**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 1934****For
                the Quarterly Period Ended September 30, 2008****OR****o**
            
            **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 o No x




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 filero
              Accelerated
                filer ̈Non-accelerated
                  filerx
              Smaller
                reporting company ̈




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 36,855,714 as of November 10, 2008.

















**NIVS
      INTELLIMEDIA TECHNOLOGY GROUP, INC.**





**FORM 10-Q**




**For
      the Quarterly Period Ended September 30, 2008**




**INDEX**




**Page****Part I**
            
            **Financial
                Information**Item
                1.
            Financial
              Statements
            1a)
            Condensed
                Consolidated Balance Sheets as of September 30, 2008 (Unaudited)
                and
                December 31, 2007
            1b)
            Condensed
                Consolidated Statements of Operations for the Three and Nine Months
                Ended
                September 30, 2008 and 2007 (Unaudited)
            2c)
            Consolidated
                Statements of Cash Flows for the Nine Months Ended September 30,
                2008 and
                2007 (Unaudited)
            3d)
            Notes
                to Consolidated Financial Statements (Unaudited)
            4Item
                2.
            Management’s
              Discussion and Analysis of Financial Condition and Results of
              Operations
            22Item
                3.
            Quantitative
              and Qualitative Disclosures About Market Risk
            32Item
                4.
            Controls
              and Procedures
            32**Part II**
            
            **Other
                Information**Item
                1.
            Legal
              Proceedings
            34Item
                1A.
            Risk
              Factors
            34Item
                2.
            Unregistered
              Sale of Equity Securities and Use of Proceeds
            36Item
                3.
            Default
              Upon Senior Securities
            36Item
                4.
            Submission
              of Matters to a Vote of Security Holders
            36Item
                5.
            Other
              Information
            36Item
                6.
            Exhibits
            37**Signatures**
            38







**Part I.
      Financial Information**




**Item
      1. Financial Statements**




**NIVS
                IntelliMedia Technology Group, Inc. and Subsidiaries****Condensed
                Consolidated Balance Sheets****(In
                US Dollars)**




**September
                30, 2008**
            
            **December
                31, 2007****(Unaudited)****Assets**Current
                AssetsCash
                and cash equivalents
            
            $
            3,114,058
            
            $
            1,438,651Short-term
                investment, marketable securities
            
            
            10,736
            
            
            10,061Trade
                receivables, net (Note 3)
            
            
            20,971,383
            
            
            4,510,833Land
                purchase price overpayment
            
            
            -
            
            
            -Interest
                receivables (Note 6)
            
            
            393,919
            
            
            -Inventories,
                net (Note 5)
            
            
            6,847,852
            
            
            17,347,370Restricted
                cash (Note 12)
            
            
            4,318,165
            
            
            1,983,247Prepaid
                expenses and deposits
            
            
            2,587,701
            
            
            18,585**Total
                current assets**
            
            
            38,243,814
            
            
            25,308,747Due
                from related parties (Note 6)
            
            
            7,619,895
            
            
            2,213,370Property
                and equipments, net (Note 7)
            
            
            54,276,881
            
            
            46,624,502Advances
                to suppliers (Note 4)
            
            
            23,975,026
            
            
            14,391,650Intangible
                assets, net (Note 8)
            
            
            2,355,195
            
            
            2,228,974**Total
                Assets**
            
            $
            126,470,811
            
            $
            90,767,243**Liabilities
                and Shareholders' Equity**Current
                LiabilitiesAccounts
                payable - trade
            
            $
            8,428,310
            
            $
            14,560,824Due
                to related parties (Note 6)
            
            
            568,063
            
            
            -Customer
                deposit (Note 9)
            
            
            3,134,519
            
            
            2,454,761Accrued
                liabilities and other payable
            
            
            1,017,163
            
            
            490,142Various
                taxes payable
            
            
            983,673
            
            
            187,711Short-term
                loans (Note 10)
            
            
            36,118,646
            
            
            28,645,571Current
                portion of long-term bank loan payable (Note 11)
            
            
            -
            
            
            4,455,656Wages
                payable
            
            
            371,183
            
            
            608,222Bank
                notes payable (Note 12)
            
            
            19,414,388
            
            
            6,399,693Corporate
                tax payable
            
            
            2,330,045
            
            
            1,725,765**Total
                current liabilities**
            
            
            72,365,990
            
            
            59,528,345Due
                to shareholder (Note 13)
            
            
            9,133,637
            
            
            11,008,770**Total
                liabilities**
            
            
            81,499,627
            
            
            70,537,115**Minority
                interest**
            
            
            1,040,001
            
            
            626,346**Shareholders'
                Equity**Preferred
                stock, $0.0001 par value, 10,000,000 sharesauthorized,
                0 shares outstanding at September 30, 2008and
                December 31, 2007 (Note 1)
            
            
            -
            
            
            -Common
                stock, $0.0001 par value, 100,000,000 sharesauthorized,
                36,855,714 and 27,546,667 shares issued and outstandingat
                September 30, 2008 (unaudited) and December 31, 2007, respectively
                (Note
                1)
            
            
            3,686
            
            
            2,755Additional
                paid-in capital
            
            
            12,205,681
            
            
            755,803Accumulated
                other comprehensive income
            
            
            3,702,406
            
            
            2,122,612Statutory
                surplus reserve fund (Note 15)
            
            
            1,278,764
            
            
            1,278,764Retained
                earnings (unrestricted)
            
            
            26,740,646
            
            
            15,443,848**Total
                Shareholders' Equity**
            
            
            43,931,183
            
            
            19,603,782**Total
                Liabilities and Shareholders' Equity**
            
            $
            126,470,811
            
            $
            90,767,243





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




1




**NIVS
                IntelliMedia Technology Group, Inc. and Subsidiaries****Condensed
                Consolidated Statements of Operations****(In
                US Dollars)**




**For
                Three Months Ended**
            
            **For
                Nine Months Ended****September
                30,**
            
            **September
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)****Revenue**
            
            $
            49,411,468
            
            $
            16,730,346
            
            $
            101,048,363
            
            $
            50,660,199Other
                Sales
            
            
            164,939
            
            
            313,838
            
            
            320,992
            
            
            599,219Cost
                of Goods Sold
            
            
            (38,261,969
            )
            
            (12,743,673
            )
            
            (77,852,802
            )
            
            (38,742,351
            )**Gross
                Profit**
            
            
            11,314,438
            
            
            4,300,511
            
            
            23,516,553
            
            
            12,517,067**Selling
                Expenses**
            
            
            1,286,796
            
            
            826,037
            
            
            2,649,900
            
            
            2,543,024-**General
                and administrative**
            
            
            
            
            
            -Amortization
            
            
            18,003
            
            
            14,858
            
            
            51,491
            
            
            45,482Depreciation
            
            
            87,859
            
            
            71,267
            
            
            249,068
            
            
            205,149Bad
                debts
            
            
            424,299
            
            
            338,838
            
            
            808,401
            
            
            1,122,461Merger
                cost
            
            
            1,783,586
            
            
            -
            
            
            1,783,586
            
            
            -Stock-based
                compensation (Note 21)
            
            
            765,000
            
            
            -
            
            
            765,000
            
            
            -Others
                General and administrative (Note 14)
            
            
            857,584
            
            
            765,073
            
            
            1,891,291
            
            
            1,866,401**Total
                General and administrative**
            
            
            3,936,331
            
            
            1,190,036
            
            
            5,548,837
            
            
            3,239,493**Research
                and development**
            
            
            261,141
            
            
            115,107
            
            
            668,323
            
            
            257,379**Total
                operating expenses**
            
            
            5,484,268
            
            
            2,131,180
            
            
            8,867,060
            
            
            6,039,896**Income
                from operations**
            
            
            5,830,170
            
            
            2,169,331
            
            
            14,649,493
            
            
            6,477,171**Other
                income (expenses)**Government
                grant
            
            
            21,506
            
            
            -
            
            
            21,506
            
            
            -Write-down
                of inventory
            
            
            -
            
            
            (2,799
            )
            
            -
            
            
            (393,205
            )Interest
                income
            
            
            250,664
            
            
            (10,104
            )
            
            393,946
            
            
            1,204Interest
                expense
            
            
            (517,857
            )
            
            (353,561
            )
            
            (1,563,094
            )
            
            (993,656
            )Imputed
                interest
            
            
            (147,620
            )
            
            (245,371
            )
            
            (446,953
            )
            
            (494,610
            )Sundry
                income (expense), net
            
            
            (31,544
            )
            
            (33,545
            )
            
            (22,370
            )
            
            (65,973
            )**Total
                other income (expenses)**
            
            
            (424,851
            )
            
            (645,380
            )
            
            (1,616,965
            )
            
            (1,946,240
            )**Income
                before minority interest and income taxes**
            
            
            5,405,319
            
            
            1,523,951
            
            
            13,032,528
            
            
            4,530,931Income
                taxes
            
            
            (645,936
            )
            
            (54,057
            )
            
            (1,621,020
            )
            
            (488,179
            )Minority
                interest
            
            
            (196,195
            )
            
            (36,761
            )
            
            (363,328
            )
            
            (101,421
            )**Net
                Income**
            
            $
            4,563,188
            
            $
            1,433,133
            
            $
            11,048,180
            
            $
            3,941,331**Basic
                and diluted earnings per share**
            
            $
            0.13
            
            $
            0.05
            
            $
            0.37
            
            $
            0.14**Weighed-average
                shares outstanding**
            
            
            34,147,201
            
            
            27,546,667
            
            
            29,746,845
            
            
            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 Cash Flows****(In
                US Dollars)**




**For
                Nine Months Ended****September
                30,****2008**
            
            **2007****Cash
                Flows From Operating Activities**
            
            **(Unaudited)**
            
            **(Unaudited)**Net
                Income
            
            $
            11,048,180
            
            $
            3,941,331Adjustments
                to reconcile net income to net cash provided by operating activities:Minority
                Interest
            
            
            363,328
            
            
            101,421Bad
                debts
            
            
            808,401
            
            
            1,122,461Depreciation
            
            
            3,575,811
            
            
            767,755Amortization
            
            
            51,491
            
            
            45,482Imputed
                interest
            
            
            446,953
            
            
            494,610Stock-based
                compensation
            
            
            765,000
            
            
            -Write-down
                of inventory
            
            
            -
            
            
            393,205Changes
                in operating assets and liabilities:Account
                receivable-trade
            
            
            (17,268,951
            )
            
            (6,778,942
            )Interest
                receivables
            
            
            (393,919
            )
            
            -Advance
                to suppliers for purchases
            
            
            (9,583,376
            )
            
            (10,343,039
            )Prepaid
                expenses and deposits
            
            
            (2,569,116
            )
            
            (127,780
            )Inventories,
                net
            
            
            10,499,518
            
            
            (6,943,597
            )Restricted
                cash
            
            
            (2,334,918
            )
            
            (1,678,062
            )Accounts
                payable and accrued liabilities
            
            
            (4,925,735
            )
            
            4,845,147Various
                taxes payable
            
            
            795,962
            
            
            (1,740,064
            )Wages
                payable
            
            
            (237,039
            )
            
            (16,510
            )Corporate
                tax payable
            
            
            604,280
            
            
            259,129**Net
                cash used in operating activities**
            
            
            (8,354,130
            )
            
            (15,657,453
            )**Cash
                Flows From Investing Activities**Purchases
                of property and equipment
            
            
            (8,176,812
            )
            
            (1,847,361
            )Purchases
                of intangible assets
            
            
            (28,674
            )
            
            -**Net
                cash used in investing activities**
            
            
            (8,205,486
            )
            
            (1,847,361
            )**Cash
                Flows From Financing Activities**Proceeds
                of loans
            
            
            69,977,859
            
            
            58,645,500Repayments
                of loans
            
            
            (66,957,669
            )
            
            (42,016,949
            )Proceeds
                of bank notes
            
            
            27,571,598
            
            
            16,476,779Repayments
                of bank notes
            
            
            (16,964,527
            )
            
            (17,001,581
            )Capital
                lease payable
            
            
            -
            
            
            (61,669
            )Net
                proceeds from private placement
            
            
            10,487,474Due
                to shareholder
            
            
            (1,875,133
            )
            
            9,655,704Due
                from related parties
            
            
            (5,406,525
            )
            
            (7,229,905
            )Due
                to related parties
            
            
            568,063
            
            
            -**Net
                cash provided by financing activities**
            
            
            17,401,140
            
            
            18,467,879Effect
                of exchange rate changes on cash
            
            
            833,883
            
            
            545,730**Net
                increase in cash and cash equivalents**
            
            
            1,675,407
            
            
            1,508,795**Cash
                and cash equivalents, beginning of period**
            
            
            1,438,651
            
            
            559,390**Cash
                and cash equivalents, end of period**
            
            $
            3,114,058
            
            $
            2,068,185**Supplemental
                disclosure information:**Interest
                expense paid
            
            $
            1,045,237
            
            $
            640,095Income
                taxes paid
            
            $
            975,084
            
            $
            434,122**Non
                cash investing and financing activities:**Exchange
                of investment for equipment (Note 5)
            
            $
            -
            
            $
            -





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




3
 
 **NIVS
          IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Amounts
          and disclosures at and for the three and nine months ended September 30,
          2008
          and 2007 are unaudited)**


**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
      December 31, 2007, Niveous had 50,000 capital shares authorized with $1.00
      par
      value and 10,000 shares issued and outstanding.





In
      April,
      2004, Niveous, the BVI company, 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 equipments for domestic and international market. As at December
      31,
      2004, 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 agreed
      to
      pay 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.
      The establishment of NIVS Shenzhen is for the purpose of corporate restructuring
      and planning.





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 December 31, 2007, NIVS HK and Mr. Li Tianfu
      hold
      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 agreed
      to
      pay NIVS HK 50M HKD within three months. 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 of 27,546,667 shares of its common stock in
      exchange for all of the issued and outstanding 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 27,546,667
      shares 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 will be 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.





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 agreed to
      file a registration statement covering the common stock sold in the Private
      Placement within 30 days of the closing of the Share Exchange.




4




**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**


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:







**2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**





**a.**
            **Basis
                of preparation**





The
      accompanying consolidated financial statements have been prepared by the Company
      in accordance with accounting principles generally accepted in the United States
      of America.





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 December 31, 2007
      and
      as of September 30, 2008, and the results of operations and cash flows for
      the
      three and nine months ended September 30, 2008 and 2007,
      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.




5




**NIVS
      IntelliMedia Technology Group, Inc. and Subsidiaries**


**Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**




**d.**
            **Fair
                values of financial
                instruments**





The
      Company’s financial instruments primarily consist of cash and cash equivalents,
      trade receivables, short-term loans receivable, inventories, due from related
      parties, prepaid expenses and other receivables, accounts payable-trade, accrued
      liabilities and other payables, value-added taxes (VAT) payable, short term
      loans, current portion of bank loans payable, registration rights penalty
      payable, other taxes payable, wages payable, corporate income taxes payable,
      due
      to related parties.





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 year ends.





**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
      receivables 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




6


**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**


**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.





**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.**
            **Segment
                information**





SFAS
      No.
      131, “Disclosures about Segments of an Enterprise and Related Information”,
      requires certain financial and supplementary information to be disclosed on
      an
      annual and interim basis for each reportable segment of an enterprise. The
      Company believes that it operates in one business segment (research,
      development, production, marketing and sales of auto electronic products) and
      in
      one geographical segment (China), as all of the Company’s current operations are
      carried out in China.





**m.**
            **Revenue
                recognition**





The
      Company generates revenues from the sales of auto 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.




**n.**
            **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.





**o.**
            **Research
                and development costs**





Research
                and development costs are expensed to operations as incurred. The
                Company
                spent $668,323 and $257,379 on direct research and development (“R&D”)
                efforts in the nine months ended September 30, 2008 and 2007,
                respectively.





**p.**
            **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.




7


**NIVS
      IntelliMedia Technology Group, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**(Amounts
      and disclosures at and for the three and nine months ended September 30, 2008
      and 2007 are unaudited)**




**q.**
            **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
                Rates**Year
                ended December 31, 2007
            
            7.29410
            
            7.59474Nine
                Months ended September 30, 2007
            
            7.4974
            
            7.6546Nine
                Months ended September 30, 2008
            
            6.8353
            
            6,9750





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





**Period
                Covered**
            
            **Balance
                Sheet Date Rates**
            
            **Average
                Rates**Year
                ended December 31, 2007
            
            7.80214
            
            7.80153Nine
                Months ended September 30, 2007
            
            7.7730
            
            7.78101Nine
                Months ended September 30, 2008
            
            7.7688
            
            7.7973





**r.**
            **Customer
                deposit**





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.





**s.**
            **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.




8





**NIVS
      IntelliMedia Technology Group, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**(Amounts
      and disclosures at and for the three and nine months ended September 30, 2008
      and 2007 are unaudited)**





**t.**
            **Recently
                issued accounting
                pronouncements**





In
      June 2008, the Financial Accounting Standards Board (“FASB”) issued FSP
      No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
      Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP
      EITF 03-6-1 concludes that unvested share-based payment awards that contain
      rights to receive non-forfeitable dividends or dividend equivalents are
      participating securities, and thus, should be included in the two-class method
      of computing earnings per share (“EPS”). FSP EITF 03-6-1 is effective for fiscal
      years beginning after December 15, 2008, and interim periods within those
      years. Early application of EITF 03-6-1 is prohibited. It also requires that
      all
      prior-period EPS data be adjusted retrospectively. We have not yet determined
      the effect, if any, of the adoption of this statement on our financial condition
      or results of operations.





In
      April
      2008, the FASB issued Staff Position FAS 142-3, Determination of the Useful
      Life
      of Intangible Assets (“FSP FAS 142-3”) which amends the factors an entity should
      consider in developing renewal or extension assumptions used to determine the
      useful life of a recognized intangible asset under FAS No. 142, Goodwill and
      Other Intangible Assets (“FAS No. 142”). FSP FAS 142-3 applies to intangible
      assets that are acquired individually or with a group of assets and intangible
      assets acquired in both business combinations and asset acquisitions. It removes
      a provision under FAS No. 142, requiring an entity to consider whether a
      contractual renewal or extension clause can be accomplished without substantial
      cost or material modifications of the existing terms and conditions associated
      with the asset. Instead, FSP FAS 142-3 requires that an entity consider its
      own
      experience in renewing similar arrangements. An entity would consider market
      participant assumptions regarding renewal if no such relevant experience exists.
      FSP FAS 142-3 is effective for year ends beginning after December 15, 2008
      with
      early adoption prohibited. We have not yet determined the effect, if any, of
      the
      adoption of this statement on our financial condition or results of
      operations.




In
      March 2008, the FASB issued SFAS 161, “Disclosures about Derivative
      Instruments and Hedging Activities”. The new standard is intended to improve
      financial reporting about derivative instruments and hedging activities by
      requiring enhanced disclosures to enable investors to better understand their
      effects on an entity’s financial position, financial performance, and cash
      flows. It is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      encouraged. The Company is currently evaluating the impact of adopting SFAS
      161
      on its consolidated financial statements.





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAS No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value re-measurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006. The adoption of this statement did not have a material
      impact on the Company’s financial position or results of
      operations.





In
      March
      2006 FASB issued SFAS 156 “Accounting for Servicing of Financial Assets” this
      Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities, with respect to the
      accounting for separately recognized servicing assets and servicing liabilities.
      This Statement:





·
            Requires
                an entity to recognize a servicing asset or servicing liability each
                time
                it undertakes an obligation to service a financial asset by entering
                into
                a servicing contract.·
            Requires
                all separately recognized servicing assets and servicing liabilities
                to be
                initially measured at fair value, if practicable.·
            Permits
                an entity to choose 'Amortization method' or ‘Fair value measurement
                method’ for each class of separately recognized servicing assets and
                servicing liabilities.·
            At
                its initial adoption, permits a one-time reclassification of
                available-for-sale securities to trading securities by entities with
                recognized servicing rights, without calling into question the treatment
                of other available-for-sale securities under Statement 115, provided
                that
                the available-for-sale securities are identified in some manner as
                offsetting the entity's exposure to changes in fair value of servicing
                assets or servicing liabilities that a servicer elects to subsequently
                measure at fair value.·
            Requires
                separate presentation of servicing assets and servicing liabilities
                subsequently measured at fair value in the statement of financial
                position
                and additional disclosures for all separately recognized servicing
                assets
                and servicing liabilities. An entity should adopt this Statement
                as of the
                beginning of its first fiscal year that begins after September 15,
                2006.




9




**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**


The
      adoption of this statement did not have a material impact on the Company’s
      financial position or results of operations.





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) ratified the provisions
      of Emerging Issues Task Force (“EITF”) Issue No. 06-3, “How Taxes Collected from
      Customers and Remitted to Governmental Authorities Should Be Presented in the
      Income Statement (That Is, Gross versus Net Presentation).” EITF Issue No. 06-3
      requires that the presentation of taxes within revenue-producing transactions
      between a seller and a customer, including but not limited to sales, use, value
      added, and some excise taxes, should be on either a gross (included in revenue
      and cost) or a net (excluded from revenue) basis. In addition, for any such
      taxes that are reported on a gross basis, a company should disclose the amounts
      of those taxes in interim and annual financial statements for each period for
      which an income statement is presented if those amounts are significant. The
      disclosure of those taxes can be done on an aggregate basis. EITF Issue No.
      06-3
      is effective for fiscal years beginning after December 15, 2006, which will
      be
      the Company’s fiscal 2008. The adoption of EITF Issue No. 06-3 did not have a
      material impact on the Company’s consolidated results of operations or financial
      position.





**u.**
            **Recently
                adopted accounting
                pronouncements**





In
      July
      2006, the FASB issued 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 taken or expects to
      take
      on a tax return (including a decision whether to file or not to file a return
      in
      a particular jurisdiction). The accounting provisions of FIN No. 48 are
      effective for fiscal years beginning after December 15, 2006. The adoption
      of
      this Interpretation had no impact on the Company’s financial position 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.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities — Including an Amendment of FASB
      Statement No. 115,” (“SFAS 159”) which is effective for fiscal years beginning
      after November 15, 2007. SFAS 159 is an elective standard which permits an
      entity to choose to measure many financial instruments and certain other items
      at fair value at specified election dates. Subsequent unrealized gains and
      losses on items for which the fair value option has been elected will be
      reported in earnings. The Company has not elected the fair value option for
      any
      assets or liabilities under SFAS 159.





SFAS
      No.
      123R, *Share-Based
      Payment, an Amendment of SFAS No. 123* ,
      was
      issued in December 2004 and was effective as of the beginning of the Group’s
      2006 fiscal year. SFAS No. 123R requires all share-based payments to qualified
      individuals, including grants of employee stock options, to be recognized as
      compensation expense in the financial statements based on their grant date
      fair
      values.





On
      December 4, 2007, the FASB issued SFAS No. 160, Noncontrolling interest in
      Consolidated Financial Statements (SFAS No. 160). SFAS No. 160 requires all
      entities to report noncontrolling (minority) interests in subsidiaries as equity
      in the consolidated financial statements. The statement establishes a single
      method of accounting for changes in a parent’s ownership interest in a
      subsidiary that do not result in deconsolidation and expands disclosures in
      the
      consolidated financial statements. SFAS No. 160 is effective for fiscal years
      beginning after December 15, 2008 and interim periods within those fiscal years.
      We have not yet determined the impact of the adoption of SFAS No. 160 on our
      consolidated financial statements and footnote disclosures.




10


**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**




On
      December 4, 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS
      No.
      141R). SFAS No. 141R requires the acquiring entity in a business combination
      to
      recognize all the assets acquired and liabilities assumed, establishes the
      acquisition date fair value as the measurement objective for all assets acquired
      and liabilities assumed, and requires the acquirer to expand disclosures about
      the nature and financial effect of the business combination. SFAS No. 141R
      is
      effective for business combinations for which the acquisition date is on or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. We have not yet determined the impact of the adoption of
      SFAS
      No. 141R on our consolidated financial statements and footnote
      disclosures.





**3.**
              **ACCOUNTS
                  RECEIVABLE**





Accounts
      receivable consists of the following:




September
                30,
            
            December
                31,2008
            
            2007Accounts
                receivable-trade
            
            $
            22,506,747
            
            $
            5,239,098Allowance
                for doubtful accounts
            
            
            (1,535,364
            )
            
            (728,265
            )Accounts
                receivable-trade, net
            
            $
            20,971,383
            
            $
            4,510,833





The
      change of the allowance for doubtful debts between the reporting periods, as
      of
      December 31, 2007, and as of September 30, 2008, is displayed as
      follows:





September
                30,
            
            December
                31,2008
            
            2007Beginning
                balance
            
            $
            (728,265
            )
            $
            (220,334
            )Provision/Reversal
                during the period
            
            
            (807,099
            )
            
            (507,931
            )Ending
                balance
            
            $
            (1,535,364
            )
            $
            (728,265
            )




**4.**
              **ADVANCES
                  TO SUPPLIERS**





Advances
      to suppliers consist of the following:





September
                30,
            
            December
                31,2008
            
            2007Dengfeng
                Digital
            
            $
            125,197
            
            $
            261,274Liangchuan
                Chemical
            
            
            -
            
            
            280,309Guangdong
                Renxin
            
            
            456,348
            
            
            200,726Kiayi
                Techonology
            
            
            124,844
            
            
            116,994Yintian
                Chemical
            
            
            472,268
            
            
            411,120Desheng
                Digital
            
            
            10,489,728
            
            
            6,466,384Baoyitong
                Trading
            
            
            -
            
            
            2,696,980Huaneng
                Ltd
            
            
            147,426
            
            
            1,077,299Shenghang
            
            
            1,110,897
            
            
            949,118Yide
            
            
            3,650,278
            
            
            364,880Ningxia
                Yuanfeng
            
            
            1,736,581
            
            
            788,994Others
            
            
            5,661,459
            
            
            777,572$
            23,975,026
            
            $
            14,391,650




11




**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**


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 arrangements. The Company has the legal right
      to
      take possession of it. The Company did not have any contract breaches for the
      years ended December 31, 2007 and the nine months ended September 30,
      2008.





**5.**
              **INVENTORY**





Inventory
      includes 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:





September
                30,
            
            December
                31,2008
            
            2007Raw
                material
            
            $
            1,074,006
            
            $
            15,965,784Finished
                goods
            
            
            5,880,300
            
            
            1,486,977Reserve
                for obsolete inventory
            
            
            (106,454
            )
            
            (105,391
            )Inventory,
                net
            
            $
            6,847,852
            
            $
            17,347,370





The
      change of the reserve for obsolete inventory between the reporting periods,
      as
      of December 31, 2007, and as of September 30, 2008, is displayed as
      follows:





September
                30,
            
            December
                31,2008
            
            2007Beginning
                balance
            
            $
            (105,391
            )
            $
            (5,130
            )Provision/Reversal
                during the period
            
            
            -
            
            
            (100,261
            )Foreign
                exchange adjustment
            
            
            (1,063
            )
            
            -Ending
                balance
            
            $
            (106,454
            )
            $
            (105,391
            )





**6.**
              **DUE
                  FROM (TO) RELATED
                  PARTIES**





Due
      from
      related parties consist of the following:





September
                30,
            
            December
                31,2008
            
            2007NIVS
                Investment (SZ) Co., Ltd.
            
            $
            -
            
            $
            773,234Zhongkena
                Technology Development
            
            
            20,921
            
            
            380,470Xentsan
                Technology (SZ) Co., Ltd.
            
            
            -
            
            
            356,452Korea
                Hyundai Light & Electric (Int'l) Holding
            
            
            1,849,865
            
            
            703,214NIVS
                Information & Technology (HZ) Co., Ltd.
            
            
            7,315
            
            
            -Hyundai
                Light & Electric (HZ) Co., Ltd.
            
            
            5,741,794
            
            
            -Total
            
            $
            7,619,895
            
            $
            2,213,370





Amounts
      owing to the Company from Zhongkena Technology Development, Korea Hyundai Light
      & Electric (Int’l) Holding and NIVS Information & Technology (HZ) Co.,
      Ltd. represent unsecured working capital loans due on demand.





Due
      to
      related parties consist of the following:





September
                30,
            
            December
                31,2008
            
            2007NIVS
                Investment (SZ) Co., Ltd.
            
            $
            568,063
            
            $
            -




12




**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**





The
      share
      holding relationships of the related parties are as follows:





Shareholder
            Title
            Holding
                %NIVS
                Investment (SZ) Co., Ltd.
            Mr.
                Li Tianfu
            Director
            90%Zhongkena
                Technology Development
            NIVS
                Investment (SZ) Co., Ltd.
            Holding
                company controlled by Mr. Li Tianfu
            60%Mr.
                Liu Jishen
            Director
            40%Xentsan
                Technology (SZ) Co., Ltd.
            NIVS
                Investment (SZ) Co., Ltd.
            Holding
                company controlled by Mr. Li Tianfu
            51%Mr.
                Li Tianfu
            Director
            49%





NIVS
      Information & Technology (HZ) Co., Ltd. is owned by Zhongkena Technology
      Development (SZ) Co., Ltd. (5%) and NIVS Investment (SZ) Co., Ltd.
      (95%).





Prior
      to
      July 18, Korea Hyundai Light & Electric (Int’l) Holding Limited owned 100%
      of Hyundai Light & Electric (HZ) Co., Ltd., and Mr. Li owned 100% Korea
      Hyundai Light & Electric (Int’l) Holding Limited. On July 18, Mr. Li sold
      his 100% ownership in Korea Hyundai Light & Electric (Int’l) Holding Limited
      to China Intelligent Electronic Holding Company Limited., which is now 100%
      owned by Ms. Jin Xiang Ying. Ms Jin Xiang Ying is an individual who is not
      related to Mr. Li or the NIVS Groups. After the transfer, Mr. Li is no longer
      a
      director of Korea Hyundai Light & Electric (Int’l) Holding Limited and
      Hyundai Light & Electric (HZ) Co., Ltd. Mr. Li's sister, Ms. Li Xue Mei, is
      an executive director and general manager of Hyundai Light & Electric (HZ)
      Co., Ltd.





On
      March
      12, 2008, the Company entered into a note agreement to lend Hyundai Light and
      Electric (HZ) Co Ltd.’s supplier 38,474,900RMB. The note bears an interest rate
      of 1.5% per month and matures in four months. The note is guaranteed by Hyundai
      Light and Electric (HZ) Co Ltd. If the note is not repaid on time, a penalty
      of
      0.5% will be assessed on the total note amount. On June 16, 2008, a supplemental
      agreement was signed by the parties to amend the note’s maturity date to
      December 31, 2008. The rest of the above loans to related parties as specified
      above were for the purpose of temporary funding in business operation. These
      funding transactions were unsecured and without fixed maturity dates. Such
      transactions were borrowed and repaid frequently. Normally, it was agreed that
      the loan amounts were to be paid back to the Company within three to six months
      from the date of the loan transaction.





On
      November 24, 2008, the note due to the Company was repaid in full by Hyundai
      Light and Electric (HZ) Co Ltd. Furthermore, 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”). The purpose of the Repayment Agreement
      was to confirm complete and immediate repayment of all loan amounts that were
      due to (from) the Company by (to) the Related Companies. Pursuant to the terms
      of the Repayment Agreement, the Company and its subsidiaries (collectively,
      the
“NIVS Group”) had outstanding loan amounts of US$9.1 million owed to Mr. Li (the
“Li Debt”) and $568,063 owed to NIVS Investment (SZ) Co., Ltd. (the “NIVS
      Investment Debt”) (see Note 13), and Mr. Li, through the Related Companies, had
      an aggregate outstanding loan amount of US$1,878,101 owed to the NIVS Group
      (the
“Related Companies’ Debt”) (as set forth in this Note 6). Pursuant to the
      Repayment Agreement, the Related Companies’ Debt was repaid and/or set off in
      full against the NIVS Investment Debt, in totality, and the Li Debt,
      partially, such that, as a result of the transactions contemplated by the
      Repayment Agreement, the Related Companies’ Debt is no longer outstanding, the
      NIVS Investment Debt was reduced to zero, and neither Mr. Li nor any of the
      Related Companies owe the NIVS Group any loan amount.





Furthermore,
      pursuant to the Repayment Agreement, a portion of the Li Debt is set off, such
      that the Li Debt remaining after deducting the total amount of the Related
      Companies’ Debt repaid via the set-off against the NIVS Investment Debt, in
      totality, and the Li Debt, partially (the “Repayment Amount”) is equal to an
      aggregate amount of US$7.8 million (the “Remaining Debt”). As a result of the
      transactions contemplated by the Repayment Agreement, the Repayment Amount
      was
      repaid and the NIVS Group does not owe any loan amount to Mr. Li or any of
      the
      Related Companies other than the Remaining Debt. The Repayment Agreement also
      contains an acknowledgement by the parties to the Repayment Agreement that
      there
      are no remaining debt obligations owed to the NIVS Group, 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 NIVS Group to such persons or entities in
      the
      future. Due to the loans that we made to the entities owned and controlled
      by
      our chief executive officer in violation of Section 402 of the Sarbanes-Oxley
      Act of 2002, we and/or our chief executive officer could become subject to
      criminal, civil or administrative sanctions, penalties, or investigations and
      may also face potential private securities litigation.




13





**NIVS
      IntelliMedia Technology Group, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**(Amounts
      and disclosures at and for the three and nine months ended September 30, 2008
      and 2007 are unaudited)**





**7.**
              **PROPERTY
                  AND EQUIPMENT**





Property
      and equipments consist of the following:





September
                30,
            
            December
                31,2008
            
            2007Building
            
            $
            16,612,494
            
            $
            15,567,497Molds
            
            
            28,636,264
            
            
            26,834,921Machinery
                and Equipments
            
            
            9,129,780
            
            
            5,762,197Electronic,
                office and other equipments
            
            
            642,734
            
            
            590,063Automobiles
            
            
            1,212,156
            
            
            844,218Construction
                in progress
            
            
            4,870,381
            
            
            -Accumulated
                Depreciation
            
            
            (6,826,928
            )
            
            (2,974,394
            )Property
                and equipments, net
            
            $
            54,276,881
            
            $
            46,624,502





The
      depreciation expenses are $3,575,811 and $767,755 in the nine months ended
      September 30, 2008 and 2007, respectively.





Nine
                months ended September 30,2008
            
            2007Cost
                of sales
            
            $
            3,293,779
            
            $
            423,665General
                & Adminitrative
            
            
            249,068
            
            
            205,149Selling
            
            
            32,964
            
            
            138,941Total
            
            $
            3,575,811
            
            $
            767,755





**8.**
              **INTANGIBLE
                  ASSETS**





Intangible
      assets consist of the following:





September
                30,
              2008
            
            December
                31,
              2007Land
                use rights
            
            $
            2,750,473
            
            $
            2,577,423Computer
                software use rights
            
            
            34,072
            
            
            4,509Accumulated
                amortization
            
            
            (429,350
            )
            
            (352,958
            )Intangible
                assets, net
            
            $
            2,355,195
            
            $
            2,228,974








The
      amortization expense is $51,491, and $45,482 in the nine months ended September
      30, 2008 and 2007, respectively.





Nine
                months ended September 30,2008
            
            2007General
                and administrative expense
            
            $
            51,491
            
            $
            45,482Total
            
            $
            51,491
            
            $
            45,482




14





**NIVS
      IntelliMedia Technology Group, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**(Amounts
      and disclosures at and for the three and nine months ended September 30, 2008
      and 2007 are unaudited)**





**9.**
              **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 their 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
      rework, 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 year ended December 31,
      2007 and the nine months ended September 30, 2008
      the Company has had no costs related to a contract breach or product quality
      issue.





Customer
      deposit consists of the following:





**Name
                of customer**
            
            
            
            September
                30, 2008
            
            December
                31, 2007MICO
                ELECTRIC (HONGKONG)
            
            Purchase
              of company products, delivered in Oct. 2008
            
            $
            140,178.76
            
            
            4.47
            %
            $
            -SWEET
                CRED LTD
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            54,571.25
            
            
            1.74
            %
            
            -印度JUPITER
            
            
            
            
            
            
            
            
            
            
            237,902.00
            
            
            10.00
            %MOSCOW
                TOR
            
            Purchase
              of company products, delivered in Nov. 2008
            
            
            126,212.95
            
            
            4.03
            %
            
            44,193.00
            
            
            2.00
            %LISEN
                EAST
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            34,256.78
            
            
            1.09
            %SPAIN
                ADL
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            88,468.12
            
            
            2.82
            %
            
            81,187.00
            
            
            3.00
            %FUZHOU
                XINHONGSHENG
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            55,282.94
            
            
            1.76
            %
            
            59,444.00
            
            
            2.00
            %INDAI
                MIRC
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            74,664.68
            
            
            2.38
            %
            
            68,520.00
            
            
            3.00
            %SAMSUNG
                K-TECH
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            124,368.27
            
            
            3.97
            %
            
            67,302.00
            
            
            3.00
            %BEIJING
                JINDACHENG
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            17,927.03
            
            
            0.57
            %
            
            128,871.00
            
            
            5.00
            %SHIJIAZHUANG
                YITE
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            41,829.74
            
            
            1.33
            %CHANGCHUN
                LONGRUIDA
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            72,992.30
            
            
            2.33
            %
            
            66,985.00
            
            
            3.00
            %HAIWEI'ER
                TRADING
            
            
            
            
            
            
            
            
            
            
            252,052.00
            
            
            10.00
            %SHENGKE
                NET
            
            
            
            
            
            
            
            
            
            
            223,192.00
            
            
            9.00
            %BEIJING
                WIRELESS
            
            Purchase
              of company products, delivered in Nov. 2008
            
            
            130,092.18
            
            
            4.15
            %
            
            153,576.00
            
            
            6.00
            %RUSSIA
                ERIMEX
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            165,055.49
            
            
            5.27
            %
            
            151,472.00
            
            
            6.00
            %LITHUANIA
                ACME
            
            
            
            
            
            
            
            
            
            
            100,929.00
            
            
            4.00
            %HANGZHOU
                WANHAI
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            74,687.48
            
            
            2.38
            %
            
            68,541.00
            
            
            3.00
            %RUSSIA
                AVE
            
            Purchase
              of company products, delivered in Nov. 2008
            
            
            116,810.42
            
            
            3.73
            %
            
            61,368.00
            
            
            2.00
            %TAIWAN
                ZHIHE
            
            Purchase
              of company products, delivered in Oct. 2008
            
            
            60,565.57
            
            
            1.93
            %
            
            55,581.00
            
            
            2.00
            %Others
            
            
            
            
            
            1,756,555.04
            
            
            56.04
            %
            
            633,646.00
            
            
            26.00
            %**Total:
                (USD)**
            
            
            
            
            $
            3,134,519.00
            
            
            
            
            $
            2,454,761.00




**10.**
              **SHORT
                  TERM LOANS**





Short
      term loans consist of the following:





September
                30,
            
            December
                31,2008
            
            2007Construction
                Bank
            
            $
            19,306,384
            
            $
            12,326,110Defutai
                Bank
            
            
            2,159,622
            
            
            2,023,773Agricultural
                Bank
            
            
            11,161
            
            
            4,590,011.10Nanyian
                Bank
            
            
            7,380,430
            
            
            7,421,508.58Henshen
                Bank
            
            
            
            
            
            541,664.54Development
                Bank
            
            
            5,559,051
            
            
            1,742,504.22Dongya
                Bank
            
            
            1,701,998
            
            
            -$
            36,118,646
            
            $
            28,645,571




15


**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**


The
      above
      outstanding short term loans are used primarily for general working capital
      purposes. Except the short term loan from Wanlizhou Electronic Limited which
      has
      non interest bearing and is unsecured, the others are recurring bank loans
      which
      carry annual interest rates of 4.87%~8.76% 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:





September
                30,
            
            December
                31,2008
            
            2007Construction
                Bank
            
            
            6.84
            %
            
            6.84
            %Defutai
                Bank
            
            
            4.92
            %
            
            4.92
            %Agricultural
                Bank
            
            
            7.20
            %
            
            7.20
            %Nanyian
                Bank
            
            
            6.84
            %
            
            6.84
            %Henshen
                Bank
            
            
            8.76
            %
            
            8.76
            %Development
                Bank
            
            
            6.48
            %
            
            6.48
            %Dongya
                Bank
            
            
            5.08
            %
            
            5.08
            %





**11.**
              **LONG
                  TERM BANK LOAN**





Long
      term
      bank loans consist of the following:





September
                30,
            
            December
                31,2008
            
            2007Shenzhen
                Pinan Bank,
            
            $
            -
            
            $
            3,084,685starting
                12/08/2004 for 30 months, 1 year renewable at maturity,7.85%
                per annum, secured by land-use rights, plant and buildingsAgricultural
                Bank of China,
            
            
            -
            
            
            1,370,971starting
                09/26/2005 for 2 years, 1 year renewable at maturity,5.76%
                per annum, secured by buildings.$
            -
            
            $
            4,455,656





**12.**
              **RESTRICTED
                  CASH AND BANK NOTES
                  PAYABLE**





Bank
      notes payable consist of the following:





September
                30,
            
            December
                31,2008
            
            2007Shenzhen
                Pingan Bank
            
            $
            -
            
            $
            4,112,913Shenzhen
                Development Bank
            
            
            10,790,047
            
            
            2,286,780Construction
                Bank
            
            
            8,624,341
            
            
            -$
            19,414,388
            
            $
            6,399,693




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:





September
                30,
            
            December
                31,2008
            
            2007Construction
                Bank,
            
            $
            1,762,721
            
            $
            -Shenzhen
                Development Bank
            
            
            2,550,678
            
            
            749,373Shenzhen
                Pingan Bank
            
            
            4,766
            
            
            1,233,874$
            4,318,165
            
            $
            1,983,247




16





**NIVS
      IntelliMedia Technology Group, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**(Amounts
      and disclosures at and for the three and nine months ended September 30, 2008
      and 2007 are unaudited)**





**13.**
              **DUE
                  TO SHAREHOLDER**





Due
      to
      shareholder consists of the following:





September
                30,
            
            December
                31,2008
            
            2007Due
                to Mr. Li Tianfu
            
            $
            9,133,637
            
            $
            11,008,770





Pursuant
      to the Repayment Agreement, as described in Note 6, the outstanding debt owed
      to
      Mr. Li was reduced to $7.8 million.





The
      above
      amounts are due to Mr. Li Tianfu. These amounts are non-secured with no fixed
      repayment date. The Company has imputed interest as an expense to the business
      operations and an addition to the paid-in capital. The calculation is performed
      quarterly using a variable rate in the range of 5.22 - 6.57% with the reference
      to the average nine month bank loan rate. The imputed interest for the periods
      present is as follows:





Three
                months ended September 30,
            
            Nine
                months ended September 30,2008
            
            2007
            
            2008
            
            2007Imputed
                interests
            
            $
            147,620
            
            $
            245,371
            
            $
            446,953
            
            $
            494,610








**14.**
              **OTHER
                  GENERAL AND
                  ADMINISTRATIVE**





For
      the
      nine months ended September 30, 2008 and 2007, the amount of other general
      and
      administrative expenses mainly composed of the following events:





September
                30,2008
            
            2007Legal
                fees
            
            $
            18,531
            
            $
            -Office
                expenses
            
            
            1,086,188
            
            
            813,697Salary
                and wages
            
            
            479,146
            
            
            590,594Consulting
            
            
            61,921
            
            
            140,029Utilities
            
            
            81,202
            
            
            106,746Others
            
            
            164,303
            
            
            215,335$
            1,891,291
            
            $
            1,866,401





**15.**
              **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.





**16.**
              **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
      PRC
      is registered in PRC and has tax advantages granted by local government for
      corporate income taxes and sales taxes commencing April 6, 2004. NIVS PRC is
      entitled to have a full tax exemption for the first two profitable years,
      followed by a 50% reduction on normal tax rate of 24% for the following three
      consecutive years.





NIVS
      Shenzhen serves as a branch company of NIVS PRC. The assessment of its tax
      liabilities is combined with that of NIVS PRC.




17


**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**


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.





The
      provision for taxes on earnings consisted of:




December
                31,2007
            
            2006
            
            2005Current
                income taxes expenses:PRC
                Enterprises Income Tax
            
            $
            1,268,963
            
            $
            752,552
            
            $
            -United
                States Federal Income Tax
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            1,268,963
            
            $
            752,552
            
            $
            -





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




December
                31,2007
            
            2006
            
            2005U.S.
                statutory rate
            
            
            34
            %
            
            34
            %
            
            34
            %Foreign
                income not recognized in the U.S.
            
            
            -34
            %
            
            -34
            %
            
            -34
            %PRC
                preferential enterprise income tax rate
            
            
            24
            %
            
            24
            %
            
            24
            %Tax
                holiday and relief granted to the Subsidiary
            
            
            -12
            %
            
            -12
            %
            
            -24
            %Provision
                for income tax
            
            
            12
            %
            
            12
            %
            
            -





**17.**
              **COMMITMENTS
                  AND****CONTINGENCIES**





(1)
              The
                  Company and its subsidiaries have entered into several tenancy
                  agreements
                  for the lease of factory premises and staff quarters. The Company’s
                  commitment for minimum lease payments under these non-cancelable
                  operating
                  leases for the next five years and thereafter is as
                  follows:





Year
                Ended December 31, 2007For
                the year 2008
            
            $
            179,093For
                the year 2009
            
            
            179,093For
                the year 2010
            
            
            179,093For
                the year 2011
            
            
            132,205For
                the year 2012
            
            
            41,483Total
            
            $
            710,966




(2)
              In
                  2007, NIVS PRC was involved into litigation with KONINKLIJKE PHILIPS
                  ELECTRONICS N.V. (“KONINKLIJKE”). KONINKLIJKE brought suit in the
                  Provincial Court in PRC alleging that NIVS PRC violated its trade-mark
                  use
                  right. With the Court intermediation, KONINKLIJKE withdrew the
                  accusation
                  and an extracurial settlement was reached in April 2008. NIVS PRC
                  agreed
                  to pay KONINKLIJKE RMB300,000 (converted to US$41,129 as at 2007
                  year-end
                  rate 7.29410:1) to settle the
                  claim.




**Plant
      Renovation**





In
      June
      2008, the Company entered into an agreement for a new plant renovation at a
      contracted price of RMB 36,117,340 (USD 5,283,997). As of September 30, 2008,
      the Company already paid RMB 33,290,368 (USD 4,870,381) for the construction
      in
      progress. The plant renovation is expected to be completed by the end of
      December 2008 and remainder balance of RMB 2,826,972 (USD 413,616) will be
      paid
      within six months upon completion.




18





**NIVS
      IntelliMedia Technology Group, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**(Amounts
      and disclosures at and for the three and nine months ended September 30, 2008
      and 2007 are unaudited)**





**Deposits
      Paid for Equipment Purchase**





In
      June
      2008, the Company signed a purchase contract to acquire equipment to be used
      in
      the new plant production line. The total purchase price is RMB 8,111,694 (USD
      1,186,741) and a deposit is required according to the contract. As of September
      30, 2008, the Company already paid RMB 2,782,548 (USD 407,087) as a deposit.
      The
      equipment is to be delivered by December 31, 2008 and the remaining balance
      of
      RMB 5,329,146 (USD 779,654) will be paid within 15 days of equipment
      delivery.





**Violation
      of Sarbanes Oxley Act**





On
      November 24, 2008, the Company has acknowledged its violation of Sarbanes Oxley
      Act Section 402. The Company has hired an independent financial consultant
      to
      review its internal controls and usual impairments. It is unable to predict
      the
      outcome of this issue should any litigation arise.




**18.**
              **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.





**19.**
              **CONCENTRATION
                  OF CREDIT RISK**





A
      significant portion of the Company’s cash at December 31, 2007 and 2006 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.





The
      following table shows the individual customer’s revenue which was higher than 5%
      of total revenue for the nine months ended September 30, 2008 and
      2007:





(In
                US Dollars)
            
            September
                30,2008
            
            
            
            2007Shenzhen
                Zhanhui
            
            
            10,401,182
            
            
            12
            %ZCX
                InternationalWEDO
                FAR EAST
            
            
            5,123,928
            
            
            6
            %Huizhou
                Zhiyuan
            
            
            5,123,928
            
            
            6
            %
            
            4,712,681
            
            
            9
            %Korea
                Nanshen
            
            
            
            
            
            
            
            
            3,114,745
            
            
            6
            %MICO
                Electronic HKHuizhou
                Dongdian
            
            
            6,657,738
            
            
            7
            %HongKong
                Huian
            
            
            
            
            
            
            
            
            9,453,712
            
            
            19
            %India
                Jupiter
            
            
            
            
            
            
            
            
            3,586,032
            
            
            7
            %Singapore
                George
            
            
            
            
            
            
            
            
            2,938,599
            
            
            6
            %Ande
                New techDenmark
                Inter salesHK
                GuanhenHuizhou
                Taiming
            
            
            5,615,672
            
            
            6
            %INTERNATIONAL
                LTD
            
            
            4,747,843
            
            
            5
            %RADIO
                SHACK GLOBAL SOURCING
            
            
            5,998,487
            
            
            7
            %




19


**NIVS
        IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(Amounts
        and disclosures at and for the three and nine months ended September 30,
        2008
        and 2007 are unaudited)**


**20.**
              **SEGMENT
                  INFORMATION**





The
      segment information for revenue is as follows:




(In
                  US Dollars)
              
              
              
              September
                  30,2008
              
              2007Standard
                  audio and video equipment
              
              
              China
              
              $
              38,429,568
              
              $
              28,806,354Europe
              
              
              3,050,970
              
              
              6,134,435North
                  America
              
              
              3,390,087
              
              
              84,286Other
                  Asian countries
              
              
              16,486,181
              
              
              12,535,375South
                  America
              
              
              5,211,502
              
              
              1,808,638Other
                  countries
              
              
              902,654Intelligent
                  audio and video equipment
              
              
              China
              
              
              3,048,225
              
              
              894,850North
                  America
              
              
              5,390,087
              
              
              0Other
                  Asian countries
              
              
              15,236,435
              
              
              371,676Other
                  audio and video equipment
              
              
              China
              
              
              9,902,654
              
              
              24,585Total
              
              $
              101,048,363
              
              
              50,660,199




**21.**
              **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 date on which the
      Company’s securities are listed on a national securities exchange. WestPark
      Capital, Inc. reserves the right to release all or a portion of the shares
      at
      its sole discretion.





**22.**
              **SUBSEQUENT
                  EVENTS**





**Repayment
      of Note from Related Party**





On
      November 24, 2008, the Company has received the repayment for the note
      receivable from Hyundai Electric and Light (HZ) Co Ltd, a related party, in
      the
      amount of RMB 38,039,000. On November 28, 2008, the Company has received the
      payment of interest in the amount of RMB 3,719,611 paid in full.





On
      November 24, 2008, the note due to the Company was repaid in full by Hyundai
      Light and Electric (HZ) Co Ltd. Furthermore, 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”). The purpose of the Repayment Agreement
      was to confirm complete and immediate repayment of all loan amounts that were
      due to (from) the Company by (to) the Related Companies. Pursuant to the terms
      of the Repayment Agreement, the Company and its subsidiaries (collectively,
      the
“NIVS Group”) had outstanding loan amounts of US$9.1 million owed to Mr. Li (the
“Li Debt”) and $568,063 owed to NIVS Investment (SZ) Co., Ltd. (the “NIVS
      Investment Debt”) (see Note 13), and Mr. Li, through the Related Companies, had
      an aggregate outstanding loan amount of US$1,878,101 owed to the NIVS Group
      (the
“Related Companies’ Debt”) (as set forth in Note 6). Pursuant to the Repayment
      Agreement, the Related Companies’ Debt was repaid and/or set off in full against
      the NIVS Investment Debt, in totality, and the Li Debt,
      partially, such that, as a result of the transactions contemplated by the
      Repayment Agreement, the Related Companies’ Debt is no longer outstanding, the
      NIVS Investment Debt was reduced to zero, and neither Mr. Li nor any of the
      Related Companies owe the NIVS Group any loan amount.




20


**NIVS
          IntelliMedia Technology Group, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(Amounts
          and disclosures at and for the three and nine months ended September 30,
          2008
          and 2007 are unaudited)**





Furthermore,
      pursuant to the Repayment Agreement, a portion of the Li Debt is set off, such
      that the Li Debt remaining after deducting the total amount of the Related
      Companies’ Debt repaid via the set-off against the NIVS Investment Debt, in
      totality, and the Li Debt, partially (the “Repayment Amount”) is equal to an
      aggregate amount of US$7.8 million (the “Remaining Debt”). As a result of the
      transactions contemplated by the Repayment Agreement, the Repayment Amount
      was
      repaid and the NIVS Group does not owe any loan amount to Mr. Li or any of
      the
      Related Companies other than the Remaining Debt. The Repayment Agreement also
      contains an acknowledgement by the parties to the Repayment Agreement that
      there
      are no remaining debt obligations owed to the NIVS Group, 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 NIVS Group to such persons or entities in
      the
      future. Due to the loans that we made to the entities owned and controlled
      by
      our chief executive officer in violation of Section 402 of the Sarbanes-Oxley
      Act of 2002, we and/or our chief executive officer could become subject to
      criminal, civil or administrative sanctions, penalties, or investigations and
      may also face potential private securities litigation.




21




**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 Note 1 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, general economic and business
      conditions, changes in foreign, political, social, and economic conditions,
      regulatory initiatives and compliance with governmental regulations, the ability
      to achieve further market penetration and additional customers, 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 nine months ended September 30, 2008, we had seven customers that each
      accounted for at least 5% of the revenues that we generated. These seven
      customers accounted for a total of approximately 48% of our revenue for that
      period. During the nine months ended September 30, 2008, we had one
      customer—Shenzhen Zhanhui (12%)—that accounted for more than 10% of our sales.





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 our on purchases from our suppliers during the year as we submit
      purchase orders further to the agreement. Notwithstanding our practices to
      reduce the cost of our materials, price fluctuations of materials will still
      affect our production cost and gross margin.




22





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 DVD players
      has been declining. By adding functionality to our DVD players, 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 nine months of 2008, our sales revenue and sales volume
      for DVD players increased 206% and 260%, respectively, compared to our sales
      revenue and volume for the first nine months of 2007. In the third quarter
      of
      2008, with the private placement funds we received in August, we expanded our
      production scale and completed many orders. In the third quarter of 2008, we
      completed an upgrade of our DVD player 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 DVD-related products have increased. In
      the
      first nine months of 2008, our sales revenue for televisions was approximately
      $11.44 million, which represented an increase of approximately 2,019% compared
      to revenue of $0.54 million from the sale of televisions for the first nine
      months of 2007. The increase in revenue for televisions resulted from an
      increase in sales volume. In the first nine months of 2008, our sales volume
      for
      televisions rose approximately 223% as compared to the first nine months of
      2007. We believe the increases 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 65% of our revenues for the nine months ended September 30, 2008,
      as compared to 71% for the first nine months of 2007, and sales of products
      with
      our own brand accounted for approximately 35% of our revenues for the same
      period, as compared to 29% for the first nine months of 2007.





**Recent
      Events**





On
      June
      27, 2008, SRKP 19, Inc., a Delaware corporation (“SRKP 19”), entered into a
      share exchange agreement, as amended on July 25, 2008 (the “Exchange
      Agreement”), with NIVS BVI and its shareholders, pursuant to which these
      shareholders would transfer all of the issued and outstanding securities of
      NIVS
      BVI to SRKP 19 in exchange for 27,546,667 shares of SRKP 19’s common stock. On
      July 25, 2008, the Share Exchange closed and we became a wholly-owned subsidiary
      of SRKP 19, which immediately changed its name to “NIVS IntelliMedia Technology
      Group, Inc.” A total of 27,546,667 shares were issued to the former shareholders
      of NIVS BVI and their designees.





In
      addition, 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, 2008,
      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.





In
      July
      2008, we entered into a two-year consulting agreement with Nascent Value LLC
      (“Nascent”). According to the agreement, as amended, Nascent will provide us
      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 us or any of our affiliates. As consideration for entering
      into the agreement and compensation for Nascent’s services under the agreement,
      we issued to Nascent 425,000 shares (“IR Shares”) of our common stock upon the
      closing of the Share Exchange. In connection with the IR Shares, we 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 our common stock were sold in the Private
      Placement. We 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 our securities are listed on
      a
      national securities exchange and the remaining 405,000 IR Shares will be subject
      to lock-up restrictions following the date on which our securities are listed
      on
      a national securities exchange. WestPark Capital, Inc. reserves the right to
      release all or a portion of the shares at its sole discretion.




23





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”). The
      purpose of the Repayment Agreement was to confirm complete and immediate
      repayment of all loan amounts that were due to (from) the Company by (to) the
      Related Companies. Pursuant to the terms of the Repayment Agreement, the Company
      and its subsidiaries (collectively, the “NIVS Group”) had outstanding loan
      amounts of US$9.1 million owed to Mr. Li (the “Li Debt”) and $568,063 owed to
      NIVS Investment (SZ) Co., Ltd. (the “NIVS Investment Debt”), and Mr. Li, through
      the Related Companies, had an aggregate outstanding loan amount of US$1,878,101
      owed to the NIVS Group (the “Related Companies’ Debt”). Pursuant to the
      Repayment Agreement, the Related Companies’ Debt was repaid and/or set off in
      full against the NIVS Investment Debt, in totality, and the Li Debt,
      partially, such that, as a result of the transactions contemplated by the
      Repayment Agreement, the Related Companies’ Debt is no longer outstanding, the
      NIVS Investment Debt was reduced to zero, and neither Mr. Li nor any of the
      Related Companies owe the NIVS Group any loan amount.





Furthermore,
      pursuant to the Repayment Agreement, a portion of the Li Debt is set off, such
      that the Li Debt remaining after deducting the total amount of the Related
      Companies’ Debt repaid via the set-off against the NIVS Investment Debt, in
      totality, and the Li Debt, partially (the “Repayment Amount”) is equal to an
      aggregate amount of US$7.8 million (the “Remaining Debt”). As a result of the
      transactions contemplated by the Repayment Agreement, the Repayment Amount
      was
      repaid and the NIVS Group does not owe any loan amount to Mr. Li or any of
      the
      Related Companies other than the Remaining Debt. The Repayment Agreement also
      contains an acknowledgement by the parties to the Repayment Agreement that
      there
      are no remaining debt obligations owed to the NIVS Group, 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 NIVS Group to such persons or entities in
      the
      future. Due to the loans that we made to the entities owned and controlled
      by
      our chief executive officer in violation of Section 402 of the Sarbanes-Oxley
      Act of 2002, we and/or our chief executive officer could become subject to
      criminal, civil or administrative sanctions, penalties, or investigations and
      may also face potential private securities litigation.





**Critical
      Accounting Policies and Estimates**





The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our financial statements which have been prepared in accordance
      with
      accounting principles generally accepted in the United States. The preparation
      of these financial statements requires us to make estimates and judgments that
      affect the reported amounts of assets and liabilities. On an on-going basis,
      we
      evaluate our estimates including the allowance for doubtful accounts, the
      salability and recoverability of inventory, income taxes and contingencies.
      We
      base our estimates on historical experience and on other assumptions that we
      believe to be reasonable under the circumstances, the results of which form
      our
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions.





We
      cannot
      predict what future laws and regulations might be passed that could have a
      material effect on our results of operations. We assess the impact of
      significant changes in laws and regulations on a regular basis and update the
      assumptions and estimates used to prepare our financial statements when we
      deem
      it necessary.





***Revenue
      recognition.*** We
      recognize revenue from the sales of products. 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
      collectivity is reasonably assured. Sales revenue is presented net of value
      added tax (VAT), sales rebates and returns. No return allowance is made as
      product returns are insignificant based on historical experience.





***Allowance
      for doubtful accounts.*** In
      estimating the collectability of accounts receivable we analyze historical
      write-offs, changes in our internal credit policies and customer concentrations
      when evaluating the adequacy of our allowance for doubtful accounts. Differences
      may result in the amount and timing of expenses for any period if we make
      different judgments or uses difference estimates. Our accounts receivable
      represent a significant portion of our current assets and total assets. Our
      realization on accounts receivable, expressed in terms of United States dollars
      may be affected by fluctuations in currency rates since the customer’s currency
      is frequently a currency other than United States dollars.





***Inventories.*** Inventories
      comprise raw materials and finished goods are stated at the lower of cost or
      market. Substantially all inventory costs are determined using the weighted
      average basis. Costs of finished goods include direct labor, direct materials,
      and production overhead before the goods are ready for sale. Inventory costs
      do
      not exceed net realizable value.




24





***Taxation.*** Under
      the
      tax laws of PRC, we have had tax advantages granted by local government for
      corporate income taxes and sales taxes commencing April 6, 2004. We have been
      entitled to have a full tax exemption for the first two profitable years,
      followed by a 50% reduction on normal tax rate of 24% for the following three
      consecutive years. 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.





**Recently
      Issued Accounting Pronouncements**





On
      December 4, 2007, the FASB issued SFAS No. 160, Noncontrolling interest in
      Consolidated Financial Statements (SFAS No. 160). SFAS No. 160 requires all
      entities to report noncontrolling (minority) interests in subsidiaries as equity
      in the consolidated financial statements. The statement establishes a single
      method of accounting for changes in a parent’s ownership interest in a
      subsidiary that do not result in deconsolidation and expands disclosures in
      the
      consolidated financial statements. SFAS No. 160 is effective for fiscal years
      beginning after December 15, 2008 and interim periods within those fiscal years.
      We have not yet determined the impact of the adoption of SFAS No. 160 on our
      consolidated financial statements and footnote disclosures.





On
      December 4, 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS
      No.
      141R). SFAS No. 141R requires the acquiring entity in a business combination
      to
      recognize all the assets acquired and liabilities assumed, establishes the
      acquisition date fair value as the measurement objective for all assets acquired
      and liabilities assumed, and requires the acquirer to expand disclosures about
      the nature and financial effect of the business combination. SFAS No. 141R
      is
      effective for business combinations for which the acquisition date is on or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. We have not yet determined the impact of the adoption of
      SFAS
      No. 141R on our consolidated financial statements and footnote
      disclosures.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, “Fair Value Measurements”, which establishes a framework for
      reporting fair value and expands disclosures about fair value measurements.
      SFAS
      No. 157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007 and interim periods within those fiscal years. The
      adoption of this standard had no impact on the Company’s financial position or
      results of operations.





In
      March
      2008, the FASB issued SFAS 161, “ *Disclosures
      about Derivative Instruments and Hedging Activities* ” *.* The
      new
      standard is intended to improve financial reporting about derivative instruments
      and hedging activities by requiring enhanced disclosures to enable investors
      to
      better understand their effects on an entity’s financial position, financial
      performance, and cash flows. It is effective for financial statements issued
      for
      fiscal years and interim periods beginning after November 15, 2008, with early
      application encouraged. The Company is currently evaluating the impact of
      adopting SFAS 161 on its consolidated financial statements.





In
      April
      2008, the FASB issued Staff Position FAS 142-3, Determination of the Useful
      Life
      of Intangible Assets (“FSP FAS 142-3”) which amends the factors an entity should
      consider in developing renewal or extension assumptions used to determine the
      useful life of a recognized intangible asset under FAS No. 142, Goodwill and
      Other Intangible Assets (“FAS No. 142”). FSP FAS 142-3 applies to intangible
      assets that are acquired individually or with a group of assets and intangible
      assets acquired in both business combinations and asset acquisitions. It removes
      a provision under FAS No. 142, requiring an entity to consider whether a
      contractual renewal or extension clause can be accomplished without substantial
      cost or material modifications of the existing terms and conditions associated
      with the asset. Instead, FSP FAS 142-3 requires that an entity consider its
      own
      experience in renewing similar arrangements. An entity would consider market
      participant assumptions regarding renewal if no such relevant experience exists.
      FSP FAS 142-3 is effective for year ends beginning after December 15, 2008
      with
      early adoption prohibited. We have not yet determined the effect, if any, of
      the
      adoption of this statement on our financial condition or results of
      operations.





In
      June
      2008, the Financial Accounting Standards Board (“FASB”) issued FSP No. EITF
      03-6-1, Determining Whether Instruments Granted in Share-Based Payment
      Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1
      concludes that unvested share-based payment awards that contain rights to
      receive non-forfeitable dividends or dividend equivalents are participating
      securities, and thus, should be included in the two-class method of computing
      earnings per share (“EPS”). FSP EITF 03-6-1 is effective for fiscal years
      beginning after December 15, 2008, and interim periods within those years.
      Early
      application of EITF 03-6-1 is prohibited. It also requires that all prior-period
      EPS data be adjusted retrospectively. We have not yet determined the effect,
      if
      any, of the adoption of this statement on our financial condition or results
      of
      operations.




25





**Recently
      Adopted Accounting Pronouncements**





In
      July
      2006, the FASB issued 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 taken or expects to
      take
      on a tax return (including a decision whether to file or not to file a return
      in
      a particular jurisdiction). The accounting provisions of FIN No. 48 are
      effective for fiscal years beginning after December 15, 2006. The adoption
      of
      this Interpretation had no impact on the Company’s financial position 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.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities — Including an Amendment of FASB
      Statement No. 115,” (“SFAS 159”) which is effective for fiscal years beginning
      after November 15, 2007. SFAS 159 is an elective standard which permits an
      entity to choose to measure many financial instruments and certain other items
      at fair value at specified election dates. Subsequent unrealized gains and
      losses on items for which the fair value option has been elected will be
      reported in earnings. The Company has not elected the fair value option for
      any
      assets or liabilities under SFAS 159.




26


**Results
      of Operations**





The
      following table sets forth information from our statements of operations for
      the
      three and nine months ended September 30, 2008 and 2007 in dollars and as a
      percentage of revenue:





**For
                Three Months Ended**
            
            
            **For
                Nine Months Ended****September
                30,**
            
            
            **September
                30,****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007****(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**
            
            $
            49,411
            
            
            99.7
            %
            
            $
            16,730
            
            
            98.2
            %
            
            $
            101,048
            
            
            99.7
            %
            
            $
            50,660
            
            
            98.8
            %Other
                Sales
            
            
            165
            
            
            0.3
            %
            
            
            314
            
            
            1.8
            %
            
            
            321
            
            
            0.3
            %
            
            
            599
            
            
            1.2
            %Cost
                of Goods Sold
            
            
            (38,262
            )
            
            -77.2
            %
            
            
            (12,744
            )
            
            -74.8
            %
            
            
            (77,853
            )
            
            -76.8
            %
            
            
            (38,742
            )
            
            -75.6
            %**Gross
                Profit**
            
            
            11,314
            
            
            22.8
            %
            
            
            4,301
            
            
            25.2
            %
            
            
            23,517
            
            
            23.2
            %
            
            
            12,517
            
            
            24.4
            %**Selling
                Expenses**
            
            
            1,287
            
            
            2.6
            %
            
            
            826
            
            
            4.8
            %
            
            
            2,650
            
            
            2.6
            %
            
            
            2,543
            
            
            5.0
            %**General
                and administrative**Amortization
            
            
            18
            
            
            0.0
            %
            
            
            15
            
            
            0.1
            %
            
            
            51
            
            
            0.1
            %
            
            
            45
            
            
            0.1
            %Depreciation
            
            
            88
            
            
            0.2
            %
            
            
            71
            
            
            0.4
            %
            
            
            249
            
            
            0.2
            %
            
            
            205
            
            
            0.4
            %Bad
                debts
            
            
            424
            
            
            0.9
            %
            
            
            339
            
            
            2.0
            %
            
            
            808
            
            
            0.8
            %
            
            
            1,122
            
            
            2.2
            %Merger
                cost
            
            
            1,784
            
            
            3.6
            %
            
            
            -
            
            
            -
            
            
            
            1,784
            
            
            1.8
            %
            
            
            -
            
            
            -Stock-based
                compensation
            
            
            765
            
            
            1.5
            %
            
            
            -
            
            
            -
            
            
            
            765
            
            
            0.8
            %
            
            
            -
            
            
            -Others
                General and administrative
            
            
            857
            
            
            1.7
            %
            
            
            765
            
            
            4.5
            %
            
            
            1,891
            
            
            1.9
            %
            
            
            1,866
            
            
            3.6
            %**Total
                General and administrative**
            
            
            3,936
            
            
            7.9
            %
            
            
            1,190
            
            
            7.0
            %
            
            
            5,549
            
            
            5.5
            %
            
            
            3,239
            
            
            6.3
            %**Research
                and development**
            
            
            261
            
            
            0.5
            %
            
            
            115
            
            
            0.7
            %
            
            
            668
            
            
            0.7
            %
            
            
            257
            
            
            0.5
            %**Total
                operating expenses**
            
            
            5,484
            
            
            11.1
            %
            
            
            2,131
            
            
            12.5
            %
            
            
            8,867
            
            
            8.7
            %
            
            
            6,040
            
            
            11.8
            %**Income
                from operations**
            
            
            5,830
            
            
            11.8
            %
            
            
            2,169
            
            
            12.7
            %
            
            
            14,649
            
            
            14.5
            %
            
            
            6,477
            
            
            12.6
            %**Other
                income (expenses)**Government
                grant
            
            
            22
            
            
            0.0
            %
            
            
            -
            
            
            -
            
            
            
            22
            
            
            0.0
            %
            
            
            -
            
            
            -Write-down
                of inventory
            
            
            -
            
            
            -
            
            
            
            (3
            )
            
            0.0
            %
            
            
            -
            
            
            -
            
            
            
            (393
            )
            
            -0.8
            %Gain
                on disposal of assets
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -Interest
                income
            
            
            251
            
            
            0.5
            %
            
            
            (10
            )
            
            -0.1
            %
            
            
            394
            
            
            0.4
            %
            
            
            1
            
            
            0.0
            %Interest
                expense
            
            
            (518
            )
            
            -1.0
            %
            
            
            (354
            )
            
            -2.1
            %
            
            
            (1,563
            )
            
            -1.5
            %
            
            
            (994
            )
            
            -1.9
            %Imputed
                interest
            
            
            (148
            )
            
            -0.3
            %
            
            
            (245
            )
            
            -1.4
            %
            
            
            (447
            )
            
            -0.4
            %
            
            
            (495
            )
            
            -1.0
            %Sundry
                income (expense), net
            
            
            (32
            )
            
            -0.1
            %
            
            
            (34
            )
            
            -0.2
            %
            
            
            (22
            )
            
            0.0
            %
            
            
            (66
            )
            
            -0.1
            %**Total
                other income (expenses)**
            
            
            (425
            )
            
            -0.9
            %
            
            
            (645
            )
            
            -3.8
            %
            
            
            (1,617
            )
            
            -1.6
            %
            
            
            (1,946
            )
            
            -3.8
            %**Income
                before minority interest and income taxes**
            
            
            5,405
            
            
            10.9
            %
            
            
            1,524
            
            
            8.9
            %
            
            
            13,033
            
            
            12.9
            %
            
            
            4,531
            
            
            8.8
            %Income
                taxes
            
            
            (646
            )
            
            -1.3
            %
            
            
            (54
            )
            
            -0.3
            %
            
            
            (1,621
            )
            
            -1.6
            %
            
            
            (488
            )
            
            -1.0
            %Minority
                interest
            
            
            (196
            )
            
            -0.4
            %
            
            
            (37
            )
            
            -0.2
            %
            
            
            (363
            )
            
            -0.4
            %
            
            
            (101
            )
            
            -0.2
            %**Net
                Income**
            
            $
            4,563
            
            
            9.2
            %
            
            $
            1,433
            
            
            8.4
            %
            
            $
            11,048
            
            
            10.9
            %
            
            $
            3,941
            
            
            7.7
            %





***Three
      months ended September 30, 2008 and 2007***





Revenues,
      which consist of sales of our products, were $49.4 million for the three months
      ended September 30, 2008, an increase of $32.7 million, or 195.8%, compared
      to
      $16.7 million for the same period in 2007. 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, as well as price
      increases of some of our audio system products. For the three months ended
      September 30, 2008, our sales revenue for standard audio equipment increased
      to
      $15.96 million, an increase of 7% compared to $14.91 million for the same period
      in 2007. Sales revenue for televisions increased to $0.29 million, an increase
      of 2,800% compared to $0.01 million for the same period in 2007. Sales revenue
      for our intelligent audio and video equipment increased to $7.32 million, an
      increase of 6,000% compared to $0.12 million for the same period in 2007. For
      the three months ended September 30, 2008, our sales volume for standard audio
      equipment decreased by 24% to 1.45 million pieces as compared to 1.92 million
      pieces for the same period in 2007. The decrease was due to product upgrades
      as
      we upgraded most of our standard audio equipment to intelligent audio equipment.
      For the three months ended September 30, 2008, our sales volume for televisions
      increased by 6,496% to 0.31 million pieces as compared to 0.0047 million pieces
      for the same period in 2007. Our sales volume for intelligent audio and video
      equipment increased by 5,370% to 0.1641 million pieces as compared to 0.003
      million pieces for the same period in 2007. We believe the increases 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.




27





Cost
      of
      sales, which include raw material, labor and manufacturing overhead, were $38.3
      million for the three months ended September 30, 2008, an increase of $25.6
      million, or 201.6%, compared to $12.7 million for the same period in 2007.
      This
      increase in cost of sales was caused by an increase in sales and was consistent
      with the increase in the revenue. As a percentage of
      the
      revenue, cost of sales for the three months ended September 30, 2008 and 2007
      were 77.2% and 74.8%, respectively.





Gross
      profit for the three months ended September 30, 2008 was $11.3 million, or
      22.8%
      of revenues, compared to $4.3 million, or 25.2% of revenues, for the comparable
      period in 2007. Management considers gross profit to be a key performance
      indicator in managing our business. Gross profit margins are a factor of cost
      of
      sales, product mix and product demand.





Selling
      expenses, which mainly include marketing, shipping, insurance, wage and other
      expenses, were $1.3 million for the three months ended September 30, 2008,
      an
      increase of $0.5 million, or 62.5%, compared to $0.8 million for the same period
      in 2007. The increase was primarily due to an increase in advertising and
      marketing activities.




Research
      and development expenses were approximately $0.3 million for the three months
      ended September 30, 2008, an increase of approximately $0.2 million, or 200%,
      compared to $0.1 million for the same period in 2007. 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
      $3.9 million for the three months ended September 30, 2008, an increase of
      $2.7
      million, or 225%, compared to $1.2 million for the same period in 2007. The
      increase was primarily a result of an increase of bad debt reserves,
      professional fees and cost of the reverse merger. We expect our general and
      administrative expenses to increase as a result of professional fees incurred
      as
      a result of being a publicly reporting company in the United
      States.





Interest
      expenses were $0.5 million and $0.4 million for the three months ended September
      30, 2008 and 2007, respectively. The increase was due to new short-term and
      long-term bank loans during the three months ended September 30,
      2008.





Income
      tax provisions for the three months ended September 30, 2008 were approximately
      $0.6 million, as compared to approximately $0.1 million for the three months
      ended September 30, 2007. The increase was primarily due to an increase in
      the
      taxable income for the three months ended September 30, 2008. 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 normal tax rate of 24% for the following three
      consecutive years. Our effective income tax rates for the three months ended
      September 30, 2008 and September 30, 2007 were 12.5% and 12%, 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.





We
      had
      net income of $4.6 million for three months ended September 30, 2008, an
      increase of $3.2 million, or 229%, compared to $1.4 million for the same period
      in 2007.





