What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-15 compared with 2016-08-16 · 1168 added, 856 removed, 153 unchanged (93% of the section changed)

FINANCIAL STATEMENTS.

SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

30, 2016 AND DECEMBER 31, 2015

June 30, 2016

30, 2021 ( Unaudited ) AND DECEMBER 31, 2020

September 30, 2021

December 31, 2020

2 unchanged sentences

Restricted Cash

Accounts Receivable, Net (including $166 and $27,512 from related party,

respectively)

Accounts Receivable, Net

Inventory, Net

4 unchanged sentences

Total Other Assets

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

2 unchanged sentences

Short Term Debt

Derivative Liability

Current Portion of Long-Term Debt

2 unchanged sentences

LONG-TERM DIVIDENDS PAYABLE

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY

Preferred Stock, $ 0.00001 par value;

100,000,000 shares authorized

Series A Preferred Stock, $0.00001 par value;

10,000,000 shares authorized, 3,938,077 and 4,003,592

shares ‘issued and outstanding as of June 30, 2016 and December 31, 2015 respectively

Series B Preferred Stock, $ 0.00001 par value;

500 shares authorized, 302.5 outstanding as of

June 30, 2016 and December 31, 2015, respectively

500 shares authorized, 0 and 257.2 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Common Stock, $ 0.00001 par value;

100,000,000 shares authorized;

30,219,247 and 27,906,739

shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively

74,070,292 and 52,671,395 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional Paid-In Capital

3 unchanged sentences

( 38,322,456 )

Total Stockholders’

Equity (Deficit)

Total Liabilities and Stockholders’

Total Stockholders’ Equity (Deficit)

( 1,694,175 )

( 3,706,568 )

Total Liabilities and Stockholders’ Equity

accompanying Notes to Condensed Consolidated Financial Statements.

SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

June 30, 2016

June 30, 2015

June 30, 2016

June 30, 2015

IVEDA SOLUTIONS, INC.

CONSOLIDATED STATEMENTS

OF OPERATIONS (UNAUDITED)

FOR NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

For the Three

September 30,

For the Three

September 30,

Equipment Sales

4 unchanged sentences

OPERATING EXPENSES

General & Administrative

Total Operating Expenses

LOSS FROM OPERATIONS

( 1,519,193 )

( 1,107,626 )

OTHER INCOME (EXPENSE)

Foreign Currency Gain

Gain (Loss ) on Derivatives and Debt Conversion

Gain (Loss) on Disposal of Assets

Miscellaneous Income (Expense)

Interest Income

2 unchanged sentences

LOSS BEFORE INCOME TAXES

(PROVISION) FOR INCOME TAXES

( 1,775,728 )

( 1,185,493 )

BENEFIT (PROVISION) FOR INCOME TAXES

$ ( 453,431 )

$ ( 600,127 )

$ ( 1,775,728 )

$ ( 1,185,493 )

BASIC AND DILUTED LOSS PER SHARE

WEIGHTED AVERAGE SHARES

accompanying Notes to Condensed Consolidated Financial Statements

SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)

THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

June 30, 2016

June 30, 2015

June 30, 2016

June 30, 2015

See accompanying Notes to Condensed Consolidated Financial Statements

IVEDA SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Paid-in-Capital

Comprehensive

Income (loss)

Stockholders’

Equity(Deficit)

Paid-in-Capital

Comprehensive

Income (loss)

Stockholders’

Equity(Deficit)

AT December 31, 2019

$ ( 36,493,300 )

$ ( 2,635,369 )

Other Comprehensive Loss

Change in Equity Adjustment from Foreign Currency

Translation, Net of Tax

Comprehensive Loss

Stock Issued for Cash

Stock Issued for Cash, shares

Based Compensation

Stock for Accounts Payable

Stock for Accounts Payable , shares

Stock for Costs of Financing

Stock for Costs of Financing , shares

for Interest Expense

Debenture Value

Stock - Series B

Stock - Series B for Dividend

Stock - Series B Shares and Dividend Payable

to Common Stock

Stock - Series B Shares and Dividend Payable

to Common Stock , shares

- P/S Series B

Conversion of Debt & Interest to Common Stock

of Debt & Interest to Common Stock , shares

of Debt to stock

of options and warrants

on Stockholder Prom Note

( 1,602,303 )

accompanying Notes to Condensed Consolidated Financial Statements

SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015

June 30, 2016

June 30, 2015

Comprehensive

AT December 31, 2020

( 38,322,456 )

( 3,706,568 )

Stock Issued for Cash

( 1,932,736 )

Based Compensation

Stock for Accounts Payable

Stock for Costs of Financing

for Interest Expense

Debenture Value

Stock - Series B for Dividend

Stock - Series B Shares and Dividend Payable

to Common Stock

- P/S Series B

of Debt & Interest to Common Stock

of options and warrants

( 1,775,728 )

Comprehensive

AT September 30, 2021 (Unaudited)

$ ( 40,138,485 )

$ ( 1,694,175 )

See accompanying Notes to Condensed Consolidated Financial Statements

IVEDA SOLUTIONS, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2021 AND 2020

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Depreciation and Amortization

(Gain) Loss on Derivatives

Amortization of Deferred Financing Costs

Stock Option Compensation

Bad Debt Expense

Inventory Valuation Allowance

Convertible Debt Value

Common Stock Warrants Issued for Services

Common Stock Warrants Issued for Interest

Gain on Derivatives and Debt Conversion

Loss on Disposal of Assets

(Increase) Decrease in Operating Assets and Liabilities

(Increase) Decrease in Operating Assets

Accounts Receivable

Other Current Assets

Accounts and Other Payables

Increase (Decrease) in Accounts and Other Payables

Net Cash Used in Operating Activities

( 1,179,673 )

CASH FLOWS FROM INVESTING ACTIVITIES

Sale (Purchase) of Property and Equipment

Purchase of Property and Equipment

Proceeds from Sale of Equipment

3 unchanged sentences

Proceeds from (Payments on) Short-Term Notes Payable/Debt

Proceeds from (Payments on) Long-Term Notes Payable/Debt

Proceeds from Exercise of Stock Options

Proceeds from (Payments to) Due to Related Parties

Proceeds from Long-Term Debt, Net of Payments

Payments on Dividends

Sale of Common Stock, Net of Cost of Capital

Series B Preferred Stock Issued, Net of Cost of Capital

Deferred Finance Costs, Net

Common Stock Issued, Net of (Cost of Capital)

Net Cash Provided by Financing Activities

3 unchanged sentences

CASH AND CASH EQUIVALENTS - END OF PERIOD

accompanying Notes to Condensed Consolidated Financial Statements

See accompanying Notes

to Condensed Consolidation Financial Statements

SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015

June 30, 2016

June 30, 2015

CONSOLIDATED STATEMENTS OF CASH FLOWS ( Unaudited ) - CONTINUED

THE NINE MONTHS ENDING SEPTEMBER 30, 2021 AND 2020

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest Paid

Income Tax Paid

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Common Stock Issued for Investor Relations

Warrants Issued for Interest Expense

Dividends Converted to Common Stock

Common Stock Issued for Finance Costs

Debenture Principal converted to Common Stock

Debenture Accrued Interest converted to Common Stock

Rent Accounts Payable to related Party converted to Common Stock

Common Stock issued for Consulting Agreements related to Cost of Capital

Accrued Dividends converted to Common Stock

accompanying Notes to Condensed Consolidated Financial Statements.

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2015.

The operating results and cash flows for the six-month period ended June 30,

2016 are not necessarily indicative of the results that will be achieved for the full fiscal year ending December 31, 2015 or

for future periods.

accompanying condensed consolidated financial statements have been prepared without audit and reflect all adjustments, consisting

of normal recurring adjustments, which are, in our opinion, necessary for a fair statement of the financial position and the results

of operations for the interim periods.

Preparing financial statements requires us to make estimates and assumptions that affect

the reported amounts of assets, liabilities, revenue, and expenses.

Estimates are used for, but not limited to, accounting for

the allowance for doubtful accounts, impairment costs, depreciation and amortization, sales returns and discounts, warranty costs,

uncertain tax positions and the recoverability of deferred tax assets, stock compensation, contingencies, and the fair value of

assets and liabilities disclosed.

Actual results and outcomes may differ from our estimates and assumptions.

The statements have

been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant

to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Certain information and footnote disclosures

normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such SEC

rules and regulations.

balance sheet at December 31, 2015 has been derived from the audited financial statements at that date but does not include all

of the information and footnotes required by GAAP for complete financial statements.

TO THE (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Operations

has been offering real-time IP video surveillance technologies to our customers since 2005.

While we still offer video surveillance technologies,

our core product line has evolved to include AI intelligent search technology that provide true intelligence to any video surveillance

system and IoT (Internet of Things) devices and platforms.

Our evolution is in response to digital transformation demands from many cities

and organizations across the globe.

Our IvedaAI intelligent video search technology adds critical intelligence to normally passive video

surveillance systems.

IvedaAI provides AI functions to any IP camera and most popular network video recorders (NVR) and video management

systems (VMS).

IvedaAI comes with an appliance or server, preconfigured with multiple AI functions based on the end user requirements.

Search (No Database Required)

Recognition (from a Database)

Plate Recognition (100+ Countries), includes make and model

Health Analytics (Facemask Detection,

and Barcode Detection

Detection – Vehicle/Person wrong direction detection

Vehicle/Person

Loitering Detection

Parking Detection

consists of deep-learning video analytics software running in a computer/server environment that can either be deployed at an edge level

or data center for centralized cloud model.

We combined hardware and artificial intelligence software for fast and efficient video search

for objects stored in an external (NVR) or storage device and live streaming video data from any IP camera.

works with any ONVIF-compliant IP cameras and most popular NVR/VMS (Video Management System) platforms, enabling accurate search across

dozens to thousands of cameras in less than 1 second.

IvedaAI products are designed to maximize efficiency, save time, and cut cost.

Instead of watching hours of video recording after-the-fact, users can set up alerts.

offers many IoT sensors and devices for various applications such as energy management, smart home, smart building, smart community and

patient/elder care.

Our gateway and station serve as the main hub for sensors and devices in any given area.

They are equipped with high-level

communication protocols such as Zigbee, WiFi, Bluetooth, and USB.

They connect to the Internet via Ethernet or cellular data network.

We provide IoT platforms that enable centralized device management and push digital services on a massive scale.

Our smart devices include

water sensor, environment sensor, entry sensor, smart plug, siren, body temperature pad, care watch and tracking devices.

also offer smart power technology for office buildings, schools, shopping centers, hotels, hospitals, and smart city projects.

power hardware is equipped with an RS485 communication interface allowing the meters to be connected to various third-party SCADA software

for monitoring and control purposes.

This line of product includes smart power, water meter, smart lighting controls systems, and smart

payment system.

Cerebro manages all the components of our smart power technology including statistics on energy consumption.

Cerebro is a software platform

designed to integrate multiple unconnected energy, security and safety applications and devices and control them through one comprehensive

user interface.

roadmap includes dashboard for all of Iveda’s platforms for central management of all devices.

Cerebro is system agnostic and will

support cross-platform interoperability.

The common unified user interface will allow remote control of platforms, sensors and subsystems

throughout an entire environment.

This integration and unification of all subsystems enable acquisition and analysis of all information

on one central command center, allowing comprehensive, effective, and overall management and protection of a city.

the last few years, smart city has been a hot topic among cities across the globe.

With little to no human interaction, technology increases

efficiency, expedites decision making, and reduces response time.

Dwindling public safety budgets and resources has necessitated the

transformation.

More and more municipalities are using next-generation technologies to improve the safety and security of its citizens.

Our response is our complete suite of IoT technologies, including AI intelligent video search technology, smart sensors, tracking devices,

video surveillance systems, and smart power.

Historically,

we sold and installed video surveillance equipment, primarily for security purposes and secondarily for operational efficiencies and

We also provided video hosting, in-vehicle streaming video, archiving, and real-time remote surveillance services to a variety

of businesses and organizations.

While we only used off-the shelf camera systems from well-known camera brands, we now source our own

cameras using manufacturers in Taiwan in order for us to be more flexible in fulfilling our customer needs.

We now have the capability

to provide IP cameras and NVRs based on customer specifications.

We still utilize ONVIF (Open Network Video Interface Forum) cameras

which is a global standard for the interface of IP-based physical security products.

2014, we changed our revenue model from direct project-based sales to licensing our platform and selling IoT hardware to service providers

such as telecommunications companies, integrators and other technology resellers already providing services to an existing customer base.

Partnering with service providers that have an existing loyal subscriber base allows us to focus on servicing just a handful of our partners

and concentrating on our technology offering.

Service providers leverage their end-user infrastructure to sell, bill, and provide customer

service for Iveda’s product offering.

This business model provides dual revenue streams – one from hardware sales and the

other from monthly licensing fees.

our subsidiary in Taiwan, specializes in deploying new, and integrating existing, video surveillance systems for airports, commercial

buildings, government customers, data centers, shopping centers, hotels, banks, and Safe City.

MEGAsys combines security surveillance

products, software, and services to provide integrated security solutions to the end user.

Through MEGAsys, we have access not only to

Asian markets but also to Asian manufacturers and engineering expertise.

MEGAsys is our research and development arm, working with a

team of developers in Taiwan.

April 2009, after eighteen months of due diligence by the Department of Homeland Security (DHS), the DHS approved us as a Qualified Anti-Terrorism

Technology (QATT) provider under a formal SAFETY Act Designation giving the technology a measure of liability protection.

Due diligence

included interviewing key employees responsible for developing and deploying our technology, partners, and customers.

The purpose of

completing the SAFETY Act Designation application is for the seller of a technology, to explain to the DHS how the technology qualifies

for the system of risk management and litigation management under the SAFETY Act.

The application is designed to elicit the information

that will allow the DHS to understand exactly what the seller’s technology is, and how it relates to the criteria for Designation

set forth in the SAFETY Act.

technology could not receive Certification status without having first received Designation status and holding that status for 5 years.

To receive SAFETY Act Certification, the Department must conclude that the technology will perform as intended, conforms to the seller’s

specifications, and is safe for use as intended.

Similar to the Designation application process, due diligence included interviewing

key employees responsible for developing and deploying our technology, partners, and customers.

We applied for certification in 2014

and after additional months of due diligence by DHS in January 2016 our Designation was elevated to a Certification.

