10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

¨ 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. 000-53285

IVEDA SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada	20-2222203
(State or other jurisdiction of incorporation or	(I.R.S. Employer
organization)	Identification No.)
1201 South Alma School Road, Suite 8500, Mesa,
Arizona	85210
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (480) 307-8700

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 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 ¨

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 such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨

Smaller reporting company x

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

Class	Outstanding as of November 8, 2013
Common stock, $0.00001 par value	26,437,466

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24
ITEM 4.	CONTROLS AND PROCEDURES	24
	PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	25
ITEM 1A.	RISK FACTORS	25
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	25
ITEM 4.	MINE SAFETY DISCLOSURES	26
ITEM 5.	OTHER INFORMATION	26
ITEM 6.	EXHIBITS	27
SIGNATURES		29

2

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IVEDA SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2013 AND DECEMBER 31, 2012

	September 30,		December 31,
	2013		2012
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	1,082,353	$	114,462
Restricted Cash		883,630		447,206
Accounts Receivable, net		508,136		1,958,799
Inventory		208,133		123,021
Other Current Assets		391,007		645,728
Total Current Assets		3,073,259		3,289,216
PROPERTY AND EQUIPMENT, Net		451,211		516,981
OTHER ASSETS
Intangible Assets, Net		151,666		166,666
Goodwill		841,000		841,000
Other Assets		104,026		105,621
Total Other Assets		1,096,692		1,113,287
Total Assets	$	4,621,162	$	4,919,484
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts and Other Payables	$	1,793,682	$	2,456,788
Due to Related Parties, net of debt discount		100,000		336,605
Short Term Debt		87,000		802,122
Current Portion of Long-Term Debt		185,338		75,707
Total Current Liabilities		2,166,020		3,671,222
LONG TERM DEBT		64,542		67,695
STOCKHOLDERS’ EQUITY
Preferred Stock		-		-
Common Stock		262		204
Additional Paid-In Capital		21,754,820		16,204,068
Accumulated Comprehensive Income (Loss)		(24,997)		(23,629)
Accumulated Deficit		(19,339,485)		(15,000,076)
Total Stockholders’ Equity		2,390,600		1,180,567
Total Liabilities and Stockholders’ Equity	$	4,621,162	$	4,919,484

See accompanying Notes to Condensed Consolidated Financial Statements

3

 

IVEDA SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	Sept. 30, 2013		Sept. 30, 2012		Sept. 30, 2013		Sept. 30, 2012
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
REVENUE
Equipment Sales	$	409,222	$	212,531	$	1,467,044	$	1,309,495
Service Revenue		149,578		162,970		476,410		811,591
Other Revenue		10,118		5,672		34,852		31,406
TOTAL REVENUE		568,918		381,173		1,978,306		2,152,492
COST OF REVENUE		471,992		322,824		1,667,665		1,729,001
GROSS PROFIT		96,926		58,349		310,641		423,491
OPERATING EXPENSES		1,645,563		867,958		4,531,718		2,854,794
LOSS FROM OPERATIONS		(1,548,637)		(809,609)		(4,221,077)		(2,431,303)
OTHER INCOME (EXPENSE)
Foreign Currency Gain (Loss)		(8,611)		(87)		(9,718)		(87)
Loss from conversion of debt		-		-		(44,000)		-
Interest Income		-		6		997		545
Interest Expense		(16,221)		(24,414)		(65,611)		(46,738)
Total Other Income (Expense)		(24,832)		(24,495)		(118,332)		(46,280)
LOSS BEFORE INCOME TAXES		(1,573,469)		(834,104)		(4,339,409)		(2,477,583)
BENEFIT FOR INCOME TAXES		-		-		-		-
NET LOSS	$	(1,573,469)	$	(834,104)	$	(4,339,409)	$	(2,477,583)
BASIC AND DILUTED LOSS PER SHARE	$	(0.06)	$	(0.04)	$	(0.18)	$	(0.15)

See accompanying Notes to Condensed Consolidated Financial Statements

4

 

IVEDA SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	Sept. 30, 2013		Sept. 30, 2012		Sept. 30, 2013		Sept. 30, 2012
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Net Loss	$	(1,573,469)	$	(834,104)	$	(4,339,409)	$	(2,477,583)
Other comprehensive income (loss):
Foreign currency translation adjustment		1,022		14,660		(7,757)		21,486
Comprehensive Loss	$	(1,572,447)	$	(819,444)	$	(4,347,166)	$	(2,456,097)

See accompanying Notes to Condensed Consolidated Financial Statements

5

 

IVEDA SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

	Nine Months Ended		Nine Months Ended
	Sept. 30, 2013		Sept. 30, 2012
	(Unaudited)		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(4,339,409)	$	(2,477,583)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Depreciation and Amortization		169,164		181,456
Loss from Conversion of Debt		44,000		-
Stock Compensation		126,813		96,573
Common Stock Issued for Services		222,206		110,562
(Increase) Decrease in Operating Assets:
Accounts Receivable		1,410,678		245,307
Inventory		(86,424)		(24,686)
Other Current Assets		56,312		(243,041)
Accounts and Other Payables		(438,889)		(113,204)
Net cash used in operating activities		(2,835,549)		(2,224,616)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment		(89,897)		(387,064)
Net cash used in investing activities		(89,897)		(387,064)
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in Restricted Cash		(441,724)		(46,903)
Proceeds from (Payments on) Short-Term Notes Payable/Debt		(586,514)		431,662
Proceeds from Exercise of Stock Options		244,574		-
Proceeds from (Payments to) Related Parties		(236,605)		352,892
Proceeds from (Payments on) Long-Term Debt		-		(35,839)
Payments on Capital Lease Obligations		(6,987)		(8,561)
Common Stock Issued, net of Cost of Capital		4,913,216		1,797,021
Net cash provided by financing activities		3,885,960		2,490,272
EFFECT OF EXCHANGE RATE CHANGES ON CASH		7,377		16,731
NET INCREASE IN CASH AND CASH EQUIVALENTS		967,891		(104,677)
Cash and Cash Equivalents - Beginning of Period		114,462		850,364
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	1,082,353	$	745,687
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid	$	66,203	$	46,738

See accompanying Notes to Condensed Consolidated Financial Statements

6

 

IVEDA SOLUTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. The operating results and cash flows for the nine-month period ended September 30, 2013, are not necessarily indicative of the results that will be achieved for the full fiscal year ending December 31, 2013 or for future periods.

The accompanying condensed consolidated financial statements have been prepared without audit and reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of financial position and the results of operations for the interim periods. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, impairment costs, depreciation and amortization, sales returns and discounts, warranty costs, uncertain tax positions and the recoverability of deferred tax assets, stock compensation, contingencies and the fair value of assets and liabilities disclosed. Actual results and outcomes may differ from management’s estimates and assumptions. The statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to such SEC rules and regulations.

The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Consolidation

Effective April 30, 2011, Iveda Solutions, Inc. (the “Company”) completed its acquisition of Sole Vision Technologies (dba “MegaSys”), a company based in Taiwan. The consolidated financial statements include the accounts of the Company and MegaSys. All intercompany balances and transactions have been eliminated in consolidation.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Since inception, the Company has generated an accumulated deficit from operations of approximately $19.3 million at September 30, 2013 and has used approximately $2.8 million in cash from operations through the current nine months ended September 30, 2013. As a result, a risk exists regarding our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty.

7

A multi-step plan was adopted by management to enable the Company to continue to operate and begin to report operating profits. The highlights of that plan are:

⋅      The Company is seeking additional financing and has engaged an investment bank to serve as placement agent. The financing may be in the form of sales of equity securities, debt convertible into equity securities and non-convertible debt, which may either be secured or unsecured.

⋅ In the third quarter of 2013, the Company launched two new camera lines in collaboration with MegaSys, its Taiwan subsidiary and Industrial Technology Research Institute (ITRI), its nonprofit research and development partner in Taiwan. These products are enablers of the Company’s video hosting services.

⋅     The Company has also recently developed two other standalone services:

o IvedaMobile–a cloud-hosting service that turns any smartphone or tablet into a mobile, cloud video streaming device. This was developed with ITRI.

o IvedaXchange – In collaboration with a technology partner, the Company developed a real-time situational awareness dashboard to enable organizations instant access to vital and filtered information such as emergency situations, location of critical assets, video monitoring, and local news. IvedaXchange is well-suited for law enforcement agencies and schools.

⋅     The Company launched a new website to highlight new products and services with corresponding applications.

⋅     The Company launched a second website allowing for direct web-sales, geared toward the residential and small-to-medium sized businesses. 

⋅     The Company intends to continue to participate in industry and vertical tradeshows to launch new products, generate leads, solicit resellers and other sales channels, and identify potential technology partners.

⋅     The Company intends to continue advertising on selected trade magazines and running Google Adwords to generate leads.

⋅     The Company has evaluated its reseller distribution channel and eliminated non-performing components of the channel.

⋅     The Company is in active collaboration with certain telecommunications companies in other countries to resell the Company’s products and services in their respective countries.

Concentrations

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts receivable.

Substantially all cash is deposited in two financial institutions, one in the United States and one in Taiwan. At times, amounts on deposit in the United States may be in excess of the FDIC insurance limit. Deposits in Taiwan financial institutions are insured by CDIC (Central Deposit Insurance Corporation) with maximum coverage of NTD 3 million. At times, amounts on deposit in Taiwan may be in excess of the CDIC insurance limit.

Accounts receivable are unsecured, and the Company is at risk to the extent such amount becomes uncollectible. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. Revenue from three customers represented approximately 59% of total revenues for the nine months ended September 30, 2013, and approximately 17% of total accounts receivable at September 30, 2013.

Intangible Assets and Goodwill

Intangible assets consist of trademarks and other intangible assets associated with the purchase price allocation of MegaSys. Such assets are being amortized over their estimated useful lives ranging from six months to ten years. Other Intangible Assets are fully amortized as of September 30, 2013. Future amortization of Intangible Assets is as follows:

Trademarks
2013	$	5,000
2014		20,000
2015		20,000
2016		20,000
Thereafter		86,666
Total	$	151,666

Goodwill represents the excess of the purchase price of MegaSys over the net assets acquired. Goodwill is tested annually for impairment or more frequently if indicators of impairment exist.

8

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2013. The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued expenses, convertible notes and amounts due to related parties. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

Segment Information

The Company conducts operations in various geographic regions outside the United States. The operations and the customer base conducted in the foreign countries are similar to the United States operations. The net revenues and net assets (liabilities) for other significant geographic regions outside the United States during the 9 months ended September 30, 2013 are as follows:

	Net Revenues		Net Assets
United States	$	378,222	$	2,349,594
Asia	$	1,404,127	$	41,006
Mexico	$	195,957		-

Furthermore, due to operations in various geographic locations, the Company is susceptible to changes in national, regional and local economic conditions, demographic trends, consumer confidence in the economy and discretionary spending priorities that may have a material adverse effect on the Company’s future operations and results.

The Company is required to collect certain taxes and fees from customers on behalf of government agencies and remit these back to the applicable governmental agencies on a periodic basis. These taxes and fees are legal assessments to the customer, for which the Company has a legal obligation to act as a collection agent. Because the Company does not retain these taxes and fees, the Company does not include such amounts in revenue. The Company records a liability when the amounts are collected and relieves the liability when payments are made to the applicable governmental agencies.

The Company operates as two reportable business segments in defined in ASC 280, "Segment Reporting." Each business segment has a chief operating decision maker and management personnel which review their business segment’s performance as it relates to revenue, operating profit and operating expenses.

