Business Model and Revenue Streams - Iveda's business model transitioned from direct project-based sales to licensing its platform and selling IoT hardware, resulting in dual revenue streams from hardware sales and monthly licensing fees [15]. - Iveda's revenue model in the US involves licensing software to organizations with existing customer bases, facilitating hardware acquisition through third-party partners [45]. - Iveda Taiwan accounted for 87% of total revenue for the years ended December 31, 2023, compared to 79% in 2022 [77]. - Revenue from two customers out of 65 total customers represented approximately 48% of total revenue for the year ended December 31, 2023, with YOU MING HUEI CO. LTD contributing 25% and Chicony Power Technology Co Ltd contributing 23% [74]. - For the year ended December 31, 2023, the company recorded net consolidated revenue of $6.5 million, an increase of $2.0 million, or 45%, compared to $4.5 million in 2022 [193]. - Recurring service revenue for 2023 was $0.44 million, or 7% of net revenue, while equipment sales and installation revenue was $6.0 million, or 93% of net revenue [193]. - Iveda Taiwan has been a significant revenue contributor since its acquisition in April 2011, focusing on deploying and integrating video surveillance systems for various sectors [17]. Technology and Product Offerings - The company offers a suite of IoT technologies, including AI intelligent video search, smart sensors, and video surveillance systems, to support smart city initiatives [20]. - IvedaAI technology enables accurate search across dozens to thousands of cameras in less than 1 second, enhancing efficiency and reducing operational costs [23]. - The company is developing the Cerebro IoT platform, which includes features such as power management, traffic management, and AI intelligent video search management [51]. - The company’s AI intelligent video search technology, IvedaAI, enhances video surveillance systems and is a key focus for future product development [173]. - Iveda's product offerings include smart utility cabinets that monitor energy consumption and detect abnormalities, utilizing IoT sensors for enhanced safety [42]. - The company has developed smart drones equipped with AI-based software for autonomous operation, enhancing safety and security in various applications [40]. Financial Performance and Losses - For the years ended December 31, 2023 and 2022, the company incurred net losses of approximately $3.2 million and $3.3 million, respectively, with accumulated losses of approximately $47 million through December 31, 2023 [65]. - Loss from operations for 2023 was $3.4 million, an increase of $0.1 million, or 2%, compared to $3.3 million in 2022 [196]. - Net loss for 2023 was $3.2 million, a decrease of $0.1 million, or 3%, from a net loss of $3.3 million in 2022 [199]. - The company has incurred significant net losses since inception and may not achieve or maintain profitability in the near future [65]. Operational Challenges and Risks - The company faces potential strains on management and operational resources due to rapid growth, which could adversely affect its financial condition and results of operations [80]. - The company relies on key management personnel, with the loss of any key employee potentially having a material adverse effect on operations [67]. - The company has limited resources for reseller distribution activities, which may impact the demand for its products [69]. - The company relies on third-party manufacturers and suppliers for hardware components, which introduces risks such as reduced control over delivery schedules and quality assurance [81]. - The company may struggle to maintain favorable terms with third-party manufacturers, impacting its ability to meet quality and quantity requirements [82]. - If the company cannot find timely replacements for manufacturers, it may have to discontinue certain products, risking legal liability and loss of reputation [83]. - An increase in manufacturers' prices or a decline in their financial condition could adversely affect the company's operations and costs [84]. - The company operates in a highly competitive industry, facing challenges from competitors with greater resources and potentially superior products [85]. Compliance and Regulatory Risks - The company is subject to risks associated with international operations, including regulatory environments and political instability in Taiwan, which could adversely impact its financial condition [91]. - The company may face risks related to compliance with export controls and trade regulations, potentially harming international sales [102]. - Recent geopolitical issues, such as the conflict in Ukraine, could have a material adverse effect on the company's results of operations and financial condition [95]. Cash Flow and Liquidity - The company has limited liquidity and has not established a stabilized source of revenue sufficient to cover operating costs [206]. - As of December 31, 2023, cash and cash equivalents were $2.9 million in the U.S. segment and $1.8 million in the Taiwan segment, down from $6.0 million and $1.3 million respectively as of December 31, 2022 [200]. - Net cash used in operating activities for the year ended December 31, 2023 was $3.5 million, an improvement from $5.4 million used in 2022 [201]. - The company