UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934For
      the quarterly period ended March 31, 2010or




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934For
      the transition period from __________ to
  ____________




Commission
File No. 000-53285





IVEDA
CORPORATION


(Exact
name of registrant as specified in its charter)




Nevada
              (State
      or other jurisdiction of incorporation or
              organization)
            98-0611159
              (I.R.S.
      Employer
              Identification
      No.)1201 South Alma School
      Road, Suite 4450, Mesa, Arizona
              (Address
      of principal executive offices)
            85210
              (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 o
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or 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 o       Accelerated
filer o       Non-accelerated
filer o 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 o No x




Number of
shares outstanding of each of the issuer's classes of common equity as of the
latest practicable date:




Class
            Outstanding as of May
      10, 2010Common
      stock, $0.00001 par value
            14,678,508








PART
I – FINANCIAL INFORMATION





ITEM
      1.
            FINANCIAL
      STATEMENTS.




IVEDA
CORPORATION





CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS





FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009





1




IVEDA
CORPORATION


(A
NEVADA CORPORATION)


TABLE
OF CONTENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


FINANCIAL
      STATEMENTSCONDENSED
      CONSOLIDATED BALANCE SHEETS
              
              
              3CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
              
              
              5CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
              
              
              6CONDENSED
      CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
              
              
              7
  2




IVEDA
CORPORATION
 (A
NEVADA CORPORATION)
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND
 DECEMBER
31, 2009





March
      31, 2010
              (Unaudited)
            
            
            December
      31, 2009ASSETSCURRENT
      ASSETSCash
      and Cash Equivalents
            
            $
            678,279
            
            
            $
            17,672Accounts
      Receivable
            
            
            31,933
            
            
            
            36,739Prepaid
      Expenses
            
            
            4,731
            
            
            
            4,062Total
      Current Assets
            
            
            714,943
            
            
            
            58,473PROPERTY
      AND EQUIPMENTOffice
      Equipment
            
            
            88,299
            
            
            
            88,299Furniture
      and Fixtures
            
            
            27,805
            
            
            
            27,805Software
            
            
            36,634
            
            
            
            36,634Leased
      Equipment
            
            
            228,995
            
            
            
            226,496Leasehold
      Improvements
            
            
            36,964
            
            
            
            36,964Total
      Property and Equipment
            
            
            418,697
            
            
            
            416,198Less:
      Accumulated Depreciation
            
            
            199,829
            
            
            
            179,648Property
      and Equipment, Net
            
            
            218,868
            
            
            
            236,550OTHER
      ASSETSDeposits
            
            
            14,230
            
            
            
            14,230Total
      Assets
            
            $
            948,041
            
            
            $
            309,253




See accompanying
Notes to Condensed Consolidated Financial Statements.


3




March
      31, 2010
              (Unaudited)
            
            
            December
      31, 2009LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCURRENT
      LIABILITIESAccounts
      Payable
            
            $
            66,040
            
            
            $
            197,535Accrued
      Expenses
            
            
            161,324
            
            
            
            315,864Current
      Portion of Capital Lease Obligations
            
            
            78,750
            
            
            
            80,505Due
      to Related Parties
            
            
            -
            
            
            
            134,000Convertible
      Debt
            
            
            -
            
            
            
            50,000Deferred
      Revenue
            
            
            9,903
            
            
            
            14,659Total
      Current Liabilities
            
            
            316,017
            
            
            
            792,563LONG-TERM
      LIABILITIESCapital
      Lease Obligations, Net of Current Portion
            
            
            35,511
            
            
            
            50,037Total
      Liabilities
            
            
            351,528
            
            
            
            842,600STOCKHOLDERS'
      (DEFICIT) EQUITYPreferred
      Stock, $0.00001 par value; 100,000,000 shares authorized; no shares
      outstanding as of March 31, 2010  and December 31,
      2009Common
      Stock, $0.00001 par value; 100,000,000 shares authorized; 14,678,508 and
      12,865,353 shares issued and outstanding, as of March 31, 2010 and
      December 31, 2009 , respectively
            
            
            147
            
            
            
            129Additional
      Paid-In Capital
            
            
            5,881,116
            
            
            
            4,213,359Accumulated
      Deficit
            
            
            (5,284,750
            )
            
            
            (4,746,835
            )Total
      Stockholders' (Deficit) Equity
            
            
            596,513
            
            
            
            (533,347
            )Total
      Liabilities and Stockholders' (Deficit) Equity
            
            $
            948,041
            
            
            $
            309,253


See accompanying
Notes to Condensed Consolidated Financial Statements.