9

	Three Months		Three Months		Condensed
	Ended September, 2013		Ended September 30, 2013		Consolidated
	Iveda Solutions, Inc.		MegaSys		Total
Revenue	$	203,942	$	364,976	$	568,918
Cost of Revenue		209,195		262,797		464,603
Gross Profit		(5,253)		102,179		96,926
Depreciation and Amort.		53,181		2,634		55,815
General and Administrative		1,375,451		214,297		1,589,748
(Loss) from Operations		(1,433,885)		(114,752)		(1,548,637)
Foreign Currency Gain (Loss)		(8,611)		-		(8,611)
Loss from the conversion of debt		-		-		-
Interest Income		-		-		-
Interest Expense		11,676		4,545		16,221
(Loss) Before Income Taxes		(1,454,172)		(119,297)		(1,573,469)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(1,454,172)	$	(119,297)	$	(1,573,469)

	Nine Months
	Ended September 30,		Nine Months
	2013		Ended September 30,		Condensed
	Iveda Solutions,		2013		Consolidated
	Inc.		MegaSys		Total
Revenue	$	574,179	$	1,404,127	$	1,978,306
Cost of Revenue		565,258		1,102,407		1,667,665
Gross Profit		8,921		301,720		310,641
Depreciation and Amortization		161,157		8,007		169,164
General and Administrative		3,758,437		604,117		4,362,554
(Loss) from Operations		(3,910,673)		(310,404)		(4,221,077)
Foreign Currency Gain (Loss)		(9,718)		-		(9,718)
Loss from the conversion of debt		(44,000)		-		(44,000)
Interest Income		-		997		997
Interest Expense		51,670		13,941		65,611
(Loss) Before Income Taxes		(4,016,061)		(323,348)		(4,339,409)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(4,016,061)	$	(323,348)	$	(4,339,409)

Revenues as shown below represent sales to external customers for each segment. Additions to long-lived assets as presented in the following table represent capital expenditures. Inventories, property and equipment for operating segments are regularly reviewed by management and are therefore provided below.

10

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Revenues
United States	$	203,943	$	148,226	$	574,179	$	601,230
Republic of China (Taiwan)		364,975		232,947		1,404,127		1,551,262
	$	568,918	$	381,173	$	1,978,306	$	2,152,492

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Operating earnings (loss)
United States	$	(1,433,885)	$	(713,160)	$	(3,910,673)	$	(2,216,260)
Republic of China (Taiwan)		(114,752)		(96,449)		(310,404)		(215,043)
	$	(1,548,637)	$	(809,609)	$	(4,221,077)	$	(2,431,303)

	Nine Months Ended
	September 30,
	2013		2012
Property and equipment
United States	$	438,686	$	580,014
Republic of China (Taiwan)		12,525		31,095
	$	451,211	$	611,109

	Nine Months Ended
	September 30,
	2013		2012
Additions to long-lived assets
United States	$	86,868		223,705
Republic of China (Taiwan)		(1,660)		11,884
	$	85,208		235,589

	Nine Months Ended
	September 30,
	2013		2012
Inventory
United States	$	51,955	$	810
Republic of China (Taiwan)		156,178		106,766
	$	208,133	$	107,576

11

	Nine Months Ended
	September 30,
	2013		2012
Total Assets
United States	$	2,467,126	$	1,898,479
Republic of China (Taiwan)		2,154,036		1,924,128
	$	4,621,162	$	3,822,607

Reclassification

Certain amounts in 2012 may have been reclassified to conform to the 2013 presentation.

New Accounting Pronouncements

In March 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-05, Foreign Currency Matters (Topic 830). This ASU resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights)within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This ASU is the final version of Proposed Accounting Standards Update EITF11Ar—Foreign Currency Matters (Topic 830), which has been deleted. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. For nonpublic entities the amendments in this Update are effective prospectively for the first annual period beginning after December 15, 2014, and interim and annual periods thereafter. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.

In February 2013, FASB issued Accounting Standards Update (ASU) No. 2013-03, Financial Instruments (Topic 825). This ASU clarifies the scope and applicability of a disclosure exemption that resulted from the issuance of Accounting Standards Update No. 2011-04,Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendment clarifies that the requirement to disclose "the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3)" does not apply to nonpublic entities for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed. This ASU is the final version of Proposed Accounting Standards Update 2013-200—Financial Instruments (Topic 825) which has been deleted. The amendments are effective upon issuance.

In February 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU improves the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.

12

The new amendments will require an organization to:

• Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

• Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). A private company is required to meet the reporting requirements of the amended paragraphs about the roll forward of accumulated other comprehensive income for both interim and annual reporting periods. However, private companies are only required to provide the information about the effect of reclassifications on line items of net income for annual reporting periods, not for interim reporting periods. The amendments are effective for reporting periods beginning after December 15, 2012, for public companies and are effective for reporting periods beginning after December 15, 2013, for private companies. Early adoption is permitted.

In January 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification(TM) (Codification) or subject to a master netting arrangement or similar agreement. The FASB undertook this clarification project in response to concerns expressed by U.S. stakeholders about the standard’s broad definition of financial instruments. After the standard was finalized, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement, significantly increasing the cost of compliance at minimal value to financial statement users. An entity is required to apply the amendments in ASU 2013-01 for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of ASU 2011-11.

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In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-04, Technical Corrections and Improvements. This ASU make technical corrections, clarifications, and limited-scope improvements to various Topics throughout the Codification. The amendments in this ASU that will not have transition guidance will be effective upon issuance for both public entities and nonpublic entities. For public entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2013.

In August 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-03, Technical Amendments and Corrections to SEC Sections. This ASU amends various SEC paragraphs pursuant to SAB 114, SEC Release No. 33-9250, and ASU 2010-22, which amend or rescind portions of certain SAB Topics.

In July 2012, the FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles-Goodwill and Other General Intangibles Other than Goodwill. Under the guidance in this ASU,an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

NOTE 2 SHORT-TERM DEBT

The Company has short term loans with two banks in Asia that bear interest from 3.24% to 5.82% During the third quarter, all short-term bank loans were paid off.

Note Payable, 10% interest per annum, maturing on December 7, 2013	$	77,000
Note Payable, 10% interest per annum, maturing on December 20, 2013		10,000
Total Short-Term Debt	$	87,000

The holder of the $77,000 note is entitled to subscribe for a purchase 7,000 warrant shares at an exercise price of $1.50 per share. The holder of the $10,000 note is entitled to subscribe for a purchase 909 warrant shares at an exercise price of $1.50 per share.

During the three months ended June 30, 2013, a $50,000 debenture was converted into shares of the Company’s common stock at a price of $1.00 per share. As a result, the Company recorded a loss on conversion of debt totaling $27,500.

During the three months ended March 31, 2013, a $45,000 note was extinguished, with $15,000 of principal being paid in cash and $30,000 of principal being converted into shares of the Company’s common stock at a price of $1.00. As a result, the Company recorded a loss from conversion of debt totaling $16,500.

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NOTE 3  EQUITY

Preferred Stock

The Company is authorized to issue 100,000,000 shares of $0.00001 par value preferred stock. No shares have been issued, and the rights and privileges of this class of stock have not been defined.

Common Stock

During the nine months ended September 30, 2013, the Company raised $5,459,501 in a private placement of shares ranging from $1.00 to a $1.10 per share. Costs associated with this raise totaled $540,150.

During the nine months ended September 30, 2013, the Company issued 80,000 shares of its common stock to consultants for services. The fair market value of these shares on their respective date of issuances totaled $122,000. As a result, the Company recorded non-cash compensation expense of $122,000.

During the nine months ended September 30, 2013, the Company issued a warrant to purchase 100,000 shares of its common stock at an exercise price of $1.65 per share. The warrant became fully vested at the time of issuance and expires ten years from the date of issuance. Using the Black Scholes pricing model, the warrant was valued at $60,075. As a result, the Company recorded non-cash compensation expense of $60,075.

NOTE 4 STOCK OPTION PLAN

The Company has also granted non-qualified stock options to employees and contractors. All non-qualified options are generally issued with an exercise price equal to the closing price of the Common Stock on the date of the grant. Options may be exercised up to ten years following the date of the grant, with vesting schedules determined by the Company upon grant. Vesting periods range from 100% fully vested upon grant to a range of four to five years. Vested options may be exercised up to three months following date of termination of the relationship. The fair values of options are determined using the Black-Scholes option-pricing model. The estimated fair value of options is recognized as an expense on the straight-line basis over the options’ vesting periods.

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Stock option transactions during the nine months ended September 30, 2013 were as follows:

	Nine months ended September 30, 2013
			Weighted -
			Average
	Shares		Exercise Price
Outstanding at Beginning of Year		5,038,512	$	0.91
Granted		160,000		1.63
Exercised		(244,500)		-
Forfeited or Canceled		(155,000)		1.09
Outstanding at End of Period		4,799,012		0.93
Options Exercisable at Period-End		3,566,628		1.25
Weighted-Average Fair Value of Options Granted During    the Period	$	0.27

Information with respect to stock options outstanding and exercisable as of September 30, 2013 is as follows:

	Options Outstanding						Options Exercisable
	Number		Weighted -				Number
	Outstanding		Average		Weighted -		Exercisable		Weighted -
Range of	at		Remaining		Average		At		Average
Exercise	Sept. 30,		Contractual		Exercise		Sept. 30,		Exercise
Prices	2013		Life		Price		2013		Price
$ 0.10 - $1.80		4,799,012		8.2 Years	$	0.93		3,566,628	$	1.25

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for options granted.

	2013
Expected Life		5 yrs
Dividend Yield		0	%
Expected Volatility		26.28	%
Risk-Free Interest Rate		0.85	%

Expected volatility for 2013 was estimated by using the Dow Jones U.S. Industry indexes sector classification methodology for industries similar to the Company. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the grant date. The expected life of the options is based on management’s estimate using historical experience.

NOTE 5 RELATED PARTY TRANSACTIONS

On November 19, 2012, the Company entered into a convertible debenture agreement with Robert Gillen for $100,000. Under the original terms of the agreement, Interest is payable at 10% per annum, payable on the maturity date of May 19, 2013. The Company issued warrants to purchase 10,000 shares of the Company Stock, at an exercise price of $ 1.10. The debenture is convertible into shares of Company Common Stock on or before the Maturity Date, at a conversion rate of $1.10 per share. On May 19, 2013, the Company extended the maturity date of the convertible debenture to November 19, 2013.		100,000
Total Due to Related Parties	$	100,000

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NOTE 6 EARNINGS (LOSS) PER SHARE

The following table provides a reconciliation of the numerators and denominators reflected in the basic and diluted earnings per share computations.

Basic EPS is computed by dividing reported earnings available to stockholders by the weighted average shares outstanding. The Company had net losses for the three months and nine months ended September 30, 2013 and 2012, and the effect of including dilutive securities in the earnings per common share would have been anti-dilutive. Accordingly, all options and warrants to purchase common shares (totaling 8,127,581 potential shares at September 30, 2013) were excluded from the calculation of diluted earnings per share for the three months and nine months ended September 30, 2013 and 2012. 

	Three Months		Three Months		Nine Months		Nine Months
	Ending		Ending		Ending		Ending
	Sept. 30, 2013		Sept. 30, 2012		Sept. 30, 2013		Sept. 30, 2012
Basic EPS
Net Loss	$	(1,573,469)		(834,104)	$	(4,339,409)		(2,477,583)
Weighted Average Shares		25,700,296		19,541,679		24,181,281		15,383,548
Basic and Diluted Loss Per Share	$	(0.06)	$	(0.04)	$	(0.18)	$	(0.15)

NOTE 7 SUBSEQUENT EVENTS

In October 2013, the Company sold 100,000 shares of Company Common Stock at a purchase price of $1.10 per share and 20,000 shares at a purchase price of $1.00 in two private placement transactions with one individual and one trust.

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

The following discussion should be read in conjunction with the Company’s unaudited financial statements and associated notes appearing elsewhere in this Form 10-Q.

Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q, including the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, which involve risks and uncertainties, including statements regarding our capital needs, business strategy, and expectations. For a discussion of certain risks related to the statements, please see Part I, “Item IA, Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (filed on April 1, 2013). Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “will,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “forecast,” “project” or “continue,” the negative of such terms or other comparable terminology.

You should not rely on forward-looking statements as predictions of future events or results. Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties, and other factors, which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. These factors may cause our actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for us to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. We disclaim any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this report, except as required by applicable law.

Except as otherwise indicated by the context, references in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” “Iveda,” and “the Company” refer to the business of Iveda Solutions, Inc.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Conditions and Results of Operations is based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A description of our critical accounting policies and related judgments and estimates that affect the preparation of our financial statements is set forth in Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2012. Such policies are unchanged.