has approximately $32 million in net operating loss carryforwards available for federal income tax purposes, which will begin to expire in 2025 [205]. Stock and Market Risks - The company has never declared or paid any cash dividends on its common stock and does not anticipate doing so in the foreseeable future [131]. - The company's common stock is subject to price volatility, which could fluctuate substantially due to various factors including market perception and quarterly operating results of other companies in the same industry [132]. - On September 28, 2023, the company received notice from Nasdaq that it no longer complies with the minimum bid price requirement of $1.00 per share [136]. - The company is subject to potential delisting from Nasdaq if it fails to regain compliance with listing requirements [138]. - The company intends to monitor the closing bid price of its common stock and consider available options to resolve noncompliance with the minimum bid price requirement [138]. Cybersecurity and Internal Controls - The company recognizes the importance of cybersecurity and plans to engage external auditors to assess its internal cybersecurity programs [151]. - The company plans to develop processes for assessing and managing cybersecurity risks as part of its overall risk management strategy [150]. - Information security breaches could lead to significant capital expenditures and damage to the company's reputation, affecting its business operations [88]. - The company has identified weaknesses in its internal controls over financial reporting, which could harm its business and stock price [127]. Real Estate and Office Space - The company currently rents approximately 3,000 square feet for its principal executive offices at a cost of approximately $4,500 per month until February 2025 [155]. - Iveda Taiwan leases approximately 4,567 square feet for its principal executive offices at a total cost of approximately $3,136 per month, with leases expiring between June and September 2024 [156].

Revenue Performance - Net consolidated revenue for Q3 2023 was $0.87 million, a decrease of 41% from $1.47 million in Q3 2022[114]. - For the nine months ended September 30, 2023, net consolidated revenue increased to $5.47 million, up 133% from $2.35 million in the same period of 2022[115]. - Service revenue for Q3 2023 was $0.09 million, representing 10% of net revenue, while equipment sales and installation revenue was $0.78 million, or 90% of net revenue[114]. - Iveda Taiwan accounted for 93% of total revenue in 2022, highlighting its significance to the company's financial performance[109]. Cost and Expenses - Total cost of revenue for Q3 2023 was $0.73 million, with a gross margin of 16%, compared to $1.11 million and a gross margin of 24% in Q3 2022[116]. - Operating expenses for Q3 2023 were $1.05 million, a slight decrease of 2% from $1.03 million in Q3 2022[118]. - Loss from operations for Q3 2023 increased to $0.9 million, up 34% from $0.7 million in Q3 2022[121]. Income and Loss - Other income for Q3 2023 was approximately $54,000, an increase from $11,000 in Q3 2022, primarily due to interest income[123]. - Net loss for the three months ended September 30, 2023, was $0.83 million, an increase of $0.16 million or 24% compared to a net loss of $0.67 million for the same period in 2022[126]. - Net loss for the nine months ended September 30, 2023, was $2.1 million, a decrease of $0.3 million or 11% compared to a net loss of $2.4 million for the same period in 2022[127]. - Other income for the nine months ended September 30, 2023, was approximately $76,000, a net increase of $84,000 compared to a net expense of ($8,000) for the same period in 2022[124]. Cash Flow - Cash and cash equivalents as of September 30, 2023, were $5.6 million, down from $7.3 million as of December 31, 2022, primarily due to operating losses[128]. - Net cash used in operating activities for the nine months ended September 30, 2023, was ($1.9) million, an improvement compared to ($3.3) million for the same period in 2022[129]. - Net cash used in investing activities for the nine months ended September 30, 2023, was $0.64 million, primarily for the development of additional IvedaAI platforms[130]. - Net cash provided by financing activities for the nine months ended September 30, 2023, was $0.84 million, a significant decrease from $12.6 million for the same period in 2022[131]. Financial Position and Risks - The company has approximately $32 million in net operating loss carryforwards available for federal income tax purposes, which will begin to expire in 2025[132]. - The company has limited liquidity and has not established a stabilized source of revenue sufficient to cover operating costs, making its continuation as a going concern dependent on generating greater revenue or raising additional funds[133]. - The company does not have any off-balance sheet arrangements or undisclosed borrowings, minimizing exposure to financing, liquidity, market, or credit risk[138]. Business Model and Strategy - The company has evolved its core product line to include AI intelligent search technology and IoT devices in response to digital transformation demands[95]. - Iveda's business model includes dual revenue streams from hardware sales and monthly licensing fees through partnerships with service providers[107].

