SEC Comment Letter for Iveda Solutions, Inc. (IVDA, IVDAW) (CIK 0001397183) (IVDA) — Oct 20, 2011
Iveda Solutions, Inc. (IVDA, IVDAW) (CIK 0001397183)
Date: Oct. 20, 2011 · CIK: 0001397183 · Accession: 0000000000-11-061632
AI Filing Summary & Sentiment
Reasoning
Letter
October 20, 2011 Via E-mail Lynne Phillis, Controller Iveda Solutions, Inc. 1201 South Alma School Road Suite 8500 Mesa, Arizona 85210
Re: Iveda Solutions, Inc. File No. 0-53285 December 31, 2010 Form 10-K Filed March 30, 2011 April 30, 2011 Form 8-K/A Filed July 15, 2011 June 30, 2011 Form 10-Q F iled August 15, 2011
Dear Ms. Phillis: We have reviewed your filings and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter with in ten business days by providing the requested information and amendment or by advising us when you will provide the re quested response. If you do not believe our comments apply to your fact s and circumstances, please tell us why in your response. After reviewing the information you provide in response to these comments, we may have additional comments. April 30, 2011 Form 8-K/A
1. The audit report in Exhibit 99.1 refers to the balance sheets as of December 31, 2010 and 2009, and the related statements for the year then ended. Please amend the Form 8-K to provide an audit report that covers both annual periods as required by Rule 8-04(3) of Regulation S-X.
June 30, 2011 Form 10-Q
2. In your next Form 10Q and future filings, please expand the disclosure in Note 7 to provide more details about the acquisition. For example, pl ease disclose the 2011 and 2012 income and revenue milestones attendant to the Earnout Shares and disclose also the terms under which the Earnout Share payments will be adjusted if the m ilestones are not achieved. See ASC 805-10-50.
3. We note that the Share Exchange Agreement identifies specific intangibles acquired in the acquisition such as patents, copyrights, technology, so ftware, software tools, know-how, processes, trade secrets, trad emarks, service marks, trade names, internet domain names, other proprietary rights, MegaSys Products, licenses, MegaSys Components, and Material Contracts. We also understand that the acquired propert y, plant and equipment (PP&E) had an initial cost basis of ap proximately $250,000. It is not clear why your preliminary purchase price allocation excluded an y fair value adjustment for the PP&E. It is also unclear why only 15% of the amount allocated to goodwill and intangibles was assigned to identified intangible assets. Please give us the appr aisals and other fair value
Ms. Lynne Phillis October 20, 2011 Page 2 of 3 documentation you used to allocate your purchas e price. Alternativel y, if you have made subsequent adjustments to the preliminary allocation materially increasing the amounts assigned to identified intangible assets subjec t to amortization and to PP&E, then please advise us about such adjustments. Comp liance with ASC 805-20- 25 should be clearly evident.
4. In your next 10Q and in future filings, please provided the detailed disclosures concerning intangible asset classes and am ortization periods re quired by ASC 350-30-50.
5. In your next 10Q and in future filings, pleas e provide the acquired revenue, earnings and supplemental pro forma disclo sures required by ASC 805-10-50.
6. In your next 10Q and in future filings, pleas e provide the reportable segment disclosures for your Iveda and your MegaSys segments pursuant to ASC 280-10. Also, please expand MD&A to separately discuss the operating re sults of each segment pursuant to Section 501.06.a of the Financial Reporting Codification.
7. Given the materiality of your accounts receiv ables to your current assets and liquidity, please expand MD&A in your next 10Q and in future filings to quantify and explain changes in your Days Sales Outstanding or receivables turnover. Explain whether the age of your receivables is consistent with the st andard payment terms granted to customers. A disaggregated analysis may be necessary if the payment terms of your U.S. and foreign businesses materially differ. If the aging of your receivables portfolio has increased, then discuss the extent to which this impacted your allowance for doubtful accounts. Further, if your receivables portfolio includes amounts over 120 days ol d then that fact should be disclosed and your basis for asserting colle ctability explained. See Section 501.13.b.1 of the Financial Reporting Codification.
8. In your next 10Q and in future filings, please disclose any legal or economic factors that materially impact your ability to transfer funds between your domestic and foreign businesses. If there are any circumstances under which such transfers may be restricted or otherwise infeasible, then your liquidity disc losure in MD&A should be disaggregated to separately analyze the liquid ity of your domestic and fore ign businesses. See Section 501.09.b of the Financial Reporting Codification.
9. In your next 10Q and in future filings, pl ease explain in MD&A why your cash reserves are not used to pay down your bank loans. In th is regard, we note th at the rate you pay on your debt substantially exceeds the return on your cash deposits.
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in the filing to be certain that the filing include s the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules requir e. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
Ms. Lynne Phillis October 20, 2011 Page 3 of 3 In responding to our comments, please provi de a written statement from the company acknowledging that: the company is responsible for the adequacy an d accuracy of the disclo sure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federa l securities laws of the United States.
You may contact Al Pavot, St aff Accountant, at (202) 551- 3738 or me at (202) 551-3355 if you have any questions. Sincerely, /s/ Terence O’Brien Terence O’Brien Accounting Branch Chief
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October 20, 2011 Via E-mail Lynne Phillis, Controller Iveda Solutions, Inc. 1201 South Alma School Road Suite 8500 Mesa, Arizona 85210 Re: Iveda Solutions, Inc. File No. 0-53285 December 31, 2010 Form 10-K Filed March 30, 2011 April 30, 2011 Form 8-K/A Filed July 15, 2011 June 30, 2011 Form 10-Q F iled August 15, 2011 Dear Ms. Phillis: We have reviewed your filings and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter with in ten business days by providing the requested information and amendment or by advising us when you will provide the re quested response. If you do not believe our comments apply to your fact s and circumstances, please tell us why in your response. After reviewing the information you provide in response to these comments, we may have additional comments. April 30, 2011 Form 8-K/A 1. The audit report in Exhibit 99.1 refers to the balance sheets as of December 31, 2010 and 2009, and the related statements for the year then ended. Please amend the Form 8-K to provide an audit report that covers both annual periods as required by Rule 8-04(3) of Regulation S-X. June 30, 2011 Form 10-Q 2. In your next Form 10Q and future filings, please expand the disclosure in Note 7 to provide more details about the acquisition. For example, pl ease disclose the 2011 and 2012 income and revenue milestones attendant to the Earnout Shares and disclose also the terms under which the Earnout Share payments will be adjusted if the m ilestones are not achieved. See ASC 805-10-50. 3. We note that the Share Exchange Agreement identifies specific intangibles acquired in the acquisition such as patents, copyrights, technology, so ftware, software tools, know-how, processes, trade secrets, trad emarks, service marks, trade names, internet domain names, other proprietary rights, MegaSys Products, licenses, MegaSys Components, and Material Contracts. We also understand that the acquired propert y, plant and equipment (PP&E) had an initial cost basis of ap proximately $250,000. It is not clear why your preliminary purchase price allocation excluded an y fair value adjustment for the PP&E. It is also unclear why only 15% of the amount allocated to goodwill and intangibles was assigned to identified intangible assets. Please give us the appr aisals and other fair value Ms. Lynne Phillis October 20, 2011 Page 2 of 3 documentation you used to allocate your purchas e price. Alternativel y, if you have made subsequent adjustments to the preliminary allocation materially increasing the amounts assigned to identified intangible assets subjec t to amortization and to PP&E, then please advise us about such adjustments. Comp liance with ASC 805-20- 25 should be clearly evident. 4. In your next 10Q and in future filings, please provided the detailed disclosures concerning intangible asset classes and am ortization periods re quired by ASC 350-30-50. 5. In your next 10Q and in future filings, pleas e provide the acquired revenue, earnings and supplemental pro forma disclo sures required by ASC 805-10-50. 6. In your next 10Q and in future filings, pleas e provide the reportable segment disclosures for your Iveda and your MegaSys segments pursuant to ASC 280-10. Also, please expand MD&A to separately discuss the operating re sults of each segment pursuant to Section 501.06.a of the Financial Reporting Codification. 7. Given the materiality of your accounts receiv ables to your current assets and liquidity, please expand MD&A in your next 10Q and in future filings to quantify and explain changes in your Days Sales Outstanding or receivables turnover. Explain whether the age of your receivables is consistent with the st andard payment terms granted to customers. A disaggregated analysis may be necessary if the payment terms of your U.S. and foreign businesses materially differ. If the aging of your receivables portfolio has increased, then discuss the extent to which this impacted your allowance for doubtful accounts. Further, if your receivables portfolio includes amounts over 120 days ol d then that fact should be disclosed and your basis for asserting colle ctability explained. See Section 501.13.b.1 of the Financial Reporting Codification. 8. In your next 10Q and in future filings, please disclose any legal or economic factors that materially impact your ability to transfer funds between your domestic and foreign businesses. If there are any circumstances under which such transfers may be restricted or otherwise infeasible, then your liquidity disc losure in MD&A should be disaggregated to separately analyze the liquid ity of your domestic and fore ign businesses. See Section 501.09.b of the Financial Reporting Codification. 9. In your next 10Q and in future filings, pl ease explain in MD&A why your cash reserves are not used to pay down your bank loans. In th is regard, we note th at the rate you pay on your debt substantially exceeds the return on your cash deposits. We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in the filing to be certain that the filing include s the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules requir e. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. Ms. Lynne Phillis October 20, 2011 Page 3 of 3 In responding to our comments, please provi de a written statement from the company acknowledging that: the company is responsible for the adequacy an d accuracy of the disclo sure in the filing; staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federa l securities laws of the United States. You may contact Al Pavot, St aff Accountant, at (202) 551- 3738 or me at (202) 551-3355 if you have any questions. Sincerely, /s/ Terence O’Brien Terence O’Brien Accounting Branch Chief