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Overview

Iveda Solutions, Inc. began operations on January 24, 2005, under the name IntelaSight, Inc., a Washington corporation doing business as Iveda Solutions (“IntelaSight”). On October 15, 2009, IntelaSight became a wholly-owned operating subsidiary of Iveda Corporation (formerly known as Charmed Homes, Inc.), a Nevada corporation, through a merger. All Company operations were conducted through IntelaSight until December 31, 2010, at which time IntelaSight merged with and into Iveda Corporation, which changed its name to Iveda Solutions, Inc. On April 30, 2011, the Company completed its acquisition of Sole-Vision Technologies, Inc. (doing business as MegaSys), a corporation organized under the laws of the Republic of China (“MegaSys”). As of April 30, 2011, MegaSys became a wholly owned subsidiary of the Company.

The Company sells and installs video surveillance equipment, primarily for security purposes and secondarily for operational efficiencies and marketing, and provides video hosting in-vehicle streaming video, archiving, and real-time remote surveillance services with a proprietary reporting system, DSR™ (Daily Surveillance Report), to a variety of businesses and organizations. By consolidating computer power into a single location at the server level, the Company creates efficiencies due to economies of scale leveraging cloud computing, which offers more features and flexibility compared to traditional box systems. The Company has a SAFETY Act Designation by the Department of Homeland Security as an anti-terrorism technology provider. The Company’s principal sources of revenue are derived from our video hosting real-time surveillance and equipment sales and installation.

MegaSys, our Taiwanese subsidiary, specializes in deploying video surveillance systems for airports, commercial buildings, government customers, data centers, shopping centers, hotels, banks, and Safe City initiatives in Taiwan and other neighboring countries. MegaSys integrates security surveillance products, software and services to provide integrated security solutions to the end user. Most of MegaSys’s revenues are derived from one-time sales, which differs from Iveda’s business model of on-going video hosting, remote video storage, and real-time surveillance revenues. MegaSys does not own any proprietary technology or intellectual property other than certain trademarks in Taiwan used in its business.

New Accounting Pronouncements

In March 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-05, Foreign Currency Matters (Topic 830). This ASU resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights)within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This ASU is the final version of Proposed Accounting Standards Update EITF11Ar—Foreign Currency Matters (Topic 830), which has been deleted. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. For nonpublic entities the amendments in this Update are effective prospectively for the first annual period beginning after December 15, 2014, and interim and annual periods thereafter. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.

In February 2013, FASB issued Accounting Standards Update (ASU) No. 2013-03, Financial Instruments (Topic 825). This ASU clarifies the scope and applicability of a disclosure exemption that resulted from the issuance of Accounting Standards Update No. 2011-04,Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendment clarifies that the requirement to disclose "the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3)" does not apply to nonpublic entities for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed. This ASU is the final version of Proposed Accounting Standards Update 2013-200—Financial Instruments (Topic 825) which has been deleted. The amendments are effective upon issuance.

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In February 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU improves the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.

The new amendments will require an organization to:

• Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

• Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). A private company is required to meet the reporting requirements of the amended paragraphs about the roll forward of accumulated other comprehensive income for both interim and annual reporting periods. However, private companies are only required to provide the information about the effect of reclassifications on line items of net income for annual reporting periods, not for interim reporting periods. The amendments are effective for reporting periods beginning after December 15, 2012, for public companies and are effective for reporting periods beginning after December 15, 2013, for private companies. Early adoption is permitted.

In January 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification(TM) (Codification) or subject to a master netting arrangement or similar agreement. The FASB undertook this clarification project in response to concerns expressed by U.S. stakeholders about the standard’s broad definition of financial instruments. After the standard was finalized, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement, significantly increasing the cost of compliance at minimal value to financial statement users. An entity is required to apply the amendments in ASU 2013-01 for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of ASU 2011-11.

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In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-04, Technical Corrections and Improvements. This ASU make technical corrections, clarifications, and limited-scope improvements to various Topics throughout the Codification. The amendments in this ASU that will not have transition guidance will be effective upon issuance for both public entities and nonpublic entities. For public entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2013.

In August 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-03, Technical Amendments and Corrections to SEC Sections. This ASU amends various SEC paragraphs pursuant to SAB 114, SEC Release No. 33-9250, and ASU 2010-22, which amend or rescind portions of certain SAB Topics.

In July 2012, the FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles-Goodwill and Other General Intangibles Other than Goodwill. Under the guidance in this ASU,an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

Results of Operations

Revenue. We recorded revenue of $568,918 for the three months ended September 30, 2013, compared to $381,173 for the three months ended September 30, 2012, an increase of $187,745 or 49%. In the third fiscal quarter of 2013, our recurring service revenue was $149,578 or 26% of revenue, and our equipment sales and installation revenue was $409,222 or 72% of revenue, compared to recurring service revenue of $129,329 or 34% of revenue, and equipment sales and installation revenue of $212,531 or 56% of revenue for the same period in 2012.

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The increase in revenue was due to a number of new customers, introduction of MyXpressCam hosting service geared toward the consumer and small business market, and dedicated direct salesperson concentrating on MyXpressCam sales.

We recorded revenue of $1,978,306 for the nine months ended September 30, 2013, compared to $2,152,492 for the nine months ended September 30, 2012, a decrease of $174,186 or 8%. In the first nine months of 2013, our recurring service revenue was $476,410 or 24% of revenue, and our equipment sales and installation revenue was $1,467,044 or 74% of revenue, compared to recurring service revenue of $476,391 or 22% of revenue, and equipment sales and installation revenue of $1,561,238 or 73% of revenue for the same fiscal period in 2012. The decrease in equipment sales and installation revenue was due to a small decrease in U.S. revenues as well as slightly lower revenues from our Taiwan subsidiary.

Cost of Revenue. Total cost of revenue was $471,992 (83% of revenues; gross margin of 17%) for the three months ended September 30, 2013, compared to $322,824 (85% of revenue; gross margin of 15%) for the three months ended September 30, 2012, an increase of $149,168 or 46%. The increase of cost of revenue and increase of gross margin was primarily due to the revenue mix being more concentrated on services, where gross margins are higher than on product sales.

Total cost of revenue was $1,667,665 (84% of revenues; gross margin of 16%) for the nine months ended September 30, 2013, compared to $1,729,001 (80% of revenues; gross margin of 20%) for the nine months ended September 30, 2012, an decrease of $61,336 or 4%. The decrease in gross margin for the nine months ended September 30, 2013 was due to the revenue mix being more concentrated on product sales, where our margins are lower than on services revenues.

Operating Expenses. Operating expenses were $1,645,563 for the three months ended September 30, 2013, compared to $867,958 for the three months ended September 30, 2012, an increase of $777,605 or 90%.

Operating expenses were $4,531,718 for the nine months ended September 30, 2013, compared to $2,854,794 for the nine months ended September 30, 2012, an increase of $1,676,924 or 59%. The large increase in operating expenses in 2013 is primarily the increase in marketing efforts through tradeshows and advertising to spur and support further growth in the company’s future.

The increase in operating expenses both in Q3 2013 and YTD 2013 over comparable periods in 2012 was primarily related to investments in meeting the Company’s long-term corporate strategic goals, primarily in research and development combined with increased marketing expenses.

Loss from Operations. As a result of the increases in operating expenses, the loss from operations increased to $1,548,637 for the three months ended September 30, 2013, compared to $809,609 for the three months ended September 30, 2012, an increase in loss of $739,028 or 91%.

As a result of the overall increase in operating expenses and decrease in gross margin, the loss from operations increased to $4,221,077 for the nine months ended September 30, 2013, compared to $2,431,303 for the nine months ended September 30, 2012, an increase in loss of $1,789,774 or 74%.

Other Expense-Net. Other expense-net was $24,832 for the three months ended September 30, 2013, compared to $24,495 for the three months ended September 30, 2012, an increase of $337 or 1%.

Other expense-net was $118,332 for the nine months ended September 30, 2013, compared to $46,280 for the nine months ended September 30, 2012, an increase of $72,052 or 1.55% This is due to the loss from conversion of debt in 2013.

Net Loss. The increase of $739,365 or 89% in the net loss to $1,573,469 for the three months ended September 30, 2013, from $834,104 for the three months ended September 30, 2012, was primarily the effect of decreased revenue and increased operating expenses in 2013.

The increase of $1,861,826 or 75% in the net loss to $4,339,409 for the nine months ended September 30, 2013, from $2,477,583 for the nine months ended September 30, 2012, was primarily the effect of reduced gross profit and increased in operating expenses. 

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Liquidity and Capital Resources

On September 30, 2013, we had cash and cash equivalents of $773,739 in our domestic business and $308,614 on September 30, 2013 in our foreign business. The increase in cash from $114,462 as of December 31, 2012 was due to approximately $5.5 million in equity raise funding. There are no legal or economic factors that materially impact our ability to transfer funds between our domestic and foreign businesses.

Net cash used in operating activities during the nine months ended September 30, 2013, and for the nine months ended September 30, 2012, was $2,835,549 and $2,224,616 respectively. Cash used in operating activities for those periods consisted primarily of the net loss from operations.

Net cash used in and provided by investing activities for the nine months ended September 30, 2013, and the nine months ended September 30, 2012, was $89,897 and $387,064 respectively. The large use of cash in investing activities in 2012 was due to increased capital expenditures to expand our infrastructure for a new major customer.

We have experienced significant operating losses since our inception. At December 31, 2012, we had approximately $19.3 million in net operating loss carry forwards available for federal and state income tax purposes. We did not recognize any benefit from these operating loss carry forwards for the year ended 2012 or through the third quarter of 2013. Our operating loss carry forwards expire starting in 2025 and continuing through 2032.

We believe that our cash on hand as of September 30, 2013 is sufficient to meet our anticipated cash needs for working capital and capital expenditures for the near term. However, the Company has limited liquidity and has not yet established a stabilized source of revenues sufficient to cover operating costs over an extended period of time. As a result, risk exists regarding the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate greater revenues through increased sales and/or its ability to raise additional funds through the capital markets. The Company has engaged Source Capital, Inc. to serve as placement agent in connection with a private placement of up to $3.0 million in principal amount of Senior Convertible Debentures. No assurance can be given that the Company will be successful in these efforts.

Revenue from three customers represented approximately 59% of total revenues for the nine months ended September 30, 2013, and approximately 17% of total accounts receivable at September 30, 2013. No other customers represented greater than 10% of total revenues in the three months ended September 30, 2013. There are some customer receivables that have aged over 120 days. These customers have been identified and an adequate allowance for doubtful accounts has been set up to offset the risk of uncollectibility.

Our U.S. operation has no new customer receivables aged over 120 days. The terms for payment for our U.S. operations are “due upon receipt”. Therefore, no allowance for doubtful accounts for this receivables was recorded this quarter with respect to our U.S. operations.

Our Taiwan operations through MegaSys have 93% of gross accounts receivables aged over 120 days as of September 30, 2013. The payment terms vary based on the timing of the completion of customer projects. MegaSys generally does not control the time of payment because MegaSys’s product is only one component of the larger project. In general, payment takes place within one year of commencing the project, except that 5% of the total payment is retained and released one year after the completion of the project. Excluding such retained amounts, MegaSys provides an allowance for doubtful accounts for any receivables that will not be paid within one year. Management has set up a 47%, or $363,954, allowance for doubtful accounts as of the quarter ended September 30, 2013. Management deems the rest to be collectible based on the nature of the customer contracts and past experience with similar customers.

The Company has a convertible debenture agreement with a maturity date of November 19, 2013 for $100,000. See Note 5.

Substantially all cash is deposited in two financial institutions, one in the United States and one in Taiwan. At times, amounts on deposit in the United States may be in excess of the FDIC insurance limit. Deposits in Taiwan financial institutions are insured by CDIC (Central Deposit Insurance Corporation) with maximum coverage of NTD 3 million. At times, amounts on deposit in Taiwan may be in excess of the CDIC insurance limit.

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Recent Developments

In October 2013, the Company engaged Source Capital, Inc. to serve as placement agent in connection with a planned private placement of up to $3.0 million in principal amount of Senior Convertible Debentures (the “Debenture Offering”). The Company intends to conduct the Debenture Offering in accordance with the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. There can be no assurance that the Company will be successful in raising proceeds from the Debenture Offering.

In October 2013, the Company sold 100,000 shares of Company Common Stock at a purchase price of $1.10 per share and 20,000 shares at a purchase price of $1.00 in two private placement transactions with one individual and one trust.

