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]