural improvements, equipment and fixtures.
All ordinary repairs and maintenance costs are expensed as
incurred.





Depreciation
for financial reporting purposes is provided using the straight-line method over
the estimated useful lives of the assets:





Building
              Molds
              Machinery
      and Equipment
              Electronic
      Equipment
            38
      years
              8
      years
              10
      years
              5
      yearsLeasehold
      Improvements
            5
      yearsOffice
      and Other Equipment
            5
      yearsAutomobiles
            5
      years





i.
            Intangible
      assets





The
Company’s intangible assets are stated at cost less accumulated amortization and
are comprised of land-use rights and computer software use
rights.  Land-use rights are related to land the Company occupies in
Guangdong Province, PRC and are being amortized on a straight-line basis over a
period of 40 years. Computer software use rights are being amortized on a
straight-line basis over a period of 10 years.


8


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





j.
            Impairment
      of long-lived assets





The
Company accounts for impairment of plant and equipment and amortizable
intangible assets in accordance with SFAS No. 144, “Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the
Company to evaluate a long-lived asset for recoverability when there is event or
circumstance that indicate the carrying value of the asset may not be
recoverable. An impairment loss is recognized when the carrying amount of a
long-lived asset or asset group is not recoverable (when carrying amount exceeds
the gross, undiscounted cash flows from use and disposition) and is measured as
the excess of the carrying amount over the asset’s (or asset group’s) fair
value.





k.
            Comprehensive
      income





The
Company has adopted SFAS No. 130,Reporting Comprehensive
Income, which establishes standards for reporting and displaying comprehensive
income, its components, and accumulated balances in a full-set of
general-purpose financial statements. Accumulated other comprehensive income
represents the accumulated balance of foreign currency translation
adjustments.





l.
            Revenue
      recognition





The
Company generates revenues from the sales of audio and video electronic products
and subcontracting activities. Sales are recognized when the following four
revenue criteria are met: persuasive evidence of an arrangement exists, delivery
has occurred, the selling price is fixed or determinable, and collectability is
reasonably assured. Sales are presented net of value added tax (VAT). No return
allowance is made as products returns are insignificant based on historical
experience.




m.
            Government
      grants





Grants
from the PRC government are recognized at their fair value where there is a
reasonable assurance that the grant will be received and the Company will comply
with all attached conditions. Government grants are recognized as revenues or
gains in the period received and as assets, decreases of liabilities, or
expenses depending on the form of the grants received.





n.
            Research
      and development costs





Research
and development costs are expensed to operations as incurred. The Company spent
$1,335,475 and $407,182, on direct research and development efforts in the three
months ended June 30, 2009 and 2008, respectively.





o.
            Income
      taxes





The
Company accounts for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes". SFAS No. 109 requires an asset and liability approach for
financial accounting and reporting for income taxes and allows recognition and
measurement of deferred tax assets based upon the likelihood of realization of
tax benefits in future years. Under the asset and liability approach, deferred
taxes are provided for the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. A valuation allowance is provided for
deferred tax assets if it is more likely than not these items will either expire
before the Company is able to realize their benefits, or that future
deductibility is uncertain.





The
Company adopted FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty
in Income Taxes,” which prescribes a comprehensive model for how a company
should recognize, measure, present and disclose in its financial statements
uncertain tax positions that the Company has take or expect to take on a tax
return (including a decision whether to file or not to file a return in a
particular jurisdiction).


9


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





p.
            Foreign
      currency translation





The
functional currency of Niveous and NIVS HK is Hong Kong Dollar (“HKD”). The
Company maintains its financial statements using the functional currency.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transaction.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income (loss) for the respective
periods.





The
functional currency of NIVS PRC and NIVS Shenzhen is the Renminbi (“RMB”), the
PRC’s currency. These two companies maintain their financial statements using
their own functional currency. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency at rates of exchange prevailing at the balance sheet dates.
Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the
dates of the transaction. Exchange gains or losses arising from foreign currency
transactions are included in the determination of net income (loss) for the
respective periods.





For
financial reporting purposes, the financial statements of Niveous and NIVS HK,
which are prepared in HKD, are translated into the Company’s reporting currency,
United States Dollars (“USD”); the financial statements of NIVS PRC and NIVS
Shenzhen, which are prepared in RMB, are translated into the Company’s reporting
currency, USD. Balance sheet accounts are translated using the closing exchange
rate in effect at the balance sheet date and income and expense accounts are
translated using the average exchange rate prevailing during the reporting
period. Adjustments resulting from the translation, if any, are included in
accumulated other comprehensive income (loss) in stockholder’s
equity.





The
exchange rates used for foreign currency translation were as follows (USD$1 =
RMB):





Period Covered
                  
                  Balance Sheet Date Rates
                  
                  
                  Average RatesYear
      ended December 31, 2008
                  
                  
                  6.81710
                  
                  
                  
                  6.93722Six
      months ended June 30, 2009
                  
                  
                  6.82476
                  
                  
                  
                  6.82269Three
      months ended June 30, 2009
                  
                  
                  6.82454
                  
                  
                  
                  6.81989Six
      months ended June 30, 2008
                  
                  
                  6.85166
                  
                  
                  
                  7.05019Three
      months ended June 30, 2008
                  
                  
                  6.85166
                  
                  
                  
                  6.98642





The
exchange rates used for foreign currency translation were as follows (USD$1 =
HKD):





Period Covered
                  
                  Balance Sheet Date Rates
                  
                  
                  Average RatesSix
      months ended June 30, 2009
                  
                  
                  7.74954
                  
                  
                  
                  7.75254Three
      months ended June 30, 2009
                  
                  
                  7.74954
                  
                  
                  
                  7.75074Six
      months ended June 30, 2008
                  
                  
                  7.80092
                  
                  
                  
                  7.81678Three
      months ended June 30, 2008
                  
                  
                  7.80092
                  
                  
                  
                  7.80012





q.
            Customer
      deposit





The
customer deposits are recorded as liability when the Company receives it and
recognized as revenue after the total amount is paid off upon the delivery of
the products.


10


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





r.
            Related
      parties





A party
is considered to be related to the Company if the party directly or indirectly
or through one or more intermediaries, controls, is controlled by, or is under
common control with the Company. Related parties also include principal owners
of the Company, its management, members of the immediate families of principal
owners of the Company and its management and other parties with which the
Company may deal if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully pursuing its own separate
interests. A party which can significantly influence the management or operating
policies of the transacting parties or if it has an ownership interest in one of
the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests is also a related party.





s.
            Recently
      issued accounting pronouncements





In June
2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards
CodificationTM and the
Hierarchy of Generally Accepted Accounting Principles a replacement of FASB
Statement No. 162," and approved—the FASB Accounting Standards CodificationTM
(Codification) as the single source of authoritative nongovernmental US GAAP.
The Codification does not change current US GAAP, but is intended to simplify
user access to all authoritative US GAAP by providing all the authoritative
literature related to a particular topic in one place. All existing accounting
standard documents will be superseded and all other accounting literature not
included in the Codification will be considered non-authoritative. For the
Company, the Codification is effective July 1, 2009 and will require future
references to authoritative US GAAP to coincide with the appropriate section of
the Codification. Accordingly, this standard will not have an impact on the
Company's consolidated results of operations or financial
condition.





In June
2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No.
46(R)," which revised the consolidation guidance for variable-interest entities.
The modifications include the elimination of the exemption for qualifying
special purpose entities, a new approach for determining who should consolidate
a variable-interest entity, and changes to when it is necessary to reassess who
should consolidate a variable-interest entity. For the Company, this standard is
effective January 1, 2010. The Company is currently evaluating the impact of
this standard, but would not expect it to have a material impact on the
Company's consolidated results of operations or financial
condition.





In June
2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial
Assets-an amendment of FASB Statement No. 140," amending the guidance on
transfers of financial assets to, among other things, eliminate the qualifying
special purpose entity concept, include a new unit of account definition that
must be met for transfers of portions of financial assets to be eligible for
sale accounting, clarify and change the derecognition criteria for a transfer to
be accounted for as a sale, and require significant additional disclosure. For
the Company, this standard is effective for new transfers of financial assets
beginning January 1, 2010. Because the Company historically does not have
significant transfers of financial assets, the adoption of this standard is not
expected to have a material impact on the Company's consolidated results of
operations or financial condition.





t.
            Recently
      adopted accounting pronouncements





In May
2009, the FASB issued SFAS No. 165, "Subsequent Events." This standard
incorporates into authoritative accounting literature certain guidance that
already existed within generally accepted auditing standards, with the
requirements concerning recognition and disclosure of subsequent events
remaining essentially unchanged. This guidance addresses events which occur
after the balance sheet date but before the issuance of financial statements.
Under SFAS No.165, as under previous practice, an entity must record the effects
of subsequent events that provide evidence about conditions that existed at the
balance sheet date and must disclose but not record the effects of subsequent
events which provide evidence about conditions that did not exist at the balance
sheet date. This standard added an additional required disclosure relative to
the date through which subsequent events have been evaluated and whether that is
the date on which the financial statements were issued. For the Company,this standard was effective
beginning April 1, 2009.


11


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





t.
            Recently
      adopted accounting pronouncements
(continued)




In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4
amends SFAS 157 and provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value
measurements. This FSP shall be applied prospectively with retrospective
application not permitted. This FSP shall be effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity early adopting this FSP must
also early adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). Additionally,
if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB
28-1) or FSP FAS 115-2 and FAS 124-2, it must also elect to early adopt this
FSP. The adoption of this standard did not have a material impact on the
Company’s consolidated results of operations or financial
condition.




In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairment” (FSP 115-2/124-2). FSP 115-2/124-2 amends
the requirements for the recognition and measurement of other-than-temporary
impairment for debt securities by modifying the pre-existing “intent and
ability” indicator. Under FSP 115-2/124-2, an other-than-temporary
impairment is triggered when there is an intent to sell the security, it is more
likely then not that the security will be required to be sold before recovery,
or the security is not expected to recover the entire amortized cost basis of
the security. Additionally, FSP 115-2/124-2 changes the presentation of an
other-than-temporary impairment in the income statement for those impairments
involving credit losses. The credit loss component will be recognized in
earnings and the remainder of the impairment will be recorded in other
comprehensive income. FSP 115-2/124-2 is effective for the Company beginning in
the second quarter of fiscal year 2009. Upon implementation at the beginning of
the second quarter of 2009, FSP 115-2/124-2 is not expected to have a
significant impact on the Company’s consolidated financial statements. The
adoption of this standard did not have a material impact on the Company’s
consolidated results of operations or financial condition.





In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosure about Fair
Value of Financial Instruments” (“FSP 107-1/APB 28-1”). FSP 107-1/APB 28-1
requires interim disclosures regarding the fair values of financial instruments
that are within the scope of FAS 107, “Disclosures about the Fair Value of
Financial Instruments,” Additionally, FSP 107-1/APB 28-1 requires disclosures of
the methods and significant assumptions used to estimate the fair value of
financial instruments on an interim basis as well as changes in the methods and
significant assumptions from prior periods. FSP 107-1/APB 28-1 does not change
the accounting treatment for these financial instruments and is effective for
the Company beginning in the second quarter of fiscal year 2009.  The
adoption of this standard did not have a material impact on the Company’s
consolidated results of operations or financial condition.




In the
first quarter of 2009, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (SFAS No.
141(R)) as amended by FASB staff position FSP 141(R)-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination.” SFAS No. 141(R)
generally requires an entity to recognize the assets acquired, liabilities
assumed, contingencies, and contingent consideration at their fair value on the
acquisition date. In circumstances where the acquisition-date fair value for a
contingency cannot be determined during the measurement period and it is
concluded that it is probable that an asset or liability exists as of the
acquisition date and the amount can be reasonably estimated, a contingency is
recognized as of the acquisition date based on the estimated amount. It further
requires that acquisition related costs be recognized separately from the
acquisition and expensed as incurred, restructuring costs generally be expensed
in periods subsequent to the acquisition date, and changes in accounting for
deferred tax asset valuation allowances and acquired income tax uncertainties
after the measurement period impact income tax expenses. In addition, acquired
in-process research and development is capitalized as an intangibles asset and
amortized over its estimated useful life. SFAS No. 141(R) is applicable to
business combinations on a prospective basis beginning in the first quarter of
2009.


12


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





t.
            Recently
      adopted accounting pronouncements
(continued)




In the first quarter of 2009, the
Company adopted SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51,” which established new
standards governing the accounting for and reporting of noncontrolling interests
(NCIs) in partially owned consolidated subsidiaries and the loss of control of
subsidiaries. Certain provisions of this standard indicate, among other things,
that NCIs (previously referred to as minority interests) be treated as a
separate component of equity, not as a liability (as was previously the case);
that increases and decreases in the parent’s ownership interest that leave
control intact be treated as equity transactions, rather than as step
acquisitions or dilution gains or losses; and that losses of a partially owned
consolidated subsidiary be allocated to the NCI even when such allocation might
result in a deficit balance. This standard also required changes to certain
presentation and disclosure requirements. SFAS No. 160 was effective
beginning January 1, 2009. As a result, upon adoption, the Company
retroactively reclassified
the “Minority interest in subsidiaries” balance previously included in the
“Other liabilities” section of the consolidated balance sheet to a new component
of equity with respect to NCIs in consolidated subsidiaries. The adoption also
impacted certain captions previously used on the consolidated statement of
income, largely identifying net income including NCI and net income attributable
to the Company.  The adoption of SFAS No. 160 did not have a material
impact on the Company’s consolidated financial position or results of
operations.