SAFETY Act Certification

provides sellers of a Qualified Anti-Terrorism Technology (QATT) with an additional measure of liability protection.

This additional

measure of liability protection is not specifically quantified by the Safety Act.

The sellers of QATTs that receive SAFETY Act Certification

are entitled to all of the liability protections that accompany SAFETY Act Designation as well as the rebuttable presumption that the

government contractor defense applies to claims arising out of, relating to, or resulting from an act of terrorism.

QATTs that received

Certification are placed on the Approved Technologies list for Homeland Security.

submitted our renewal application in August 2019 prior to the expiration of our Certification in October 2019.

During this time, we have

been in constant communication with the Science and Technology Directorate at the SAFETY Act office related to updating our information.

We are now awaiting final approval for recertification.

Our products are not considered to be certified during the renewal process, but

we don’t expect this to significantly impact our ability to sell our technology in the U.S.

or international customers.

SAFETY Act Certification covers the entire company.

MEGAsys is our wholly-owned subsidiary and we use the same technology and products

to provide solutions to our Customers.

However, the liability protection is limited to the U.S, and we would not expect that the certification

has had or will have any significant effect on the MEGAsys results of operations.

Consolidation

April 30, 2011, we completed our acquisition of Sole Vision Technologies (dba MEGAsys), a company based in Taiwan.

We consolidate

our financial statements with the financial statements of MEGAsys.

All intercompany balances and transactions have been eliminated

in consolidation.

accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern,

which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.

Our Audit Report

on the Consolidated Financial Statements for the year ended December 31, 2015 contained a going concern qualification.

Since inception,

we have generated an accumulated deficit from operations of approximately $33 million at June 30, 2016 and have used approximately

$0.3 million in cash to fund operations through the six months ended June 30, 2016.

As a result, a significant risk exists regarding

our ability to continue as a going concern.

The condensed consolidated 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.

adopted a multi-step plan to enable us to continue to operate and begin to report operating profits.

The highlights of that plan

are as follows:

developed Sentir, our cloud-based video management platform, and began executing on our strategy to license its use as a VSaaS

offering to partners, as of March 2014, such as telecommunications companies, ISPs, data centers, and cable companies in order

to gain access to their existing subscriber bases.

introduced the ZEE®

line of cloud, plug-and-play cameras in September 2013.

The camera line includes two indoor cameras,

one outdoor camera, and one pan/tilt P/T camera.

We utilize contract manufacturers for our cloud cameras and other cloud-enabled

The Sentir-enabled cameras simplify service providers’

VSaaS offering to end users.

developed IvedaMobile®

a cloud-hosting service that turns any smartphone or tablet into a mobile, cloud video

streaming device.

introduced IvedaHome for shipments beginning 2016, cloud-based home security and automation systems.

signed an exclusive reseller agreement in November 2015 with a local group in Vietnam that will sell to the Vietnam Telecom

and Integrator market under the name Iveda Vietnam.

Our initial shipment of ZEE cameras was sent in February 2016 for delivery

to Vietnam Posts and Telecommunications (VNPT) for distribution to its customers.

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

closed $500,000 strategic investment transaction with the new majority owner of Iveda Vietnam.

The new majority owner is expected

to fund the working capital requirements for deposits and final payment before we ship cameras and other Sentir-enabled devices,

through our contract manufacturing relationships in Asia.

This role is key in facilitating business with large telecom customers

on terms acceptable in Vietnam.

are actively collaborating with certain telecommunications companies in other countries to resell our products and services

in their respective countries.

Our initial shipments of ZEE cameras were sent in June and August 2014 for delivery to Filcomserve

as reseller to the Philippine Long Distance Company (“PLDT”) for distribution to its customers.

launched a new website highlighting our licensing business model, which focuses on telecommunications companies, data centers,

ISPs, cable companies, and other similar organizations.

reduced our U.S.-based segment operating costs by eliminating its direct project-based sales channel and all costs related

to project-based sales as well as our real time monitoring services to focus our activities and resources on licensing Sentir.

November 2013, we hired Bob Brilon as our Chief Financial Officer and Executive Vice President of Business Development.

February 2014, Mr.

Brilon was appointed as our President.

Brilon has strong ties with the investment community and has

extensive experience with domestic and foreign institutional investors, which may be instrumental in raising capital to fund

Brilon has also been instrumental in restructuring the business model reducing the workforce and implementing

relevant cost reductions in 2014, 2015 and 2016.

We consolidate our

financial statements with the financial statements of MEGAsys.

All intercompany balances and transactions have been eliminated in consolidation.

accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates

the realization of assets and the liquidation of liabilities in the normal course of business.

We generated accumulated losses of approximately

$ 38 million from January 2005 through December 31, 2020 and have insufficient working capital and cash flows to support operations.

factors raise substantial doubt about our ability to continue as a going concern.

The consolidated 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.

of Long-Lived Assets

have a significant amount of property and equipment, consisting primarily of leased equipment.

We review the recoverability of the carrying

value of long-lived assets using the methodology prescribed in ASC 360 “Property, Plant and Equipment.” We review our long-lived

assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not

be recoverable.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset

to the undiscounted future net operating cash flows expected to be generated by the asset.

If such assets are considered to be impaired,

the impairment to be recognized is measured as the amount by which the carrying value of the assets exceeds their fair value.

no t make any impairment for the nine months ended September 30, 2021 or the years ended December 31, 2020 and 2019.

of Accounting

consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally

accepted in the United States of America.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Actual results

could differ from these estimates.

and Expense Recognition

Company applies the provisions of Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers , and all

related appropriate guidance.

The Company recognizes revenue under the core principle to depict the transfer of control to its customers

in an amount reflecting the consideration to which it expects to be entitled.

In order to achieve that core principle, the Company applies

the following five-step approach:

(1) identify the contract with a customer, (2) identify the performance obligations in the contract,

(3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize

revenue when a performance obligation is satisfied.

Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the

In situations where sales are to a distributor, the Company had concluded its contracts are with the distributor as the Company

holds a contract bearing enforceable rights and obligations only with the distributor.

As part of its consideration for the contract,

the Company evaluates certain factors including the customers’ ability to pay (or credit risk).

For each contract, the Company

considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.

In determining the

transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which

it expects to be entitled.

As the Company’s standard payment terms are less than one year, it has elected the practical expedient

under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

The Company allocates the transaction

price to each distinct product based on its relative standalone selling price.

The product price as specified on the purchase order is

considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar

circumstances.

Revenue is recognized when control of the product is transferred to the customer ( i.e.

, when the Company’s

performance obligations is satisfied), which typically occurs at shipment.

Further in determining whether control has been transferred,

the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred

to the customer.

Customers do not have a right to return the product other than for warranty reasons for which they would only receive

repair services or replacement product.

The Company has also elected the practical expedient under ASC 340-40-25-4 to expense commissions

for product sales when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less

than one year.

Company sells its products and services primarily to municipalities and commercial customers in the following manner:

majority of MEGAsys sales are project sales to Taiwan customers and are made direct to the end customer (typically a municipality

or a commercial customer) through its sales force, which is composed of its employees.

Revenue is recorded when the equipment is

shipped to the end customer and charged for service when installation or maintenance work is performed.

from fixed-price equipment installation contracts (project sales) are recognized on the percentage-of-completion method.

The percentage

completed is measured by the percentage of costs incurred to date to estimated total costs for each contract.

This method is used because

management considers expended costs to be the best available measure of progress on these contracts.

Because of inherent uncertainties

in estimating costs and revenues, it is at least reasonably possible that the estimates used will change.

costs include all direct material, subcontractors, labor costs, and equipment costs and those indirect costs related to contract performance.

General and administrative costs are charged to expense as incurred.

Provisions for estimated losses on uncompleted contracts are made

in the period in which such losses are determined.

Changes in job performance, job conditions, and estimated profitability may result

in revisions to costs and income and are recognized in the period in which the revisions are determined.

Changes in estimated job profitability

resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements are accounted for

as changes in estimates in the current period.

Profit incentives are included in revenues when their realization is reasonably assured.

Claims are included in revenues when realization is probable and the amount can be reliably estimated.

majority of Iveda US hardware sales are to international customers and are made through independent distributors or integrators who

purchase products from the Company at a wholesale price and sell to the end user (typically municipalities or a commercial customer)

at a retail price.

The distributor retains the margin as its compensation for its role in the transaction.

The distributor or integrator

generally maintains product inventory or product is drop shipped from the manufacturer, customer receivables and all related risks

and rewards of ownership.

Accordingly, upon application of steps one through five above, revenue is recorded when the product is

shipped to the distributor or as directed by the distributor consistent with the terms of the distribution agreement.

US also sells software that include licensing fees that are paid either monthly or yearly.

The revenues are recorded monthly, if

the license is paid yearly the revenue will be recorded as deferred revenue and amortized on a straight-line basis over the respective

Comprehensive

loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.

other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income

are required to be reported in a financial statement that is presented with the same prominence as other financial statements.

component of other comprehensive income is the foreign currency translation adjustment.

Concentrations

instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and

trade accounts receivable.

instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and trade

accounts receivable.

Substantially

all cash is deposited in two financial institutions, one in the United States and one in Taiwan.

At times, amounts on deposit

in the United States may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit.

in Taiwan financial institutions are insured by Central Deposit Insurance Corporation (“CDIC”) with maximum coverage

of NTD 3 million.

At times, amounts on deposit in Taiwan may be in excess of the CDIC insurance limit.

receivable are unsecured, and we are at risk to the extent such amount becomes uncollectible.

At times, amounts on deposit in the

United States may be in excess of the FDIC insurance limit.

Deposits in Taiwan financial institutions are insured by CDIC (Central

Insurance Corporation) with maximum coverage of NTD 3 million.

At times, amounts on deposit in Taiwan may be in excess of the CDIC Insurance

receivables are unsecured, and we are at risk to the extent such amount becomes uncollectible.

We perform periodic credit evaluations

of our customers’

financial condition and generally do not require collateral.

U.S.-based segment revenue from one customers

represented approximately 78% of total revenue for the six months ended June 30, 2016, and three customers represented approximately

52% of the total U.S.-based segment accounts receivable at June 30, 2016.

Taiwan-based segment revenue from two customers represented

approximately 81% of total revenue for the six months ended June 30, 2016, and four customers represented approximately 84% of

total Taiwan-based segment accounts receivable at June 30, 2016.

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of our customers’ financial condition and generally do not require collateral.

Two customers represented approximately 40 % and

77 % of total accounts receivable of $ 76,063 and $ 226,614 as of September 30, 2021 and December 31, 2020, respectively.

These customers

are longtime customers, and we don’t expect any problem with collectability of these accounts receivable.

had revenue from one customer with greater than 10% of total revenues during the nine months ended September 30, 2021 that represented

approximately 25 %

of total revenues.

We had $ 219,222

revenues ( 25 % )

from Chunghwa Telecom.

had revenue from two customers with greater than 10% of total revenues during 2020 that represented approximately 39 %

of total revenues.

We had $ 414,415

revenues ( 28 % )

from Chunghwa Telecom and $ 159,048

revenues ( 11 % )

from Siemens .

other customers represented greater than 10 % of total revenues in nine months ended September 30, 2021 and 2020.

and Cash Equivalents

purposes of the statement of cash flows, we consider all highly liquid debt instruments purchased with an original maturity of three

months or less to be cash equivalents.

provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information,

and existing economic conditions.

For our U.S.-based segment, receivables past due more than 120 days are considered delinquent.

our Taiwan-based segment, receivables over one year are considered delinquent.

Delinquent receivables are written off based on individual

credit valuation and specific circumstances of the customer.

As of September 30, 2021 and December 31, 2020, respectively, an allowance

for uncollectible accounts of $ 0 and $ 0 was deemed necessary for our U.S.-based segment.

current deposits represent tender deposits placed with local governments and major customers in Taiwan during the bidding process for

new proposed projects.

Current Assets

current assets represent cash paid in advance to insurance companies and vendors for service coverage extending into subsequent periods.

review our inventories for excess or obsolete products or components based on an analysis of historical usage and an evaluation of estimated

future demand, market conditions, and alternative uses for possible excess or obsolete parts.

The allowance for slow-moving and obsolete

inventory is $ 0 and $ 0 , as of September 30, 2021 and December 31, 2020, respectively.

and Equipment

and equipment are stated at cost.

Depreciation is computed primarily using the straight-line method over estimated useful lives of three

to seven years.

Expenditures for routine maintenance and repairs are charged to expense as incurred.

Depreciation expense for the nine

months ended September 30, 2021 and September 30, 2020 was $ 10,482 and $ 5,000 , respectively.

assets consist of trademarks and other intangible assets associated with the purchase price allocation of MEGAsys.

are being amortized over their estimated useful lives ranging from six months to ten years.

Other intangible assets are fully

amortized at June 30, 2016.

Future amortization of trademarks is as follows:

Such assets are being

amortized over their estimated useful lives of nine months to ten years .

Other intangible assets and trademarks are fully amortized at

September 30, 2021.

Current year amortization of trademarks was as follows:

SCHEDULE OF FUTURE AMORTIZATION OF TRADEMARKS

Deposits—Long-Term

deposits consist of a deposit related to the leases of MEGAsys’ office space, and tender deposits placed with local governments

and major customers in Taiwan as part of the bidding process, which are anticipated to be held more than one year if the bid is accepted.

income taxes are recognized in the consolidated financial statements for the tax consequences in future years of differences between

the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates.

differences arise from sales cut-off, depreciation, deferred rent expense, and net operating losses.

Valuation allowances are established

when necessary to reduce deferred tax assets to the amount that represents our best estimate of such deferred tax assets that, more likely

than not, will be realized.

Income tax expense is the tax payable for the year and the change during the year in deferred tax assets

and liabilities.

During 2020, we reevaluated the valuation allowance for deferred tax assets and determined that no current benefits

should be recognized for the year ended December 31, 2020.

are subject to U.S.

federal income tax as well as state income tax.

income tax returns are subject to review and examination by federal, state, and local authorities.

tax returns for the

years 2016 to 2020 are open to examination by federal, local, and state authorities.

Taiwan tax returns are subject to review and examination by the Taiwan Ministry of Finance.