Financial Performance - Net consolidated revenue for Q2 2023 was $2.39 million, a 267% increase from $0.65 million in Q2 2022[108] - For the first half of 2023, net consolidated revenue reached $4.60 million, up 421% from $0.88 million in the same period of 2022[109] - Equipment sales and installation revenue constituted 97% of net revenue in Q2 2023, compared to 91% in Q2 2022[108] - Total cost of revenue for Q2 2023 was $2.11 million, representing 88% of revenue and a gross margin of 12%[110] - Operating expenses for Q2 2023 were $1.1 million, a decrease of 12% from $1.2 million in Q2 2022[112] - Loss from operations decreased to $0.82 million in Q2 2023, down 22% from $1.06 million in Q2 2022[115] - Net loss for the three months ended June 30, 2023, was $0.76 million, a decrease of $0.31 million or 29% compared to the same period in 2022[120] - Net loss for the six months ended June 30, 2023, was $1.3 million, down $0.36 million or 21% from $1.7 million in the same period in 2022[121] Cash Flow and Liquidity - Cash and cash equivalents increased to $8.6 million as of June 30, 2023, compared to $7.3 million as of December 31, 2022, primarily due to the exercise of 945,900 warrants[122] - Net cash provided in operating activities for the six months ended June 30, 2023, was $0.85 million, a significant improvement from net cash used of ($2.18) million in the same period in 2022[123] - Net cash used in investing activities for the six months ended June 30, 2023, was $0.44 million, primarily for the development of additional IvedaAI platforms[124] - Net cash provided by financing activities for the six months ended June 30, 2023, was $0.94 million, compared to $7.0 million in the same period in 2022[125] - Company has limited liquidity and has not established a stabilized source of revenue sufficient to cover operating costs[127] Tax and Financial Risks - Approximately $32 million in net operating loss carryforwards available for federal income tax purposes, beginning to expire in 2025[126] - Company does not have any off-balance sheet arrangements or undisclosed borrowings, minimizing exposure to financing and liquidity risks[132] Market and Business Model - Iveda Taiwan accounted for 93% of total revenue in 2022, highlighting its significance to the company's financial performance[103] - The company’s AI intelligent video search technology enhances traditional video surveillance systems, responding to global digital transformation demands[89] - Iveda's business model includes dual revenue streams from hardware sales and monthly licensing fees, leveraging partnerships with service providers[101] Economic Environment - No significant impact from current levels of inflation in the United States or Taiwan on operations[131]

Financial Performance - Net consolidated revenue for Q1 2023 was $2.21 million, an increase of $1.98 million or 855% compared to $0.23 million in Q1 2022[106] - Service revenue accounted for $0.20 million or 9% of net revenue in Q1 2023, while equipment sales and installation revenue was $2.0 million or 91% of net revenue[106] - Total cost of revenue for Q1 2023 was $1.72 million, representing 78% of revenue with a gross margin of 22%, compared to $0.09 million and 61% gross margin in Q1 2022[107] - Operating expenses increased by $0.25 million or 31% to $1.04 million in Q1 2023, primarily due to increased personnel for IvedaAI and investor relations expenses[108] - Loss from operations decreased to $0.55 million in Q1 2023, a reduction of $0.10 million or 15% compared to Q1 2022[110] - Net loss for Q1 2023 was $0.55 million, down $0.12 million or 17% from $0.67 million in Q1 2022, driven by increased net revenues[112] Cash Flow and Liquidity - Cash and cash equivalents as of March 31, 2023, were $8.4 million, up from $7.3 million in Q1 2022, attributed to the exercise of warrants[113] - Net cash provided in operating activities for Q1 2023 was $0.17 million, compared to a net cash used of $0.77 million in Q1 2022[114] - Net cash used in investing activities for Q1 2023 was $0.18 million, primarily for the development of additional IvedaAI platforms[115] - Net cash provided by financing activities for Q1 2023 was $1.07 million, up from $0.15 million in Q1 2022, primarily due to the exercise of 945,900 warrants[116] - The company has limited liquidity and its continuation as a going concern depends on generating greater revenue or raising additional funds through capital markets[119] - Substantially all cash is deposited in three financial institutions, with amounts in the U.S. potentially exceeding