Effective
January 1, 2009, the Company adopted the provisions of EITF 07-5,"Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”). EITF 07-5 applies to any freestanding financial instruments or embedded
features that have the characteristics of a derivative, as defined by SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities,”
and to any freestanding financial instruments that are potentially settled in an
entity’s own common stock. The adoption of EITF 07-5 was not material to the
Company's financial statements or results of operations.





In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS
157"). SFAS 157 defines fair value, establishes a framework and gives guidance
regarding the methods used for measuring fair value, and expands disclosures
about fair value measurements. In February 2008, the FASB issued FASB Staff
Position 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13
and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13" ("FSP
157-1") and FASB Staff Position 157-2, "Effective Date of FASB Statement No.
157" ("FSP 157-2"). FSP 157-1 amends SFAS 157 to remove certain leasing
transactions from its scope. FSP 157-2 delays the effective date of SFAS 157 for
all non-financial assets and non-financial liabilities, except for items that
are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until fiscal years beginning after November
15, 2008. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years.  The Company adopted SFAS 157 effective January 1, 2008 for all
financial assets and liabilities as required. The adoption of SFAS 157 was not
material to the Company's financial statements or results of
operations.


13


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
3 – TRADE RECEIVABLES, NET





Trade
receivables consist of the following:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Trade
      receivables
                  
                  $
                  26,456,591
                  
                  
                  $
                  23,742,432Allowance
      for doubtful accounts
                  
                  
                  (3,373,367
                  )
                  
                  
                  (3,378,076
                  )Trade
      receivables, net
                  
                  $
                  23,083,224
                  
                  
                  $
                  20,364,356





The
change of the allowance for doubtful debts between the reporting periods, as of
June 30, 2009 and December 31, 2008 is displayed as follows:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Beginning
      balance
                  
                  $
                  (3,378,076
                  )
                  
                  $
                  (728,265
                  )Provision/Reversal
      during the period
                  
                  
                  -
                  
                  
                  
                  (2,531,479
                  )Exchange
      rate effect
                  
                  
                  4,709
                  
                  
                  
                  (118,332
                  )Ending
      balance
                  
                  $
                  (3,373,367
                  )
                  
                  $
                  (3,378,076
                  )





NOTE
4 – ADVANCES TO SUPPLIERS





In
accordance with the contracts with the Company’s suppliers, cash is advanced for
material and equipment purchase. The delivery term is usually 30 days. In the
event of a breach of contract, the Company has the following rights and penalty
protection:





The
Company has the right to get back the deposit and charge double interest on the
deposit according to the interest rate during the same period in which the
contract was breached. The Company owns the raw material and equipment acquired
from the suppliers under the agreements. The Company has the legal right to take
possession of it. The Company did not have any contract breaches for the year
ended December 31, 2008 and six months ended June 30, 2009.





For the
six months ended June 30, 2009, two suppliers accounted for more than 10% of the
advances to suppliers and each accounted approximately 6% and 11%, respectively.
Total purchases of each supplier in 2009 accounted for approximately, 20% and
7%, respectively.





For the
fiscal year ended December 31, 2008, four suppliers accounted for more than 10%
of the advances to suppliers and each accounted approximately 24%, 24%, 19% and
12%, respectively. Total purchases of each supplier in 2008 accounted for
approximately, 19%, 0%, 0% and 6%, respectively. Those two suppliers with zero
purchases in 2008 were the main suppliers of raw materials related with the
Company’s IPTV products. The Company made cash advances in November and December
2008 and raw materials were shipped in February 2009.


14


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
5 – INVENTORIES, NET





Inventories
include raw material and finished goods. Finished goods contain direct material,
direct labor and manufacturing overhead and do not contain general and
administrative costs. Inventory consists of the following:





June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Raw
      material
                  
                  $
                  11,665,248
                  
                  
                  $
                  10,692,030Finished
      goods
                  
                  
                  9,169,667
                  
                  
                  
                  828,700Reserve
      for obsolete inventory
                  
                  
                  (240,635
                  )
                  
                  
                  (240,898
                  )Inventory,
      net
                  
                  $
                  20,594,280
                  
                  
                  $
                  11,279,832





The
change of the reserve for obsolete inventory as of June 30, 2009 and December
31, 2008 is displayed as follows:





June 30,
                    
                    
                    December 31,2009
                    
                    
                    2008Beginning
      balance
                    
                    $
                    (240,898
                    )
                    
                    $
                    (105,391
                    )Provision/Reversal
      during the period
                    
                    
                    -
                    
                    
                    
                    (131,837
                    )Foreign
      exchange adjustment
                    
                    
                    263
                    
                    
                    
                    (3,670
                    )Ending
      balance
                    
                    $
                    (240,635
                    )
                    
                    $
                    (240,898
                    )





NOTE
6 – PROPERTY AND EQUIPMENT, NET





Property
and equipment consist of the following:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Building
                  
                  $
                  16,638,611
                  
                  
                  $
                  16,656,779Molds
                  
                  
                  31,611,440
                  
                  
                  
                  28,712,602Machinery
      and equipment
                  
                  
                  14,436,401
                  
                  
                  
                  14,452,170Electronic,
      office and other equipment
                  
                  
                  2,140,545
                  
                  
                  
                  1,869,063Automobiles
                  
                  
                  1,280,169
                  
                  
                  
                  1,215,387Construction
      in progress
                  
                  
                  1,509,469
                  
                  
                  
                  1,506,717Accumulated
      depreciation
                  
                  
                  (10,967,595
                  )
                  
                  
                  (8,081,231
                  )Property
      and equipment, net
                  
                  $
                  56,649,040
                  
                  
                  $
                  56,331,487





The
depreciation expenses are $2,896,131 and $2,347,467 in six months ended June 30,
2009 and 2008, respectively, and is comprised of the following:





June 30,2009
                  
                  
                  2008Cost
      of sales
                  
                  $
                  2,599,651
                  
                  
                  $
                  2,175,519Selling
      expenses
                  
                  
                  132,156
                  
                  
                  
                  10,739General
      and administrative expenses
                  
                  
                  164,324
                  
                  
                  
                  161,209Total
                  
                  $
                  2,896,131
                  
                  
                  $
                  2,347,467


15





NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the six months ended June 30, 2009 and 2008 are
unaudited)





NOTE
7 – INTANGIBLE ASSETS





Intangible
assets consist of the following:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Land
      use rights
                  
                  $
                  2,754,761
                  
                  
                  $
                  2,757,769Computer
      software use rights
                  
                  
                  4,819
                  
                  
                  
                  4,824Trademark
                  
                  
                  46,274
                  
                  
                  
                  29,339Accumulated
      amortization
                  
                  
                  (484,655
                  )
                  
                  
                  (448,549
                  )Intangible
      assets, net
                  
                  $
                  2,321,199
                  
                  
                  $
                  2,343,383





The
amortization expense is $35,793 and $33,488 in the six months ended June 30,
2009 and 2008, respectively, and are comprised of the following:





June 30,2009
                  
                  
                  2008General
      and administrative expenses
                  
                  $
                  35,793
                  
                  
                  $
                  33,488





NOTE
8 – CUSTOMER DEPOSIT





The
Company requires its customers to pay 30% deposit of the total amount for each
order. The customer deposits are recorded as liability when the Company receives
it and are recognized as revenue after the total amount is paid off upon the
delivery of the products. In its agreement, the Company specifies the delivery
date (usually 30 days after the order is placed) and the liability for breach of
the contract. If the Company cannot fulfill its supply to its customers
according to the contract, the customers have the right to get back their
deposit. If the products do not meet the quality standard or need to be
reworked, the Company is responsible for the rework and certain expenses. The
Company may compensate its customers for their loss if the customers rework or
repack by themselves. If the customers do not pay the balance according to the
contract, the Company will charge them 0.5% of the balance amount each day at
the second week after the due date. But the total breach amount should not be
over 20% of the total amount of the contract. For the six months ended June 30,
2009 and year ended December 31, 2008, the Company has had no costs related
to a contract breach or product quality issue.





For the
six months ended June 30, 2009, only three customers in the aging list of the
customer deposit and each accounted approximately 59%, 21% and 20%,
respectively. Total sales to each customer in 2009 accounted for approximately
0%, 0% and 0% of total sales, respectively.





For the
year ended December 31, 2008, two customers accounted for more than 10% of the
customer deposit and each accounted approximately 26% and 12%, respectively.
Total sales to each customer in 2008 accounted for approximately 1% and 4% of
total sales, respectively.


16


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
9 – SHORT-TERM LOANS





Short-term
loans consist of the following:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Construction
      Bank
                  
                  $
                  18,415,027
                  
                  
                  $
                  19,495,158Defutai
      Bank
                  
                  
                  2,673,359
                  
                  
                  
                  2,175,207Nanyian
      Bank
                  
                  
                  4,662,527
                  
                  
                  
                  6,683,487Development
      Bank
                  
                  
                  10,330,365
                  
                  
                  
                  5,757,583Pufa
      Bank
                  
                  
                  1,758,360
                  
                  
                  
                  1,760,280$
                  37,839,638
                  
                  
                  $
                  35,871,715





The above
outstanding short term loans are used primarily for general working capital
purposes. Recurring bank loans carry annual interest rates of 4.50%~7.39% with
maturity dates ranging from 30 days to one year.  These loans are
either non-secured or secured by the Company’s accounts receivable, building and
land-use rights.





The
annual interest rates are shown as follows:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Construction
      Bank
                  
                  
                  7.39
                  %
                  
                  
                  6.84
                  %Defutai
      Bank
                  
                  
                  4.50
                  %
                  
                  
                  4.92
                  %Agricultural
      Bank
                  
                  
                  -
                  
                  
                  
                  7.20
                  %Nanyian
      Bank
                  
                  
                  7.12
                  %
                  
                  
                  6.84
                  %Shenzhen
      Development Bank
                  
                  
                  5.35
                  %
                  
                  
                  6.48
                  %Pufa
      Bank
                  
                  
                  7.20
                  %
                  
                  
                  7.20
                  %





NOTE
10 – RESTRICTED CASH AND BANK NOTES PAYABLE





Bank
notes payable consist of the following:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Shenzhen
      Development Bank
                  
                  $
                  9,628,754
                  
                  
                  $
                  10,336,605Construction
      Bank
                  
                  
                  9,199,323
                  
                  
                  
                  8,512,596$
                  18,828,077
                  
                  
                  $
                  18,849,201





The bank
notes have no interest bearing.  Additionally, the bank charges a 1⁄2 of
1 percent fee on the amounts borrowed by the Company.





The terms
of the bank notes payable require the Company to maintain a deposit at the bank
to secure the notes as follows:





June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Construction
      Bank
                  
                  $
                  1,780,126
                  
                  
                  $
                  1,753,433Shenzhen
      Development Bank
                  
                  
                  12,322,071
                  
                  
                  
                  9,923,397Defutai
      Bank
                  
                  
                  500,524
                  
                  
                  
                  -Shenzhen
      Pingan Bank
                  
                  
                  -
                  
                  
                  
                  4,765$
                  14,602,721
                  
                  
                  $
                  11,681,595


17


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
11 - DUE TO SHAREHOLDER





Due to
shareholder consists of the following:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Due
      to Mr. Li Tianfu
                  
                  $
                  -
                  
                  
                  $
                  7,842,780





The above
amounts are due to Mr. Li Tianfu. These amounts are non-secured, no interest
bearing, and are considered to be long-term with no fixed repayment date. The
imputed interests are assessed as an expense to the business operation and an
addition to the paid-in capital. The calculation is performed quarterly by
annual rate in the range of 5.22 ~ 6.57% with the reference to the average three
months loan rate. The imputed interests for the six months ended June 30, 2009
and 2008 are as follows:


June 30,2009
                  
                  
                  2008Imputed
      interests
                  
                  $
                  -
                  
                  
                  $
                  299,333





On
November 28, 2008, the Company and its subsidiaries entered into a Debt
Repayment and Set-Off Agreement (the “Repayment Agreement”) with Mr. Li and each
of NIVS Investment (SZ) Co., Ltd.; Zhongkena Technology Development; Xentsan
Technology (SZ) Co., Ltd.; Korea Hyundai Light & Electric (Int'l) Holding;
NIVS Information & Technology (HZ) Co., Ltd.; and Hyundai Light &
Electric (HZ) Co., Ltd. (collectively, the “Related
Companies”).  Pursuant to the Agreement, as it was amended on December
22, 2008, each of the Related Companies agreed to completely and immediately
repay all outstanding loan amounts that it owed to the Company and the Company
agreed to repay $996,433 of the debt that it owed to Mr. Li.