These issuances were made pursuant to Section 4(2) of the Securities Act of 1933, as amended, Regulation D, and Rule 506 promulgated thereunder. The facts relied upon by the Company to use this exemption were the following: (a) the Company did not use general solicitation or advertising to market the securities; (b) the issuances were only made to accredited investors; and (c) the Company informed the investors that they would receive “restricted” securities.

Off Balance Sheet Arrangements . During the reporting period, the Company had no off-balance sheet arrangements, as such term is defined in Item 303(a)(4) of Regulation S-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, the Company is not required to provide Part I, Item 3 disclosures in this Quarterly Report.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the design and operation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2013. Based on our evaluation, our principal executive officer and our principal financial officer concluded that the design and operation of our disclosure controls and procedures were not effective as of September 30, 2013.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting for our U.S. operations. We are in the process of evaluating our internal controls over financial reporting for MegaSys.

Limitations on the Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Iveda have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or Board override of the control.

24

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Segregation of Duties

As of September 30, 2013, the Company had two employees knowledgeable in SEC accounting and reporting. As a result, there is proper segregation of duties necessary to insure that all transactions are accounted for accurately and in a timely manner. In addition, as our resources allow, we plan to add financial personnel to our management team in order to ensure proper segregation of the duties necessary for accurate and timely financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

See “Part I, Item 3. Legal Proceedings” of the Company’s Annual Report on Form 10-K filed on April 1, 2013, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS.

As a smaller reporting company, the Company is not required to provide Part II, Item 1A disclosures in this Quarterly Report.

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

During the reporting period, pursuant to a $3 million private placement , the Company received a total of $1,502,000 and issued 1,502,000 shares of Common Stock in twenty three private placement transactions with a mix of investors including ) thirteen individuals, eight corporations and two trusts. All issuances were at $1 per share.

In October 2013, the Company sold 100,000 shares of Company Common Stock at a purchase price of $1.10 per share and 20,000 shares at a purchase price of $1.00 in two private placement transactions with one individual and one trust.

These issuances were made pursuant to Section 4(2) of the Securities Act of 1933, as amended, Regulation D, and Rule 506 promulgated thereunder. The facts relied upon by the Company to use this exemption were the following: (a) the Company did not use general solicitation or advertising to market the securities; (b) the issuances were only made to accredited investors; and (c) the Company informed the investors that they would receive only “restricted” securities.

ITEM 3. DEFAULT ON SENIOR SECURITIES.

None.

25

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

None.

26

ITEM 6. EXHIBITS.

Exhibit
Number	Description
2.1	Share Exchange Agreement, dated March 21, 2011, by and among Iveda Solutions, Inc., a Nevada corporation, Sole-Vision Technologies, Inc. (doing business as MegaSys), a corporation organized under the laws of the Republic of China, and the shareholders of MegaSys (Incorporated by reference to Form 10-K/A filed on 2/9/2012).
3.1	Articles of Incorporation of Charmed Homes Inc. (Incorporated by reference to Exhibit 3.1 to Form SB-2 filed on 4/20/2007).
3.2	Bylaws of Charmed Homes Inc. (Incorporated by reference to Exhibit 3.2 to Form SB-2 filed on 4/20/2007).
3.3	Amendment to Bylaws of Charmed Homes Inc. (Incorporated by reference Exhibit 3.1 to Form 8-K/A filed on 12/15/2008).
3.4	Amendment to Articles of Incorporation, filed with the Nevada Secretary of State on September 9, 2009 (Incorporated by reference to Exhibit 3.4 to Form 8-K filed on 10/21/2009).
4.1	Specimen Stock Certificate (Incorporated by reference to Exhibit 4.1 to Form SB-2 filed on 4/20/2007).
4.2	Form of Stock Option Agreement under the IntelaSight, Inc. 2008 Stock Option Plan (Incorporated by reference to Exhibit 4.2 to Form S-4/A1 filed on 7/10/2009).
4.3	Form of Common Stock Purchase Warrant issued by IntelaSight, Inc. (Incorporated by reference to Exhibit 4.3 to Form S-4/A1 filed on 7/10/2009).
4.4	2009 Stock Option Plan, dated October 15, 2009 (Incorporated by reference to Exhibit 4.4 to Form 8-K filed on 10/21/2009).
4.5	Form of Common Stock Purchase Warrant issued by Iveda Corporation in conjunction with the Merger (Incorporated by reference to Exhibit 4.5 to Form 8-K filed on 10/21/2009).
4.6	Iveda Solutions, Inc. 2010 Stock Option Plan, as amended (Incorporated by reference to Appendix A to the Definitive Proxy Statement on Schedule 14A filed on 5/2/2011).
4.7	Form of Notice of Grant of Stock Option under the Iveda Solutions, Inc. 2010 Stock Option Plan, as amended (Incorporated by reference to Exhibit 4.2 to Form S-8 filed on 6/24/2011).
4.8	Form of Stock Option Agreement under the Iveda Solutions, Inc. 2010 Stock Option Plan, as amended (Incorporated by reference to Exhibit 4.3 to Form S-8 filed on 6/24/2011).
4.9	Form of Stock Option Exercise Notice under the Iveda Solutions, Inc. 2010 Stock Option Plan, as amended (Incorporated by reference to Exhibit 4.4 to Form S-8 filed on 6/24/2011).
10.1	Application Development Service Agreement dated July 14, 2006 by and between Axis Communications AB and IntelaSight, Inc. (Incorporated by reference to Exhibit 10.4 to Form S-4/A2 filed on 8/5/2009).
10.2	Partner Agreement dated January 30, 2007 by and between Milestone Systems, Inc. and IntelaSight, Inc. (Incorporated by reference to Exhibit 10.5 to Form S-4/A1 filed on 7/10/2009).
10.3	Solution Partner Agreement dated March 13, 2008 by and between Milestone Systems A/S and IntelaSight, Inc. (Incorporated by reference to Exhibit 10.6 to Form S-4/A1 filed on 7/10/2009).
10.4	Channel Partner Program Membership Agreement — Gold Solution Partner Level — dated June 23, 2009 by and between Axis Communications Inc. and IntelaSight, Inc. (Incorporated by reference to Exhibit 10.9 to Form S-4/A1 filed on 7/10/2009).
10.5	Stock Purchase Agreement, dated October 15, 2009, by and among Iveda Corporation, IntelaSight, Inc., Ian Quinn and Kevin Liggins (Incorporated by reference to Exhibit 10.10 to Form 8-K filed on 10/21/2009).

27

10.6	Subscription Agreement, dated July 26, 2010 (Incorporated by reference to Exhibit 10.10 to Form 10-Q filed on 11/12/2010).
10.7	Line of Credit Promissory Note, dated September 15, 2010 (Incorporated by reference to Exhibit 10.11 to Form 10-Q filed on 11/12/2010).
10.8	Agreement for Services, dated October 20, 2010 (Incorporated by reference to Exhibit 10.12 to Form 10-Q filed on 11/12/2010).
10.9	Consulting Agreement, dated October 25, 2010 (Incorporated by reference to Exhibit 10.13 to Form 10-Q filed on 11/12/2010).
10.10	Operating Level Agreement, dated October 25, 2010 (Incorporated by reference to Exhibit 10.14 to Form 10-Q filed on 11/12/2010).
10.11	Side Letter, dated March 21, 2011, by and among Iveda Solutions, Inc., Sole-Vision Technologies, Inc. (doing business as MegaSys), and the shareholders of MegaSys (Incorporated by reference to Exhibit 10.15 to Form 10-K filed on 3/30/2011).
10.12	Non-Exclusive Strategic Collaboration Agreement between Iveda Solutions, Inc. and Telmex, U.S.A., LLC, dated October 28, 2011 (Incorporated by reference to Exhibit 10.12 to Form 10-Q/A filed on 3/7/2012).
10.13	2010 Digital Video Remote Monitoring Recording System Procurement Contract between Sole-Vision Technology, Inc. and New Taipei City Police Department Purchasing Authority, dated January 9, 2012 (Incorporated by reference to Exhibit 10.13 to Form 10-K filed on 3/30/2012).
10.14	Consulting Agreement between Iveda Solutions, Inc. and Amextel S.A. de C.V. dated November 2, 2011 (Incorporated by reference to Exhibit 10.14 to Form 10-K/A filed on 5/10/2012).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**.
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**.
101.1	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2013 and 2012, (iii) Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2013 and 2012, and (iv) the Notes to Condensed Consolidated Financial Statements (Unaudited).**

* Filed herewith

** Furnished herewith

28

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.

	IVEDA SOLUTIONS, INC.
	(Registrant)
Date: November 14, 2013	BY:	/s/ David Ly
		David Ly
		President, Chief Executive Officer, and Chairman (Principal Executive Officer)
	BY:	/s/ Brian Duling
		Brian Duling
		CFO (Chief Financial Officer)

29

 

EX-31.1

Exhibit 31.1

 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

EXCHANGE ACT RULE 13a-1(a) or RULE 15d-14(a)

(AUTHORIZED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, David Ly, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Iveda Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2013

/s/ David Ly

David Ly

Chief Executive Officer

(Principal Executive Officer)

 

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

EXCHANGE ACT RULE 13a-1(a) or RULE 15d-14(a)

(AUTHORIZED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, Brian Duling, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Iveda Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2013

/s/ Brian Duling

Brian Duling

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

 PURSUANT TO 18 U.S.C. § 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

I, David Ly, Chief Executive Officer (principal executive officer) of Iveda Solutions, Inc. (the “Registrant”), certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based upon a review of the Quarterly Report on Form 10-Q for the period ended September 30, 2013 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.

Date: November 14, 2013

/s/ David Ly

David Ly

Chief Executive Officer

(Principal Executive Officer)

 

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

 PURSUANT TO 18 U.S.C. §1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

I, Brian Duling, Chief Financial Officer (principal financial officer) of Iveda Solutions, Inc. (the “Registrant”), certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based upon a review of the Quarterly Report on Form 10-Q for the period ended September 30, 2013 of the Registrant (the “Report”):

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.

Date: November 14, 2013

/s/ Brian Duling

Brian Duling

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

XML

RELATED PARTY TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Schedule of Related Party Transactions [Table Text Block]

On November 19, 2012, the Company entered into a convertible debenture agreement with Robert Gillen for $100,000. Under the original terms of the agreement, Interest is payable at 10% per annum, payable on the maturity date of May 19, 2013. The Company issued warrants to purchase 10,000 shares of the Company Stock, at an exercise price of $ 1.10. The debenture is convertible into shares of Company Common Stock on or before the Maturity Date, at a conversion rate of $1.10 per share. On May 19, 2013, the Company extended the maturity date of the convertible debenture to November 19, 2013.		100,000
Total Due to Related Parties	$	100,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net Loss	$ (1,573,469)	$ (834,104)	$ (4,339,409)	$ (2,477,583)
Other comprehensive income (loss):
Foreign currency translation adjustment	1,022	14,660	(7,757)	21,486
Comprehensive Loss	$ (1,572,447)	$ (819,444)	$ (4,347,166)	$ (2,456,097)

XML

RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 5 RELATED PARTY TRANSACTIONS

On November 19, 2012, the Company entered into a convertible debenture agreement with Robert Gillen for $100,000. Under the original terms of the agreement, Interest is payable at 10% per annum, payable on the maturity date of May 19, 2013. The Company issued warrants to purchase 10,000 shares of the Company Stock, at an exercise price of $ 1.10. The debenture is convertible into shares of Company Common Stock on or before the Maturity Date, at a conversion rate of $1.10 per share. On May 19, 2013, the Company extended the maturity date of the convertible debenture to November 19, 2013.		100,000
Total Due to Related Parties	$	100,000

XML

SHORT-TERM DEBT (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Total Short-Term Debt	$ 87,000	$ 802,122
Note Payable, 10% interest per annum, maturing on December 7, 2013 [Member]
Notes Payable	77,000
Note Payable, 10% interest per annum, maturing on December 20, 2013 [Member]
Notes Payable	$ 10,000

XML

EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table provides a reconciliation of the numerators and denominators reflected in the basic and diluted earnings per share computations.