Our Taiwan tax return for the years 2016

to 2020 are open to examination by the Taiwan Ministry of Finance.

cash represents time deposits on account to secure short-term bank loans in our Taiwan-based segment.

and Other Payables

SCHEDULE OF ACCOUNTS AND OTHER PAYABLES

September 30, 2021

December 31, 2020

Accounts Payable

Accrued Expenses

Deferred Revenue and Customer Deposits

Accounts and Other Payables

payments received from customers on future installation projects are recorded as deferred revenue.

January 1, 2006, we adopted the fair value recognition provisions of ASC 718, “Share-Based Payment,” which requires the recognition

of an expense related to the fair value of stock-based compensation awards.

We elected the modified prospective transition method as

permitted by ASC 718.

Under this transition method, stock-based compensation expense includes compensation expense for stock-based compensation

granted on or after the date ASC 718 was adopted based on the grant-date fair value estimated in accordance with the provisions of ASC

We recognize stock-based compensation expense on a straight-line basis over the requisite service period of the award.

value of stock-based compensation awards granted prior to, but not yet vested as of December 31, 2020 and 2019, were estimated using

the “minimum value method” as prescribed by original provisions of ASC 718, “Accounting for Stock-Based Compensation.”

Therefore, no compensation expense is recognized for these awards in accordance with ASC 718.

We recognized $ 165,167 and $ 95,167 of stock-based

compensation expense for the years ended December 31, 2020 and 2019, respectively and $ 88,000 for the nine months ended September 30,

Value of Financial Instruments

value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of June

value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of September

30, 2021 and December 31, 2020.

The respective carrying values of certain on-balance-sheet financial instruments approximate their

These financial instruments include cash, accounts receivable, accounts payable, accrued expenses, and amounts due

to related parties.

Fair values were assumed to approximate carrying values for these financial instruments because either they

are short-term in nature and their carrying amounts approximate their fair values or they are receivable or payable on demand.

Financial Instruments

do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

We evaluate all of our financial

instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

For derivative

financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value

and is then re-valued at the reporting date, with changes in the fair value reported in the consolidated statements of operations.

For stock-based derivative financial instruments, we use the Black-Scholes option pricing model to value the derivative instruments

at inception and on subsequent valuation dates.

The classification of derivative instruments, including whether such instruments

should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

Derivative instrument liabilities

are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument

could be required within 12 months of the balance sheet date.

Our derivative liability relates to the 2013 Warrants issued in

connection with the 2013 Debentures (subsequently converted to Series A Preferred Stock on December 9, 2014).

These warrants contain

a ratchet provision, which allows the exercise price to adjust downward based on certain events.

The respective carrying values of certain on-balance-sheet financial instruments approximate their fair

These financial instruments include cash, accounts receivable, 0 payable, accrued expenses, 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 their fair values or because they are receivable or payable on demand.

conduct operations in various geographic regions.

The operations conducted and the customer bases located in the foreign countries

are similar to the operations conducted and the customer bases located in the United States.

The net revenue and net assets (liabilities)

The operations conducted and the customer bases located in the foreign countries are

similar to the business conducted and the customer bases located in the United States.

The net revenues and net assets (liabilities)

for other significant geographic regions are as follows:

June 30, 2016

Net Assets (Liabilities)

SCHEDULE OF NET REVENUE AND NET ASSETS (LIABILITIES) FOR OTHER SIGNIFICANT GEOGRAPHIC REGIONS

September 30, 2021

(Liabilities)

United States

$ ( 2,404,401 )

Republic of China (Taiwan) MEGAsys

Republic of China (Taiwan)

due to operations in various geographic locations, we are susceptible to changes in national, regional, and local economic conditions,

demographic trends, consumer confidence in the economy, and discretionary spending priorities that may have a material adverse

effect on our future operations and results.

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

demographic trends, consumer confidence in the economy, and discretionary spending priorities that may have a material adverse effect

on our future operations and results.

are required to collect certain taxes and fees from customers on behalf of government agencies and remit them back to the applicable

governmental agencies on a periodic basis.

The taxes and fees are legal assessments to the customer, for which we have a legal

obligation to act as a collection agent.

The taxes and fees are legal assessments to the customer, for which we have a legal obligation

to act as a collection agent.

Because we do not retain the taxes and fees, we do not include such amounts in revenue.

We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable governmental

operate two reportable business segments as defined in ASC 280, “Segment Reporting.”

We have a U.S.-based segment,

Iveda, and a Taiwan-based segment, MEGAsys.

Each segment has a chief operating decision maker and management personnel who review

their respective segment’s performance as it relates to revenue, operating profit, and operating expenses.

of operations for the three and six months ended June 30, 2016 for each of our reporting segments are provided below.

June 30, 2016

Iveda Solutions, Inc.

Cost of Revenue

Depreciation and Amortization

General and Administrative

Gain (Loss) from Operations

Foreign Currency Gain

Gain on Derivatives

Gain on Disposal of Asses, Net

Interest Income

Interest Expense

Gain (Loss) Before Income Taxes

Benefit (Provision) for Income Taxes

Net Income (Loss)

June 30, 2016

Cost of Revenue

Depreciation and Amortization

General and Administrative

Gain (Loss) from Operations

Foreign Currency Gain

Gain on Derivatives

Loss on Disposal of Assets, Net

Interest Income

Interest Expense

Gain (Loss) Before Income Taxes

Provision for Income Taxes

Net Income (Loss)

$ (1,059,553 )

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

as shown below represents sales to external customers for each segment.

Intercompany revenue is immaterial and has been eliminated.

to long-lived assets as presented in the following table represent capital expenditures.

and property and equipment for operating segments are regularly reviewed by management and are therefore provided below.

Three Months Ended

Six Months Ended

United States

Republic of China (Taiwan)

Three Months Ended

Six Months Ended

Operating Earnings (Loss)

United States

$ (1,740,396 )

Republic of China (Taiwan)

$ (1,008,915 )

$ (1,675,895 )

Six Months Ended

Property and Equipment, Net

United States

Republic of China (Taiwan)

Six Months Ended

Additions (Disposals) to Long-Lived Assets

United States

Republic of China (Taiwan)

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended

Inventory, Net

United States

Republic of China (Taiwan)

Six Months Ended

United States

Republic of China (Taiwan)

We record a liability

when the amounts are collected and relieve the liability when payments are made to the applicable governmental agencies.

Reclassification

amounts in 2015 may have been reclassified to conform to the 2016 presentation.

amounts in 2020 have been reclassified to conform to the 2021 presentation.

Accounting Standards

were no new standards recently issued which would have an impact on our operations or disclosures.

new relevant accounting standards

2 RELATED PARTIES

SCHEDULE OF RELATED PARTY TRANSACTIONS

September 30, 2021

December 31, 2020

During 2020 one of the three MEGAsys directors loaned money to MEGAsys at no interest.

On October 18, 2018, we entered into a debenture agreement for $ 50,000 with Quadrant International LLC (four partners, three of which are related parties) at 0.0 % interest per annum with interest and principal payable on the maturity date of December 31, 2019 .

On September 10, 2014, we entered into a debenture agreement with Mr.

Alex Kuo, a member of the Board of Directors, for $ 30,000 , through his wife, Li-Min Hsu, at 9.5 % interest per annum with interest and principal payable on the extended maturity date of December 31, 2015 .

As consideration for the extension of the debenture, we granted Mrs.

Hsu options to purchase 3,000 shares of our common stock with an exercise price of $ 0.77 per share.

*No longer a Director

On September 8, 2014, we entered into a debenture agreement with Mr.

Kuo’s wife, Li-Min Hsu, for

interest per annum with interest and principal payable on the extended maturity date of December

As consideration for the extension of the debenture, we granted Mrs.

Hsu options to purchase 10,000

shares of our common stock with an exercise price of $ 0.77

*No longer a Director

On August 28, 2014, we entered into a debenture agreement with Mr.

Gregory Omi, formerly a member of our Board of Directors of the company for $ 200,000 , at 9.5 % interest per annum with interest and principal payable on the extended maturity date of December 31, 2016 .

As consideration for the extension of the debenture, we granted Mr.

Omi options to purchase 20,000 shares of our common stock with an exercise price of $ 0.77 per share.

This debenture was extended to December 31, 2016 .

Omi is currently the CTO of the company.

On November 19, 2012, we entered into a convertible debenture agreement with Mr.

Robert Gillen, a member of our Board of Directors, for $ 100,000 (the “Gillen I Debenture”), under his company Squirrel-Away, LLC.

Under the original terms of the agreement, interest is payable at 10 % per annum and became due on December 19, 2014 .

Gillen I Debenture was extended to January 5, 2015.

On June 20, 2013, interest of $ 5,000 was paid on the debenture.

As consideration for agreeing to extend the maturity date of the debenture to December 31, 2015 , we granted Mr.

Gillen options to purchase 10,000 shares of common stock at an exercise price of $ 0.77 per share This debenture was extended to December 31, 2016.

Total Due to Related Parties $ 300,000

Less Current Portion

Debt Discount

Total Long-Term

3 SHORT-TERM AND LONG-TERM DEBT

short-term debt balances were as follows:

June 30, 2016

SCHEDULE OF SHORT-TERM DEBT

September 30, 2021

December 31, 2020

Loan from Bank SinoPac at 2.95% interest rate per annum.

Due at June 2016 - December

Loan from Hua Nan Bank at 2.88% interest rate per annum.

Due at February 2016 - August 2016.

Loan from shareholder at 9.5% interest rate per annum.

Originated February 2016 with initial

term to March 31, 2016, then due upon demand, repaid in July 2016.

Loan from Shanghai Bank at 3.24% interest rate per annum.

2015 - March 2016.

Unsecured loan from a shareholder in April 2018 for $ 100,000 at a 50 % interest rate and six month maturity, was due October 2018 .

principal and interest convertible at $ 0.35 per share into common stock at the option of the holder until repaid.

Note Payable to Siemens due December 31, 2021 at 0 % interest.

Loan from Hua Nan Bank in 2020 at 2.42 % interest rate per annum and due December 2021 , 2019 loan at 2.61 % interest paid, February - April 2020

Debenture agreements with various shareholders at 10 % interest rate beginning in February 2019 - December 2019, one year maturity, were due February 2020 – December 2020 , principal and interest convertible at $ 0.35 per share into common stock at the option of the holder until repaid.

Debenture agreements with various shareholders at 10 % - 20 % interest rate beginning in January 2020 - February 2021, one year maturity, due January 2021 – February 2022 , principal and interest convertible at $ 0.35 per share into common stock at the option of the holder until repaid.

Short-term three month loan at 0 % interest from a shareholder in June 2020 , was due September 2020.

Balance at end of period

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

are currently authorized to issue up to 100,000,000 shares of preferred stock, par value $0.00001 per share, 10,000,000 shares

of which are designated as Series A Preferred Stock and 500 shares of which are designated as Series B Preferred Stock.

of Incorporation authorize the issuance of shares of preferred stock with designations, rights, and preferences determined from

time to time by our Board of Directors.

Accordingly, our Board of Directors is empowered, without stockholder approval, to issue

preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power

or other rights of the stockholders of our common stock.

In the event of issuance, the preferred stock could be utilized, under

certain circumstances, as a method of discouraging, delaying, or preventing a change in control of our company.

Long-term debt balances were as follows:

SCHEDULE OF LONG-TERM DEBT

Loans from Shanghai Bank with interest rates 1.00 % per annum due February 2024

Current Portion of Long-term debt

Balance at end of period

4 PREFERRED STOCK

are currently authorized to issue up to 100,000,000 shares of preferred stock, par value $ 0.00001 per share, 10,000,000 shares of which

are designated as Series A Preferred Stock and 500 shares of which are designated as Series B Preferred Stock.

Our Articles of Incorporation

authorize the issuance of shares of preferred stock with designations, rights, and preferences determined from time to time by our Board

of Directors.

Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend,

liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the stockholders of

our common stock.

In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging,

delaying, or preventing a change in control of our company.

A Preferred Stock

1 unchanged sentence

Each share of Series A Preferred Stock accrues cumulative

dividends at a rate of 9.5% per annum on the original issue price of $1.00 per share.

Accrued but unpaid dividends are payable

by us, either in cash or in shares of our common stock, upon the occurrence of a Liquidation Event (as defined in our Articles

of Incorporation) or upon conversion of the shares into shares of our common stock.

In addition, in the event of any liquidation,

dissolution, or winding up of our company, the holders of Series A Preferred Stock are entitled to receive distributions of any

of the assets of our company prior and in preference to the holders of our common stock, but after distribution of any assets

of our company to the holders of our Series B Preferred Stock in an amount equal to the Series B Preferred Stock’s original

issue price plus any accrued but unpaid dividends.

share of Series A Preferred Stock is convertible at the option of the holder, at any time, into shares of our common stock equal

to the original issue price divided by an adjusted conversion price of $0.97 per share of Series A Preferred Stock, subject to

certain adjustments.

On April 22, 2016, conversion price was adjusted to $0.86 as a result of Series B Tranche A warrants exercised

by certain shareholders, at an adjusted exercise price of $0.35 per share.

On June 30, 2017, all shares of Series A Preferred

Stock not already converted will automatically convert into shares of our common stock at the then-applicable conversion price.

holders of Series A Preferred Stock have the same voting rights as, and vote as a single class with, the holders of our common

Each holder of our Series A Preferred Stock is entitled to the number of votes equal to the number of shares of our common

stock into which such shares of Series A Preferred Stock may be converted.

In addition, in the event we sell, grant, or issue

any Common Stock Equivalent (as defined in our Articles of Incorporation) at a price per share that is lower than the then-applicable

conversion price for the Series A Preferred Stock, the conversion price for the Series A Preferred Stock will be adjusted to account

for the dilutive issuance.

If we effectuate a stock split or subdivision of our common stock or our Board of Directors declares

a dividend payable in our common stock, the conversion price for the Series A Preferred Stock will be appropriately decreased

to protect the Series A Preferred Stock holders from any dilutive effect of the stock split, subdivision, or stock dividend.

if the number of shares of our common stock outstanding decreases due to a reverse stock split or other combination of the outstanding

shares of our common stock, then the applicable conversion price of the Series A Preferred Stock will increase in order to proportionately

decrease the number of shares issuable upon conversion .

Holders of our Series A Preferred Stock have no sinking fund or

redemption rights.

the six months ended June 30, 2016, we issued 72,204 shares of common stock for conversion of Series A preferred shares.

dividends at a rate of 9.5 % per annum of the original issue price of $ 1.00 per share.