Pursuant
to the terms of the Repayment Agreement, the Company and its subsidiaries
(collectively, the “NIVS Group”) had outstanding loan amounts of $8,838,159 owed
to Mr. Li (the “Li Debt”), and Mr. Li, through the Related Companies, had an
aggregate outstanding loan amount of $996,433 owed to the NIVS Group (the
“Related Companies’ Debt”), with $996,433 owed by Korea Hyundai Light &
Electric (Int'l) Holding.  The loans were unsecured with no fixed
repayment date. Pursuant to the Repayment Agreement, the Related Companies’ Debt
of $996,433 was repaid in full by set-off against the Li Debt of $8,838,159 such
that, as a result of the transactions contemplated by the Repayment Agreement,
the Related Companies’ Debt was no longer outstanding and neither Mr. Li nor any
of the Related Companies owed the NIVS Group any loan
amount.  Moreover, after the repayments under the Repayment Agreement,
the Company’s remaining debt owed to Mr. Li was $7,842,780 as of December 31,
2008.





The
parties to the Repayment Agreement also acknowledged that there were no
remaining debt obligations owed to the Company or its subsidiaries, either
directly or indirectly, by Mr. Li, any other executive officer or director, or
any related family member, of the Company, or any entity owned or controlled by
such persons, including the Related Companies, and that no loans or similar
arrangements will be made by the Company or its subsidiaries to such persons or
entities in the future.   Due to the loans that the Company made
to the entities owned and controlled by its chief executive officer in violation
of Section 402 of the Sarbanes-Oxley Act of 2002, the Company and/or its chief
executive officer could become subject to criminal, civil or administrative
sanctions, penalties, or investigations and may also face potential private
securities litigation.





On
December 24, 2008, the Company entered into an agreement with Mr. Li pursuant to
which the outstanding debt of $7,842,780 that the Company owed to Mr. Li would
be converted into shares of the Company’s common stock.  According to
the agreement, the shares would be issued upon the closing of its public
offering, which closed in March 2009. The number of shares that the Company
issued to Mr. Li was equal to the debt amount of approximately $7,841,726 (as
adjusted for currency fluctuations) divided by the offering price of the public
offering.  Based on the offering price for the Company’s offering of
$3.50 per share, the Company issued 2,240,493 shares of common stock to Mr.
Li.  After giving effect to the conversion, the debt owed to Mr. Li
was no longer outstanding and the Company does not have any outstanding debt
owed to Mr. Li.  As a result of the conversion, the number of shares
that Mr. Li beneficially owned increased from 12,204,667 shares to 14,445,160
shares.  This represented a 3.3% increase of Mr. Li’s ownership of the
Company’s outstanding shares of common stock from 33.1% to
36.4%.


18


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
12- OTHER GENERAL AND ADMINISTRATIVE





For the
six months ended June 30, 2009 and 2008, the amount of other general and
administrative expenses mainly composed of the following:


June 30,2009
                  
                  
                  2008Audit
      and accounting
                  
                  $
                  42,792
                  
                  
                  $
                  7,783Legal
      fees
                  
                  
                  220,000
                  
                  
                  
                  18,543Office
      expenses
                  
                  
                  921,035
                  
                  
                  
                  593,622Salary
      and wages
                  
                  
                  391,376
                  
                  
                  
                  275,733Consulting
                  
                  
                  112,781
                  
                  
                  
                  56,580Rent
      and utilities
                  
                  
                  26,453
                  
                  
                  
                  81,065Others
                  
                  
                  250,553
                  
                  
                  
                  381$
                  1,964,990
                  
                  
                  $
                  1,033,707





NOTE
13- STATUTORY RESERVES





As
stipulated by the relevant laws and regulations for enterprises operating in
PRC, the subsidiaries of the Company are required to make annual appropriations
to a statutory surplus reserve fund. Specifically, the subsidiaries of the
Company are required to allocate 10% of their profits after taxes, as determined
in accordance with the PRC accounting standards applicable to the subsidiaries
of the Company, to a statutory surplus reserve until such reserve reaches 50% of
the registered capital of the subsidiaries of the Company.


19


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
14- INCOME TAX





Niveous
is registered in BVI and pays no taxes.





NIVS HK
is a holding company registered in Hong Kong and has no operating profit for tax
liabilities.





NIVS
Shenzhen serves as a branch company of NIVS PRC. The assessment of its tax
liabilities is combined with that of NIVS PRC.  NIVS PRC is qualified
as Hi-Tech Company in 2009.





Beginning
January 1, 2008, the new Enterprise Income Tax (“EIT”) law has replaced the old
laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”).
The new standard EIT rate of 25% replaces the 33% rate applicable to both DES
and FIEs, except for High Tech companies that pay a reduced rate of 15%, subject
to government verification for Hi-Tech company status in every three years. For
companies established before March 16, 2007 continue to enjoy tax holiday
treatment approved by local government for a grace period of either for the next
5 years or until the tax holiday term is completed, whichever is
sooner.





The
provision for taxes on earnings consisted of:


June 30,2009
                        
                        
                        2008Current
      income taxes expenses:PRC
      Enterprises Income Tax
                        
                        $
                        1,275,869
                        
                        
                        $
                        975,084United
      States Federal Income Tax
                        
                        
                        -
                        
                        
                        
                        -Total
                        
                        $
                        1,275,869
                        
                        
                        $
                        975,084





A
reconciliation between the income tax computed at the U.S. statutory rate and
the Group’s provision for income tax is as follows:





June 30,2009
                  
                  
                  2008U.S.
      statutory rate
                  
                  
                  34
                  %
                  
                  
                  34
                  %Foreign
      income not recognized in the U.S.
                  
                  
                  -34
                  %
                  
                  
                  -34
                  %PRC
      preferential enterprise income tax rate
                  
                  
                  25
                  %
                  
                  
                  25
                  %Tax
      holiday and relief granted to the Subsidiary
                  
                  
                  -10
                  %
                  
                  
                  -12.5
                  %Provision
      for income tax
                  
                  
                  15
                  %
                  
                  
                  12.5
                  %





The tax
authority of the PRC Government conducts periodic and ad hoc tax filing reviews
on business enterprises operating in the PRC after those enterprises had
completed their relevant tax filings, hence the Company’s tax filings may not be
finalized.  It is therefore uncertain as to whether the PRC tax
authority may take different views about the Company’s tax filings which may
lead to additional tax liabilities.


20


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
15 - COMMITMENTS AND CONTINGENCIES





Lack of
Insurance





The
company does not carry any business interruption insurance, products liability
insurance or any other insurance policy except for a limited property insurance
policy. As a result, the Company may incur uninsured losses, increasing the
possibility that the investors would lose their entire investment in the
Company.





The
Company could be exposed to liabilities or other claims for which the Company
would have no insurance protection. The Company does not currently maintain any
business interruption insurance, products liability insurance, or any other
comprehensive insurance policy except for property insurance policies with
limited coverage. As a result, the Company may incur uninsured liabilities and
losses as a result of the conduct of its business. There can be no guarantee
that the Company will be able to obtain additional insurance coverage in the
future, and even if it can obtain additional coverage, the Company may not carry
sufficient insurance coverage to satisfy potential claims. Should uninsured
losses occur, any purchasers of the Company’s common stock could lose their
entire investment.





Because
the Company does not carry products liability insurance, a failure of any of the
products marketed by the Company may subject the Company to the risk of product
liability claims and litigation arising from injuries allegedly caused by the
improper functioning or design of its products. The Company cannot assure that
it will have enough funds to defend or pay for liabilities arising out of a
products liability claim. To the extent the Company incurs any product liability
or other litigation losses, its expenses could materially increase
substantially. There can be no assurance that the Company will have sufficient
funds to pay for such expenses, which could end its operations and the investors
would lose their entire investment.





NOTE
16 - OPERATING RISK





Country
risk





The
Company has significant investments in the PRC. The operating results of the
Company may be adversely affected by changes in the political and social
conditions in the PRC and by changes in Chinese government policies with respect
to laws and regulations, anti-inflationary measures, currency conversion and
remittance abroad, and rates and methods of taxation, among other things. The
Company can give no assurance that those changes in political and other
conditions will not result in have a material adverse effect upon the Company’s
business and financial condition.





NOTE
17 - CONCENTRATION OF CREDIT RISK





A
significant portion of the Company’s cash at June 30, 2009 and December 31, 2008
is maintained at various financial institutions in the PRC which do not provide
insurance for amounts on deposit.  The Company has not experienced any
losses in such accounts and believes it is not exposed to significant credit
risk in this area.





The
Company operates principally in the PRC and grants credit to its customers in
this geographic region. Although the PRC is economically stable, it is always
possible that unanticipated events in foreign countries could disrupt the
Company’s operations.





In 2009,
two customers had net sales exceeding 10% of total net sales of the quarter. In
2008, three customers had net sales exceeding 10% of total net sales of the
quarter.


21





NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
18 - SEGMENT INFORMATION





The
segment information for revenue is as follows:


June 30,2009
                    
                    
                    2008Standard
      audio and video equipment
                    
                    China
                    
                    $
                    18,303,590
                    
                    
                    $
                    16,743,723Europe
                    
                    
                    7,129,815
                    
                    
                    
                    2,321,975North
      America
                    
                    
                    1,052,949
                    
                    
                    
                    2,320,156Other
      Asian Countries
                    
                    
                    11,011,889
                    
                    
                    
                    9,230,018South
      America
                    
                    
                    1,142,349
                    
                    
                    
                    2,610,873Other
      Countries
                    
                    
                    1,078,487
                    
                    
                    
                    89,577Intelligent
      audio and video equipment
                    
                    China
                    
                    
                    10,184,611
                    
                    
                    
                    2,315,727Europe
                    
                    
                    4,069,275
                    
                    
                    
                    -North
      America
                    
                    
                    641,052
                    
                    
                    
                    4,788,582Other
      Asian Countries
                    
                    
                    8,468,199
                    
                    
                    
                    7,661,188South
      America
                    
                    
                    1,242,768
                    
                    
                    
                    -Other
      Countries
                    
                    
                    1,346,332
                    
                    
                    
                    -Other
      audio and video equipment
                    
                    China
                    
                    
                    3,317,320
                    
                    
                    
                    3,555,076Europe
                    
                    
                    333,039
                    
                    
                    
                    -Other
      Asian Countries
                    
                    
                    794,775
                    
                    
                    
                    -Total
                    
                    
                    
                    $
                    70,116,450
                    
                    
                    $
                    51,636,895





NOTE
19 - JULY 2008 INVESTOR RELATIONS AGREEMENT





In July
2008, the Company entered into a two-year consulting agreement with Nascent
Value LLC (“Nascent”). According to the agreement, as amended, Nascent will
provide the Company with business consulting and investor relation services.
Nascent is a third-party investor relations firm that does not have any other
relationship or common ownership with the Company or any of the Company’s
affiliates. As consideration for entering into the agreement and compensation
for Nascent’s services under the agreement, the Company issued to Nascent
425,000 shares (“IR Shares”) of its common stock upon the closing of the Share
Exchange. In connection with the IR Shares, the Company recognized a stock-based
compensation charge during the three months ended September 30, 2008 in the
amount of $765,000, which is derived from valuing each share at $1.80, the price
at which shares of the Company’s common stock were sold in the Private
Placement. The Company also agreed to pay Nascent $6,000 per month for its
services. Nascent also entered into a lock-up agreement with WestPark Capital,
Inc., the placement agent for the Private Placement, pursuant to which 20,000 IR
Shares will be subject to lock-up restrictions until the Company’s securities
are listed on a national securities exchange and the remaining 405,000 IR Shares
will be subject to lock-up restrictions following the listing of the Company’s
common stock on NYSE Amex, which occurred in March 2009. WestPark Capital, Inc.
reserves the right to release all or a portion of the shares at its sole
discretion.


22


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
20 - EARNINGS PER SHARE





Basic net
income per share is computed by dividing net income by the weighted-average
number of shares outstanding during the period.





Diluted
net income per share is computed by using the weighted-average number of shares
of common stock outstanding and, when dilutive, potential shares from options
and warrants to purchase common stock, using the treasury stock
method.





The
following table illustrates the computation of basic and dilutive net income per
share and provides a reconciliation of the number of weighted-average basic and
diluted shares outstanding:


June 30,2009
                  
                  
                  2008Net
      income
                  
                  $
                  6,963,952
                  
                  
                  $
                  6,345,427Denominator:Basic
      weighted-average shares outstanding
                  
                  
                  39,028,629
                  
                  
                  
                  27,546,667Effect
      of dilutive warrants
                  
                  
                  -
                  
                  
                  
                  -Basic
      weighted-average shares outstanding
                  
                  
                  39,028,629
                  
                  
                  
                  27,546,667Net
      income per share:Basic
                  
                  $
                  0.18
                  
                  
                  $
                  0.23Diluted
                  
                  $
                  0.18
                  
                  
                  $
                  0.23





NOTE
21 - COMMON STOCK WARRANTS





Since the
inception of NIVS USA, the NIVS USA’s shareholders held an aggregate of
7,096,390 warrants. Immediately prior to the closing of the share exchange on
July 25, 2008, the shareholders canceled an aggregate of 6,149,723 warrants such
that the shareholders held an aggregate of 946,667 warrants immediately after
the Share Exchange. On March 19, 2009, the shareholders exercised the aggregate
warrants at $0.0001 per share in accordance with the net exercise provision
contact in the underlying warrant agreements. As a result of the net exercise
provision, the Company issued an aggregate of 946,640 shares of common
stock.





In March
2009, NIVS USA completed a public offering of its commons stock and issued a
warrant to purchase 55,000 shares at an exercise price of $4.20 per share. The
warrant has 5 year term and is not exercisable until at least one year from the
date of issuance.