FDIC insurance limits[120] - The company does not require collateral for accounts receivable, which are unsecured and subject to collection risk[121] - No doubtful accounts receivable allowances were set up for both U.S. and Taiwan-based segments for Q1 2023[122] Operational Insights - Iveda Taiwan accounted for 93% of total revenue in 2022, highlighting its significance to the company's overall financial performance[101] - As of March 31, 2023, the company had approximately $32 million in net operating loss carryforwards for federal income tax purposes, which will begin to expire in 2025[118] - Current levels of inflation in the U.S. and Taiwan have not significantly impacted the company's operations[123] - The company does not have off-balance sheet arrangements or undisclosed borrowings, minimizing exposure to financing and liquidity risks[124]

Business Model and Revenue Streams - Iveda's business model transitioned from direct project-based sales to licensing its platform and selling IoT hardware, resulting in dual revenue streams from hardware sales and monthly licensing fees [15]. - Iveda Taiwan has been a significant revenue source since its acquisition in April 2011, focusing on deploying and integrating video surveillance systems for various sectors [17]. - Revenue from two customers out of 42 total customers represented approximately 52% of total revenue for the year ended December 31, 2022, with Chunghwa Telecom contributing 21% and Chicony Power Technology Co Ltd contributing 31% [73]. - Iveda Taiwan's operations accounted for 79% and 93% of the company's total revenue for the years ended December 31, 2022 and 2021, respectively [76]. - Net consolidated revenue for the year ended December 31, 2022, was $4.5 million, an increase of $2.6 million, or 133%, compared to $1.9 million in 2021 [183]. - Recurring service revenue for 2022 was $308,881, or 7% of net revenue, while equipment sales and installation revenue was $4.2 million, or 93% of net revenue [183]. Market Trends and Technology - The global AI market is projected to grow from USD 50.1 billion in 2020 to over USD 110 billion by 2024, indicating a doubling of spending [45]. - The global IoT market size was USD 308.97 billion in 2020, with a projected growth to USD 1,854.76 billion by 2028, reflecting a compound annual growth rate of 23.1% [46]. - IvedaAI technology enables accurate search across dozens to thousands of cameras in less than 1 second, enhancing efficiency and reducing operational costs [23]. - IvedaAI technology provides various AI functions, including object search, face recognition, and intrusion detection, enhancing video surveillance systems [164]. - Iveda has evolved its core product line to include AI intelligent search technology and IoT devices in response to digital transformation demands [163]. - The Cerebro IoT platform integrates various systems for centralized management, supporting smart city initiatives and enhancing operational efficiency [30]. - Iveda's Cerebro platform integrates multiple applications for centralized management of energy, security, and safety systems [171]. - Iveda's smart pole solution, Utilus, provides power and internet connectivity for sensor management, improving city services and emergency response times [33]. Financial Performance and Challenges - For the years ended December 31, 2022 and 2021, the company incurred net losses of approximately $3.3 million and $3.0 million, respectively, with accumulated losses of approximately $44 million through December 31, 2022 [58]. - The company experienced a significant reduction in revenues during 2020 and the first quarter of 2021 due to the global effects of the COVID-19 pandemic [59]. - The company expects to experience significant and rapid growth, which may strain its senior management team and financial resources [77]. - Operating expenses increased to $4.3 million for 2022, up $0.7 million, or 21%, primarily due to increased personnel and research and development expenses [185]. - Loss from operations for 2022 was $3.3 million, an increase of $0.6 million, or 22%, compared to $2.7 million in 2021 [186]. - Net cash used in operating activities for 2022 was $5.4 million, compared to $2.0 million in 2021 [190]. Risks and Dependencies - The company relies on key management personnel, and the loss of any of these individuals could materially adversely affect its business [67]. - The company cannot predict with certainty the potential customer demand for its products, which may impact its ability to generate sufficient revenue to become profitable [69]. - The company relies on third-party manufacturers and suppliers for all hardware components, which poses risks such as reduced control over delivery schedules and quality assurance [80]. - The company may face challenges in maintaining favorable terms with third-party manufacturers, impacting the ability to meet quality, quantity, or timeliness requirements [81]. - If unable to find timely replacements for manufacturers, the company may have to discontinue certain products, risking legal liability and loss of reputation [82]. - Increased prices from manufacturers or a decline in their financial condition could adversely affect the company's operations and costs [83]. - The company operates in a highly competitive industry, facing competition from companies with greater resources, which may affect profitability [84]. - The timing of revenue can vary significantly due to lengthy evaluation periods by customers, impacting cash flow [89]. - The company is subject to risks associated with international operations in Taiwan, including economic downturns and political instability, which could adversely affect revenue [92]. - Recent geopolitical issues, such as the conflict in Ukraine, could negatively impact the company's operations and financial condition [94]. - The company relies on service providers for distribution, and termination of relationships with larger providers could lead to a decline in business [102]. Intellectual Property and Legal Matters - Iveda does not own any patents but has licensed U.S. Patent No. 8,719,442 for cloud-video technologies, indicating a reliance on proprietary technology for competitive advantage [40]. - The company does not own any patents and relies on trade secrets and other measures to protect its intellectual property, which may not be sufficient [113]. - The company has been named as a defendant in two patent-related lawsuits, both of which have been settled [108]. - The company may incur substantial costs defending against claims of infringement on the proprietary rights of others [110]. Capital and Stock Information - The company intends to issue additional securities, which could result in substantial dilution for existing stockholders [121]. - The company has never declared or paid any cash dividends on its common stock and does not anticipate doing so in the foreseeable future [131]. - The common stock is subject to significant price volatility, influenced by market perception and economic conditions [132]. - A prolonged decline in the stock price could adversely affect the company's ability to raise working capital and continue operations [133]. - The company is listed on The Nasdaq Capital Market under the symbol "IVDA" and must comply with continued listing requirements to avoid delisting [134]. - The company has issued a total of 15,066,739 shares of common stock as of December 31, 2022, with approximately 700 beneficial owners [152]. - The high bid for the common stock in the first quarter of fiscal year 2022 was $18.00, while the low bid was $5.28 [152]. Operational and Accounting Matters - The company has approximately $32 million in net operating loss carryforwards available for federal income tax purposes, which will begin to expire in 2025 [193]. - The company's federal net operating loss carryforwards begin to expire in 2025, while state carryforwards applicable in California and Arizona began to expire in 2014 [106]. - The company has no off-balance sheet arrangements or undisclosed borrowings, minimizing exposure to financing and liquidity risks [207]. - Critical accounting policies include stock-based compensation and income tax valuation allowances, which require complex judgments and estimates [210]. - The company reviews the recoverability of long-lived assets, primarily leased equipment, to ensure their carrying value is supported by future cash flows [211]. - The company reported that its internal control over financial reporting was not effective as of December 31, 2022, due to inadequate controls related to change management [127]. COVID-19 Impact and Economic Conditions - The Company has effectively maintained business operations during the COVID-19 pandemic without significant challenges or material expenditures expected for business continuity [203]. - Revenue for the year ending December 31, 2021, has been impacted by COVID-19 conditions, but the Company believes it has sufficient capital to sustain operations for one year [205]. - Current inflation levels in the United States and Taiwan have not significantly impacted the Company's operations [206].