Accrued but unpaid dividends are payable by us,

either in cash or in shares of our common stock, upon the occurrence of a Liquidation Event (as defined in our Articles of Incorporation)

or upon conversion of the shares into shares of our common stock.

In addition, in the event of any liquidation, dissolution, or winding

up of our company, the holders of Series A Preferred Stock are entitled to receive distributions of any of the assets of our company

prior and in preference to the holders of our common stock, but after distribution of any assets of our company to the holders of our

Series B Preferred Stock in an amount equal to the Series B Preferred Stock’s original issue price plus any accrued but unpaid

share of Series A Preferred Stock is convertible at the option of the holder, at any time, into shares of our common stock equal to the

original issue price divided by an initial conversion price of $ 1.00 per share of Series A Preferred Stock, subject to certain adjustments.

On June 30, 2017, all shares of Series A Preferred Stock not already converted automatically converted into shares of our common stock

at the then-applicable conversion price.

holders of Series A Preferred Stock have the same voting rights as, and vote as a single class with, the holders of our common stock.

Each holder of our Series A Preferred Stock is entitled to the number of votes equal to the number of shares of our common stock into

which such shares of Series A Preferred Stock may be converted.

In addition, in the event we sell, grant, or issue any Common Stock Equivalent

(as defined in our Articles of Incorporation) at a price per share that is lower than the then-applicable conversion price for the Series

A Preferred Stock, the conversion price for the Series A Preferred Stock will be adjusted to account for the dilutive issuance.

effectuate a stock split or subdivision of our common stock or our Board of Directors declares a dividend payable in our common stock,

the conversion price for the Series A Preferred Stock will be appropriately decreased to protect the Series A Preferred Stock holders

from any dilutive effect of the stock split, subdivision, or stock dividend.

Similarly, if the number of shares of our common stock outstanding

decreases due to a reverse stock split or other combination of the outstanding shares of our common stock, then the applicable conversion

price of the Series A Preferred Stock will increase in order to proportionately decrease the number of shares issuable upon conversion .

Holders of our Series A Preferred Stock have no sinking fund or redemption rights.

B Preferred Stock

are authorized to issue up to 500 shares of Series B Preferred Stock.

Each share of Series B Preferred Stock accrues dividends

at a rate of 9.5% per annum on the original issue price of $10,000 per share.

Dividends on the Series B Preferred Stock accrue

daily and compound annually.

All accrued but unpaid dividends on the Series B Preferred Stock must be paid, declared, or set aside

prior to the declaration of any dividend on any class of stock that is junior in preference to the Series B Preferred Stock.

on the Series B Preferred Stock are paid quarterly, beginning on July 1, 2015 in either cash or shares of our common stock.

addition, all accrued but unpaid dividends are payable by us, either in cash or in shares of our common stock, upon the occurrence

of a Liquidation Event (as defined in our Articles of Incorporation) or upon the conversion of the shares into shares of our common

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the event of any liquidation, dissolution, or winding up of our company, the holders of Series B Preferred Stock are entitled

to receive distributions of any of the assets of our company equal to 100% of the original issue price plus all accrued but unpaid

dividends prior and in preference to the holders of Series A Preferred Stock and holders of our common stock.

We also have the

option to redeem all, but not less than all, of the Series B Preferred Stock, provided that certain conditions have been met.

Should we choose to redeem the outstanding shares of our Series B Preferred Stock, we are required to pay the original purchase

price plus all accrued but unpaid dividends.

Each share of Series B Preferred Stock is convertible at the option of the holder,

at any time, into shares of our common stock equal to the original issue price divided by an initial conversion price of $0.75

per share of Series B Preferred Stock, subject to certain adjustments.

On April 22, 2016, conversion price was adjusted to $0.35

as a result of Series B Tranche A warrants exercised by certain shareholders, at an adjusted exercise price of $0.35 per share.

On December 31, 2017, all shares of our Series B Preferred Stock not already converted will automatically convert into shares

of our common stock at the then-applicable conversion price.

holders of Series B Preferred Stock have no voting rights, except as are expressly provided in our Articles of Incorporation or

required by law.

Without the approval of at least a majority of the outstanding Series B Preferred Stock, we may not authorize

or issue (i) any additional or other shares of capital stock that are of senior rank to the shares of Series B Preferred Stock

in respect of the preferences as to dividends, distributions, or payments upon the liquidation, dissolution, and winding up of

our company, (ii) any additional or other shares of capital stock that are of equal rank to the shares of Series B Preferred Stock

in respect of the preferences as to dividends, distributions, or payments upon the liquidation, dissolution, and winding up of

our company, or (iii) any capital stock junior in preference to the Series B Preferred Stock having a maturity date that is prior

to the maturity date of the Series B Preferred Stock.

Furthermore, if we consummate a Fundamental Transaction (as defined in our

Articles of Incorporation) while shares of our Series B Preferred Stock are outstanding, then the holders of those outstanding

shares have the right to receive, upon conversion of the Series B Preferred Stock, the same amount and kind of securities, cash,

or property as they would have received if they would have been holders of the number of shares of common stock issuable upon

conversion in full of all shares of our Series B Preferred Stock immediately prior to the Fundamental Transaction.

addition, in the event we sell, grant, or issue any Common Stock Equivalent (as defined in our Articles of Incorporation) at a

price per share that is lower than the then-applicable conversion price for the Series B Preferred Stock (the “Effective

Price”), the conversion price for the Series B Preferred Stock will be adjusted to the Effective Price.

we effectuate a stock split or subdivision of our common stock or our Board of Directors declares a dividend payable in our common

stock, the conversion price for the Series B Preferred Stock will be appropriately decreased to protect the Series B Preferred

Stock holders from any dilutive effect of the stock split, subdivision, or stock dividend.

Similarly, if the number of shares

of our common stock outstanding decreases due to a reverse stock split or other combination of the outstanding shares of our common

stock, then the applicable conversion price of the Series B Preferred Stock will increase in order to proportionately decrease

the number of shares issuable upon conversion.

Each share of Series B Preferred Stock accrues dividends at a rate

of 9.5 % per annum of the original issue price of $ 10,000 per share.

Dividends on the Series B Preferred Stock accrue daily and compound

All accrued but unpaid dividends on the Series B Preferred Stock must be paid, declared, or set aside prior to the declaration

of any dividend on any class of stock that is junior in preference to the Series B Preferred Stock.

Dividends on the Series B Preferred

Stock are paid quarterly, beginning on July 1, 2015 in either cash or shares of our common stock.

In addition, all accrued but unpaid

dividends are payable by us, either in cash or in shares of our common stock, upon the occurrence of a Liquidation Event (as defined

in our Articles of Incorporation) or upon the conversion of the shares into shares of our common stock.

the event of any liquidation, dissolution, or winding up of our company, the holders of Series B Preferred Stock are entitled to receive

distributions of any of the assets of our company equal to 100% of the original issue price plus all accrued but unpaid dividends prior

and in preference to the holders of Series A Preferred Stock and holders of our common stock.

We also have the option to redeem all,

but not less than all, of the Series B Preferred Stock, provided that certain conditions have been met.

Should we choose to redeem the

shares of our Series B Preferred Stock outstanding, we are required to pay the original purchase price plus all accrued but unpaid dividends.

Each share of Series B Preferred Stock is convertible at the option of the holder, at any time, into shares of our common stock equal

to the original issue price divided by an initial conversion price of $ 0.75 per share of Series B Preferred Stock, subject to certain

holders of Series B Preferred Stock have no voting rights, except as are expressly provided in our Articles of Incorporation or required

Without the approval of at least a majority of the outstanding Series B Preferred Stock, we may not authorize or issue (i) any

additional or other shares of capital stock that are of senior rank to the shares of Series B Preferred Stock in respect of the preferences

as to dividends, distributions, or payments upon the liquidation, dissolution, and winding up of our company, (ii) any additional or

other shares of capital stock that are of equal rank to the shares of Series B Preferred Stock in respect of the preferences as to dividends,

distributions, or payments upon the liquidation, dissolution, and winding up of our company, or (iii) any capital stock junior in preference

to the Series B Preferred Stock having a maturity date that is prior to the maturity date of the Series B Preferred Stock.

if we consummate a Fundamental Transaction (as defined in our Articles of Incorporation) while shares of our Series B Preferred Stock

are outstanding, then the holders of those outstanding shares have the right to receive, upon conversion of the Series B Preferred Stock,

the same amount and kind of securities, cash, or property as they would have received if they would have been holders of the number of

shares of common stock issuable upon conversion in full of all shares of our Series B Preferred Stock immediately prior to the Fundamental

addition, in the event we sell, grant, or issue any Common Stock Equivalent (as defined in our Articles of Incorporation) at a price

per share that is lower than the then-applicable conversion price for the Series B Preferred Stock (the “Effective Price”),

the conversion price for the Series B Preferred Stock will be adjusted to the Effective Price.

we effectuate a stock split or subdivision of our common stock or our Board of Directors declares a dividend payable in our common stock,

the conversion price for the Series B Preferred Stock will be appropriately decreased to protect the Series B Preferred Stockholders

from any dilutive effect of the stock split, subdivision, or stock dividend.

Similarly, if the number of shares of our common stock outstanding

decreases due to a reverse stock split or other combination of the outstanding shares of our common stock, then the applicable conversion

price of the Series B Preferred Stock will increase in order to proportionately decrease the number of shares issuable upon conversion.

Holders of our Series B Preferred Stock have no sinking fund rights.

the six months ended June 30, 2016, we issued 362,473 shares of common stock in payment of dividends to Series B preferred stockholders.

As of September 30, 2021, we have no outstanding shares of Series

B Preferred Stock.

are authorized to issue up to 100,000,000 shares of common stock, par value $ 0.00001 per share.

All outstanding shares of our

common stock are of the same class and have equal rights and attributes.

The holders of our common stock are entitled to one vote

per share on all matters submitted to a vote of the stockholders of our company.

Our common stock does not have cumulative voting

Persons who hold a majority of the outstanding shares of our common stock entitled to vote on the election of directors

can elect all of the directors who are eligible for election.

Holders of our common stock are entitled to share equally in dividends,

if any, as may be declared from time to time by our Board of Directors.

In the event of liquidation, dissolution, or winding up

of our company, subject to the preferential liquidation rights of any series of preferred stock that we may from time to time

designate, the holders of our common stock are entitled to share ratably in all of our assets remaining after payment of all liabilities

and preferential liquidation rights.

Holders of our common stock have no conversion, exchange, sinking fund, redemption, or appraisal

rights (other than such as may be determined by the Board of Directors in its sole discretion) and have no preemptive rights to

subscribe for any of our securities.

the six months ended June 30, 2016, we issued 362,473 shares of common stock in payment of dividends to Series B preferred stockholders.

the six months ended June 30, 2016, we issued 89,690 shares of common stock for exercised options to purchase common stock.

the six months ended June 30, 2016, we issued 1,088,570 shares of common stock for exercised warrants to purchase common stock.

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the six months ended June 30, 2016, we issued 72,204 shares of common stock for conversion of Series A preferred shares.

the six months ended June 30, 2016, we issued 11,000 shares of common stock for origination fees for a $100,000 short term loan.

the six months ended June 30, 2016, we issued 628,571 shares of common stock (with 800,000 warrants at $0.35 exercise price) for

$500,000 strategic investment.

the six months ended June 30, 2016, we issued 60,000 shares of common stock for the referral of the $500,000 strategic investment.

Receivable from Stockholder

September 2014, an advisor/stockholder of our company exercised warrants to purchase 200,000 and 300,000 shares of common stock,

granted at an exercise price of $1.02 and $1.00 per share, respectively, in exchange for 5% promissory notes totaling $504,000

due at the extended maturity date of June 30, 2017.

Early payments have been received and $11,806 has been applied to the principal.

At September 30, 2015, a prepayment discount was negotiated amending the total outstanding to $230,000.

$100,000 was received

on September 30, 2015, and $130,000 was received on October 20, 2015.

OPTIONS AND WARRANTS

have granted non-qualified stock options to employees, contractors, and directors as equity compensation and to debenture holders

for the extension of debenture maturity dates.

All non-qualified options are generally issued with an exercise price no less than

the fair market value of the common stock on the date of the grant as determined by our Board of Directors.

Options may be exercised

up to ten years following the date of the grant, with vesting schedules determined by us upon grant.

Vesting schedules vary by

grant, with some fully vesting immediately upon grant and others vesting ratably over a period of time up to four years.

vested options may be exercised up to three months following the date of termination of the relationship with the employee, contractor,

or director unless alternate terms are specified at grant.

The fair values of options are determined using the Black-Scholes option-pricing

The estimated fair value of options is recognized as expense on the straight-line basis over the options’

option transactions during the six months ended June 30, 2016 were as follows:

Six months ended June 30, 2016

Weighted-Average

Exercise Price

All outstanding shares of our common

stock are of the same class and have equal rights and attributes.

The holders of our common stock are entitled to one vote per share

on all matters submitted to a vote of the stockholders of our company.

Our common stock does not have cumulative voting rights.

who hold a majority of the outstanding shares of our common stock entitled to vote on the election of directors can elect all of the

directors who are eligible for election.

Holders of our common stock are entitled to share equally in dividends, if any, as may be declared

from time to time by our Board of Directors.

In the event of liquidation, dissolution, or winding up of our company, subject to the preferential

liquidation rights of any series of preferred stock that we may from time to time designate, the holders of our common stock are entitled

to share ratably in all of our assets remaining after payment of all liabilities and preferential liquidation rights.

Holders of our

common stock have no conversion, exchange, sinking fund, redemption, or appraisal rights (other than such as may be determined by the

Board of Directors in its sole discretion) and have no preemptive rights to subscribe for any of our securities.

Company raised $ 2,113,000 during the nine months ended September 30, 2021 issuing 5,355,238 shares of common stock and warrants to purchase

common shares with a Fair Market Value of approximately $ 900,000 .

6 STOCK OPTION PLAN AND WARRANTS

October 15, 2009, we adopted the 2009 Stock Option Plan (the “2009 Option Plan”), with an aggregate number of 1,500,000 shares

of common stock issuable under the plan.

The purpose of the 2009 Option Plan was to assume options that were already issued in the 2006

and 2008 Option plans under Iveda Corporation after the merger with Charmed Homes.

January 18, 2010, we adopted the 2010 Stock Option Plan (the “2010 Option Plan”), which allows the Board to grant options

to purchase up to 1,000,000 shares of common stock to directors, officers, key employees, and service providers of our company.

the 2010 Option Plan was amended to increase the number of shares issuable under the 2010 Option Plan to 3,000,000 shares.