4


IVEDA
CORPORATION
 (A
NEVADA CORPORATION)
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009





3
      months ending
              March
      31, 2010
              (Unaudited)
            
            
            3
      months ending
              March
      31, 2009
              (Unaudited)REVENUE
            
            $
            112,682
            
            
            $
            223,824COST
      OF REVENUE
            
            
            99,025
            
            
            
            165,232GROSS
      PROFIT
            
            
            13,657
            
            
            
            58,592OPERATING
      EXPENSES
            
            
            545,337
            
            
            
            568,966LOSS
      FROM OPERATIONS
            
            
            (531,680
            )
            
            
            (510,374
            )OTHER
      INCOME (EXPENSE)Interest
      Income
            
            
            354
            
            
            
            1,184Interest
      Expense
            
            
            (6,589
            )
            
            
            (7,931
            )Total
      Other Income (Expense)
            
            
            (6,235
            )
            
            
            (6,747
            )LOSS
      BEFORE INCOME TAXES
            
            
            (537,915
            )
            
            
            (517,121
            )BENEFIT
      (PROVISION) FOR INCOME TAXES
            
            
            -
            
            
            
            -NET
      LOSS
            
            $
            (537,915
            )
            
            $
            (517,121
            )BASIC
      AND DILUTED LOSS PER SHARE
            
            $
            (0.04
            )
            
            $
            (0.04
            )WEIGHTED
      AVERAGE SHARES
            
            
            13,722,655
            
            
            
            12,150,332


See accompanying
Notes to Condensed Consolidated Financial Statements.
 5


IVEDA
CORPORATION
 (A
NEVADA CORPORATION)
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009





3
      months ending
              March
      31, 2010
              (Unaudited)
            
            
            3
      months ending
              March
      31, 2009
              (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Loss
            
            $
            (537,915
            )
            
            $
            (517,121
            )Adjustments
      to Reconcile Net Loss to Net Cash Used
      by Operating ActivitiesDepreciation
            
            
            20,181
            
            
            
            19,318Stock
      Compensation
            
            
            81,700
            
            
            
            10,000(Increase)
      Decrease in Operating Assets:Accounts
      Receivable
            
            
            4,806
            
            
            
            (21,868
            )Prepaid
      Expense
            
            
            (669
            )
            
            
            7,034Inventory
            
            
            -
            
            
            
            13,530Accounts
      Payable
            
            
            (131,495
            )
            
            
            70,050Accrued
      Expenses
            
            
            (154,540
            )
            
            
            15,143Deferred
      Revenue
            
            
            (4,756
            )
            
            
            (21,964
            )Net
      cash used in operating activities
            
            
            (722,688
            )
            
            
            (425,878
            )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of Property and Equipment
            
            
            -
            
            
            
            (7,193
            )Net
      cash provided by (used in) investing activities
            
            
            -
            
            
            
            (7,193
            )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from (payments to) related parties
            
            
            (134,000
            )
            
            
            -Proceeds
      from issuance of convertible notes
            
            
            -
            
            
            
            50,000Payments
      on Capital Lease Obligations
            
            
            (18,780
            )
            
            
            (12,218
            )Common
      Stock Issued, net of Cost of Capital
            
            
            1,536,075
            
            
            
            85,000Net
      cash provided by financing activities
            
            
            1,383,295
            
            
            
            122,782NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            660,607
            
            
            
            (310,289
            )Cash
      and Cash Equivalents - Beginning of Period
            
            
            17,672
            
            
            
            335,189CASH
      AND CASH EQUIVALENTS - END OF PERIOD
            
            $
            678,279
            
            
            $
            24,900SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONDebt
      Converted to Stock
            
            $
            50,000
            
            
            $
            -Interest
      Paid
            
            $
            6,589
            
            
            $
            7,931Property
      and Equipment Purchased via Capital Lease
            
            $
            2,499
            
            
            $
            -


See accompanying
Notes to Condensed Consolidated Financial Statements.
 6
 IVEDA
CORPORATION
 (A
NEVADA CORPORATION)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


NOTE 1
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES


BASIS
OF PRESENTATION





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, 2009. 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 three-month period ended March 31, 2010, are not necessarily indicative of
the results that will be achieved for the full fiscal year ending
December 31, 2010 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, inventory valuation,
restructuring costs, goodwill and intangible asset valuation, impairment costs,
depreciation and amortization, sales returns and discounts, warranty costs,
derivative valuation, uncertain tax positions and the recoverability of deferred
tax assets, stock compensation, business combinations, 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 accounting principles generally accepted in the
United States of America ("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 accounting principles generally accepted in the United States of America,
have been condensed or omitted pursuant to such SEC rules and
regulations.