***Nine
      months ended September 30, 2008 and 2007***





Revenues
      were $101.0 million for the nine months ended September 30, 2008, an increase
      of
      $50.3 million, or 99.2%, compared to $50.7 million for the same period in 2007.
      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, as well as price increases of some of our audio system products.
      For
      the nine months ended September 30, 2008, our sales revenue for standard audio
      equipment increased to $39.23 million, an increase of 2% compared to $38.4
      million for the same period in 2007. Sales revenue for televisions increased
      to
      $11.44 million, an increase of 2,019% compared to $0.54 million for the same
      period in 2007. Sales revenue for our intelligent audio and video equipment
      increased to $9.93 million, an increase of 1,141% compared to $0.8 million
      for
      the same period in 2007. For the nine months ended September 30, 2008, our
      sales
      volume for standard audio equipment decreased by 17% to 3.4 million pieces
      as
      compared to 4.09 million pieces for the same period in 2007. The decrease was
      due to product upgrades as we upgraded most of our standard audio equipment
      to
      intelligent audio equipment. For the nine months ended September 30, 2008,
      our
      sales volume for televisions increased by 6,400% to 0.26 million pieces as
      compared to 0.004 million pieces for the same period in 2007. Our sales volume
      for intelligent audio and video equipment increased by 2,700% to 0.42 million
      pieces as compared to 0.015 million pieces for the same period in 2007. We
      believe the increases 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.




28





Cost
      of
      sales were $77.9 million for nine months ended September 30, 2008, an increase
      of $39.2 million, or 101.3%, compared to $38.7 million for the same period
      in
      2007. This increase in cost of sales was caused by an increase in sales and
      was
      consistent with the increase in the revenue. As a percentage of the revenue,
      cost of sales for the nine months ended September 30, 2008 and 2007 were 76.8%
      and 75.6%, respectively.





Gross
      profit for the nine months ended September 30, 2008 was $23.5 million, or 23.2%
      of revenues, compared to $12.5 million, or 24.4% of revenues, for the comparable
      period in 2007. Management considers gross profit to be a key performance
      indicator in managing our business. Gross profit margins are a factor of cost
      of
      sales, product mix and product demand.





Selling
      expenses were $2.6 million for nine months ended September 30, 2008, an increase
      of $0.1 million, or 4%, compared to $2.5 million for the same period in 2007.
      The increase was primarily due to an increase in advertising and marketing
      activities.




Research
      and development expenses, which were approximately $0.7 million for the nine
      months ended September 30, 2008, an increase of approximately $0.4 million,
      or
      133.3%, compared to $0.3 million for the same period in 2007. 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 $5.5 million for the nine months ended
      September 30, 2008, an increase of $2.3 million, or 71.9%, compared to $3.2
      million for the same period in 2007. The increase was primarily a result of
      the
      cost of merger. We expect our general and administrative expenses to increase
      as
      a result of professional fees incurred as a result of being a publicly reporting
      company in the United States.





Interest
      expenses were $1.6 million and $1.0 million for the nine months ended September
      30, 2008 and 2007, respectively. The increase was due to new short-term and
      long-term bank loans during the nine months ended September 30,
      2008.





Income
      tax provisions for the nine months ended September 30, 2008 were approximately
      $1.6 million, as compared to approximately $0.5 million for the nine months
      ended September 30, 2007. The increase was primarily due to an increase in
      the
      taxable income for the nine months ended September 30, 2008. 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 normal tax rate of 24% for the following three
      consecutive years. Our effective income tax rates for the nine months ended
      September 30, 2008 and September 30, 2007 were 12.5% and 12%, 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.





We
      had
      net income of $11.0 million for the nine months ended September 30, 2008, an
      increase of $7.1 million, or 182.1%, compared to $3.9 million for the same
      period in 2007.





**Liquidity
      and Capital Resources**





We
      had an
      unrestricted cash balance of approximately $3.1 million as of September 30,
      2008, as compared to $1.4 million as of December 31, 2007. In addition, we
      also
      had approximately $4.3 million in restricted cash as of September 30, 2008,
      as
      compared to $2.0 million as of December 31, 2007. 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.





We
      are
      subject to the regulations of the PRC, which restricts 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.




29





We
      had
      negative working capital of approximately $33.6 million and $34.2 million as
      at
      September 30, 2008 and December 31, 2007, respectively. The increase of negative
      working capital was largely caused by the substantial increases in financing
      from bank loans and notes.





Our
      accounts receivable has been an increasingly significant portion of our current
      assets, representing $21 million and $4.5 million, or 54.8% and 17.8% of current
      assets, as at September 30, 2008 and December 31, 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.





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
      typically offer certain of our customers 30 to 90 days credit terms for payment.
      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 collectability of specific
      customer accounts, the aging of accounts receivable, our history of bad debts,
      and the general condition of the industry. If a major customer’s credit
      worthiness deteriorates, or our customers’ actual defaults exceed historical
      experience, our estimates could change and impact our reported results. We
      have
      not experienced any significant amount of bad debt since the inception of our
      operation.





As
      of
      September 30, 2008, inventories amounted to $6.8 million, compared to $17.3
      million at December 31, 2007. We have experienced increased sales volume
      annually and, as a result, we have increased our inventories accordingly. We
      keep 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.





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 $55.5 million and $39.5 million as at September 30, 2008 and
      December 31, 2007, respectively. These loans carry annual interest rates of
      approximately 4.9% to 8.8% 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.





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. (collectively,
      the “Related Companies”). The loans were unsecured with no fixed repayment date.
      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 related parties continued after the
      closing of the Share Exchange, as more fully describe in Note 6 to the financial
      statements contained in this Quarterly Report on Form 10-Q. As of September
      30,
      2008, the entities owned by Mr. Li had an aggregate outstanding loan balance
      of
      $7.6 million owed to NIVS Group. As of September 30, 2008, NIVS Group had an
      aggregate outstanding loan balance due to shareholder Mr. Li of $9.1 million
      and
      $568,063 owed to NIVS Investment (SZ) Co., Ltd.





On
      November 24, 2008, the Company and its subsidiaries entered into a Debt
      Repayment and Set-Off Agreement (the “Agreement”) with Mr. Li and the Related
      Companies. The purpose of the agreement was to confirm complete and immediate
      repayment of all loan amounts that were due to (from) the Company by (to) the
      Related Companies. Pursuant to the terms of the Agreement, the Company and
      its
      subsidiaries (collectively, the “NIVS Group”) had outstanding loan amounts of
      US$9.1 million owed to Mr. Li (the “Li Debt”) and $568,063 owed to NIVS
      Investment (SZ) Co., Ltd. (the “NIVS Investment Debt”), and Mr. Li, through the
      Related Companies, had an aggregate outstanding loan amount of US$1,878,101
      owed
      to the NIVS Group (the “Related Companies’ Debt”). Pursuant to the Agreement,
      the Related Companies’ Debt was repaid and/or set off in full against the NIVS
      Investment Debt, in totality, and the Li Debt, partially, such that, as a
      result of the transactions contemplated by the Agreement, the Related Companies’
Debt is no longer outstanding, the NIVS Investment Debt was reduced to zero,
      and
      neither Mr. Li nor any of the Related Companies owe the NIVS Group any loan
      amount.




30





Furthermore,
      pursuant to the Agreement, a portion of the Li Debt is set off, such that the
      Li
      Debt remaining after deducting the total amount of the Related Companies’ Debt
      repaid via the set-off against the NIVS Investment Debt, in totality, and the
      Li
      Debt, partially (the “Repayment Amount”) is equal to an aggregate amount of
      US$7.8 million (the “Remaining Debt”). As a result of the transactions
      contemplated by the Agreement, the Repayment Amount was repaid and the NIVS
      Group does not owe any loan amount to Mr. Li or any of the Related Companies
      other than the Remaining Debt. The Agreement also contains an acknowledgement
      by
      the parties to the Agreement that there are no remaining debt obligations owed
      to the NIVS Group, 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 NIVS Group to such persons
      or entities in the future. Due to the loans that we made to the entities owned
      and controlled by our chief executive officer in violation of Section 402 of
      the
      Sarbanes-Oxley Act of 2002, we and/or our chief executive officer could become
      subject to criminal, civil or administrative sanctions, penalties, or
      investigations and may also face potential private securities
      litigation.





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, 2008, 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. We have used and intend to use 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





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 $214,258 and $157,134 for the nine months ended
      September 30, 2008 and 2007, 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.





The
      ability of NIVS PRC to pay dividends may be restricted due to the foreign
      exchange control policies and availability of cash balance of the Chinese
      operating subsidiaries. A majority of our revenue being earned and currency
      received are denominated in RMB, which is subject to the exchange control
      regulation in China, and, as a result, we may unable to distribute any dividends
      outside of China due to PRC exchange control regulations that restrict our
      ability to convert RMB into US Dollars. Accordingly, we may not be able to
      access NIVS PRC’s funds may not be readily available to us to satisfy
      obligations which have been incurred outside the PRC, which could adversely
      affect our business and prospects or our ability to meet our cash
      obligations.





Net
      cash
      used in operating activities was $8.4 million for the nine months ended
      September 30, 2008, compared to net cash used in operating activities of $15.7
      million for the nine months ended September 30, 2007. The decrease in net cash
      used in operating activities was primarily due to an increase in cash provided
      from net income from $3.9 million to $11 million, for the respective periods,
      which primarily resulted from our increase in sales revenue. In addition, the
      change in net cash used in operating activities was due to an increase of cash
      used in account receivables from $6.8 million to $17.3 million, for the
      respective periods, which primarily resulted from an increase in our sales
      volume for the nine months ended September 30, 2008. The change in net cash
      used
      in operating activities was due to an increase of cash used in depreciation
      from
      $0.8 million to $ 3.6 million for the respective periods. Our increase in net
      cash used in operating activities for the nine months ended September 30, 2008
      was partially offset by a decrease in cash used in advances to suppliers from
      $10.3 million for the first nine months of 2007 to $9.6 million for the first
      nine months of 2008. We increased our inventories from $6.9 million to $10.5
      million in an attempt to lock in costs of materials in response to increasing
      material costs.





Investing
      activity during the nine months ended September 30, 2008 and 2007 included
      the
      purchasing of property and equipment and intangible assets, which resulted
      in
      net cash used in investing activities of $8.2 million for the nine months ended
      September 30, 2008, compared to net cash used in investing activities of $1.8
      million for the nine months ended September 30, 2007. The increase in net cash
      used in purchasing of property was due to our purchase of production equipment
      to expand our production scale in the third quarter of 2008. In June 2008,
      we
      entered into an agreement for a new plant renovation at a contracted price
      of
      RMB 36,117,340 (USD 5,283,997). As of September 30, 2008, we had paid RMB
      33,290,368 (USD 4,870,381) for the construction in progress. The plant
      renovation is expected to be completed by the end of December 2008 and remainder
      balance of RMB 2,826,972 (USD 413,616) will be paid within six months upon
      completion.




31





Net
      cash
      provided by financing activities amounted to $17.4 million for the nine months
      ended September 30, 2008, compared to net cash provided by financing activities
      of $18.5 million for the nine months ended September 30, 2007. The decrease
      in
      cash provided was primarily a result of an increase in repayment of loans and
      bank notes that we took out during 2007. During the nine months ended September
      30, 2008, lenders extended our credit lines as our operations expanded, and
      our
      net proceeds from loan and bank notes was only $13.6 million for the nine months
      ended September 30, 2008, which is $2.4 million less than the net proceeds
      from
      loans and banks notes of $16 million for the nine months ended September 30,
      2007.





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 and thereafter
      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 and
      thereafter, in addition to the possibility of conducting debt and equity
      financings. 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.





**Item
      3. Quantitative and Qualitative Discloses About Market Risk**




***Interest
      Rate Risk***





We
      may
      face some risk from potential fluctuations in interest rates, although our
      debt
      obligations are primarily short-term in nature, but some bank loans have
      variable rates. If interest rates have great fluctuations, our financing cost
      may be significantly affected.





***Foreign
      Currency Risk***





Substantially
      all of our operations are conducted in the PRC and our primary operational
      currency in Chinese Renminbi (“RMB”). As a result, currently the effect of the
      fluctuations of RMB exchange rates only has minimum impact on our business
      operations, but will be increasingly material as we introduce our products
      widely into new international markets. Substantially all of our revenues and
      expenses are denominated in RMB. However, we use the United States dollar for
      financial reporting purposes. Conversion of RMB into foreign currencies is
      regulated by the People’s Bank of China through a unified floating exchange rate
      system. Although the PRC government has stated its intention to support the
      value of the RMB, there can be no assurance that such exchange rate will not
      again become volatile or that the RMB will not devalue significantly against
      the
      U.S. dollar. Exchange rate fluctuations may adversely affect the value, in
      U.S.
      dollar terms, of our net assets and income derived from our operations in the
      PRC.





***Country
      Risk***





The
      substantial portion of our assets and operations are located and conducted
      in
      China. While the PRC economy has experienced significant growth in the past
      twenty years, growth has been uneven, both geographically and among various
      sectors of the economy. The Chinese government has implemented various measures
      to encourage economic growth and guide the allocation of resources. Some of
      these measures benefit the overall economy of China, but may also have a
      negative effect on us. For example, our operating results and financial
      condition may be adversely affected by government control over capital
      investments or changes in tax regulations applicable to us. If there are any
      changes in any policies by the Chinese government and our business is negatively
      affected as a result, then our financial results, including our ability to
      generate revenues and profits, will also be negatively affected.





**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 us in the reports that we file 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.




32




As
      of the
      end of the period covered by this report, we conducted an evaluation, under
      the
      supervision and with the participation of our Chief Executive Officer (CEO)
      and
      our Chief Financial Officer (CFO), 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 CEO and CFO concluded that the Company’s disclosure
      controls and procedures had significant deficiencies that caused our controls
      and procedures to be ineffective.





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
      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 is 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. 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, as more fully describe in Note 6 to
      the
      financial statements contained in this Quarterly Report on Form
      10-Q.





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, as more
      fully describe in Note 22 to the financial statements contained in this
      Quarterly Report on Form 10-Q. 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.




33





We
      have
      also since taken steps to improve the process designed to prevent such loans
      to
      our directors, officers or related entities by engaging Protiviti Inc., a third
      party consulting firm with significant experience in implementing Section 402
      preventative measures and controls and procedures, to ensure that future Section
      402 violations do not occur. 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, the internal auditors, the outside auditors and other appropriate
      parties, as applicable, before 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. Our
      Amended and Restated Audit Committee Charter and Amended and Restated Code
      of
      Business Conduct and Ethics are attached as Exhibits 99.1 and 99.2 to this
      Quarterly Report on Form 10-Q.





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 improve 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 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 engage outside consultants
      to assist us in assessing and improving our internal controls and procedures
      when necessary.





**Changes
      in Internal Control over Financial Reporting**





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 on July 25, 2008, which occurred
      after the end of the period covered by this report, the internal control over
      financial reporting utilized by NIVS BVI prior to the Share Exchange became
      the
      internal control over financial reporting of our company. Following the Share
      Exchange the sole business conducted by our company became the business
      conducted by NIVS BVI, and we appointed new officers and directors.





Based
      on
      the evaluation of our management as required by paragraph (d) of Rule 13a-15
      or
      15d-15 of the Exchange Act, and other than as stated in this Item 4, there
      were
      no changes in our internal control over financial reporting that occurred during
      the third quarter of the fiscal year that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.





**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. Except as set forth below, there have been no material revisions to
      the
“Risk Factors” as set forth in our Quarterly Report on Form 10-Q filed with the
      Securities and Exchange Commission on August 19, 2008.




34





**Adverse
      capital and credit market conditions may significantly affect our ability to
      meet liquidity needs, access to capital and cost of
      capital.**





The
      capital and credit markets have been experiencing extreme volatility and
      disruption for more than twelve months. In recent weeks, the volatility and
      disruption have reached unprecedented levels. In some cases, the markets have
      exerted downward pressure on availability of liquidity and credit capacity
      for
      certain issuers. We have historically relied on credit to fund our business
      and
      we need liquidity to pay our operating expenses. Without sufficient liquidity,
      we will be forced to curtail our operations, and our business will suffer.
      Disruptions, uncertainty or volatility in the capital and credit markets may
      also limit our access to capital required to operate our business. Such market
      conditions may limit our ability to replace, in a timely manner, maturing
      liabilities and access the capital necessary to operate and grow our business.
      As such, we may be forced to delay raising capital or bear an unattractive
      cost
      of capital which could decrease our profitability and significantly reduce
      our
      financial flexibility. Our results of operations, financial condition, cash
      flows and capital position could be materially adversely affected by disruptions
      in the financial markets.





**The
      ability of our Chinese operating subsidiaries to pay dividends may be restricted
      due to foreign exchange control regulations of China.**





The
      ability of our Chinese operating subsidiaries to pay dividends may be restricted
      due to the foreign exchange control policies and availability of cash balance
      of
      the Chinese operating subsidiaries. Because substantially all of our operations
      are conducted in China and a substantial majority of our revenues are generated
      in China, a majority of our 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, we may be unable to distribute any dividends outside
      of China due to PRC exchange control regulations that restrict our ability
      to
      convert RMB into US Dollars. Accordingly, we may not be able to access NIVS
      PRC’s funds which may not be readily available to us to satisfy obligations
      which have been incurred outside the PRC, which could adversely affect our
      business and prospects or our ability to meet our cash obligations.





**If
      we fail to maintain effective internal controls over financial reporting, the
      price of our common stock may be adversely affected.**





We
      are
      required to establish and maintain appropriate internal controls over financial
      reporting. Failure to establish those controls, or any failure of those controls
      once established, could adversely impact our public disclosures regarding our
      business, financial condition or results of operations. Any failure of these
      controls could also prevent us from maintaining accurate accounting records
      and
      discovering accounting errors and financial frauds. Rules adopted by the SEC
      pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual
      assessment of our internal control over financial reporting, and attestation
      of
      this assessment by our independent registered public accountants. The SEC
      extended the compliance dates for non-accelerated filers, as defined by the
      SEC.
      Accordingly, we believe that the annual assessment of our internal controls
      requirement will first apply to our annual report for the 2008 fiscal year
      and
      the attestation requirement of management’s assessment by our independent
      registered public accountants will first apply to our annual report for the
      2009
      fiscal year. The standards that must be met for management to assess the
      internal control over financial reporting as effective are new and complex,
      and
      require significant documentation, testing and possible remediation to meet
      the
      detailed standards. 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.
      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 and related
      parties in violation of Section 402 of the Sarbanes-Oxley Act of 2002. We may
      encounter additional problems or delays in completing activities necessary
      to
      improve our internal control over financial reporting. In addition, the
      attestation process by our independent registered public accountants is new
      and
      we may encounter problems or delays in completing the implementation of any
      requested improvements and receiving an attestation of our assessment by our
      independent registered public accountants. If we cannot assess our internal
      control over financial reporting as effective, or our independent registered
      public accountants are unable to provide an unqualified attestation report
      on
      such assessment, investor confidence and share value may be negatively
      impacted.





In
      addition, management’s assessment of internal controls over financial reporting
      may identify weaknesses and conditions that need to be addressed in our internal
      controls over financial reporting or other matters that may raise concerns
      for
      investors. Any actual or perceived weaknesses and conditions that need to be
      addressed in our internal control over financial reporting, disclosure of
      management’s assessment of our internal controls over financial reporting, or
      disclosure of our public accounting firm’s attestation to or report on
      management’s assessment of our internal controls over financial reporting may
      have an adverse impact on the price of our common stock.





**We
      incurred an expense charge of $765,000 in connection with the issuance of
      425,000 shares of common stock that we issued in connection with an agreement
      for investor relations services.**





We
      entered into a two-year consulting agreement with Nascent Value LLC (“Nascent”)
      pursuant to which we issued 425,000 shares of our common stock to Nascent.
      In
      connection with the issuance of the shares of common stock, we recognized a
      charge to stock compensation in the third quarter of 2008 in the amount of
      $765,000, which is derived from valuing each share at $1.80, the price at which
      shares of our common stock were sold in the Private Placement. The expense
      had a
      negative effect on our results of operations and we may not realize a benefit
      from the investor relations services that is comparable to such negative effect.
      As a result, our operations may suffer and our stock price may
      decline.




35





**We
      provided loans to certain entities owned and controlled by our chief executive
      officer in violation of Section 402 of the Sarbanes-Oxley Act of 2002 and we
      and/or our chief executive officer could become subject to criminal, civil
      or
      administrative sanctions, penalties, or investigations and may also face
      potential private securities litigation.**





Section
      402 of the Sarbanes-Oxley Act of 2002 ("Section 402") prohibits us from directly
      or indirectly, including through any subsidiary, extending or maintaining
      credit, arranging for the extension of credit, or renewing an extension of
      credit, in the form of a personal loan to or for any of our directors or
      executive officers. 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.





It
      was
      intended that all loans from the Company to the entities owned by our CEO and
      related parties be repaid prior to the closing of the Share Exchange, and no
      further loans would be made after the closing of the Share Exchange. In November
      2008, it was discovered that the loans to entities owned by our CEO and related
      parties continued after the closing of the Share Exchange, as more fully
      describe in Note 6 to the financial statements contained in this Quarterly
      Report on Form 10-Q. Although we have attempted to take remedial steps to
      address the violation of Section 402 by requiring immediate and full repayment
      of all outstanding loan balances, the violation of Section 402 may cause
      governmental authorities, such as the United States Securities and Exchange
      Commission, to subject us to criminal, civil, or administrative sanctions,
      penalties, or investigations, which may not be resolved favorably and will
      require significant management time and attention, and we could incur costs
      which could materially and negatively affect our business, results of operations
      and cash flows. There are no assurances that an investigation or litigation
      will
      not commence, and if commenced, that such investigation or litigation will
      result in a favorable outcome for us. Similarly, private parties may also
      initiate civil litigation against us for such violations.





**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**




Not
      applicable.




**Item
      5. Other Information**




On
      November 28, 2008, the Company and its subsidiaries entered into a Debt
      Repayment and Set-Off Agreement (the “Agreement”) with Tianfu Li, the Company’s
      Chief Executive Officer and Chairman of the Board; 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”). Each of the Related Companies are owned and/or
      controlled by Mr. Li. The purpose of the agreement was to confirm repayment
      of
      all loan amounts that were due to (from) the Company by (to) the Related
      Companies.





As
      described in the Agreement, the Company and its subsidiaries (collectively,
      the
“NIVS Group”) had outstanding loan amounts of US$9.1 million owed to Mr. Li (the
“Li Debt”) and $568,063 owed to NIVS Investment (SZ) Co., Ltd. (the “NIVS
      Investment Debt”), and Mr. Li, through the Related Companies, had an aggregate
      outstanding loan amount of US$1,878,101 owed to the NIVS Group (the “Related
      Companies’ Debt”). Pursuant to the Agreement, the Related Companies’ Debt is
      repaid and/or set off in full against the NIVS Investment Debt, in totality,
      and
      the Li Debt, partially, such that, as a result of the transactions
      contemplated by the Agreement, the Related Companies’ Debt is no longer
      outstanding, the NIVS Investment Debt was reduced to zero, and neither Mr.
      Li
      nor any of the Related Companies owe the NIVS Group any loan amount.




36





Furthermore,
      pursuant to the Agreement, a portion of the Li Debt is set off, such that the
      Li
      Debt remaining after deducting the total amount of the Related Companies’ Debt
      repaid via the set-off against the NIVS Investment Debt, in totality, and the
      Li
      Debt, partially (the “Repayment Amount”) is equal to an aggregate amount of
      US$7.8 million (the “Remaining Debt”). As a result of the transactions
      contemplated by the Agreement, the Repayment Amount was repaid and the NIVS
      Group does not owe any loan amount to Mr. Li or any of the Related Companies
      other than the Remaining Debt.





The
      Agreement also contains an acknowledgement by the parties to the Agreement
      that
      there are no remaining debt obligations owed to the NIVS Group, 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 NIVS Group to such persons or entities in
      the
      future.





On
      November 28, 2008, in an attempt to strengthen our internal controls and prevent
      the occurrence of further loans from us to any officer or director of our
      company, we amended our code of business conduct and ethics to emphasize that
      our management, outside counsel and other appropriate parties should be
      consulted prior to any proposed loan, advance of funds, transfer of funds,
      creation of debt or other liability, or similar transaction with a related
      party, including any entity in which one of our directors or executive officers
      has a direct or indirect interest, and that no such transaction shall be
      permitted to occur without prior written approval and authorization by the
      Audit
      Committee. We similarly amended and restated our Audit Committee charter to
      reflect the foregoing. Our Amended and Restated Audit Committee Charter and
      Amended and Restated Code of Business Conduct and Ethics are attached as
      Exhibits 99.1 and 99.2 to this Quarterly Report on Form 10-Q.






**Item
      6. Exhibits**




(a)  Exhibits




**Exhibit**
              **Number**
            
            **Description of Document**31.1
            
            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 the 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.*99.1
            
            Amended
                and Restated Audit Committee Charter99.2
            
            Amended
                and Restated Code of Business Conduct and
                Ethics





*
              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.
  37




**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:
                December 3, 2008
            /s/
            Tianfu
                LiBy:
            Tianfu
                LiIts:
            Chairman
                of the Board and Chief Executive
                Officer





38