In 2012, 2010

Option Plan was again amended to increase the number of shares issuable under the 2010 Option Plan to 13,000,000 shares.

The shares issuable

pursuant to the 2010 Option Plan are registered with the SEC under Forms S-8 filed on February 4, 2010 (No.

333- 164691), June 24, 2011

333-175143), and December 4, 2013 (No.

The 2010 Option Plan expired on January 18, 2020.

adopted a new plan called Iveda Solutions, Inc.

2020 Plan (the “2020 Plan”).

The 2020 Plan will have a maximum of 10 million

option shares authorized with similar terms and conditions to the 2010 Option Plan.

This plan has not been approved by the shareholders

and as of December 31, 2020 and 2,500,000 options were outstanding under the 2020 Option Plan.

options may be granted as either incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986,

as amended (the “Code”), or as options not qualified under Section 422 of the Code.

All options are issued with an exercise

price at or above the fair market value of the common stock on the date of the grant as determined by our Board of Directors.

stock option plan awards of restricted stock are intended to qualify as deductible performance-based compensation under Section 162(m)

Incentive Stock Option awards of unrestricted stock are not designed to be deductible to us under Section 162(m).

the plans, stock options will terminate on the tenth anniversary date of the grant or earlier if provided in the grant.

have also granted non-qualified stock options to employees and contractors.

All non-qualified options are generally issued with an exercise

price no less than the fair value of the common stock on the date of the grant as determined by our Board of Directors.

Options may be

exercised up to ten years following the date of the grant, with vesting schedules determined by us upon grant.

Vesting schedules vary

by grant, with some fully vesting immediately upon grant to others that ratably vest over a period of time up to four years.

vested options may be exercised up to three months following date of termination of the relationship unless alternate terms are specified

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.

At December 31, 2020, we had no unrecognized

stock- based compensation.

option transactions during 2020 and 2019 were as follows:

SCHEDULE OF STOCK OPTION TRANSACTIONS

Outstanding at Beginning of Year

( 1,270,000 )

Forfeited or Canceled

Outstanding at End of Period

Options Exercisable at End of Period

Weighted-Average Fair Value of Options Granted During the Period

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

with respect to stock options outstanding and exercisable as of June 30, 2016 is as follows:

Outstanding at End of Year

Options Exercisable at Year-End

Weighted-Average Fair Value of Options Granted During the Year

with respect to stock options outstanding and exercisable at December 31, 2020 is as follows:

SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE

Options Outstanding

1 unchanged sentence

Outstanding at

June 30, 2016

Exercisable at

June 30, 2016

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:

$ 0.04 - $ 1.75

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.

SCHEDULE OF BLACK-SCHOLES OPTION-PRICING MODEL

Expected Life

2 unchanged sentences

Risk-Free Interest Rate

volatility for 2016 and 2015 was estimated by using the Dow Jones U.S.

Industry Indices sector classification methodology for

industries similar to that in which we operate.

The risk-free rate for periods within the contractual life of the option is based

Treasury yield curve in effect at the grant date.

The expected life of the options is based on the actual expiration

date of the grant.

have periodically issued warrants to purchase shares of common stock as equity compensation to officers, directors, employees,

and consultants.

We have also issued warrants as incentive in connection with the purchase of debt and equity securities.

of June 30, 2016, warrants to purchase 7,453,016 shares of common stock were outstanding, all of which were issued either as equity

compensation or in connection with financing transactions.

Vesting schedules vary by grant, with some fully vesting immediately

upon grant and others vesting ratably over a period of time up to four years.

The warrants expire during a range from two to ten

years following the date of the grant.

The fair value of warrants is determined using the Black-Scholes option-pricing model.

The estimated fair value of warrants is recognized as expense on the straight-line basis over the warrants’

vesting periods.

transactions during the six months ended June 30, 2016 were as follows:

Outstanding at December 31, 2015

transactions during 2020 and 2019 were as follows:

SCHEDULE OF WARRANT TRANSACTIONS

Outstanding at Beginning of Year

Forfeited or Canceled

Warrants Redeemable at June 30, 2016

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PARTY TRANSACTIONS

June 30, 2016

During June 2015 MEGAsys entered into an unsecured loan agreement with two of its directors,

Cheung and Mr.

Shiau for $18,180 and $36,360, respectively.

During July 2015 MEGAsys entered into additional unsecured

loans from Mr.

Cheung for $315,120.

All of the loans are at maximum of 8.8% interest per annum and matured December 30, 2015.

We paid the $284,820 principal balance and accrued interest on January 31, 2016.

On December 30, 2014, we entered into a debenture agreement with Mr.

Farnsworth, a member

of our Board of Directors, for $10,000, at 9.5% interest per annum with interest and principal payable on January 31, 2015.

We paid the principal and accrued interest on the Farnsworth Debenture in full on January 26, 2015.

On December 9, 2014, we entered into a debenture agreement with Mr.

Gillen, a member of our

Board of Directors, for $100,000, at 9.5% interest per annum with interest and principal payable on January 5, 2015.

also received a warrant to purchase 25,000 shares of our common stock at an exercise price of $1.00 per share.

As consideration

for agreeing to extend the maturity date of the debenture, we granted Mr.

Gillen options to purchase 10,000 shares of our

common stock at an exercise price of $0.77 per share.

We paid the principal and accrued interest on the Gillen Debenture in

full on February 4, 2015.

On October 14, 2014, we entered into a debenture agreement with Mr.

Joe Farnsworth, a member

of our Board of Directors, for $35,000, at 9.5% interest per annum with interest and principal payable on February 5, 2015.

We paid the principal and accrued interest on the Farnsworth Debenture in full on February 4, 2015.

On September 10, 2014, we entered into a debenture agreement with Mr.

a member of the Board of Directors, for $30,000, through his wife, Li-Min Hsu, at 9.5% interest per annum with interest and

principal payable on the extended maturity date of December 31, 2015.

As consideration for the extension of the debenture,

we granted Mrs.

Hsu options to purchase 3,000 shares of our common stock with an exercise price of $0.77 per share.

On September 8, 2014, we entered into a debenture agreement with Mr.

Kuo’s wife, Li-Min

Hsu, for $100,000, at 9.5% interest per annum with interest and principal payable on the extended maturity date of December

As consideration for the extension of the debenture, we granted Mrs.

Hsu options to pruchase 10,000 shares of our

common stock with an exercise price of $0.77 per share.

On August 28, 2014, we entered into a debenture agreement with Mr.

Gregory Omi, a member of

our Board of Directors of the company for $200,000, at 9.5% interest per annum with interest and principal payable on the

extended maturity date of Decemer 31, 2016.

As consideration for the extension of the debenture, we granted Mr.

to purchase 20,000 shares of our common stock with an exercised price of $0.77 per share.

This debenture was extended to December

31, 2016 and as consideration for agreeing to exend the maturity date of the debenture, we granted Mr.

Omi options to purchase

20,000 shares of common stock at an exercised price of $0.65 per share.

On November 19, 2012, we entered into a convertible debenture agreement with Mr.

Robert Gillen,

a member of our Board of Directors, for $100,000 (the “Gillen I Debenture”), under his company Squirrel-Away,

Under the original terms of the agreement, interest is payable at 10% per annum and became due on December 19, 2014.

Gillen I Debenture was extended to January 5, 2015.

On June 20, 2013, interest of $5,000 was paid on the debenture.

As consideration

for agreeing to extend the maturity date of the debenture to December 31, 2015, we granted Mr.

Gillen options to purchase

10,000 shares of common stock at an exercised price of $0.77 per share This debenture was extended to December 31, 2016 and

as consideration for agreeing to exend the maturity date of the debenture, we granted Mr.

Gillen options to purchase 10,000

shares of common stock at an exercised price of $0.65 per share.

On April 1, 2016, we entered into a debenture agreement with Mr.

Farnsworth, a member of our Board of Directors, for $10,000, at 9.5% interest per annum with interest and principal payable

on July 1, 2016.

Total Due to Related Parties

Less Current Portion

Debt Discount

Total Long-Term

SOLUTIONS, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Party Transactions –

2016 MEGAsys conducted business with a Taiwan based system integrator, Iwei Da System Ltd.

and has one of MEGAsys directors as

a common director also less than 2% shareholder of Iveda.

The sales to the system integrator for the six-month period ended June

30, 2016 was $168,654, at June 30, 2016 there was accounts receivable balance of $166.

May 2016 we abandoned our prior lease at 1201 S Alma School Road, Suite 8500, Mesa, Arizona and subleased on a month to month

basis approximately 2,500 square feet of office space at 460 S.

Greenfield, Suite 5, Mesa, Arizona from Farnsworth Realty &

Management Company for $3,000 per month.

One of our directors, Joe Farnworth, is 70% stakeholder in Farnsworth Realty & Management

(LOSS) PER SHARE

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

computations, as required by ASC No.

260, “Earnings per Share.”

earnings per share (“EPS”) is computed by dividing reported earnings available to stockholders by the weighted average

shares outstanding.

We had net losses for the years ended December 31, 2015 and 2014 and the effect of including dilutive securities

in the earnings per common share would have been anti-dilutive for the purpose of calculating EPS.

Accordingly, all options, warrants,

and shares potentially convertible into common shares were excluded from the calculation of diluted earnings per share for the

quarters ended June 30, 2016 and 2015 and six months ended June 30, 2016 and 2015.

Total common stock equivalents that could be

convertible into common stock were 26,499,901 and 22,127,032 for June 30, 2016 and 2015, respectively.

June 30, 2016

June 30, 2015

June 30, 2016

June 30, 2015

( 2,203,331 )

Outstanding at End of Year

Warrant Exercisable at Year-End

Weighted-Average Fair Value of Warrants Granted During the Year

$ 0.10 - $ 0.26

$ 0.00 - $ 0.22

with respect to warrants outstanding and exercisable at December 31, 2020 is as follows:

SUMMARY OF WARRANTS OUTSTANDING AND EXERCISABLE INFORMATION

Warrants Outstanding

Warrants Exercisable

Number Outstanding at

Average Remaining Contractual

Number Exercisable at

$ 0.35 - $ 1.65

fair value of each warrant 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.

SCHEDULE OF WARRANTS OUTSTANDING AND EXERCISABLE

Expected Life

Dividend Yield

Expected Volatility

Risk-Free Interest Rate

0.19 - 1.59 %

1.74 - 2.47 %

7 INCOME TAXES

Federal Corporate Income Tax

differences between financial statement carrying amounts and the tax basis of assets and liabilities and tax credit and operating loss

carryforward that create deferred tax assets and liabilities are as follows:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

Tax Operating Loss Carryforward - USA

Valuation Allowance - USA

( 9,800,000 )

( 9,600,000 )

Deferred Tax Assets,

valuation allowance increased approximately $ 2.1 million, primarily as a result of the increased net operating losses of our U.S.- based

of December 31, 2020, we had federal net operating loss carryforwards for income tax purposes of approximately $ 25.0 million which will

begin to expire in 2025 .

We also had Arizona and California net operating loss carryforwards for income tax purposes of approximately

$ 19.4 million and $ 2.0 million, respectively, which began to expire in 2014 .

These carryforwards have been utilized in the determination

of the deferred income taxes for financial statement purposes.

The following table accounts for federal net operating loss carryforwards

SUMMARY OF OPERATING LOSS CARRYFORWARDS

(Republic of China) Corporate Tax

Technologies, Inc.

is a subsidiary of the Company which is operating in Taiwan as a profit-seeking enterprise.

Its applicable corporate

income tax rate is 17%.

In addition, Taiwan’s corporate tax system allows the government to levy a 10% profit retention tax on

undistributed earnings for the prior year.

This tax will not be provided if the company distributed the earnings before the ended of

the fiscal year.

to the Taiwan corporate income tax (“TCIT”) reporting system, the TCIT sales cut-off base is concurrent with the business

tax classified as value-added type (“VAT”) which will be reported to the Ministry of Finance (“MOF”) on a bi-monthly

Since the VAT and TCIT are accounted for on a VAT tax basis that recorded all sales on business tax on a VAT tax reporting system,

the Company is bound to report the TCIT according to the MOF prescribed tax reporting rules.

Under the VAT tax reporting system, sales

cut-off did not take the accrual base but rather on a VAT taxable reporting basis.

Therefore, when the company adopted US GAAP on accrual

basis, the sales cut-off TCIT timing difference which derived from the VAT reporting system will create a temporary sales cut-off timing

difference and this difference is reflected in the deferred tax assets or liabilities calculations.

8 EARNINGS (LOSS) PER SHARE

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

as required by ASC No.

260, “Earnings per Share.”

earnings per share (“EPS”) is computed by dividing reported earnings available to stockholders by the weighted average shares

We had net losses for the years ended December 31, 2020 and 2019 and the effect of including dilutive securities in the

earnings per common share would have been anti-dilutive for the purpose of calculating EPS.

Accordingly, all options, warrants, and shares

potentially convertible into common shares were excluded from the calculation of diluted earnings per share for the periods ended September

30, 2021 and 2020.

SCHEDULE OF EARNINGS PER SHARE BASIC AND DILUTED

$ ( 1,775,728 )

$ ( 1,185,493 )

Weighted Average Shares

Basic and Diluted Loss Per Share

have evaluated subsequent events from the balance sheet date through the date the condensed consolidated financial statements

were issued and determined that there are no additional items to disclose.

MANAGEMENT’S

Basic Loss Per Share

9 CONTINGENT LIABILITIES—TAIWAN

to certain contracts with Siemens, Chung-Hsin Electric and Machinery Manufacturing Corp, MEGAsys is required to provide after-project

If MEGAsys fails to provide these after-project services in the future, other parties of the related contract would have recourse.

The financial exposure to MEGAsys in the event of failure to provide after- project services in the future as of September 30, 2021 is

10 SUBSEQUENT EVENTS

October 1, 2021 to November 8, 2021, short-term debenture holders converted $ 110,000

principal and $ 22,809

accrued interest into 384,454

shares of common stock, we sold 756,000

shares of unregistered restricted common

stock at $ 0.75

for $ 567,000

of proceeds and a warrant to purchase

shares of common stock at $ 0.35

was exercised for $ 94,500 .