The
balance sheet at December 31, 2009 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.




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. The Company
generated accumulated losses of $4,746,835 through December 31, 2009 and has a
working capital deficit of approximately $734,000. These factors raise
substantial doubt about the Company's 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 closed the private placement memorandum dated October 26, 2009 and
      raised a total of $1,595,000.


·
            A
      private placement memorandum was prepared to raise an additional
      $1,500,000. As of March 31, 2010 a total of $190,000 has been
      raised.


·
            Establish
      distributor networks with existing companies to create a reseller network
      to increase the scope of the Company’s marketing activities with low cost
      to the Company.


·
            Launch
      public relations and marketing
campaigns.


·
            The
      Company may evaluate and consider merger and/or acquisition
      activities.





7


IVEDA
CORPORATION
 (A
NEVADA CORPORATION)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009




Principles of
Consolidation




The
consolidated financial statements include the financial statements of the
Company and its wholly owned subsidiary.  All significant
inter-company balances and transactions have been eliminated in
consolidation.





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 one financial institution. At times, amounts on deposit may be in
excess of the FDIC 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. Two
customers represented approximately 50% (38% and 12%) of total revenues for the
year ended December 31, 2009. The accounts receivable from these customers were
approximately 57% of total accounts receivable as of December 31, 2009. Revenue
from two customers represented approximately 73% of total revenues for the
period ended March 31, 2010 and approximately 64% of total accounts receivable
at March 31, 2010. No other customers represented greater than 10% of total
revenues in 2009 and the three months ended March 31, 2010.





Fair Value of Financial
Instruments




Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of December 31,
2009.  The respective carrying value 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.





Reclassification




Certain
amounts in 2009 have been reclassified to conform to the 2010
presentation.




8


IVEDA
CORPORATION
 (A
NEVADA CORPORATION)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009




NOTE
      2
            CONVERTIBLE
      DEBT




The
Company issued $50,000 of unsecured convertible debt in December 2009 that
matured February 28, 2010 bearing an annual interest rate of 8%. The note and
accrued interest were converted into 67,155 shares of common stock in January
2010.





NOTE
      3
            EQUITY





Preferred
Stock




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





Common
Stock





During
October 2009, the Company issued 401,094 and 2,455 shares of its common stock in
payment of principal and interest, respectively, for convertible debt recorded
at $401,094 and $2,455, respectively.





During
the three month period ended March 31, 2010 the Company issued 1,813,155 shares
of Common Stock.  1,695,000 shares were related to private placement
memorandums, 67,155 shares were from convertible debentures, 50,000 shares were
from the exercise of warrants issued during the period and 1,000 shares were
from the exercise of employee stock options.





During
the three month period ended March 31, 2010 the Company issued and had
outstanding additional warrants to purchase 250,000 shares of common stock at
$1.00 and 172,500 shares of common stock at $1.10.  These warrants
were issued as a cost of financing.





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 that may be less than 100 percent of the fair value of the common stock on
the date of the grant as determined by the Company's Board of Directors. 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
expense on the straight-line basis over the options’ vesting
periods.





9


IVEDA
CORPORATION
 (A
NEVADA CORPORATION)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


Stock
option transactions during three months ended March 31, 2010 were as
follows:




Three
      months ended March 31, 2010Weighted
      -AverageExerciseShares
            
            
            PriceOutstanding
      at Beginning of Year
            
            
            1,182,729
            
            
            $
            0.37Granted
            
            
            256,500
            
            
            
            1.30Exercised
            
            
            (1,000
            )
            
            
            -Forfeited
      or Canceled
            
            
            (3,000
            )
            
            
            0.85Outstanding
      at End of Period
            
            
            1,435,229
            
            
            
            0.53Options
      Exercisable at Period-End
            
            
            1,308,874
            
            
            
            0.46Weighted-Average
      Fair Value ofOptions Granted During the
    Period
            
            $
            1.30





Information
with respect to stock options outstanding and exercisable at March 31,
2010 is
as follows:




Options
      Outstanding
              
              
              Options
      ExercisableRange
      of
                Exercise
                Prices
              
              
              Number
                Outstanding
                at
                March
      31,
                2010
              
              Weighted
      -
                Average
                Remaining
                Contractual
                Life
              
              Weighted
      -
                Average
                Exercise
                Price
              
              
              Number
                Exercisable
                At
                March
      31,
                2010
              
              
              Weighted
      -
                Average
                Exercise
                Price$
              0.10
      - $1.30
              
              
              
              1,435,229
              
              8
      Years
              
              $
              0.53
              
              
              
              1,308,874
              
              
              $
              0.46





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.