The
summary of the status of the Company’s outstanding warrant activity is as
follows:





Warrants
                  
                  
                  Average
                    Exercise PriceBalance
      December 31, 2007
                  
                  
                  7,096,390
                  
                  
                  $
                  0.0001Warrants
      issued to shareholders
                  
                  
                  -
                  
                  
                  $Warrants
      exercised
                  
                  
                  -
                  
                  
                  $
                  -Forfeited/canceled
                  
                  
                  6,149,723
                  
                  
                  $
                  -Balance
      December 31, 2008
                  
                  
                  946,667Warrants
      issued to underwriter
                  
                  
                  55,000
                  
                  
                  $
                  4.20Warrants
      exercised
                  
                  
                  (946,667
                  )
                  
                  $
                  -Forfeited/canceled
                  
                  
                  -
                  
                  
                  $
                  -Balance
      June 30, 2009
                  
                  
                  55,000


23


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
22 – OMNIBUS INCENTIVE PLAN





On June
23, 2009, the NIVS IntelliMedia Technology Group, Inc. 2009 Omnibus Incentive
Plan (the “Plan”) was approved and adopted. As approved by the Board and
shareholders, the Plan reserved a total of 4.0 million shares authorized for
issuance under the Plan. A description of the material terms of the Plan and
complete copy of the Plan are included in the Company's definitive proxy
statement filed with the SEC on April 30, 2009 in connection with the Annual
Meeting. The material features of the Plan are summarized as
follows:
 
 The
Compensation Committee of the Company’s Board of Directors (or the Board of
Directors if so desired) (the “Committee”) has the authority to determine,
within the limits of the express provisions of the Plan, the individuals to whom
awards will be granted, the nature, amount and terms of such awards and the
objectives and conditions for earning such awards. The Committee may grant
awards to any employee, director, consultant or other person providing services
to the Company or its affiliates. The maximum awards that can be granted under
the Plan to a single participant in any calendar year will be 1 million shares
of common stock (whether through grants of Options or Stock Appreciation Rights
or other awards of common stock or rights with respect thereto) or $1 million in
the form of cash-based incentive awards.
 
 Awards
under the Plan may include incentive stock options, nonqualified stock options,
stock appreciation rights (“SARs”), restricted shares of common stock,
restricted stock units, performance share or unit awards, other stock-based
awards and cash-based incentive awards.
 
 As of
June 30, 2009, no specific awards have been granted or are contemplated under
the Plan. Also, the exact types and amounts of any future awards to be made to
any eligible participants pursuant to the Plan are not presently
determinable.  Due to the discretionary nature of the Plan, it is
impossible to state who the participants in the Plan will be in the future or
the number of options or other awards to be received by a person or
group.
 
 An
aggregate of 4,000,000 shares of the Company’s common stock is reserved for
issuance and available for awards under the Plan, including incentive stock
options granted under the Plan. With respect to awards made under the Plan,
shares of common stock underlying awards that are forfeited or canceled (as a
result, for example, of the lapse of an option or a forfeiture of restricted
stock), as well as any shares surrendered to or withheld by the Company in
payment or satisfaction of the exercise price of a stock option or tax
withholding obligations with respect to an award, will be available for
additional grants under the Plan.  On the exercise of a SAR, only the
number of shares actually issued will be counted against the number of shares
reserved for grant under the Plan. Shares to be issued or purchased under the
Plan will be authorized but unissued shares of common stock. Shares issued with
respect to awards assumed by the Company in connection with acquisitions do not
count against the total number of shares available for new awards under the
Plan.




NOTE
23 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION





Basis of
Presentation





The
condensed parent company financial statements have been prepared in accordance
with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of
the subsidiaries of NIVS IntelliMedia Technology Group exceed 25% of the
consolidated net assets of NIVS IntelliMedia Technology Group. The ability of
the Company’s Chinese operating subsidiaries to pay dividends may be restricted
due to the foreign exchange control policies and availability of cash balances
of the Chinese operating subsidiaries. Because substantially all of the
Company’s operations are conducted in China and a substantial majority of our
revenues are generated in China, a majority of the Company’s revenue being
earned and currency received are denominated in Renminbi (RMB). RMB is subject
to the exchange control regulation in China, and, as a result, the Company may
be unable to distribute any dividends outside of China due to PRC exchange
control regulations that restrict its ability to convert RMB into US
Dollars.





The
condensed parent company financial statements have been prepared using the same
accounting principles and policies described in the notes to the consolidated
financial statements, with the only exception being that the parent company
accounts for its subsidiaries using the equity method. Refer to the consolidated
financial statements and notes presented above for additional information and
disclosures with respect to these financial statements.


24


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
23- CONDENSED PARENT COMPANY FINANCIAL INFORMATION (continued)





NIVS
IntelliMedia Technology Group, Inc.




(Formerly
SRKP 19, Inc.)





CONDENSED PARENT COMPANY
BALANCE SHEETS




(Dollars
in Thousands)





June 30,
                                                                        
                                                                        
                                                                        December 31,2009
                                                                        
                                                                        
                                                                        2008(Unaudited)ASSETSCash
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -Other
      receivables
                                                                        
                                                                        
                                                                        8Investment
      in subsidiaries, at equity in net assets
                                                                        
                                                                        
                                                                        62,307
                                                                        
                                                                        
                                                                        
                                                                        46,521Total
      Assets
                                                                        
                                                                        
                                                                        62,315
                                                                        
                                                                        
                                                                        
                                                                        46,521LIABILITIES AND STOCKHOLDERS’ EQUITY
      (DEFICIT)CURRENT
      LIABILITIESDue
      to subsidiaries
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        132Total
      Current Liabilities
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        132COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITY (DEFICIT):Preferred
      stock, $.0001 par value, 10,000,000 shares authorized, none
    issuedCommon
      stock, $.0001 par value, 100,000,000 shares authorized, 40,675,347 and
      36,855,714 shares issued and outstanding at June 30, 2009 and December 31,
      2008, respectively
                                                                        
                                                                        
                                                                        4
                                                                        
                                                                        
                                                                        
                                                                        4Additional
      Paid in Capital
                                                                        
                                                                        
                                                                        21,717
                                                                        
                                                                        
                                                                        
                                                                        12,663Accumulated
      other comprehensive income
                                                                        
                                                                        
                                                                        3,868
                                                                        
                                                                        
                                                                        
                                                                        3,960Statutory
      surplus reserve fund
                                                                        
                                                                        
                                                                        3,569
                                                                        
                                                                        
                                                                        
                                                                        3,569Retained
      earnings (unrestricted)
                                                                        
                                                                        
                                                                        33,157
                                                                        
                                                                        
                                                                        
                                                                        26,193Total
      Stockholders’ Equity (Deficit)
                                                                        
                                                                        
                                                                        62,315
                                                                        
                                                                        
                                                                        
                                                                        46,389Total
      Liabilities and Shareholders' Equity
                                                                        
                                                                        $
                                                                        62,315
                                                                        
                                                                        
                                                                        $
                                                                        46,521


25


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)





NOTE
23- CONDENSED PARENT COMPANY FINANCIAL INFORMATION (continued)





NIVS
IntelliMedia Technology Group, Inc.




(Formerly
SRKP 19, Inc.)





CONDENSED PARENT COMPANY
STATEMENTS OF OPERATIONS




(Dollars
in Thousands)





For the
                            
                            
                            For the
                            
                            
                            For the
                            
                            
                            For theThree Months Ended
                            
                            
                            Three Months Ended
                            
                            
                            Six Months Ended
                            
                            
                            Six Months EndedJune 30,
                            
                            
                            June 30,
                            
                            
                            June 30,
                            
                            
                            June 30,2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008(Unaudited)
                            
                            
                            (Unaudited)
                            
                            
                            (Unaudited)
                            
                            
                            (Unaudited)Revenue
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Other
      general and administrative
                            
                            
                            39
                            
                            
                            
                            2
                            
                            
                            
                            487
                            
                            
                            
                            13Total
      Expenses
                            
                            
                            39
                            
                            
                            
                            2
                            
                            
                            
                            487
                            
                            
                            
                            13Equity
      in undistributed income of subsidiaries
                            
                            
                            4,635
                            
                            
                            
                            -
                            
                            
                            
                            7,451
                            
                            
                            
                            -Income
      before income taxes
                            
                            
                            4,596
                            
                            
                            
                            (2
                            )
                            
                            
                            6,964
                            
                            
                            
                            (13
                            )Provision
      for income tax
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Net
      income
                            
                            $
                            4,596
                            
                            
                            $
                            (2
                            )
                            
                            $
                            6,964
                            
                            
                            $
                            (13
                            )




26


NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Notes to
Consolidated Financial Statements


(Amounts
and disclosures at and for the three and six months ended June 30, 2009 and 2008
are unaudited)




NOTE
23- CONDENSED PARENT COMPANY FINANCIAL INFORMATION (continued)





NIVS
IntelliMedia Technology Group, Inc.




(Formerly
SRKP 19, Inc.)





CONDENSED PARENT COMPANY
STATEMENTS OF CASH FLOWS




(Dollars
in Thousands)





For
      the
                                                                  
                                                                  
                                                                  For
      theSix Months Ended
                                                                  
                                                                  
                                                                  Six Months EndedJune 30,
                                                                  
                                                                  
                                                                  June 30,2009
                                                                  
                                                                  
                                                                  2008(Unaudited)
                                                                  
                                                                  
                                                                  (Unaudited)Cash
      Flows from Operating Activities:Net
      income
                                                                  
                                                                  $
                                                                  6,964
                                                                  
                                                                  
                                                                  $
                                                                  (13
                                                                  )Other
      receivables
                                                                  
                                                                  
                                                                  (8
                                                                  )Equity
      in undistributed income of subsidiaries
                                                                  
                                                                  
                                                                  (7,451
                                                                  )
                                                                  
                                                                  
                                                                  -Net
      Cash (Used) by Operating Activities
                                                                  
                                                                  
                                                                  (495
                                                                  )
                                                                  
                                                                  
                                                                  (13
                                                                  )Cash
      Flows from Investing Activities:Capital
      contribution to subsidiaries
                                                                  
                                                                  
                                                                  (8,559
                                                                  )
                                                                  
                                                                  
                                                                  -Net
      Cash (Used) by Investing Activities
                                                                  
                                                                  
                                                                  (8,559
                                                                  )
                                                                  
                                                                  
                                                                  -Cash
      Flows from Financing Activities:Advances
      from stockholders
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  15Repayment
      to subsidiaries
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Net
      proceeds of share issuance
                                                                  
                                                                  
                                                                  9,054
                                                                  
                                                                  
                                                                  
                                                                  -Net
      Cash Provided by Financing Activities
                                                                  
                                                                  
                                                                  9,054
                                                                  
                                                                  
                                                                  
                                                                  15Net
      increase/(decrease) in cash and cash equivalents
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  2Cash
      and cash equivalents, beginning of period
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  1Cash
      and cash equivalents, end of period
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  3




27




ITEM
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





The
following discussion relates to the financial condition and results of
operations of NIVS IntelliMedia Technology Group, Inc. (the “Company”) and its
subsidiaries, including its wholly-owned subsidiary, NIVS Holding Company
Limited, a British Virgin Islands corporation (“NIVS BVI”), and NIVS (Huizhou)
Audio & Video Tech. Co., Ltd., a company organized under the laws of the PRC
(“NIVS PRC”), which is 97.5% owned by NIVS BVI and 2.5% owned by Tianfu Li, our
Chief Executive Officer and Chairman of the Board. See the notes to the
financial statements of this report for more information on our organization and
ownership structure.





Forward-Looking
Statements





The
following discussion of our financial condition and results of operations should
be read in conjunction with our unaudited consolidated financial statements and
the related notes, and the other financial information included in this
Quarterly Report.





This
Quarterly Report contains forward-looking statements that involve substantial
risks and uncertainties. All statements other than historical facts contained in
this report, including statements regarding our future financial position,
capital expenditures, cash flows, business strategy and plans and objectives of
management for future operations, are forward-looking statements. The words
“anticipated,” “believe,” “expect, “plan,” “intend,” “seek,” “estimate,”
“project,” “could,” “may,” and similar expressions are intended to identify
forward-looking statements. Such statements reflect our management’s current
views with respect to future events and financial performance and involve risks
and uncertainties, including, without limitation, Our reliance on our major
customers for a large portion of our net sales; our ability to develop and
market new products; our ability to continue to borrow and raise additional
capital to fund our operations; our ability to collect aging trade receivables
and the effect of a growing doubtful account allowance; our ability to
accurately forecast amounts of supplies needed to meet customer demand; exposure
to market risk through sales in international markets; the market acceptance of
our products; exposure to product liability and defect claims; and fluctuations
in the availability of raw materials and components needed for our products; and
various other matters, many of which are beyond our control. Actual results may
vary materially and adversely from those anticipated, believed, estimated
or otherwise indicated should one or more of these risks or uncertainties occur
or if any of the risks or uncertainties described elsewhere in this report
occur. Consequently, all of the forward-looking statements made in this filing
are qualified by these cautionary statements and there can be no assurance of
the actual results or developments.





Overview





Through
NIVS PRC, we engage in the development, production and sales of audio and video
equipment, and set-top box products. In recent years, we have spent substantial
resources on research and development to establish intelligent video and audio
products (meaning products incorporating Chinese speech interactive technology),
which we believe should help us diversify our revenue streams in addition to
adding a higher margin product line. We combine our Chinese speech interactive
technology with traditional video and audio products to form an intelligent
audio-visual system consisting of the audio system, TV set and DVB. Our audio
products have a solid reputation and established brand name in the PRC, while
abroad our products have been named among the most popular brands on consumer
websites for several years.





We sell
our products to wholesalers and distributors of electronic products. For export
sales and OEM production, we produce based on customer demand and orders. For
products with our own brand names, customers generally do not provide us with
any long-term commitments. As a result it is necessary for us to estimate, based
in part on non-binding estimates by our customers and potential customers, the
requirements for our products. In addition, in some instances, we develop
products based on anticipated customer demand with no assurance that we will
receive the anticipated orders. To the extent that we do not receive the
anticipated orders or that our customers require products in greater quantities
than anticipated, our revenue and margins will be affected.




A small
number of customers account for a very significant percentage of our revenue.
For the six months ended June 30, 2009, we had two customers that each accounted
for at least 5% of the revenues that we generated. These two customers accounted
for a total of approximately 21.2% of our revenue for that period. During the
six months ended June 30, 2009, we had one customer that accounted for more than
10% of our sales. The customer accounted for 11.78% of our sales.  The
loss of any of these customers could have a material adverse effect upon our
revenue and net income.





We have
longstanding business relationships with certain suppliers with stable supply
sources, and we believe this practice helps us reduce our risk on shortage of
raw material supply.  We also enter into one-year agreements with some
of our suppliers that provide our forecast of the quantity that we believe that
we will need for the upcoming year.  These agreements typically result
in obtaining a discount on our purchases from our suppliers during the year as
we submit purchase orders further to the agreements.  Notwithstanding
our practices to reduce the cost of our materials, price fluctuations of
materials will still affect our production cost and gross
margin.


28


Various
factors may impact our company’s performance in different ways. Our ability to
compete effectively in light of the short life cycle of many of our products is
related to the amount of resources we invest in research and development and how
quickly we are able to produce new product models to replace products with older
functionality.  By upgrading our products, adding functionality, and
improving technological specifications, we can increase the value of such
products and the resulting product price, which can help compensate for losses
associated with the short life cycle of many of our products and can help
increase our revenue.  For example, the average selling price for
certain of our existing speaker and CRT TV has been declining.  By
adding functionality to our speaker to form a home theater system and shift CRT
TV to LCDTV production, we believe we increased the value of such products and
the resulting product price.





In
addition, we have shifted our focus from one product to another product that we
believe would increase our profitability.  For example, in the first
six months of 2009, our sales revenue for LCDTV increased approximately 107.4%,
respectively, compared to our sales revenue for the first six months of 2008. In
the third quarter of 2008, with the private placement funds we received, we
expanded our production scale in December and completed many orders. In the
first six month of 2009, we completed an upgrade of our LCDTV to maintain the
margin and attract more customers. As a result, we received more orders from
customers than in previous years and, therefore, our sales of LCDTV-related
products have increased.





In
addition, during the first six months of 2009, our sales revenue for home
theater was approximately $6.24 million, which represented an increase of
approximately 79.83% compared to revenue of $3.47 million from the sale of home
theater for the first six months of 2008. The increase in revenue for home
theater resulted from an increase in sales volume. In the first six months of
2009, our sales volume for home theater increased approximately 62.24% as
compared to the first six months of 2008. We believe the increase in sales
revenue and volume are a result of our investment of resources into the research
and development of new products and design, our focus on the promotion of our
brand, and expansion of our sales channels.





In the
past, we have relied more heavily on sales to original equipment manufacturers
(OEMs) for a significant portion of our revenues; however, we have increased our
focus on and investment of resources in sales of our own brand, which we believe
will permit us to decrease our reliance on OEM sales. OEM sales accounted for
approximately 60.5% of our revenues for the six months ended June 30, 2009, as
compared to 65.2% for the six months ended June 30, 2008, and sales of products
with our own brand accounted for approximately 39.5% of our revenues for the
same period, as compared to 34.8% for the same period in 2008.


29


Results
of Operations





The
following table sets forth information from our statements of operations for the
three months ended June 30, 2009 and 2008 (unaudited) in dollars and as a
percentage of revenue:





For Three Months Ended
                                                
                                                
                                                For Six Months EndedJune 30,
                                                
                                                
                                                June 30,2009
                                                
                                                
                                                2008
                                                
                                                
                                                2009
                                                
                                                
                                                2008(in
                                                  dollars)
                                                
                                                
                                                (as percent
                                                  of revenue)
                                                
                                                
                                                (in
                                                  dollars)
                                                
                                                
                                                (as percent
                                                  of revenue)
                                                
                                                
                                                (in
                                                  dollars)
                                                
                                                
                                                (as percent
                                                  of revenue)
                                                
                                                
                                                (in
                                                  dollars)
                                                
                                                
                                                (as percent
                                                  of revenue)(all
      amounts are in thousands except percentages, share and per share
      amounts)Revenue
                                                
                                                $
                                                40,860
                                                
                                                
                                                
                                                99.9
                                                %
                                                
                                                
                                                24,861
                                                
                                                
                                                
                                                99.6
                                                %
                                                
                                                
                                                70,116
                                                
                                                
                                                
                                                99.8
                                                %
                                                
                                                
                                                51,637
                                                
                                                
                                                
                                                99.7
                                                %Other
      Sales
                                                
                                                
                                                61
                                                
                                                
                                                
                                                0.1
                                                %
                                                
                                                
                                                93
                                                
                                                
                                                
                                                0.4
                                                %
                                                
                                                
                                                152
                                                
                                                
                                                
                                                0.2
                                                %
                                                
                                                
                                                156
                                                
                                                
                                                
                                                0.3
                                                %Cost
      of Goods Sold
                                                
                                                
                                                (31,174
                                                )
                                                
                                                
                                                -76.2
                                                %
                                                
                                                
                                                (19,208
                                                )
                                                
                                                
                                                -77.0
                                                %
                                                
                                                
                                                (54,270
                                                )
                                                
                                                
                                                -77.2
                                                %
                                                
                                                
                                                39,591
                                                )
                                                
                                                
                                                -76.4
                                                %Gross
      Profit
                                                
                                                
                                                9,748
                                                
                                                
                                                
                                                23.8
                                                %
                                                
                                                
                                                5,746
                                                
                                                
                                                
                                                23.0
                                                %
                                                
                                                
                                                15,999
                                                
                                                
                                                
                                                22.8
                                                %
                                                
                                                
                                                12,202
                                                
                                                
                                                
                                                23.6
                                                %Selling
      Expenses
                                                
                                                
                                                2,127
                                                
                                                
                                                
                                                5.2
                                                %
                                                
                                                
                                                743
                                                
                                                
                                                
                                                3.0
                                                %
                                                
                                                
                                                3,268
                                                
                                                
                                                
                                                4.7
                                                %
                                                
                                                
                                                1,363
                                                
                                                
                                                
                                                2.6
                                                %General
      and administrative
                                                
                                                
                                                -Amortization
                                                
                                                
                                                18
                                                
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                17
                                                
                                                
                                                
                                                0.1
                                                %
                                                
                                                
                                                36
                                                
                                                
                                                
                                                0.1
                                                %
                                                
                                                
                                                33
                                                
                                                
                                                
                                                0.1
                                                %Depreciation
                                                
                                                
                                                83
                                                
                                                
                                                
                                                0.2
                                                %
                                                
                                                
                                                66
                                                
                                                
                                                
                                                0.3
                                                %
                                                
                                                
                                                164
                                                
                                                
                                                
                                                0.2
                                                %
                                                
                                                
                                                161
                                                
                                                
                                                
                                                0.3
                                                %Bad
      debts
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (68
                                                )
                                                
                                                
                                                -0.3
                                                %
                                                
                                                
                                                -
                                                
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                384
                                                
                                                
                                                
                                                0.7
                                                %Others
      General and administrative
                                                
                                                
                                                822
                                                
                                                
                                                
                                                2.0
                                                %
                                                
                                                
                                                272
                                                
                                                
                                                
                                                1.1
                                                %
                                                
                                                
                                                1,965
                                                
                                                
                                                
                                                2.8
                                                %
                                                
                                                
                                                1,034
                                                
                                                
                                                
                                                2.0
                                                %Total
      General and administrative
                                                
                                                
                                                923
                                                
                                                
                                                
                                                2.3
                                                %
                                                
                                                
                                                287
                                                
                                                
                                                
                                                1.1
                                                %
                                                
                                                
                                                2,165
                                                
                                                
                                                
                                                3.1
                                                %
                                                
                                                
                                                1,613
                                                
                                                
                                                
                                                3.1
                                                %Research
      and development
                                                
                                                
                                                763
                                                
                                                
                                                
                                                1.9
                                                %
                                                
                                                
                                                252
                                                
                                                
                                                
                                                1.0
                                                %
                                                
                                                
                                                1,335
                                                
                                                
                                                
                                                1.9
                                                %
                                                
                                                
                                                407
                                                
                                                
                                                
                                                0.8
                                                %Total
      operating expenses
                                                
                                                
                                                3,813
                                                
                                                
                                                
                                                9.3
                                                %
                                                
                                                
                                                1,282
                                                
                                                
                                                
                                                5.1
                                                %
                                                
                                                
                                                6,769
                                                
                                                
                                                
                                                9.6
                                                %
                                                
                                                
                                                3,383
                                                
                                                
                                                
                                                6.5
                                                %Income
      from operations
                                                
                                                
                                                5,934
                                                
                                                
                                                
                                                14.5
                                                %
                                                
                                                
                                                4,464
                                                
                                                
                                                
                                                17.9
                                                %
                                                
                                                
                                                9,230
                                                
                                                
                                                
                                                13.1
                                                %
                                                
                                                
                                                8,819
                                                
                                                
                                                
                                                17.0
                                                %Other
      income (expenses)
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -Government
      grant
                                                
                                                
                                                67
                                                
                                                
                                                
                                                0.2
                                                %
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                67
                                                
                                                
                                                
                                                0.1
                                                %Interestexpense
                                                
                                                
                                                (324
                                                )
                                                
                                                
                                                -0.8
                                                %
                                                
                                                
                                                (514
                                                )
                                                
                                                
                                                -2.1
                                                %
                                                
                                                
                                                (886
                                                )
                                                
                                                
                                                -1.3
                                                %Imputed
      interest
                                                
                                                
                                                -
                                                
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                (109
                                                )
                                                
                                                
                                                -0.4
                                                %
                                                
                                                
                                                -
                                                
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                1,045
                                                )
                                                
                                                
                                                -2.0
                                                %Sundry
      income (expense), net
                                                
                                                
                                                -
                                                
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                (7
                                                )
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                10
                                                
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                (299
                                                )
                                                
                                                
                                                -0.6
                                                %Total
      other income (expenses)
                                                
                                                
                                                (257
                                                )
                                                
                                                
                                                -0.6
                                                %
                                                
                                                
                                                (629
                                                )
                                                
                                                
                                                -2.5
                                                %
                                                
                                                
                                                (809
                                                )
                                                
                                                
                                                -1.2
                                                %
                                                
                                                
                                                9
                                                
                                                
                                                
                                                0.0
                                                %1,335
                                                )
                                                
                                                
                                                -2.6
                                                %Income
      before non-controlling interest and income taxes
                                                
                                                
                                                5,677
                                                
                                                
                                                
                                                13.9
                                                %
                                                
                                                
                                                3,835
                                                
                                                
                                                
                                                15.4
                                                %
                                                
                                                
                                                8,421
                                                
                                                
                                                
                                                12.0
                                                %
                                                
                                                
                                                7,484
                                                
                                                
                                                
                                                14.4
                                                %Income
      taxes
                                                
                                                
                                                (962
                                                )
                                                
                                                
                                                -2.4
                                                %
                                                
                                                
                                                (470
                                                )
                                                
                                                
                                                -1.9
                                                %
                                                
                                                
                                                (1,276
                                                )
                                                
                                                
                                                -1.8
                                                %
                                                
                                                
                                                (975
                                                )
                                                
                                                
                                                -1.9
                                                %Net Income
      before noncontrolling interest
                                                
                                                $
                                                4,715
                                                
                                                
                                                
                                                11.5
                                                %
                                                
                                                $
                                                3,365
                                                
                                                
                                                
                                                13.5
                                                %
                                                
                                                $
                                                7,145
                                                
                                                
                                                
                                                10.2
                                                %
                                                
                                                $
                                                6,509
                                                
                                                
                                                
                                                12.6
                                                %Noncontrolling
      interest
                                                
                                                
                                                (120
                                                )
                                                
                                                
                                                -0.3
                                                %
                                                
                                                
                                                (79
                                                )
                                                
                                                
                                                -0.3
                                                %
                                                
                                                
                                                (181
                                                )
                                                
                                                
                                                -0.3
                                                %
                                                
                                                
                                                (164
                                                )
                                                
                                                
                                                -0.3
                                                %Net
      income attributable NIVS IntelliMedia Technology Group,
    Inc.
                                                
                                                $
                                                4,595
                                                
                                                
                                                
                                                11.2
                                                %
                                                
                                                $
                                                3,286
                                                
                                                
                                                
                                                13.2
                                                %
                                                
                                                $
                                                6,964
                                                
                                                
                                                
                                                9.9
                                                %
                                                
                                                $
                                                6,345
                                                
                                                
                                                
                                                12.3
                                                %





Three
months ended June 30, 2009 and 2008





Revenues,
which consist of sales of our products, were $40.9 million for the three months
ended June 30, 2009, an increase of $16.0 million, or 64.4%, compared to $24.9
million for the same period in 2008. The increase in revenue was attributed
mainly to the increased demand for our products, which we believe is a result of
our market expansion efforts. The increase of revenue was also due to the new
sales of digital equipment and LCD products.  For the three months
ended June 30, 2009, our sales revenue for standard audio equipment increased to
$19.7 million, an increase of 61.7% compared to $12.2 million for the same
period in 2008. Sales revenue for televisions increased to $6.4 million, an
increase of 116.1% compared to $3.0 million for the same period in 2008. Sales
revenue for our intelligent audio and video equipment increased to $6.1 million,
an increase of 90.9% compared to $2.9 million for the same period in 2008. For
the three months ended June 30, 2009, our sales volume for standard audio
equipment increased by 47.6% to 1.6 million pieces as compared to 1.1 pieces for
the same period in 2008. The increase was due to product upgrades. For the three
months ended June 30, 2009, our sales volume for televisions decreased by 27.6%
to 0.6 million pieces as compared to 0.9 million pieces for the same period in
2008. Our sales volume for intelligent audio and video equipment increased to
2.3 million pieces as compared to 0.3 million pieces for the same period in
2008. We believe the increase in sales revenue and volume are a result of our
investment of resources into the research and development of new products and
design to meet the requirements of the market, our focus on the promotion of our
brand, and expansion of our sales channels.