Financial Information.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and associated

notes appearing elsewhere in this Quarterly Report Form 10-Q and with our audited consolidated financial statements included in

our Annual Report on Form 10-K for the year ended December 31, 2015.

following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and associated notes

appearing elsewhere in this Form 10-Q Quarterly Report and with our audited consolidated financial statements for the year ended December

31, 2020 included in this Form 10-Q Quarterly Report.

Regarding Forward-Looking Information

Quarterly Report on Form 10-Q contains forward looking statements that involve risks and uncertainties.

Report on Form 10-Q Quarterly Report contains forward looking statements that involve risks and uncertainties.

All statements other than

statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding future events, our

future financial performance, business strategy, and plans and objectives for future operations, are forward-looking statements.

In many cases, you can identify forward-looking statements by terminology such as “anticipates,”

“believes,”

“can,”

“continue,”

“could,”

“estimates,”

“expects,”

“intends,”

“may,”

“plans,”

“potential,”

“predicts,”

“should,”

or “will”

or the negative of these terms or other comparable terminology.

Although we do not make forward looking statements unless we believe

we have a reasonable basis for doing so, we cannot guarantee their accuracy.

These statements are only predictions and involve

known and unknown risks, uncertainties, and other factors, including the risks outlined under “Risk Factors”, “Liquidity

and Capital Resources”

with respect to our ability to continue to generate cash from operations or new investments, or elsewhere

in this Quarterly Report on Form 10-Q or discussed in our Annual Report on Form 10-K for the year ended December 31, 2015, which

may cause our or our industry’s actual results, levels of activity, performance, or achievements to differ materially from

those expressed or implied by these forward-looking statements.

Moreover, we operate in a very competitive and rapidly changing

New risks emerge from time to time, and it is not possible for us to predict all risk factors, nor can we address

the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results

to differ materially from those contained in any forward-looking statements.

should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Quarterly

Report on Form 10-Q.

Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking

statements after the date of this Quarterly Report on Form 10-Q to conform our statements to actual results or changed expectations.

statements of historical fact contained in this Form 10-Q Quarterly Report, including statements regarding future events, our future

financial performance, business strategy, and plans and objectives for future operations, are forward-looking statements.

In many cases,

you can identify forward-looking statements by terminology such as “anticipates,” “believes,” “can,”

“continue,” “could,” “estimates,” “expects,” “intends,” “may,”

“plans,” “potential,” “predicts,” “should,” or “will” or the negative of

these terms or other comparable terminology.

Although we do not make forward looking statements unless we believe we have a reasonable

basis for doing so, we cannot guarantee their accuracy.

These statements are only predictions and involve known and unknown risks, uncertainties,

and other factors, including the risks outlined under “Risk Factors”, “Liquidity and Capital Resources” with

respect to our ability to continue to generate cash from operations or new investment, or elsewhere in this Report on Form 10-Q Quarterly

Report or discussed in our audited consolidated financial statements for the year ended December 31, 2020, which may cause our or our

industry’s actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied

by these forward-looking statements.

Moreover, we operate in a very competitive and rapidly changing environment.

New risks emerge from

time to time, and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business

or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained

in any forward-looking statements.

Accounting Policies and Estimates

Management’s

Discussion and Analysis of Financial Conditions and Results of Operations is based upon our financial statements, which have been

prepared in accordance with GAAP.

The preparation of these financial statements requires us to make estimates and judgments that

affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

A description of our critical accounting

policies and related judgments and estimates that affect the preparation of our financial statements is set forth in Item 7, “Management’s

Discussion and Analysis of Financial Conditions and Results of Operations,”

of our Annual Report on Form 10-K for the year

ended December 31, 2015.

Discussion and Analysis of Financial Conditions and Results of Operations is based upon our financial statements, which have been prepared

in accordance with GAAP.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported

amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.

We base our estimates

on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results may

differ from these estimates under different assumptions or conditions.

A description of our critical accounting policies and related

judgments and estimates that affect the preparation of our financial statements is set forth in our audited consolidated financial statements

for the year ended December 31, 2020.

Such policies are unchanged.

developed Sentir®, a video surveillance management platform with big data storage technology for flexible and scalable distribution

of hosted video surveillance services to end users.

Sentir has an enterprise-class video hosting architecture, utilizing robust

data centers.

Sentir is ideal for service providers such as telecommunications companies, Internet service providers (“ISPs”),

data centers, and cable companies with an existing physical infrastructure that are looking to add video surveillance services

to their customer offerings.

Sentir allows scalability, flexibility, and centralized video management, access, and storage.

The advantage this platform offers end users is that there is no need to buy and maintain video surveillance software and hardware.

This platform enables real-time viewing and recorded playback of video on computers and mobile devices with push notifications

Our expertise allows us to enable large service providers to offer cloud-based plug-and-play video surveillance using

our Sentir platform.

Historically,

we sold and installed video surveillance equipment, primarily for security purposes and secondarily for operational efficiencies

and marketing.

We also provided video hosting, in-vehicle streaming video, archiving, and real-time remote surveillance services

to a variety of businesses and organizations.

Our principal sources of revenue were derived from monthly fees from video hosting

and real-time surveillance services and one-time fees for equipment sales and installation.

2014, we shifted our revenue model from direct project-based sales to licensing Sentir and selling Sentir-enabled plug-and-play

cloud cameras to service providers such as telecommunications companies, ISPs, data centers, and cable companies already providing

services to an existing customer base.

Partnering with service providers that have an existing loyal subscriber base allows us

to focus on our customers, the service providers, and leverage their end-user infrastructure to sell, bill, and provide customer

service for the Sentir cloud video surveillance offering.

This business model provides dual revenue streams –

one from camera

sales to the service providers and the other from monthly Sentir licensing fees on a per-camera activation basis.

April, 2011, we completed our acquisition of MEGAsys®, a company founded in 1998 by a group of sales and research and development

professionals from Taiwan Panasonic Company.

MEGAsys, our subsidiary in Taiwan, specializes in deploying new, and integrating

existing, video surveillance systems for airports, commercial buildings, government customers, data centers, shopping centers,

hotels, banks, and Safe City initiatives in Taiwan and other neighboring countries.

MEGAsys combines security surveillance products,

software, and services to provide integrated security solutions to the end user.

Through MEGAsys, we have access not only to Asian

markets but also to Asian manufacturers and engineering expertise.

has been offering real-time IP video surveillance technologies to our customers since 2005.

While we still offer video surveillance technologies,

our core product line has evolved to include AI intelligent search technology that provide true intelligence to any video surveillance

system and IoT (Internet of Things) devices and platforms.

Our evolution is in response to digital transformation demands from many cities

and organizations across the globe.

Our IvedaAI intelligent video search technology adds critical intelligence to normally passive video

surveillance systems.

IvedaAI provides AI functions to any IP camera and most popular network video recorders (NVR) and video management

systems (VMS).

IvedaAI comes with an appliance or server, preconfigured with multiple AI functions based on the end user requirements.

Search (No Database Required)

Recognition (from a Database)

Plate Recognition (100+ Countries), includes make and model

Health Analytics (Facemask Detection,

and Barcode Detection

Detection – Vehicle/Person wrong direction detection

Vehicle/Person

Loitering Detection

Parking Detection

consists of deep-learning video analytics software running in a computer/server environment that can either be deployed at an edge level

or data center for centralized cloud model.

We combined hardware and artificial intelligence software for fast and efficient video search

for objects stored in an external (NVR) or storage device and live streaming video data from any IP camera.

works with any ONVIF-compliant IP cameras and most popular NVR/VMS (Video Management System) platforms, enabling accurate search across

dozens to thousands of cameras in less than 1 second.

IvedaAI products are designed to maximize efficiency, save time, and cut cost.

Instead of watching hours of video recording after-the-fact, users can set up alerts.

offers many IoT sensors and devices for various applications such as energy management, smart home, smart building, smart community and

patient/elder care.

Our gateway and station serve as the main hub for sensors and devices in any given area.

They are equipped with high-level

communication protocols such as Zigbee, WiFi, Bluetooth, and USB.

They connect to the Internet via Ethernet or cellular data network.

We provide IoT platforms that enable centralized device management and push digital services on a massive scale.

Our smart devices include

water sensor, environment sensor, entry sensor, smart plug, siren, body temperature pad, care watch and tracking devices.

also offer smart power technology for office buildings, schools, shopping centers, hotels, hospitals, and smart city projects.

power hardware is equipped with an RS485 communication interface allowing the meters to be connected to various third-party SCADA software

for monitoring and control purposes.

This line of product includes smart power, water meter, smart lighting controls systems, and smart

payment system.

Cerebro manages all the components of our smart power technology including statistics on energy consumption.

Cerebro is a software platform

designed to integrate multiple unconnected energy, security and safety applications and devices and control them through one comprehensive

user interface.

roadmap includes dashboard for all of Iveda’s platforms for central management of all devices.

Cerebro is system agnostic and will

support cross-platform interoperability.

The common unified user interface will allow remote control of platforms, sensors and subsystems

throughout an entire environment.

This integration and unification of all subsystems enable acquisition and analysis of all information

on one central command center, allowing comprehensive, effective, and overall management and protection of a city.

the last few years, the smart city concept has been a hot topic among cities across the globe.

With little to no human interaction, technology

increases efficiency, expedites decision making, and reduces response time.

Dwindling public safety budgets and resources has necessitated

the transformation.

More and more municipalities are using next-generation technologies to improve the safety and security of its citizens.

Our response is our complete suite of IoT technologies, including AI intelligent video search technology, smart sensors, tracking devices,

video surveillance systems, and smart power.

license our platform and sell IoT hardware to service providers such as telecommunications companies, integrators and other technology

resellers already providing services to an existing customer base.

Partnering with service providers that have an existing loyal customer

base allows us to focus on servicing just a handful of our partners and concentrating on our technology offering.

Service providers leverage

their end-user infrastructure to sell, bill, and provide customer service for Iveda’s product offering.

This business model provides

dual revenue streams – one from hardware sales and the other from monthly licensing fees.

April 2009, after eighteen months of due diligence by the Department of Homeland Security (DHS), the DHS approved us as a Qualified Anti-Terrorism

Technology (QATT) provider under a formal SAFETY Act Designation giving the technology a measure of liability protection.

Due diligence

included interviewing key employees responsible for developing and deploying our technology, partners, and customers.

The purpose of

completing the SAFETY Act Designation application is for the seller of a technology, to explain to the DHS how the technology qualifies

for the system of risk management and litigation management under the SAFETY Act.

The application is designed to elicit the information

that will allow the DHS to understand exactly what the seller’s technology is, and how it relates to the criteria for Designation

set forth in the SAFETY Act.

technology could not receive Certification status without having first received Designation status and holding that status for 5 years.

To receive SAFETY Act Certification, the Department must conclude that the technology will perform as intended, conforms to the seller’s

specifications, and is safe for use as intended.

Similar to the Designation application process, due diligence included interviewing

key employees responsible for developing and deploying our technology, partners, and customers.

We applied for certification in 2014

and after additional months of due diligence by DHS, in January 2016, our Designation was elevated to a Certification.

SAFETY Act Certification

provides sellers of a Qualified Anti-Terrorism Technology (QATT) with an additional measure of liability protection.

This additional

measure of liability protection is not specifically quantified by the Safety Act.

The sellers of QATTs that receive SAFETY Act Certification

are entitled to all of the liability protections that accompany SAFETY Act Designation as well as the rebuttable presumption that the

government contractor defense applies to claims arising out of, relating to, or resulting from an act of terrorism.

QATTs that received

Certification are placed on the Approved Technologies list for Homeland Security.

submitted our renewal application in August 2019 prior to the expiration of our Certification in October 2019.

During this time, we have

been in constant communication with the Science and Technology Directorate at the SAFETY Act office related to updating our information.

We are now awaiting final approval for recertification.

Our products are not considered to be certified during the renewal process, but

we do not expect this to significantly impact our ability to sell our technology in the U.S.

or international customers.

communicate the results of this process to investors through a press release distributed via a news wire service and will be posted on

SAFETY Act Certification covers the entire company as a Qualified Anti-Terrorism Technology.

The SAFETY Act creates certain liability

limitations for “claims arising out of, relating to, or resulting from an Act of Terrorism” where Qualified Anti-Terrorism

Technologies have been deployed.

The term “act of terrorism” means any act that the Secretary determines meets the requirements

under subparagraph (b) of the Act.

An act meets the requirements of this subparagraph if the act- (i) is unlawful;

(ii) causes harm to

a person, property, or entity, in the United States, and (iii) uses or attempts to use instrumentalities, weapons or other methods designed

or intended to cause mass destruction, injury or other loss to citizens or institutions of the United States.

MEGAsys is our wholly owned

subsidiary, and we use the same technology and products to provide solutions to our customers.

The Certification, if renewed is granted

government and the liability protection only applies to customers that are U.S.-based MEGAsys does not receive liability

protection from the Certification.

The Company believes the lack of liability protection from the Certification will have no significant

effect on the MEGAsys results of operations.

The Company believes the Certification has an intrinsic value for the company as a whole

as a marketing tool but does not believe it will have a material effect on the results of operations if it is not renewed.

our subsidiary in Taiwan, specializes in deploying new, and integrating existing, video surveillance systems for airports, commercial

buildings, government customers, data centers, shopping centers, hotels, banks, and Safe City.

MEGAsys combines security surveillance

products, software, and services to provide integrated security solutions to the end user.

Through MEGAsys, we have access not only to

Asian markets but also to Asian manufacturers and engineering expertise.

MEGAsys is our research and development arm, working with a

team of developers and managing our relationship with the Industrial Technology Research Institute (“ITRI”) in Taiwan.

MEGAsys also houses the application engineering team that supports Sentir implementation for our service provider customers in

The acquisition of MEGAsys provided the following benefits to our business:

team of developers in Taiwan.

April, 2011, we completed our acquisition of MEGAsys ® , a company founded in 1998 by a group of sales and research and

development professionals from Taiwan Panasonic Company.

MEGAsys, our subsidiary in Taiwan, specializes in deploying new, and integrating

existing, video surveillance systems for airports, commercial buildings, government customers, data centers, shopping centers, hotels,

banks, and Safe City initiatives in Taiwan and other neighboring countries.

MEGAsys combines security surveillance products, software,

and services to provide integrated security solutions to the end user.

Through MEGAsys, we have access not only to Asian markets but

also to Asian manufacturers and engineering expertise.

MEGAsys is our research and development arm, working with a team of developers

and managing our relationship with the Industrial Technology Research Institute (“ITRI”) in Taiwan.