2010Expected
      Life
            
            5
      yrDividend
      Yield
            
            
            0
            %Expected
      Volatility
            
            
            47.3
            %Risk-Free
      Interest Rate
            
            
            2.67
            %




Expected
volatility was estimated by using the average volatility of three public
companies offering services 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 options is based
on the average of three public companies offering services similar to the
Company.




10






NOTE
      5
            RELATED
      PARTY TRANSACTIONS




In 2009
the Company borrowed $134,000 from certain shareholders for use in
operations.  The balance at December 31, 2009 was
$134,000.  The advances bore no interest and were repaid in January
2010.





The
Company has provided surveillance services since 2005 to entities owned by Ross
Farnsworth, either through a family partnership or through his majority owned
LLC, and subsequently Ross Farnsworth became a shareholder of the Company in
2006.  Mr. Farnsworth’s holdings are less than 5% of the Company but the
revenue for the period ending March 31, 2010 were $16,718 and no trade accounts
receivable balance at March 31, 2010.





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, as required
by SFAS No. 128, “Earnings Per Share“(“EPS”).





Basic EPS
is computed by dividing reported earnings available to stockholders by the
weighted average shares outstanding.  The Company had net losses for
the quarters ended March 31, 2010 and 2009 and the effect of including dilutive
securities in the earnings per common share would have been
anti-dilutive.  Accordingly, all options to purchase common shares
were excluded from the calculation of diluted earnings per share for the
quarters ended March 31, 2010 and 2009.





March
      31, 2010
            
            
            March
      31, 2009Basic
      EPSNet
      Loss
            
            $
            (537,915
            )
            
            $
            (517,121
            )Weighted
      Average Shares
            
            
            13,722,655
            
            
            
            12,150,332Basic
      Loss Per Share
            
            $
            (0.04
            )
            
            $
            (0.04
            )





11




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




Management's
Discussion and Analysis of Financial Condition and Results of Operations – Iveda
Corporation




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





Caution
Regarding Forward-Looking Information





All
statements contained in this Form 10-Q, other than statements of historical
facts, that address future activities, events or developments are
forward-looking statements, including, but not limited to, statements containing
the words "believe," "expect," "anticipate," "intends," "estimate," "forecast,"
"project," and similar expressions . All statements other than statements of
historical fact are statements that could be deemed forward-looking statements,
including any statements of the plans, strategies and objectives of management
for future operations; any statements concerning proposed new products,
services, developments or industry rankings; any statements regarding future
economic conditions or performance; any statements of belief; and any statements
of assumptions underlying any of the foregoing.  These statements are
based on certain assumptions and analyses made by us in light of our experience
and our assessment of historical trends, current conditions and expected future
developments as well as other factors we believe are appropriate under the
circumstances. However, whether actual results will conform to the expectations
and predictions of management is subject to a number of risks and uncertainties
described under “Risk Factors” under Part II Item 1A below and in the “Risk
Factors” section of our Form 10-K for the fiscal year ended December 31, 2009
that may cause actual results to differ materially.





Consequently,
all of the forward-looking statements made in this Form 10-Q are qualified by
these cautionary statements and there can be no assurance that the actual
results anticipated by management will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on our
business operations.  Readers are cautioned not to place undue
reliance on such forward-looking statements as they speak only of the Company's
views as of the date the statement was made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.





Results
of Operations for the Three Months Ended March 31, 2010 Compared to


the
Three Months Ended March 31, 2009





Net Revenue.We recorded net revenue of $112,682 for the three months ended March 31,
2010, compared to $223,824 for the three months ended March 31, 2009, a decrease
of $111,142 or 50%. Revenues were primarily derived from our real-time
surveillance and equipment sales and installation. In Q1 2010, our recurring
service revenue was $100,444 or 89% of net revenue and our equipment sales and
installation revenue was $12,238 or 11% of net revenue, compared to recurring
service revenue of $92,269 or 41% of net revenue, and equipment sales and
installation revenue of $131,555 or 59% of net revenue in 2009. The decrease in
revenue was due to fewer equipment sales in the first quarter of 2010 than the
first quarter of 2009.  Revenue for the quarter ended March 31, 2009
was substantially higher than that for the quarter ended March 31, 2010 because
of a significant installation project that was started in 2008 and was completed
in the first quarter of 2009, in addition to a large equipment sale to one
customer.




12




Cost of
Revenue.Total cost of revenue
was $99,025 for the three months ended March 31, 2010, compared to $165,232 for
the three months ended March 31, 2009, a decrease of $66,207 or 40%. The
decrease in cost of revenue was primarily due to the decrease in
revenue.





Operating
Expenses.Operating expenses were
$545,337 for the three months ended March 31, 2010, compared to $568,966 for the
three months ended March 31, 2009, a decrease of $23,629 or 4%. The decrease in
operating expenses was primarily related to cuts in marketing, travel, and
personnel costs.





Loss from
Operations.As a result of the
decreases in revenues and related gross profit, loss from operations increased
to $531,680 for the three months ended March 31, 2010, compared to $510,374 for
the three months ended March 31, 2009, an increase in loss of $21,306 or
4%.





Other
Expense-Net.Other expense-net was
$6,235 for the three months ended March 31, 2010, compared to $6,747 for the
three months ended March 31, 2009, a decrease of $512 or 8%.





Net
Loss.The
increase of $20,794 or 4% in the net loss to $537,915 for the three months ended
March 31, 2010 from $517,121 for the three months ended March 31, 2009 was
primarily a net effect of a $111,000 revenue reduction related to lower
equipment sales.





Liquidity
and Capital Resources




We had
cash and cash equivalents of $678,279 on March 31, 2010. The significant
improvement in cash on hand from $17,672 as of December 31, 2009 resulted from
cash raised through stock sales made during January 2010.





Net cash
used in operating activities during the three months ended March 31, 2010 and
2009, respectively, was $722,688 and $517,121. Cash used in operating activities
for the three months ended March 31, 2010 and 2009, respectively, consisted
primarily of the net loss from operations.





Net cash
provided by investing activities for the three months ended March 31, 2010 and
2009, respectively, was $0 and $7,193 for the purchase of property and
equipment.





Net cash
provided by financing activities for the three months ended March 31, 2010 was
$1,383,295, primarily from sale of common stock.  Net cash provided by
financing activities for the three months ended March 31, 2009 was $122,782,
primarily from sale of common stock and proceeds from the issuance of
convertible notes.





At
December 31, 2009, we had approximately $4.4 million in net operating loss
carryforwards available for federal and state income tax purposes. We did not
recognize any benefit from these operating loss carryforwards for the year ended
2009 or thus far in 2010, which expire beginning in 2010 through
2026.





We have
experienced significant operating losses since our inception. We entered into a
new lease agreement in 2008 and increased our occupancy costs as we increased
our lease commitment from 1,411 square feet to 3,667 square feet. Our capital
expenditures and working capital requirements could increase depending on our
operating results and other adjustments to our operating plan as may be needed
to respond to competition or unexpected events.




13




We
believe that our cash on hand is sufficient to meet our anticipated cash needs
for working capital and capital expenditures for only the next 6 to 8 months. We
continually evaluate our working capital needs and we are seeking to obtain
additional working capital through debt and equity offerings. There can be no
assurance that additional funds will be available on acceptable terms. In the
event that additional funds are not available on acceptable terms, we could be
required to reduce the scope of or cease operations.





The
economic events in 2009 resulting in a downturn of spending and the credit
shortage severely curtailed our ability to raise financing in 2009 and we
focused almost exclusively on raising capital.  Therefore, we were
unable to fund our sales and marketing plans which did not allow us to focus on
sales during the latter half of 2009 and this lack of focus impacted our sales
pipeline in the first quarter of 2010.  Not only was our management
focused on raising capital but we also focused on consummating our merger in
October 2009, and reducing costs to sustain our operations.  It was
not until toward the end of January 2010 that we received a cash infusion. In
early February we hired new sales and marketing staff and started planning for
launching a marketing campaign to increase our sales.  These
activities did not increase our revenues for the first quarter but our sales
team has received positive feedback and leads for potential new customers
although there is no assurance we will close any of these
opportunities.  The full launch of our sales and marketing campaign
was not completed until April 2010 and we hope to see some results toward the
latter part of the second quarter although the timing of the closing of sales to
new potential customers is dependent on numerous factors outside our
control.





Our
management is cautiously optimistic because we began experiencing a shorter
sales cycle in April. Our marketing as a service company versus an equipment
company has started to resonate among our potential customers.  In
today’s difficult economic times, companies are avoiding large capital
expenditures.  Because Iveda Corporation is able to be a service
provider in the security industry rather than a seller of cameras and other
products, management believes that this attractive value proposition provides
companies the ability to secure their properties without large capital
expenditure. Iveda Corporation offers an inexpensive, but effective, alternative
to security guards, with our real-time video surveillance service using existing
camera systems.  Even if the customer has to purchase cameras to
enable Iveda Corporation's service, Iveda Corporation is still able to provide
up to 50% savings compared to traditional security guard services.





Iveda
Corporation's average monthly burn rate in the first quarter of 2010 was
approximately $135,000.    We raised capital of
approximately $1.5 million in January 2010 and used this cash to hire sales and
marketing employees, among other things.  We also continue to
establish distributor networks with existing companies to create a reseller
network to increase the scope of Iveda Corporation's marketing activities at a
relatively low cost to Iveda Corporation, by utilizing resellers’ sales and
marketing resources and leveraging their customer base. If we are not able to
quickly increase our sales then we will need to raise additional capital during
the year and may be required to cut back to a skeleton crew to maintain our
existing operations.





Two
customers represented greater than 10% of total revenue for the three months
ended March 31, 2010 - Insurance Auto Auctions (58%) and Farnsworth
(15%).





Substantially
all cash is deposited in one financial institution. At times, amounts on deposit
may be in excess of the FDIC insurance limit.




14




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
disclosure 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-14(c) and 15d-14(c)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as of March 31, 2010.  Based on that evaluation, our principal
executive officer and our principal financial officer concluded that the design
and operation of our disclosure controls and procedures were
effective.  The design of any system of controls 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, regardless of how remote.  However,
management believes that our system of disclosure controls and procedures is
designed to provide a reasonable level of assurance that the objectives of the
system will be met.





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(e) and 15d-15(e) under 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.





PART
II. OTHER INFORMATION


ITEM
      1A.
              RISK
      FACTORS.


There have been no material changes to the risk factors
discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2009.




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





During the three months
ended March 31, 2010, the Company issued 412,155 shares of common stock, in
addition to issuances that were previously reported on a Form 8-K.  Of
these shares, 67,155 were issued to 2 individuals on January 17, 2010 upon
conversion of debentures sold by the Company in October 2009; 50,000 were issued
upon exercise of the warrants granted to a broker dealer in exchange for
placement agent services on March 8, 2010 as described below; and 295,000 shares
were issued between January 12, 2010 through February 26, 2010 in exchange for
$295,000 to 6 individual investors who invested pursuant to the Company's
private placement memoranda.





All of
these securities were issued pursuant to Section 4(2) of the Securities Act of
1933 and Regulation D and Rule 506 promulgated thereunder.   We
paid a total of $19,000 in commissions and fees to a broker-dealer and a
consultant with respect to the $295,000 raised.




In
January 2010, the Company issued warrants to purchase 250,000 shares of common
stock at $1.00 per share to 2 consultants and 35,000 shares at $1.10 per share
to 1 consultant in exchange for consulting services.  The Company also
issued warrants to purchase 137,500 shares of common stock at $1.10 per share in
February 2010 and warrants to purchase 50,000 shares at an exercise price of $10
in February 2010.  These 187,500 warrants were issued to affiliates of
Source Capital for placement agent services rendered in fiscal
2009.





Each of
these securities were issued pursuant to Section 4(2) of the Securities Act of
1933, as amended.


15
  ITEM
      6.
                EXHIBITS.


Exhibits:





31.1
            
            Rule
      13a-14(a)/15d-14(a) Certification of Principal Executive
      Officer31.2
            
            Rule
      13a-14(a)/15d-14(a) Certification of Principal Financial
      Officer32
            
            Section
      1350 Certifications





16




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 on this 14th day of
May, 2010.




IVEDA
      CORPORATION
                (Registrant)By:
              /s/ David LyDavid
      LyPresident,
      Chief Executive Officer, and Chairman/s/
      Robert J. BrilonRobert
      J. BrilonPrincipal
      Accounting Officer, Part Time Chief Financial Officer, Treasurer




17