	Three Months		Three Months		Nine Months		Nine Months
	Ending		Ending		Ending		Ending
	Sept. 30, 2013		Sept. 30, 2012		Sept. 30, 2013		Sept. 30, 2012
Basic EPS
Net Loss	$	(1,573,469)		(834,104)	$	(4,339,409)		(2,477,583)
Weighted Average Shares		25,700,296		19,541,679		24,181,281		15,383,548
Basic and Diluted Loss Per Share	$	(0.06)	$	(0.04)	$	(0.18)	$	(0.15)

XML

STOCK OPTION PLAN (Details) (USD $)	9 Months Ended
	Sep. 30, 2013
Shares, Outstanding at Beginning of Year	5,038,512
Shares, Granted	160,000
Shares, Exercised	(244,500)
Shares, Forfeited or Canceled	(155,000)
Shares, Outstanding at End of Period	4,799,012
Shares, Options Exercisable at Period-End	3,566,628
Weighted-Average Fair Value of Options Granted During the Period	$ 0.27
Weighted - Average Exercise Price, Outstanding at Beginning of Year	$ 0.91
Weighted - Average Exercise Price, Granted	$ 1.63
Weighted - Average Exercise Price, Exercised	$ 0
Weighted - Average Exercise Price, Forfeited or Canceled	$ 1.09
Weighted - Average Exercise Price, Outstanding at End of Period	$ 0.93
Weighted - Average Exercise Price, Options Exercisable at Period-End	$ 1.25

XML

EQUITY (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2013
Preferred Stock, Shares Authorized (in shares)	100,000,000
Preferred Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.00001
Proceeds from Issuance of Private Placement	$ 5,459,501
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs (in dollars)	540,150
Maximum [Member]
Stock Issued During Period, Price Per Share (in dollars per share)	$ 1.10
Minimum [Member]
Stock Issued During Period, Price Per Share (in dollars per share)	$ 1.00
Common Stock [Member]
Stock Issued During Period, Shares, Issued for Services	80,000
Stock Issued During Period, Value, Issued for Services	122,000
Allocated Share-based Compensation Expense	122,000
Warrant [Member]
Allocated Share-based Compensation Expense	60,075
Warrants To Purchase Common Stock	100,000
Investment Warrants, Exercise Price	$ 1.65
Investment Warrants Expiration Period	10 years
Stock and Warrants Issued During Period, Value, Preferred Stock and Warrants	$ 60,075

XML

EARNINGS (LOSS) PER SHARE (Details Textual)	9 Months Ended
	Sep. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	8,127,581

XML

RELATED PARTY TRANSACTIONS (Details) (USD $)	Sep. 30, 2013
Due to Related Parties	$ 100,000
Convertible debenture agreement with Robert Gillen [Member]
Due to Related Parties	$ 100,000

XML

SHORT-TERM DEBT (Details Textual) (USD $)	3 Months Ended				9 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Sep. 30, 2013 Maximum [Member] Due in April and September of 2013 [Member]	Sep. 30, 2013 Minimum [Member] Due in April and September of 2013 [Member]	Sep. 30, 2013 Note Payable, 10% interest per annum, maturing on December 7, 2013 [Member]	Sep. 30, 2013 Note Payable, 10% interest per annum, maturing on December 20, 2013 [Member]
Short-term Debt, Percentage Bearing Fixed Interest Rate			5.82%	3.24%	10.00%	10.00%
Debt Instrument, Maturity Date					Dec. 07, 2013	Dec. 20, 2013
Purchase of Warrant					7,000	909
Warrant Exercise Price					$ 1.50	$ 1.50
Extinguishment of Debt, Amount		$ 45,000
Payments of Debt Extinguishment Costs		15,000
Debt Conversion, Converted Instrument, Amount	50,000	30,000
Debt Instrument, Convertible, Conversion Price	$ 1.00	$ 1.00
Gain Loss On Conversion Of Debt	$ 27,500	$ 16,500

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. The operating results and cash flows for the nine-month period ended September 30, 2013, are not necessarily indicative of the results that will be achieved for the full fiscal year ending December 31, 2013 or for future periods.

The accompanying condensed consolidated financial statements have been prepared without audit and reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of financial position and the results of operations for the interim periods. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, impairment costs, depreciation and amortization, sales returns and discounts, warranty costs, uncertain tax positions and the recoverability of deferred tax assets, stock compensation, contingencies and the fair value of assets and liabilities disclosed. Actual results and outcomes may differ from management’s estimates and assumptions. The statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to such SEC rules and regulations.

The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Consolidation

Effective April 30, 2011, Iveda Solutions, Inc. (the “Company”) completed its acquisition of Sole Vision Technologies (dba “MegaSys”), a company based in Taiwan. The consolidated financial statements include the accounts of the Company and MegaSys. All intercompany balances and transactions have been eliminated in consolidation.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Since inception, the Company has generated an accumulated deficit from operations of approximately $19.3 million at September 30, 2013 and has used approximately $2.8 million in cash from operations through the current nine months ended September 30, 2013. As a result, a risk exists regarding our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty.

A multi-step plan was adopted by management to enable the Company to continue to operate and begin to report operating profits. The highlights of that plan are:

⋅      The Company is seeking additional financing and has engaged an investment bank to serve as placement agent. The financing may be in the form of sales of equity securities, debt convertible into equity securities and non-convertible debt, which may either be secured or unsecured.

⋅ In the third quarter of 2013, the Company launched two new camera lines in collaboration with MegaSys, its Taiwan subsidiary and Industrial Technology Research Institute (ITRI), its nonprofit research and development partner in Taiwan. These products are enablers of the Company’s video hosting services.

⋅     The Company has also recently developed two other standalone services:

o IvedaMobile–a cloud-hosting service that turns any smartphone or tablet into a mobile, cloud video streaming device. This was developed with ITRI.

o IvedaXchange – In collaboration with a technology partner, the Company developed a real-time situational awareness dashboard to enable organizations instant access to vital and filtered information such as emergency situations, location of critical assets, video monitoring, and local news. IvedaXchange is well-suited for law enforcement agencies and schools.

⋅     The Company launched a new website to highlight new products and services with corresponding applications.

⋅     The Company launched a second website allowing for direct web-sales, geared toward the residential and small-to-medium sized businesses. 

⋅     The Company intends to continue to participate in industry and vertical tradeshows to launch new products, generate leads, solicit resellers and other sales channels, and identify potential technology partners.

⋅     The Company intends to continue advertising on selected trade magazines and running Google Adwords to generate leads.

⋅     The Company has evaluated its reseller distribution channel and eliminated non-performing components of the channel.

⋅     The Company is in active collaboration with certain telecommunications companies in other countries to resell the Company’s products and services in their respective countries.

Concentrations

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts receivable.

Substantially all cash is deposited in two financial institutions, one in the United States and one in Taiwan. At times, amounts on deposit in the United States may be in excess of the FDIC insurance limit. Deposits in Taiwan financial institutions are insured by CDIC (Central Deposit Insurance Corporation) with maximum coverage of NTD 3 million. At times, amounts on deposit in Taiwan may be in excess of the CDIC insurance limit.

Accounts receivable are unsecured, and the Company is at risk to the extent such amount becomes uncollectible. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. Revenue from three customers represented approximately 59% of total revenues for the nine months ended September 30, 2013, and approximately 17% of total accounts receivable at September 30, 2013.

Intangible Assets and Goodwill

Intangible assets consist of trademarks and other intangible assets associated with the purchase price allocation of MegaSys. Such assets are being amortized over their estimated useful lives ranging from six months to ten years. Other Intangible Assets are fully amortized as of September 30, 2013. Future amortization of Intangible Assets is as follows:

Trademarks
2013	$	5,000
2014		20,000
2015		20,000
2016		20,000
Thereafter		86,666
Total	$	151,666

Goodwill represents the excess of the purchase price of MegaSys over the net assets acquired. Goodwill is tested annually for impairment or more frequently if indicators of impairment exist.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2013. The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued expenses, convertible notes and amounts due to related parties. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

Segment Information

The Company conducts operations in various geographic regions outside the United States. The operations and the customer base conducted in the foreign countries are similar to the United States operations. The net revenues and net assets (liabilities) for other significant geographic regions outside the United States during the 9 months ended September 30, 2013 are as follows:

	Net Revenues		Net Assets
United States	$	378,222	$	2,349,594
Asia	$	1,404,127	$	41,006
Mexico	$	195,957		-

Furthermore, due to operations in various geographic locations, the Company is susceptible to changes in national, regional and local economic conditions, demographic trends, consumer confidence in the economy and discretionary spending priorities that may have a material adverse effect on the Company’s future operations and results.

The Company is required to collect certain taxes and fees from customers on behalf of government agencies and remit these back to the applicable governmental agencies on a periodic basis. These taxes and fees are legal assessments to the customer, for which the Company has a legal obligation to act as a collection agent. Because the Company does not retain these taxes and fees, the Company does not include such amounts in revenue. The Company records a liability when the amounts are collected and relieves the liability when payments are made to the applicable governmental agencies.

The Company operates as two reportable business segments in defined in ASC 280, "Segment Reporting." Each business segment has a chief operating decision maker and management personnel which review their business segment’s performance as it relates to revenue, operating profit and operating expenses.

	Three Months		Three Months		Condensed
	Ended September, 2013		Ended September 30, 2013		Consolidated
	Iveda Solutions, Inc.		MegaSys		Total
Revenue	$	203,942	$	364,976	$	568,918
Cost of Revenue		209,195		262,797		464,603
Gross Profit		(5,253)		102,179		96,926
Depreciation and Amort.		53,181		2,634		55,815
General and Administrative		1,375,451		214,297		1,589,748
(Loss) from Operations		(1,433,885)		(114,752)		(1,548,637)
Foreign Currency Gain (Loss)		(8,611)		-		(8,611)
Loss from the conversion of debt		-		-		-
Interest Income		-		-		-
Interest Expense		11,676		4,545		16,221
(Loss) Before Income Taxes		(1,454,172)		(119,297)		(1,573,469)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(1,454,172)	$	(119,297)	$	(1,573,469)

	Nine Months
	Ended September 30,		Nine Months
	2013		Ended September 30,		Condensed
	Iveda Solutions,		2013		Consolidated
	Inc.		MegaSys		Total
Revenue	$	574,179	$	1,404,127	$	1,978,306
Cost of Revenue		565,258		1,102,407		1,667,665
Gross Profit		8,921		301,720		310,641
Depreciation and Amortization		161,157		8,007		169,164
General and Administrative		3,758,437		604,117		4,362,554
(Loss) from Operations		(3,910,673)		(310,404)		(4,221,077)
Foreign Currency Gain (Loss)		(9,718)		-		(9,718)
Loss from the conversion of debt		(44,000)		-		(44,000)
Interest Income		-		997		997
Interest Expense		51,670		13,941		65,611
(Loss) Before Income Taxes		(4,016,061)		(323,348)		(4,339,409)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(4,016,061)	$	(323,348)	$	(4,339,409)

Revenues as shown below represent sales to external customers for each segment. Additions to long-lived assets as presented in the following table represent capital expenditures. Inventories, property and equipment for operating segments are regularly reviewed by management and are therefore provided below.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Revenues
United States	$	203,943	$	148,226	$	574,179	$	601,230
Republic of China (Taiwan)		364,975		232,947		1,404,127		1,551,262
	$	568,918	$	381,173	$	1,978,306	$	2,152,492

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Operating earnings (loss)
United States	$	(1,433,885)	$	(713,160)	$	(3,910,673)	$	(2,216,260)
Republic of China (Taiwan)		(114,752)		(96,449)		(310,404)		(215,043)
	$	(1,548,637)	$	(809,609)	$	(4,221,077)	$	(2,431,303)

	Nine Months Ended
	September 30,
	2013		2012
Property and equipment
United States	$	438,686	$	580,014
Republic of China (Taiwan)		12,525		31,095
	$	451,211	$	611,109

	Nine Months Ended
	September 30,
	2013		2012
Additions to long-lived assets
United States	$	86,868		223,705
Republic of China (Taiwan)		(1,660)		11,884
	$	85,208		235,589

	Nine Months Ended
	September 30,
	2013		2012
Inventory
United States	$	51,955	$	810
Republic of China (Taiwan)		156,178		106,766
	$	208,133	$	107,576

	Nine Months Ended
	September 30,
	2013		2012
Total Assets
United States	$	2,467,126	$	1,898,479
Republic of China (Taiwan)		2,154,036		1,924,128
	$	4,621,162	$	3,822,607

Reclassification

Certain amounts in 2012 may have been reclassified to conform to the 2013 presentation.