MEGAsys also houses the

application engineering team that supports Sentir implementation for our service provider customers in Asia.

The Company depends on MEGAsys

as the majority of the company’s revenues have come from MEGAsys since we acquired them in April 2011.

For the nine months

ended September 30, 2021 MEGAsys operations accounted for 95% of the total revenue.

For the years ended December 31, 2020

and 2019, MEGAsys’s operations accounted for 71% and 95% of our total revenue, respectively.

acquisition of MEGAsys provided the following benefits to our business:

established presence and credibility in Asia and access to the Asian market.

1 unchanged sentence

in Asia for cost-effective research and development of new product offerings and securing the best pricing for end user devices.

of products directly using MEGAsys’s product sourcing expertise to enhance our custom integration capabilities.

to the global distribution potential for our products and services.

April 2009, the Department of Homeland Security (“DHS”) approved us as a Qualified Anti-Terrorism Technology provider

under a formal SAFETY Act Designation.

The designation gives us, our partners, and our customers certain liability protection.

We became the first company to offer real-time Internet Protocol (“IP”) video hosting and remote surveillance services

with a SAFETY Act Designation.

Our SAFETY Act Designation was renewed in October 2014.

In January 2016, after thoroughly reviewing

the analysis of the DHS Office of SAFETY Act, the Deputy Under Secretary of Science and Technology has determined that our technology

satisfies the criteria set forth in Section 442(d)(s) of the SAFETY Act and in Section 25.8(a) of the Regulations and officially

issued a Certification.

A Certificate of Conformance of Technology was issued and our video surveillance products and services

were placed on “Approved Products List for Homeland Security.”

November 2012, we signed a cooperation agreement with ITRI, a research and development organization based in Taiwan.

with ITRI, we have developed cloud-video services.

Pursuant to the cooperation agreement, we received the right to license some

of ITRI’s patents that were used in the development.

We also have exclusive rights to license the products and services

we develop in cooperation with ITRI.

June and August 2014, in collaboration with our local partner in the Philippines, we shipped our ZEE ®

cloud plug-and-play

cameras for delivery to the Philippine Long Distance Telephone Company (“PLDT”) for distribution to its customers

with a cloud video surveillance service offering, utilizing our Sentir platform.

December 2014, we entered into a Framework Agreement with Vietnam Posts and Telecommunications Group (VNPT), the largest telecommunications

company in Vietnam to install Sentir at its data centers and conduct technical testing for mass distribution of our ZEE cameras

to its existing customer base.

In June 2015, Sentir was installed at four of VNPT’s data centers.

After technical testing,

in July 2015, VNPT issued a thorough report validating Sentir.

November 2015, we signed an agreement with Nguyen Business & Investment Co., Ltd.

as our exclusive reseller in Vietnam with

a committed $1 Million prepaid Sentir licenses.

Since then, they formed Iveda Vietnam Co., Ltd.

to be the operating entity to

license the Sentir platform and resell Sentir-enabled devices (e.g., ZEE, IvedaHome).

On June 30, 2016, we completed a strategic

investment transaction with the new majority owner of Iveda Vietnam and for cash consideration of $500,000, we sold 628,571 shares

of our unregistered common stock and a warrant exercisable at $0.35 per share to purchase 800,000 shares of our unregistered common

stock with a 5-year term.

Prior to the closing of the strategic investment, Iveda Vietnam had paid $435,000 to the Company, of

which $50,000 was allocated to Sentir server hardware shipped in December 2015 and $385,000 to prepaid license fees.

In conjunction

with the $500,000 strategic investment into the Company from the new majority owner, we agreed to amend the exclusive reseller

agreement to accept the $435,000 payment as full execution of the terms of the agreement.

Together with ITRI,

we have developed cloud-video services.

Pursuant to the cooperation agreement, we received the right to license some of ITRI’s

patents that were used in the development.

We also have exclusive rights to license the products and services we develop in cooperation

Accounting Standards

1 unchanged sentence

of Operations

We recorded net consolidated revenue of $338,624 for the three months ended June 30, 2016, compared to $775,561

for the three months ended June 30, 2015, a decrease of ($436,937), or (56%).

In the three months ended June 30, 2016, our recurring

service revenue was $25,907, or 8% of net consolidated revenue, and our equipment sales and installation revenue was $307,109,

or 91% of net consolidated revenue, compared to recurring service revenue of $46,911, or 6% of net consolidated revenue, and equipment

sales and installation revenue of $726,695, or 94% of net consolidated revenue, for the same period in 2015.

Our U.S.-based segment

saw an increase of $71,141 in net consolidated revenue during the three months ended June 30, 2016, while our Taiwan-based segment

revenue decreased by ($508,078) during the same period.

The increase in U.S.-based segment revenue was due to equipment sales

to our Vietnam Reseller, of Sentir-enabled plug-and-play cloud cameras.

The decrease in Taiwan-based segment revenue was primarily

due to delays on long-term contracts awarded and started during 2015.

recorded net consolidated revenue of $751,141 for the six months ended June 30, 2016, compared to $1,301,384 for the six months

ended June 30, 2015, a decrease of ($550,243) or (42%).

In the six months ended June 30, 2016, our recurring service revenue was

$50,390 or 7% of revenue, and our equipment sales and installation revenue was $692,308 or 92% of revenue, compared to recurring

service revenue of $145,251 or 11% of revenue, and equipment sales and installation revenue of $1,141,218 or 88% of revenue for

the same period in 2015.

The decrease in revenue was due to delays in significant long-term contracts that were awarded and began

in 2015 in Taiwan..

The increase in U.S.-based segment revenue was due to equipment sales to our Resellers of Sentir-enabled plug-and-play

cloud cameras.

Total cost of revenue was $256,252 (76% of revenue, representing a gross margin of 24%) for the three months

ended June 30, 2016, compared to $634,857 (82% of revenue;

representing a gross margin of 18%) for same period in 2015, a decrease

of ($378,605), or (60%).

The U.S.-based segment increase in cost of revenue corresponds with increased sales through our Vietnam

The Taiwan-based segment decreased cost of revenue and were primarily due to reduced revenues caused by the delay

on significant long-term contracts awarded and began in 2015.

We recorded net consolidated revenue of $411,452 for the three months ended September 30, 2021, compared to $278,238

for the three months ended September 30, 2020, an increase of $133,214, or 48%.

In the three months ended September 30, 2021, our recurring

service revenue was $106,434, or 26% of net consolidated revenue, and our equipment sales and installation revenue was $300,756, or 73%

of net consolidated revenue, compared to recurring service revenue of $143,945, or 52% of net consolidated revenue, and equipment sales

and installation revenue of $132,315, or 48% of net consolidated revenue, for the same period in 2020.

Our U.S.-based segment saw an

increase of $11,748, or 42% in net consolidated revenue during the three months ended September 30, 2021, while our Taiwan-based segment

revenue increased by $121,466, or 49% during the same period.

The minimal increase in U.S.-based segment revenue was due to limited sales

of equipment to our customers during our transition to IvedaAI products.

The increase in Taiwan-based segment revenue was primarily due

to additional long-term contracts awarded and started during the three months ended September 30, 2021.

See COVID-19 effects discussion

below in Liquidity and Capital Resources.

recorded net consolidated revenue of $1,304,725 for the nine months ended September 30, 2021, compared to $1,164,640 for the nine months

ended September 30, 2020, an increase of 140,084 or 12%.

For the nine months ended September 30, 2021 MEGAsys operations accounted for

95% of the total revenue.

In the nine months ended September 30, 2021, our recurring service revenue was $219,414 or 17% of revenue,

and our equipment sales and installation revenue was $1,079,861 or 83% of revenue, compared to recurring service revenue of $244,296

or 21% of revenue, and equipment sales and installation revenue of $912,822 or 78% of revenue for the same period in 2020.

in consolidated net revenue was primarily related to long-term contracts that were awarded starting in the second quarter of 2021

in Taiwan but the U.S.-based segment revenue decrease of ($376,306) was due to limited sales of equipment to our customers during our

transition to IvedaAI products.

See also COVID-19 effects discussion below in Liquidity and Capital Resources.

Total cost of revenue was $136,887 (33% of revenue, representing a gross margin of 67%) for the three months ended

September 30, 2021, compared to $447,248 (161% of revenue;

representing a gross margin of (61%) for same period in 2020, a decrease of

$310,361, or 69%.

The U.S.-based segment decrease in cost of revenue corresponds with decreased equipment sales.

The Taiwan-based segment

significant decrease in cost of revenue were primarily due to cost reductions related to COVID-19 delays from the same period in 2020.

cost of revenue was $781,895 (60% of revenues;

gross margin of 22%) for the six months ended June 30, 2016, compared to $993,552

gross margin of 40%) for the nine months ended September 30, 2021, compared to $1,007,321

(86% of revenues;

representing a gross margin of 24%) for the six months ended June 30, 2015, a decrease of ($406,809) or (41%).

The decrease of cost of revenue and decrease of gross margin was primarily due to delays in large project revenues in Taiwan during

the six months ended June 30, 2016.

Operating expenses were $524,447 for the three months ended June 30, 2016, compared to $967,788 for the same

period in 2015, a decrease of ($443,341), or (46%).

The decrease in operating expenses was primarily related to a continued decrease

in US based administrative, sales and technical support personnel, project-based marketing and sales expenses that has been shifted

to our resellers, consulting, and research and development expenses.

expenses were $1.2 million for the six months ended June 30, 2016, compared to $2.0 million for the six months ended June 30,

2015, a decrease of ($810,333) or (41%).

The decrease in operating expenses in 2016 over 2015 was primarily related to a continued

decrease in salaried personnel, direct project-based marketing and sales expenses, consulting, and research and development expenses.

representing a gross margin of 14%) for the nine months ended September 30, 2020, a decrease of $225,426 or 22%.

decrease of cost of revenue was primarily related to the reduction of low margin equipment sales in the U.S.-based segment and resulted

in an increased of gross margin.

The Taiwan based segment has seen positive momentum coming out of COVID-19 delays in large project revenues

in 2020 during the nine months ended June 30, 2021.

Operating expenses were $698,717 for the three months ended September 30, 2021, compared to $411,286 for the same period

in 2020, an increase of $287,431, or 70%.

The increase in operating expenses was primarily related to a ramp up in personnel in the US

based administrative, sales and technical support personnel as well as research and development expenses for IvedaAI.

Additional professional

expenses have been incurred during this period with an effort to get financial information filed with the OTC Markets and filing of the

Form 10-12g registration statement.

expenses were $2,042,022 for the nine months ended September 30, 2021, compared to $1,264,945 for the nine months ended September 30,

2020, an increase of $777,077 or 66%.

The increase in operating expenses was primarily related to a ramp up in personnel in the US based

administrative, sales and technical support personnel as well as research and development expenses for IvedaAI.

Additional professional

expenses have been incurred during this period with an effort to get financial information filed with the OTC Markets and filing of the

Form 10-12g registration statement.

from Operations.

As a result of the decrease in operating expenses, loss from operations decreased to ($442,075) for the

three months ended June 30, 2016, compared to ($827,084) for the same period in 2015, a decrease in loss of ($385,009), or (47%).

as a result of the decrease in operating expenses the loss from operations decreased to $1.0 million, for the six months ended

June 30, 2016, compared to $1.7 million for the six months ended June 30, 2015, a decrease in loss of ($666,980) or (40%).

Other expense-net was $17,923 for the three months ended June 30, 2016, compared to $40,412 for the same

period in 2015, a decrease of ($22,489), or (56%).

The change is primarily due to the decrease in interest expense.

expense-net was $33,927 for the six months ended June 30, 2016, compared to $30,985 for the six months ended June 30, 2015, an

increase of $2,942 or 9% primarily related to the decrease in gain on derivatives and the decreased loss on disposal of assets..

Net loss was ($476,709) for the three months ended June 30, 2016, compared to ($880,349) for the same period in

The decrease of ($403,640), or (46%), was primarily due to a decrease in operating expenses which was primarily related

to a continued decrease in sales and technical support personnel, project-based marketing and sales expenses that has been shifted

to our resellers, consulting, and research development expenses.

decrease of ($660,179) or (38%) in the net loss to $1.0 million for the six months ended June 30, 2016, from $1.7 million for

the six months ended June 30, 2015, was primarily the effect of a decrease in operating expenses.

As a result of Taiwan based segment increase in revenues and gross margins, loss from operations decreased to

($424,151) for the three months ended September 30, 2021, compared to ($580,296) for the same period in 2020, a decrease in loss of $156,145,

as a result of the increase in operating expenses the loss from operations increased to ($1,519,193) for the nine months ended September

30, 2021, compared to ($1,107,626) for the nine months ended September 2020, an increase in loss of ($411,567) or (37%).

Other expense-net was ($29,280) for the three months ended September 30, 2021, compared to ($19,831) for the same

period in 2020, an increase of ($9,449), or (48%).

The change is primarily due to the increase in interest expense related to US based

debentures issued starting in 2019 to February 2021.

expense-net was ($256,535) for the nine months ended September 30, 2021, compared to ($77,867) for the nine months ended September 30,

2020, an increase of ($178,668) or (229%) primarily related to the increase in interest expense from the US based debentures issued starting

in 2019 to February 2021.

A significant non-cash interest expense has been recorded for the value of convertible features of debentures

issued as well as the warrants issued as incentives for the convertible debentures.

Net loss was ($453,411) for the three months ended September 30, 2021, compared to ($600,127) for the same period in 2020.

The decrease of $146,695, or 24%, was primarily due to the Taiwan based segment increase in revenues and gross margins offsetting the

increase in operating expenses which was primarily related to a ramp up in personnel in the US based administrative, sales and technical

support personnel as well as research and development expenses for IvedaAI.

Additional professional expenses have been incurred during

this period with an effort to get financial information filed with the OTC Markets and filing of the Form 10-12g registration statement.

Net loss was ($1,775,328) for the nine months ended September 30, 2021, compared to ($1,185,493) for the nine months ended September

The increase of ($590,235) or (50%) in net loss was primarily the effect of the increase in operating expenses which was related

to a ramp up in personnel in the US based administrative, sales and technical support personnel as well as research and development expenses

Additional professional expenses have been incurred during this period with an effort to get financial information filed

with the OTC Markets and filing of the Form 10-12g registration statement.

and Capital Resources

of June 30, 2016, we had cash and cash equivalents of $463,917 in our U.S.-based segment and $495,616 in our Taiwan-based segment,

of September 30, 2021, we had cash and cash equivalents of $939,399 in our U.S.-based segment and $292,035 in our Taiwan-based segment,

compared to $32,574 in our U.S.-based segment and $216,947 in our Taiwan-based segment as of December 31, 2020.