Revenue Performance - Net consolidated revenue for Q3 2022 was $1.5 million, a 257% increase from $0.4 million in Q3 2021, driven by equipment sales and installation revenue of $1.36 million, or 93% of net revenue [115]. - For the nine months ended September 30, 2022, net consolidated revenue was $2.3 million, an 80% increase from $1.3 million in the same period in 2021, with equipment sales and installation revenue at $2.14 million, or 91% of net revenue [117]. - Iveda Taiwan accounted for 93% of total revenue in 2021, highlighting its critical role in the company's financial performance [109]. - Iveda's acquisition of Iveda Taiwan in 2011 has significantly contributed to its revenue growth and access to Asian markets [109]. Cost and Expenses - Total cost of revenue for Q3 2022 was $1.1 million, representing 76% of revenue and a gross margin of 24%, compared to $0.14 million (33% of revenue; 67% gross margin) in Q3 2021 [118]. - Operating expenses for Q3 2022 were $1.03 million, a 48% increase from $0.70 million in Q3 2021, primarily due to increased personnel and R&D expenses for IvedaAI [120]. - Loss from operations for Q3 2022 increased to $0.68 million, a 60% rise from $0.42 million in Q3 2021, mainly due to higher operating expenses [122]. Net Loss and Cash Flow - Net loss for the nine months ended September 30, 2022, was $2.4 million, an increase of $0.62 million or 35% compared to $1.78 million for the same period in 2021 [128]. - Cash and cash equivalents increased to $10.6 million as of September 30, 2022, compared to $1.4 million as of September 30, 2021, primarily due to stock offerings with net proceeds of $11.5 million [129]. - Net cash used in operating activities for the nine months ended September 30, 2022, was $3.3 million, up from $1.2 million for the same period in 2021 [130]. - Net cash provided by financing activities for the nine months ended September 30, 2022, was $12.6 million, compared to $2.2 million in 2021, mainly from equity offerings [132]. Tax and Liquidity - The company has approximately $29 million in net operating loss carryforwards available for federal income tax purposes, which will begin to expire in 2025 [133]. - The company has experienced significant operating losses since inception and has limited liquidity, relying on increased sales or additional capital to continue operations [135]. - The company has no off-balance sheet arrangements or undisclosed borrowings, minimizing exposure to financing or liquidity risks [148]. Impact of External Factors - The company does not expect material changes to its assets or its ability to account for those assets despite the ongoing COVID-19 pandemic [142]. - The company has taken actions to comply with government restrictions during the COVID-19 pandemic, allowing it to operate effectively and maintain business continuity [144]. - The company does not believe current inflation levels in the U.S. or Taiwan have significantly impacted its operations [147]. Product Development and Partnerships - The company has developed AI intelligent video search technology, enhancing its product offerings in response to digital transformation demands [95]. - Iveda's smart power technology includes a comprehensive management platform, Cerebro, which integrates energy, security, and safety applications [103]. - The company has established partnerships with service providers, creating dual revenue streams from hardware sales and monthly licensing fees [107].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the quarterly period ended June 30, 2022 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. 001-41345 IVEDA SOLUTIONS, INC. (Exact name of registrant as specified in its charter) Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Nevada 20-2222203 (State or other ju ...