30


Cost of
sales, which include raw material, labor and manufacturing overhead, were $31.2
million for the three months ended June 30, 2009, an increase of $12.0 million,
or 62.3%, compared to $19.2 million for the same period in 2008. The increase
was primarily a result of the increase in sales and was relatively consistent
with the increase in our net revenue. As a percentage of net revenue, cost of
sales for the three months ended June 30, 2009 and 2008 was 76.1% and 77.2%,
respectively.





Gross
profit for the three months ended June 30, 2009 was $9.7 million, or 23.9% of
revenues, compared to $5.7 million, or 22.8% of revenues, for the comparable
period in 2008. Gross profit margins are a factor of cost of sales, product mix
and product demand. In the first six month of 2009, the price of LCDTV and
standard audio equipments which are large percentage of our sales
increased. These factors caused the increase in gross margin.





Selling
expenses, which mainly include marketing, shipping, insurance, wage and other
expenses, were $2.1 million for the three months ended June 30, 2009, an
increase of $1.4 million, or 186.3%, compared to $0.7 million for the same
period in 2008. The increase was primarily due to an increase in television
advertising (on CCTV) and marketing activities.





Research
and development expenses were approximately $0.8 million for the three months
ended June 30, 2009, an increase of approximately $0.5 million, or 202.3%,
compared to $0.25 million for the same period in 2008. We believe that our focus
on research and development contributed to the increase in our total sales. In
the future, we expect to continue to increase our research and development
efforts and to enable us to manufacture wider lines of products.





General
and administrative expenses, which include wage, benefit, bad debts, utility,
consulting, professional fee, various taxes and levies and other expenses, were
$0.9 million for the three months ended June 30, 2009, an increase of $0.6
million, or 122%, compared to $0.3 million for the same period in 2008. The
increase was primarily a result of increase in professional fees incurred as a
result of being a publicly reporting company in the United States in the
first six month of 2009.  We expect our general and administrative
expenses to increase as a result of business expansion and professional fees
incurred as a result of being a publicly reporting company in the United
States.





Interest
expenses were $0.3 million and $0.5 million for the three months ended June 30,
2009 and 2008, respectively. The decrease was due to the decrease in the
interest rate during the three months ended June 30, 2009.





Income
tax provisions for the three months ended June 30, 2009 were approximately $1.0
million, as compared to approximately $0.5 million for the three months ended
June 30, 2008. The increase was primarily due to an increase in the taxable
income and the increase of the tax rate for the three months ended June 30,
2009. NIVS PRC is registered in PRC and has had tax advantages granted by local
government for corporate income taxes and sales taxes commencing April 6, 2004.
NIVS PRC has been entitled to have a full tax exemption for the first two
profitable years, followed by a 50% reduction on a normal tax rate of 24% for
the following three consecutive years. Our effective income tax rates for the
three months ended June 30, 2009 and June 30, 2008 were 15% and 12.5%,
respectively.  On March 16, 2007, the National People’s Congress of
China enacted a new PRC Enterprise Income Tax Law, under which foreign invested
enterprises and domestic companies will be subject to enterprise income tax at a
uniform rate of 25%. The new law became effective on January 1, 2008. During the
transition period for enterprises established before March 16, the tax rate will
be gradually increased starting in 2008 and be equal to the new tax rate in
2012. We believe that our profitability will be negatively affected in the near
future as a result of the new EIT Law.





Net
income was $4.5 million for the three months ended June 30, 2009, an increase of
$1.3 million, or 39.9%, compared to $3.2 million for the same period in
2008.





Six
months ended June 30, 2009 and 2008





Revenues
were $70.1 million for the six months ended June 30, 2009, an increase of $18.5
million, or 35.8%, compared to $51.6 million for the same period in 2008. The
increase in revenue was attributed mainly to the increased demand for our
products, which we believe is a result of our market expansion efforts. The
increase of revenue was also due to the new sales of digital equipment and LCD
products.  For the six months ended June 30, 2009, our sales revenue
for standard audio equipment increased to $37.2 million, an increase
of 42.0% compared to $27.2 million for the same period in 2008. Sales
revenue for televisions increased to $8.7 million, an increase of 107.1%
compared to $4.2 million for the same period in 2008. Sales revenue for our
intelligent audio and video equipment increased to $19.0 million, an increase of
28.7% compared to $14.8 million for the same period in 2008. For the six months
ended June 30, 2009, our sales volume for standard audio equipment increased by
49.7% to 2.9 million pieces as compared to 2.0 million pieces for the same
period in 2008. The increase was due to product upgrades. For the six months
ended June 30, 2009, our sales volume for televisions decreased by 24.8% to 0.9
million pieces as compared to 1.1 million pieces for the same period in 2008.
Our sales volume for intelligent audio and video equipment increased by 238.2%
to 2.7 million pieces as compared to 0.8 million pieces for the same period in
2008. We believe the increase in sales revenue and volume are a result of our
investment of resources into the research and development of new products and
design to meet the requirements of the market, our focus on the promotion of our
brand, and expansion of our sales channels.


31


Cost of
sales were $54.3 million for the six months ended June 30, 2009, an increase of
$14.7 million, or 37.1%, compared to $39.6 million for the same period in 2008.
The increase was primarily a result of the increase in sales and was relatively
consistent with the increase in our net revenue. As a percentage of net revenue,
cost of sales for the six months ended June 30, 2009 and 2008 was 77.2% and
76.4%, respectively.





Gross
profit for the six months ended June 30, 2009 was $16.0 million, or 22.8% of
revenues, compared to $12.2 million, or 23.6% of revenues, for the comparable
period in 2008. Gross profit margins are a factor of cost of sales, product mix
and product demand. In the first quarter of 2009, the sales price of standard
audio equipment products, which accounted for a large percentage of our sales,
decreased while some of the costs involved in production
increased.  Gross profit improved in second quarter, partially
offsetting the decrease in gross margin for the first six months of
2009.





Selling
expenses, which mainly include marketing, shipping, insurance, wage and other
expenses, were $3.3 million for the six months ended June 30, 2009, an increase
of $1.9 million, or 139.8%, compared to $1.4 million for the same period in
2008. The increase was primarily due to an increase in television
advertising (on CCTV) and marketing activities.





Research
and development expenses were approximately $1.3 million for the six months
ended June 30, 2009, an increase of approximately $0.9 million, or 228%,
compared to $0.4 million for the same period in 2008. We believe that our focus
on research and development contributed to the increase in our total sales. In
the future, we expect to continue to increase our research and development
efforts and to enable us to manufacture wider lines of products.





General
and administrative expenses were $2.2 million for the six months ended June 30,
2009, an increase of $0.6 million, or 34.3%, compared to $1.6 million for
the same period in 2008. The increase was primarily a result of increase in
professional fees incurred as a result of being a publicly reporting company in
the United States in the first six month of 2009.  We expect our
general and administrative expenses to increase as a result of business
expansion and professional fees incurred as a result of being a publicly
reporting company in the United States.





Interest
expenses were $0.9 million and $1.0 million for the six months ended June 30,
2009 and 2008, respectively. The decrease was due to the decrease in the
interest rate during the three months ended June 30, 2009.





Income
tax provisions for the six months ended June 30, 2009 were approximately $1.3
million, as compared to approximately $1.0 million for the six months ended June
30, 2008. The increase was primarily due to an increase in the taxable
income for the six months ended June 30, 2009. NIVS PRC is registered in PRC and
has had tax advantages granted by local government for corporate income taxes
and sales taxes commencing April 6, 2004. NIVS PRC has been entitled to have a
full tax exemption for the first two profitable years, followed by a 50%
reduction on a normal tax rate of 24% for the following three consecutive years.
Our effective income tax rates for the six months ended June 30, 2009 and June
30, 2008 were 15% and 12.5%, respectively.  On March 16, 2007, the
National People’s Congress of China enacted a new PRC Enterprise Income Tax Law,
under which foreign invested enterprises and domestic companies will be subject
to enterprise income tax at a uniform rate of 25%. The new law became effective
on January 1, 2008. During the transition period for enterprises established
before March 16, the tax rate will be gradually increased starting in 2008 and
be equal to the new tax rate in 2012. We believe that our profitability
will be negatively affected in the near future as a result of the new EIT
Law.





Net
income was $6.9 million for the six months ended June 30, 2009, an increase of
$0.6 million, or 9.7%, compared to $6.3 million for the same period in
2008.





Liquidity
and Capital Resources





We had an
unrestricted cash balance of approximately $0.3 million as of June 30, 2009, as
compared to $0.5 million as of December 31, 2008. In addition, we also had
approximately $14.6 million in restricted cash as of June 30, 2009, as compared
to $11.7 million as of December 31, 2008. Our restricted cash is held as a
security deposit for our recurring, short-term bank notes. Our funds are kept in
financial institutions located in China, and banks and other financial
institutions in the PRC do not provide insurance for funds held on deposit,
and in the event of a bank failure, we may not have access to our funds on
deposit.  In addition, we are subject to the regulations of the PRC,
which restrict the transfer of cash from China, except under certain specific
circumstances. Accordingly, such funds may not be readily available to us to
satisfy obligations that have been incurred outside the PRC.




We had
negative working capital of approximately $8.4 million, $49.7 million, $18.6
million and $34.2 million as at June 30, 2009 and 2008 and as of December 31,
2008 and 2007, respectively. The decrease of negative working capital was
largely caused by public offering fund raising and management attention to the
aging of accounts payable.





Our
accounts receivable has been an increasingly significant portion of our current
assets, representing $23.1 million, $5.4 million, $20.4 million,
and  4.5 million, or 39.3%, 18%, 45.3%, and 18.0% of current assets,
as at June 30, 2009 and 2008 and as of December 31, 2008 and 2007,
respectively.  If customers responsible for a significant amount of
accounts receivable were to become insolvent or otherwise unable to pay for our
products, or to make payments in a timely manner, our liquidity and results of
operations could be materially adversely affected. An economic or industry
downturn could materially adversely affect the servicing of these accounts
receivable, which could result in longer payment cycles, increased collections
costs and defaults in excess of management’s expectations. A significant
deterioration in our ability to collect on accounts receivable could affect our
cash flow and working capital position and could also impact the cost or
availability of financing available to us.


32


We
provide our major customers with payment terms ranging from 30 to 90 days.
Additionally, our production lead time is approximately three weeks, from the
inspection of incoming materials, to production, testing and packaging. We need
to keep a large supply of raw materials and work in process and finished goods
inventory on hand to ensure timely delivery of our products to our
customers.  We maintain an allowance for doubtful accounts for
estimated losses resulting from the inability of our customers to make required
payments. Allowance for doubtful accounts is based on our assessment of the
aging of accounts receivable, the collectibility of specific customer accounts,
our history of bad debts, and the general condition of the industry. Our aging
of accounts receivables could result in our inability to collect receivables
requiring us to increase our doubtful accounts reserve, which would decrease our
net income and working capital.  We experienced no bad debt expense in
the six month of 2009 compared to $1.7 million in the fourth quarter of
2008.  Due to the difficulty in assessing future trends, we could be
required to further increase our provisions for doubtful accounts.  As
our accounts receivable age and become uncollectible our cash flow and results
of operations are negatively impacted.





As of
June 30, 2009, inventories amounted to $20.6 million, compared to $1.3 million
at June 30, 2008. As of December 31, 2008, inventories amounted to $11.3
million, compared to $17.3 million as of December 31, 2007. We have experienced
increased sales volume annually and, also, we launched promotion campaign in
domestic market in the first six month of 2009; as a result, we expect to
experience an increase in our inventory levels going forward, including both of
raw material and finished goods.  We maintain certain reserve amounts
of raw materials in our inventories and engage in long-term arrangements with
suppliers in an attempt to protect against any rising prices and shortages of
raw materials used to manufacture our products. We also maintain certain amounts
of finished goods to meet the customers’ demand when launching nationwide
promotion campaign.





NIVS PRC
has entered into various revolving bank loans and bank notes to finance our
operation. Most of the loans are one year renewable. NIVS PRC had bank loans of
approximately $37.8 million, $31.6 million, $35.9 million and $28.6 million as
at June 30, 2009 and 2008 and as of December 31, 2008 and 2007, respectively.
These loans carry annual interest rates of approximately 2.5% to 7.4% with
maturity dates ranging from 30 days to one year. These loans are either
unsecured or secured by the Company’s buildings, receivables and land use
rights.





From June
2005 to November 2008, our subsidiaries entered into hundreds of loan
transactions with NIVS PRC’s founder and our principal shareholder and current
Chief Executive Officer and Chairman of the Board, Tianfu Li.  In
these loan transactions, we would borrow funds from Mr. Li.  As of
September 30, 2008, our subsidiaries had an aggregate outstanding loan balance
due to Mr. Li of $9.1 million and $568,063 owed to NIVS Investment (SZ) Co.,
Ltd.  In addition, our subsidiaries, primarily through NIVS PRC and
NIVS International (H.K.) Limited (“NIVS HK”), would lend funds to the entities
that were owned and controlled by Mr. Li.  These entities
controlled by Mr. Li are NIVS Investment  (SZ) Co., Ltd.; Zhongkena
Technology Development; Xentsan Technology (SZ) Co., Ltd.; Korea Hyundai Light
& Electric (Int'l) Holding; NIVS Information & Technology (HZ) Co.,
Ltd.; and Hyundai Light & Electric (HZ) Co., Ltd. (collectively, the
“Related Companies”).  Our loans to related parties also include a
loan to a supplier of Hyundai Light and Electric (HZ) Co. Ltd. in the amount of
38,474,900RMB, which is equal to approximately U.S. $5.5 million. The note
carried an interest rate of 1.5% per month and was guaranteed by Hyundai Light
and Electric (HZ) Co Ltd.





The
amount of the loans made by our subsidiaries to the Related Companies ranged in
amount.  The aggregate amount loaned from our subsidiaries to the
Related Companies was approximately $13 million and $10 million during the years
ended December 31, 2008 and 2007, respectively.  The loan amounts owed
to our subsidiaries by the Related Companies as of December 31, 2008 and 2007
were $0 and $2.2 million, respectively.  As of December 31, 2008, our
subsidiaries had an aggregate outstanding loan balance due to Mr. Li of $7.8
million, which was converted into equity upon the closing of our public offering
in March 2009. All of the loans to and from our subsidiaries were unsecured with
no fixed repayment date.  The loans were borrowed and repaid
frequently.  Normally, it was agreed that the loan amounts were to be
paid back to our subsidiaries within three to six months from the date of
the loan transaction.  The loans to the Related Companies were for
temporary funding of each of the Related Companies’ business.





As
presented in our statements of cash flows in our financial statements, the cash
payments directly to and from our largest shareholder, Mr. Li, are reflected as
“Due to Shareholder” and are classified as financing activities pursuant to
paragraph 18 of SFAS 95, which provides that “financing activities include
obtaining resources from owners and providing them with a return on, and a
return of, their investment; borrowing money and repaying amounts
borrowed.”  The loan transactions with the related parties are
classified as investing activity in accordance with paragraphs 16a and 17a of
SFAS 95 as the related parties are not “owners” of our company as described in
paragraph 18 of SFAS 95 since the entities do not own equity in our
company.  In addition, Mr. Li, from July 2008, has not owned any part
of Hyundai Light & Electric (Int’l) Holding Limited, and Mr. Li has never
had any ownership interest of the supplier of Hyundai Light & Electric
(Int’l) Holding Limited that was the holder of the note.  The loans to
the related parties were not a borrowing of funds by us, nor a repayment of
funds borrowed by an owner.


33


Upon the
closing of the Share Exchange, we, a publicly reporting company under U.S.
securities laws, gained ownership of the subsidiaries. As a result, our
subsidiaries became subject to the Sarbanes-Oxley Act of 2002, including Section
402’s prohibition against personal loans to directors and executive officers,
either directly or indirectly. Because the loans did not have a purpose directly
related to the business operations of our company or our subsidiaries, we
believe that the loans made and outstanding after the closing of the Share
Exchange may violate Section 402 of Sarbanes-Oxley, which would subject us and
our chief executive officer to possible criminal, civil or administrative
sanctions, penalties, or investigations, in addition to potential
private securities litigation. It was intended that all loans from our
subsidiaries to our officers and directors, whether directly or indirectly, be
repaid in full prior to the closing of the Share Exchange, and no further loans
were to be made to such related parties after the closing of the Share Exchange,
which occurred on July 25, 2008. In November 2008, it was discovered that the
loans to the entities owned by Mr. Li continued after the closing of the Share
Exchange, as more fully described in the notes to the financial statements
contained in this report. We made a total of 47 loans, with a total loan amount
of $3,221,915, to the Related Companies after the closing of the Share
Exchange.





On
November 28, 2008, we and our subsidiaries entered into a Debt Repayment and
Set-Off Agreement (the “Agreement”) with Mr. Li and the Related
Companies.  Pursuant to the Agreement, as it was amended on December
22, 2008, each of the Related Companies agreed to completely and immediately
repay all outstanding loan amounts that it owed to us and our subsidiaries and
we and our subsidiaries agreed to repay approximately $1.0 million of the debt
that we and our subsidiaries owed to Mr. Li.  As inducement for the
Related Companies for entering into the Agreement, we and our subsidiaries
agreed to, among other things, permit the amounts owed to us by the Related
Companies to be off-set by amounts that we owed to Mr. Li and acknowledge that
the Related Companies no longer owed any loan amounts to us or our
subsidiaries.





Immediately
prior to the repayments under the Agreement, our subsidiaries had an aggregate
outstanding loan amount of approximately $8.8 million owed to Mr. Li (the “Li
Debt”).  On the same date, Mr. Li, through the Related Companies, had
an aggregate outstanding loan amount of approximately $1.0 million owed to our
subsidiaries (the “Related Companies’ Debt”), which consisted of approximately
$1.0 million owed by Korea Hyundai Light & Electric (Int'l) Holding.
Pursuant to the Agreement, the Related Companies’ Debt of approximately $1.0
million was repaid by set off against the Li Debt of approximately $8.8
million.  As a result of the transactions contemplated by the
Agreement, the Related Companies’ Debt is no longer outstanding and neither Mr.
Li nor any of the Related Companies owed us or our subsidiaries any loan
amount.  Moreover, after the repayments under the Agreement, our
subsidiaries’ remaining debt owed to Mr. Li was approximately $7.8
million.  The parties to the Repayment Agreement also acknowledged
that there were no remaining debt obligations owed to the us or our
subsidiaries, either directly or indirectly, by Mr. Li, any other executive
officer or director, or any related family member, of our company or
subsidiaries, or any entity owned or controlled by such persons, including the
Related Companies, and that no loans or similar arrangements will be made by us
or our subsidiaries to such persons or entities in the future.





On
December 24, 2008, we and three of our subsidiaries (NIVS BVI, NIVS HK, and NIVS
PRC) entered into an agreement with Mr. Li pursuant to which the outstanding
debt of $7.8 million that we owed to Mr. Li would be converted into shares of
our common stock based on the closing price of our public offering that we
conducted in March 2009.  According to the agreement, we issued
2,240,493 shares of our common stock to Mr. Li in March 2009 upon the closing of
our public offering.  As a result of the conversion, the debt amount
of $7.8 million was converted into shares of common stock at $3.50 per share,
and the debt is no longer outstanding.





In March
2009, we completed a public offering consisting of 550,000 shares of our common
stock. WestPark Capital, Inc. acted as underwriter in the public
offering.  Our shares of common stock were sold to the public at a
price of $3.50 per share, for gross proceeds of approximately $1.9
million.  Compensation for WestPark Capital’s services included
discounts and commissions of $192,500, a $57,750 non-accountable expense
allowance, roadshow expenses of approximately of $10,000, and legal counsel fees
(excluding blue sky fees) of $40,000.  WestPark Capital also received
a warrant to purchase 55,000 shares of our common stock at an exercise price of
$4.20 per share.  The warrant, which has a term of five years, is not
exercisable until at least one-year from the date of issuance.  The
warrant also carries registration rights.  In April 2009, the
underwriters exercised their over-allotment option in full for the offer and
sale of 82,500 additional shares of common stock at $3.50 per share, for gross
proceeds of $288,750.





In April
2009, WestPark Capital exercised its over-allotment option to purchase an
additional of 82,500 shares of common stock.  The shares were sold a
price of $3.50 per share for a gross proceed of
$288,750.  Compensation incurred in the public offering included
discounts and commissions of $28,875, an $8,663 non-accountable expense
allowance, other expenses of $4,821, and legal counsel fees of
$42,500.





On July
25, 2008, concurrently with the close of the Share Exchange, we conducted an
initial closing of a private placement transaction pursuant to which we sold an
aggregate of 5,239,460 shares of common stock at $1.80 per share, for gross
proceeds of approximately $9.4 million. On August 12, 2009, we conducted a
second and final closing of the private placement pursuant to which we sold an
additional 1,304,587 shares of common stock at $1.80 per share for gross
proceeds of approximately $2.3 million. Accordingly, we sold a total of
6,544,047 shares of common stock in the private placement for aggregate gross
proceeds of approximately $11.8 million (the “Private Placement”). WestPark
Capital, Inc., the placement agent for the Private Placement, was paid a
commission equal to 6.5% of the gross proceeds from the financing, in addition
to a $130,000 success fee for the Share Exchange, for an aggregate fee of
approximately $896,000.  We agreed to file a registration statement
covering the common stock sold in the Private Placement and to pay for
all costs related to the registration of the shares. The registration
statement covering such shares was declared effective by the Securities and
Exchange Commission in March 2009.  We have used the proceeds from the
Private Placement to provide working capital for speech-controlled TV and
product promotion, speech-controlled audio acoustics, DVD, and DVB production
capacity expansion, technology and product research and development, basic
research and application product development, brand building and publicity and
strengthening channel building and brand promotion in China and to increase
reserve funds as well as new production lines for LCD TV for the expansion of
business.


34


We are
required to contribute a portion of our employees’ total salaries to the Chinese
government’s social insurance funds, including pension insurance, medical
insurance, unemployment insurance, and job injuries insurance, and maternity
insurance, in accordance with relevant regulations. Total contributions to the
funds are approximately $106,000 and $93,000 for the six months ended June 30,
2009 and 2008, respectively. We expect that the amount of our contribution to
the government’s social insurance funds will increase in the future as we expand
our workforce and operations and commence contributions to an employee housing
fund.





Net cash
provided in operating activities was $0.3 million for the six months ended June
30, 2009, compared to net cash provided in operating activities of $2.8 million
for the six months ended June 30, 2008.  The decrease in net cash
provided in operating activities was primarily due to an increase in
inventories and accounts receivable. Our decrease in net cash provided in
operating activities for the six months ended June 30, 2009 was partially offset
by a decrease in advance to suppliers for purchase.





Investing
activity during the six months ended June 30, 2009 and 2008 included the
purchasing of property and equipment and intangible assets, which resulted in
net cash used in investing activities of $3.3 million for the six months ended
June 30, 2009, compared to net cash used in investing activities of $2.8 million
for the six months ended June 30, 2008. The increase in net cash used in
investing activities was primarily due to our purchase of production equipment
to expand our production scale in the first six months of 2009. In June 2008, we
entered into an agreement for the purchase of production equipment and a new
plant renovation at a contracted price of RMB 36,117,340 (USD
$5,283,997).  As of June 30, 2009, we had paid $3.3 million for the
purchase of production equipment and plant renovation. The plant renovation and
the equipment installation was completed in the end of 2008. The remainder
balance of RMB 24,210 (USD$3,542) was paid in January, 2009.





Net cash
provided by financing activities amounted to $2.8 million for the six months
ended June 30, 2009, compared to net cash used by financing activities of 1.2
million for the six months ended June 30, 2008.  The increase in cash
provided by financing activities was primarily an increase in cash flow
provided by bank loans financing and our IPO closing in March 2009.





Based
upon our present plans, we believe that cash on hand, cash flow from operations
and funds available to us through financing will be sufficient to fund our
capital needs for at least the next 12 months. We expect that our primary
sources of funding for our operations for the upcoming 12 months will result
from our continued use of bank loans and bank notes and cash flow from
operations to fund our operations during the upcoming 12 months. However, our
ability to maintain sufficient liquidity depends partially on our ability to
achieve anticipated levels of revenue, while continuing to control costs. If we
did not have sufficient available cash, we would have to seek additional debt or
equity financing through other external sources, which may not be available on
acceptable terms, or at all. Failure to maintain financing arrangements on
acceptable terms would have a material adverse effect on our business, results
of operations and financial condition.





Seasonality





The first
quarter is traditionally our low season due to the long Chinese New Year
Holiday, with sales gradually increasing in the second quarter. Sales are
usually highest in the fourth quarter as most of the factories in China will
ship out their stock to prepare the Chinese New Year Holiday.





Off-Balance
Sheet Arrangements





We have
no material off-balance sheet transactions.





Critical
Accounting Policies and Estimates




Management’s
discussion and analysis of results of operations and financial condition are
based upon our consolidated financial statements. These statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America. These principles require management to make
certain estimates and assumptions that affect amounts reported and disclosed in
the financial statements and related notes. The most significant estimates and
assumptions include valuation of inventories, provisions for income taxes,
allowance for doubtful accounts, and purchase price allocation relating to the
business acquired. Actual results could differ from these estimates.
Periodically, we review all significant estimates and assumptions affecting the
financial statements and record the effect of any necessary
adjustments.





We
describe our significant accounting policies in Note 1, Summary of
Significant Accounting Policies, of the Notes to Consolidated Financial
Statements included in our Annual Report on Form 10-K as of and for the
year ended December 31, 2008. We discuss our critical accounting policies
and estimates in Management’s Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report on Form 10-K as of and for
the year ended December 31, 2008. Other than as indicated in this quarterly
report, there have been no material revisions to the critical accounting
policies as filed in our Annual Report on Form 10-K as of and for the year
ended December 31, 2008 with the SEC on March 31, 2009.


35


ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




There
have been no material changes in market risk from the information provided in
Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
other than those discussed below.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





Evaluation
of disclosure controls and procedures





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.





As of the
end of the period covered by this Annual Report, we conducted an evaluation,
under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures are not
effective as of June 30, 2009 due to the deficiencies described
below.





These
deficiencies consisted of inadequate staffing and supervision that could lead to
the untimely identification and resolution of accounting and disclosure matters
and failure to perform timely and effective reviews. In addition, there are
deficiencies in the recording and classification of accounting transactions and
a lack of personnel with expertise in US generally accepted accounting
principles and US Securities and Exchange Commission rules and
regulations.





In
October 2008, our independent registered public accounting firm Kempisty &
Company Certified Public Accountants, P.C. (“Kempisty”), informed us that our
financial statements for the years ended 2007, 2006, and 2005 and the quarter
ended June 30, 2008 and 2007 contained an error in the accounting treatment of
imputed interest on due to shareholders loan, resulting in an understatement of
our expenses for those periods.  We did not account for the addition
of imputed interest in our financial statements at the time of
issuance.  We reviewed the accounting for the imputed interest and,
based on the review, we concluded that we misapplied accounting principles
generally accepted in the United States of America and we restated our financial
statements for the periods indicated above.  We concluded that the
imputed interest on loans due to our principal shareholders should have been
accounted for as an expense to business operation and an addition to paid-in
capital.  We accounted for the imputed interest as an expense to
business operations and an addition to paid-in capital.




In
December 2008, Kempisty informed us that our financial statements for the years
ended 2007, 2006, and 2005, the six months ended June 30, 2008 and 2007, and the
nine months ended September 30, 2008 and 2007, contained an error in the
accounting treatment for “Due from related parties,” whereby
a misclassification of “Due from related parties” resulted in an
overstatement of our assets and shareholders’ equity for those periods. We
misclassified “Due from related parties” by recording related party receivables
as an asset instead of as a deduction from stockholders’ equity for the
periods referenced above. We reviewed the accounting for “Due from related
parties” and, based on the review, we concluded that we misapplied accounting
principles generally accepted in the United States of America and
we restated our financial statements for the periods indicated above. We
concluded that “Due from related parties” should have been accounted for by
recording related party receivables as a deduction from stockholders’ equity. We
accounted for “Due from related parties” by recording related party receivables
as a deduction from stockholders’ equity.





Furthermore,
in November 2008, our management identified a material weakness in our controls
and procedures regarding our failure to timely disclose and prevent loan
transactions made to entities owned and controlled by our CEO in violation of
Section 402 of the Sarbanes-Oxley Act of 2002 (“Section 402”).  The
facts of the loan transactions and remediation are as follows:





On July
25, 2008, we consummated a share exchange transaction (the “Share Exchange”)
pursuant to a share exchange agreement (the “Exchange Agreement”) dated as of
June 27, 2008, and amended as of July 25, 2008, with NIVS Holding Company
Limited, a British Virgin Islands corporation (“NIVS BVI”) and the shareholders
of NIVS BVI (the “Shareholders”), whereby we (i) became the 100% parent of NIVS
BVI and its subsidiaries, including its 97.5%-owned subsidiary NIVS (Huizhou)
Audio & Video Tech. Co., Ltd., a company organized under the laws of the PRC
(“NIVS PRC”); (ii) assumed the operations of NIVS BVI and its subsidiaries and
(iii) changed our name from SRKP 19, Inc. to NIVS IntelliMedia Technology Group,
Inc. Upon the closing of the Share Exchange, the sole business conducted by our
company became the business conducted by NIVS BVI, and we appointed new officers
and directors, which were officers and directors of NIVS BVI. Prior to the Share
Exchange, NIVS PRC entered into loan transactions with its founder and our
principal shareholder and current Chief Executive Officer and Chairman of the
Board, Tianfu Li. In these transactions, NIVS PRC would borrow funds from Mr. Li
and NIVS PRC would also lend funds to entities that were owned and controlled by
Mr. Li. These entities are NIVS Investment (SZ) Co., Ltd.; Zhongkena
Technology Development; Xentsan Technology (SZ) Co., Ltd.; Korea Hyundai Light
& Electric (Int'l) Holding; NIVS Information & Technology (HZ) Co.,
Ltd.; and Hyundai Light & Electric (HZ) Co., Ltd. The loans were unsecured
with no fixed repayment date.


36


It was
intended that all loans from the Company to officers and directors, whether
directly or indirectly, be repaid prior to the closing of the Share Exchange,
and no further loans would be made to such related parties after the closing of
the Share Exchange. In November 2008, it was discovered that the loans to
entities owned by our CEO and other related parties continued after the closing
of the Share Exchange.  Upon the discovery of the continued loans to
entities owned by our CEO and other related parties, we took remedial steps to
address the violation of Section 402 by requiring immediate and full repayment
of all outstanding loan balances, including all accrued interest, and we have
received full repayment of the amounts owed to us by the entities owned and
controlled by our CEO.  We entered into a repayment agreement with the
entities owned by our CEO and other related parties pursuant to which all
amounts owed by such entities to us was repaid in full.





We have
taken steps to improve the process designed to prevent such loans to our
directors, officers or related entities by engaging (i) Protiviti, a third party
consulting firm with experience in implementing Section 402 preventative
measures and controls and procedures, (ii) two consultants in U.S. public
reporting requirements, and (iii) a financial consultant with experience in
public company reporting and advising China-based companies listed in the United
States.   Furthermore, in January 2009, we appointed a new
independent director and Chairman of our Audit, Compensation, and Nominating
Committees, Charles Mo.  In January 2009, we also hired a new Interim
Chief Financial Officer and Corporate Secretary, Simon Zhang, who has experience
with financial reporting under U.S. GAAP. In addition, we have amended our Audit
Committee charter and Code of Business Conduct and Ethics to specifically
provide that our Audit Committee must discuss and review with management, our
outside legal counsel, our independent auditor and other appropriate parties, as
applicable, before approving any proposed loan, advance of funds, transfer of
funds, creation of debt or other liability, or similar transaction that involves
a related party, including any entity in which a director or executive officer
of the Company has a direct or indirect interest.  No transaction is
permitted to occur until such review and analysis is complete and the Audit
Committee provides prior written approval and authorization.





In January 2009, in an effort to take
additional measuresto
improve our internal controls and procedures regarding related party
transactions and to adopt a policy for the identification, approval, processing,
recording and disclosure of related party transactions, we adopted the NIVS
IntelliMedia Technology Group, Inc. Policy and Procedures With
Respect To Related Person Transactions.  Additionally, in January
2009, in an effort to take additional measures to improve our internal controls
and procedures to ensure that information required to be disclosed by
ourcompany in the reports that we file or
submit under U.S. securities laws and the SEC’s rules and regulations is accumulated
and communicated to our management, including our CEO and CFO, to allow timely
decisions regarding required disclosure, we adoptedthe NIVS IntelliMedia Technology Group,
Inc. Disclosure Controls and Procedures.





In
January 2009, we engaged Protiviti as our consultant for improving our controls
and procedures. Protiviti completed the first phase of its review in March 2009
and we received their comments and carried out the improvement processes
accordingly in the following four months. We will have second phase review by
Protiviti in August 2009 and will have the trial run to test the improved
controls and procedures with the assistance of Protiviti.





In
addition to the foregoing, we are seeking to improve our controls and procedures
in an effort to remediate these deficiencies through improving supervision,
education, and training of our accounting staff. As stated above, we have
engaged third-party financial consultants to review and analyze our financial
statements and assist us in improving our reporting of financial
information.  Management plans to enlist additional qualified in-house
accounting personnel and third-party accounting personnel to ensure that
management will have adequate resources in order to attain complete reporting of
financial information disclosures in a timely matter. We believe that the
remedial steps that we have taken and plan to take will address the conditions
identified by our CEO and CFO in our disclosure controls and procedures. We will
continue to monitor the effectiveness of these improvements. We also plan to
work with the outside consultants we have engaged in assessing and improving our
internal controls and procedures when necessary.





Changes
in Internal Control over Financial Reporting





Due to
the implementation of the remedial measures described above, there were changes
in our internal controls over financial reporting during the second quarter of
fiscal 2009 that have materially affected, or are reasonably likely to
materially affect our internal control over financial
reporting.


37


PART
II.          OTHER
INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGS




Not
applicable.




ITEM
      1A.
            RISK
      FACTORS




Any
investment in our common stock involves a high degree of risk. Investors should
carefully consider the risks described below and all of the information
contained in our public filings before deciding whether to purchase our common
stock. There have been no material revisions to the “Risk Factors” as set forth
in our annual report on Form 10-K as filed with the SEC on March 31,
2009.





ITEM
      2.
            UNREGISTERED
      SALE OF EQUITY SECURITIES AND USE OF
PROCEEDS





Not
applicable.





ITEM
      3.
            DEFAULT
      UPON SENIOR SECURITIES





Not
applicable.




ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS





On June
23, 2009, we held our annual meeting of stockholders. Of the 39,646,207 shares
eligible to vote, 28,723,969, or 72.5%, votes were returned, formulating a
quorum. At the annual stockholders meeting, the following matters were submitted
to stockholders for vote: Proposal I—Election of directors; Proposal
II—Ratification of the appointment of Kempisty & Company Certified Public
Accountants, P.C. as our independent auditors for the year ending December 31,
2009; and Proposal III —Approval of the NIVS IntelliMedia Technology Group, Inc.
2009 Omnibus Incentive Plan.





Proposal
I—Election of Directors





The
results of voting on these proposals are as follows:




Director
                  
                  For
                  
                  
                  Withheld
                  
                  ElectedTianfu
      Li
                  
                  
                  28,686,616
                  
                  
                  
                  37,353
                  
                  YesRuxiang
      Niu
                  
                  
                  28,686,616
                  
                  
                  
                  37,353
                  
                  YesMinghui
      Zhang
                  
                  
                  28,686,616
                  
                  
                  
                  37,353
                  
                  YesGengqiang
      Yang
                  
                  
                  28,686,616
                  
                  
                  
                  37,353
                  
                  YesCharles
      Mo
                  
                  
                  28,686,616
                  
                  
                  
                  37,353
                  
                  Yes





All
directors were elected at our annual meeting of stockholders.





Proposal
II—Ratification of the appointment of Kempisty & Company Certified Public
Accountants, P.C.. as our independent auditors for the year ending
December 31, 2009.





Proposal
II was approved with 28,608,108 shares voted for, 115,751 voted against and 110
abstained from voting, thereby, ratifying the appointment of Kempisty &
Company Certified Public Accounts, P.C., as our independent auditors for the
year ending December 31, 2009.





Proposal
III—Approval of the NIVS IntelliMedia Technology Group, Inc. 2009 Omnibus
Incentive Plan.





Proposal
III was approved with 27,546,667 shares voted for, 314,156 voted against and 100
abstained from voting, thereby, approving the NIVS IntelliMedia Technology
Group, Inc. 2009 Omnibus Incentive Plan.





ITEM
      5.
            OTHER
      INFORMATION




Not
applicable.


38


ITEM
      6.
            EXHIBITS




(a)
            Exhibits




Exhibit
                Number
              
              Description of Document31.1
              
              Certification
      of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K,
      as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
              
              Certification
      of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K,
      as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
              
              Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.*


*
            This
      exhibit shall not be deemed “filed” for purposes of Section 18 of the
      Securities Exchange Act of 1934 or otherwise subject to the liabilities of
      that section, nor shall it be deemed incorporated by reference in any
      filing under the Securities Act of 1933 or the Securities Exchange Act of
      1934, whether made before or after the date hereof and irrespective of any
      general incorporation language in any
filings.





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




NIVS
      IntelliMedia Technology Group, Inc.Dated:
      August 12, 2009
              
              /s/  Tianfu LiBy:
              Tianfu LiIts:
              Chairman
      of the Board and Chief Executive
Officer




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