This increase

in our cash and cash equivalents is primarily a result of the $380.000 Warrant Exercise to Common Stock and the sale of $500,000

of Common Stock during the quarter ended June 30, 2016.

There are no legal or economic factors that materially impact our ability

to transfer funds between our U.S.-based and Taiwan-based segments.

cash used in operating activities during the six months ended June 30, 2016 was $0.3 million compared to $2.4 million during the

six months ended June 30, 2015.

Net cash used in operating activities for the six months ended June 30, 2016 consisted primarily

of the net loss offset by approximately $624,000 in collection of accounts receivable.

Cash used in operating activities for the

six months ended June 30, 2015 consisted primarily of the net loss and approximately $925,000 increase in accounts receivable

offset by approximately $84,000 in non-cash stock option compensation.

cash used in investing activities for the six months ended June 30, 2016 was $793.

Net cash provided by investing activities during

the six months ended June 30, 2015 was $298.

cash provided by financing activities for the six months ended June 30, 2016 was $1.1 million compared with $3.0 million during

the six months ended June 30, 2015.

Net cash provided by financing activities in 2016 is primarily a result of the $380.000 Warrant

Exercise to Common Stock and the sale of $500,000 of Common Stock during the quarter ended June 30, 2016.

Net cash provided by

financing activities in 2015 consisted primarily of proceeds from the sale of Series B Preferred Stock, short-term debt proceeds,

and related party short-term debt proceeds.

This increase in our

cash and cash equivalents is primarily a result of the $2.1 million sale of Common Stock with Warrants during the nine months ended September

There are no legal or economic factors that materially impact our ability to transfer funds between our U.S.-based and Taiwan-based

cash used in operating activities during the nine months ended September 30, 2021 was $1.2 million compared to $0.1 million net cash

used during the nine months ended September 30, 2020.

Net cash used in operating activities for the nine months ended September 30, 2021

consisted primarily of the $1.8 million net loss, $0.3 million in inventory, $0.3 of prepaids and advances to suppliers offset by approximately

$0.6 million in additional accrued expenses.

Cash used in operating activities for the nine months ended September 30, 2020 consisted

primarily of the net loss and offset by $0.6 million in additional accrued expenses as well as $0.6 million collection of accounts receivable.

cash used in investing activities for the nine months ended September 30, 2021 was $17,352.

Net cash used by investing activities during

the nine months ended September 30, 2020 was $35,305.

cash provided by financing activities for the nine months ended September 30, 2021 was $2.2 million compared with $0.1 million provided

during the nine months ended September 30, 2020.

Net cash provided by financing activities in 2021 is primarily a result of the $2.1

million sale of Common Stock with Warrants during the nine months ended September 30, 2021.

Net cash provided by financing activities

in 2020 consisted primarily of an increase in short-term debt balances at the U.S based operations.

of September 30, 2021, we had $485,000 outstanding Short-Term Debt on the Iveda US books and $385,000 is past the maturity date and the

remaining $100,000 comes due February 2022.

There are no penalties related to the past due Notes, interest continues to accrue until

paid or converted to common Stock at $0.35 per share.

During the nine months ended September 30, 2021, Noteholders converted $499,750

of principal and the company expects a significant portion of the remaining Short-Term Debt to be converted to common stock over the

next twelve months.

The company expects to pay the remaining Short-Term Debt, if any, from operations and future equity capital raises.

There can be no assurance that the company will be able to generate enough operating cashflow or raise equity funds in a timely manner

hence the entire Short-Term Debt balance would be past due as of the end of February 2022.

have experienced significant operating losses since our inception.

At June 30, 2016, we had approximately $26 million in net operating

At December 31, 2020, we had approximately $25 million in net operating

loss carryforwards available for federal income tax purposes, which will begin to expire in 2025.

We did not recognize any benefit

from the federal net operating loss carryforwards in 2015.

We also had approximately $18.0 million in state net operating loss

carryforwards, which began to expire in 2014.

have limited liquidity and have not yet established a stabilized source of revenue sufficient to cover operating costs, based

on our current estimated burn rate.

Accordingly, our continuation as a going concern is dependent upon our ability to generate

greater revenue through increased sales and/or our ability to raise additional funds through the capital markets.

can be given that we will be successful in future financing and revenue-generating efforts.

Even if funding is available, we cannot

assure investors that it will be available on terms that are favorable to our existing stockholders.

Additional funding may be

achieved through the issuance of equity or debt securities that could be significantly dilutive to the percentage ownership of

our existing stockholders.

In addition, these newly issued securities may have rights, preferences, or privileges senior to those

of our existing stockholders.

Accordingly, such a financing transaction could materially and adversely impact the price of our

common stock.

We did not recognize any benefit from

the federal net operating loss carryforwards in 2021 or 2020.

We also had approximately $2.8 million in state net operating loss carryforwards,

which expire after five years.

have limited liquidity and have not yet established a stabilized source of revenue sufficient to cover operating costs, based on our

current estimated burn rate.

Accordingly, our continuation as a going concern is dependent upon our ability to generate greater revenue

through increased sales and/or our ability to raise additional funds through the capital markets.

No assurance can be given that we will

be successful in future financing and revenue-generating efforts.

Even if funding is available, we cannot assure investors that it will

be available on terms that are favorable to our existing stockholders.

Additional funding may be achieved through the issuance of equity

or debt securities that could be significantly dilutive to the percentage ownership of our existing stockholders.

In addition, these

newly issued securities may have rights, preferences, or privileges senior to those of our existing stockholders.

Accordingly, such a

financing transaction could materially and adversely impact the price of our common stock.

Substantially

all of our cash is deposited in two financial institutions, one in the United States and one in Taiwan.

all of our cash is deposited in three financial institutions, two in the United States and one in Taiwan.

At times, amounts on deposit

in the United States may be in excess of the FDIC insurance limit.

Deposits in Taiwan financial institutions are insured by CDIC

(“Central Deposit Insurance Corporation”) with maximum coverage of NTD 3 million.

At times, amounts on deposit in

Taiwan may be in excess of the CDIC insurance limit.

Deposits in Taiwan financial institutions are insured by CDIC (“Central

Deposit Insurance Corporation”) with maximum coverage of NTD 3 million.

At times, amounts on deposit in Taiwan may be in excess

of the CDIC insurance limit.

accounts receivable are unsecured, and we are at risk to the extent such amounts become uncollectible.

Although we perform periodic

evaluations of our customers’

credit and financial condition, we generally do not require collateral in exchange for our

products and services provided on credit.

U.S.-based segment revenue from three customers represented approximately 63% of total

revenue for the quarter ended June 30, 2016, and U.S.-based segment accounts receivable from two customers represented approximately

83% of total U.S.-based segment accounts receivable at June 30, 2016.

Taiwan-based segment revenue from three customers represented

approximately 83% of total revenue for the quarter ended June 30, 2016, and Taiwan-based segment accounts receivable from two

customers represented approximately 51% of total Taiwan-based segment accounts receivable at June 30, 2016.

No other customers

represented greater than 10% of total revenue in the quarter ended June 30, 2016.

provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection

information, and existing economic conditions.

Payment terms for our U.S.-based segment require prepayment for our ZEE cameras

before they are shipped and monthly Sentir licensing fees, which are due in advance on the first day of each month.

For our U.S.-based

segment, accounts receivable that are more than 120 days past due are considered delinquent.

Payment terms for our Taiwan-based

segment vary based on our agreements with our customers.

Generally, we receive payment for our products and services within one

year of commencing the project, except that we retain 5% of the total payment amount and release such amount one year after the

completion of the project.

Although our Taiwan-based segment had 34% of gross accounts receivables aged over 180 days at June

30, 2016, we provide an allowance for doubtful accounts for any receivables that will not be paid within one year, which excludes

such retained amounts.

For our U.S.-based segment, we set up doubtful accounts receivable allowances of $0 and $2,736 for the

quarters ended June 30, 2016 and 2015, respectively.

For our Taiwan-based segment, we set up doubtful accounts receivable allowances

of $351,192 and $468,030 for the quarters ended June 30, 2016 and 2015, respectively.

We deem the rest of our accounts receivable

to be collectible based on certain factors, including the nature of the customer contracts and past experience with similar customers.

Delinquent receivables are written off based on individual credit valuation and specific circumstances of the customer, and we

generally do not charge interest on past due receivables.

the periods for which financial information is presented, we do not believe that the current levels of inflation in the United

States have had a significant impact on our operations.

Likewise, we do not believe that the current levels of inflation in Taiwan

have had a significant impact on the operations of MEGAsys.

Although we perform periodic evaluations

of our customers’ credit and financial condition, we generally do not require collateral in exchange for our products and services

provided on credit.

Taiwan-based segment revenue from three customers represented approximately 74% of total revenue for the quarter

ended September 30, 2021, and accounts receivable from two customers represented approximately 59% of total accounts receivable at September

No other customers represented greater than 10% of total revenue in the quarter ended September 30, 2021.

provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information,

and existing economic conditions.

Payment terms for our U.S.-based segment require prepayment for most products before they are shipped

and monthly service fees, which are due in advance on the first day of each month.

For our U.S.-based segment, accounts receivable

that are more than 120 days past due are considered delinquent.

Payment terms for our Taiwan-based segment vary based on our agreements

with our customers.

Generally, we receive payment for our products and services within one year of commencing the project, except that

we retain 5% of the total payment amount and release such amount one year after the completion of the project.

Although our Taiwan-based

segment had minimal gross accounts receivables aged over 180 days at September 30, 2021, we provide an allowance for doubtful accounts

for any receivables that will not be paid within one year, which excludes such retained amounts.

For our U.S.-based segment, we had no

doubtful accounts receivable allowances for the quarters ended September 30, 2021 and 2020, respectively.

For our Taiwan-based segment,

we set up doubtful accounts receivable allowances of approximately $3,000 and $3,000 for the quarters ended September 30, 2021 and 2020,

respectively.

We deem the rest of our accounts receivable to be collectible based on certain factors, including the nature of the customer

contracts and past experience with similar customers.

Delinquent receivables are written off based on individual credit valuation and

specific circumstances of the customer, and we generally do not charge interest on past due receivables.

COVID-19 pandemic represents a fluid situation that presents a wide range of potential impacts of varying durations for different global

geographies, including locations where the Company has offices, employees, customers, vendors and other suppliers and business partners.

most businesses, the COVID-19 pandemic and efforts to mitigate the same began to have impacts on our business in March 2020.

time, much of our first fiscal quarter was completed.

During the remainder of 2020 and the first quarter of 2021, the Company observed

decreases in demand from certain customers, including primarily municipalities and commercial customers in Taiwan as well as delays in

project timelines in Taiwan.

However, the Company is beginning to experience an increase in demand for the six months ended September

30, 2021, compared to the last half of 2020.

the fact that the Company’s products are sold through a variety of distribution channels, the Company expects its sales will experience

more volatility as a result of the changing and less predictable operational needs of many customers as a result of the COVID-19 pandemic.

The Company is aware that many companies, including many of its suppliers and customers, are reporting or predicting negative impacts

from COVID-19 on future operating results.

Although the Company observed significant declines in demand for its products from certain

customers during 2020 and the first quarter of 2021, the Company believes that the impact of the COVID-19 remains too fluid and unknown,

hindering the Company from determining the long-term demand for current products.

The Company also cannot be certain how demand may shift

over time as the impacts of the COVID-19 pandemic may go through several phases of varying severity and duration.

Company does not expect there to be material changes to its assets on its balance sheet or its ability to timely account for those assets.

The Company has also reviewed the potential impacts on future risks to the business as it relates to collections, returns and other business-related

date, travel restrictions and border closures have not materially impacted its ability to obtain inventory or manufacture or deliver

products or services to customers.

However, if such restrictions become more severe, they could negatively impact those activities in

a way that would harm the business over the long term.

Travel restrictions impacting people can restrain our ability to assist its customers

and distributors as well as impact its ability to develop new distribution channels, but at present the Company does not expect these

restrictions on personal travel to be material to our business operations or financial results.

The Company has taken steps to restrain

and monitor its operating expenses and therefore it does not expect any such impacts to materially change the relationship between costs

and revenues.

most companies, the Company has taken a range of actions with respect to how it operates to assure it complies with government restrictions

and guidelines as well as best practices to protect the health and well-being of its employees and its ability to continue operating

its business effectively.

To date, the Company has been able to operate its business effectively using these measures and to maintain

internal controls as documented and posted.

The Company also has not experienced challenges in maintaining business continuity and does

not expect to incur material expenditures to do so.

However, the impacts of COVID-19 and efforts to mitigate the same have remained unpredictable

and it remains possible that challenges may arise in the future.

actions the Company has taken so far during the COVID-19 pandemic include, but are not limited to requiring all employees who can work

from home to work from home and increasing its IT networking capability to best assure employees can work effectively outside the office.

Company currently believes revenue for the year ending December 31, 2021 will still be impacted due to the conditions noted.

the Company’s current cash position and its projected cash flow from operations, the Company believes that it will have sufficient

capital and or have access to sufficient capital through public and private equity and debt offerings to sustain operations for a period

of one year following the date of this filing.

If business interruptions resulting from the COVID-19 pandemic were to be prolonged or

expanded in scope, the business, financial condition, results of operations and cash flows would be negatively impacted.

will continue to actively monitor this situation and will implement actions necessary to maintain business continuity.

the periods for which financial information is presented, we do not believe that the current levels of inflation in the United States

have had a significant impact on our operations.

Likewise, we do not believe that the current levels of inflation in Taiwan have had

a significant impact on the operations of MEGAsys.

Balance Sheet Arrangements

2 unchanged sentences

or other contractually narrow or limited purposes.

In addition, we do not have any undisclosed borrowings or debt, and we have

not entered into any synthetic leases.

We are, therefore, not materially exposed to any financing, liquidity, market, or credit

risk that could arise if we had engaged in such relationships.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In addition, we do not have any undisclosed borrowings or debt, and we have not entered

into any synthetic leases.

We are, therefore, not materially exposed to any financing, liquidity, market, or credit risk that could arise

if we had engaged in such relationships.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements