UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




Form 10-Q




x
            
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the Quarterly Period Ended March 31, 2009ORo
            
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934




For
the transition period
from            to




Commission
File No. 000-52933




NIVS
IntelliMedia Technology Group, Inc.


(Exact
name of Registrant as specified in its charter)




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





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


(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)





86-752-3125862


(COMPANY’S
TELEPHONE NUMBER, INCLUDING AREA CODE)





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




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




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




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















NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC.




FORM 10-Q




For
the Quarterly Period Ended March 31, 2009




INDEX




PagePart I
                  
                  Financial
      InformationItem
      1.
                  Financial
      Statements
                  1a)
                  Condensed
      Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and December
      31, 2008
                  1b)
                  Condensed
      Consolidated Statements of Operations for the Three Months Ended March 31,
      2009 and 2008 (Unaudited)
                  2c)
                  Condensed
      Consolidated Statements of Changes in Equity and Comprehensive Income
      For The Three Months Ended March 31, 2009
                  3d)
                  Condensed
      Consolidated Statements of Cash Flows for the Three Months Ended March 31,
      2009 and 2008 (Unaudited)
                  4e)
                  Notes
      to Consolidated Financial Statements (Unaudited)
                  5Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  29Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  36Item
      4.
                  Controls
      and Procedures
                  36Part II
                  
                  Other
      InformationItem
      1.
                  Legal
      Proceedings
                  38Item 1A.
                  Risk
      Factors
                  38Item
      2.
                  Unregistered
      Sale of Equity Securities and Use of Proceeds
                  38Item
      3.
                  Default
      Upon Senior Securities
                  38Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  38Item
      5.
                  Other
      Information
                  39Item
      6.
                  Exhibits
                  39Signatures
                  40





Part I.
Financial Information




ITEM
1.                 FINANCIAL
STATEMENTS


NIVS
IntelliMedia Technology Group, Inc. and Subsidiaries
 Condensed
Consolidated Balance Sheets
 (In US
Dollars)
 
 March
      31,
                                
                                
                                December
      31,2009
                                
                                
                                2008(Unaudited)AssetsCurrent
      AssetsCash
      and cash equivalents
                                
                                $
                                2,181,215
                                
                                
                                $
                                461,504Short-term
      investment, marketable securities
                                
                                
                                11,021
                                
                                
                                
                                -Trade
      receivables, net (Note 3)
                                
                                
                                18,607,892
                                
                                
                                
                                20,364,356VAT
      refundable
                                
                                
                                154,538
                                
                                
                                
                                1,094,090Inventories,
      net (Note 5)
                                
                                
                                16,756,860
                                
                                
                                
                                11,279,832Restricted
      cash (Note 10)
                                
                                
                                12,731,570
                                
                                
                                
                                11,681,595Prepaid
      expenses and deposits
                                
                                
                                356,462
                                
                                
                                
                                81,690Total
      current assets
                                
                                
                                50,799,558
                                
                                
                                
                                44,963,067Property
      and equipment, net (Note 6)
                                
                                
                                57,765,279
                                
                                
                                
                                56,331,487Advances
      to suppliers (Note 4)
                                
                                
                                11,957,095
                                
                                
                                
                                15,286,028Intangible
      assets, net (Note 7)
                                
                                
                                2,331,228
                                
                                
                                
                                2,343,383Total
      Assets
                                
                                $
                                122,853,160
                                
                                
                                $
                                118,923,965Liabilities
      and Shareholders' EquityCurrent
      LiabilitiesAccounts
      payable - trade
                                
                                $
                                2,317,269
                                
                                
                                $
                                2,020,363Customer
      deposit (Note 8)
                                
                                
                                188,077
                                
                                
                                
                                1,393,171Accrued
      liabilities and other payable
                                
                                
                                1,119,821
                                
                                
                                
                                1,441,922Various
      taxes payable
                                
                                
                                1,869,777
                                
                                
                                
                                470,860Short-term
      loans (Note 9)
                                
                                
                                34,982,857
                                
                                
                                
                                35,871,715Wages
      payable
                                
                                
                                449,729
                                
                                
                                
                                800,744Bank
      notes payable (Note 10)
                                
                                
                                20,166,697
                                
                                
                                
                                18,849,201Corporate
      tax payable
                                
                                
                                3,055,105
                                
                                
                                
                                2,744,518Total
      current liabilities
                                
                                
                                64,149,332
                                
                                
                                
                                63,592,494Due
      to shareholder (Note 11)
                                
                                
                                -
                                
                                
                                
                                7,842,780Total
      liabilities
                                
                                
                                64,149,332
                                
                                
                                
                                71,435,274EquityNIVS
      IntelliMedia Technology Group, Inc.'s shareholder equityPreferred
      stock, $0.0001 par value, 10,000,000 sharesauthorized,
      0 shares outstanding at March 31, 2009and
      December 31, 2008 (Note 1)
                                
                                
                                -
                                
                                
                                
                                -Common
      stock, $0.0001 par value, 100,000,000 sharesauthorized,
      40,592,847 and 36,855,714 shares issued and outstandingat
      March 31, 2009 and December 31, 2008, respectively (Note
1)
                                
                                
                                4,059
                                
                                
                                
                                3,686Additional
      paid-in capital
                                
                                
                                21,513,357
                                
                                
                                
                                12,663,513Accumulated
      other comprehensive income
                                
                                
                                3,860,505
                                
                                
                                
                                3,960,012Statutory
      surplus reserve fund (Note 13)
                                
                                
                                3,568,869
                                
                                
                                
                                3,568,869Retained
      earnings (unrestricted)
                                
                                
                                28,561,838
                                
                                
                                
                                26,193,371Due
      from related parties (Note 7)
                                
                                
                                -
                                
                                
                                
                                -Total
      NIVS IntelliMedia Technology Group, Inc. Shareholders'
    Equity
                                
                                
                                57,508,628
                                
                                
                                
                                46,389,451Noncontrolling
      interest
                                
                                
                                1,195,200
                                
                                
                                
                                1,099,240Total
      Equity
                                
                                
                                58,703,828
                                
                                
                                
                                47,488,691Total
      Liabilities & Equity
                                
                                $
                                122,853,160
                                
                                
                                $
                                118,923,965
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  1
 
 NIVS
IntelliMedia Technology Group, Inc. and Subsidiaries
 Condensed
Consolidated Statements of Operations
 (In US
Dollars)
 
 For
      the Three Months EndedMarch 31,2009
                              
                              
                              2008(Unaudited)
                              
                              
                              (Unaudited)Revenue
                              
                              $
                              29,256,728
                              
                              
                              $
                              26,776,321Other
      Sales
                              
                              
                              91,072
                              
                              
                              
                              62,871Cost
      of Goods Sold
                              
                              
                              (23,096,780
                              )
                              
                              
                              (20,383,122
                              )Gross
      Profit
                              
                              
                              6,251,020
                              
                              
                              
                              6,456,070Selling
      Expenses
                              
                              
                              1,141,223
                              
                              
                              
                              620,212General
      and administrativeAmortization
                              
                              
                              17,445
                              
                              
                              
                              16,500Depreciation
                              
                              
                              81,270
                              
                              
                              
                              95,480Bad
      debts
                              
                              
                              -
                              
                              
                              
                              452,301Others
      general and administrative (Note 12)
                              
                              
                              1,142,915
                              
                              
                              
                              761,397Total
      general and administrative
                              
                              
                              1,241,630
                              
                              
                              
                              1,325,678Research
      and development
                              
                              
                              572,535
                              
                              
                              
                              154,772Total
      operating expenses
                              
                              
                              2,955,388
                              
                              
                              
                              2,100,662Income
      from operations
                              
                              
                              3,295,632
                              
                              
                              
                              4,355,408Other
      income (expenses)Interest
      expense
                              
                              
                              (562,063
                              )
                              
                              
                              (531,502
                              )Imputed
      interest
                              
                              
                              -
                              
                              
                              
                              (190,139
                              )Sundry
      income (expense), net
                              
                              
                              9,981
                              
                              
                              
                              15,733Total
      other income (expenses)
                              
                              
                              (552,082
                              )
                              
                              
                              (705,908
                              )Income
      before noncontrolling interest and income taxes
                              
                              
                              2,743,550
                              
                              
                              
                              3,649,500Income
      taxes (Note 14)
                              
                              
                              (313,955
                              )
                              
                              
                              (505,513
                              )Net
      income
                              
                              
                              2,429,595
                              
                              
                              
                              3,143,987Net
      income attributable to the noncontrolling interest
                              
                              
                              (61,128
                              )
                              
                              
                              (84,073
                              )Net
      income attributable NIVS IntelliMedia Technology Group,
    Inc.
                              
                              $
                              2,368,467
                              
                              
                              $
                              3,059,914Basic
      earnings per share - net income attributable to NIVS's common
      shareholders
                              
                              $
                              0.06
                              
                              
                              $
                              0.11Weighed-average
      shares outstanding, Basic
                              
                              
                              37,391,115
                              
                              
                              
                              27,546,667Diluted
      earnings per share - net income attributable to NIVS's common
      shareholders
                              
                              $
                              0.06
                              
                              
                              $
                              0.11Weighed-average
      shares outstanding, Diluted
                              
                              
                              37,391,115
                              
                              
                              
                              27,546,667
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  2
 
 NIVS
IntelliMedia Technology Group, Inc. and Subsidiaries
 Condensed
Consolidated Statements of Changes in Equity and Comprehensive
Income
 For The Three Months Ended March 31, 2009
 (In US
Dollars)
  
 NIVS
      IntelliMedia Technology Group, Inc. and
      SubsidiariesAccumulatedAdditional
                            
                            
                            Statutory
                            
                            
                            Other
                            
                            
                            Retained
                            
                            
                            
                            
                            
                            TotalCommon
      Stock
                            
                            
                            Paid-in
                            
                            
                            Reserve
                            
                            
                            Comprehensive
                            
                            
                            Earnings
                            
                            
                            Due
      from
                            
                            
                            Stockholders'
                            
                            
                            Noncontrolling
                            
                            
                            Comprehensive
                            
                            
                            TotalShares
                            
                            
                            Amount
                            
                            
                            Capital
                            
                            
                            Fund
                            
                            
                            Income
                            
                            
                            (Unrestricted)
                            
                            
                            Related
      Parties
                            
                            
                            Equity
                            
                            
                            Interset
                            
                            
                            Income
                            
                            
                            EquityBalance
      at December 31, 2008
                            
                            
                            36,855,714
                            
                            
                            $
                            3,686
                            
                            
                            $
                            12,663,513
                            
                            
                            $
                            3,568,869
                            
                            
                            $
                            3,960,012
                            
                            
                            $
                            26,193,371
                            
                            
                            $
                            -
                            
                            
                            $
                            46,389,451
                            
                            
                            $
                            1,099,240
                            
                            
                            
                            
                            
                            $
                            47,488,691Sales of
      550,000 shares at $3.50 in IPO, net of Issuance cost of
      $916,509
                            
                            
                            550,000
                            
                            
                            
                            55
                            
                            
                            
                            1,008,436
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,008,491
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            1,008,491Issuance
      of 2,240,493 shares at $3.50 in exchange for "Li
      Debt"
                            
                            
                            2,240,493
                            
                            
                            
                            224
                            
                            
                            
                            7,841,502
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            7,841,726
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            7,841,726Issuance
      of 946,640 shares upon exercise of 946,667 cashless
    warrants
                            
                            
                            946,640
                            
                            
                            
                            94
                            
                            
                            
                            (94
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            -Capital contributed
      from noncontrolling interest
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            37,383
                            
                            
                            
                            
                            
                            
                            37,383Foreign
      currency translation adjustment
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            (99,507
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (99,507
                            )
                            
                            
                            (2,551
                            )
                            
                            $
                            (102,058
                            )
                            
                            
                            (102,058
                            )Net
      income for the three months ended March 31, 2009
    (Unaudited)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,368,467
                            
                            
                            
                            -
                            
                            
                            
                            2,368,467
                            
                            
                            
                            61,128
                            
                            
                            
                            2,429,595
                            
                            
                            
                            2,429,595Comprehensive
      Income
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            $
                            2,327,537
                            
                            
                            
                            -Due
      from related parties
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            -Balance
      at March 31, 2009
                            
                            
                            40,592,847
                            
                            
                            $
                            4,059
                            
                            
                            $
                            21,513,357
                            
                            
                            $
                            3,568,869
                            
                            
                            $
                            3,860,505
                            
                            
                            $
                            28,561,838
                            
                            
                            $
                            -
                            
                            
                            $
                            57,508,628
                            
                            
                            $
                            1,195,200
                            
                            
                            
                            
                            
                            
                            $
                            58,703,828
  For The Three Months Ended March 31,2009
                              
                              
                              2008Net
      income
                              
                              $
                              2,429,595
                              
                              
                              $
                              3,143,987Other
      comprehensive income, net of tax:Unrealized
      gain (loss) on foreign currency translation, net of tax
                              
                              
                              (99,507
                              )
                              
                              
                              1,249,836Total
      other comprehensive income, net of tax
                              
                              
                              2,330,088
                              
                              
                              
                              4,393,823Comprehensive
      incomeComprehensive
      income attributable to the noncontrolling interest
                              
                              
                              (2,551
                              )
                              
                              
                              32,047Comprehensive
      income attributable to NIVS's common shareholders
                              
                              $
                              2,327,537
                              
                              
                              $
                              4,425,870
  The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  3
 
 NIVS
      IntelliMedia Technology Group, Inc. and SubsidiariesCondensed
      Consolidated Statements of Cash Flows(In
      US Dollars)
 
 For
      The Three Months EndedMarch 31,2009
                                                          
                                                          
                                                          2008(Unaudited)
                                                          
                                                          
                                                          (Unaudited)Cash
      Flows From Operating ActivitiesNet
      Income
                                                          
                                                          $
                                                          2,368,467
                                                          
                                                          
                                                          $
                                                          3,250,053Adjustments
      to reconcile net income to net cash provided by operating
      activities:Noncontrolling
      interest
                                                          
                                                          
                                                          61,128
                                                          
                                                          
                                                          
                                                          84,073Imputed
      interest
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          190,139Bad
      debts
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          452,301Depreciation
                                                          
                                                          
                                                          1,420,781
                                                          
                                                          
                                                          
                                                          1,151,053Amortization
                                                          
                                                          
                                                          17,445
                                                          
                                                          
                                                          
                                                          16,500Changes
      in operating assets and liabilities:Account
      receivable-trade
                                                          
                                                          
                                                          1,756,464
                                                          
                                                          
                                                          
                                                          (5,004,572
                                                          )Advance
      to suppliers for purchases
                                                          
                                                          
                                                          3,328,933
                                                          
                                                          
                                                          
                                                          261,132Prepaid
      expenses and deposits
                                                          
                                                          
                                                          (274,772
                                                          )
                                                          
                                                          
                                                          (43,871
                                                          )Inventories,
      net
                                                          
                                                          
                                                          (5,477,028
                                                          )
                                                          
                                                          
                                                          4,516,528Restricted
      cash
                                                          
                                                          
                                                          (1,049,975
                                                          )
                                                          
                                                          
                                                          (2,301,293
                                                          )VAT
      refundable
                                                          
                                                          
                                                          939,552
                                                          
                                                          
                                                          
                                                          -Accounts
      payable and accrued liabilities
                                                          
                                                          
                                                          (1,230,289
                                                          )
                                                          
                                                          
                                                          (3,824,385
                                                          )Various
      taxes payable
                                                          
                                                          
                                                          1,398,917
                                                          
                                                          
                                                          
                                                          892,713Wages
      payable
                                                          
                                                          
                                                          (351,015
                                                          )
                                                          
                                                          
                                                          (251,474
                                                          )Corporate
      tax payable
                                                          
                                                          
                                                          310,587
                                                          
                                                          
                                                          
                                                          588,459Net
      cash provided by operating activities
                                                          
                                                          
                                                          3,219,195
                                                          
                                                          
                                                          
                                                          (22,644
                                                          )Cash
      Flows From Investing ActivitiesPurchases
      of property and equipment
                                                          
                                                          
                                                          (2,919,384
                                                          )
                                                          
                                                          
                                                          (2,805,059
                                                          )Purchases
      of intangible assets
                                                          
                                                          
                                                          (8,937
                                                          )
                                                          
                                                          
                                                          -Short-term
      investment, marketable securities
                                                          
                                                          
                                                          (11,021
                                                          )
                                                          
                                                          
                                                          -Net
      cash used in investing activities
                                                          
                                                          
                                                          (2,939,342
                                                          )
                                                          
                                                          
                                                          (2,805,059
                                                          )Cash
      Flows From Financing ActivitiesIncrease
      (decrease) in loans payable
                                                          
                                                          
                                                          (888,858
                                                          )
                                                          
                                                          
                                                          (2,183,908
                                                          )Increase
      (decrease) in notes payable
                                                          
                                                          
                                                          1,317,496
                                                          
                                                          
                                                          
                                                          5,613,234Net
      proceeds of share issuance
                                                          
                                                          
                                                          1,008,436
                                                          
                                                          
                                                          
                                                          --
                                                          
                                                          
                                                          
                                                          (827,287
                                                          )Due
      from related parties
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          472,668Net
      cash provided by (used in) financing activities
                                                          
                                                          
                                                          1,437,074
                                                          
                                                          
                                                          
                                                          3,074,707Effect
      of exchange rate changes on cash
                                                          
                                                          
                                                          4,784
                                                          
                                                          
                                                          
                                                          321,465Net
      increase in cash and cash equivalents
                                                          
                                                          
                                                          1,719,711
                                                          
                                                          
                                                          
                                                          568,468Cash
      and cash equivalents, beginning of period
                                                          
                                                          
                                                          461,504
                                                          
                                                          
                                                          
                                                          1,438,651Cash
      and cash equivalents, end of period
                                                          
                                                          $
                                                          2,181,215
                                                          
                                                          
                                                          $
                                                          2,007,120Supplemental
      disclosure information:Interest
      expense paid
                                                          
                                                          $
                                                          562,063
                                                          
                                                          
                                                          $
                                                          531,502Income
      taxes paid
                                                          
                                                          $
                                                          313,955
                                                          
                                                          
                                                          $
                                                          505,513Supplemental
      Financing Activities:Exchange
      of Li debt for common shares
                                                          
                                                          $
                                                          (7,841,726
                                                          )Issuance
      of shares for warrant exercise
                                                          
                                                          $
                                                          94
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  4
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
 
 NIVS
IntelliMedia Technology Group, Inc. (“NIVS USA”) was incorporated in the State
of Delaware on December 7, 2006. NIVS USA was originally organized as a “blank
check” shell company to investigate and acquire a target company or business
seeking the perceived advantages of being a publicly held corporation. On July
25, 2008, NIVS USA (i) closed a share exchange transaction pursuant to which it
became the 100% parent of Niveous Holding Company Limited (“Niveous”) (ii)
assumed the operations of Niveous and its subsidiaries, and (iii) changed its
name from SRKP 19, Inc. to NIVS IntelliMedia Technology Group, Inc.
 
 Because
the shares issued by the NIVS USA to the shareholders of Niveous and their
designees in the aforementioned transaction represented a controlling interest,
the transaction has been accounted for as a recapitalization or reverse merger
with Niveous being considered the acquirer. The accompanying consolidated
financial statements have been restated on a retroactive basis to present the
capital structure of Niveous as though it were the reporting
entity.
 
 Niveous
was incorporated in British Virgin Islands (BVI) on October 31,
2003.  As at March 31, 2009, Niveous had 50,000 capital shares
authorized with $1.00 par value and 10,000 shares issued and
outstanding.
 
 In April,
2004, Niveous acquired 97.5% of ownership of NIVS (HZ) Audio & Video Tech
Company Limited (“NIVS PRC”) from its original shareholders.  NIVS PRC
is the main operating company located in Huizhou, PRC.  It engages in
research, development, production, marketing and sales of audio & video
electronic equipment for the domestic and international markets.  As
at March 31, 2009, Niveous and Mr. Li Tianfu hold 97.5% and 2.5% of total
interests of NIVS PRC, respectively.
 
 In April,
2005, Niveous acquired 100% of ownership of NIVS International (H.K.) Limited
(“NIVS HK”) under an ownership transfer agreement.  NIVS HK is a
holding company incorporated in November 2004 in Hong Kong, PRC with the
original sole shareholder Mr. Li Tianfu.  Pursuant to the transfer
agreement, Niveous paid Mr. Li Tianfu 1M HKD for the ownership
transfer.
 
 In
February 2006, NIVS PRC established a branch company NIVS (HZ) Audio & Video
Tech Company Limited Shenzhen Branch (“NIVS Shenzhen”) located in Shenzhen, PRC.
NIVS Shenzhen is currently performing sales and marketing for the Company’s
products.
 
 In
November 2007, Niveous entered an ownership transfer agreement to transfer its
whole ownership of NIVS PRC to NIVS HK.  After the restructuring, NIVS
PRC became a subsidiary of NIVS HK.  As at March 31, 2009, NIVS HK and
Mr. Li Tianfu held 97.5% and 2.5% of total interests of NIVS PRC,
respectively.
 
 In June
2008, NIVS HK entered an ownership transfer agreement to transfer its whole
ownership of NIVS PRC to Niveous.  Pursuant to the agreement, Niveous
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”), and
upon the closing of the Share Exchange on July 25, 2008, SRKP 19 issued
an aggregate of 27,546,667shares of its common stock to the shareholders of
Niveous and their designees in exchange for all of the issued and outstanding
securities of Niveous. Immediately after the closing of the Share Exchange, SRKP
19 changed its corporate name from “SRKP 19, Inc.” to “NIVS IntelliMedia
Technology Group, Inc.” For accounting
purposes, the Share Exchange was treated as a reverse
acquisition.
  5
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
1. DESCRIPTION OF BUSINESS AND ORGANIZATION (CONTINUED)
 
 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. filed
a registration statement covering the common stock sold in the Private Placement
that was declared effective by the Securities and Exchange Commission ("SEC") in
March 2009.
 
 On
December 24, 2008, NIVS USA entered into an agreement with Mr. Li pursuant to
which the outstanding debt that it and its subsidiaries owed to Mr. Li would be
converted into shares of NIVS USA common stock.  According to the
agreement, the shares would be issued upon the closing of its public
offering.  The public offering closed on March 18, 2009 and NIVS USA
issued 2,240,493 shares of common stock to Mr. Li, which is equal to the debt
amount of approximately $7.8 million divided by the offering price of public
offering, which was $3.50 per share.  As a result of the conversion of
the debt into equity, the debt is no longer outstanding, and NIVS USA and its
subsidiaries do not have any outstanding debt owed to Mr. Li.  As a
result of the shares issued in the debt conversion, the number of shares that
Mr. Li beneficially owns increased from 12,204,667 shares to 14,445,160
shares.
 
 In March
2009, NIVS USA completed a public offering consisting of 550,000 shares of
common stock. WestPark Capital, Inc. acted as underwriter in the public
offering.  Shares of common stock were sold to the public at a price
of $3.50 per share, for gross proceeds of approximately $1.9
million.  Compensation for WestPark Capital’s services included
discounts and commissions of $192,500, a $57,750 non-accountable expense
allowance, roadshow expenses of approximately of $10,000, and legal counsel fees
(excluding blue sky fees) of $40,000.  WestPark Capital also received
a warrant to purchase 55,000 shares of common stock at an exercise price of
$4.20 per share.  The warrant, which has a term of five years, is not
exercisable until at least one-year from the date of
issuance.   The warrant also carries registration
rights.
 
 NIVS USA
and its subsidiaries – Niveous, NIVS HK, NIVS PRC and NIVS Shenzhen shall be
collectively referred throughout as the “Company”.
 
 To
summarize the paragraphs above, the organization and ownership structure of the
Company is currently as follows:
  
  6
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a.
                    Basis
      of preparation
 
 The
consolidated financial statements have been prepared in accordance with US GAAP
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation SX. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company for the
year ended December 31, 2008 and notes thereto contained in the Report on Form
10-K of the Company as filed with the United States Securities and Exchange
Commission (the “SEC”). Interim results are not necessarily indicative of the
results for the full year.
 
 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 March 31, 2009 and
December 31, 2008, and the results of operations and cash flows for the three
months ended March 31, 2009 and 2008, respectively.
 
 b.
                    Basis
      of consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
subsidiaries.  All significant inter-company transactions have been
eliminated in consolidation.
 
 c.
                    Use
      of estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting year. Because of the use
of estimates inherent in the financial reporting process, actual results could
differ from those estimates.
 
 d.
                    Fair
      values of financial instruments
 
 Statement
of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures About Fair Value of
Financial Instruments,” defines financial instruments and requires fair
value disclosures of those financial instruments. On January 1, 2008, the
Company adopted SFAS No. 157, “Fair Value Measurements,” which defines fair
value, establishes a three-level valuation hierarchy for disclosures of fair
value measurement and enhances disclosures requirements for fair value measures.
Current assets and current liabilities qualified as financial instruments and
management believes their carrying amounts are a reasonable estimate of fair
value because of the short period of time between the origination of such
instruments and their expected realization and if applicable, their current
interest rate is equivalent to interest rates currently
available.  The three levels are defined as follow:
 
 ·
                    Level
      1 — inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.
 ·
                    Level
      2 — inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the assets or liability, either directly or indirectly, for
      substantially the full term of the financial
  instruments.
 ·
                    Level
      3 — inputs to the valuation methodology are unobservable and significant
      to the fair value.
 
 As of the
balance sheet date, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented due to the
short maturities of these instruments and that the interest rates on the
borrowings approximate those that would have been available for loans of similar
remaining maturity and risk profile at respective period-ends. Determining which
category an asset or liability falls within the hierarchy requires significant
judgment. The Company evaluates the hierarchy disclosures each
quarter.
  7
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 e.
                    Cash
      and cash equivalents
 
 Cash and
cash equivalents include cash on hand, demand deposits with banks and liquid
investments with an original maturity of three months or less.
 
 f.
                    Accounts
      receivable
 
 Accounts
receivable are recognized and carried at original invoiced amount less an
allowance for uncollectible accounts, as needed.
 
 The
Company uses the aging method to estimate the valuation allowance for
anticipated uncollectible receivable balances. Under the aging method, bad debts
percentages determined by management based on historical experience as well as
current economic climate are applied to customers’ balances categorized by the
number of months the underlying invoices have remained outstanding. The
valuation allowance balance is adjusted to the amount computed as a result of
the aging method. When facts subsequently become available to indicate that the
amount provided as the allowance was incorrect, an adjustment which classified
as a change in estimate is made.
 
 g.
                    Inventories
 
 Inventories
are stated at the lower of cost, as determined on a weighted average basis, or
market. Costs of inventories include purchase and related costs incurred in
bringing the products to their present location and condition. Market value is
determined by reference to selling prices after the balance sheet date or to
management’s estimates based on prevailing market conditions. The management
writes down the inventories to market value if it is below cost. The management
also regularly evaluates the composition of its inventories to identify
slow-moving and obsolete inventories to determine if valuation allowance is
required.
 
 h.
                    Property
      and equipment
 
 Property
and equipment are initially recognized and recorded at cost. Gains or losses on
disposals are reflected as gain or loss in the period of disposal. The cost of
improvements that extend the life of plant and equipment are capitalized. These
capitalized costs may include structural improvements, equipment and fixtures.
All ordinary repairs and maintenance costs are expensed as
incurred.
 
 Depreciation
for financial reporting purposes is provided using the straight-line method over
the estimated useful lives of the assets:
 
 Building
                      Molds
                      Machinery
      and Equipment
                      Electronic
      Equipment
                    38
      years
                      8
      years
                      10
      years
                      5
      yearsLeasehold
      Improvements
                    5
      yearsOffice
      and Other Equipment
                    5
      yearsAutomobiles
                    5
      years
 
 i.
                    Intangible
      assets
 
 The
Company’s intangible assets are stated at cost less accumulated amortization and
are comprised of land-use rights and computer software use
rights.  Land-use rights are related to land the Company occupies in
Guangdong Province, PRC and are being amortized on a straight-line basis over a
period of 40 years. Computer software use rights are being amortized on a
straight-line basis over a period of 10 years.
  8
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 j.
                    Impairment
      of long-lived assets
 
 The
Company accounts for impairment of plant and equipment and amortizable
intangible assets in accordance with SFAS No. 144, “Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the
Company to evaluate a long-lived asset for recoverability when there is event or
circumstance that indicate the carrying value of the asset may not be
recoverable. An impairment loss is recognized when the carrying amount of a
long-lived asset or asset group is not recoverable (when carrying amount exceeds
the gross, undiscounted cash flows from use and disposition) and is measured as
the excess of the carrying amount over the asset’s (or asset group’s) fair
value.
 
 k.
                    Comprehensive
      income
 
 The
Company has adopted SFAS No. 130,Reporting Comprehensive
Income, which establishes standards for reporting and displaying comprehensive
income, its components, and accumulated balances in a full-set of
general-purpose financial statements. Accumulated other comprehensive income
represents the accumulated balance of foreign currency translation
adjustments.
 
 l.
                    Revenue
      recognition
 
 The
Company generates revenues from the sales of audio and video electronic products
and subcontracting activities. Sales are recognized when the following four
revenue criteria are met: persuasive evidence of an arrangement exists, delivery
has occurred, the selling price is fixed or determinable, and collectability is
reasonably assured. Sales are presented net of value added tax (VAT). No return
allowance is made as products returns are insignificant based on historical
experience.
  m.
                    Government
      grants
 
 Grants
from the PRC government are recognized at their fair value where there is a
reasonable assurance that the grant will be received and the Company will comply
with all attached conditions. Government grants are recognized as revenues or
gains in the period received and as assets, decreases of liabilities, or
expenses depending on the form of the grants received.
 
 n.
                    Research
      and development costs
 
 Research
and development costs are expensed to operations as incurred.  The
Company spent $572,535 and $154,772, on direct research and development efforts
in the three months ended March 31, 2009 and 2008, respectively.
 
 o.
                    Income
      taxes
 
 The
Company accounts for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes". SFAS No. 109 requires an asset and liability approach for
financial accounting and reporting for income taxes and allows recognition and
measurement of deferred tax assets based upon the likelihood of realization of
tax benefits in future years. Under the asset and liability approach, deferred
taxes are provided for the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. A valuation allowance is provided for
deferred tax assets if it is more likely than not these items will either expire
before the Company is able to realize their benefits, or that future
deductibility is uncertain.
  9
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 p.
                    Foreign
      currency translation
 
 The
functional currency of Niveous and NIVS HK is Hong Kong Dollar (“HKD”). The
Company maintains its financial statements using the functional currency.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transaction.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income (loss) for the respective
periods.
 
 The
functional currency of NIVS PRC and NIVS Shenzhen is the Renminbi (“RMB”), the
PRC’s currency. These two companies maintain their financial statements using
their own functional currency. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency at rates of exchange prevailing at the balance sheet dates.
Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the
dates of the transaction. Exchange gains or losses arising from foreign currency
transactions are included in the determination of net income (loss) for the
respective periods.
 
 For
financial reporting purposes, the financial statements of Niveous and NIVS HK,
which are prepared in HKD, are translated into the Company’s reporting currency,
United States Dollars (“USD”); the financial statements of NIVS PRC and NIVS
Shenzhen, which are prepared in RMB, are translated into the Company’s reporting
currency, USD. Balance sheet accounts are translated using the closing exchange
rate in effect at the balance sheet date and income and expense accounts are
translated using the average exchange rate prevailing during the reporting
period. Adjustments resulting from the translation, if any, are included in
accumulated other comprehensive income (loss) in stockholder’s
equity.
 
 The
exchange rates used for foreign currency translation were as follows (USD$1 =
RMB):
 
 Period Covered
                          
                          Balance Sheet Date Rates
                          
                          
                          Average RatesYear
      ended December 31, 2008
                          
                          
                          6.81710
                          
                          
                          
                          6.93722Three
      months ended March 31, 2009
                          
                          
                          6.82547
                          
                          
                          
                          6.82547Three
      months ended March 31, 2008
                          
                          
                          7.00220
                          
                          
                          
                          7.15461
  The
exchange rates used for foreign currency translation were as follows (USD$1 =
HKD):
 
 Period Covered
                          
                          Balance Sheet Date Rates
                          
                          
                          Average RatesThree
      months ended March 31, 2009
                          
                          
                          7.75014
                          
                          
                          
                          7.75374Three
      months ended March 31, 2008
                          
                          
                          7.77968
                          
                          
                          
                          7.79423
 
 q.
                    Customer
      deposit
 
 The
customer deposits are recorded as liability when the Company receives it and
recognized as revenue after the total amount is paid off upon the delivery of
the products.
  10
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 r.
                    Related
      parties
 
 A party
is considered to be related to the Company if the party directly or indirectly
or through one or more intermediaries, controls, is controlled by, or is under
common control with the Company. Related parties also include principal owners
of the Company, its management, members of the immediate families of principal
owners of the Company and its management and other parties with which the
Company may deal if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully pursuing its own separate
interests. A party which can significantly influence the management or operating
policies of the transacting parties or if it has an ownership interest in one of
the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests is also a related party.
 
 s.
                    Recently
      issued accounting pronouncements
  In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4
amends SFAS 157 and provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value
measurements. This FSP shall be applied prospectively with retrospective
application not permitted. This FSP shall be effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity early adopting this FSP must
also early adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). Additionally,
if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB
28-1) or FSP FAS 115-2 and FAS 124-2, it must also elect to early adopt this
FSP. The Company is currently evaluating this new FSP but do not believe that it
will have a significant impact on the determination or reporting of the
Company’s financial results.
  In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairment” (FSP 115-2/124-2). FSP 115-2/124-2
amends the requirements for the recognition and measurement of
other-than-temporary impairment for debt securities by modifying the
pre-existing “intent and ability” indicator. Under FSP 115-2/124-2, an
other-than-temporary impairment is triggered when there is an intent to sell the
security, it is more likely then not that the security will be required to be
sold before recovery, or the security is not expected to recover the entire
amortized cost basis of the security. Additionally, FSP 115-2/124-2 changes the
presentation of an other-than-temporary impairment in the income statement for
those impairments involving credit losses. The credit loss component will be
recognized in earnings and the remainder of the impairment will be recorded in
other comprehensive income. FSP 115-2/124-2 is effective for the Company
beginning in the second quarter of fiscal year 2009. Upon implementation at the
beginning of the second quarter of 2009, FSP 115-2/124-2 is not expected to have
a significant impact on the Company’ consolidated financial
statements.
 
 In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosure about Fair
Value of Financial Instruments” (“FSP 107-1/APB 28-1”). FSP 107-1/APB 28-1
requires interim disclosures regarding the fair values of financial instruments
that are within the scope of FAS 107, “Disclosures about the Fair Value of
Financial Instruments,” Additionally, FSP 107-1/APB 28-1 requires disclosures of
the methods and significant assumptions used to estimate the fair value of
financial instruments on an interim basis as well as changes in the methods and
significant assumptions from prior periods. FSP 107-1/APB 28-1 does not change
the accounting treatment for these financial instruments and is effective for
the Company beginning in the second quarter of fiscal year
2009.
  11
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 t.
                    Recently
      adopted accounting pronouncements
  In the
first quarter of 2009, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (SFAS No.
141(R)) as mended by FASB staff position FSP 141(R)-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination.” SFAS No. 141(R)
generally requires an entity to recognize the assets acquired, liabilities
assumed, contingencies, and contingent consideration at their fair value on the
acquisition date. In circumstances where the acquisition-date fair value for a
contingency cannot be determined during the measurement period and it is
concluded that it is probable that an asset or liability exists as of the
acquisition date and the amount can be reasonably estimated, a contingency is
recognized as of the acquisition date based on the estimated amount. It further
requires that acquisition related costs be recognized separately from the
acquisition and expensed as incurred, restructuring costs generally be expensed
in periods subsequent to the acquisition date, and changes in accounting for
deferred tax asset valuation allowances and acquired income tax uncertainties
after the measurement period impact income tax expenses. In addition, acquired
in-process research and development is capitalized as an intangibles asset and
amortized over its estimated useful life. SFAS No. 141(R) is applicable to
business combinations on a prospective basis beginning in the first quarter of
2009. The Company does not complete any business combination in the first
quarter of 2009.
  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.
  Effective
January 1, 2009, the Company adopted the provisions of EITF 07-5,"Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”). EITF 07-5 applies to any freestanding financial instruments or embedded
features that have the characteristics of a derivative, as defined by SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities,”
and to any freestanding financial instruments that are potentially settled
in an entity’s own common stock. The adoption of EITF 07-5 was not material to
the Company's financial statements or results of operations.
 
 In 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.
  12
 
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 t.
                    Recently
      adopted accounting pronouncements
(continued)
 
 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.
 
 NOTE
3. TRADE RECEIVABLES, NET
 
 Trade
receivables consist of the following:
 
 March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008Trade
      receivables
                        
                        $
                        21,980,670
                        
                        
                        $
                        23,742,432Allowance
      for doubtful accounts
                        
                        
                        (3,372,778
                        )
                        
                        
                        (3,378,076
                        )Trade
      receivables, net
                        
                        $
                        18,607,892
                        
                        
                        $
                        20,364,356
 
 The
change of the allowance for doubtful debts between the reporting periods, as of
March 31, 2009 and December 31, 2008a is displayed as follows:
 
 March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008Beginning
      balance
                        
                        $
                        (3,378,076
                        )
                        
                        $
                        (728,265
                        )Provision/Reversal
      during the period
                        
                        
                        -
                        
                        
                        
                        (2,531,479
                        )Exchange
      rate effect
                        
                        
                        5,298
                        
                        
                        
                        118,332Ending
      balance
                        
                        $
                        (3,372,778
                        )
                        
                        $
                        (3,378,076
                        )
  13
 NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
4. ADVANCES TO SUPPLIERS
 
 In
accordance with the contracts with the Company’s suppliers, cash is advanced for
material and equipment purchase. The delivery term is usually 30 days. In the
event of a breach of contract, the Company has the following rights and penalty
protection:
 
 The
Company has the right to get back the deposit and charge double interest on the
deposit according to the interest rate during the same period in which the
contract was breached. The Company owns the raw material and equipment acquired
from the suppliers under the agreements. The Company has the legal right to take
possession of it. The Company did not have any contract breaches for the year
ended December 31, 2008 and three months ended March 31, 2009.
 
 For the
three months ended March 31, 2009, three suppliers accounted for more than 10%
of the advances to suppliers and each accounted approximately 12%, 12% and 11%,
respectively. Total purchases of each supplier in 2009 accounted for
approximately, 20%, 7% and 0%, respectively. The supplier with zero purchases as
of March 31, 2009 was the new supplier in 2009 and purchases occurred in April
2009.
 
 For the
fiscal year ended December 31, 2008, four suppliers accounted for more than 10%
of the advances to suppliers and each accounted approximately 24%, 24%, 19% and
12%, respectively. Total purchases of each supplier in 2008 accounted for
approximately, 19%, 0%, 0% and 6%, respectively. Those two suppliers with zero
purchases in 2008 were the main suppliers of raw materials related with the
Company’s IPTV products. The Company made cash advances in November and December
2008 and raw materials were shipped in February 2009.
 
 NOTE
5. INVENTORIES, NET
 
 Inventories
include raw material and finished goods. Finished goods contain direct material,
direct labor and manufacturing overhead and not contain general and
administrative costs. Inventory consists of the following:
 
 March
      31,
                            
                            
                            December
      31,2009
                            
                            
                            2008Raw
      material
                            
                            $
                            6,051,352
                            
                            
                            $
                            10,692,030Finished
      goods
                            
                            
                            10,946,110
                            
                            
                            
                            828,700Reserve
      for obsolete inventory
                            
                            
                            (240,602
                            )
                            
                            
                            (240,898
                            )Inventory,
      net
                            
                            $
                            16,756,860
                            
                            
                            $
                            11,279,832
 
 The
change of the reserve for obsolete inventory as of March 31, 2009 and December
31, 2008 is displayed as follows:
 
 March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008Beginning
      balance
                        
                        $
                        (240,898
                        )
                        
                        $
                        (105,391
                        )Provision/Reversal
      during the period
                        
                        
                        -
                        
                        
                        
                        (131,837
                        )Foreign
      exchange adjustment
                        
                        
                        296
                        
                        
                        
                        (3,670
                        )Ending
      balance
                        
                        $
                        (240,602
                        )
                        
                        $
                        (240,898
                        )
  14
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
6. PROPERTY AND EQUIPMENT, NET
 
 Property
and equipment consist of the following:
 
 March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Building
                  
                  $
                  16,636,340
                  
                  
                  $
                  16,656,779Molds
                  
                  
                  31,326,632
                  
                  
                  
                  28,712,602Machinery
      and Equipments
                  
                  
                  14,434,436
                  
                  
                  
                  14,452,170Electronic,
      office and other equipment
                  
                  
                  2,135,660
                  
                  
                  
                  1,869,063Automobiles
                  
                  
                  1,213,896
                  
                  
                  
                  1,215,387Construction
      in progress
                  
                  
                  1,509,263
                  
                  
                  
                  1,506,717Accumulated
      Depreciation
                  
                  
                  (9,492,957
                  )
                  
                  
                  (8,081,231
                  )Property
      and equipment, net
                  
                  $
                  57,765,279
                  
                  
                  $
                  56,331,487
 
 The
depreciation expenses are $1,420,781, and $1,151,053 in three months ended March
31, 2009 and 2008, respectively, and is comprised of the following:
 
 March
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008Cost
      of sales
                  
                  $
                  1,274,801
                  
                  
                  $
                  1,042,451Selling
      expenses
                  
                  
                  64,710
                  
                  
                  
                  13,122General
      and administrative expenses
                  
                  
                  81,270
                  
                  
                  
                  95,480Total
                  
                  $
                  1,420,781
                  
                  
                  $
                  1,151,053
 
 NOTE
7. INTANGIBLE ASSETS, NET
 
 Intangible
assets consist of the following:
 March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Land
      use rights
                  
                  $
                  2,754,385
                  
                  
                  $
                  2,757,769Computer
      software use rights
                  
                  
                  4,818
                  
                  
                  
                  4,824Trade
      mark
                  
                  
                  38,239
                  
                  
                  
                  29,339Accumulated
      amortization
                  
                  
                  (466,214
                  )
                  
                  
                  (448,549
                  )Intangible
      assets, net
                  
                  $
                  2,331,228
                  
                  
                  $
                  2,343,383
  The
amortization expense is $17,445 and $16,500 in the three months ended March 31,
2009 and 2008, respectively, and are comprised of the following:
 
 March
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008General
      and administrative expense
                  
                  $
                  17,445
                  
                  
                  $
                  16,500
  15
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
8. CUSTOMER DEPOSIT
 
 The
Company requires its customers to pay 30% deposit of the total amount for each
order. The customer deposits are recorded as liability when the Company receives
it and are recognized as revenue after the total amount is paid off upon the
delivery of the products. In its agreement, the Company specifies the delivery
date (usually 30 days after the order is placed) and the liability for breach of
the contract. If the Company cannot fulfill its supply to its customers
according to the contract, the customers have the right to get back their
deposit. If the products do not meet the quality standard or need to be
reworked, the Company is responsible for the rework and certain expenses. The
Company may compensate its customers for their loss if the customers rework or
repack by themselves. If the customers do not pay the balance according to the
contract, the Company will charge them 0.5% of the balance amount each day at
the second week after the due date. But the total breach amount should not be
over 20% of the total amount of the contract. For the three months ended March
31, 2009 and year ended December 31, 2008, the Company has had no costs
related to a contract breach or product quality issue.
 
 For the
period ended March 31, 2009, three customers accounted for more than 10% of the
customer deposit and each accounted approximately 52%, 24% and 11%,
respectively. Total sales to each customer in 2009 accounted for approximately
0%, 0% and 0% of total sales, respectively. Those three customers with zero
sales as of March 31, 2009 were all foreign companies.
 
 For the
year ended December 31, 2008, two customers accounted for more than 10% of the
customer deposit and each accounted approximately 26% and 12%, respectively.
Total sales to each customer in 2008 accounted for approximately 1% and 4% of
total sales, respectively.
  NOTE
9. SHORT TERM LOANS
 
 Short
term loans consist of the following:
 
 March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Construction
      Bank
                  
                  $
                  19,023,479
                  
                  
                  $
                  19,495,158Defutai
      Bank
                  
                  
                  2,172,538
                  
                  
                  
                  2,175,207Nanyian
      Bank
                  
                  
                  4,666,592
                  
                  
                  
                  6,683,487Shenzhen
      Development Bank
                  
                  
                  7,362,128
                  
                  
                  
                  5,757,583Pufa
      Bank
                  
                  
                  1,758,120
                  
                  
                  
                  1,760,280$
                  34,982,857
                  
                  
                  $
                  35,871,715
 
 The above
outstanding short term loans are used primarily for general working capital
purposes. Recurring bank loans carry annual interest rates of 4.50%~7.39% with
maturity dates ranging from 30 days to one year.  These loans are
either non-secured or secured by the Company’s accounts receivable, building and
land-use rights.
  16
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
9. SHORT TERM LOANS (CONTINUED)
 
 The
annual interest rates are shown as follows:
 
 March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Construction
      Bank
                  
                  
                  7.39
                  %
                  
                  
                  6.84
                  %Defutai
      Bank
                  
                  
                  4.50
                  %
                  
                  
                  4.92
                  %Agricultural
      Bank
                  
                  
                  -
                  
                  
                  
                  7.20
                  %Nanyian
      Bank
                  
                  
                  7.12
                  %
                  
                  
                  6.84
                  %Shenzhen
      Development Bank
                  
                  
                  5.35
                  %
                  
                  
                  6.48
                  %Pufa
      Bank
                  
                  
                  7.20
                  %
                  
                  
                  7.20
                  %
 
 NOTE
10. RESTRICTED CASH AND BANK NOTES PAYABLE
 
 Bank
notes payable consist of the following:
 
 March
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008Shenzhen
      Development Bank
                      
                      $
                      10,972,403
                      
                      
                      $
                      10,336,605Construction
      Bank
                      
                      
                      9,194,294
                      
                      
                      
                      8,512,596$
                      20,166,697
                      
                      
                      $
                      18,849,201
 
 The bank
notes have no interest bearing. Additionally, the banks charge 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:
 
 March
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008Construction
      Bank,
                      
                      $
                      1,780,128
                      
                      
                      $
                      1,753,433Shenzhen
      Development Bank
                      
                      
                      10,951,442
                      
                      
                      
                      9,923,397Shenzhen
      Pingan Bank
                      
                      
                      -
                      
                      
                      
                      4,765$
                      12,731,570
                      
                      
                      $
                      11,681,595
  17
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
11. DUE TO SHAREHOLDER
 
 Due to
shareholder consists of the following:
 
 March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008Due
      to Mr. Li Tianfu
                    
                    $
                    -
                    
                    
                    $
                    7,842,780
 
 The above
amounts are due to Mr. Li Tianfu. These amounts are non-secured, no interest
bearing, and are considered to be long-term with no fixed repayment date. The
imputed interests are assessed as an expense to the business operation and an
addition to the paid-in capital. The calculation is performed quarterly by
annual rate in the range of 5.22 ~ 6.57% with the reference to the average three
months loan rate. The imputed interests are as follows:
 
 March
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008Imputed
      interests
                    
                    $
                    -
                    
                    
                    $
                    190,139
 
 On
November 28, 2008, the Company and its subsidiaries entered into a Debt
Repayment and Set-Off Agreement (the “Repayment Agreement”) with Mr. Li and each
of NIVS Investment (SZ) Co., Ltd.; Zhongkena Technology Development; Xentsan
Technology (SZ) Co., Ltd.; Korea Hyundai Light & Electric (Int'l) Holding;
NIVS Information & Technology (HZ) Co., Ltd.; and Hyundai Light &
Electric (HZ) Co., Ltd. (collectively, the “Related
Companies”).  Pursuant to the Agreement, as it was amended on December
22, 2008, each of the Related Companies agreed to completely and immediately
repay all outstanding loan amounts that it owed to the Company and the Company
agreed to repay $996,433 of the debt that it owed to Mr. Li.
 
 Pursuant
to the terms of the Repayment Agreement, the Company and its subsidiaries
(collectively, the “NIVS Group”) had outstanding loan amounts of $8,838,159 owed
to Mr. Li (the “Li Debt”), and Mr. Li, through the Related Companies, had an
aggregate outstanding loan amount of $996,433 owed to the NIVS Group (the
“Related Companies’ Debt”), with $996,433 owed by Korea Hyundai Light &
Electric (Int'l) Holding.  The loans were unsecured with no fixed
repayment date. Pursuant to the Repayment Agreement, the Related Companies’ Debt
of $996,433 was repaid in full by set-off against the Li Debt of $8,838,159 such
that, as a result of the transactions contemplated by the Repayment Agreement,
the Related Companies’ Debt was no longer outstanding and neither Mr. Li nor any
of the Related Companies owed the NIVS Group any loan
amount.  Moreover, after the repayments under the Repayment Agreement,
the Company’s remaining debt owed to Mr. Li was $7,842,780 as of December 31,
2008.
 
 The
parties to the Repayment Agreement also acknowledged that there were no
remaining debt obligations owed to the Company or its subsidiaries, either
directly or indirectly, by Mr. Li, any other executive officer or director, or
any related family member, of the Company, or any entity owned or controlled by
such persons, including the Related Companies, and that no loans or similar
arrangements will be made by the Company or its subsidiaries to such persons or
entities in the future.   Due to the loans that the Company made
to the entities owned and controlled by its chief executive officer in violation
of Section 402 of the Sarbanes-Oxley Act of 2002, the Company and/or its chief
executive officer could become subject to criminal, civil or administrative
sanctions, penalties, or investigations and may also face potential private
securities litigation.
  18
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
11. DUE TO SHAREHOLDER (CONTINUED)
 
 On
December 24, 2008, the Company entered into an agreement with Mr. Li pursuant to
which the outstanding debt of $7,842,780 that the Company owed to Mr. Li would
be converted into shares of the Company’s common stock.  According to
the agreement, the shares would be issued upon the closing of its public
offering, which closed in March 2009.  The number of shares that the
Company issued to Mr. Li was equal to the debt amount of approximately
$7,841,726 (as adjusted for currency fluctuation) divided by the offering
price of the public offering.  Based on the offering price for the
Company’s offering of $3.50 per share, the Company issued 2,240,493 shares of
common stock to Mr. Li.  After giving effect to the conversion, the
debt owed to Mr. Li was no longer outstanding and the Company does not have any
outstanding debt owed to Mr. Li.  As a result of the conversion, the
number of shares that Mr. Li beneficially owned increased from 12,204,667 shares
to 14,445,160 shares.  This represented a 3.3% increase of Mr. Li’s
ownership of the Company’s outstanding shares of common stock from 33.1% to
36.4%.
 
 NOTE
12. OTHER GENERAL AND ADMINISTRATIVE
 
 For the
three months ended March 31, 2009 and 2008, the amount of other general and
administrative expenses mainly composed of the following:
 
 March
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008Audit
      and accounting
                    
                    $
                    16,186
                    
                    
                    $
                    25,000Legal
      fee
                    
                    
                    219,999
                    
                    
                    
                    18,539Office
      expenses
                    
                    
                    486,031
                    
                    
                    
                    327,150Salary
      and wages
                    
                    
                    223,360
                    
                    
                    
                    148,170Consulting
                    
                    
                    96,800
                    
                    
                    
                    51,857Rent
      & Utilities
                    
                    
                    14,742
                    
                    
                    
                    33,994Others
                    
                    
                    85,797
                    
                    
                    
                    156,687$
                    1,142,915
                    
                    
                    $
                    761,397
 
 NOTE
13. STATUTORY RESERVES
 
 As
stipulated by the relevant laws and regulations for enterprises operating in
PRC, the subsidiaries of the Company are required to make annual appropriations
to a statutory surplus reserve fund. Specifically, the subsidiaries of the
Company are required to allocate 10% of their profits after taxes, as determined
in accordance with the PRC accounting standards applicable to the subsidiaries
of the Company, to a statutory surplus reserve until such reserve reaches 50% of
the registered capital of the subsidiaries of the Company.
  19
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
14. INCOME TAX
 
 Niveous
is registered in BVI and pays no taxes.
 
 NIVS HK
is a holding company registered in Hong Kong and has no operating profit for tax
liabilities.
 
 NIVS
Shenzhen serves as a branch company of NIVS PRC. The assessment of its tax
liabilities is combined with that of NIVS PRC.  NIVS PRC is qualified
as Hi-Tech Company in 2009.
 
 Beginning
January 1, 2008, the new Enterprise Income Tax (“EIT”) law has replaced the old
laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”).
The new standard EIT rate of 25% replaces the 33% rate applicable to both DES
and FIEs, except for High Tech companies that pay a reduced rate of 15%, subject
to government verification for Hi-Tech company status in every three years. For
companies established before March 16, 2007 continue to enjoy tax holiday
treatment approved by local government for a grace period of either for the next
5 years or until the tax holiday term is completed, whichever is
sooner.
 
 The
provision for taxes on earnings consisted of:
 
 March
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008Current
      income taxes expenses:PRC
      Enterprises Income Taxes:
                    
                    $
                    313,955
                    
                    
                    $
                    505,513United
      States Federal Income Taxes
                    
                    
                    -
                    
                    
                    
                    -Total
                    
                    $
                    313,955
                    
                    
                    $
                    505,513
 
 A
reconciliation between the income tax computed at the U.S. statutory rate and
the Group’s provision for income tax is as follows:
 
 March
      31,
                      2009
                    
                    
                    March
      31,
                      2008U.S.
      statutory rate
                    
                    
                    34
                    %
                    
                    
                    34
                    %Foreign
      income not recognized in the U.S.
                    
                    
                    -34
                    %
                    
                    
                    -34
                    %PRC
      preferential enterprise income tax rate
                    
                    
                    25
                    %
                    
                    
                    25
                    %Tax
      holiday and relief granted to the Subsidiary
                    
                    
                    -10
                    %
                    
                    
                    -12.5
                    %Provision
      for income tax
                    
                    
                    15
                    %
                    
                    
                    12.5
                    %
 
 The tax
authority of the PRC Government conducts periodic and ad hoc tax filing reviews
on business enterprises operating in the PRC after those enterprises had
completed their relevant tax filings, hence the Company’s tax filings may not be
finalized.  It is therefore uncertain as to whether the PRC tax
authority may take different views about the Company’s tax filings which may
lead to additional tax liabilities.
  20
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
15. COMMITMENTS AND CONTINGENCIES
 
 Lack of
Insurance
 
 The
Company could be exposed to liabilities or other claims for which the Company
would have no insurance protection. The Company does not currently maintain any
business interruption insurance, products liability insurance, or any other
comprehensive insurance policy except for property insurance policies with
limited coverage. As a result, the Company may incur uninsured liabilities and
losses as a result of the conduct of its business. There can be no guarantee
that the Company will be able to obtain additional insurance coverage in the
future, and even if it can obtain additional coverage, the Company may not carry
sufficient insurance coverage to satisfy potential claims. Should uninsured
losses occur, any purchasers of the Company’s common stock could lose their
entire investment.
 
 Because
the Company does not carry products liability insurance, a failure of any of the
products marketed by the Company may subject the Company to the risk of product
liability claims and litigation arising from injuries allegedly caused by the
improper functioning or design of its products. The Company cannot assure that
it will have enough funds to defend or pay for liabilities arising out of a
products liability claim. To the extent the Company incurs any product liability
or other litigation losses, its expenses could materially increase
substantially. There can be no assurance that the Company will have sufficient
funds to pay for such expenses, which could end its operations and the investors
would lose their entire investment.
 
 NOTE
16. OPERATING RISK
 
 Country
risk
 
 The
Company has significant investments in the PRC. The operating results of the
Company may be adversely affected by changes in the political and social
conditions in the PRC and by changes in Chinese government policies with respect
to laws and regulations, anti-inflationary measures, currency conversion and
remittance abroad, and rates and methods of taxation, among other things. The
Company can give no assurance that those changes in political and other
conditions will not result in have a material adverse effect upon the Company’s
business and financial condition.
 
 NOTE
17. CONCENTRATION OF CREDIT RISK
 
 A
significant portion of the Company’s cash at March 31, 2009 and December 31,
2008 is maintained at various financial institutions in the PRC which do not
provide insurance for amounts on deposit.  The Company has not
experienced any losses in such accounts and believes it is not exposed to
significant credit risk in this area.
 
 The
Company operates principally in the PRC and grants credit to its customers in
this geographic region. Although the PRC is economically stable, it is always
possible that unanticipated events in foreign countries could disrupt the
Company’s operations.
 
 In 2009,
two customers had net sales exceeding 10% of total net sales of the quarter. In
2008, three customers had net sales exceeding 10% of total net sales of the
quarter.
  21
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
18. SEGMENT INFORMATION
 
 The
segment information for revenue is as follows:
  March
      31,
                      
                      
                      March
      31,2009
                      
                      
                      2008Standard
      audio and video equipment:
                      China
                      
                      $
                      12,126,717
                      
                      
                      $
                      14,022,918Europe
                      
                      
                      4,582,037
                      
                      
                      
                      1,167,181North
      America
                      
                      
                      541,811
                      
                      
                      
                      861,077Other
      Asian Countries
                      
                      
                      5,191,075
                      
                      
                      
                      5,432,077South
      America
                      
                      
                      92,656
                      
                      
                      
                      -Other
      Countries
                      
                      
                      1,078,046
                      
                      
                      
                      386,549Intelligent
      audio and video equipment:
                      China
                      
                      
                      1,568,875
                      
                      
                      
                      2,809,429Europe
                      
                      
                      812,853
                      
                      
                      
                      411,816North
      AmericaOther
      Asian Countries
                      
                      
                      1,205,101
                      
                      
                      
                      632,681South
      AmericaOther
      CountriesOther
      audio and video equipment:
                      China
                      
                      
                      1,651,616
                      
                      
                      
                      853,327Europe
                      
                      
                      187,193
                      
                      
                      
                      93,359North
      AmericaOther
      Asian Countries
                      
                      
                      218,748
                      
                      
                      
                      50,295South
      America
                      
                      
                      
                      
                      
                      
                      55,612Other
      CountriesTotal
                      
                      
                      $
                      29,256,728
                      
                      
                      $
                      26,776,321
 
 NOTE
19. JULY 2008 INVESTOR RELATIONS AGREEMENT
 
 In July
2008, the Company entered into a two-year consulting agreement with Nascent
Value LLC (“Nascent”). According to the agreement, as amended, Nascent will
provide the Company with business consulting and investor relation services.
Nascent is a third-party investor relations firm that does not have any other
relationship or common ownership with the Company or any of the Company’s
affiliates. As consideration for entering into the agreement and compensation
for Nascent’s services under the agreement, the Company issued to Nascent
425,000 shares (“IR Shares”) of its common stock upon the closing of the Share
Exchange. In connection with the IR Shares, the Company recognized a stock-based
compensation charge during the three months ended September 30, 2008 in the
amount of $765,000, which is derived from valuing each share at $1.80, the price
at which shares of the Company’s common stock were sold in the Private
Placement. The Company also agreed to pay Nascent $6,000 per month for its
services. Nascent also entered into a lock-up agreement with WestPark Capital,
Inc., the placement agent for the Private Placement, pursuant to which 20,000 IR
Shares will be subject to lock-up restrictions until the Company’s securities
are listed on a national securities exchange and the remaining 405,000 IR Shares
will be subject to lock-up restrictions following the listing of the Company’s
common stock on NYSE Amex, which occurred in March 2009. WestPark Capital, Inc.
reserves the right to release all or a portion of the shares at its sole
discretion.
  22
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
20. EARNINGS PER SHARE
 
 Basic net
income per share is computed by dividing net income by the weighted-average
number of shares outstanding during the period.
 
 Diluted
net income per share is computed by using the weighted-average number of shares
of common stock outstanding and, when dilutive, potential shares from options
and warrants to purchase common stock, using the treasury stock
method.
 
 The
following table illustrates the computation of basic and dilutive net income per
share and provides a reconciliation of the number of weighted-average basic and
diluted shares outstanding:
 
 March 31,2009
                                          
                                          2008Net
      income
                                          
                                          $
                                          2.368,467
                                          
                                          $
                                          3,059,914Denominator:Basic
      weighted-average shares outstanding
                                          
                                          
                                          37,391,115
                                          
                                          
                                          27,546,667Effect
      of dilutive warrants
                                          
                                          
                                          -
                                          
                                          
                                          -Basic
      weighted-average shares outstanding
                                          
                                          
                                          37,391,115
                                          
                                          
                                          27,546,667Net
      income per share:Basic
                                          
                                          $
                                          0.06
                                          
                                          $
                                          0.11Diluted
                                          
                                          $
                                          0.06
                                          
                                          $
                                          0.11
 
 NOTE
21. COMMON STOCK WARRANTS
 
 Since the
inception of NIVS USA, the NIVS USA’s shareholders held an aggregate of
7,096,390 warrants. Immediately prior to the closing of the share exchange on
July 25, 2008, the shareholders canceled an aggregate of 6,149,723 warrants such
that the shareholders held an aggregate of 946,667 warrants immediately after
the Share Exchange. On March 19, 2009, the shareholders exercised the aggregate
warrants at $0.0001 per share in accordance with the net exercise provision
contact in the underlying warrant agreements.  As a result of the net
exercise provision, the Company issued an aggregate of 946,640 shares of common
stock.
 
 In March
2009, NIVS USA completed a public offering of its commons stock and issued a
warrant to purchase 55,000 shares at an exercise price of $4.20 per share. The
warrant has 5 year term and is not exercisable until at least one year from the
date of issuance.
 
 The
summary of the status of the Company’s outstanding warrant activity is as
follows:
  Warrants
                    
                    
                    Average
                      Exercise
      PriceBalance
      December 31, 2007
                    
                    
                    7,096,390
                    
                    
                    $
                    0.0001Warrants
      issued to shareholders
                    
                    
                    -
                    
                    
                    $Warrants
      exercised
                    
                    
                    -
                    
                    
                    $
                    -Forfeited/canceled
                    
                    
                    6,149,723
                    
                    
                    $
                    -Balance
      December 31, 2008
                    
                    
                    946,667Warrants
      issued to underwriter
                    
                    
                    55,000
                    
                    
                    $
                    4.20Warrants
      exercised
                    
                    
                    (946,667
                    )
                    
                    $
                    -Forfeited/canceled
                    
                    
                    -
                    
                    
                    $
                    -Balance
      March 31, 2009
                    
                    
                    55,000
  23
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 
 NOTE
22. CONDENSED PARENT COMPANY FINANCIAL INFORMATION
 
 Basis of
Presentation
 
 The
condensed parent company financial statements have been prepared in accordance
with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of
the subsidiaries of NIVS IntelliMedia Technology Group exceed 25% of the
consolidated net assets of NIVS IntelliMedia Technology Group. The ability of
the Company’s Chinese operating subsidiaries to pay dividends may be restricted
due to the foreign exchange control policies and availability of cash balances
of the Chinese operating subsidiaries. Because substantially all of the
Company’s operations are conducted in China and a substantial majority of its
revenues are generated in China, a majority of the Company’s revenue being
earned and currency received are denominated in Renminbi (RMB). RMB is subject
to the exchange control regulation in China, and, as a result, the Company may
be unable to distribute any dividends outside of China due to PRC exchange
control regulations that restrict its ability to convert RMB into US
Dollars.
 
 The
condensed parent company financial statements have been prepared using the same
accounting principles and policies described in the notes to the consolidated
financial statements, with the only exception being that the parent company
accounts for its subsidiaries using the equity method. Refer to the consolidated
financial statements and notes presented above for additional information and
disclosures with respect to these financial statements.
 
  24
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
22. CONDENSED PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
 
 NIVS IntelliMedia Technology Group, Inc.
 (Formerly
SRKP 19, Inc.)
 
 CONDENSED PARENT COMPANY
BALANCE SHEETS
 (Dollars
in Thousands)
  March 31,
                            
                            
                            December 31,2009
                            
                            
                            2008(Unaudited)ASSETSCash
                            
                            $
                            -
                            
                            
                            $
                            -Investment
      in subsidiaries, at equity in net assets
                            
                            
                            57,506
                            
                            
                            
                            46,521Total
      Assets
                            
                            
                            57,506
                            
                            
                            
                            46,521LIABILITIES AND STOCKHOLDERS’ EQUITY
      (DEFICIT)CURRENT
      LIABILITIESDue
      to subsidiaries
                            
                            
                            -
                            
                            
                            
                            132Total
      Current Liabilities
                            
                            
                            -
                            
                            
                            
                            132COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITY (DEFICIT):Preferred
      stock, $.0001 par value, 10,000,000 shares authorized, none
      issuedCommon
      stock, $.0001 par value, 100,000,000 shares authorized, 40,592,847 and
      36,855,714 shares issued and outstanding at March 31, 2009 and December
      31, 2008, respectively
                            
                            
                            4
                            
                            
                            
                            4Additional
      Paid in Capital
                            
                            
                            21,513
                            
                            
                            
                            12,663Accumulated
      other comprehensive income
                            
                            
                            3,858
                            
                            
                            
                            3,960Statutory
      surplus reserve fund
                            
                            
                            3,569
                            
                            
                            
                            3,569Retained
      earnings (unrestricted)
                            
                            
                            28,562
                            
                            
                            
                            26,193Total
      Stockholders’ Equity (Deficit)
                            
                            
                            57,506
                            
                            
                            
                            46,389Total
      Liabilities & Shareholders' Equity
                            
                            $
                            57,506
                            
                            
                            $
                            46,521
 
  25
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NIVS
IntelliMedia Technology Group, Inc.
 (Formerly
SRKP 19, Inc.)
 
 CONDENSED PARENT COMPANY
STATEMENTS OF OPERATIONS
 (Dollars
in Thousands)
  For the
                              
                              
                              For theThree Months Ended
                              
                              
                              Three Months EndedMarch 31,
                              
                              
                              March 31,2009
                              
                              
                              2008(Unaudited)
                              
                              
                              (Unaudited)Revenue
                              
                              $
                              -
                              
                              
                              $
                              -Other
      general and administrative
                              
                              
                              448
                              
                              
                              
                              11Total
      Expenses
                              
                              
                              448
                              
                              
                              
                              11Equity
      in undistributed income of subsidiaries
                              
                              
                              2,816
                              
                              
                              
                              -Income
      before income taxes
                              
                              
                              2,368
                              
                              
                              
                              (11
                              )Provision
      for income tax
                              
                              
                              -
                              
                              
                              
                              -Net
      income
                              
                              $
                              2,368
                              
                              
                              $
                              (11
                              )
 26
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
  NIVS
IntelliMedia Technology Group, Inc.
 (Formerly
SRKP 19, Inc.)
 
 CONSDENSED PARENT COMPANY
STATEMENTS OF CASH FLOWS
 (Dollars
in Thousands)
 
  For the
                                    
                                    
                                    For theThree Months Ended
                                    
                                    
                                    Three Months EndedMarch 31,
                                    
                                    
                                    March 31,2009
                                    
                                    
                                    2008(Unaudited)
                                    
                                    
                                    (Unaudited)Cash
      Flows from Operating Activities:Net
      income
                                    
                                    $
                                    2,368
                                    
                                    
                                    $
                                    (11
                                    )Equity
      in undistributed income of subsidiaries
                                    
                                    
                                    (2,816
                                    )
                                    
                                    
                                    -Net
      Cash (Used) by Operating Activities
                                    
                                    
                                    (448
                                    )
                                    
                                    
                                    (11
                                    )Cash
      Flows from Investing Activities:Capital
      contribution to subsidiaries
                                    
                                    
                                    (560
                                    )
                                    
                                    
                                    -Net
      Cash (Used) by Investing Activities
                                    
                                    
                                    (560
                                    )
                                    
                                    
                                    -Cash Flows from Financing
      Activities:Advances
      from stockholders
                                    
                                    
                                    
                                    
                                    
                                    
                                    15Repayment
      to subsidiaries
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Net
      proceeds of share issurance
                                    
                                    
                                    1,008
                                    
                                    
                                    
                                    -Net
      Cash Provided by Financing Activities
                                    
                                    
                                    1,008
                                    
                                    
                                    
                                    15Net
      increase/(decrease) in cash and cash equivalents
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4Cash
      and cash equivalents, beginning of period
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Cash
      and cash equivalents, end of period
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    4
  27
  NIVS
INTELLIMEDIA TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements and disclosures
 Amounts
and disclosures for the three months ended March 31, 2009 and 2008 are Unaudited
 NOTE
23. SUBSEQUENT EVENTS
 
 In April
2009, the underwriters to the Company’s public offering that closed in March
2009 exercised its over-allotment option to purchase an additional 82,500 shares
of common stock (the “Shares”). The Shares were sold to the underwriter to cover
over-allotment at a price of $3.50 per share for gross proceeds of
$288,750.  Compensation incurred in the public offering included
discounts and commissions of $28,875, an $8,663 non-accountable expense
allowance, other expenses of $4,821, and legal counsel fees of
$42,500.
  28




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





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





Forward-Looking
Statements





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





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





Overview





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





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




A small
number of customers account for a very significant percentage of our revenue.
For the three months ended March 31, 2009, we had 3 customers that each
accounted for at least 5% of the revenues that we generated. These three
customers accounted for a total of approximately 35.5% of our revenue for that
period. During the three months ended March 31, 2009, we had two customers that
accounted for more than 10% of our sales. The customers accounted for 32.5% of
our sales.  The loss of any of these customers could have a material
adverse effect upon our revenue and net income.





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


29


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 three months of 2009, our sales revenue and sales volume
for DVD players increased 153.7% and 140.4%, respectively, compared to our sales
revenue and volume for the first three months of 2008. 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 three months of 2009, our sales revenue for televisions was approximately
$2.3 million, which represented an increase of approximately 37.3% compared to
revenue of $1.7 million from the sale of televisions for the first three months
of 2008. The increase in revenue for televisions resulted from an increase in
sales volume. In the first three months of 2009, our sales volume for
televisions increased approximately 7% as compared to the first three months of
2008. 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 50% of our revenues for the three months ended March 31, 2009, as
compared to 65% for the first three months of 2008, and sales of products with
our own brand accounted for approximately 50% of our revenues for the same
period, as compared to 35% for the first three months of 2008.





We
anticipate that certain costs of operation will increase in the future,
including costs and expenses associated with contributions to the PRC housing
assistance fund for our employees, which we anticipate to increase approximately
20%. Additionally, changes in Chinese labor laws may require us to raise lower
employee salary standards, which will ultimately increase our operation and
production costs.





Recent
Events





March
2009 Public Offering





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





March
2009 Conversion of Debt to Shares Upon Closing of Public Offering





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


30





Results
of Operations





The
following table sets forth information from our statements of operations for the
three months ended March 31, 2009 and 2008 (unaudited) in dollars and as a
percentage of revenue:





For Three Months EndedMarch 31,2009
                  
                  
                  2008(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
                  
                  $
                  29,257
                  
                  
                  
                  99.7
                  %
                  
                  $
                  26,776
                  
                  
                  
                  99.8
                  %Other
      Sales
                  
                  
                  91
                  
                  
                  
                  0.3
                  %
                  
                  
                  63
                  
                  
                  
                  0.2
                  %Cost
      of Goods Sold
                  
                  
                  (23,097
                  )
                  
                  
                  78.7
                  %
                  
                  
                  (20,383
                  )
                  
                  
                  75.9
                  %Gross
      Profit
                  
                  
                  6,251
                  
                  
                  
                  21.3
                  %
                  
                  
                  6,456
                  
                  
                  
                  24.1
                  %Selling
      Expenses
                  
                  
                  1,141
                  
                  
                  
                  3.9
                  %
                  
                  
                  620
                  
                  
                  
                  2.3
                  %%General
      and administrativeAmortization
                  
                  
                  17
                  
                  
                  
                  0.1
                  %
                  
                  
                  17
                  
                  
                  
                  0.1
                  %Depreciation
                  
                  
                  81
                  
                  
                  
                  0.3
                  %
                  
                  
                  95
                  
                  
                  
                  0.4
                  %Bad
      debts
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  452
                  
                  
                  
                  1.7
                  %Stock-based
      compensationOthers
      General and administrative
                  
                  
                  1,143
                  
                  
                  
                  3.9
                  %
                  
                  
                  761
                  
                  
                  
                  2.8
                  %Total
      General and administrative
                  
                  
                  1,242
                  
                  
                  
                  4.2
                  %
                  
                  
                  1,326
                  
                  
                  
                  4.9
                  %Research
      and development
                  
                  
                  573
                  
                  
                  
                  2.0
                  %
                  
                  
                  155
                  
                  
                  
                  0.6
                  %Total
      operating expenses
                  
                  
                  2,955
                  
                  
                  
                  10.1
                  %
                  
                  
                  2,101
                  
                  
                  
                  7.8
                  %Income
      from operations
                  
                  
                  3,296
                  
                  
                  
                  11.2
                  %
                  
                  
                  4,355
                  
                  
                  
                  16.2
                  %Other
      income (expenses)Interest
      expense
                  
                  
                  (562
                  )
                  
                  
                  1.9
                  %
                  
                  
                  (532
                  )
                  
                  
                  2.0
                  %Imputed
      interest
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (190
                  )
                  
                  
                  0.7
                  %Sundry
      income (expense), net
                  
                  
                  10
                  
                  
                  
                  0.0
                  %
                  
                  
                  16
                  
                  
                  
                  0.1
                  %Total
      other income (expenses)
                  
                  
                  (552
                  )
                  
                  
                  1.9
                  %
                  
                  
                  (706
                  )
                  
                  
                  -2.6
                  %Income
      before noncontrolling interest and income taxes
                  
                  
                  2,744
                  
                  
                  
                  9.3
                  %
                  
                  
                  3,650
                  
                  
                  
                  13.6
                  %Income
      taxes
                  
                  
                  (314
                  )
                  
                  
                  1.1
                  %
                  
                  
                  (506
                  )
                  
                  
                  1.9
                  %Noncontrolling
      interest
                  
                  
                  (61
                  )
                  
                  
                  0.2
                  %
                  
                  
                  (84
                  )
                  
                  
                  0.3
                  %Net
      Income
                  
                  $
                  2,368
                  
                  
                  
                  8.1
                  %
                  
                  $
                  3,060
                  
                  
                  
                  11.4
                  %





Three
months ended March 31, 2009 and 2008





Revenues,
which consist of sales of our products, were $29.3 million for the three months
ended March 31, 2009, an increase of $2.5 million, or 9.3%, compared to $26.8
million for the same period in 2008. The increase in revenue was attributed
mainly to the increased demand for our products, which we believe is a result of
our market expansion efforts. The increase of revenue was also due to the new
sales of digital equipment and LCD products. For the three months ended March
31, 2009, our sales revenue for standard audio equipment increased to $ 23.6
million, an increase of  8.0% compared to $21.9 million for the same
period in 2008. Sales revenue for televisions increased to $2.3 million, an
increase of 37.3% compared to $1.7 million for the same period in 2008. Sales
revenue for our intelligent audio and video equipment decreased to $3.6 million,
a decrease of 6.9% compared to $3.9 million for the same period in 2008. For the
three months ended March 31, 2009, our sales volume for standard audio equipment
increased by 12.4% to 1.1 million pieces as compared to 1.0 million pieces for
the same period in 2008. The increase was due to product upgrades. For the three
months ended March 31, 2009, our sales volume for televisions increased by 7% to
0.70 million pieces as compared to 0.65 million pieces for the same period in
2008. Our sales volume for intelligent audio and video equipment decreased by
1.7% to 0.435 million pieces as compared to 0.447 million pieces for the same
period in 2008. 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.


31





Cost of
sales, which include raw material, labor and manufacturing overhead, were $23.1
million for the three months ended March 31, 2009, an increase of $2.7 million,
or 13.3%, compared to $20.4 million for the same period in 2008. The increase
was primarily a result of the increase in sales and was relatively consistent
with the increase in our net revenue. As a percentage of net revenue, cost of
sales for the three months ended March 31, 2009 and 2008 was 78.6% and 75.9%,
respectively.





Gross
profit for the three months ended March 31, 2009 was $6.3 million, or 21.4% of
revenues, compared to $6.4 million, or 24.1% of revenues, for the comparable
period in 2008. Gross profit margins are a factor of cost of sales, product mix
and product demand. In the first quarter of 2009, the price of standard audio
equipments which are large percentage of our sales decreased and some of the
costs involved in production increased. These factors caused the decrease in
gross margin.





Selling
expenses, which mainly include marketing, shipping, insurance, wage and other
expenses, were $1.1 million for the three months ended March 31, 2009, an
increase of $0.5 million, or 84.0%, compared to $0.6 million for the same period
in 2008. The increase was primarily due to an increase in television advertising
(on CCTV) and marketing activities.





Research
and development expenses were approximately $0.6 million for the three months
ended March 31, 2009, an increase of approximately $0.4 million, or 269.9%,
compared to $0.2 million for the same period in 2008. We believe that our focus
on research and development contributed to the increase in our total sales. In
the future, we expect to continue to increase our research and development
efforts and to enable us to manufacture wider lines of products.





General
and administrative expenses, which include wage, benefit, bad debts, utility,
consulting, professional fee, various taxes and levies and other expenses, were
$1.2 million for the three months ended March 31, 2009, a decrease of $0.1
million, or 6.3%, compared to $1.3 million for the same period in 2008. The
decrease was primarily a result of no bad debt expense in the first quarter of
2009.  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 $0.6 million and $0.5 million for the three months ended March 31,
2009and 2008, respectively. The increase was due to the increase in the balance
of short-term bank loans during the three months ended March 31,
2009.





Income
tax provisions for the three months ended March 31, 2009 were approximately $0.3
million, as compared to approximately $0.5 million for the three months ended
March 31, 2008. The decrease was primarily due to a decrease in the taxable
income for the three months ended March 31, 2009. NIVS PRC is registered in PRC
and has had tax advantages granted by local government for corporate income
taxes and sales taxes commencing April 6, 2004. NIVS PRC has been entitled to
have a full tax exemption for the first two profitable years, followed by a 50%
reduction on a normal tax rate of 24% for the following three consecutive years.
Our effective income tax rates for the three months ended March 31, 2009 and
March 31, 2008 were 15% 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.





Net
income was $2.4 million for the three months ended March 31, 2009, a decrease of
$0.7 million, or 22.6%, compared to $3.1 million for the same period in
2008.





Liquidity
and Capital Resources





We had an
unrestricted cash balance of approximately $2.2 million as of March 31, 2009, as
compared to $0.5 million as of December 31, 2008. In addition, we also had
approximately $12.7 million in restricted cash as of March 31, 2009, as compared
to $11.7 million as of December 31, 2008. Our restricted cash is held as a
security deposit for our recurring, short-term bank notes. Our funds are kept in
financial institutions located in China, and banks and other financial
institutions in the PRC do not provide insurance for funds held on deposit, and
in the event of a bank failure, we may not have access to our funds on
deposit.  In addition, we are subject to the regulations of the PRC,
which restrict the transfer of cash from China, except under certain specific
circumstances. Accordingly, such funds may not be readily available to us to
satisfy obligations that have been incurred outside the PRC.




We had
negative working capital of approximately $13.3 million, $33.4 million, $18.6
million and $34.2 million as at March 31, 2009 and 2008 and as of December 31,
2008 and 2007, respectively. The decrease of negative working capital was
largely caused by public offering fund raising and management attention to the
aging of accounts payable.


32





Our
accounts receivable has been an increasingly significant portion of our current
assets, representing $18.6 million, $9.5million, $20.4 million,
and  4.5 million, or 36.6%, 33.1%, 45.3%, and 18.0% of current assets,
as at March 31, 2009 and 2008 and as of December 31, 2008 and 2007,
respectively.  If customers responsible for a significant amount of
accounts receivable were to become insolvent or otherwise unable to pay for our
products, or to make payments in a timely manner, our liquidity and results of
operations could be materially adversely affected. An economic or industry
downturn could materially adversely affect the servicing of these accounts
receivable, which could result in longer payment cycles, increased collections
costs and defaults in excess of management’s expectations. A significant
deterioration in our ability to collect on accounts receivable could affect our
cash flow and working capital position and could also impact the cost or
availability of financing available to us.





We
provide our major customers with payment terms ranging from 30 to 90 days.
Additionally, our production lead time is approximately three weeks, from the
inspection of incoming materials, to production, testing and packaging. We need
to keep a large supply of raw materials and work in process and finished goods
inventory on hand to ensure timely delivery of our products to our
customers.  We maintain an allowance for doubtful accounts for
estimated losses resulting from the inability of our customers to make required
payments. Allowance for doubtful accounts is based on our assessment of the
aging of accounts receivable, the collectibility of specific customer accounts,
our history of bad debts, and the general condition of the industry. Our aging
of accounts receivables could result in our inability to collect receivables
requiring us to increase our doubtful accounts reserve, which would decrease our
net income and working capital.  We experienced no bad debt expense in
the first quarter of 2009 compared to $1.7 million in the fourth quarter of
2008. We believed it was appropriate to maintain the reserve balance for
doubtful accounts primarily due to a decrease in the aging of our accounts
receivable with a growth in our outstanding receivables as of March 31, 2008,
and the general decline in the domestic and global economy.  Due to
the difficulty in assessing future trends, we could be required to further
increase our provisions for doubtful accounts.  As our accounts
receivable age and become uncollectible our cash flow and results of operations
are negatively impacted.





As of
March 31, 2009, inventories amounted to $16.8 million, compared to $12.8 million
at March 31, 2008. As of December 31, 2008, inventories amounted to $11.3
million, compared to $17.3 million as of December 31, 2007. We have experienced
increased sales volume annually and, also, we launched promotion campaign in
domestic market in the first quarter of 2009; as a result, we expect to
experience increases in our inventory levels going forward, including both of
raw material and finished goods.  We maintain certain reserve amounts
of raw materials in our inventories and engage in long-term arrangements with
suppliers in an attempt to protect against any rising prices and shortages of
raw materials used to manufacture our products. We also maintain certain amounts
of finished goods to meet the customers’ demand when launching nationwide
promotion campaign.





NIVS PRC
has entered into various revolving bank loans and bank notes to finance our
operation. Most of the loans are one year renewable. NIVS PRC had bank loans of
approximately $35.0 million, $28.2 million, $35.9 million and $28.6 million as
at March 31, 2009 and 2008 and as of December 31, 2008 and 2007, respectively.
These loans carry annual interest rates of approximately 4.5 % to 7.4 % with
maturity dates ranging from 30 days to one year. These loans are either
unsecured or secured by the Company’s buildings, receivables and land use
rights.





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





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


33





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





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





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





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





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





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


34





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





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 $55,243 and $67,782 for the three months ended March 31,
2009 and 2008, respectively. We expect that the amount of our contribution to
the government’s social insurance funds will increase in the future as we expand
our workforce and operations and commence contributions to an employee housing
fund.





Net cash
provided in operating activities was $3.2 million for the three months ended
March 31, 2009, compared to net cash used in operating activities of $0.02
million for the three months ended March 31, 2008.  The increase in
net cash provided in operating activities was primarily due to a decrease in
advances to suppliers and a decrease in accounts receivable. Our increase in net
cash provided in operating activities for the three months ended March 31, 2009
was partially offset by an increase in cash used in inventories in response to
increasing material prices and demand of our products.





Investing
activity during the three months ended March 31, 2009 and 2008 included the
purchasing of property and equipment and intangible assets, which resulted in
net cash used in investing activities of $2.9 million for the three months ended
March 31, 2009, compared to net cash used in investing activities of $2.8
million for the three months ended March 31, 2008. The increase in net cash used
in investing activities was primarily due to our purchase of production
equipment to expand our production scale in the first quarter of 2009. In June
2008, we entered into an agreement for the purchase of production equipment and
a new plant renovation at a contracted price of RMB 36,117,340 (USD
$5,283,997).  As of March 31, 2009, we had paid $2.9 for the purchase
of production equipment and plant renovation. The plant renovation and the
equipment installation was completed in the end of 2008. The remainder balance
of RMB 24,210 (USD$3,542) has paid in January, 2009.





Net cash
provided by financing activities amounted to $1.4 million for the three months
ended March 31, 2009, compared to net cash provided by financing activities of
$3.1 million for the three months ended March 31, 2008.  The decrease
in cash provided by financing activities was primarily a decrease in cash flow
provided by various notes payable financing and partially offset by our IPO
closing in March 2009.





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





Seasonality





The first
quarter is traditionally our low season due to the long Chinese New Year
Holiday, with sales gradually increasing in the second quarter. Sales are
usually highest in the fourth quarter as most of the factories in China will
ship out their stock to prepare the Chinese New Year Holiday.
 35





Off-Balance
Sheet Arrangements





We have
no material off-balance sheet transactions.





Critical
Accounting Policies and Estimates




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





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





ITEM
3.                 QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




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





ITEM
4.                 CONTROLS
AND PROCEDURES





Evaluation
of disclosure controls and procedures





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





As of the
end of the period covered by this Annual Report, we conducted an evaluation,
under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures are not
effective as of March 31, 2009 due to the deficiencies described
below.





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





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


36





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





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





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





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





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





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


37


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





Changes
in Internal Control over Financial Reporting





Due to
the implementation of the remedial measures described above, there were changes
in our internal controls over financial reporting during the first quarter of
fiscal 2009 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. There have been no material revisions to the “Risk Factors” as set forth
in our annual report on Form 10-K as filed with the SEC on March 31,
2009.





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





In March
2009, we completed our public offering of common stock in conjunction with the
listing of our common stock for trading on NYSE Amex.  The SEC
declared the registration statements for the public offering, File No.
333-153005, effective on March 12, 2009.  On March 18, 2009, we sold
550,000 shares of common stock at an issue price of $3.50 per
share.  The managing underwriter for the offering was WestPark
Capital, Inc. Our shares of common stock were sold to the public at a price of
$3.50 per share, for gross proceeds of approximately $1.9
million.  Compensation for WestPark Capital’s services included
discounts and commissions of $192,500, a $57,750 non-accountable expense
allowance, roadshow expenses of approximately of $10,000, and legal counsel fees
(excluding blue sky fees) of $40,000.   As of March 31, 2009, we have
used approximately $1.6 million of the proceeds from the offering for working
capital purposes to finance our existing operations.  In April 2009,
the underwriters exercised their over-allotment option in full for the offer and
sale of 82,500 additional shares of common stock at $3.50 per share, for gross
proceeds of $288,750.





In March
2009, upon the closing of our public offering held in conjunction with our
listing on NYSE Amex, we issued to WestPark Capital, Inc. warrants to purchase
up to 55,000 shares of our common stock in exchange for its underwriting
services provided to us in connection with our public offering. The warrants are
exercisable at a per share exercise price of $4.20, subject to standard
anti-dilution adjustments for stock splits and similar transactions, and will
expire after five years. The securities were issued to WestPark Capital in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder.





ITEM
3.                 DEFAULT
UPON SENIOR SECURITIES





Not
applicable.




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




Not
applicable.


38


ITEM
5.                 OTHER
INFORMATION




Not
applicable.




ITEM
6.                 EXHIBITS




(a)      
      Exhibits




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





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


39


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:
      May 19, 2009
                /s/
                Tianfu LiBy:
                Tianfu LiIts:
                Chairman
      of the Board and Chief Executive
Officer


40