Financial Performance - Net consolidated revenue for the three months ended March 31, 2022, was $0.23 million, a decrease of 31% compared to $0.33 million for the same period in 2021[124]. - Recurring service revenue accounted for 18% of net revenue in Q1 2022, up from 9% in Q1 2021, while equipment sales and installation revenue decreased from 91% to 82%[124]. - Total cost of revenue was $0.09 million for Q1 2022, representing 39% of revenue with a gross margin of 61%, compared to $0.02 million (65% of revenue; 35% gross margin) in Q1 2021[126]. - Operating expenses increased by 40% to $0.8 million in Q1 2022, primarily due to increased personnel and R&D expenses for IvedaAI[127]. - Loss from operations rose to $0.65 million in Q1 2022, an increase of 44% compared to $0.45 million in Q1 2021[128]. - Net loss for Q1 2022 was $0.67 million, a 5% increase from $0.63 million in Q1 2021, driven by higher operating expenses[130]. Cash Flow and Liquidity - Cash and cash equivalents decreased to $0.75 million as of March 31, 2022, down from $0.82 million a year earlier, primarily due to operating losses[131]. - Net cash used in operating activities was $0.77 million in Q1 2022, compared to $0.16 million in Q1 2021[132]. - Net cash provided by financing activities was $0.15 million in Q1 2022, a decrease from $0.63 million in Q1 2021, mainly due to bank loan proceeds in Taiwan[134]. - The company has limited liquidity and has not established a stabilized source of revenue sufficient to cover operating costs, making its continuation as a going concern dependent on generating greater revenue or raising additional funds[136]. - The company believes it will have sufficient capital to sustain operations for a period of one year following the date of the filing, based on its current cash position and projected cash flow from operations[148]. Revenue Sources and Risks - Iveda Taiwan accounted for 93% of total revenue in 2021, highlighting its critical role in the company's revenue generation[118]. - As of March 31, 2022, the company had approximately $29 million in net operating loss carryforwards available for federal income tax purposes, which will begin to expire in 2025[135]. - The company has not recognized any benefit from federal net operating loss carryforwards in 2021 or 2020[135]. - The company has set up no doubtful accounts receivable allowances for its U.S. and Taiwan-based segments for the three months ended March 31, 2022[139]. - The company’s accounts receivable are unsecured, posing a risk if amounts become uncollectible[138]. Impact of External Factors - The company estimates that the COVID-19 pandemic resulted in decreases of approximately $1.2 million in revenues and $0.3 million in gross profit contribution for the year ended March 31, 2021[141]. - The company has taken actions to comply with government restrictions during the COVID-19 pandemic, including requiring employees to work from home[147]. - The company does not expect current levels of inflation in the United States or Taiwan to have a significant impact on its operations[149]. - The company has no relationships with unconsolidated entities or financial partnerships that would expose it to financing, liquidity, market, or credit risk[150].

Market Growth - The global AI market is projected to grow from USD 50.1 billion in 2020 to over USD 110 billion by 2024, indicating a significant increase in spending on AI technologies[44]. - The global IoT market size was USD 308.97 billion in 2020, with a projected growth to USD 1,854.76 billion by 2028, reflecting a compound annual growth rate of 23.1%[45]. - The company operates in the AI and IoT sectors, both of which are projected to experience substantial growth, positioning the company favorably in the market[44][45]. Business Model - Iveda's business model provides dual revenue streams from hardware sales and monthly licensing fees, focusing on partnerships with service providers[17]. - The company transitioned its business model in 2014 from direct project-based sales to licensing its platform and selling IoT hardware, resulting in dual revenue streams from hardware sales and monthly licensing fees[17]. - Iveda's business model in the US focuses on licensing software to organizations with existing customer bases, facilitating hardware acquisition through third-party partners[34]. Product Offerings - Iveda's product offerings include AI intelligent video search, smart sensors, and IoT platforms, responding to digital transformation demands[20]. - Iveda's core product line has evolved to include AI intelligent video search technology, responding to digital transformation demands from cities and organizations worldwide[20]. - Iveda's surveillance solutions include advanced features such as face recognition, license plate recognition, and public health analytics[30]. Technology and Innovation - IvedaAI technology enables accurate search across dozens to thousands of cameras in less than 1 second, enhancing efficiency in video surveillance[26]. - The Cerebro IoT platform integrates various systems for central management, supporting cross-platform interoperability and providing a comprehensive user interface for managing city systems[32]. - The company has established a partnership with the Industrial Technology Research Institute (ITRI) in Taiwan to develop cloud-video technologies and has exclusive rights to license related patents[41]. Operational Structure - The company employs 10 full-time employees in the U.S. and 25 in Taiwan, highlighting its operational scale[48]. - As of December 31, 2021, the company had 35 full-time employees, with 10 in the United States and 25 in Taiwan, highlighting the company's reliance on skilled personnel for future success[48]. - The company’s principal executive office is located in Mesa, Arizona, indicating its operational base in the United States[46]. Strategic Acquisitions - Iveda Corporation completed the acquisition of MEGAsys in April 2011, which has since contributed significantly to the company's revenue[15]. - The company completed the acquisition of MEGAsys on April 30, 2011, which is a significant step in its growth strategy[50]. - The company has a history of strategic mergers and acquisitions, including the reverse merger with IntelaSight, which has shaped its current operational structure[50]. Client Base - MEGAsys services enterprise and government clients, including Chunghwa Telecom and the Taiwan Stock Exchange, indicating a strong client base in the region[35]. Risk Management - The company maintains comprehensive general liability insurance, which is customary in its industry, ensuring risk management and compliance with state laws[49]. - Future changes in government regulations regarding security and surveillance could impact operational costs and business continuity[47]. - The company is subject to potential infringement claims regarding its proprietary technology, which could lead to costly litigation or royalty arrangements[42]. Research and Development - The company has a focus on R&D, with a new CTO leading the development of the Cerebro platform using both internal and outsourced resources[37].