New Accounting Pronouncements

In March 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-05, Foreign Currency Matters (Topic 830). This ASU resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights)within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This ASU is the final version of Proposed Accounting Standards Update EITF11Ar—Foreign Currency Matters (Topic 830), which has been deleted. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. For nonpublic entities the amendments in this Update are effective prospectively for the first annual period beginning after December 15, 2014, and interim and annual periods thereafter. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.

In February 2013, FASB issued Accounting Standards Update (ASU) No. 2013-03, Financial Instruments (Topic 825). This ASU clarifies the scope and applicability of a disclosure exemption that resulted from the issuance of Accounting Standards Update No. 2011-04,Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendment clarifies that the requirement to disclose "the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3)" does not apply to nonpublic entities for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed. This ASU is the final version of Proposed Accounting Standards Update 2013-200—Financial Instruments (Topic 825) which has been deleted. The amendments are effective upon issuance.

In February 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU improves the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.

The new amendments will require an organization to:

• Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

• Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). A private company is required to meet the reporting requirements of the amended paragraphs about the roll forward of accumulated other comprehensive income for both interim and annual reporting periods. However, private companies are only required to provide the information about the effect of reclassifications on line items of net income for annual reporting periods, not for interim reporting periods. The amendments are effective for reporting periods beginning after December 15, 2012, for public companies and are effective for reporting periods beginning after December 15, 2013, for private companies. Early adoption is permitted.

In January 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification(TM) (Codification) or subject to a master netting arrangement or similar agreement. The FASB undertook this clarification project in response to concerns expressed by U.S. stakeholders about the standard’s broad definition of financial instruments. After the standard was finalized, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement, significantly increasing the cost of compliance at minimal value to financial statement users. An entity is required to apply the amendments in ASU 2013-01 for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of ASU 2011-11.

In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-04, Technical Corrections and Improvements. This ASU make technical corrections, clarifications, and limited-scope improvements to various Topics throughout the Codification. The amendments in this ASU that will not have transition guidance will be effective upon issuance for both public entities and nonpublic entities. For public entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2013.

In August 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-03, Technical Amendments and Corrections to SEC Sections. This ASU amends various SEC paragraphs pursuant to SAB 114, SEC Release No. 33-9250, and ASU 2010-22, which amend or rescind portions of certain SAB Topics.

In July 2012, the FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles-Goodwill and Other General Intangibles Other than Goodwill. Under the guidance in this ASU,an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

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EQUITY

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 3  EQUITY

Preferred Stock

The Company is authorized to issue 100,000,000 shares of $0.00001 par value preferred stock. No shares have been issued, and the rights and privileges of this class of stock have not been defined.

Common Stock

During the nine months ended September 30, 2013, the Company raised $5,459,501 in a private placement of shares ranging from $1.00 to a $1.10 per share. Costs associated with this raise totaled $540,150.

During the nine months ended September 30, 2013, the Company issued 80,000 shares of its common stock to consultants for services. The fair market value of these shares on their respective date of issuances totaled $122,000. As a result, the Company recorded non-cash compensation expense of $122,000.

During the nine months ended September 30, 2013, the Company issued a warrant to purchase 100,000 shares of its common stock at an exercise price of $1.65 per share. The warrant became fully vested at the time of issuance and expires ten years from the date of issuance. Using the Black Scholes pricing model, the warrant was valued at $60,075. As a result, the Company recorded non-cash compensation expense of $60,075.

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EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 6 EARNINGS (LOSS) PER SHARE

The following table provides a reconciliation of the numerators and denominators reflected in the basic and diluted earnings per share computations.

Basic EPS is computed by dividing reported earnings available to stockholders by the weighted average shares outstanding. The Company had net losses for the three months and nine months ended September 30, 2013 and 2012, and the effect of including dilutive securities in the earnings per common share would have been anti-dilutive. Accordingly, all options and warrants to purchase common shares (totaling 8,127,581 potential shares at September 30, 2013) were excluded from the calculation of diluted earnings per share for the three months and nine months ended September 30, 2013 and 2012. 

	Three Months		Three Months		Nine Months		Nine Months
	Ending		Ending		Ending		Ending
	Sept. 30, 2013		Sept. 30, 2012		Sept. 30, 2013		Sept. 30, 2012
Basic EPS
Net Loss	$	(1,573,469)		(834,104)	$	(4,339,409)		(2,477,583)
Weighted Average Shares		25,700,296		19,541,679		24,181,281		15,383,548
Basic and Diluted Loss Per Share	$	(0.06)	$	(0.04)	$	(0.18)	$	(0.15)

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STOCK OPTION PLAN

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 4 STOCK OPTION PLAN

The Company has also granted non-qualified stock options to employees and contractors. All non-qualified options are generally issued with an exercise price equal to the closing price of the Common Stock on the date of the grant. Options may be exercised up to ten years following the date of the grant, with vesting schedules determined by the Company upon grant. Vesting periods range from 100% fully vested upon grant to a range of four to five years. Vested options may be exercised up to three months following date of termination of the relationship. The fair values of options are determined using the Black-Scholes option-pricing model. The estimated fair value of options is recognized as an expense on the straight-line basis over the options’ vesting periods.

 

Stock option transactions during the nine months ended September 30, 2013 were as follows:

	Nine months ended September 30, 2013
			Weighted -
			Average
	Shares		Exercise Price
Outstanding at Beginning of Year		5,038,512	$	0.91
Granted		160,000		1.63
Exercised		(244,500)		-
Forfeited or Canceled		(155,000)		1.09
Outstanding at End of Period		4,799,012		0.93
Options Exercisable at Period-End		3,566,628		1.25
Weighted-Average Fair Value of Options Granted During    the Period	$	0.27

Information with respect to stock options outstanding and exercisable as of September 30, 2013 is as follows:

	Options Outstanding						Options Exercisable
	Number		Weighted -				Number
	Outstanding		Average		Weighted -		Exercisable		Weighted -
Range of	at		Remaining		Average		At		Average
Exercise	Sept. 30,		Contractual		Exercise		Sept. 30,		Exercise
Prices	2013		Life		Price		2013		Price
$ 0.10 - $1.80		4,799,012		8.2 Years	$	0.93		3,566,628	$	1.25

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for options granted.

	2013
Expected Life		5 yrs
Dividend Yield		0	%
Expected Volatility		26.28	%
Risk-Free Interest Rate		0.85	%

Expected volatility for 2013 was estimated by using the Dow Jones U.S. Industry indexes sector classification methodology for industries similar to the Company. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the grant date. The expected life of the options is based on management’s estimate using historical experience.

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STOCK OPTION PLAN (Details 1) (USD $)	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Range of Exercise Prices (Minimum) (in dollars per share)	$ 0.10
Range of Exercise Prices (Maximum) (in dollars per share)	$ 1.80
Number of Options, Outstanding at September 30, 2013 (in shares)	4,799,012	5,038,512
Weighted - Average Remaining Contractual Life (in years)	8 years 2 months 12 days
Options Outstanding, Weighted -Average Exercise Price (in dollars per share)	$ 0.93	$ 0.91
Number of Options, Exercisable at September 30, 2013 (in shares)	3,566,628
Options Exercisable, Weighted - Average Exercise Price (in dollars per share)	$ 1.25

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RELATED PARTY TRANSACTIONS (Details Textual) (USD $)			1 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	May 19, 2013 Debt Agreement 2 [Member]	Nov. 19, 2012 Debt Agreement 2 [Member]
Debt Instrument, Face Amount				$ 100,000
Debt Instrument, Interest Rate at Period End				10.00%
Debt Instrument, Maturity Date			Nov. 19, 2013	May 19, 2013
Issuance of Warrants to Purchase Common Stock				10,000
Warrants Exercise Price				$ 1.10
Debt Instrument, Convertible, Conversion Price	$ 1.00	$ 1.00		$ 1.10

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
REVENUE
Equipment Sales	$ 409,222	$ 212,531	$ 1,467,044	$ 1,309,495
Service Revenue	149,578	162,970	476,410	811,591
Other Revenue	10,118	5,672	34,852	31,406
TOTAL REVENUE	568,918	381,173	1,978,306	2,152,492
COST OF REVENUE	471,992	322,824	1,667,665	1,729,001
GROSS PROFIT	96,926	58,349	310,641	423,491
OPERATING EXPENSES	1,645,563	867,958	4,531,718	2,854,794
LOSS FROM OPERATIONS	(1,548,637)	(809,609)	(4,221,077)	(2,431,303)
OTHER INCOME (EXPENSE)
Foreign Currency Gain (Loss)	(8,611)	(87)	(9,718)	(87)
Loss from conversion of debt	0	0	(44,000)	0
Interest Income	0	6	997	545
Interest Expense	(16,221)	(24,414)	(65,611)	(46,738)
Total Other Income (Expense)	(24,832)	(24,495)	(118,332)	(46,280)
LOSS BEFORE INCOME TAXES	(1,573,469)	(834,104)	(4,339,409)	(2,477,583)
BENEFIT FOR INCOME TAXES	0	0	0	0
NET LOSS	$ (1,573,469)	$ (834,104)	$ (4,339,409)	$ (2,477,583)
BASIC AND DILUTED LOSS PER SHARE (in dollars per share)	$ (0.06)	$ (0.04)	$ (0.18)	$ (0.15)

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Future amortization of Intangible Assets is as follows:

Trademarks
2013	$	5,000
2014		20,000
2015		20,000
2016		20,000
Thereafter		86,666
Total	$	151,666

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The net revenues and net assets (liabilities) for other significant geographic regions outside the United States during the 9 months ended September 30, 2013 are as follows:

	Net Revenues		Net Assets
United States	$	378,222	$	2,349,594
Asia	$	1,404,127	$	41,006
Mexico	$	195,957		-

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

The Company operates as two reportable business segments in defined in ASC 280, "Segment Reporting." Each business segment has a chief operating decision maker and management personnel which review their business segment’s performance as it relates to revenue, operating profit and operating expenses.

	Three Months		Three Months		Condensed
	Ended September, 2013		Ended September 30, 2013		Consolidated
	Iveda Solutions, Inc.		MegaSys		Total
Revenue	$	203,942	$	364,976	$	568,918
Cost of Revenue		209,195		262,797		464,603
Gross Profit		(5,253)		102,179		96,926
Depreciation and Amort.		53,181		2,634		55,815
General and Administrative		1,375,451		214,297		1,589,748
(Loss) from Operations		(1,433,885)		(114,752)		(1,548,637)
Foreign Currency Gain (Loss)		(8,611)		-		(8,611)
Loss from the conversion of debt		-		-		-
Interest Income		-		-		-
Interest Expense		11,676		4,545		16,221
(Loss) Before Income Taxes		(1,454,172)		(119,297)		(1,573,469)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(1,454,172)	$	(119,297)	$	(1,573,469)

	Nine Months
	Ended September 30,		Nine Months
	2013		Ended September 30,		Condensed
	Iveda Solutions,		2013		Consolidated
	Inc.		MegaSys		Total
Revenue	$	574,179	$	1,404,127	$	1,978,306
Cost of Revenue		565,258		1,102,407		1,667,665
Gross Profit		8,921		301,720		310,641
Depreciation and Amortization		161,157		8,007		169,164
General and Administrative		3,758,437		604,117		4,362,554
(Loss) from Operations		(3,910,673)		(310,404)		(4,221,077)
Foreign Currency Gain (Loss)		(9,718)		-		(9,718)
Loss from the conversion of debt		(44,000)		-		(44,000)
Interest Income		-		997		997
Interest Expense		51,670		13,941		65,611
(Loss) Before Income Taxes		(4,016,061)		(323,348)		(4,339,409)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(4,016,061)	$	(323,348)	$	(4,339,409)

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

Revenues as shown below represent sales to external customers for each segment. Additions to long-lived assets as presented in the following table represent capital expenditures. Inventories, property and equipment for operating segments are regularly reviewed by management and are therefore provided below.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Revenues
United States	$	203,943	$	148,226	$	574,179	$	601,230
Republic of China (Taiwan)		364,975		232,947		1,404,127		1,551,262
	$	568,918	$	381,173	$	1,978,306	$	2,152,492

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Operating earnings (loss)
United States	$	(1,433,885)	$	(713,160)	$	(3,910,673)	$	(2,216,260)
Republic of China (Taiwan)		(114,752)		(96,449)		(310,404)		(215,043)
	$	(1,548,637)	$	(809,609)	$	(4,221,077)	$	(2,431,303)

	Nine Months Ended
	September 30,
	2013		2012
Property and equipment
United States	$	438,686	$	580,014
Republic of China (Taiwan)		12,525		31,095
	$	451,211	$	611,109

	Nine Months Ended
	September 30,
	2013		2012
Additions to long-lived assets
United States	$	86,868		223,705
Republic of China (Taiwan)		(1,660)		11,884
	$	85,208		235,589

	Nine Months Ended
	September 30,
	2013		2012
Inventory
United States	$	51,955	$	810
Republic of China (Taiwan)		156,178		106,766
	$	208,133	$	107,576

	Nine Months Ended
	September 30,
	2013		2012
Total Assets
United States	$	2,467,126	$	1,898,479
Republic of China (Taiwan)		2,154,036		1,924,128
	$	4,621,162	$	3,822,607

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$ (4,339,409)	$ (2,477,583)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Depreciation and Amortization	169,164	181,456
Loss from Conversion of Debt	44,000	0
Stock Compensation	126,813	96,573
Common Stock Issued for Services	222,206	110,562
(Increase) Decrease in Operating Assets:
Accounts Receivable	1,410,678	245,307
Inventory	(86,424)	(24,686)
Other Current Assets	56,312	(243,041)
Accounts and Other Payables	(438,889)	(113,204)
Net cash used in operating activities	(2,835,549)	(2,224,616)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment	(89,897)	(387,064)
Net cash used in investing activities	(89,897)	(387,064)
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in Restricted Cash	(441,724)	(46,903)
Proceeds from (Payments on) Short-Term Notes Payable/Debt	(586,514)	431,662
Proceeds from Exercise of Stock Options	244,574	0
Proceeds from (Payments to) Related Parties	(236,605)	352,892
Proceeds from (Payments on) Long-Term Debt	0	(35,839)
Payments on Capital Lease Obligations	(6,987)	(8,561)
Common Stock Issued, net of Cost of Capital	4,913,216	1,797,021
Net cash provided by financing activities	3,885,960	2,490,272
EFFECT OF EXCHANGE RATE CHANGES ON CASH	7,377	16,731
NET INCREASE IN CASH AND CASH EQUIVALENTS	967,891	(104,677)
Cash and Cash Equivalents - Beginning of Period	114,462	850,364
CASH AND CASH EQUIVALENTS - END OF PERIOD	1,082,353	745,687
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid	$ 66,203	$ 46,738

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and Cash Equivalents	$ 1,082,353	$ 114,462
Restricted Cash	883,630	447,206
Accounts Receivable, net	508,136	1,958,799
Inventory	208,133	123,021
Other Current Assets	391,007	645,728
Total Current Assets	3,073,259	3,289,216
PROPERTY AND EQUIPMENT, Net	451,211	516,981
OTHER ASSETS
Intangible Assets, Net	151,666	166,666
Goodwill	841,000	841,000
Other Assets	104,026	105,621
Total Other Assets	1,096,692	1,113,287
Total Assets	4,621,162	4,919,484
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts and Other Payables	1,793,682	2,456,788
Due to Related Parties, net of debt discount	100,000	336,605
Short Term Debt	87,000	802,122
Current Portion of Long-Term Debt	185,338	75,707
Total Current Liabilities	2,166,020	3,671,222
LONG TERM DEBT	64,542	67,695
STOCKHOLDERS’ EQUITY
Preferred Stock	0	0
Common Stock	262	204
Additional Paid-In Capital	21,754,820	16,204,068
Accumulated Comprehensive Income (Loss)	(24,997)	(23,629)
Accumulated Deficit	(19,339,485)	(15,000,076)
Total Stockholders’ Equity	2,390,600	1,180,567
Total Liabilities and Stockholders’ Equity	$ 4,621,162	$ 4,919,484

XML

STOCK OPTION PLAN (Details 2)	9 Months Ended
	Sep. 30, 2013
Expected Life	5 years
Dividend Yield	0.00%
Expected Volatility	26.28%
Risk-Free Interest Rate	0.85%

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Accumulated Deficit	$ 19,339,485		$ 15,000,076
Net Cash Used in Operating Activities	2,835,549	2,224,616
Accounting Standards Update 2012-02 [Member]
New Accounting Pronouncement or Change in Accounting Principle, Description	The FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles-Goodwill and Other General Intangibles Other than Goodwill. Under the guidance in this ASU,an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.
Customer Three [Member]
Concentration Risk Customer Percentage	59.00%
Accounts Receivable [Member]
Concentration Risk Customer Percentage	17.00%
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life	6 months
Maximum [Member]
Cash CDIC Insured Amount	$ 3,000,000
Finite-Lived Intangible Asset, Useful Life	10 years

XML

SUBSEQUENT EVENTS (Details Textual) (Subsequent Event [Member])	9 Months Ended
	Sep. 30, 2013
Subsequent Event [Member]
Subsequent Event, Description	In October 2013, the Company sold 100,000 shares of Company Common Stock at a purchase price of $1.10 per share and 20,000 shares at a purchase price of $1.00 in two private placement transactions with one individual and one trust.

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Consolidation

Effective April 30, 2011, Iveda Solutions, Inc. (the “Company”) completed its acquisition of Sole Vision Technologies (dba “MegaSys”), a company based in Taiwan. The consolidated financial statements include the accounts of the Company and MegaSys. All intercompany balances and transactions have been eliminated in consolidation.

Liquidity Disclosure [Policy Text Block]

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Since inception, the Company has generated an accumulated deficit from operations of approximately $19.3 million at September 30, 2013 and has used approximately $2.8 million in cash from operations through the current nine months ended September 30, 2013. As a result, a risk exists regarding our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty.

A multi-step plan was adopted by management to enable the Company to continue to operate and begin to report operating profits. The highlights of that plan are:

⋅      The Company is seeking additional financing and has engaged an investment bank to serve as placement agent. The financing may be in the form of sales of equity securities, debt convertible into equity securities and non-convertible debt, which may either be secured or unsecured.

⋅ In the third quarter of 2013, the Company launched two new camera lines in collaboration with MegaSys, its Taiwan subsidiary and Industrial Technology Research Institute (ITRI), its nonprofit research and development partner in Taiwan. These products are enablers of the Company’s video hosting services.

⋅     The Company has also recently developed two other standalone services:

o IvedaMobile–a cloud-hosting service that turns any smartphone or tablet into a mobile, cloud video streaming device. This was developed with ITRI.

o IvedaXchange – In collaboration with a technology partner, the Company developed a real-time situational awareness dashboard to enable organizations instant access to vital and filtered information such as emergency situations, location of critical assets, video monitoring, and local news. IvedaXchange is well-suited for law enforcement agencies and schools.

⋅     The Company launched a new website to highlight new products and services with corresponding applications.

⋅     The Company launched a second website allowing for direct web-sales, geared toward the residential and small-to-medium sized businesses. 

⋅     The Company intends to continue to participate in industry and vertical tradeshows to launch new products, generate leads, solicit resellers and other sales channels, and identify potential technology partners.

⋅     The Company intends to continue advertising on selected trade magazines and running Google Adwords to generate leads.

⋅     The Company has evaluated its reseller distribution channel and eliminated non-performing components of the channel.

⋅     The Company is in active collaboration with certain telecommunications companies in other countries to resell the Company’s products and services in their respective countries.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts receivable.

Substantially all cash is deposited in two financial institutions, one in the United States and one in Taiwan. At times, amounts on deposit in the United States may be in excess of the FDIC insurance limit. Deposits in Taiwan financial institutions are insured by CDIC (Central Deposit Insurance Corporation) with maximum coverage of NTD 3 million. At times, amounts on deposit in Taiwan may be in excess of the CDIC insurance limit.

Accounts receivable are unsecured, and the Company is at risk to the extent such amount becomes uncollectible. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. Revenue from three customers represented approximately 59% of total revenues for the nine months ended September 30, 2013, and approximately 17% of total accounts receivable at September 30, 2013.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Intangible Assets and Goodwill

Intangible assets consist of trademarks and other intangible assets associated with the purchase price allocation of MegaSys. Such assets are being amortized over their estimated useful lives ranging from six months to ten years. Other Intangible Assets are fully amortized as of September 30, 2013. Future amortization of Intangible Assets is as follows:

Trademarks
2013	$	5,000
2014		20,000
2015		20,000
2016		20,000
Thereafter		86,666
Total	$	151,666

Goodwill represents the excess of the purchase price of MegaSys over the net assets acquired. Goodwill is tested annually for impairment or more frequently if indicators of impairment exist.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2013. The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued expenses, convertible notes and amounts due to related parties. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

Segment Reporting, Policy [Policy Text Block]

Segment Information

The Company conducts operations in various geographic regions outside the United States. The operations and the customer base conducted in the foreign countries are similar to the United States operations. The net revenues and net assets (liabilities) for other significant geographic regions outside the United States during the 9 months ended September 30, 2013 are as follows:

	Net Revenues		Net Assets
United States	$	378,222	$	2,349,594
Asia	$	1,404,127	$	41,006
Mexico	$	195,957		-

Furthermore, due to operations in various geographic locations, the Company is susceptible to changes in national, regional and local economic conditions, demographic trends, consumer confidence in the economy and discretionary spending priorities that may have a material adverse effect on the Company’s future operations and results.

The Company is required to collect certain taxes and fees from customers on behalf of government agencies and remit these back to the applicable governmental agencies on a periodic basis. These taxes and fees are legal assessments to the customer, for which the Company has a legal obligation to act as a collection agent. Because the Company does not retain these taxes and fees, the Company does not include such amounts in revenue. The Company records a liability when the amounts are collected and relieves the liability when payments are made to the applicable governmental agencies.

The Company operates as two reportable business segments in defined in ASC 280, "Segment Reporting." Each business segment has a chief operating decision maker and management personnel which review their business segment’s performance as it relates to revenue, operating profit and operating expenses.

	Three Months		Three Months		Condensed
	Ended September, 2013		Ended September 30, 2013		Consolidated
	Iveda Solutions, Inc.		MegaSys		Total
Revenue	$	203,942	$	364,976	$	568,918
Cost of Revenue		209,195		262,797		464,603
Gross Profit		(5,253)		102,179		96,926
Depreciation and Amort.		53,181		2,634		55,815
General and Administrative		1,375,451		214,297		1,589,748
(Loss) from Operations		(1,433,885)		(114,752)		(1,548,637)
Foreign Currency Gain (Loss)		(8,611)		-		(8,611)
Loss from the conversion of debt		-		-		-
Interest Income		-		-		-
Interest Expense		11,676		4,545		16,221
(Loss) Before Income Taxes		(1,454,172)		(119,297)		(1,573,469)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(1,454,172)	$	(119,297)	$	(1,573,469)

	Nine Months
	Ended September 30,		Nine Months
	2013		Ended September 30,		Condensed
	Iveda Solutions,		2013		Consolidated
	Inc.		MegaSys		Total
Revenue	$	574,179	$	1,404,127	$	1,978,306
Cost of Revenue		565,258		1,102,407		1,667,665
Gross Profit		8,921		301,720		310,641
Depreciation and Amortization		161,157		8,007		169,164
General and Administrative		3,758,437		604,117		4,362,554
(Loss) from Operations		(3,910,673)		(310,404)		(4,221,077)
Foreign Currency Gain (Loss)		(9,718)		-		(9,718)
Loss from the conversion of debt		(44,000)		-		(44,000)
Interest Income		-		997		997
Interest Expense		51,670		13,941		65,611
(Loss) Before Income Taxes		(4,016,061)		(323,348)		(4,339,409)
(Provision) For Income Taxes		-		-		-
Net Loss	$	(4,016,061)	$	(323,348)	$	(4,339,409)

Revenues as shown below represent sales to external customers for each segment. Additions to long-lived assets as presented in the following table represent capital expenditures. Inventories, property and equipment for operating segments are regularly reviewed by management and are therefore provided below.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Revenues
United States	$	203,943	$	148,226	$	574,179	$	601,230
Republic of China (Taiwan)		364,975		232,947		1,404,127		1,551,262
	$	568,918	$	381,173	$	1,978,306	$	2,152,492

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Operating earnings (loss)
United States	$	(1,433,885)	$	(713,160)	$	(3,910,673)	$	(2,216,260)
Republic of China (Taiwan)		(114,752)		(96,449)		(310,404)		(215,043)
	$	(1,548,637)	$	(809,609)	$	(4,221,077)	$	(2,431,303)

	Nine Months Ended
	September 30,
	2013		2012
Property and equipment
United States	$	438,686	$	580,014
Republic of China (Taiwan)		12,525		31,095
	$	451,211	$	611,109

	Nine Months Ended
	September 30,
	2013		2012
Additions to long-lived assets
United States	$	86,868		223,705
Republic of China (Taiwan)		(1,660)		11,884
	$	85,208		235,589

	Nine Months Ended
	September 30,
	2013		2012
Inventory
United States	$	51,955	$	810
Republic of China (Taiwan)		156,178		106,766
	$	208,133	$	107,576

	Nine Months Ended
	September 30,
	2013		2012
Total Assets
United States	$	2,467,126	$	1,898,479
Republic of China (Taiwan)		2,154,036		1,924,128
	$	4,621,162	$	3,822,607

Reclassification, Policy [Policy Text Block]

Reclassification

Certain amounts in 2012 may have been reclassified to conform to the 2013 presentation.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements

In March 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-05, Foreign Currency Matters (Topic 830). This ASU resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights)within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This ASU is the final version of Proposed Accounting Standards Update EITF11Ar—Foreign Currency Matters (Topic 830), which has been deleted. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. For nonpublic entities the amendments in this Update are effective prospectively for the first annual period beginning after December 15, 2014, and interim and annual periods thereafter. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption.

In February 2013, FASB issued Accounting Standards Update (ASU) No. 2013-03, Financial Instruments (Topic 825). This ASU clarifies the scope and applicability of a disclosure exemption that resulted from the issuance of Accounting Standards Update No. 2011-04,Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendment clarifies that the requirement to disclose "the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3)" does not apply to nonpublic entities for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed. This ASU is the final version of Proposed Accounting Standards Update 2013-200—Financial Instruments (Topic 825) which has been deleted. The amendments are effective upon issuance.

In February 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU improves the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.

The new amendments will require an organization to:

• Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

• Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). A private company is required to meet the reporting requirements of the amended paragraphs about the roll forward of accumulated other comprehensive income for both interim and annual reporting periods. However, private companies are only required to provide the information about the effect of reclassifications on line items of net income for annual reporting periods, not for interim reporting periods. The amendments are effective for reporting periods beginning after December 15, 2012, for public companies and are effective for reporting periods beginning after December 15, 2013, for private companies. Early adoption is permitted.

In January 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification(TM) (Codification) or subject to a master netting arrangement or similar agreement. The FASB undertook this clarification project in response to concerns expressed by U.S. stakeholders about the standard’s broad definition of financial instruments. After the standard was finalized, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement, significantly increasing the cost of compliance at minimal value to financial statement users. An entity is required to apply the amendments in ASU 2013-01 for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of ASU 2011-11.

In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-04, Technical Corrections and Improvements. This ASU make technical corrections, clarifications, and limited-scope improvements to various Topics throughout the Codification. The amendments in this ASU that will not have transition guidance will be effective upon issuance for both public entities and nonpublic entities. For public entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2013.

In August 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-03, Technical Amendments and Corrections to SEC Sections. This ASU amends various SEC paragraphs pursuant to SAB 114, SEC Release No. 33-9250, and ASU 2010-22, which amend or rescind portions of certain SAB Topics.

In July 2012, the FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles-Goodwill and Other General Intangibles Other than Goodwill. Under the guidance in this ASU,an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

XML

STOCK OPTION PLAN (Details Textual)	9 Months Ended
	Sep. 30, 2013
Defined Contribution Plan, Employers Matching Contribution, Annual Vesting Percentage	100.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years

XML

STOCK OPTION PLAN (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

Stock option transactions during the nine months ended September 30, 2013 were as follows:

	Nine months ended September 30, 2013
			Weighted -
			Average
	Shares		Exercise Price
Outstanding at Beginning of Year		5,038,512	$	0.91
Granted		160,000		1.63
Exercised		(244,500)		-
Forfeited or Canceled		(155,000)		1.09
Outstanding at End of Period		4,799,012		0.93
Options Exercisable at Period-End		3,566,628		1.25
Weighted-Average Fair Value of Options Granted During    the Period	$	0.27

Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding and Exercisable [Table Text Block]

Information with respect to stock options outstanding and exercisable as of September 30, 2013 is as follows:

	Options Outstanding						Options Exercisable
	Number		Weighted -				Number
	Outstanding		Average		Weighted -		Exercisable		Weighted -
Range of	at		Remaining		Average		At		Average
Exercise	Sept. 30,		Contractual		Exercise		Sept. 30,		Exercise
Prices	2013		Life		Price		2013		Price
$ 0.10 - $1.80		4,799,012		8.2 Years	$	0.93		3,566,628	$	1.25

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for options granted.

	2013
Expected Life		5 yrs
Dividend Yield		0	%
Expected Volatility		26.28	%
Risk-Free Interest Rate		0.85	%

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 7 SUBSEQUENT EVENTS

In October 2013, the Company sold 100,000 shares of Company Common Stock at a purchase price of $1.10 per share and 20,000 shares at a purchase price of $1.00 in two private placement transactions with one individual and one trust.

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SHORT-TERM DEBT

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Bank Loans Short-term [Text Block]

NOTE 2 SHORT-TERM DEBT

The Company has short term loans with two banks in Asia that bear interest from 3.24% to 5.82% During the third quarter, all short-term bank loans were paid off.

Note Payable, 10% interest per annum, maturing on December 7, 2013	$	77,000
Note Payable, 10% interest per annum, maturing on December 20, 2013		10,000
Total Short-Term Debt	$	87,000

The holder of the $77,000 note is entitled to subscribe for a purchase 7,000 warrant shares at an exercise price of $1.50 per share. The holder of the $10,000 note is entitled to subscribe for a purchase 909 warrant shares at an exercise price of $1.50 per share.

During the three months ended June 30, 2013, a $50,000 debenture was converted into shares of the Company’s common stock at a price of $1.00 per share. As a result, the Company recorded a loss on conversion of debt totaling $27,500.

During the three months ended March 31, 2013, a $45,000 note was extinguished, with $15,000 of principal being paid in cash and $30,000 of principal being converted into shares of the Company’s common stock at a price of $1.00. As a result, the Company recorded a loss from conversion of debt totaling $16,500.

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EARNINGS (LOSS) PER SHARE (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Basic EPS
Net Loss	$ (1,573,469)	$ (834,104)	$ (4,339,409)	$ (2,477,583)
Weighted Average Shares (in shares)	25,700,296	19,541,679	24,181,281	15,383,548
Basic and Diluted Loss Per Share (in dollars per share)	$ (0.06)	$ (0.04)	$ (0.18)	$ (0.15)

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (Trademarks [Member], USD $)	Sep. 30, 2013
Trademarks [Member]
2013	$ 5,000
2014	20,000
2015	20,000
2016	20,000
Thereafter	86,666
Total	$ 151,666

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SHORT-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Schedule of Short-term Debt [Table Text Block]

The Company has short term loans with two banks in Asia that bear interest from 3.24% to 5.82% During the third quarter, all short-term bank loans were paid off.

Note Payable, 10% interest per annum, maturing on December 7, 2013	$	77,000
Note Payable, 10% interest per annum, maturing on December 20, 2013		10,000
Total Short-Term Debt	$	87,000

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Revenues	$ 568,918	$ 381,173	$ 1,978,306	$ 2,152,492
Operating earnings (loss)	(1,548,637)	(809,609)	(4,221,077)	(2,431,303)
Property and equipment	451,211	611,109	451,211	611,109	516,981
Additions to long-lived assets			85,208	235,589
Inventory	208,133	107,576	208,133	107,576
Total Assets	4,621,162	3,822,607	4,621,162	3,822,607	4,919,484
United States [Member]
Revenues	203,943	148,226	574,179	601,230
Operating earnings (loss)	(1,433,885)	(713,160)	(3,910,673)	(2,216,260)
Property and equipment	438,686	580,014	438,686	580,014
Additions to long-lived assets			86,868	223,705
Inventory	51,955	810	51,955	810
Total Assets	2,467,126	1,898,479	2,467,126	1,898,479
Republic of China (Taiwan) [Member]
Revenues	364,975	232,947	1,404,127	1,551,262
Operating earnings (loss)	(114,752)	(96,449)	(310,404)	(215,043)
Property and equipment	12,525	31,095	12,525	31,095
Additions to long-lived assets			(1,660)	11,884
Inventory	156,178	106,766	156,178	106,766
Total Assets	$ 2,154,036	$ 1,924,128	$ 2,154,036	$ 1,924,128

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net Revenues	$ 149,578	$ 162,970	$ 476,410	$ 811,591
United States [Member]
Net Revenues			378,222
Net Assets	2,349,594		2,349,594
Asia [Member]
Net Revenues			1,404,127
Net Assets	41,006		41,006
Mexico [Member]
Net Revenues			195,957
Net Assets	$ 0		$ 0

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 08, 2013
Document Information [Line Items]
Entity Registrant Name	Iveda Solutions, Inc.
Entity Central Index Key	0001397183
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	IVDA
Entity Common Stock, Shares Outstanding		26,437,466
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue	$ 568,918	$ 381,173	$ 1,978,306	$ 2,152,492
Cost of Revenue	471,992	322,824	1,667,665	1,729,001
Gross Profit	96,926	58,349	310,641	423,491
Depreciation and Amort.			169,164	181,456
(Loss) from Operations	(1,548,637)	(809,609)	(4,221,077)	(2,431,303)
Foreign Currency Gain (Loss)	(8,611)	(87)	(9,718)	(87)
Loss from the conversion of debt	0	0	(44,000)	0
Interest Expense	(16,221)	(24,414)	(65,611)	(46,738)
(Loss) Before Income Taxes	(1,573,469)	(834,104)	(4,339,409)	(2,477,583)
(Provision) For Income Taxes	0	0	0	0
Net Loss	(1,573,469)	(834,104)	(4,339,409)	(2,477,583)
Iveda Solutions Inc [Member]
Revenue	203,942		574,179
Cost of Revenue	209,195		565,258
Gross Profit	(5,253)		8,921
Depreciation and Amort.	53,181		161,157
General and Administrative	1,375,451		3,758,437
(Loss) from Operations	(1,433,885)		(3,910,673)
Foreign Currency Gain (Loss)	(8,611)		(9,718)
Loss from the conversion of debt	0		(44,000)
Interest Income	0		0
Interest Expense	11,676		51,670
(Loss) Before Income Taxes	(1,454,172)		(4,016,061)
(Provision) For Income Taxes	0		0
Net Loss	(1,454,172)		(4,016,061)
Megasys [Member]
Revenue	364,976		1,404,127
Cost of Revenue	262,797		1,102,407
Gross Profit	102,179		301,720
Depreciation and Amort.	2,634		8,007
General and Administrative	214,297		604,117
(Loss) from Operations	(114,752)		(310,404)
Foreign Currency Gain (Loss)	0		0
Loss from the conversion of debt	0		0
Interest Income	0		997
Interest Expense	4,545		13,941
(Loss) Before Income Taxes	(119,297)		(323,348)
(Provision) For Income Taxes	0		0
Net Loss	(119,297)		(323,348)
Condensed Consolidated [Memeber]
Revenue	568,918		1,978,306
Cost of Revenue	464,603		1,667,665
Gross Profit	96,926		310,641
Depreciation and Amort.	55,815		169,164
General and Administrative	1,589,748		4,362,554
(Loss) from Operations	(1,548,637)		(4,221,077)
Foreign Currency Gain (Loss)	(8,611)		(9,718)
Loss from the conversion of debt	0		(44,000)
Interest Income	0		997
Interest Expense	16,221		65,611
(Loss) Before Income Taxes	(1,573,469)		(4,339,409)
(Provision) For Income Taxes	0		0
Net Loss	$ (1,573,469)		$ (4,339,409)