Revenue Performance - Net consolidated revenue for Q3 2021 was $411,452, an increase of 48% from $278,238 in Q3 2020[127] - Recurring service revenue for Q3 2021 was $106,434, representing 26% of net consolidated revenue, down from 52% in Q3 2020[127] - Equipment sales and installation revenue for Q3 2021 was $300,756, accounting for 73% of net consolidated revenue, up from 48% in Q3 2020[127] - For the nine months ended September 30, 2021, net consolidated revenue was $1,304,725, a 12% increase from $1,164,640 in the same period of 2020[128] - MEGAsys operations accounted for 95% of total revenue for the nine months ended September 30, 2021[128] - The U.S.-based segment saw a minimal revenue increase of $11,748, or 42%, while the Taiwan-based segment revenue increased by $121,466, or 49% in Q3 2021[127] - The increase in Taiwan-based segment revenue was primarily due to additional long-term contracts awarded during Q3 2021[127] - Revenue from three customers in the Taiwan-based segment represented approximately 74% of total revenue for the quarter ended September 30, 2021[148] Costs and Expenses - Total cost of revenue for the three months ended September 30, 2021, was $136,887, representing 33% of revenue and a gross margin of 67%, a decrease of $310,361 or 69% compared to the same period in 2020[129] - Operating expenses for the three months ended September 30, 2021, were $698,717, an increase of $287,431 or 70% compared to the same period in 2020, primarily due to increased personnel and research and development expenses[131] Profitability and Loss - Net loss for the three months ended September 30, 2021, was ($453,411), a decrease of $146,695 or 24% compared to the same period in 2020, attributed to increased revenues and gross margins in the Taiwan-based segment[137] Cash Flow and Financing - Cash and cash equivalents as of September 30, 2021, were $939,399 in the U.S.-based segment and $292,035 in the Taiwan-based segment, compared to $32,574 and $216,947 respectively as of December 31, 2020[140] - Net cash used in operating activities during the nine months ended September 30, 2021, was $1.2 million, compared to $0.1 million in the same period in 2020, primarily due to a net loss of $1.8 million[141] - Net cash provided by financing activities for the nine months ended September 30, 2021, was $2.2 million, primarily from a $2.1 million sale of Common Stock with Warrants[143] Debt and Financial Risk - As of September 30, 2021, the company had $485,000 in outstanding Short-Term Debt, with $385,000 past the maturity date[144] - The company had approximately $25 million in net operating loss carryforwards available for federal income tax purposes as of December 31, 2020, which will begin to expire in 2025[145] - The company does not have any relationships with unconsolidated entities or financial partnerships, indicating no exposure to off-balance sheet arrangements[159] - There are no undisclosed borrowings or debt reported by the company, minimizing financial risk[159] - The company has not entered into any synthetic leases, further reducing potential financial liabilities[159] - The company is not materially exposed to financing, liquidity, market, or credit risk associated with off-balance sheet arrangements[159] - There are no quantitative or qualitative disclosures about market risk applicable to the company[160] Technology and Business Model - IvedaAI technology enhances video surveillance systems with AI functions, providing critical intelligence to video data[108] - The company has established a presence in Asia, enhancing global distribution potential and access to cost-effective R&D[128] - Iveda's business model includes dual revenue streams from hardware sales and monthly licensing fees through partnerships with service providers[118] Future Outlook - The company expects revenue for the year ending December 31, 2021, to be impacted by ongoing conditions related to the COVID-19 pandemic[157]